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By John Helmer, Moscow

As Canadian stock market regulators open their first-ever investigation into listing practices by Russian companies trading on the Toronto Stock Exchange, the chief executive of High River Gold (HRG) has warned shareholders against reading reports appearing on this website.

A Canadian shareholder of HRG has received an email letter from Konstantin Soboloevsky, the chief executive officer of High River Gold based in Toronto. Alexei Mordashov owns about 73% of HRG; 27% of the shares are held by minority shareholders, most of them Canadians.

The shareholder asked HRG to clarify what has been the impact of recent Russian court litigation which Mordashov initiated against a 50% stakeholder, also Russian, in the big but unmined Prognoz silver deposit in the Russian fareast. Mordashov has been trying to force Prognoz into bankruptcy and put the rival shareholder’s stake into administration. If he succeeds, the Canadian asked, what additional asset value should be attributed to HRG’s reserves and resources, and thus to its share price? And vice versa — if Mordashov fails, what might the impact be for HRG’s market capitalization, particularly if the state revoked the Prognoz licences. Blow by blow, the Prognoz story can be found here, and here’s how the Russian appeals court ruled in May to put an end to Mordashov’s bankruptcy campaign.

Loss to HRG of the Prognoz asset’s value “was an obvious concern,” wrote the shareholder, “and has been interpreted as such, so if this is no longer an issue, this is market disclosure warranted. Secondly, if that is the case, will HRG find reason to WRITE UP its assets value of Prognoz? If a decision has not been made, if the court finds in HRG’s favor (is there a likely date for a decision?) and retains its 50%, will HRG rewrite the value of the holding back up? It is, as you and I and others know, possibly the world’s largest silver deposit and you cannot leave it on the books at zero or an unrealistic number, as this book value has a correlation to a stock value attributed to it.”

Finally, HRG was asked about Mordashov’s recently advertised intention to try again to sell shares of Nord Gold on the London Stock Exchange, and before that attempt, the shareholder asked Sobolevsky, is he preparing a fresh takeover offer for the HRG minorities?

Sobolevsky replied: “Thank you for further information on this matter. is not very reliable source of information. The court case for Prognoz is not yet determined and we are still in the process of complex bankruptcy proceedings in Russia which involve many “sub-proceedings” covering different aspects of the case.”

Last week, it was disclosed that Mordashov’s conduct of shareholder takeover attempts may one of several Russian targets in what the Ontario Securities Commission (OSC) has announced as an “Emerging Market Issuers Regulatory Review”. The OSC has never done this before. But it has sent teams of agents to Moscow to extol the benefits of its type of regulation to attract Russian companies to list their shares on the Toronto Stock Exchange. Among those known to have made the attempt but failed, one is the junior goldminer, GP Gold, owned by the Lanta Bank proprietor, Sergei Dokuchayev and his family.

The OSC spokesman, Carolyn Shaw-Rimmington, was asked how the OSC defines “emerging markets issuers”, and whether they include Russian and Chinese-owned companies. She refused to say, claiming: “we have not disclosed specific information on the issuers being examined as part of this review.”

All the OSC has said so far is that the enquiry is “a targeted review of Ontario reporting issuers listed on Canadian exchanges and having significant business operations in emerging markets. The review is designed to closely examine the disclosure of certain issuers from those markets and the vehicles through which these companies have accessed the Ontario market. OSC staff will also focus on the role of the auditors and underwriters in this process, who act as important gatekeepers with responsibilities under Ontario securities law.”

Canadian sources say the new OSC announcement refers to all emerging markets, not only Russia or China. The reason for the regulators to act, suggest these sources, goes beyond the case of Sino-Forest Corporation, a Chinese-owned timber concern which trades on the Toronto exchange, and which has been the subject of an OSC investigation since May. In that case, the OSC admitted on June 8 that its investigation covers charges of false or misleading claims in prospectuses, and insider trading in Sino-Forest shares ahead of the release of bad news. Sino-Forest’s share price has collapsed from C$26.08 on March 31 to a low of $1.97 on June 21 – shareholder value destroyed amounts to more than $6 billion.

Mordashov recently ordered the annual general meeting of HRG shareholders to be held at Whitehorse, in the Yukon Territory. Just three people attended the proceedings, which lasted 15 minutes.

So far HRG has not released a report of what was decided at the AGM, except to reveal that in one of the votes cast by Mordashov, one of his Russian trusties on the HRG board was substituted for another: “Mr. Stepanov was elected to the Board of Directors of the Company by the shareholders on the annual general meeting of shareholders of High River held on June 30, 2011 and replaced Igor Klimanov as Director of the Company.” Stepanov has been working for Mordashov’s Russian coalmine company for several years. Before that he worked for Victor Vekselberg, the junior aluminium oligarch.

Investigations by stock market regulators of Russian oligarchs do occur from time to time – in London by the Financial Services Authority (FAS), in Hong Kong and Singapore, even in Australia. But Canada has the reputation among leading western mine financiers of pursuing highly precise disclosure about matters irrelevant to the asset verification, valuation, and shareholding control issues of most importance to the market. So the timing of an OSC enquiry into Russians may be awkward for Mordashov if he is planning to try another IPO attempt for Nord Gold.

That isn’t to imply what the OSC refuses to say – which “emerging market issuers” are in their gunsights.

From the Republic of Guinea comes the news that Crew Gold, another of the Mordashov-controlled goldminers which are part of the Nord Gold group, is facing a renewed effort to compel compliance with its licence and mining concession terms, or face revocation of its right to mine and export gold. The costs, penalties, and the asset devaluation risk have yet to be disclosed to the Toronto Stock Exchange.

A source close to President Alpha Conde has said that following his recent negotiations with London-listed Rio Tinto over the iron-ore concession known as Simandou, compliance negotiations will be pursued with the Russian aluminium concern, UC Rusal, and thereafter with Crew Gold, whose alleged violations were detailed last November here.

In Moscow today, Mordashov was asked through spokesman Sergei Loktionov to identify and explain what “not very reliable information” the Sobolevsky letter was referring to. Loktionov replied: “We are not planning to answer”.

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