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By John Helmer in Moscow

London market plays Scrooge as RAB sells Oxus Gold for 100% premium.

The streets of all the Christian cities of the world are filled at this time of year with buskers singing carols, holding out hands or buckets to receive offerings of money for the less fortunate in this world.

It must have been in this spirit that on December 10, Oxus Gold, the London-listed junior gold miner, announced that its principal shareholder, RAB Special Situations (Master) Fund, has granted Zeromax GmbH, its second largest shareholder, an option to buy up to 52.254 million of Oxus shares. RAB proposed to sell at 80 pence per share until December 18, with the possibility of extending the offer to January 31, 2008. On the day, RAB made this offer, the market price of Oxus shares was 40 pence. Thus, it seems the seasonal charity was on the Zeromax side, and it was RAB doing the busking — for a premium of 100%.

RAB’s proposal amounts to the sale of almost 14% of the 365 million Oxus shares on issue. The Oxus announcement was accompanied by this commentary from Richard Wilkins, a director: “The strategic alliance with Zeromax is an integral part of our strategy going forward. We very much welcome this significant potential increase in Zeromax’s shareholding in the Company. The price per share which Zeromax has agreed to pay represents a clear vote of confidence in the positive and profitable future of the Company. We also look forward to the ongoing support of RAB Capital who will still remain one of our largest shareholders should this option be exercised by Zeromax.”

Stranger than the mystery of Christmas to relate, the Oxus share price started falling from December 12, and it is now down to 33.75 pence.

Two weeks before notice of the option was given, Mineweb asked RAB whether it had been telling Oxus shareholders that it wanted to sell Oxus shares, and whether RAB believed the talk of selling had contributed to the decline of the Oxus share price at a time when the gold price was moving upwards. Philip Richards is the RAB director in charge of the Oxus dealings, according to subordinate Marc Popiolek. Richards declined to answer the questions. Instead, a company spokesman, David Trenchard, told Mineweb “we have been a consistent buyer of Oxus in the market.” As to doubt in the market about that, Trenchard said, “you need to be very careful with allegations like this.”

Speaking for Oxus on November 28, Harry Eustace, the company’s vice president, told Mineweb that RAB had not been in “direct contact” with Oxus regarding its intentions. As to what he thought they might be, Eustace said: “we don’t have a clear and precise explanation for the fall [of the share price].There is no single shareholder to blame. There was retail selling [of shares], but our institutional shareholding has remained stable.”

Eustace joined Oxus last year, when Zeromax bought into the company at a quarter of the price it has now agreed to pay RAB. According to the Oxus announcement of November 30, 2006, “Zeromax has agreed to invest £12,255,000 through a private placement of 57,000,000 new ordinary shares at 21.5p per share representing 16.1% of an enlarged Oxus share capital base. Some 8,550,000 shares are being subscribed for by 6 December 2006, and the remainder shall be subscribed for by 10 January 2007.”

Eustace is close to Tashkent entrepreneur, Miradil Djalalov, whose political relationships are well-known in Uzbekistan, where Oxus’s assets are located. Oxus, in trouble with the Uzbek government over a large tax claim, needed Djalalov, and Gulnara Karimova, the powerful daughter of the Uzbek President, with whom Djalalov is in business. When Zeromax bought into Oxus, its tax problems were resolved. Eustace moved from his position at Zeromax to his current one at Oxus.

The fall of Oxus’s share price this past November was unaccompanied by any negative news, and Oxus executives were adamant in assuring Mineweb they knew of no reason for the decline, which reached 25.5 pence, the year’s low, on November 29. That was three days after RAB announced it was buying Oxus shares, lifting its aggregate stake to 28.96%. Mineweb reported what was happening on December 3:


One week later, it now appears in retrospect, RAB decided to sell, and Zeromax to buy, at a premium that is more than double the market price. If fully exercised, Zeromax’s stake in Oxus would increase to 109.254 million shares, almost 30% of the 365 million shares on issue.

When exactly RAB and Zeromax negotiated their deal, in relation to what they told the market through Mineweb, turns out to be less significant now than why Zeromax agreed to deliver an enormous margin to RAB; and why the market apparently hasn’t shared in the enthusiasm.

Reports from industry sources in Moscow, and a bulletin from the Aton brokerage last week, suggest that gold mining assets throughout the former Soviet Union are being sought by Russian consolidators, because they are currently undervalued. This demand is helping to push up the price of shares of such Russian gold miners as Highland Gold — recently taken over by Roman Abramovich — and Celtic Resources, acquired by Severstal steel magnate, Alexei Mordashov. According to Aton, “we consider that Severstal and Roman Abramovich are far from finishing consolidation of the new gold business. In our opinion, this means that other small gold mining companies in Russia and the republics of the former USSR can shortly become targets of acquisition.” Oxus is one of the potential targets, the report concludes.

In these circumstances, the Moscow market suspects that Zeromax may be willing to double RAB’s money, because it has another buyer, to whom it plans to resell its shares. The speculation focuses on yet another Russian metals magnate, who is known to have interests in Uzbekistan, and who is also looking to diversify his metals portfolio. This is Alisher Usmanov, whose principal assets are two Russian steel mills and two iron-ore mines. He shares proprietorship of these with Andrei Skoch, a member of parliament; and Vassily Anisimov, a former aluminium smelter owner. Usmanov is also known to be pursuing uranium prospects across the Russian border in Kazakhstan.

Is he after Uzbek gold properties, Mineweb asked Yelena Sennik, spokesman for Usmanov’s Metalloinvest holding. She said that she did not expect Usmanov to respond, but would ask the question anyway. There has been no answer.

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