Canadian miner Kinross Gold Corp. announced recently it agreed to sell its Russian assets to Russia’s Highland Gold Mining and its affiliates for $680 million. It appears to be the first public sale of an asset a large Western company is leaving behind in Russia after Russia’s invasion to Ukraine.
Kinross said it would receive $400 million for the giant Arctic Kupol mine and the surrounding exploration licences, and another $280 million for the Udinsk mine until 2027. The deal is yet to be approved by the Russian Government while Russian Minister of Industry and Trade Denis Manturov has already supported it.
But the sale could face unexpected challenges. According to a source close to the deal Canadian authorities are now investigating the fact that Highland Gold Mining company’s beneficial owner is the President of Russia’s state-owned VTB Bank Andrey Kostin who is on the Canadian sanctions list since 2019. Canadians are prohibited from dealing with such persons.
Highland Gold Mining is formally controlled by Vladislav Sviblov, a 41 years old former manager of a Russian real estate developer PIK Group. According to Forbes magazine, since 2019 Sviblov acquired a number of mining assets in Russia worth over $1.5 billion with VTB Bank loans.
Among them are Ozernoye polymetallic deposit, a 40% stake in Highland Gold Mining (acquired from Roman Abramovich), Gold of Kamchatka (acquired from Viktor Vekselberg), a
UK-listed Trans-Siberian Gold company as well as some other assets. In less than three years Sviblov got control over companies producing over 16 tonnes of gold annually, competing with top Russian gold majors like Polyus Gold, Nordgold and Polymetal.
VTB Bank also agreed to provide multi-billion financing for the development of Sviblov’s new mines and deposits. In some cases loan agreements were signed personally by the President of VTB Bank Andrey Kostin – something very unusual given the modest size of those loans.
Russian media hinted that there is a kind of “special relations” between VTB Bank and Vladislav Sviblov. Over 20% of PIK Group – Sviblov’s former employer – is also owned by VTB Bank.
In February – April 2022, “blocking” sanctions were imposed on VTB Bank in the USA, Canada, the UK and the EU. Such restrictions imply the blocking of all its assets in those countries, bans on any transactional transactions involving the bank in their currencies, as well as with any counterparties from these countries.
Andrey Kostin has been under US sanctions since 2018, Canada since 2019, and EU sanctions since 2022.