Russian Oligarchs Are Moving Assets Out Of Russia, Converting Rubles Into Hard Assets
We noticed a very interesting development late last week when there was a very late after-hours press release announcing what would generally be considered a normal transaction of shares in a thinly traded micro-cap mining company called Atico Mining. This tiny company is producing gold and copper from an underground mine in Colombia at a relatively low cost.
Fast forward to the press release (which can be read in its entirety here) stating that Frontdeal is acquiring the 10.9M shares and 4.45M warrants Aterra Investments was holding in Atico Mining at a fixed price of 57 Canadian dollar cents. This sounds like just another boring announcement, but we dug a bit deeper into this story and discovered some remarkable things.
First of all, the owner of both Frontdeal and Aterra is the same person as both companies seem to be controlled by Alexei Mordashov. Does that name sound familiar? It should, as he’s the CEO of Severstal and has recently done some interesting deals in the gold space with NordGold (which is a spinoff from Severstal). On top of that, he’s an economist so his knowledge of the financial sector and situation should be at a sophisticated level. So why would someone move his shares in a mining company from company A (which he controls) to company B (which he controls as well)?
Alexei Mordashov, CEO of Severstal. Source
It might be very helpful to know that Frontdeal (the acquirer) is registered in Cyprus, which, as you know, is the favorite offshore spot for Russians to store a large chunk of their net worth. Aterra Investments however, is still registered in Russia (but operates through a subsidiary on the British Virgin Islands). This leads to a remarkable conclusion as it sure looks like Mordashov is starting to move his hard assets out of Russia by putting them in an offshore company. What’s even more remarkable is that the transaction won’t happen in Canadian Dollars, nor US Dollars and not even in Euro’s, but in Russian Rubles. The agreement calls for a payment in Russian Rubles equivalent to the value of C$0.57 at the time of closing (so the volatility of the Russian Ruble has been dealt with)..
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