For many decades, the gold mining industry of the Soviet Union remained one of the largest in the world holding the well-balanced second place after South Africa in terms of gold output. From 1991, the industry started to decay, when instead of ten large territorial enterprises of Russia there emerged over 600 subsoil using companies mining from their first tens of kilos to 1.5-2.0 tons of metal per year. Naturally, such businesses could neither maintain geological exploration nor gold mining in the country.
Strategically located to the western coast of Southern Africa, Angola is the third largest and one of the most mineral potentially endowed and blessed country in sub-Saharan Africa. Angola said 8.6 million carats were mined by the formal sector in 2007. Endiama (Empresa de Diamantes de Angola) is the national diamond company of Angola founded in 1981 and it is the exclusive concessionary of mining rights in the domain of diamonds. Our agency had a possibility to address a couple of questions to the Head of Department of Strategical Planning and Investments, Tiago Dias.
Avi Paz, President of the Israel Diamond Exchange, was born in 1946 into a family of Belgian diamantaires. In 1971, he started trading in diamonds and became a member of the Israel Diamond Exchange. He is also the owner and general manager of Paz Avi Fancy Ltd, a diamond processing enterprise established in 1977, which was the first company in Israel to produce fancy cut diamonds. Avi Paz turned to be President of the Exchange in 2005. Recently he was elected for the second term. During the recent World Diamond Congress in Shanghai, Avi Paz was elected new President of the World Federation of Diamond Bourses.
The creation of the Namibian Diamond Trading Company (NDTC) is based on a 50x50 partnership between the Government of the Republic of Namibia and De Beers. The agreement, which resulted in the creation of the company, was signed in January 2007 and holds immense possibilities for the country in terms of the economic activity such a venture, is expected to generate. The purpose of the NDTC is to make diamonds available for sale in Namibia for local manufacturing. Shihaleni Ellis Ndjaba is the CEO of Namibian Diamond Trading Company (NDTC). Until January 2008 he was the Permanent Secretary in the Ministry of Works, Transport and Communication.
On April 15, 2008 in Moscow, President of OAO Lukoil Vagit Alekperov, Chairman of De Beers Societe Anonym (De Beers) Nicky Oppenheimer, Managing Director of De Beers Gareth Penny, Chairman of Archangel Diamond Corporation (ADC) Bruce Cleaver and Director of ADC Tom Beardmore-Grey signed agreements on ownership rights and development terms for the Verkhotina Area located to the North-West of Arkhangelsk.
This transaction covers the acquisition of an interest in OAO Arkhangelskoe Geologodobychnoe Predpriyatie (AGD) by ADC; currently, AGD whose 100% of stock is owned by LUKOIL Group holds the license to explore and mine the Verkhotina Area.
The interest acquired by ADC in AGD will not exceed 49.99%. The rest of the stock will remain the property of LUKOIL.
Completion of the transaction will depend on consent to be received from the Federal Antimonopoly Service of the Russian Federation and other preconditions.
Upon completing the transaction, the litigation and arbitration proceedings relating to the Verkhotina license ownership rights will be terminated.
1. License owner
The license for the Verkhotina Area encompassing the Diamond Field named after Grib is owned by OAO Arkhangelskgeoldobycha (AGD).
It was established on the basis of Arkhangelskgeologia, a Soviet enterprise privatized in 1995. Strictly speaking, Arkhangelskgeologia gave birth to two companies – AGD and Arkhangelskgeolrazvedka (AGR). 75% of the AGR stock was obtained by ZAO Almakom controlled by Almazyuvelirexport (AYuE). Initially, the AGD stockholders included MAPO-bank (33%), Rosneft (33%), and the State Committee on State Property Management of the Arkhangelsk Region (33%). In the course of privatization, all the diamond licenses were divided in two parts and transferred to AGD and AGR. Since in 1993, there were biddings for diamond areas in the Arkhangelsk Region, and AGD and AGR retained their licenses in partnership with foreign companies. Thus, AGD was operating: 1) in team with BHP in the Snegurochka Diamond Pipe; 2) in team with Texas Star Resources in the Letneozerskaya Area; 3) in team with De Beers in the Tovskaya and Ust-Pinezhskaya Areas; 4) in team with Gal Marine+Princenton Interprises in the Keretskaya Area (on the White Sea shelf); 5) in team with Canmet Resources (later transformed into ADC) on the Verkhotina Area. In its turn, AGR financed by Almakom and ZAO Arkhangeskiye Almazy (both controlled by AYuE) was operating in the Letneozerskaya, Velskaya and Shenturskaya Areas.
From a more general point of view on this situation, the initiative in geological prospecting within the area of responsibility of former Arkhangeslkgeologia was taken up by two Russian structures – the diamond community of AYuE and the oil community of Rosneft, as well as by two foreign giants – De Beers and BHP.
Three years of work spent for diamonds produced no results. While the experience of work in the Snegurochka and Pervomaysko-Koltsovskaya Areas proved to be negative.
In 1996, in the Verkhotina Area there was discovered the Grib diamond deposit. In May of the same year, Canadian venture investor Canmet/ADC started subject-matter negotiations with De Beers aiming to sell an interest in the project. The agreement was reached on November 22, 1997 and was about gradual acquisition of the ADC stock by Task, a legal company. By May 1998, Task already purchased 37% of ADC and up to 51% of warrants.
The Russian part started its game targeted at the AGD oil projects. In 1998, LUKOIL bought the controlling block of shares in AGD. From the legal point of view, on June 5, 1998, the controlling block containing 73.6% of AGD shares was transferred to the account of OOO V.A.Invest whose co-founders included the LUKOIL-Garant Pension Fund (50.1%) and Interfin, a Moscow-based firm. Later, the Interfin interest in V.A.Invest was dispersed among dummy companies – Radioscan, AGD-Invest, AGD-Oil and Moskovski Neftyanoi Soyuz. Virtually all the decisions related to licenses and AGD problems were taken by Alisher Usmanov (diamonds) and Vagit Alekperov (oil and gas).
2. Transformations
After V. Putin was elected President of the Russian Federation in March 2000, a new stage was opened in the development of mineral resources in this country. Subsoil users started to re-structure their business to “protect national interests” and to achieve “accounting transparency.” A series of transformations was introduced to AGD as well. At some stage, V.A.Invest was cancelled and the AGD stock was transferred to LUKOIL. Then, having obtained a government permission, LUKOIL acquired 25% of AGD stock from Rosneft by way of cross-cancelled debts and thus LUKOIL turned into a 100% AGD owner.
The first phase of business was devoted to oil. In the end of 2002 in the Nenets Autonomous Area, LUKOIL established ZAO Noryanmarneftegaz where LUKOIL-Sever and AGD were equal stockholders. The main oil licenses were already transferred from AGD to Noryanmarneftegaz. The final move was to transfer the Nenets licenses right to LUKOIL. From the license and legal point of view, the oil story was evidently finalized in 2004.
The second – diamond - phase got off the ground now.
3. Foreign partner
In the end of 2002, when De Beers acquired 64% of ACD stock, the ACD board of directors was drastically changed. It included such De Beers people as G.Ralfe, R.Clark, D.Massola, R.Sheriff, and C.Hards (DeBeers Canada). R.Wake-Walker resigned doing it of his own free will and explaining in a press release that he was not agree with the way the company was managed. FireBird, a U.S. investment fund, happens to be the largest among minority shareholders (owning about 5%).
4. Legal conflict
In a joint LUKOIL and De Beers press release, the court proceedings are mentioned just casually. In effect, the legal battles were going on for more than 10 years tapping both parties for tens of millions of dollars. After the arbitration decisions taken to the benefit of LUKOIL (on October 28, 2002 in Arkhangelsk and on June 21, 2003 in Saint Petersburg) the litigation was transferred to the International Arbitration Court in Stockholm and to the U.S.A., Colorado (Denver District Court).
The current amicable agreement draws a line under the prolonged conflict and after procedural formalities will give an opportunity to De Beers to develop the diamond field in the North of Russia.
Vladimir Teslenko
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