Russian copper producer UMMC is in talks with the government to acquire a majority stake in the gold mining company UGC which was seized by the state in July, two industry sources told Reuters on Wednesday.
The sources confirmed an earlier report by the Izvestia newspaper, which said that a firm called Atlas Mining that holds some UMMC assets, is negotiating with the Finance Ministry regarding the acquisition.
Neither UMMC nor the Finance Ministry responded to requests for comment from Reuters.
In July, Russia’s general prosecutor’s office won a lawsuit to transfer ownership of the majority stake in UGC, Russia’s fourth-largest gold producer, to the state, alleging it was obtained “through corruption.”
The stake now held by the Finance Ministry was previously owned by Russian billionaire Konstantin Strukov, who acquired gold-producing assets at a bargain price in 1997 from a bankrupt Soviet-era enterprise.
Since the start of the military action in Ukraine, the state has seized over $50 billion worth of assets from Western firms and Russian owners, marking the largest redistribution of property in Russia since privatization in the 1990s.
The government and courts have cited reasons for these seizures ranging from national security to illegal acquisitions. The government has promised to sell some of the assets.
One source noted that there had been other bidders for UGC assets, but they were no longer interested. The source added that there will be a formal bidding process, but its outcome is “predetermined.”
Both UGC and UMMC are under Western sanctions.
Shares in UGC, which in 2023 had one of the largest public offerings since the start of the conflict in Ukraine, fell by about 8% on Wednesday due to what a third source described as fears of a possible delisting of its shares.
According to Izvestia, which cited unnamed sources, the government is seeking 100 billion roubles ($1.23 billion) for the stake in UGC, while UMMC is offering half that amount.
UMMC said in 2022 that its previous owners, billionaires Iskander Makhmudov and Alexei Bokarev, no longer held shares in the company. The company hasn’t disclosed its current ownership.
The Finance Ministry said in September that it plans to sell its 67% stake in UGC before the end of October, following a valuation.
Lender Gazprombank, previously considered a potential buyer of UGC, holds 22%, and minority shareholders own the remaining 11%, according to UMMC’s website.
(By Anastasia Lyrchikova, Darya Korsunskaya, Elena Fabrichnaya and Gleb Bryanski; Editing by Elaine Hardcastle)
