Oxus Gold Wins Appeal

by Nathan Hamm on 1/2/2007 · 2 comments

Now this is odd

Oxus Gold plc said that its Amantaytau Goldfields (AGF) joint venture in Uzbekistan has successfully appealed against fines and penalties imposed by a regional court in October.

As a result, the fines – totaling about 208 mln usd – are no longer payable, said the mining firm.

Various restrictions imposed on its operations as a result of the earlier ruling have also been lifted, it said.

The government can appeal, and if it does, expect the court’s decision to have a lot to do with the outcome of a policy review of special importance to Uzbekistan that is expected to come in February.

This makes one wonder whether or not Newmont would have fared better if the US had sanctions against Uzbekistan.

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– author of 2991 posts on 17_PersonNotFound.

Nathan is the founder and Principal Analyst for Registan, which he launched in 2003. He was a Peace Corps Volunteer in Uzbekistan 2000-2001 and received his MA in Central Asian Studies from the University of Washington in 2007. Since 2007, he has worked full-time as an analyst, consulting with private and government clients on Central Asian affairs, specializing in how socio-cultural and political factors shape risks and opportunities and how organizations can adjust their strategic and operational plans to account for these variables. More information on Registan's services can be found here, and Nathan can be contacted via Twitter or email.

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Robert Rand January 2, 2007 at 9:19 pm

Not really that odd. To survive, Oxus (unlike Newmont) agreed to let an Uzbek government controlled venture, Zeromax, get a stake in its operations. (see the BBC monitoring piece pasted below). So the reversal of fortune in court makes perfect sense: now Karimov and co. profits, along with Oxus. I’d be rather surprised if the Uzbek tax man appealed.

BBC Monitoring Former Soviet Union, 2006-12-11

It appears that the British gold mining company Oxus Gold has made sweeping concessions to Uzbekistan in order to preserve its presence in the country, analyst from Tashkent Andrey Saidov says, commenting on the recent deal under which 16 per cent shares in the Uzbek-UK gold joint venture Amantaytau Goldfields went to the government-backed Zeromax. “By letting Zeromax have16 per cent of its shares, the British company most likely decided to come to compromise with the Uzbek government and thus to preserve its presence in the gold mining sector of the country,” Saidov says. The following is an excerpt from Andrey Saidov’s article “Redivision of Uzbek gold is nearing completion”, published by the Centasia.org website on 10 December; a subheading inserted editorially: The British gold mining company Oxus [Gold] has decided to sell 16 per cent of its shares in the Amantaytau Goldfields joint venture that is developing gold fields in Central Kyzylkum [in central Uzbekistan] to the Swiss company Zeromax. The latter is close to the government circles of Uzbekistan. According to experts, the deal aims to settle a financial dispute with the Uzbek authorities by making compromise.
In the autumn of 2006, the Tashkent civil court satisfied the suit of the [Uzbek] tax agencies to recover a 223m-dollar tax debt accumulated in 2003-2005 from the Amantaytau Goldfields, the company which had been given preferential treatment in terms of taxes and customs duties for developing production up until 2010 in the past. But at the beginning of June 2006, the Uzbek government issued a special resolution annulling the preferential treatment for foreign companies. As a result, Western companies engaged in gold mining had to deal with financial claims. They tried to contest the claims but in vain. For example, judicial conflict between the Uzbek authorities and the US corporation Newmont Mining, which used to have a 50 per cent stake in the Zarafshon-Newmont joint venture, ended up with the arrest of [the joint-venture’s] property which will be auctioned in the middle of this month.
The British company Oxus, which came to Kyzylkum almost ten years later than the US gold miners, used to have a 50 per cent stake in the Amantaytau Goldfields joint venture, as well as the Uzbek government’s license for developing the extremely promising gold fields Amantaytau, Uzunbuloq and Vysokovoltnoye.
The remaining shares in the joint venture belonged to the same Navoiy Mining and Metallurgical Combine (10 per cent) and to Uzbekistan’s State Committee for Geology and Mineral Resources (40 per cent).
UK company makes concession to preserve presence in gold mining sector .
By letting Zeromax have16 per cent of its shares, the British company most likely decided to come to compromise and thus to preserve its presence in the gold mining sector of Uzbekistan. Whereas the Americans have been deprived of everything.
“Zeromax’s history of success in Uzbekistan is a model worthy of emulation in terms of cooperation between a foreign investor and the country’s government that wants to support foreign investment,” a statement issued by Oxus says. It also says that the British company has already started to cooperate with Zeromax on the issue of resolving tax and other problems to restore the activities of the Amantaytau Goldfields as soon as possible. As part of the deal, Uzbek businessman Mirodil Jamolov, who has been named by Oxus to be the official owner of the company registered in Switzerland [i.e. Zeromax], will be on the board of directors of the British company as its new member.

Nathan January 2, 2007 at 9:22 pm

Goes to show how much I miss 🙂

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