For some oligarchs, when the seas are rough, they sail off to Zug

Global Outlook

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The Independent Online

Don’t you just hate it when the paint job on your £200m superyacht doesn’t come up shiny enough?

The Russian billionaire Andrey Melnichenko was so incensed when it happened to his Philippe Starck-designed gin palace that he sued Dulux – or its owner AkzoNobel – for damages, saying the paint appeared to run and caused a “cloudy” appearance.

It’s not only the tycoon’s yacht – simply named “A” after his model wife Aleksandra – that’s been having something of a respray.

The fertiliser company EuroChem, which made him his billions, has also been undergoing some changes.

One of its big, potentially transformative investments of late was a €4bn (£3bn) potash mining project in Russia. EuroChem brought in a London Stock Exchange-listed company, Shaft Sinkers, to – as its name suggests – sink a shaft into the ground to get the mine started.

That was back in 2008 in Volgograd. The plan was to get 2.3illion tonnes of potash out of the ground every year by 2012 and double that in 2015. But any investment of multiple billions of dollars carries a big risk.

At the time, potash prices were riding high at near $900 a tonne, and EuroChem declared that even if it fell to $500, the Volgograd mine investment would still make a profit. As the news site Business Insider reported, the company did not expect prices to go lower than $700 to $800, meaning, as its finance chief said: “Our investments carry almost no financial risks.”

Unfortunately for Mr Melnichenko, potash fell through $700 and beyond. In the last quarter it was trading at an average of $281.

Shaft Sinkers continued working on what was its first job in Russia, using the same technology that it successfully employed in a mine in the North York Moors of England. But behind the scenes, all was not dandy. Just before New Year’s Eve, 2011, Shaft Sinkers admitted to the stock market that difficult ground conditions had made for slow progress and that it had begun talks with EuroChem to terminate the contract.

After much squabbling, during which Shaft Sinkers’ shares crashed (they were 191.9p in 2011 – just 9p this week), m’learned friends were approached and a series of lawsuits followed. EuroChem sued the mine sinking firm and its biggest investors – who happen to be the three Kazakh oligarchs behind the controversial mining company ENRC.

EuroChem’s litigation has not started well: its first case – against the Kazakh trio - was thrown out of a Dutch court. How the pending cases against Shaft Sinkers in France and Switzerland fare, we wait to see. Notably, Shaft Sinkers this week looked like it was about to swing a £9m lifeline loan, but the shares remain ... well, choose whatever mine-related pun you will.

But, in the meantime, EuroChem has made some strategic moves with the rest of its business as well. Despite Vladimir Putin’s rather clear message to oligarchs that he wants them to keep their investments at home, EuroChem announced last year it was planning a $1.5bn potash plant in Louisiana, of all places. All’s gone rather quiet on that since the Ukraine crisis, it should be said.

Then, this month, the company said it was moving its base from Russia to Switzerland. Analysts say that’s another move that may not have gone down so well in the Kremlin, particularly as EuroChem has received millions of dollars of loans from the Russian state-controlled Sberbank over the years. One of those was made as recently as last month, when Sberbank – the subject of US sanctions since the Crimean crisis - corralled investors including HSBC into a $750m loan to the company.

Perhaps HSBC, Barclays and RBS, which have also lent EuroChem hundreds of millions, will feel more comfortable having EuroChem based in Zug. But isn’t it rather worrying being so far from Moscow when most of your business is in Russia?

And besides, the last time I looked, Switzerland was landlocked. Where’s Mr Melnichenko going to park his yacht?

It might not be cricket but it’s all about who you know

Aboubacar Sampil is on a nice little number. The 50-year-old businessman based in the West African country of Guinea has, by all accounts, the ear of the President, Alpha Conde, and is apparently bezzie mates with the leader’s son.

Guinea has sadly found fame recently as being at the centre of the ebola epidemic, but before then, it was best known for the scramble among Western firms interested in its vast iron-ore deposits.

It emerges this week that the mining company founded by one such scrambler – the England cricketer turned mining millionaire Phil Edmonds – paid Mr Sampil (or, more accurately, his consultancy) millions of dollars to grease the wheels to get its mining concessions up and running.

To be more precise: Mr Sampil was made a non-executive director of Mr Edmonds’ Sable Resources in April 2012 on a salary of £72,000. Mr Sampil’s Faniya Ressources was then paid $6m for what sources describe as “lobbying” services. Further funds appear to have gone to another Sampil firm called Rio Pongo – although how much and why is not clear.

All that money worked:  little more than a year after his appointment, Alpha Conde’s Government awarded Sable both a mining licence and rare permission to export the iron ore through Liberia, rather than though the infrastructure-lacking Guinea.

Quite how Mr Sampil achieved this, and what actual work that involved for the six mill,  is not clear.

But, with the lucrative rights in the bag, who’s complaining?

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