Abramovich buys Highland Gold stake

Millhouse, the investment vehicle owned by Roman Abramovich, has bought a 40 per cent stake in Highland Gold, the Aim-listed miner whose largest resource is in a remote Russian region controlled by the billionaire owner of Chelsea football club.

Highland said that Millhouse will pay $400m (195m) for two lots of shares which will make it the largest shareholder in the company, overtaking Canada's Barrick, the world's largest gold producer, which owns 34 per cent.

Henry Horne, Highland's chief executive, said that the partnership was well timed. "We are very pleased. This is the right combination. It's a strong combination," he said.

The deal, which was welcomed by Barrick, helped to take Highland's share price to 175p, up 11.75p at the close, as investors recognised the potential benefits of a partnership with the London-based oligarch.

The Myskoye gold deposit, Highland's flagship development project, sits in the Chukotka Autonomous Territory in the far north-east reaches of the Russian state, where Mr Abramovich has been governor since 2000.

After criticism from the Russian environmental watchdog Rosprirodnadzor, which said in October that the company should lose its right to explore and mine in the area, the company recently won a federal extension to develop the resource by 2010.

In addition to a capital injection, which will aid the development, the move will help the company to navigate the country's political and regulatory maze.

Tim Dudley, an analyst at Arbuthnot Securities, said that the new relationship with Mr Abramovich would help to reassure Western investors.

"The stock is doing well today and I think it's because investors are feeling more confident. They have won an important friend," he said. "On the downside, the announcement means there is now one major shareholder with a lot of influence to do things like appoint its own chief executive, so this may turn out differently."