Khan shareholders file suit against Russian mining giant
A group of investors has filed suit in Ontario court against Russia’s state-owned uranium mining giant ARMZ, claiming it misled shareholders and contributed to the share price collapse of a Canadian junior miner. The suit is a potential headache for a Russian company that recently bought control of one of Canada’s largest uranium miners and has worked hard to present itself to Bay Street investors as a good corporate citizen.The plaintiffs own roughly 40%of KhanResourcesInc., a Toronto-based junior that has spent more than a decade trying to develop the Dornod uranium deposit in Mongolia. Those plans fell apart last year after the company found itself in the middle of a geopolitical fiasco involving Mongolia, Russia and China.
One of the players is Russia’s Atomredmetzoloto, better known as ARMZ. In late 2009, the company launched a hostile takeover bid for Khan.
That same year, the Mongolian and Russian governments signed a nuclear co-operation deal that included a proposal to develop Dornod. It appeared to push Khan out of the picture.
The plaintiffs claim ARMZ did not properly disclosed these details. They allege it disguised its true intentions for Dornod.
“The fundamental problem is there was a side deal going on between the government of Mongolia and the government of Russia,” said Marc Henderson, chief executive of Laramide Resource Ltd., Khan’s largest shareholder.
Ultimately, Khan was pushed out without any takeover. Shortly after ARMZ made its hostile bid, Khan negotiated a friendly tie-up with a Chinese company. Mongolia responded by stripping Khan of its licences. The Chinese walked away, and Khan’s shareholders were left with nothing. Khan has claimed that Russia was quietly squeezing the Mongolian government behind the scenes to get control of Dornod.
The lawsuit, filed in the Ontario Superior Court of Justice, seeks $80-million in damages.
Khan has filed its own $300-million legal action against ARMZ, but the Russian Ministry of Justice refused to comply with it.