Australian mining firm RGC Ltd. is considering pulling out of Ukraine following the collapse of its joint gold mining project with the Industry Ministry, an official from the firm said Tuesday July 1.
John Elder, manager of RGCs Kyiv office, said his company laid the blame for its projects failure squarely on the Industry Ministry, which he said had unilaterally withdrawn from a gold mining joint venture agreement with RGC.
Under the agreement, signed in October last year, RGC was to have invested $15 million into developing the Muzhievo gold deposit in the Carpathian mountains, while the ministry would have provided licenses, geological data, and infrastructure for the project. Profits from sales of mined gold were to be split evenly between the two partners.
According to Elder, two weeks after a meeting between the two sides in May, the Industry Ministry sent RGC a letter effectively demanding that the joint venture be set up in one week. According to the text of the letter, if the joint venture was not set up within three weeks after the date of the two sides May meeting the ministry will consider itself free of its obligations under the [joint venture] agreement.
That deadline is passed, because there were a number of legal and commercial issues [which could not be resolved] in that period of time, said Elder.
The main issue was the way in which the ministry was to transfer the Muzhievo mines assets to the joint venture, according to Elder.
There was a chance that it could have been portrayed legally as an illegal privatization of the [mine], we wanted to make sure that we didnt do anything that was potentially illegal, he said.
RGC now considers its cooperation with the Industry Ministry to be at an end: Essentially, they withdrew from the deal … it was the Industry Ministry that withdrew, said Elder.
Ghennady Veselovskiy, head of the Industry Ministrys precious metals mining department, denied that his ministry had pulled out of the agreement with RGC, and was surprised by the firms interpretation of the ministrys May letter.
Weve written dozens of letters over the period [of our cooperation with RGC], and they havent done anything [to set up the joint venture] for nine months, said Veselovskiy.
He, in turn, alleged that it was RGC that had broken off the deal, referring to a letter to the ministry from RGC dated June 13, 1997.
In that letter, according to Veselovskiy, RGC gave several reasons for breaking the joint venture agreement. Among these were the companys fears that under current Ukrainian law it could be denied exclusive rights to mine the gold in the Muzhievo area. Veselovskiy later could not be reached for comment on RGCs concerns over the legality of the ministrys property transfers to the joint venture.
RGC, which since 1994 has invested about $2 million in geological surveying in Ukraine, is now considering its future in the country, according to Elder.
Weve been here so long, and all weve got to show for it is our experiences, he said.
