This page has been archived and commenting is disabled.
Russian Oligarchs Are Moving Assets Out Of Russia, Converting Rubles Into Hard Assets
We noticed a very interesting development late last week when there was a very late after-hours press release announcing what would generally be considered a normal transaction of shares in a thinly traded micro-cap mining company called Atico Mining. This tiny company is producing gold and copper from an underground mine in Colombia at a relatively low cost.
Fast forward to the press release (which can be read in its entirety here) stating that Frontdeal is acquiring the 10.9M shares and 4.45M warrants Aterra Investments was holding in Atico Mining at a fixed price of 57 Canadian dollar cents. This sounds like just another boring announcement, but we dug a bit deeper into this story and discovered some remarkable things.
First of all, the owner of both Frontdeal and Aterra is the same person as both companies seem to be controlled by Alexei Mordashov. Does that name sound familiar? It should, as he’s the CEO of Severstal and has recently done some interesting deals in the gold space with NordGold (which is a spinoff from Severstal). On top of that, he’s an economist so his knowledge of the financial sector and situation should be at a sophisticated level. So why would someone move his shares in a mining company from company A (which he controls) to company B (which he controls as well)?
Alexei Mordashov, CEO of Severstal. Source
It might be very helpful to know that Frontdeal (the acquirer) is registered in Cyprus, which, as you know, is the favorite offshore spot for Russians to store a large chunk of their net worth. Aterra Investments however, is still registered in Russia (but operates through a subsidiary on the British Virgin Islands). This leads to a remarkable conclusion as it sure looks like Mordashov is starting to move his hard assets out of Russia by putting them in an offshore company. What’s even more remarkable is that the transaction won’t happen in Canadian Dollars, nor US Dollars and not even in Euro’s, but in Russian Rubles. The agreement calls for a payment in Russian Rubles equivalent to the value of C$0.57 at the time of closing (so the volatility of the Russian Ruble has been dealt with).
The central point in this press release isn’t a change of ownership in shares of Atico Mining, but Mordashov being effectively moving his Rubles from an offshore account in Cyprus and converting those Rubles into liquid hard assets. This could be the first step with many more to follow as Aterra also owns a sizeable stake in Silver Bear Resources which (for now) owns a large silver project in Russia and some smaller investments in non-precious metals deals.
The capital flight out of Russia is still ongoing and according to the data of the Russian Central Bank, the total amount of capital outflow is expected to be $128B in 2014 (well that was the estimate in November, and the final number will very likely be higher than 128 billion dollar) and probably $50-75B in 2015. It won’t just the oil price which will hurt Russia, but the increased perceived risk of doing business in the country. The Russian Ruble had crashed earlier this winter but seems to have stabilized now at an USD/RUB exchange rate of 50-55 and an EUR/RUB rate of 60-65 (see next image), and the sudden depreciation of the Ruble might very well have been caused by several high net worth individuals and company’s withdrawing their cash from the country by converting the Russian Rubles into other currencies (probably the Swiss Franc as there was a sudden boost in the CHF index when the Ruble was crashing).
The EUR/RUB exchange rate. Source
The pieces of the puzzle are starting to fall into place and this Frontdeal-Aterra deal could definitely be seen as just one of the pieces of evidence of an ongoing capital flight out of Russia whereby a rich Russian oligarch (who’s an economist!) prefers to keep his hard assets abroad in Cyprus instead of at a subsidiary of a Moscow-registered investment fund. The capital flight will be centering around investing in 'safer' currencies and in hard assets with gold still being one of the most appealing asset classes.
Just to give you an idea how horrible the crash of the Ruble was; in just 7 weeks time (!!), the gold price in Ruble increased by a stunning 70%. That's right, 70%. Who owns gold, safeguards his purchasing power whilst the average Russian citizen will have to adapt its consumption rate to 'the new normal'.
>>> Check Out Our Latest Gold Report!
Sprout Money offers a fresh look at investing. We analyze long lasting cycles, coupled with a collection of strategic investments and concrete tips for different types of assets. The methods and strategies from Sprout Money are transformed into the Gold & Silver Report and the Technology Report.
Follow us on Twitter @SproutMoney
»
- advertisements -
Exactly, exactly.
Moving out? Nonsense, more like moving in. Because everyone of them know (or more like the thoughtful ones), the so called developed West will steel their money and other assets even they are Putin bashers when the "big crunch" happens.
Oracle, the West will move in after the crash and everything is on the cheap. Until then, it will be a capital flight which causes the crash. The oligarchs know that the Russian system goes to the highest bidder. Convert to foreign assets, then turn around and buy those previously sold assets in Russia at low prices.
"After crash of the Russian economy", stop listening the "Russians are living from the oil gas revenues" meme.
Here is the fun fact, about 16% of the Russian GDP is from oil and gas revenues, about 10-15% are the other resource exports. So, from what is the rest of the GDP?
Not to mention, the oil and gas prices are in Ruble therms are more or less the same, and the budget and trade surpluses and the bilateral deals with China.
So, who is crumbling because of the unserviceable public debt, the West (EU, USSA, Japan) or Russia with 16% dept to GDP ratio?
BTW, when the Western financial system crashes, will somebody with his/her right mind trust the same people who crashed it or the same bankrupted institutions?
I don't think so.
Regarding your last paragraph, I disagree. Recall the crises of '08 and how all the actors stayed in office and in their boardrooms.
Well you have a point, but there are 2 main reasons for that:
-the system is crooked, but somewhat they temporally managed to pull it together;
-the world back then didn't had alternative international financial system, now it has.
you realised the chosenites are puppets themselves, no?
And just about every contra predictions since 2008 were met with counter-contras, no? They knew...and they plotted with the knowledge. We are muppets-don't-know as there will surly be other counter-contra measures, no.
So to say alternative international financial system(s) Put-in-Xi or others, I doubt they'll be successful, unless permitted by the puppet masters.
We must act outside of the matrix !
Nah, you're not paying attention, there's no need to steal it, you just print more of it and thus debase it.
Has the same effect as stealing it, over time, but it's 100% legal ... if you have the correct heritage.
lol
I used to like Sprout but he is a real NWO stooge.
That is not fast enough and the "choosenites" are running out of the time. :)
Oh come on, you know the Choosenites run multi-century plans, they have time to steal the lot. ;)
Well, the Choosenites are just the zombified managers (as most of the other so called elites) and their owners are running multi-century long plans. (Both group is running out of the time.)
If you doubt, answer me: Why happened so many pogrom, because the majority "envied their smarts and money" or the majority needed a lightning rod, and the Choosenites were designed for that to (among other things, like being a sacrificial pawn if needed)?
And other question: Why are the Choosenites unable self-reflection and correction of their ways, if they are not zombies and sacrificial pawn in somebody game.
The rapist can not blame anyone else for his erect penis.
http://downloads.umu.nu/Books/Hoffmanstrange.pdf
https://archive.org/details/TheBeastsOfTheApocalypse1959
oh boy ... lol ... look man, I'm sorry I interacted, I shall take more care in future.
I'll take it as capitulation. LOL
Frankly, if the Choosenites were that smart as they think or You think, would have these problems?
I don't think so.
They can always buy houses in Cali so when we confiscate the Chinese RE [under some nefarious pretense] we can grab theirs also [under another diabolical pretense].
Exactly. The last I heard, we're still 'holding' Iran's stash from 1979. Once the oligarch puts his cash into the western system, he has been effectively flushed out of the bushes and into the open field for the hunters.