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By John Helmer in Moscow

Rumpelstiltskin is one of the nastier dwarves in the canon of scary children’s stories. But for investors in goldmining, it is worth remembering that his investment in gold production proved to be pretty successful until he got careless when talking to himself, and revealed his name.

Pavel Maslovsky’s name as a goldminer in Russia isn’t so fanciful. An English geologist who worked with him on the development of the Pokrovsky goldmine in the 1990s, says: “To my knowledge Pavel Maslovsky has worked his arse off for years on this project and I never had reason to doubt his credibility or honesty.” The source says she also visited the Pokrovsky mine site. “While I was there I was told that… Pavel had passed winters on site in a wooden hut with the rest of the crew working to get the project started. Doesn’t sound like a pyramid scheme to me.”

You don’t need to be a particularly experienced geologist to tell the difference. But then the records of Tokur Zoloto (“Tokur Gold”), the company Maslovsky first established to mine the Pokrovsky deposit, and from which his subsequent fortune has flowed, weren’t easily accessible to the geologist. They haven’t been accessible to investors in Maslovsky’s goldmine prospectuses to the London Stock Exchange since then.

On Tuesday, September 21, when Maslovsky and his associates posted their prospectus to list shares of a new company called IRC Limited on the Hong Kong Stock Exchange, there was no information about Tokur Gold there too.

There are 307 pages of the main prospectus. Deloitte the auditor adds another 106, and with other reports and recitals, the total document runs to 743 pages. The convenient search device can be tested. Maslovskiy (note the spelling difference) is mentioned 31 times; counting his son Alexei, his stepson Yury Makarov, and another relative named Dmitry Maslovsky, the Maslovsky clan is mentioned 36 times. Pavel the father is a non-executive director of the new company; he is also a major shareholder and chief executive of the pre-listing parent, Petropavlovsk Plc, and a director on its board. Makarov becomes the chief executive of IRC and an executive director of its board. Alexei stays where he is at Petropavlovsk running group development; while Dmitry, an ex-Russian Navy officer, is in charge of shipping and port operations for IRC.

If investors in the Hong Kong market are serious about testing the gold value of the names in IRC, Maslovsky is an important one.

The history of the Maslovsky businesses that precede IRC is therefore relevant to the valuation of that name. But if Tokur or Tokur Gold (Zoloto) are searched for in the IRC prospectus, there is nothing. Trying bankruptcy, there are just two references, one of which has no relevance to IRC or the Maslovsky history. The relevant reference is in the section spelling out Russian risks. It says: “bankruptcy procedures…are not well developed and are subject to misuse.”

Maslovsky ought to know. That’s because on February 2, 1998, Tokur Zoloto was ordered into bankruptcy in a ruling of the Arbitrazh Court of Amur region. Maslovsky was asked whether he acknowledges that bankruptcy of his company. He refused to reply.

In the litigation section of the new IRC prospectus, there is a reference to a bitter fight in Cyprus over shares in one of the IRC’s prospects, Garinskoye. It’s nasty, complicated, and not relevant to Maslovsky’s liabilities a decade ago, when he and Peter Hambro were starting out. But about that past, the prospectus looks clear and categorical. “No member of the Group was a party to any material legal or administrative proceedings…” (page 217). And then again, at page VIII-52, aside from the Cyprus court case, “no member of the Group was engaged in any litigation, claim, or arbitration of material importance…”

The prospectus also offers a history of the group. This starts at the year 1994, when it says the “Petropavlovsk Group (then called Peter Hambro Mining Group) was founded principally focusing on the acquisition, exploration, development, and production of precious metals.” The next year in this history is 2001. There is nothing in between.

According to the US standard, when a public figure like Maslovsky promotes himself, his reputation, and his business record for selling shares to the public – no matter where – it is relevant for the share-buying public to know what has been published about him, especially in places where he is known best. What has been accused against him is relevant to be known, and therefore made public, even if the charges turn out to be untrue.

Maslovsky’s silence, and the blanks in the prospectuses, should therefore be weighed against what the Russian media have been reporting over many years. Here’s a sample – click on each pyramid to read the story in Russian.

The point of these reported claims is that Maslovsky advertised in the fareast of Russia for shareholders to subscribe their funds to enable the development of the Pokrovsky goldmine. Those shareholders believed him, and handed over their money. But subsequently they did not receive dividends, and they then lost their stakes when Tokur Zoloto was ordered into bankruptcy by the Amur courts. Somehow, however, the Pokrovsky mine was sold by Maslovsky into the partnership he formed offshore with Peter Hambro. Maslovsky gained; the original shareholders of Tokur Zoloto lost.

Did the shareholders really believe Rumpelstiltskin had the secret of weaving straw into gold? Were they liable for their naivety? Did Rumpy take care not to reveal his name this time around?

The answer to those questions ought to be up to Maslovsky to answer. Because he refuses to acknowledge that the Tokur Zoloto bankruptcy occurred, he was asked two further questions:

— what explanation does he give for failing to disclose to public shareholders in prospectuses issued in 2002 (London AIM), 2009 (London main board), and this week in Hong Kong, that there have been bankruptcy orders issued by Russian arbitrazh courts against companies and assets in Amur, for which he had legal responsibility at the time?


— how does he respond to the published allegations in Russia that he operated a pyramid scheme, raising investor expectations from the Pokrovsky mining project through drawing in shareholder funds for Tokur Zoloto, and then not repaying the shareholders, allowing Tokur Zoloto to default on its obligations and go bankrupt, while he sold the Pokrovsky asset to the Peter Hambro group companies, for the benefit of himself?

Maslovsky has so far declined to answer.

The Hong Kong Stock Exchange and the companies it approves for listing and trading their shares are governed by the fraudulent and reckless misrepresentation provisions of the Securities and Futures Ordinance, sect. 107. If that’s what is buried in the history of Tokur Zoloto, is concealing it an offence now? And even if the concealment as such is not an offence, according to the Ordinance, is Maslovsky a fit and proper person for having done whatever he did, and then concealed it, according to sect. 129 of the Ordinance?

The Exchange spokesman Scott Sapp was asked to say whether the listing rules, policies and practices of the Exchange require the disclosure by individual corporate officers or by companies seeking listing approval, or by the listed companies themselves, to disclose any history of bankruptcy proceedings, judgements or orders against themselves, or their assets or corporate entities? Sapp was also asked to say if concealment of bankruptcy history by a company seeking listing is cause for sanction. His reply is still awaited.

So, while we wait, children, let’s go back to Rumpelstiltskin’s story, and see what we think, now that we understand what successful mining companies really do to make gold out of straw. Beware, though, not to confuse fairy tales with true stories.

We start with the Miller. He prostitutes his daughter to the King. Then there’s his daughter. She might have said, “O Big-Boy! I don’t really know the trick of turning straw into gold. That’s just my pimp turning you on. But I do love you, and I’m sure we could have a golden time together’. But the Miller’s Daughter doesn’t say that. Instead, she asks Rumpelstiltskin to accept her contract offer, which amounts to a fraud against the King. She also accepts the reciprocal obligations of the deal, just as she had accepted them when her Big-Boy had promised her marriage, if she came up with the gold instead of straw. Rumpy complies; the Miller’s Daughter hands over the gold; the King completes his end of the M&A deal.

Only post-deal, the Miller’s Daughter doesn’t need the little fellow any more. So she stiffs him. She’s more than a whore – she’s a thief. That’s obvious when it comes time to paying by handing over her first-born child.

Now let’s not hear about the sacredness of a mother’s love for her baby. This tart knew she had to pay a dividend when her investment in gold turned profitable. Also, she didn’t have to have the baby. But she defaults, thinking to herself, ‘Maybe queens can get away with screwing dwarves.’ The folks in Amur know what that’s like when it happens.

So what happens next in the fairy-tale? Having whored her way to queenship, the Miller’s Daughter asks the kingdom’s spies to intercept whatever dwarves are saying. And that’s how Rumpy, over-confident that he was safe from eavesdropping, lost his asset – his name.

The tale seems to go off the tracks at this point. The whore who cheats Rumpelstiltskin has done it so obviously, why does Rumpy get angry? Why doesn’t he just get even? He dies, rather than than dishonour his word, leaving the Miller’s Daughter to profit from dishonouring hers.

What’s the moral for real life in that, boys and girls?

It’s obvious what part in this tale is played by Pavel Maslovsky, but what about his London partner, Peter Hambro? Well, children, that shouldn’t be difficult for you. He’s the King. And as kings usually do, whatever their sexual or fiscal orientations, he ends up with the sex, the gold — and the self-inflicted death of the only person who could testify to how the fortune was really made.

And that, children, is what goldmining on the stock market is really about. Not something for little people to chance themselves at.

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