One minute `gold auction`
15 March, 2012
One minute `gold auction`

Only one bidder - LLC Mining Investments - participated in an auction of a 27-year exploration/extraction licence for gold, copper and other precious minerals encompassing 1200 hectares in the Shida Kartli region; the auction was held on February 29 by the Agency of Natural Resources. GEL 100 million was fixed as a starting price and Mining Investments received the licence for GEL 110.5 million without much effort for it was the sole unrivaled bidder at the bidding marathon of the

most attractive mining deposit of the country which currently accounts for most, if not all, of Georgia’s gold and copper (ore) exports -3.9% and 5% of Georgia’s total exports respectively in 2011. 

 

Non-governmental watchdog Transparency International Georgia (TI Georgia) along with Georgian independent experts think Georgian government held the auction non-transparently for it could be impossible to fail to attract much more serious investors at Madneuli against the backdrop of permanently rising prices on gold as well as copper and do not divest the 27-year licence for ridiculous price of USD 110.5 million.  Last year alone, Georgia exported gold worth USD 110 million, and USD 85 million worth of copper ore and concentrates.

As Mathias Huter, TI Georgia’s expert, said in the interview with Gregorian Journal, he  talked to foreign mining companies and they say the auction call period was too short, just six weeks [auction was announced on January 19, 2012 and held on February 29] while they needed much more time several months, perhaps half year, to send their experts and research the deposit, evaluate and make decisions.

The winning company that was registered in Tbilisi on 13 February 2012, two weeks before the auction took place, is obliged, based on auction terms to evaluate the licensed Bolnisi and Sakdrisi ores in 24 month and 48 months respectively starting April 15 of 2014 when the licence eneters into effect. Alvydas Brusokas, a Lithuanian citizen, is the sole owner and director of the company.

“ TI Georgia did not have much time to monitor the process: The auction ended within a minute, after the chairman of the meeting announced that LLC Mining Investments has won the licence for GEL 110.5 million, one bidding step of GEL 50 thousand  above the starting price,” Huter said.  “We believe this existing mine was an extremely valuable and attractive asset, and the fact that only one bidder participated indicates that the auction process was - once more - not designed to attract a large number of international investors with relevant experiences. If government applied much effort it could attract reputable companies from US, Canada or any other countries with much better professional experience.”

Brusokas himself was not present at the auction. TI Georgia recognized at least one familiar face in this auction who represented Brusokas’ company. In a previous auction, this individual seemed to represent the Caucasian Mining Group, a company with fairly opaque ownership, which won another major gold and copper mining licence in October 2011.

Madneuli ownership has always been a stumbling block surrounded by mystery and leading to the Kremlin affiliated Sergey Generalov [an imputed buddy of Valdimer Putin, Russia’s new president as well as Temur Alasania, uncle of Georgian President Saakashvili] billionaire and head of Russian Industrial Investors owning golden ores in Armenia too. In 2005 privatization tender announced for JSC Madneuli’s 97.25% shares was won by Stanton Equities Corporation. Madneuli, a daughter company of GeoProMining Group, a sister-company of Russian Industrial Investor, owns the questioned deposits licence at the moment that expires in 2014.

LLC Mining Investments is also believed to be affiliated with Generalov’s company for not a single other investor turned out willing to bid for gold and copper ore license, experts doubt it was a governmental lobby prohibiting even local investors to bid for the licence did not change hands actually.

Ditrikh Muller, a market analyst with Georgian Investment Group, thinks the price is completely unfair when it comes to 27-year license, while price for gold stands between USD 1600-1700 per ounce and is supposed to go higher if the US approves higher state debt ceiling. He disapproves the state approach to divest such a valuable ore as Madneuli and advocates to have it under state management and license only ore mining and exploration service, so that the state could handle with the extracted ore at its own discretion and enjoy profits.

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