Millionaire Strukov’s golden peak ruined by criminal world
Gold miners working in Vershino-Darasunsky township of the Zabaykalsky krai went on strike over the money for the second time in the last six months. Why a company literally sitting on a gold vein has no funds to pay salaries? Especially taking that the mine owner, Chelyabinsk industrialist Konstantin Strukov, is a dollar millionaire. After the scandal, Strukov said that he has to sell the enterprise 25 times cheaper in comparison with its original purchase price “because of the criminal world”. Sounds intriguing, doesn’t it? The CrimeRussia was figuring out what’s going on at Darasun mine.
On September 18, 2017, several dozen miners employed with Darasunsky Rudnik (Darasun Mine) company went on hunger strike demanding to pay the salary arrears. Several hundred people were deprived of the severance pay after the decision of the company owner, millionaire Konstantin Strukov, to get rid of the troubled asset. Strukov has provided a pretty vague explanation of his decision: “We failed to overcome the criminal world”. Allegedly, the business has been ruined by the illegal gold mining.
According to Forbes, Konstantin Strukov is the 108th richest businessman in Russia as of 2017. His wealth is estimated at $950 million. However, according to his income declaration for the year of 2016, Konstantin Strukov has officially earned only 351.9 million rubles ($6.1 million), while his wife earned 200 thousand rubles ($3.5 thousand).
Chelyabinsk industrialist Konstantin Strukov
What criminal world?
It is not a secret that any venture generating good revenues is ‘supervised’ by some ‘authoritative’ people. Those who believe that the times when any business was based on firearms and murders have passed with the 1990s are wrong. For instance, the jade mining business in the Zabaykalsky krai used to be ‘overseen’ by Il’shat ‘Sadyk’ Ivanov, a henchman of Georgy ‘Takha’ Uglava. Currently both of them are in jail, and their ‘authority’ and influence have declined.
The refusal of the government to recognize jade a precious or even semiprecious stone is another important factor: jade mining requires a very simple license, similar to that required for gravel mining. Gold mining is regulated more strictly and the scope of illegal operations is lower. However, the criminal world is likely involved into that industry as well – because the procured gold has to be somehow sold. Therefore, bans on private gold mining do not stop ‘black diggers’.
Even Anatoly Chumilin, Minister of Education of the Zabaykalsky Krai, has admitted that residents of Vershino-Darasunsky township make a living off of illegal gold mining. After a business trip to the Tungokochensky district in June 2015, he had requested the respective ministries to put the things to order.
“I had a business trip and became aware that illegal gold mining and trade are thriving. I mean Vershino-Darasunsky township. People create entire underground enterprises there and mine considerable amounts of gold using leaching and other techniques. The law enforcement structures put a blind eye to this. People put their lives to risk, while the gold belongs to the state. We can’t shut it down, so the issue has to be dealt with at a higher level,” – Chumilin said.
Senator Stepan Zhiryakov representing the Zabaykalsky krai has outlined the scope of the illegal gold mining. According to him, mine employees assist the illegal diggers: “Starting from the hoister operator to cager personnel who help people to descend to the mines for a remuneration. ‘Black diggers’ lived there for weeks. I have seen photos showing their living conditions – they had comfortably accommodated in former lamp rooms, established sleeping places, brought foods. They had all the required equipment: perforation guns, generators, mills. It could not be brought there manually – so it had to be transported through the cage. In addition, it is necessary to know where is the gold. Therefore, somebody had to direct them. A mineral surveyor or geologist could be involved there. They had their own mercury and acid – somebody had to bring these reagents to the township and sell. Where were the law enforcement authorities? Some people were caught there with petty things. But in fact, larger amounts of gold were removed,” – Zhiryakov said.
Stepan Zhiryakov, Senator representing the Zabaykalsky krai
In fact, Vershino-Darasunsky township makes a living off of illegal gold production in abandoned mines. After the death of a ‘black digger’ in an abandoned mine of Darasunsky Rudnik (Darasun Mine) Limited Liability Company, the Tungokochensky District Court has satisfied the lawsuit filed by the Prosecutor’s Office and ordered to block the entrances to abandoned mines – however, the protesting township residents did not allow the workers to do so. In February 2015, bailiffs, backed by the Rapid Response Team of the Special Department of Operative Duty of the Administration for the Zabaykalsky Krai of the Federal Bailiffs’ Service, had attempted to enforce the court decision again. A Riot Police squad had maintained the civil order. However, the local residents had tried to obstruct the bailiffs’ actions again – they felled trees and dug spikes on the way of the special machinery.
Senator Zhiryakov does not rule out that miners employed with Darasunsky Rudnik were also producing gold privately. Perhaps, the mine management has reduced the labor participation coefficient from 1 to 0.3 due to that reason. This decision has caused a strike at the mine in May 2017. 80 people had refused to ascent from the mine and demanded to revise the incentive payments and pay salary arrears outstanding for only a few days at that time.
“Such things do not happen for no reason. It’s possible to blame the management, but there had to be some reason,” – the Senator has emphasized.
Regional functionaries have urgently arrived to the township to clarify the situation. Then the mine administration has paid the arrears and stated that it is ready to sell the enterprise.
This statement seemed weird amid good financial results. According to Forbes, the enterprise has produced 306 kg of gold in 2016. The total production of UGC Gold Mining Company (Uzhuralzoloto) was 14.6 tons of gold. According to Focus.kontur.ru, the income of Darasunsky Rudnik Limited Liability Company for the year of 2015 (no data are available for 2016) was 677 million rubles ($11.8 million), while its net profit was 215.9 million rubles ($3.7 million).
Over 12 tons of gold have been mined in the Zabaykalsky krai in 2016; this is 7% more than in 2015. Novo-Shirokinsky Rudnik Open Joint Stock Company (a subsidiary of Russdragmet) and Rudnik Aleksandrovsky Joint Stock Company (a subsidiary of Zapadnaya Gold Mining Ltd.) were the leaders in the gold ore extraction – each of them has produced more than 2,000 kg of gold. Mangazeya Mining Ltd. has produced over 850 kg of gold on Savkinskoe gold field in 2016, while Darasunsky Rudnik Limited Liability Company produced more than 300 kg.
Non-payments of salaries had occurred in the past as well. In December 2014, the Prosecutor’s Office of the Zabaykalsky Krai had requested the Investigations Directorate in the Zabaykalsky Krai of the Investigative Committee of the Russian Federation (ICR) to initiate a criminal case for non-payment of salaries to 150 employees of Darasun mine for the total amount of 10 million rubles ($173.7 thousand). In December 2015, the criminal case against Ivan Starodubtsev, ex-General Director of Darasunsky Rudnik Limited Liability Company charged under part 2 of Article 145.1 and part 1 of Article 145.1 of the Criminal Code of the Russian Federation (full and partial non-payment of salaries), has been submitted to court. After staff cuts in 2013 and 2014, the General Director refused to pay salaries to 222 employees. The total amount outstanding was 6.6 million rubles ($114.6 thousand). According to the Prosecutor’s Office, the company had sufficient funds on its accounts to pay the arrears in that period, but the General Director was using the money for other purposes not related to the top-priority liabilities.
Conflicts with personnel and salary delays occur at other enterprises belonging to Strukov as well. His companies demonstrate the same attitude towards their partners: 19 lawsuits for the total amount of 496 million rubles ($8.6 million) have been filed against UGC Gold Mining Company in the last year. Strukov’s businesses are mentioned in reports of the Federal Environmental, Industrial, and Nuclear Supervision Service of Russia (Rostechnadzor) on a regular basis due to hundreds of violations of mandatory industrial safety and waterworks regulations.
Uryumkan is the leader in stream gold production (900 kg of the precious metal procured in 2016). The company has launched gold mining operations back in 2010 as a mining partnership – but it was never involved into the gold ore extraction. Currently Promsvyazbank holds the entire company in pledge. In 2012, Sergei Berbidaev, ex-General Director of Uryumkan (he was killed in a traffic accident in October 2016), decided to launch gold ore production as well. The bank has offered a loan to finance the plant construction and upon its commissioning, Promsvyazbank is to become the guaranteed gold purchaser. Darkhan company founded by Uryumkan is going to launch a plant on Kirchenskoe gold field in the nearest future. The enterprise expects to start producing gold by the end of the year. There is no word yet about the debt repayment to Promsvyazbank. Therefore, the acquisition of ‘profitless’ – from the UGC Gold Mining Company’s point of view – mine in Vershino-Darasunsky township looks weird.
First announcements about this deal were made immediately after the May strike. According to the employees, UGC Gold Mining Company (Uzhuralzoloto), the owner of Darasun mine, has started handing over the administration to the future owner, Uryumkan Limited Liability Company, since June 1, 2017. The deal was supposed to close by the end of June. The transaction value is already known: $1 million. In 2007, Konstantin Strukov had purchased Darasun mine from Canadian company Highland Gold Mining Ltd. for $25 million. In addition, the Strukov’s company has invested 10 billion rubles ($173.7 million) into this mine.
Uzhuralzoloto Group of Companies belongs to Cyprus-based Ugold Limited. Both companies have been established in 2007. UGC Management Company whose Chairman is Konstantin Strukov manages Uzhuralzoloto. The Cypriot offshore company owns 5% of the management company.
Yesterday it became known that the former mine administration has paid all the arrears to the miners and the hunger strike is over. However, the situation with the workers still remains unknown. In total, 454 persons have been terminated in the period since June 24 and until August 4 in the framework of the staff cuts. Konstantin Strukov claims that his company has no relation to the mine anymore. According to him, the agreement of purchase and sale has been signed on August 15. “We have completely withdrawn since September 1,” – he said.
Aleksander Kulikov, First Deputy Prime Minister of the Government of the Zabaykalsky Krai, says that it is premature to discuss new jobs for the miners from Vershino-Darasunsky township. There was no official announcement of the deal closure yet, neither did the new owner announce the recruitment of miners.
An administrative case has been instituted against Yuri Busygin, ex-General Director of the enterprise, for non-payment of salary arrears. The Regional State Labor Inspection has submitted results of the mine inspection to the court. The watchdog agency has found that Darasunsky Rudnik Limited Liability Company had not only violated the labor legislation but also failed to rectify the identified defects on time.
In the light of the above, the statement made by Konstantin Strukov that the company was sold “because of the criminal world” seems a little bit ambiguous...
The prosecutors want the former Russian Federation Council member to go to prison for 14 years instead of 9 and pay a 500-million-ruble ($8.8 million) fine instead of 70 million rubles ($1.2 million).