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. Last Updated: 07/27/2016

Mitvol's Agency Rules Highland in Violation

The country's environment watchdog said Tuesday that Highland Gold Mining was in breach of the terms of its license to develop its large Maiskoye gold deposit in the Far East.

The agency has no jurisdiction to rule on licensing issues, but comments by its outspoken deputy head, Oleg Mitvol, have previously raised concern among investors about growing state involvement in the natural resources sector.

The agency said in a statement that Mitvol had sent a letter to the Federal Subsoil Resource Use Agency, which rules on mining licenses, advising that the owner of the license to develop the Maiskoye deposit in Chukotka had not fulfilled license terms.

It did not name Highland Gold directly in the statement.

A spokeswoman for the Federal Subsoil Resource Use Agency said her agency had not received any correspondence signed by Mitvol in the last few days. But she said it would usually take three days for a document sent by Mitvol's agency to arrive at the subsoil agency's attention.

Both agencies are part of the Natural Resources Ministry.

A metals analyst expressed doubt that Highland would lose its license.

"The risk of losing the Maiskoye license is lower than 50 percent. Eventually, they will manage to get the terms revised," said Vladimir Zhukov, an analyst at Alfa Bank. "But the process may not be as easy as they expect."

Highland, the country's fourth-largest gold miner, paid $34 million for Maiskoye and has since invested $70 million there.

Its license states that the first ton -- or 32,150 ounces -- of gold should be produced by Dec. 31, 2007. The complaint from Mitvol's agency centers on the fact that Highland has applied for a three-year extension to this date.

Highland declined immediate comment in response to the complaint Tuesday. It issued a statement on July 4 saying a feasibility study on Maiskoye was due to be published in the second half of this year. Highland managing director Henry Horne said last week that the first output at Maiskoye was scheduled for the second half of 2010 and that the company had applied for a license extension last year, its first such application for Maiskoye. "We have always told the market the production date for Maiskoye is the second half of 2010," he said.

Highland Gold is owned 34 percent by Canada's Barrick Gold Corporation, the world's largest gold miner.

Shares of Highland Gold fell as much as 5.5 percent before rebounding to 122.5 pence (25 cents) at 8:43 a.m. in London. They have fallen nearly 50 percent in the last 12 months, hitting a low of ?1.05 on June 29.

Comments by Mitvol caused another London-listed gold miner, Peter Hambro Mining, to lose one-third of its market value over a few days in December, although the shares bounced back after the miner received the all clear in an inspection.