In far eastern Russia, where current temperatures are sub-zero and polar bears are roaming wild, a little-known publicly listed company backed by Australian billionaire philanthropists Paul Little and Jane Hansen is mining coal and shipping it to Asia.
While most Australian businesses left Russia after Vladimir Putin invaded Ukraine two years ago – partly in protest against the war and partly because of the Commonwealth’s strict sanctions regime – Tigers Realm Coal ploughed ahead with its operations, expanding from China to the rest of the Asian market, and reaping a net profit of $46 million in the past year.
Tigers Realm Coal, which operates in Russia, has launched legal action against DFAT. Credit: Tigers Realm
The Department of Foreign Affairs and Trade warned Tigers it was likely in breach of the Autonomous Sanctions Act, but the miner was unconvinced, describing DFAT’s non-binding finding as untenable, and launching legal action in June in the hopes of having the finding overturned.
The saga, which could have wide-scale ramifications for Australia’s sanctions regime, will finally play out in Federal Court’s chambers in Canberra on Monday when lawyers for Tigers will seek to convince Justice Geoffrey Kennett that sanctions on importing, purchasing and transporting Russian coal does not apply to their client.
“Based on public reporting, we have a situation of an Australian company extracting mineral resources in Russia and selling them elsewhere,” says Anton Moiseienko, a lecturer at the ANU College of Law, where he focuses on targeted sanctions.
“If they had tried to import that into Australia, the [ramifications] would have been clear. But, as they are selling Russian-origin coal outside Australia, the question is: is that caught by Australian sanctions laws? And that hinges on the court’s interpretation of transport.”
Tigers was formed in 2010 by mining entrepreneur Owen Hegarty and Tony Manini with coking coal assets in Colombia and Russia, and listed on the Australian Stock Exchange a year later at 54¢ a share. It was a troubled start for the miner, even long before Russia’s annexation of Crimea – shares fell 16 per cent on the day it listed, and it has never managed to recover.
Today, the company, which has a market cap of $72 million and its operations centre on the Amaam coking coal deposits in Chukotka Autonomous Okrug in Russia’s far east, is fetching just 0.05¢ a share.
And if the Federal Court rules in favour of DFAT, it will be a further blow for Tigers, which in 2020 was riding high on the hopes of capitalising on China’s blacklisting of Australian coal.
“If the Federal Court forms the view that [sanctions do], in fact, apply to a material aspect of the company’s activities, the company will be required to give urgent consideration as to the steps required to ensure compliance with sanctions [including the possible cessation of those operations],” Tigers told investors on Thursday.
Tigers Realm hauling coal in Russia’s far east. Credit: Tigers Realm
“In such an eventuality, the company’s ability to continue as a going concern is likely to be impacted.”
Tiger’s largest shareholder – controlling 59.89 per cent of the company – is Bruce Gray, who is the non-executive director of Tigers and founder of market darling Sirtex Medical, followed by Russian private equity firm Baring Vostok Mining Holding, which owns 18.2 per cent, according to the most recent annual report published last week.
The Russian Direct Investment Fund, Moscow’s sovereign wealth fund established in 2011 by Putin to make it easier for foreign firms to co-invest with the Kremlin in Russian companies, owns 8.41 per cent of Tigers. The US Treasury has said the fund is “widely considered a slush fund” for Putin and is “emblematic of Russia’s broader kleptocracy.” The Australian government moved to sanction its chief executive, Kirill Dmitriev, in March 2022. The Russian Direct Investment Fund has rejected this description, saying it follows the laws of countries where it invests.
Namarong Investments, whose directors include logistics billionaire Paul Little and his wife, University of Melbourne chancellor Jane Hansen, controls 5.63 per cent of Tigers.
‘Cases like this show in general strategic terms there are still companies with significant links to Russia and there are companies affected by sanctions against Russia, so we shouldn’t be too quick to dismiss sanctions as something that is purely symbolic or bereft of practical impact.’
Anton Moiseienko, ANU college of law
Gray and Little did not respond to questions before deadline. Hansen declined to comment. As investors, they’re not involved in managing the company’s operations.
Anti-corruption activists, including Transparency International’s chief executive, Clancy Moore, will be watching Monday morning’s hearings closely.
“Given that Russian coal is a sanctioned good under Australia’s sanctions laws, it would be surprising if they were allowed to continue mining, exporting and selling Russian coal,” Moore says.
Last week, Tigers filed its annual financial report showing the company mined 1.6 kilotonnes of coal, raking in revenue of $140 million in the year to December 31. It reported a net profit of $46 million, down 13 per cent.
Subsidiaries of Tigers Realm Coal Limited
- Tigers Realm Coal (Cyprus) Pty Ltd - Cyprus
- Greaterbay Larnaca Finance (Cyprus) Pty Ltd - Cyprus
- Telofina Holdings Ltd - Cyprus
- Rosmiro Investments Limited - Cyprus
- Anadyrsky Investments Limited - Cyprus
- Beringpromtrading LLP - Kazakhstan
- Beringpromugol LLC - Russia
- Port Ugolny LLC - Russia
- Bering Ugolny Investments LLC - Russia
- TIG Trading DMCC - United Arab Emirates
- Eastshore Coal Holding Pty Ltd - Cyprus
- Northern Pacific Coal Company - Russia
The records show Tigers has been paying royalties to the Russian government for its Amaam North and Amaam mining projects. The company amended its royalties agreement two weeks ago; under the new arrangement, it paid $858,000 in February and is required to pay $4.5 million in two equal instalments by June next year.
Moiseienko says while there may be an assumption that the impact of Australian sanctions against Russia is marginal because there is little trade between the two countries, Tigers’ continued investment in the Eastern European country highlights why the Commonwealth should not dismiss sanctions as a critical tool.
Australia was 94th on the list of Russia’s main export destinations right before the pandemic, according to DFAT. Australia exported $723 million in goods to Russia in 2019-20, while importing $250 million in goods from Russia.
“Cases like this show in general strategic terms there are still companies with significant links to Russia and there are companies affected by sanctions against Russia, so we shouldn’t be too quick to dismiss sanctions as something that is purely symbolic or bereft of practical impact,” Moiseienko says.
Last month, Russian aluminium producer Rusal lost a lawsuit against Rio Tinto after the mining giant refused to continue working with Rusal – a minority shareholder – in its Queensland alumina refinery over Australia’s sanctions regime.
In a statement, a DFAT spokesman said: “The Australian Sanctions Office in the Department of Foreign Affairs and Trade takes sanctions compliance seriously. It would not be appropriate for the department to comment on matters before the court.”
Tigers did not respond to repeated requests for comment.
Its chairman, Craig Wiggill, told investors at its annual meeting in August it was dangerous to declare or signal an intention to leave or wind down activities in Russia following Putin’s presidential decree last year giving the government the legal power to take foreign assets into administration.
“The company has not applied [to the foreign minister] for an exemption permit as it has determined it is not appropriate to do so where the company does not consider its operations fall within the scope of [the sanctions regime],” Wiggill said at the time.
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clarification
This story has been updated to say the Russian Direct Investment Fund is considered a slush fund by the US Treasury, a description rejected by the fund.