Aurora Acquisition Corp (AURC)

[MUSHROOMKING]

The deputy head of Rospriradnadzor, the Russian inspectorate for mining licenses and environmental protection, Oleg Mitvol, took the unusual step this week in Moscow of saying No.

On April 18, Mitvol met with Nikolai Shabalin, Chief Geologist and Director for oil projects in Russia of DeGolyer & McNaughton, the North America-based auditor for global energy companies. Mitvol then issued an unprecedented attack, not only on the estimation practices of DeGolyer & McNaughton, but on the reserve claims and balance-sheet estimates issued by public mining companies on international stock exchanges.

Yevgeniy Snegirev, Mitvol's spokesman, told Mineweb that he could not provide details on any of the companies which Rospriradnadzor intends to inspect for evidence of alleged reserve manipulation by DeGolyer & McNaughton. One of these, identified by Mitvol's agency, is Victoria Oil & Gas, an affiliate of Kevin Foo's Celtic Resources.

For the present, the focus of the inspection agency is on the oil and gas sector. According to an official statement issued by Mitvol's parent ministry, the Ministry of Natural Resources, Mitvol has despatched a letter to the Federal Security Service (FSB) requesting a joint audit operation aimed at "abuse in the distribution of dubious geological information in the resource sector."

Mitvol's statement explicitly singles out foreign mining companies, registered on foreign stock exchanges, which he charges with promoting reserve estimates from "purportedly independent auditors....the majority of the companies do not possess those reserves which are declared by them at stock exchanges."

For an example, Mitvol named the London listed Imperial Energy. In the ministry statement, he accused Imperial Energy, with the audit support of DeGolyer & McNaughton (D&M), of multiplying the reserves in their license areas by several magnitudes over the reserves officially verified and accepted by the State Committee on Reserves (GKZ). "According to GKZ, on the reserves of affiliated structures of the company Imperial Energy, there are stocks at only on one deposit - Maiskoye -- and reserves of [Russian classification] С1, just 2.6 million tonnes [of oil equivalent] are registered. However, reserves have been published in the mass media at tens of times more than the real indicators." According to Mitvol, this is game of inflating value in order to boost share prices and generate stock market profit. At the same time, he claimed, such companies are "not investing sufficient means in the real sector of the Russian economy." He warned that sharp practices in reserve estimation risk "harm to the image of Russia, [and] trust of investors in the country."

Mitvol has called for FSB intervention to review all reserve estimates of foreign companies working since 2003 on mineral extraction in Russia. The proposal thus extends well beyond the example of the oil and gas sector, and aims squarely at the sector in which foreign miners are most active - gold mining