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The ship that went missing while carrying gold ore from a Polymetal mine has been found. One body was also found and one person has been arrested.
A ship loaded with gold ore from Polymetal International’s (LSE:POLY) Avlayakan deposit went missing in late October. It was found sunken at the bottom of the Sea of Okhotsk earlier this month. Though most of the crew is still missing, one body has been found and one person has been arrested.
Polymetal began trial open-pit mining at Avlayakan in 2010. From Kiran, a settlement of about 600 people, the site is accessible by a winter road that is operational 80 to 100 days a year. Polymetal’s website notes that access to Kiran by sea is possible from early June to mid-October.
Amurskaya, a dry cargo ship, left the port of Kiran on October 28, carrying ore from Avlayakan and destined for the port of Okhotsk, the access point to Khakanja, Polymetal’s processing plant.
Radio contact with the ship was later lost, according to Polymetal. The crew of nine did not call for help, but authorities have stated that an emergency radio buoy went off at 8:15 am Moscow time, signaling a problem.
A week and a half later, Russian divers found the ship sunken in the Sea of Okhotsk. An object believed to be Amurskaya had been spotted earlier, but initially the weather did not permit an underwater investigation.
One body was found inside the ship, but after some 20 days of search the whereabouts of the other crew members remain unknown.
“A ladder, the lack of people on the bridge, the open door to the room below the bridge deck and the lack of lifeboats on board confirms with a high likelihood that the crew attempted an emergency evacuation,” authorities said.
A Polymetal press release notes that Russia’s Emergency Situations Ministry said the vessel went missing during a severe storm, which seems to suggest that weather caused the ship to sink. But excessive weight is believed to have also played a role in the demise of Amurskaya.
The ship, built in 1972, is believed to have been carrying 700 to 750 metric tons (mt) of gold ore, vastly exceeding its maximum capacity of 611 mt. Some experts believe that the load’s size coupled with the stormy weather caused the ship to capsize and sink.
College Hill is the firm representing Polymetal with international media. Leonid Fink, a partner, would only confirm that public sources report that the ship contained 700 mt of gold ore.
When Gold Investing News (GIN) inquired further as to how Polymetal’s knowledge could be limited to public reports, Fink said, “the company has instructed us not to provide any further comment while the legal inquiry into the accident is underway.”
This incident has sparked a criminal investigation, and Alexander Shiltsin, director general of Nikolayevsk-on-Amur Seaport company, has been arrested and charged with safety violations leading to the death of two or more persons. If convicted, he could face a maximum sentence of seven years.
“He knew for certain that the loading of raw materials on the dry-cargo ship was carried out in violation of the rules of transportation of dangerous cargoes,” and that “because of the bad weather conditions the ship cannot sail,” but the head of the port “personally gave instructions to the ship’s crew to sail in the Sea of Okhotsk,” a regional Investigation Department reportedly said.
Polymetal’s press release states that Amurskaya was contracted by a Polymetal subsidiary.
Asked whether Polymetal has had any discussions or made decisions regarding future shipments with this cargo company, Fink sidestepped the question, saying only that “the incident and its possible causes are being investigated by the Russian authorities.”
Fink did confirm that the gold ore has not been recovered.
In response to GIN’s inquiry about the financial impact of the loss, Fink replied, “putting 700 tonnes of ore into perspective, in the nine months ending September 30, 2012 Khakanja hub of Polymetal [a group of three mines, including Avlayakan] mined 1,050,000 tonnes of gold ore.”
With each metric ton of ore containing about 6 grams of gold, analyst Sergey Donskoy of Societe General estimates that the gold ore was valued at $230,000.
Fink said that the transport company is fully responsible for the cargo.
Securities Disclosure: I, Michelle Smith, do not hold equity interest in any of the companies mentioned in this article.