The former minority shareholders of a major Russian mining company have encountered what may be the final setback in their 17-year attempt to pressure the company’s new owner to pay them compensation for a deal which the courts say did not violate their rights.

Investigators have detained the self-proclaimed head of a group of former minority shareholders of Lebedinsky Mining and Processing Plant (LGOK), who have been in a years-long dispute with LGOK’s parent company and Russia's largest iron ore producer Metalloinvest. The latter is part of the USM Holding group of companies, where sanctioned billionaire Alisher Usmanov is a shareholder.

The US and UK imposed sanctions against Metalloinvest and a number of other Russian metals companies in 2023.

According to business daily RBC, the new head of the former minority shareholders, Andrei Burkin, was detained on January 31 in Russia’s Belgorod region on “suspicion of extortion carried out by a group of individuals.”

Earlier, authorities reportedly searched a residence tied to Burkin in connection with his activities as the purported leader of the former shareholders’ group. In December 2023, Russian media published reports of a letter signed by Burkin and marked as “confidential,” which said that the former minority shareholders would agree to drop their claims against Metalloinvest in return for compensation in the amount of EUR 2 million.

The searches were tied to an extortion case brought by Metalloinvest. The metals company subsequently confirmed to Russian media that “the reason for filing an extortion claim was the systematic activity of spreading multiple defamatory publications and false denunciations about the company.”

As bne IntelliNews reported earlier, the conflict dates back to 2007, when Metalloinvest’s predecessor Gazmetal, having consolidated a 99.47% stake in LGOK, announced a mandatory buyout of the remaining 0.53% stake from LGOK’s minority shareholders in line with Russian federal law. The buyout took place that October, giving Gazmetal full control of the mining company.

But in 2008, iron ore prices nearly doubled and LGOK’s valuation increased, as bne IntelliNews noted earlier. In response, a group of the minority shareholders who had been bought out in the October deal went to the courts to seek the increase in compensation for their shares.

The courts rejected their claims, finding that the buyout had been carried out in line with a fair valuation of LGOK at the time of the 2007 deal. By 2013, the former shareholders had lost a total of 16 cases in the courts, which found that the deal had been carried out with no violation of their shareholding rights.

After nearly a decade of silence, the former shareholders resumed their complaints when reports emerged in 2021 that Metalloinvest was planning to carry out an IPO. They began to send letters directly to LGOK managers and shareholders, demanding money and threatening to file new cases with various Russian and foreign government agencies, including in Germany. An LGOK spokesman told bne IntelliNews that the company’s lawyers at the time were “treating the letters and threats as a case of extortion.”

By 2023, the then-leader of the former minority shareholders, Andrei Ivanov, said in an interview that he was dropping his claims against LGOK and Metalloinvest after a thorough review of the latter’s auditing statements. According to Ivanov, the documents showed that, contrary to the former shareholders’ claims that several trading companies had been used for tax evasion and the withdrawal of LGOK's profits abroad, the funds in question were in fact used to pay taxes in Russia.

He also said that the former minority shareholders’ claims did not receive much interest from law enforcement agencies in Germany, Switzerland and the UK, and he ultimately conceded that their own claims had been unfounded.

In the same interview, Ivanov said that several former minority shareholders disagreed with his position and decided to continue their demands for compensation.

Ivanov reportedly stepped away from the shareholders’ dispute and Burkin became the group’s leader.

“In all honesty, I can’t support what they’re doing,” Ivanov said. “The situation and the facts are personally very clear to me. In this situation, it would be simply unfair to continue the confrontation - this is no longer a fight for the truth, but ordinary extortion.”

It is noteworthy that in August 2022, the prosecutor’s office in Cologne reportedly turned down a claim of the same group of former minority shareholders to initiate criminal proceedings against Metalloinvest’s shareholders in Germany. The prosecutor's office responded that it had found no grounds to launch an investigation.