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MOSCOW ( – For at least a few hours on Monday, Harmony Gold’s Bernard Swanepoel knew more about Norilsk Nickel’s plan to spin off its gold assets in an offshore placement than Norilsk Nickel itself.

“Harmony wishes to advise”, a company announcement declared in Johannesburg, “that it has consented to the transfer by Norilsk Nickel of all its snares in the issued share capital of Gold Fields to an indirect wholly-owned subsidiary of Norilsk (“Subco”) and to cede all its rights and delegate all its obligations in terms of Norilsk’s irrevocable undertaking to Subco.”

In Moscow, the spokesman for Norilsk Nickel told Mineweb she didn’t know anything about Subco. Neither did the spokesman for Polyus,Norilsk Nickel’s principal gold-mining unit, although he admitted he had just seen Harmony’s announcement.

According to Harmony’s version of the correspondence it has just received from Norilsk Nickel, “the transfer by Norilsk of its Gold Fields shares to Subco is in accordance with its strategy to consolidate all of its gold assets into one vehicle and does not have any impact on the obligators under the irrevocable undertaking.”

Exactly who has authority to speak for Norilsk Nickel n such binding terms, and to plan what to do next, has been unclear since January, when Vladimir Potanin and Mikhail Prokhorov, the co-owners of Norilsk Nickel, decided to fire Leonid Rozhetskin, their principal strategist for the C oldfields deal. Since then Rozhetskin has been unable or unwilling to return to Moscow, where awkward questions from state investigators probing other dea s await him. An associate told Mineweb that he believes Rozhetskin is comfolable abroad with a well-known Italian partner, and that currently, he is talking with Merrill Lynch about the future of what is now called Subco. According to documents that surfaced in a New York court late last year, the spin-off gold company was first codenamed I for “new international goldco” by RozHetskin and his advisors at HSBC. According to HSBC’s presentation of “Project Golf, if Harmony Gold and Norilsk Nickel succeeded in their takeover of Gold Fields, “I” was to be created out of the international gold assets of all thiiee companies, and “listed as a new ‘major’ in North America attracting premium valuation.”

Potanin and Prokhorov have refused all opportunities to speak, or requests to answer questions in public, about the Gold Fields acquisition, or their “1” plan. Notwithstanding, Potanin has told Gold Fields CEiO Ian Cockerill that Rozhetskin continues to have his authority to negotiate on the fate of the 20-percent shareholding, and the last stages of Swanepuel’s ill-fated bid. Gold Fields’s management, and other major stakeholders in Harmony, expect the bid to expire on May 20. In the meantime, is the disclosure of Subco by Swanepoel a last-ditch move to expose Potanin and Prokhorov ttji the commitment they once made to the takeover?

For one Moscow investment banker, who has been at different times close to all sides and a consistent backer of the “I” strategy, Subco was a surprise name for no surprise at all. “As far as I know,” he told Mineweb, Norilsk Nickel “can do what they like with their holding of gold asset.” If he were advising Norilsk Nickel at the moment, and he says he is no:, he would advise the company not to sell the Gold Fields stake, “There is ncl pressure to sell now. I know of no [government] pressure to sell.”

Late on Monday afternoon, Norilsk Nickel issued u press release citing Prokhorov for the announcement that it intends to create a new gold asset company, and then sell its shares abroad. “At its meeting on April 15th, 2005,” the fresh announcement reads, “the Board of Directors: of MMC Norilsk Nickel (“Company”) resolved to initiate steps which should leatjl to the demerger of the Company’s Russian gold assets consolidated under |ZAO “POLUS” and its subsidiaries (“Polyus”) and the Company’s 20% interest in Gold Fields Limited (the “Transaction”).

The contemplated Transaction, if implemented, shoLId create a new large independent gold major (Newco) with the potential for substantial organic growth and a window into one of the world’s most prospective gold regions: Russia. The Transaction, if implemented, would, in the (opinion of the directors, provide investors with direct exposure to this unique Investment, and should allow Newco to realize its inherent growth options, enhance gold business’s direct access to the financing opportunities and unlock substantial value for all Company’s shareholders.”

“The initial step in the Transaction will be to consolidate! all the Company’s gold assets (including its 20% interest in Gold Fields Limited) under is the intention of the Board of MMC Norilsk Nickel that tsewco would seek both domestic and international listings as soon as practicable, following the Transaction.”

Prokhorov is cited in the announcement as saying “we.; see the demerger as a means to unlock substantial value for all Norilsk shareholders and to create a platform to build a new global gold major centred around existing gold assets.” Deutsche Bank is listed as financial advisor for the new scheme, and its legality assigned to Debevoise & Plimpton.

For investment bankers and lawyers, there can never be a political obstacle so high that it cannot be climbed to sustain their clients’ willingness to pay lucrative placement and arranging fees in the hope of seeing their cash safely out of Russia.

And so, when Brian Gilbertson, CEO of SUAL International, the Moscow-based resource company, announced last week that the Kremlin will not allow the large-scale sale of SUAL shares abroad, a Moscow resource banker claimed Gilbertson was talking his book, not telling the truth. SUAL is not ready for a placement, the banker told Mineweb. Gilbertson was passing the buck to the political leadership, he claimed.

The banker also claimed that his institution has three mandates from Russian resource companies on the go at present, and that none of them has been blocked by Kremlin fiat. Accordingly, he was emphatic that Norilsk Nickel’s owners are free to plan to move their gold assets offshore to “I” or Subco or Newco. Naturally, the banker didn’t concede that his firm’s access to know the Kremlin’s mind has been limited recently; especially since a share-buying scheme of a closed company the Kremlin is trying to eform was discovered to have been one of his bank’s inventions, and to have led to an investigation of its legality.

But is there a contradiction between what Gilbertson iiaid is impermissible, and what Potanin, Prokhorov, deutsche Bank and Debevoise & Plimpton would like to get away with?

In remarks to the Russian Economic Forum in London April 11, Gilbertson is reported to have said that Kremlin policy currently prohibits large-scale share listings or initial public offerings for Russian resource companies. He also acknowledged with apparent approval legislative and regulatory provisions in Chile, Brazil, and South Africa to assure state control of resource companies like his own, SUAL, Gilbertson assured, “accordingly will develop its strategic opportunities with its feet firmly rooted in the soils of Russia and the CIS.”

Yevgeny Ivanov, CEO of Polyus and the principal strategist of Norilsk Nickel’s gold strategy, followed Gilbertson at the same conference. But his remarks suggested that there are wings to his feet.

In response to questions about offshore listing plans, Ivanov said that he and his colleagues are considering listing in either Toronto or New York, or buying a company already listed there. Norilsk Nickel already owns the London-listed Norimet, and the New York-listed Stillwater Mining. But for the gold spinoff, Ivanov evidently has in mind something new. He was not asked directly about “I”, but acknowledged that a reverse takeover into Gold Fields was another “theoretical” possibility. At the time, noone had ever heard of Subco or Newco.

A few days earlier, Ivanov had told a Russian audience that these options could not be implemented for another two years. His spokesman told Mineweb that “all decisions could be made not earlier than in 2007.” What exactly must happen in the next two years is unclear. When asked if he favours Kremlin approval or disapprovasl of such an offshore listing plan, Vladimir Litvinenko, President Vladimir Putin’s advisor on resource policy, signaled that he is negative. Local bankers believe that the Newco will require at least a year of technical work to prepare. Two years may be required to overcome the Kremlin objections that are visible now.

Gilbertson’s acknowledgement of a Kremlin bar to IPO’s for major Russian resource companies is the first of its kind. Other Russian executives are sensitive to the requirement for Kremlin approval of their schemes, but they never discuss them openly. Once before, when Norilsk Nickel first announced, a year ago, that it had acquired the Gold Fields stake from Anglo American, it claimed publicly that no Russian government approval was required, and none had been sought. Central Bank action, and Kremlin advice, began to change that position several weeks later. However, it is still not clear what Kremlin officials have demanded, and what Potanin has promised in return.

I, Newco, or Subco are names that have a temporary ring to them. Why Norilsk Nickel’s board did not announce its plan immediately after deciding it last Friday, and waited until after Harmony Gold had disclosed it today, suggests that neither the board, nor the company owners have the confidence that their plan will be anything but temporary also.

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