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By John Helmer in Moscow

Suleiman Kerimov is selling Polyus Gold shares in a bid to raise cash. The market signal triggered a price decline for the Moscow and London-listed share (PGML:LN) of 5% this week through Thursday. A Moscow brokerage is predicting that the selloff may cut the price by 10%.

The chain of circumstances was revealed by a source close to the transaction, who clarified why the first press leak in Moscow suggested that both Kerimov (38%), and his co-controlling shareholder Mikhail Prokhorov (40%, including friendlies), intended to sell 5% apiece, for a total disposal of 10%. Onexim, Prokhorov’s holding, refused to confirm this, and on November 19, Polyus Gold posted this website announcement:

“OJSC Polyus Gold announces that, following relevant notification, it has been informed of the intention of companies related to Onexim and Nafta Moskva to sell up to 5% in aggregate of shares in the charter capital of OJSC Polyus Gold, in the form of shares and/or American Depositary Receipts, subject to market conditions, through an accelerated book building process. Credit Suisse Securities (Europe) Limited and Renaissance Securities (Cyprus) Limited are acting as Joint Bookrunners on the offering.”

It is unusual for Russian companies to disclose information about share dealings of their principal shareholders, and there had to be a special reason for Yevgeny Ivanov, the chief executive of Polyus Gold – a Prokhorov man – to do it. The reason, according to insiders, is that Prokhorov – now known in parts of New York as “the People’s Billionaire” because he is trying to buy a popular basketball team – isn’t selling his 5% at all. But Prokhorov also doesn’t want to appear to be differing with Kerimov, or opposed to his sale. The source believes that the original press leak got the sale right, but not the number of sellers. The latest Polyus Gold announcement is Prokhorov’s discreet way of correcting that mistake: it is a warning to the market not to expect to see a 10% bloc of shares pressure the price twice as far downwards as the 5% sale may do.
 

There are other signs of Prokhorov’s disinclination. Renaissance Capital is Prokhorov’s bank; he bought half of it last year because Stephen Jennings, who runs the house, couldn’t repay a Prokhorov loan with money, so shares were given instead. A source close to the bank said he can’t think of any reason why Prokhorov might be selling out of Polyus Gold right now, unless it may be because he calculates that at $1,146 per ounce, the gold price may be peaking.

Arguably, several Moscow analysts say, Polyus Gold’s share price has been discounted too deeply in the market for the year and a half it took for Prokhorov and his former partner, Vladimir Potanin, to end their fighting and settle accounts. When Potanin sold to Kerimov earlier this year, the Moscow brokerages argued that this, plus the rising gold price, ought to allow a recovery for Polyus Gold. In the past three months – until this week’s correction – the share price has gained 35%; that’s better than the 21% gain for gold, but not as good as the Russian RTS share price index, which rose 47%. Other Russian goldminers have done better on the up than Polyus, just one, Polymetal, has done worse.

Credit Suisse is Kerimov’s bank – one of several. Sources close to his affairs in Switzerland say that the bank has financed some of Kerimov’s asset purchases, including a building; the motor yacht, Ice, bought in 2005 from Ernesto Bertarelli, a Swiss magnate; and several airplanes, according to a source at the Freestream brokerage of Alireza Ittihadieh – two Boeing 737 BBJs; two Gulfstream-550s, one Gulfstream V; and one Lear 60XR. The boat, including interior decoration and a refit, has cost a reported $300 million. It is also reported, and widely believed in the markets that Kerimov bought Credit Suisse shares last year, paying part of the price in cash, part in funds borrowed from the bank. The bank isn’t clarifying any of its transactions with Kerimov, their terms, or the current financial position.

Kerimov himself does not speak in public, and his spokesman at Nafta Moskva refuses to clarify how much of his stake Kerimov is selling from Polyus Gold, or the reason why. “All the information that can be used is published at the website of Polyus Gold”, a person identifying himself by a forename said on the company’s telephone. Kerimov’s spokesman at the Russian Senate, the Federation Council, regards questions about him and his public affairs to be “none of your business”.

Kerimov’s European bankers and business associates are sensitive to the possibility that he may be under financial pressure. In the Moscow market there is no suggestion that this is so. A banker close to the Polyus Gold transaction acknowledges that the market already realizes Kerimov is a tactical buyer and seller of stock, because that has been his business strategy in the Russian goldmining sector before – and a profitable one, too. A report by UBS in Moscow this week acknowledges that having decided to sell one bloc of shares now, he may decide to sell again. According to the UBS report by Kirill Chuyko, “we believe the lower size of the offering may be indicative of weak demand for the placement, which is potentially negative from the perspective of market sentiment. Also, in our view, a 5% placement creates some overhang risk, if core shareholders decide to sell more to the market in the future.”

That may be more thumbs up – or more thumbs off.

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