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By John Helmer, Moscow

Mikhail Prokhorov – Russia’s no-fault oligarch, according to a dozen people familiar with the matter at Bloomberg – was tossed out of Russian politics for his incompetence last month. Yesterday it turned out that the only company he controls with an international share listing and a positive profit line, Polyus Gold, has been kissed off by the international mining market.

Prokhorov’s share price fell on the news. In its Russian listing, Polyus Gold is down 23% in the year to date. It has been falling steadily while the gold price has been rising. In its brand-spanking new London-listed form, Polyus Gold International has dropped 13% in the past month. Polyus Gold International is the outcome of Prokhorov’s two-year reverse takeover of the Jersey Island vehicle of the Assaubayev family of Kazakhstan. The process, in which each side called each other thieves and fraudsters and supplied the courts with plentiful evidence, has not been value-accretive

But Bloomberg is doing its best with the bad news, reporting on October 5 that: “Polyus Gold International Plc, Russia’s largest gold miner, is focused on its growth strategy and doesn’t currently plan mergers, said James Nieuwenhuys, chief operating officer of the company’s OAO Polyus Gold unit. “We are far too busy now,” Nieuwenhuys told reporters at a conference in Moscow. Polyus is concentrating on increasing production, moving its domicile from Jersey to the U.K. mainland and gaining inclusion in the benchmark FTSE 100 Index, he said.”

A South African, Nieuwenhuys was hired by Prokhorov in May to improve the marketing of Polyus Gold, when it was already facing resistance by the international goldminers – Kinross, Barrick, Newmont, Anglo Gold Ashanti — to any form of merger or acquisition with the Russian company.

The Bloomberg report acknowledged that “billionaire co-owner Mikhail Prokhorov said in December the company was seeking to merge with an international rival as early as this year to become one of the world’s three biggest gold miners.”

On May 20, Prokhorov was still talking up his M&A transaction. “We have already drawn up a shortlist (of possible partners),” he told the Russian press. That he should have been permitted by the Kremlin to attempt to sell his Russian assets to a foreign mining company – never mind that he had moved them out of Russian jurisdiction to Jersey — may have been the real reason for Prokhorov’s readiness, also disclosed in May, to be drafted into leading the Right Cause political splinter party during this year’s parliamentary elections.

Alfa Bank’s metals analyst Barry Ehrlich reported to clients today that the collapse of Prokhorov’s sellout (and that of co-controlling shareholder, Suleiman Kerimov) “reflects the reality that the company cannot be merged with a global major at a premium, and rather would probably merge at a discount to the counterparty, based on analysis we carried out earlier this year. It may also reflect potential merger partners’ low valuation and limited confidence in an on-time commissioning of Natalka, particularly after limited development works were carried out in 1H11, we believe.”

According to the Alfa Bank report, “while we never believed a merger could take place at a valuation that would provide a share price boost to Polyus, some investors did and we therefore believe this news is NEGATIVE.”

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