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By John Helmer, Moscow

At a physicists’ teaparty, Albert Einstein once asked Niels Bohr whether the two of them should accept that “the moon does not exist if nobody is looking at it.” Bohr’s reply was that, hard as Einstein might try, so long as the moon was accompanied by noone, Einstein’s proof would be hard to come by.

As a businessman selling off visible assets for cash in the bank, Mikhail Prokhorov is rapidly becoming just such an unprovable moon. So Einstein to Bohr, he’s agreed with his trusted friend and manager, Dmitry Razumov, managing director of the Onexim holding in Moscow, to issue a public strategy statement and give the former’s lunacy more credibility. According to Razumov, the two of them speak once every two or three weeks, depending on Prokhorov’s phases. “He is completely away from the daily management of work items. He did not meet with the management; he isn’t included in the [Onexim] board of directors. However, he is still the main beneficiary. We are meeting relatively regularly to discuss politics and the economy.” Based on paper values, and before counting the impact of commodity price falls, Razumov says Onexim is worth between $13 billion and $15 billion. Here is the April 24 interview.

Intergeo is the last of the mining companies created by Prokhorov still owned by Onexim after its 38% stake in Polyus Gold was sold in February for $3.6 billion. But Intergeo’s worth in Prokhorov’s and Razumov’s valuation of Onexim cannot average out at the $3 billion claimed — “definitely over C$1 billion, not over C$5 billion” — when Intergeo was first advertised to the Toronto stock market in 2011 and again in May 2012. If that is still true, Intergeo would be worth almost as much as the Polyus Gold just disposed of, or 20% of the new cash value of Onexim. It is also one of Onexim’s biggest debtors, owing at least $200 million.

But there’s the moon question – is Intergeo blue cheese? Is it worth anything? Unlike Polyus Gold, which is Russia’s largest producing goldminer with gold output of 1.7 million troy ounces per year and gold sale revenues of $2.8 billion, Intergeo remains, as it was in 2011, a non-producing collection of copper and nickel deposits, with traces of gold, platinum, molybdenum, and cobalt, the value of which requires more geological information and feasibility studies to prove. The Intergeo website provides a map for locating where its assets are in eastern Russia, but there has been no news on the website since May 2012. The Canadian financial data archive, Sedar, reveals that Intergeo has released for the Canadian market no financial reports, nothing since its advertising documents on May 15-16, 2012.

Source: Intergeo

Two technical reports were issued at the time, one prepared by SRK on Ak-Sug copper; and one by Micon on the Kingkashky, Verkhnekingashsky and Kuyovsky nickel and copper deposits. There are four tell-tale lines in both reports.

In the sections titled “Data Verification” and “Mineral Processing and Metallurgical Testing” SRK disclosed: “SRK did not collect any samples for independent verification though SRK did observe the process of handling the drill core and preparing the samples for assaying…SRK considers that additional test-work needs to be conducted on samples collected from drill core samples in order to verify whether these samples are representative or not.” In the section titled “Data Verification”, Micon reported “that all aspects of the exploration activities and data collection were to a high standard with the exception of the lack of use of Certified Reference Materials for assay standards. This issue remains a problem and Micon has recommended a programme of re-assaying using blind standard samples.”

In other words, Intergeo’s moon may be full of blue cheese, but then again it may not. After looking themselves, the consulting experts aren’t sure.

In May 2012 Intergeo issued to the Toronto Stock Exchange, through Morgan Stanley and Nesbitt Burns what was called a preliminary share sale prospectus. That document conceded the company’s Russian mineable prospects might be empty, commercially speaking. “The Company has not defined or delineated any proven or probable reserves on any of its properties for the purposes of NI 43-101. Mineral exploration and development involves a high degree of risk and few properties that are explored are ultimately developed into producing mines. There can be no assurance that the Company’s mineral exploration programs at either the Ak-Sug Project or the Kingash Project, or at any other mineral property, will establish the presence of any proven or probable mineral reserves for the purposes of NI 43-101. The failure to establish proven or probable reserves at any mineral property would severely restrict the Company’s ability to implement its strategies for long-term growth.”

The prospectus offer amounted to an invitation from Prokhorov to Canadian investors to pay for his moon probe instead of spending his own money. “The Company has limited financial resources,” the prospectus acknowledged, “and expects to incur losses for the foreseeable future.” Here’s the story of what happened to that gambit.

The valuation target for Intergeo in the “preliminary” documentation can be gauged from two sets of numbers presented for Ak-Sug and Kingash. Capital expenditure for each was reported as $1.94 billion and $2.75 billion, respectively. The Net Present Value (NPV) calculation for each was $802 million and $1.39 billion.

One of the problems of the listing attempt at the time was that Intergeo’s controlling executive, Maxim Finsky – a friend of Prokhorov’s since childhood – had been presiding over a series of value-destructive shareholding transactions and then a gold delivery and loan default at a Canadian listed junior mining group which Finsky controlled directly, White Tiger Gold (WTG) and Century Mining. The latter’s default was not admitted in the Intergeo papers a year ago.

Since then WTG has suffered its own near-default, and this time Finsky has been ousted from management and shareholding. Or at least this is the impression formed by the report of his sale of his stake in WTG to Sergei Yanchukov. That tale can be read here.

In March of this year, sources in the North American mining community picked up word that Intergeo was trying again on the Toronto Stock Exchange. Since then there has been a collapse of the global gold price, and with that the share prices of most junior miners which have maps and shovels, but no product to sell and no cash in hand.

The moment was hardly auspicious for Prokhorov and Razumov to try to sell Intergeo shares for the second time in Canada. Intergeo’s chief executive in Russia, Grigory Potapov – nominally Finsky’s subordinate — refused to respond to questions, and the story ended there.

Yesterday, Razumov admitted that the attempt had been made, and that for the second time it fell short of realization. According to Razumov: “Intergeo remains our strategic asset. We have not stopped working there, although investment has slowed for some time, according to the economic situation in the country and the world. The plans are the same; they have not changed. We want by the end of the year to have a prefeasibility study; and by the end of 2014, a feasibility study, and then proceed to commercial development.”

Razumov implies the SRK and Micon reports on Ak-Sug and Kingash do not reach even prefeasibility standard. He admits money for exploration and studies “cannot be raised” from others. “As for the IPO, I would heed the call at any time. Yet just a few weeks ago, we were convinced that we would do the placement in May. But we decided jointly with the consultant to postpone for a few more months.”

Asked what Onexim needs the consultant for, and whether it lacks the money to develop the Russia n mining projects, Razumov responded: “The money is there, but we want to get an independent assessment of the project on the part of investors… this early stage is difficult. [we have] done a lot of geological work, got a lot of technological expertise, preparing documents for banks, we are working with local authorities on infrastructure. Why [delay] now? In the next year or two, when we go to make a placement under a feasibility study and with the beginning of development, we will already have a history with investors. In fact, for such assets this is fairly standard practice.”

In other words, for the last remaining strategic mine asset in Russia with Prokhorov’s name on it, there are no takers this year, just as there were no takers a year ago.

Onexim was asked to clarify whether it has removed Finsky from the association with Intergeo, in order to improve its marketability in Toronto. The holding was also asked whether it has cut Finsky’s White Tiger Gold loose, and no longer maintains a relationship with its new owners and shareholders. The Onexim spokesman said there will no comment beyond what Razumov said in his published interview. A spokesman for Intergeo in Moscow says Finsky is still president of the company.

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