Time to build

Co-owner of Polyus Gold Mikhail Prokhorov is ready to move from geological exploration to the construction of factories

One of the largest shareholders of Polyus Gold, the head of the Onexim group, Mikhail Prokhorov, yesterday told reporters about how he sees the further development of the gold mining company . “The company’s task now is not to engage in geological exploration, but to build factories,” he said. -- Production is insufficient compared to the resources that Polyus has. Increasing resources was the first stage of the company's strategy, and it was successfully implemented. We need to move on to the second stage of the strategy - build factories.” In turn, Interros board member Larisa Zelkova, a representative of the second major shareholder of the gold miner, Interros head Vladimir Potanin, with whom Mr. Prokhorov cannot come to a common opinion on the development of the asset, told Vremya Novostei: “Everything that has been said Mr. Prokhorov has already provided for the Polyus strategy, but so far it is not being implemented 100%.”

The Polyus Gold company was created in mid-March 2006 by spinning off the gold mining assets of Norilsk Nickel. Mr. Prokhorov last year said that Polyus needed to develop geological exploration, and since the company did not have money for this, he proposed the option of separating assets into the Polyus Geologorazvedka structure and conducting an additional issue of its shares in favor of Polyus shareholders Gold". However, Interros opposed this: its representatives pointed out that in this way Mr. Prokhorov was inviting all investors to pay for the main assets a second time. However, in spite of everything, as a Vremya Novostey source close to Mr. Potanin said, almost all assets were transferred to the offshore structure Polyus Exploration, affiliated with Polyus Gold. Now that Mr. Prokhorov controls the management of Polyus and has a decisive vote on the board of directors, Interros, on the eve of the annual meeting of Polyus shareholders, is trying to turn the situation around.

And at this time, Mr. Prokhorov talks about the need to shift priority from geological exploration to processing. Over the past year, Polyus has been actively conducting geological exploration work in all regions of the company’s operations. In particular, the total volume of drilling work was almost doubled. Also last year, the company acquired seven new licenses for deposits, the total resources of which in categories P1+P2+P3 amount to more than 1.7 thousand tons. However, production volume is not increasing; last year it remained at the 2006 level - 37.8 tons. However, Mr. Prokhorov does not lose optimism. In his opinion, by 2011 gold production could increase to 55-57 tons. But the market is still skeptical about such initiatives. “Previously, the company was actively conducting exploration, but now the time has really come to build, but the company may have difficulties with costs,” says Uralsib analyst Dmitry Smolin. In his opinion, the company needs to seriously think about attracting a foreign investor among large gold mining companies to develop its deposits. “They have experience and technology, and in addition, they will have the necessary control over the intended use of funds,” the analyst believes.

However, recently the company had a chance to receive additional funds for development. Over the past month, three large investors - the British investment fund Kazimir Partners, the Onexim group and ALROSA - have expressed interest in acquiring quasi-treasury shares on the balance sheet of the affiliated offshore Jenington International Inc. However, management did not accept any of the proposals, considering that the company did not need the extra money yet. “The sale of the stake owned by Jenington will result in more than $2.3 billion in excess cash resources for the company at the turn of 2008-2009 and a loss of value for shareholders due to the early sale of shares,” the Polyus Gold statement said. "

As Mr. Prokhorov told reporters on the sidelines of the forum yesterday, Onexim is not planning a repeat offer to purchase quasi-treasury shares of Polyus. "I'm at about 30% now. I'm happy with that for now," he said. However, ALROSA’s management is in no hurry to abandon its intention to acquire Polyus shares. “We want to wait until the end of the conflict between the shareholders (of Polyus. - Ed. ) and think again. This is an interesting asset,” Sergei Vybornov, head of the diamond mining company, told Reuters. - We do not want to participate in the conflict in any way. “I am confident that they will come to an agreement among themselves, and then we will negotiate a possible purchase of the stake, including the possible option of purchasing a controlling stake.”

Irina TSYRULEVA