Polyus Gold (Open Joint Stock Company, OJSC) is the leading gold producer in Russia and was formed in March 2006 as a result of the spin-off of MMC Norilsk Nickel’s gold mining assets. The operating mines and development/exploration projects are located in 5 major gold mining regions of Russia - Krasnoyarsk, Irkutsk, Magadan, Amur regions and the Republic of Sakha (Yakutia).
Gold production in 2006 totaled 37.8 tonnes (1 215 000 oz).
The company’s reserves (JORC) as of 10 September 2007 amount to 68.6 m oz., based on the Inpedendent Expert's Report and Natalka deposit reserves audit prepared by Micon International.
Polyus Gold owns 100% of its operating subsidiary, ZAO (CJSC) Polyus which holds blocks in the following companies: OJSC Lenzoloto (68,2%), Lenskaya Gold Mining Company, LZRK (100%), OJSC Matrosov Mine (93,3%), OJSC Aldanzoloto GRK (100%), OJSC South-Verkhoyansk Mining Company, SVMC (100%), OJSC Yakut Mining Company (100%).
Polyus is working to an approved strategy of four times growth by 2015, resulting in 3.9m oz of production annually. It has two major projects in the Krasnoyarsk region, Blagodatnoye, the largest gold discovery in Russia with reserves of 7.2m oz, and Titimukhta.
Polyus Gold unit wins entrails usage licence for Doroninskoye ore field
12.10.07, 11:12 AM ET
LONDON (Thomson Financial) - OJSC Polyus Gold said its unit Magadan Exploration Ltd has won the auction for an entrails usage licence at the Doroninskoye ore field in the Magadan region in Russia for 18.7 mln roubles, or 720,000 usd.
The company said it expects its exploration works at the deposit to result in the discovery of a 'significant' gold-silver mineralization on the flanks of the ore-bearing system.
The field's resources are estimated at 5.5 tonnes of gold, 1,340 tonnes of silver and 4,800 tonnes of tin.
Exploration works at Doroninskoye in 2008-12 will require approximately 75 mln roubles, the company said in a statement.
On Dec 5, the company said it has won an auction for an entrails usage licence at the Kuzeyevskiy ore field in the Sukhobzimskiy district of the Krasnoyarsk region for about 1.5 mln usd.
TFN.newsdesk@thomson.com
Polyus Gold board fails to approve fields carveout
Tue Dec 18, 2007 7:47am EST
By Aleksandras Budrys (Reuters)
MOSCOW, Dec 18 (Reuters) - Board members of Russia's top gold miner Polyus Gold (PLZL.MM: Quote, Profile, Research) (PLZLq.L: Quote, Profile, Research) failed on Tuesday to approve carving out of some of its exploration assets for lack of a quorum, a Polyus statement showed.
Board members representing Polyus co-owner Vladimir Potanin, who opposes the carving out, boycotted the meeting, while one of two independent directors failed to appear, a board member told Reuters. A proposed share issue was not discussed.
"The Board entrusted (Polyus General Director Yevgeni) Ivanov to prepare and submit to the Board the comparative analyses of possible variants to carve out the above exploration assets," the statement said.
It said the variants included "delivery of exploration licenses to an independent entity with the subsequent listing of this entity on Russian and international stock exchanges, or by means of selling these exploration assets."
On the nine-seat board there are two independent directors, four who represent the interests of co-owner Mikhail Prokhorov, and Potanin's three members. In order to establish a quorum both independent directors had to participate.
Billionaire tycoons Potanin and Prokhorov are in a protracted process of dividing assets, including Polyus and its former parent company, the metals giant Norilsk Nickel (GMKN.MM: Quote, Profile, Research).
Prokhorov said last week that Polyus, which sits on the world's third-largest gold reserves, had no means to develop its deposits and needed to raise cash through an additional share issue, which he wanted to discuss at the meeting on Tuesday.
A Polyus spokeswoman said the share issue was not discussed.
"We are happy that no decision has been taken on a share issue, due to a lack of quorum," said Sergei Batekhin, a Polyus board member representing Potanin.
"We are against the carving out and we have only one formal lever to stop this process -- through blocking the (share) issue which may finally result in the carving out," said Batekhin, who is also a deputy head of Potanin's holding company Interros.
He said he believed depriving Polyus of its assets as proposed by the management damaged both shareholders' interests and the business itself as it reduced the company's value.
"We also suspect that (our opponents) are trying to dispose of deposits, which the market values at a higher price than at which they may be proposed to be sold," Batekhin said.
"We hope that Ivanov prepares documents for the next board in such a form that board members would not have a suspicion they are being manipulated," he said.
He said the main reason for disagreement lay in management not adjusting Polyus's structure to internationally accepted standards of corporate governance, under which important decisions are made by shareholders rather than managers.
Polyus expects to produce 1.215 million ounces of gold in 2007, the same amount as in 2006, the Polyus statement said. (Editing by Quentin Bryar)
Russia's Polyus to launch Natalka gold mine by 2013
Tue Jan 29, 2008 6:14am EST
MOSCOW, Jan 29 (Reuters) - Polyus Gold (PLZL.MM: Quote, Profile, Research) (PLZLq.L: Quote, Profile, Research) plans to launch what will be Russia's largest gold mine, the $2.5 billion Natalka project, in 2012 or 2013, the company's chief executive said in a statement on Tuesday.
Polyus, which mines nearly a quarter of Russia's gold, expects the Natalka mine in the country's remote northeast to produce over 1.3 million ounces a year of the precious metal -- more than the company's entire forecast production for 2007. Polyus's board, led by billionaire chairman Mikhail Prokhorov, has approved $31.3 million in capital expenditure at Natalka in 2008. It will spend $14 million installing a pilot plant in May and $8.7 million completing a feasibility study.
"We expect our enquiry for state financing of infrastructure development in the area of Natalka will soon be considered by the State Investment Fund," Chief Executive Yevgeny Ivanov said.
Natalka, in Magadan region, is the world's third-largest gold deposit, with reserves of 40.8 million ounces at an average grade of 1.13 grams per tonne to internationally recognised Joint Ore Reserves Committee (JORC) standards.
Polyus, the world's fourth-largest gold company by reserves, plans to more than triple gold output to 3.9 million ounces by 2015. It has forecast 2007 output to be close to the 1.2 million ounces mined in 2006.
The company said it would launch another project, Verninskoye in the Siberian region of Irkutsk, in 2010.
Gold production would amount to 154,000 ounces in 2010 and rise to 206,000 ounces in 2011, Polyus said in the statement.
Investment in the project over the period 2005-2011 would be $208 million, excluding exploration expenses, the cost of the licence and value-added tax, the company said.
Polyus is majority owned by Prokhorov and former business partner Vladimir Potanin, who are engaged in a protracted split of their various shared assets in mining, media and banking.
The company owns what is currently Russia's biggest gold mine, Olimpiada, and is developing several other projects across Siberia and the Russian Far East.
(Reporting by Robin Paxton; editing by Chris Johnson)
"Gold glitters in the eyes of Russia's billionaires"
Potanin's Interros wants corporate changes at Polyus Gold
Published: 17 Jan 08 - 23:01
Interros, the investment company controlled by Russian billionaire Vladimir Potanin, said on Thursday that the corporate governance systems of Polyus Gold were below international standards for large public companies and called for an extraordinary general meeting of the gold-miner's shareholders.
The agenda of the proposed meeting would include the “improvement of corporate governance and decision-making system at Polyus Gold, amendments to the company’s charter, as well as the re-election of the board of directors”, according to a statement on Interros' website.
Polyus, which is Russia's biggest gold producer, had ignored attempts by Interros to reform its corporate structure, and the company's management had acted without shareholder approval in attempting to sell assets, the statement said.
Potanin is engaged in a protracted dispute with former business partner Mikhail Prokhorov, over how to split their jointly-held business interests, which include a controlling stake in Polyus.
Edited by:
Creamer Media ReporterBattle for Polyus Gold moves to London(Source: Mineweb)
Polyus Gold's rival owners appeal to the London market and the London High Court to resolve asset-stripping charges.
Author: John Helmer
Posted: Monday , 04 Feb 2008
MOSCOW -
It's an entirely new version of the tale of Dick Whittington and his cat.
In the 17th century story, a poor orphan boy goes to London where he dreams the streets are paved with gold, only to discover they aren't. Everything turns out fortunately, though, for he sells his cat to the rat-ridden King of Barbary for a fortune, which he then invests to make another fortune. Rat-catching was Dick's capital.
The new tale pits the two former partners of Russia's richest goldmining company, Polyus Gold, against each other. They are already gold-plated. But they are going to London to try to save, not to make their fortunes. Under way in front of Polyus's institutional shareholders, investment analysts and fund managers there is an unprecedented roadshow and counter-roadshow, making rival presentations for shareholder support.
Soon, it is expected that one of the two partners will file suit in the London High Court, charging the other with violating the terms of their agreements, and asking the court to sort out how to divide the goldminer's assets, before they are spirited away. Dick's cat has his work cut out for him this time.
Vladimir Potanin and Mikhail Prokhorov have been at war with each other now for a full year. Moving the battlefield to London is new. Potanin's stake in Polyus is 22%, Moscow brokers say. Prokhorov holds a similarly sized stake. In addition, through a joint holding company called KM Invest, they share 7.4% of Polyus. Simple arithmetic suggests the free float of independent investors ought to be 48.6%. However, Prokhorov has claimed to have bought another 3% of Polyus shares in the market, boosting his base stake to 25%, and reducing the free float to 45%. No one is certain if that's true.
The KM Invest stake is a problem of its own. Ostensibly, the holding allows a straightforward 50/50 split between Potanin and Prokhorov, allocating each 3.7%. But KM Invest turns out to be an umbrella, covering 150 affiliated companies, all registered offshore. Each of these holds Polyus shares in tiny lots. Designed by the partners to prevent their control of the company from being raided, the structure is defeating for the two partners, now that they have fallen out. Such agreements as may exist between Potanin and Prokhorov for KM Invest are governed, not by Russian law, but by UK law. Prokhorov has gone down the deadend of Russian litigation, applying to the Moscow Arbitration Court for what amounts to an injunction and freeze order against disposal of the KM Invest shares without his say-so.
Potanin disputes that there is Russian jurisdiction. He is preparing to invoke UK jurisdiction to charge Prokhorov with attempting to strip gold assets out of Polyus, in favour of a new company he controls, Polyus Exploration. Created on April 2 last, by Prokhorov and Polyus chief executive Evgeny Ivanov, one month before Potanin ousted him from his job, the rationale of the new company was this: "Polyus Exploration will be holding licenses for greenfield exploration projects which are currently in Polyus Gold's pipeline. The decision to create Polyus Exploration was taken by the Board of Directors of Polyus Gold by absentee ballots in March 2006...." Ivanov is quoted in the announcement as explaining: "the programme is focused on bringing good organization to our greenfield exploration projects and aimed at making the process more transparent for investors. The Company's exploration business has proved to be highly efficient, and the programme will help to raise its investment appeal and to achieve even better results in the future".
The idea, as Prokhorov and Ivanov - reinstated as chief executive in October - are explaining to London audiences, is to carve out selected gold assets from the portfolio, vest them in the subsidiary; register that subsidiary offshore; and pay for this by a new issue of shares. Polyus the parent would get 20% in the new company; if minority Polyus shareholders want a stake in what they thought they formerly owned, they must pay again.
In its London roadshow, Potanin's message is that Prokhorov's scheme effectively asks Polyus shareholders to pay twice over, giving up 80% of their assets for nothing. The London audience has also been told that some current Russian shareholders may not be allowed to hold shares in the foreign company. Some institutions may not be allowed to invest in an early stage mining company. The lack of transparency to date on which assets will be transferred, at what value, should add to shareholder resistance, Potanin's men have argued. This is such an obviously bad deal for everyone exept Prokhorov, Potanin believes that the majority of Polyus would reject it, if they had a chance to vote on it.
Prokhorov and Ivanov argue they have put together the scheme with board approval. However, the charter of the Polyus board allows a quorum of just 3 directors out of 9 to make strategic decisions, including disposal of the assets, without consulting shareholders. In addition, the management of the new company, Polyus Exploration, is allowed to make strategic decisions about its assets, without referring back to the board of the parent company.
In a statement circulated to shareholders on January 17, Interros called for an emergency meeting of shareholders on April, to vote for a new board, and for new rules to constrain the Prokhorov spin-off, carve-up scheme. "The current system of management of the Company," said Interros, "significantly limits the ability of shareholders and their representatives in the Board of Directors (BoD) to influence the decision-making procedure both with regard to the Company per se and its affiliated and dependent structures. Firstly, the current wording of the Charter allows the Director General [Ivanov], at his or her own discretion, and without coordination with the BoD, to pass decisions on conclusion of important transaction, which formally do not fall under the category of major transactions and transactions with vested interest. That includes the composition of management bodies of the company or the conclusion of significant deals and other activities that may impact the cost of shares of the "Polyus Gold" company."
The statement also warns that the mining licences being contemplated for transfer to Polyus Exploration aren't "peripheral assets... Here we face an attempt to remove the core assets."
Prokhorov's strategy has been getting a good run in the Financial Times, where Moscow correspondent Catherine Belton has been given the owners' box seat as Prokhorov made common cause with Oleg Deripaska to attack Potanin's other major mine stake, Norilsk Nickel.
But the FT has been slow to notice that Potanin's counter-attack has been effective at Polyus. The last news Belton reported from the Prokhorov camp was in August, when she claimed "Russia's state-run Alrosa is close to acquiring a leading stake in Polyus Zoloto,Russia's top gold mining company, according to people familiar with the situation. An announcement on the deal could come in days, the people familiar with the situation said."
Naturally, neither the state nor Alrosa was keen on paying Prokhorov to quit a sinking ship, from which he was emptying all the valuables. What Alrosa chief executive Sergei Vybornov thought he was bidding for was Polyus intact, without any transfers to Polyus Exploration.
In August, the Alrosa negotiation was aired by Prokhorov to put the wind up Potanin, and induce him to pay a higher price to beat the state to Prokhorov's 25%. But government officials said Prokhorov's price was too high; there was disagreement between Vybornov and Prokhorov, and nothing came of the deal. At that point, Prokhorov put into gear his asset carve-up; but the FT lost interest. It hasn't noticed that the battlefield has moved to the City, and to the law courts.
Prokhorov's strategist and head of his Onexim holding in Moscow is Dmitry Razumov. He was asked to respond to the charge of asset stripping by Polyus Exploration; and to say how he regards the proposals for chaging the structure and powers of the Polyus board. Razumov refused to respond.
The issues at stake in the KM Invest litigation could make for indeterminable delay in resolving Polyus's ownership. But the transparency of the issues and claims in conflict has not proved to be as bad for the share price over the past month as the initial outbreak of war a year ago. Since Mineweb last reported on the fight at Polyus in mid-December: http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=42034&sn=Detail
The market capitalization of the company has grown from $8.3 billion to $9.6 billion. Despite the sharp losses of Russian stock market indexes over January, the Polyus share price has gained 9.8%. This is a reversal of last year's trend, when Polyus was one of the few major goldminers in the world to show a downward trend in value against the rising Russian market index; and against the rising price for gold. For January, the Polyus share price gained more than the price of gold, which grew by 9.5%.
This trend upwards was relatively unsupported by production reports and projections. Gold production remained unchanged during the year at 1.2 million oz. A reduction in gold production at the Kuranakh mine in Yakutia, down 9% year on year, due to a decrease in the average grade, was compensated by growth in alluvial production (up 4%), and slightly higher output at the company's most important mine, Olympiada, where output climbed 1%. Management projections for 2008 envisage gold production remaining flat this year at 1.2 million oz. New sources of gold, and new projects, won't be counted until the end of 2009 at the earliest.
In the meantime, Polyus is experiencing a severe increase in production costs, as well as in capital estimates for its biggest undeveloped mines. Management says that revenues for 2007 should rise by 15% to $855 million, due to higher average realized gold prices (up 17% to $706/oz in 2007). Ebitda for 2007 is estimated at between $300 million-$320 million, excluding a $130- million charge for share options; Ebitda was $299 million in 2006. On the negative side, total cash costs for 2007 appear to have risen to $365-$375/oz, up 33%. The drivers are well-known -- a 30% increase in stripping works at Olympiada mine, rouble appreciation, and inflation.
A report from UralSib analyst Michael Kavanagh indicates that "Polyus Gold is one of the cheapest gold producers in the world; however, those reserves are not worth much if they cannot be exploited profitably." The market reaction appears to be that, so long as Potanin keeps a head-lock on Prokhorov, minority shareholders stand to benefit, and the market value of the company should gain.
Thus, after management changes and twists in the loyalties of the Polyus board last year, Potanin's Moscow holding Interros has now emerged as the public defender of share value. According to Interros, if the London-based institutions mobilize in concert, and the High Court enjoins Prokhorov from disposing of the KM Invest shares, there should be enough votes at the April meeting to adopt the board and charter changes. "Then any decision to dispose of part or all of Polyus Exploration's assets would need to be agreed by a majority of Polyus Gold Directors and shareholders, maximising the interests of all shareholders."
One curiosity in this saga of gold, London ambition, and rat-catching is the dog that hasn't barked. A source close to the fight says that there is no sign that the Kremlin is taking sides -- none at all.
Not yet.
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