Polyus gives away extra gold

Ivan Kulakov got the control over Nezhdaninskoye.
As Kommersant found out, Ivan Kulakov, Roman Abramovich's ex-partner in Sibneft and Highland Gold, acquires 82.3% of a large Nezhdaninskoye gold deposit from Said Kerimov's Polyus. The amount of the deal, according to Kommersant, will amount to $150 million, while the minority shareholder of the Nezhdaninskoye deposit, Polymetal, will retain the option to increase the share to 50%. Nezhdaninskoye is a difficult deposit. Polyus has long been looking for partners, but decided to withdraw from the project, "not seeing the synergy with other assets," Kommersant sources say. Meanwhile, the sectoral experts do not rule out that other investors may stand behind Ivan Kulakov.

The largest gold producer of the Russian Federation, Said Kerimov's Polyus, sells control (82.3%) in Nezhdaninskoye gold deposit in Yakutia (JV with Polymetal), three sources of Kommersant familiar with the situation told. Two of them specify that the buyer is an entity controlled by one of the founders, and now the minority shareholder of Highland Gold, Ivan Kulakov. The transaction amount is $100-150 million, interlocutors of Kommersant say, expecting its closure "in the near future."

In 2006, Polyus (then Polyus Gold, controlled by the alliance of Vladimir Potanin and Mikhail Prokhorov) consolidated Nezhdaninskoye by buying 50% in YuVGK from Potanin's Interros for $300 million, which owns the license until 2021. A year before, another 50% had been bought from ALROSA. Reserves of the Nezhdaninskoye are about 20 million ounces of gold, in 2009, Polyus agreed on an alliance on it with Kinross Gold, but two years later the Canadians withdrew, finding the asset risky due to "doubly stubborn ores" and low metal content (5 grams per ton).

In 2013, Polyus wrote off about $250 million worth of Nezhdaninskoye due to the fall in gold prices and acknowledged that the development prospects are in question. But in December 2015 the company agreed on a partnership with Polymetal, which received 15.3% in the project for $18 million (the share will increase to 17.7% for $3 million, part of the funds went for additional exploration). Polymetal also has an option to increase the share to 50% for $72 million in the second stage - the development and establishment of the mining and processing plant. The head of Polymetal Vitaly Nesis said in 2016 that 20 million ounces were unattainable, but 10 million ounces (according to JORC) "seems quite real." Exploration should be completed in April, Polymetal told Kommersant in late February that "the decision to move to the next stage will be taken in the spring."

With the launch of the project, Polymetal is to become the managing partner of the South Eastern Regional Generating Company, the parties reported. Whether Polymetal has an option to buy out the entire share of Polyus, was not disclosed. Kommersant sources assume that there was such an option, but Polymetal did not use it, and note that Ivan Kulakov's entity should become the successor of Polyus in the Nezhdaninskoye agreement. "Nezhdaninskoye is a non-core asset for Polyus, in which the company acts in an unusual role for it as a financial investor, not an operator," says a source close to Kommersant. "The deposit does not provide synergy with existing assets, the deal is needed for Polyus to focuse on open large-tonnage mining and development of its projects." Polyus itself didn't comment on the situation, and Ivan Kulakov did not answer Kommersant's request. Polymetal said that "they do not comment on other people's transactions and do not have information."

Ivan Kulakov was a formal owner of the Oil Finance Company (NFC) and in the mid-1990s he participated in the privatization scheme of 51% of Sibneft by the entities of Roman Abramovich and Boris Berezovsky. On the basis of the NFC, the assets of Highland Gold were formed, the main shareholder of which is Millhouse belonging to Roman Abramovich (26.6% through Primerod International Ltd), but the partners' views on development from the beginning of the 2000s differed greatly, as did financial opportunities. As a result, Ivan Kulakov's share in Highland declined from 22.7% to 4.5%.

Kommersant's interlocutors in the industry say that they have not heard about Ivan Kulakov's activity in gold mining for a long time, and do not rule out that he can act in the interests of other investors or for resale. Highland Gold has nothing to do with Nezhdaninskoye's deal, they say. Millhouse doesn't participate in it either, assures a source close to the company (which does not comment on the topic). According to SPARK and Kartoteka.ru, Ivan Kulakov has 47.57% of SUNSKY CARBON LLC in Karelia, he is also a co-founder of the non-state owned landowners and homeowners of the Skolkovo cottage community.

In 2016, 238.8 tons (7.67 million ounces) were mined in Russia's gold deposits, 20% of which was the extraction from resistant ores, and this share is growing, explains the head of the Union of gold miners Sergey Kashuba. In his opinion, for the development of Nezhdaninskoye it is necessary to solve technological issues, but Polymetal has a serious experience with working with persistent ores. On Nezhdaninskoye it is logical to make a concentrate for export or tolling processing in the Chinese province of Shandong, Mr. Kashuba believes, in 2016, China produced 453 tons (14.56 million ounces), capacity allowed to smelt another 80 tons (2.57 million ounces) of gold on give-and-take raw materials.