Medvedev to Polyus: Don't Whine

President Dmitry Medvedev on Wednesday criticized the director of Polyus Gold for "whining" in a comment that may have played a part in dampening investor demand for stock in one of the world's largest gold miners.

Polyus shares surged in morning trade after news that billionaire Mikhail Prokhorov was close to gaining control of the company, removing the risk of a standoff with his partner in the venture, billionaire Vladimir Potanin.

But the stock price slid later in the day after Medvedev told Polyus director Yevgeny Ivanov to stop complaining about delays in state support for the development of the world's third-largest gold deposit, Natalka.

"I understand that it's difficult for businesses to work, that we have an unwieldy bureaucracy, but don't whine," Medvedev said at a meeting with officials and business people in the far eastern city of Magadan. "If gold mining profits are too marginal for you, give up this work; we'll find someone else. If you want, we can take the license back."

By the end of trading, Polyus shares had lost about two-thirds of the gains from earlier in the day but still posted a rise of 3.8 percent from Tuesday.

Ivanov had mentioned that the government had indicated in October that it might help financing design work on the project, but had yet to reach a final decision, Polyus said in a statement.

He also made requests for tax breaks based on the low gold content of the ore in Natalka, Reuters reported.

Ivanov did get something of a positive response to one of his requests, with Medvedev ordering First Deputy Prime Minister Igor Sechin to look into providing 12 billion rubles ($481.5 million) for the construction of power lines and other energy infrastructure for the project, Bloomberg reported.

Natalka, based in the Magadan region, is expected to produce more than 1 million ounces of gold per year, which would raise Russia's total production by one-quarter. Opening exploitation of the field in 2013 will require an estimated $2.5 billion in investment, and Polyus has already spent $100 million on exploration for the project.

Economic Development Minister Elvira Nabiullina said the comments by Medvedev, who stopped in Magadan on a regional development tour of the Far East, were meant to urge the company to work better and respect the state's interests, Interfax reported.

Polyus shares went up sharply in the morning after Kommersant reported that Prokhorov was nearing an agreement with Potanin to obtain a further 35 percent in the company. Prokhorov, the owner of investment vehicle Onexim, already holds a 30 percent stake and is the gold miner's chairman.

In exchange for the stake, Prokhorov would give Potanin a 2 percent stake in Norilsk Nickel, 25.8 percent in Rusia Petroleum, which holds the license for the Kovykta gas field in Siberia, and 95 percent in poultry producer Agros, the report said.

Onexim chief Dmitry Razumov confirmed the report as generally accurate, Reuters reported. "We are close to a final deal, but we don't know when," he said.

A spokeswoman at Potanin's Interros investment company declined to comment Wednesday.

Medvedev's testy comments about Polyus conjured images of Prime Minister Vladimir Putin's rough handling of coal and steel firm Mechel in July, which slashed off a heavy chunk of the company's value.

Prokhorov reacted swiftly, calling a meeting of the company's board of directors for Sept. 30 to address Medvedev's remarks.

"Medvedev's comments were just a kind of thing which would scare off, particularly, foreign investors," said Michael Kavanagh, an analyst at UralSib.

But he added that the comments didn't represent a direct threat and that the Polyus Gold's valuation doesn't include Natalka.

Like the rest of the market, I didn't take it as a Mechel-like situation," said Robert Mantse, an analyst at Alfa Bank.

n Medvedev laid flowers at a Magadan memorial to victims of the Soviet prison camps on Wednesday, a gesture campaigners said may signal a new readiness to confront Russia's past, Reuters reported.

Medvedev's visit was significant because his predecessor, Vladimir Putin, stayed away from the memorial when he visited the region three years ago.