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. Last Updated: 07/27/2016

Kudrin Sees Alrosa Buying Polyus Stake

MTKudrin
WASHINGTON -- State diamond miner Alrosa is considering whether to pursue an offer to buy a stake in Polyus Gold, the world's fourth-largest gold company by reserves, Finance Minister Alexei Kudrin said.

Kudrin, who also heads the supervisory board of Alrosa, said no decision had yet been made. He did not say from whom the diamond company had received the offer to invest in Polyus, which produces nearly one-quarter of the country's gold.

"We are considering the offer. The deal is currently being studied, but there are no decisions yet," Kudrin, who is attending an annual International Monetary Fund meeting in the U.S. capital, said late Monday.

Alrosa has previously expressed an interest in buying the stake of 25 percent plus one share in Polyus held by the gold miner's chairman, Mikhail Prokhorov, and has approached state-controlled bank VTB to fund the proposed acquisition.

Prokhorov and partner Vladimir Potanin are engaged in a protracted division of their various assets, including large stakes in Polyus and mining giant Norilsk Nickel.

Media first reported that Prokhorov would buy Potanin out of Polyus and that the latter would take control of Norilsk, but Prokhorov has since built up the largest single stake in both firms, raising the possibility he could sell to a third party.

VTB president Andrei Kostin told Vedomosti in August that the bank would be interested in any deal worth $2 billion or more between Alrosa and Polyus. The gold miner has a market capitalization of $8.5 billion.

Asked why negotiations over Alrosa's purchase of a stake in Polyus had taken so long, Kudrin said: "It happens that conditions aren't suitable, so they are discussed. If the conditions aren't suitable, then the deal might not take place."

He said earlier media reports of a sale had been premature, adding, "We are still studying the conditions."

Prokhorov last week resumed the chairmanship of Polyus after a four-month absence, and he reinstalled former chief executive Yevgeny Ivanov in a move interpreted by some analysts as a sign he was close to a resolution with Potanin.

Kudrin said Alrosa was not considering buying into Norilsk Nickel.

"There are no negotiations to date. There have not been any proposals. To speak of this is premature," the finance minister said.

Kudrin also said Monday that the government would heavily revise down its 2007 budget surplus in order to pump more funds into state-owned investment vehicles. Kudrin said the surplus was now expected to be 2.84 percent of gross domestic product, compared with the previous estimate of 4.81 percent.

He said this would translate as a surplus of 912.5 billion rubles ($36.79 billion), down from an earlier target of 1.5 trillion rubles.