Suleiman Kerimov finally did what he was always expected to do with Polymetal, Russia's principal silver miner -- he has sold out.  

The move was confirmed in a Monday morning press release from one of the buyers, the ICT group belonging to former Polymetal owner Alexander Nesis. He has acquired a 24% shareholding. The sale to a consortium, which also includes Moscow investor Alexander Mamut (19%), and the PPF group of Prague (25%), also indicates that, in Kerimov's judgement, Russian gold and silver miner valuations have reached their peak for the foreseeable future.

The ICT announcement says no price or valuation will be disclosed in their transaction. ICT says only that it is buying a 24% stake in Polymetal from Kerimov's aggregate holding of 69%. The ICT press release also quotes Nikolai Dobrinov, a partner of Nesis, as hinting that Kerimov may have been obliged to accept less than he once thought his stake was worth.  

In January 2006, Kerimov paid $930 million in cash to ICT for 100% of Polymetal. At the London IPO for Polymetal a year later, the target valuation of the company, arranged with Merrill Lynch, Deutsche Bank, and UBS, was $2.4 billion, or $8.72 per share. It subsequently dropped as low as $4.50 last August. The peak this year was $9.85 in March. First word that Kerimov was selling out came shortly afterwards.

Nesis is paying roughly half of what he earned the first time round to buy back in. Vitaly Nesis, Alexander's brother and chief executive of Polymetal through the Kerimov holding, appears to have overcome the pessimism he has been feeling about the company's prospects under its outgoing proprietor. 

Kerimov, an opportunistic investor, has also been reported recently as cashing out his Russian stakes in Gazprom and Sberbank.

According to Dobrinov, in our opinion the Polymetal company shares are underestimated today, and their price has good prospects of growth. 

Moscow newspaper reports claim the deal, executed on June 11, was worth $2.1 billion, which would represent a 15% premium to the market capitalization on the day of completion. Since none of the three new buyers will hold more than 30% in Polymetal, no mandatory offer to minority shareholders will be required.

A bulletin from UralSib Bank in Moscow comments that the deal will not be a major driver for the stock, despite the potential 15% premium to the current market price... we view the return of Polymetal's former shareholder, IST Group, as slightly positive for the company as the current top management team...will likely remain at the helm of the company. 

In Moscow trading immediately after Monday's deal announcement, Polymetal's share price dropped 6% to $8.30. After a brief gain in May, when word of the Kerimov sale negotiations first leaked out, the share price has been falling steadily.

Polymetal is Russia's largest silver producer, with output of almost 16 million ounces in 2007. It is the third largest gold producer in the country with 242,000 oz. Paltry profitability in 2005 and 2006 was reported as a result of loan agreements with ABN Amro and other banks, which obliged the mining  company to commit for forward sale its gold and silver production at prices well below the market price.