Russian miner Polyus Gold said on Wednesday the sale of a 6.54 percent stake to co-owner Mikhail Prokhorov would lead to a loss of shareholder value by generating more cash than was necessary to fund growth.

Polyus, the world's fourth-largest gold company by reserves, said Prokhorov's bid to buy treasury shares was similar in price to an earlier bid by British asset management firm Kazimir Partners, which had offered to buy a smaller 2.5 percent stake.

The early sale of the stake will lead to the loss of shareholder value, Polyus said in a statement.

Polyus is the last battleground in the protracted asset split between billionaire partners-turned-rivals Prokhorov and Vladimir Potanin. Analysts interpret Prokhorov's share bid as an attempt to tighten control of the company that he chairs.

Onexim, his investment company, offered on Friday to buy the entire stake held by Polyus unit Jennington International. The offer price was not disclosed.

Polyus said the sale would generate excessive cash of $2.3 billion, including the $1.4 billion in funds already declared.

Kazimir Partners offered $73.44 per share, or $350 million, to buy enough Jennington shares for a 2.5 percent stake in Polyus. Polyus also urged shareholders to reject this offer, which expired on May 26.

Polyus produces a quarter of Russia's gold and has ambitious plans to develop some of the world's largest gold deposits in Siberia and the Russian Far East with the aim of more than tripling production by 2015.

Polyus said it would not require any debt financing before 2010 as long as the gold price remains above $850 per ounce. It was trading at over $880 on Wednesday, having this year rocketed to all-time highs above $1,000 an ounce.

Only after 2010, the management is planning to raise additional money through debt financing, and consider the possibility of selling the Jennington stake, Polyus said.

In the event the Jennington stake is sold, the money raised will not be used before 2011.

Polyus management, which analysts say has traditionally been loyal to Onexim, has effectively controlled the voting rights on the 6.54 percent of treasury stock owned by Jennington. Analysts say this practice has been criticised by Potanin's company, Interros.

Interros is campaigning for the appointment of more independent directors to the Polyus board ahead of an annual general meeting on June 26. A source close to the company told Reuters Interros would send letters to Polyus shareholders seeking their support on this matter.

Potanin is also opposed to plans by Polyus to carve off its exploration business into a separate company.

Onexim is understood to own about 30 percent of Polyus.

Potanin's Interros has a comparable stake, which was boosted when he bought Prokhorov out of their jointly held KM-Invest vehicle, which owns 7.4 percent of Polyus.

Polyus shares closed down 3.9 percent on Moscow's MICEX exchange on Wednesday, underperforming the 2.2 percent decline on the bourse's metals and mining index.

The company's London-traded stock closed down 5.9 percent, before the company issued the statement. (Reporting by Robin Paxton)

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