The share price of Polyus Gold started tumbling on the Moscow exchange even before the votes were counted at Thursday's Annual General Meeting of shareholders in Moscow. At the Moscow bell, Polyus was down more than 3% on the day to $60 per share.

Since May 21, when the share price spiked on shenanigans already reported, the Polyus price has dropped 25%. There was still time for the London exchange to keep the price tumbling, which it did through the afternoon, dropping more than 6% as this was being written. Almost $4 billion in market capitalization has evaporated in a month; $106 million per day, and that includes weekends.

The results of voting on the new board of directors indicated that Mikhail Prokhorov has retained his own and four other seats. These are to be occupied by Chief Executive Evgeny Ivanov and Valery Rudakov, beneficiaries of a lucrative and lawful share options scheme reported in Mineweb early this month. In addition, two other sitting directors, Yekaterina Salnikova and Yevgeny Braiko, have been re-elected to positions backing Prokhorov. Prokhorov's holding Onexim declined to characterize the outcome of the board vote, and spokesman, Igor Petrov, told Mineweb:  We don't have a position. Please read the Polyus statement. 

The company statement quotes Chief Executive Ivanov as saying:  We are pleased that the institutional investors supported the election of two independent directors into the Board - Valery Braiko and Robert Buchan. Particularly, we welcome the election of Robert Buchan, known as one of the leading gold mining professionals in the world.

Opposing Prokhorov, former partner Vladimir Potanin and his Interros holding elected Andrei Klishas, chairman of Interros (who replaces Sergei Batekhin, another Interros supporter); and Yevgeny Yarovikov, head of the investment department at the Interros holding.

Two western independents were voted on to the board. Lord Patrick Gillford was re-elected, fighting off a campaign by Ivanov and the Onexim supporters to oust him on the ground that his criticism of management policy has made him ineligible to be an independent director. Gillford defeated a bid by Prokhorov to throw his votes in favour of his proposed independent, Christophe Charlier, an investment banker. Charlier used to work for Prokhorov when the latter was chief executive of Norilsk Nickel. Charlier's defeat by Gillford suggests that the minorities remain guarded towards Prokhorov and Ivanov. The Ivanov statement on the Polyus website pointedly does not refer to Gillford as an independent

The second undisputed independent - a newcomer to the board - is Robert Buchan, a veteran North American goldminer, who was formerly with Kinross,  and is now  associated with Allied Nevada.

It is unclear exactly how many minority shareholders were eligible to vote at the AGM, and what percentage of Polyus's 191 million shares the free float currently comprises. An informed estimate is that about 60 institutions, funds or individuals in the free float control about 30% of the voting shares. In theory, the free-float independents ought to have 3 directors on the board.

Prokhorov and the Onexim side claims to have no more than a 23% stake in the company, but the AGM vote clearly shows they have marshaled more than that. As Mineweb has already reported, they command the votes of the 6.54% shareholding held by the offshore-listed Jenington International, which is owned through the Russian listed affiliate of Polyus the parent. The official company statement claims: Jenington International Inc. holding a 6.5% stake of OJSC Polyus Gold voted proportionally for all the candidates to the Board, in accordance with the Board's decision taken on May 21, 2008. 

The Potanin and Interros group have a shareholding of about 30%. The new board suggests that they have managed to elect two committed directors, and two independents. According to a statement from Interros, We consciously reduced our presence on the board in favor of independent directors. Now there are three independent ones. Let's see how the management will be able to implement what it has promised.

The discrepancy in the count of independent directors hinges on the performance of Braiko, who runs the Russian Goldminers Union. He is on record voting for the Prokhorov-Ivanov initiatives, and is viewed by Moscow analysts, as well as by the Potanin side, as on Onexim's side. Braiko has declined the opportunity to explain his position. Ivanov's statement on the company website counts Braiko as an independent.

The company statement is also controversial in declaring that the shareholders of Polyus Gold voted FOR the amendments to the Charter of OJSC Polyus Gold, aimed at improving the Company's corporate governance. This is disputed by the Potanin side, and by independent sources. One told Mineweb that Prokhorov's supporters were able to vote down the governance amendments. They have a majority on the board. Now they can pass every single decision they want, the source said.

A market source added that the outcome of the vote indicates that Prokhorov and Ivanov were backed by roughly 40% of the votes cast.

UralSib Bank metals analyst Michael Kavanagh told Mineweb the vote leaves Prokhorov still very much in control with 5 of 9.  At this stage,  this doesn't inspire a great deal of confidence,  as to date,  management have done a good job of accumulating licences, but a poor job of project development; they have also failed to deliver any production growth. In addition, one could call Polyus a 'gravy train',  as generous bonuses are paid and share options granted,  without  improvement in financial results.

UralSib is advising the market to take a wait and see approach. But we are growing old waiting for production growth, while watching capex and opex rise.