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By John Helmer, Moscow

White Tiger Gold (WTG) was supposed to be the curtain-raiser on the Canadian stock market for Mikhail Prokhorov and Maxim Finsky, his childhood playmate, to sell shares in their collection of little known gold and other mineral prospects and mining licences in Russia. That collection is called Intergeo, and it cost Prokhorov and Finsky play money.

At one time, Prokhorov’s former shareholding partner in Norilsk Nickel, Vladimir Potanin, accused him and Finsky of filling Intergeo with stolen goods—licences originally acquired for Norilsk Nickel and with the latter’s money. That case never went to court because Prokhorov and Potanin managed to settle between themselves which side each would get out of the bed they had shared together. Finsky got out too on Prokhorov’s side, and became boss of Intergeo.

He and Prokhorov then said to themselves how fine it would be if they could repeat the success they and Potanin had had, spending about $1 billion on goldmines in Russia, spinning them into a new name company, Polyus Gold, and listing that in London at a lucrative multiple. At one time the $1 billion they had spent of Norilsk Nickel’s money on Polyus Gold reached $9.2 billion in market capitalization; today it’s worth $8.1 billion.

The initial public offering (IPO) plan for Intergeo was advertised by Prokhorov in April of 2011. The idea then was that Intergeo would be spun out of Prokhorov’s Moscow holding Onexim, and shares sold on a public stock market in Canada. Prokhorov and Finsky claimed at the time their assets would be valued at $3 billion on the Toronto Stock Exchange (TSX), and that they expected the IPO to occur within three to six months.

That didn’t happen. Instead, Finsky’s WTG has collapsed into virtual worthlessness. Starting with a share price in January 2011 of C$6.58 – representing a market cap of C$2.2billion – WTG is today trading at 10 cents, worthno more than $34 million. The latest operating and financial reports show WTG lost $10 million in 2011, fifteen times more than it had lost in 2010. Gold production at five Russian deposits, one in Canada and one in Peru came to 52,907 ounces. It is producing this gold at a whopping $2,572 cash cost per ounce. No Russian goldminer comes close.

In fact, just one of the Russian deposits is actually in production. It’s called Savkino. Located in what used to be called Chita region (now Trans-Baikal krai), 15 clicks from the Chinese border, this is a hole in the ground which can be mined for only six months of the year, and has a remaining mine life of no more than six years. To expand the annual output of gold from Savkino, WTG says it needs to find $25 million.

The annual report of WTG for last year, issued on April 5, acknowledged “White Tiger Gold’s liquidity as at December 31, 2011 was insufficient to meet the company’s corporate, administrative and exploration costs and commitments for the next twelve months, if not sooner in the event of any unexpected events.” In short, almost broke.

One of the reasons is the unusual payments WTG is making to Finsky and another Russian stakeholder, Sergei Yanchukov, whose pocket companies are selling assets and lending money to WTG; and in salary paid out to WTG’s Canadian executives. In its first-quarter report for this year, WTG admits to a quarterly loss of $6.9 million, of which $4.5 million went on “administrative expenses”. The loss was up 273% over the same period of 2011; the salary item was up 123%. The quarterly interest expense reported was $471,000, up 187% on the year.

The other lenders to WTG are the Russian state bank VTB, which has taken gold output as collateral; and IFC-Bank, which has secured its money with the Russian prospect licences. VTB agreed to an announcement from Finsky last December that it has approved a loan to WTG of $150 million, issued in at least three tranches depending on WTG’s performance, and required to be spent on the Russian prospects. The first tranche of $40 million was reportedly released on March 29. VTB was asked to respond to the insolvency disclosure and to the TSX investigation, and explain what has happened to its promised loan. Elena Veteleva, a bank spokesman, said: “We do not comment on this issue”.

Unrevealed in WTG’s reporting is that IFC-Bank is a related party once you know that Prokhorov and Finsky are playmates. IFC stands for International Financial Club. In fact, it is the Russian bank MFK which Prokhorov controls and which he owns along with these stakeholding oligarchs – Suleiman Kerimov (Prokhorov’s partner inPolyus Gold),Victor Vekselberg, and Alexander Abramov.

The Toronto Stock Exchange (TSX) has reacted to the deteriorating WTG position with an announcement this week that it is investigating the company for possible delisting on the exchange. It is probably too late. As WTG was collapsing and destroying about $2.17 billion in Canadian shareholder value, the Ontario Securities Commission (OSC) and the Ontario Supreme Court both decided they could find nothing amiss. It will be less difficult for the TSX now that there is almost nothing left.


In the investor blogs and internet chatrooms, where disgruntled shareholders discuss these things in Canada, there are two theories of what has happened to ruin both WTG and Century Mining — the actively producing goldminer which Finsky took over and absorbed into WTG in October 2011, and which is being destroyed, along with WTG. One theory is that Finsky (and Prokhorov behind him) have been gulled by Canadian hucksters they have employed into anticipating that with a little Russian seed money, and the appearance of much bigger-value gold assets in Russia than have been registered with the Russian State Reserves Committee, WTG could generate several multiples of growth. To date, the published WTG reports claim that reserve estimates for the Russian projects have been prepared by non-Russian consultants; they have not been submitted to or authorized by the State Reserves Committee, so in Russian terms, the reserves don’t exist.

That was the bull trap – the lure that WTG’s falling share price would be turned around for the benefit of new public shareholders.

Definition of ‘Bull Trap’
A false signal indicating that a declining trend in a stock or index has reversed and is heading upwards when, in fact, the security will continue to decline.

The second theory is that Finsky (with Prokhorov behind him) has been gulling the Canadian market into devaluing WTG to the point where he can buy the entire shareholding for a song, and take the company private. At that point, the theory goes, he will start reviving production, end the loss-making, and keep all the profits, including the future upside in share value, for himself. That’s the clap trap.

From the start, Finsky’s conversion of the Russian prospects into WTG was a reverse listing scheme like the one Prokhorov had pursued between Polyus Gold and Jersey-domiciled, London- listed Kazakh Gold. But from the minority stakeholders of Century Mining, who tried fighting Finsky off, there is a record of charges of misleading market filings, misinformation regarding asset valuations leading to a possibly fraudulent exchange ratio for shares of the two companies, conflict of interest, and worse.

On May 11 Finsky announced that from his WTG pocket he is proposing to borrow, and from another pocket he is proposing to lend $16 million. The WTG announcement says: “The Loans will be unsecured, will mature one year from the closing date and will bear interest at 15% per annum. The proceeds from the Loans will be used for: (i) financing operations at the Company’s Lamaque project, including build up of major inventory items; (ii) supporting capital development at the Company’s Savkino and Nasedkino projects in Russia; and (iii) general corporate purposes.” To secure the money, WTG is giving Finsky about 36 million share warrants – that’s about 11% of the WTG issue. Currently, that’s worth less than $4 million. The move is explained as necessary to prevent WTG defaulting on repayment on an earlier loan agreement with Deutsche Bank London.

Finsky, according to the WTG announcement, currently owns about 40% of WTG. The latest financial operations will boost his stake to 46%. The other Russian stakeholder, Sergei Yanchukov, currently holds 13% of WTG’s shares, but stands to boost this to 35% if he exercises his share warrants. The WTG admits that “as the Loan Transactions involve insiders of the Company and will result in significant dilution to existing shareholders …the Company is required to obtain shareholder approval pursuant to the applicable policies of the TSX. However, the Company has applied to the TSX, pursuant to the provisions of Section 604(e) of the Manual, for an exemption from the requirement to obtain shareholder approval, on the basis that the Company is in serious financial difficulty.”

In short, Finsky has mismanaged his company so badly that he is obliged to wipe out its independent shareholders in order to save the property for—himself. Little wonder the company announcement claims it “has been unable to obtain sufficient third party financing to fund the repayment of the 2011 Unique [Finsky vehicle] Loans and to provide the additional funding the Company requires.”

The announcement was signed by Daniel Major. A few days later, he was replaced as chief executive by James McBurney, an ex-US Marine with a history at Merrill Lynch’s mining and resource lending businesses that has left no recollection of him at Merrill Lynch in Moscow. He has a reputation in the market as an expert in taking public companies private.

“Well, it looks like they played the bull-trap pretty well,”” commented one of the Canadian minority shareholders on the Stockigloo.com website site. “Not really a lot to say till it all sinks in. Looks like they [Finsky] don’t really mind delusion as long as they get the delusion at 22 cents [Finsky’s share warrant strike price].”Another investor responded: “Pre-Merger [October 2011with Century Mining] WTG claimed it had secure financing. What I am getting from this [announcement] is they were full of [expletive deleted] from the beginning. Correct me if I am wrong.”

One of the Canadians who took Finsky to the Ontario Supreme Court to block the takeover of Century mining last year has called on the Toronto exchange to “start your investigation from the beginning: i.e. how did WTG get listing on the TSX in the first place?? You will find that Maxim Finsky (WTG’s largest shareholder) used a dubious reverse takeover to get a toehold on the TSX in late 2010. Then he ran the share-price up $8.50 by January 2011 (to pay for CMM’s shares with worthless WTG paper). And today WTG shares are at $0.065. All this with three producing gold mines… I suggest that you should also look at the trading violations by insiders of WTG, and the false/misleading disclosure practices by White Tiger Gold during the last several months. Perhaps you should consider calling in the RCMP[Royal Canadian Mounted Police]. It appears that there are a lot of us, minority shareholders, being ripped off.”

For their response to the critics, Finsky at the Intergeo office in Moscow and Prokhorov at the Onexim office were asked these questions:
— how does he explain the collapse of market confidence in White Tiger Gold (WTG) and Century Mining, according to the evidence of share price decline?
— why is he lending money to WTG to save its operations from halting and the company going bankrupt? Why will no other bank lend after he claimed he had secured financing for the company’s needs before the merger with Century Mining? Why is he charging a 15% interest rate?
— what has happened to the VTB bank loan of $150 million announced as agreed last December?
— does the WTG story mean the end of the plan to arrange an IPO for Intergeo on a Canadian stock exchange? If WTG is delisted because it is on the verge of bankruptcy, is Finsky admitting failure?

Secretaries at both offices acknowledged receipt, but there has been no reply.

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