UPDATE 3-Russian gold miner Polyus says Fosun stake deal scrapped

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MOSCOW, Jan 15 (Reuters) - Russia's largest gold miner Polyus said on Monday that plans to sell a 10 percent stake to a consortium led by China's Fosun International had been dropped after one of the conditions of the agreement was not met.

The Fosun-led consortium had been in talks since 2016 to buy a large minority stake in Polyus, which is controlled by the family of Russian tycoon Suleiman Kerimov. Kerimov was arrested as part of a tax evasion case in France late last year.

Shares in the Russian gold producer fell 3.6 percent to a five-month low after news the $887 million deal had fallen through, leaving the company the worst performer on Russia's MOEX index .MCX.

"After the condition precedent was not satisfied, the parties discussed further options but did not reach a consensus, following which Polyus Gold International Limited proposed to terminate the agreement," Polyus said in its statement.

"The parties agreed to terminate the agreement, including the option for the consortium to acquire an additional 5 percent of the company's share capital pursuant to the agreement," the company said.

Polyus declined further comment on the termination of the deal.

According to one source with knowledge of the matter, the decision, made jointly by the companies, was due in part to Kerimov's arrest as this cast uncertainty over Polyus's prospects and sent the company's share price down.

Russia, the world's third largest gold producer, has been looking for investments from Asian countries including China since sanctions were imposed on Moscow by the West over its actions in Ukraine.

The deal for the Fosun-led consortium to buy 12,561,868 ordinary shares was signed in May 2017 and later delayed until February this year.

Polyus delisted from the London Stock Exchange in 2015, but it returned to London in June last year, buoyed by hikes in global gold prices and news of the Fosun-led deal.

The Chinese deal had valued Polyus at $70.6 per share, which was equal to the upper end of the price range for its share offer.

Fosun's interest in the Russian gold miner came at a time when a number of Chinese companies were targeting gold mine acquisitions in an attempt to build on domestic demand amid the global recovery in prices.

China, the world's top consumer, producer and importer of gold, has ambitions to be a global price setter.

It was to be the Chinese group's first Russian deal. Fosun, one of China's most prolific dealmakers headed by billionaire Guo Guangchang, had already set up two subsidiary companies, Fosun Management (Russia) and Fosun Eurasia Capital, with the aim of building its asset management business in Russia and neighbouring regions, according to the company's website.

The Shanghai-based conglomerate is best known outside China for its portfolio of businesses including French resort chain Club Med, margarine maker St Hubert and Portugal's largest listed bank Millennium bcp.

The collapse of the Polyus deal marks a setback for Fosun, which along with other Chinese conglomerates such as Dalian Wanda and HNA Group has dialled back on some ambitions abroad after Beijing stepped up scrutiny of outbound dealmaking, notably in sectors such as property, hotels and entertainment.

Fosun has already pared back its foreign real estate portfolio. It sold off a Sydney office tower for A$142.5 million ($109 million) this week and is also selling Lloyds Chambers in London. (Reporting by Polina Ivanova and Julie Zhu; Editing by Katya Golubkova and Mark Potter)