* Pulling application to create parent company
* Was a key step in FTSE inclusion
* Polyus could still sell stock without redomicile
* Rivals Evraz, Polymetal recently became FTSE-listed
By Polina Devitt and Megan Davies
March 20 (Reuters) - Russian gold miner Polyus Gold , part controlled by tycoon Mikhail Prokhorov, said on Tuesday it was withdrawing its application to create a new parent company, considered necessary for it to gain inclusion into the prestigious FTSE 100 index.
Without the FTSE inclusion and redomicile from its current Jersey home, the company could still go ahead with plans for a share sale worth several hundred million dollars, analysts and two sources familiar with the matter said.
The withdrawal, however, casts doubt on Prokhorov's ability to secure a large-scale deal for Polyus, as its ambition to gain a premium London listing is seen as key to doing a deal.
Polyus had been awaiting approval from a committee chaired by prime minister and newly-elected president Vladimir Putin. That committee had delayed giving approval, seen by some observers as linked to Prokhorov's presidential ambitions.
Prokhorov, who was placed third in the March 4 presidential election with around 8 percent of the vote has announced plans to launch a liberal political party, and previously rejected suggestions Polyus might be a hostage to his political fortunes.
A spokesman for Polyus said on Monday it had dropped the bid to move to London. Polyus confirmed the move in a statement on Tuesday, saying it filed a request to withdraw its application for approval for creating a parent company.
Polyus' shares fell 2 percent in London, down 7 cents to $3.03.
As part of its plan to gain top FTSE billing, Polyus had aimed to increase its free float from the current 14 to 25 percent through a sale of shares, including treasury shares, which could have raised up to $800 million.
Polyus could still gain a premium listing by selling its treasuries shares to repay some debt, a source familiar with the company's plans said, although as a Jersey registered company it would not be able to achieve FTSE inclusion with a free float of under 50 percent. It has about $500 million in short term debt.
The absence of a London move may delay Polyus' plans for a secondary public offering, Andrew Jones, analyst at Renaissance Capital, wrote in a research note on Tuesday.
"Polyus's ultimate goal of merging with a large international gold producer would also be derailed by this decision," Jones wrote.
A source familiar with its plans to raise its profile in London said on Monday the rest of Polyus' plans had not changed, suggesting its ambition to do a large deal may still be in place.
There has been speculation Polyus is keen to do a deal with rival Polymetal. Discussions over such a move have taken place at the shareholder level, two sources familiar with the matter previously told Reuters.
Both firms continue to deny they are in talks about a deal.
A move to the FTSE would have followed similar moves by Evraz, part-owned by Chelsea Football Club's Roman Abramovich, and Polymetal, part-owned by tycoons Alexander Nesis and Alexander Mamut with Czech investor PPR, which recently became premium listed FTSE 100 stocks.
President-elect Putin chairs a government commission with sweeping authority over foreign investment in firms like Polyus, whose gold reserves are considered strategic by the state.
In October, the commission did not approve a request by Polyus to seek a premium listing, a decision linked by some analysts to Prokhorov's failed first attempt to enter national politics as leader of the Right Cause party.
In an interview with Reuters in January, Prokhorov, by then running for president and thought by some analysts to have the Kremlin's tacit blessing for his bid, said he was confident the government would remove obstacles in its way.