Precious metals producer Polymetal International has announced the sale of its Russian assets to a Siberian gold miner for approximately $3.7 billion, a deal prompted by the repercussions of the conflict in Ukraine.
The company stated that its Russian assets were subjected to U.S. sanctions in 2023 following Moscow’s military actions in Ukraine in February 2022.
Consequently, Polymetal relocated its headquarters from Jersey to Kazakhstan and listed on the Astana International Exchange (AIX) in an effort to facilitate the sale.
The agreement entails Polymetal International selling its Russian business to Mangazeya Plus, a subsidiary of Mangazeya Mining owned by businessman Sergey Yanchukov, for around $3.69 billion, including the Russian operation’s net debt of $2.21 billion.
Polymetal’s shares on the Moscow stock exchange plummeted by 8.6% following the announcement.
CEO Vitaly Nesis stressed the urgency of the sale, stating that the deteriorating external environment left no room for waiting for improvements in the overall conditions for doing business in Russia.
Nesis expressed dissatisfaction with the terms of the deal, acknowledging that although it was satisfactory, it fell short of fair value.
Analysts at Tinkoff Investments highlighted the significant discount at which the assets were valued compared to both Russian peers and the company’s historical averages.
Despite this, Nesis affirmed that Mangazeya’s offer was the most realistic among the final proposals, as it addressed key vulnerabilities in the structure of the new company.
Mangazeya Mining, primarily active in eastern Siberia since its establishment in 2011, produced 466,000 ounces of gold last year, in contrast to Polymetal’s 1.23 million gold equivalent ounces in Russia.
Yanchukov confirmed that the existing management team, led by CEO Sergey Cherkashin, would continue to lead the company.
The transaction, fully compliant with all sanctions, will involve payments in roubles, including $1.48 billion in cash, $1.43 billion in dividends from the Russian business, and an additional $50 million.
Polymetal International plans to utilise $1.15 billion of received dividends to settle intra-group debts and allocate part of the $300 million retained post-tax proceeds to developing the Ertis POX project in Kazakhstan.
Looking ahead, Nesis outlined plans for potential mergers and acquisitions in Kazakhstan and Tajikistan, with the aim of eventually returning to the London Stock Exchange after achieving a production target of 1 million gold equivalent ounces in three years.
He emphasised that prioritising growth over dividends is imperative, considering the challenging new realities.