Major players in the gold mining market, primarily the structures of Vladislav Sviblov, are eyeing the Russian assets of Polymetal. The group is facing the effects of sanctions and is considering options for separating toxic assets in Russia from those in Kazakhstan. One such option would be to sell to a third party, but to do so, Polymetal would need to re-register.
The structures of Vladislav Sviblov are interested in acquiring a part of the Russian assets of the gold mining company Polymetal, two sources report to Kommersant. According to one of them, due diligence was carried out. Another Kommersant source speaks of interest in assets from UMMC, another player in the gold mining market with large-scale expansion plans. Highland Gold spokesman Vladislava Sviblova declined to comment, a Polymetal spokesman said he does not comment on rumors, while noting that the redomiciliation strategy in Kazakhstan remains unchanged.
The parent company of the group – Polymetal International – is registered on the island of Jersey. As of December 31, 2022, the largest shareholder of the company is Alexander Nesis’ ICT group with 23.9% of shares, PPF Group owns 3.3%, directors and management control 0.9%. 75.2% are in free circulation.
Polymetal has begun considering selling some of its assets in 2022. Although there were no direct sanctions against the company, due to the restrictions imposed, logistics were difficult, there were problems with equipment and sales. Thus, the company stated that it was accumulating stocks of silver in warehouses due to the lack of reliable distribution channels. In the summer of 2022, Polymetal announced three options for changing the structure of the group: the sale of Russian assets to a third party while maintaining business in Kazakhstan, the buyout of Russian assets by management, and the spin-off of Russian assets into a separate company.
To separate the assets of the company, re-registration is required, since the island of Jersey is included in the list of jurisdictions unfriendly to Russia.
By decree of the President of the Russian Federation, the sale of assets in a number of sectors by non-residents from unfriendly countries is prohibited without special permission from the head of state. “Moving” to a friendly jurisdiction, Polymetal reported in the financial statements, will allow the company to restore shareholder value and enable M&A transactions. Astana is the preferred jurisdiction.
In January 2023, during an investor day, Vitaly Nesis, the company’s chief executive officer, said that at that time there was most likely no talk of a sale, but the company would like to separate “toxic” Russian assets from “non-toxic” assets in Kazakhstan. In Kazakhstan, the company operates at the assets of Kyzyl (with a production of 330 koz) and Varvarinskoye (211 koz). Russia has deposits of Dukat (292 thousand ounces of gold equivalent), Omolon (199 thousand ounces), Albazino (230 thousand ounces), Maiskoye (120 thousand ounces), Svetloe (104 thousand ounces), Vorontsovskoye (93 koz), Nezhdaninskoye (133 koz) and Amur GMK. Also in Russia there are a number of projects for the future.
If the redomiciliation is approved, it may be completed in the third quarter of this year, then the division of assets is possible in the first half of 2024, Interfax reported, citing Vitaly Nesis.
Vladislav Sviblov comes from the real estate industry and has been actively investing in gold mining in recent years. In 2019, he invested in the Ozernoye polymetallic deposit and then began acquiring gold mining assets. In 2020, he bought Highland Gold, as well as the Darkhan and Darasun mines, and in 2021, Trans-Siberian and Gold of Kamchatka. The Union of Gold Producers of the Russian Federation estimated the total production at the assets at 16 tons of gold – this is the third place in the country after Polyus and Polymetal. In the summer of 2022, another deal was made – Mr. Sviblov bought out the Russian assets of the Kinross group.
At the moment, the gold market is seeing increased activity in the field of mergers and acquisitions (M&A), says Boris Krasnozhenov from Alfa Bank. In early February, the world’s largest gold producer, Newmonth Corp., made an offer to buy Australian company Newcrest Mining Ltd for $17 billion, he said. cycle. Currently, the price of gold is in the range of $1800-1850 per ounce, which is below the multi-year average of about $1900 per ounce. Given the growing demand for physical gold and the growth of inflationary expectations, it can be assumed that a rally in the gold market with prices above $2,000 per ounce may occur on the horizon of 6-12 months.