Polymetal Can Consolidate The Nezhdaninskoye Gold Field
Highland Gold minority shareholder Ivan Kulakov will not stay in the shareholders of the large Nezhdaninskoye gold deposit in Yakutia. Having bought 82.3% of the project from Polyus in March, Mr. Kulakov agreed on a phased sale of the asset to Nezhdaninsky’s second co-owner – Polymetal. The repurchase amount of 75.3% in the joint venture will be up to $ 180 million, but only $ 10 million will be paid in cash, and the rest – in shares of Polymetal.
Gold mining Polymetal entered into an option with the Cyprus Pallavicino Holdings Ltd, Ivan Kulakov, which assumes the consolidation of the Nezhdaninskoye gold deposit in Yakutia with 10.9 million ounces of resources. Polymetal, which owns 17.7% of Nezhdaninsky’s joint venture to develop Nezhdaninskoye (Cyprus UVGK Holdings Limited), will buy 7% of Pallavicino from JV for $ 8mn and can pay an option at 75.3% for $ 105-180 mln, based on JORC asset inventory . But cash Pallavicino will receive only $ 10 million (another $ 12 million – option premium), and the rest – shares Polymetal (apparently, the additional issue). The exact package will be calculated by the market, the option is valid from February 1 to June 1, 2018. The capitalization of Polymetal is $ 5.09 billion, that is, Ivan Kulakov can get up to 3.5% in the current capital. To purchase a 7% stake and exercise the option, the approval of the commission on control over foreign investment, and the option – also the FAS.
Polymetal can and sell Pallavicino 24.7% in the joint venture, but for a nominal € 1 thousand with $ 20 million invested in the project. Polymetal says it’s an opportunity to exit the project without obligations, “if it does not provide the required return on capital” , But this is unlikely. “The asset is ideally suited to key competencies of Polymetal in the processing of refractory ores and the development of remote deposits,” said Vitaly Nesis, the head of the company. Investments can reach $ 200-250 million from free cash flow.
Ivan Kulakov, a former partner of Roman Abramovich, formed the gold mining Highland Gold Mining, where he was a co-owner and managing director, but from the mid-2000s he remained a minority with 4.5%. Mr. Kulakov in March bought 82.3% of UVGK from Polyus Said Kerimov for $ 158 million ($ 58 million will be paid after Nezhdaninskiy’s launch). Sources of Kommersant then assumed that Ivan Kulakov could act in the interests of other buyers or resell the package. In 2013, Polymetal bought for $ 73.3 million in shares and $ 3.9 million in cash for the Mamin mining company from the structures, the main owner of which was Kommersant’s sources.
Kommersant sources familiar with Nezhdaninsky’s spring talks say that Polyus wanted to sell the asset quickly, but Polymetal, which had the option to increase the stake to 50% and the preemptive right of redemption, was not ready. Then the “Pole” sold the package to Ivan Kulakov, there were no tripartite negotiations, the interlocutors of “Kommersant” say. “Structuring of the deal happened with the new owner,” confirms Polymetal. To receive comments of Mr. Kulakov it was not possible. Whether he borrowed loans to buy a stake, it is not known, in the Cyprus registry of data on the pledges of Pallavicino there. Polymetal does not comment on Ivan Kulakov’s possible sale of the company’s shares, the source of Kommersant, close to the co-owners of the gold miner, does not know of any agreements and calls the businessman a “comfortable shareholder.” Director of Metallurgy and Mining Prosperity Capital Management Nikolai Sosnovsky notes that the dividend yield of Polymetal shares is about 5% per annum in dollars, and daily trading volumes of $ 20-30 million allow you to quickly monetize paper if you want.
Polymetal will pay $ 10-17 per ounce of resources without taking into account its share, Oleg Petropavlovskiy from BCS points out, while Kyzyl and Komarovskoye in Kazakhstan were bought in 2014-2016 for $ 92 and $ 70-129 per ounce of resources, respectively. Most of Nezhdaninskiy’s resources are “supposed” (7.7 million ounces), he says, Polymetal sees a real conversion of all resources into 2.4 million ounces of reserves. Polymetal constantly gets the resource base to load the recycling, the analyst recalls.