Severstal to spin gold off, focus on steel
MOSCOW. Sept 30 (Interfax) - Severstal plans to spin its gold mining unit Nordgold off and concentrate on steel and related mining, Severstal chief Alexei Mordashov said at the company's Capital markets Day on Thursday.
The two businesses have differing multiples, he said.
Severstal has not yet decided how Nordgold will be spun off. "A spin-of is one option and sale is a sub-option, and there are others we haven't yet made or mind up, but we'd like to do so in a reasonable amount of to," Mordashov said.
He also said the company was not thinking of acquiring ferroalloy production assets.
Nor is it thinking of selling shares in its upstream division Severstal Resource for the time being as it sees a possible conflict of interests there, Mordashov said.
Thomas Veraszto, Severstal's Senior Vice President, Corporate Development, told Interfax that the company was currently deciding on its investment program for the coming year. "It might be on a par with this year's or smaller, depending on the markets. We aren't ruling out deferring some projects which have not begun or which are no in a very advanced stage," he said.
Regarding the development strategy, Veraszto said: "We had two ways, including developing the company as highly diversified one, as diversification mitigates risk. We have decided to focus on steel, that is all other projects like uranium, minerals, metals can be developed outside of Severstal," he said.
Severstal Resource brings together iron ore, coal and gold mining assets in Russia and abroad.
Nordgold canceled an IPO in London at the start of this year. It plans to mine 800,000-840,000 oz gold equivalent in 2011.
Nordgold has eight operating assets in four countries, plus a number of assets at the exploration and pre-production phase. The assets include High River Gold Mines (HRG) Ltd., in which Nordgold owns around 75%, and which operates the Berizitovy mine in Russia's Amur region; the Zun-Holba and Irokinda deep mines in Buryatia, licensed to OJSC Buryatzoloto ; 50% of the Prognoz silver deposit in Yakutia; and two projects in Burkina-Faso - Somita, operating company for the Taparco mine, and the Bissa exploration project. Nordgold also owns the Aprelkovo mine in Russia's TransBaikal territory; Neryungri-Metallik in Yakutia; Suzdal, Zherek and Balazhal in Kazakhstan; and 100% of Crew Gold, which operates the Lefa mine in Guinea.
Nordgold chief Nikolai Zelensky told reporters in London that Nordgold was ready to buy HRG's minority shareholders out at an acceptable price.
"We so far own around 75%, and Canadian law states we will have to make a buyout offer after the 90% threshold is crossed," he said. Nordgold raises its stake in HRG to 75.06% in stages by he end of August, Its most recent transaction was to buy 1.4% at C$1.29 a share or a discount of almost 6%. The stock traded at C$1.31 in Toronto on September 28, valuing HRG at C1.1 billion, so the minority stake could be worth $270 million at market value. An initiative group of minority shareholders thinks the asset is undervalued.