Polymetal approves transactions related to Kazakh gold project acquisition
MOSCOW. Sept 17 (Interfax) - Shareholders in Polymetal , Russia's biggest silver producer and a major gold producer, approved a number of transactions related to the restructuring of debt owed by JSC Varvarinskoye, the operator for the Kazakhstan-based Varvarinskoye gold and copper field, at an EGM on September 15, the company said in a statement.
Specifically, the shareholders approved a "Corporate Guarantee, Equitable Share Mortgage, Loan Agreement, Deed of Assignment, and Amendment and Restatement Agreement between JSC Varvarinskoye as a borrower and bank syndicate as a creditor, by virtue of which the Company undertakes to the creditor subject to restructuring of current debt and hedging obligations of JSC Varvarinskoye to secure obligations of JSC Varvarinskoye and to provide a purpose loan to JSC Varvarinskoye in order to allow JSC Varvarinskoye to meet its working capital requirements."
Polymetal is buying Varvarinskoye from Orsu Metals. The total consideration payable to Orsu by Polymetal comprises of $8 million in cash payable upon completion, and deferred consideration of up to a maximum of $12 million (plus any deferral interest), contingent on and calculable in reference to future prices of gold and copper.
Prior to entering into the Transaction, Orsu held certain debt and hedging obligations relating to Varvarinskoye with a syndicate of banks including Investec Bank, Nedbank Limited and Natixis Bank, specifically: debt obligations in the amount of approximately $73 million, comprising of a $35 million Export Credit Insurance Corporation, South Africa (ECIC) Loan, a $8 million Convertible Loan, a $18 million Commercial Loan, and $12 million of overdue hedging obligations; and gold forward contracts totaling 338,468 ounces at a strike price of $574.25 per ounce with a total estimated value of approximately negative $140 million (based on a spot gold price of $950 per ounce).
Polymetal has said the transaction is conditional on the Lenders, Varvarinskoye and Polymetal entering into definitive refinancing documents, which will be subject to the lenders' and ECIC's final approval.
In addition, the transaction is conditional upon obtaining necessary regulatory approvals.
Orsu expects to close the deal during Q3 2009.
Varvarinskoye is situated in north-western Kazakhstan, 130 kilometers from the regional center Kostanai and 10km from the border with Russia. Approximately $240 million was invested by Orsu Metals and its predecessor company, European Minerals Corporation, to build an open- pit mine, a 4.2 Mtpa processing plant and all related infrastructure.
The mine commenced production of gold in December 2007 and copper- gold concentrate in March 2008.
In the first quarter of 2009, Varvarinskoye produced a total of 13,599 ounces of gold and 1,743 tonnes of copper recovered to concentrate.