Polymetal mulling sale of Russian assets

MOSCOW. July 19 (Interfax) - Polymetal , Russia's largest silver producer and one of the country’s biggest gold miners, is considering selling its Russian assets, the company said in a statement.

Polymetal has set up a special board of directors committee consisting of independent non-executive members to consider the possible deal.

If it sells its assets in Russia, Polymetal will focus primarily on its operations in Kazakhstan.

The potential deal would be subject to shareholder approval.

“The Committee is acting in the interests of all of the Company’s shareholders with the ultimate goal of unlocking the Company’s value by removing its exposure to the Russian Assets,” committee chairman Paul Ostling was quoted as saying in the press release.

Polymetal said it believes that the potential transaction would increase the likelihood of the company’s “ability to re-enter all the relevant equity and sustainability indices and regain a significantly wider institutional audience.”

The company said earlier that it was considering splitting its asset ownership structure by jurisdiction. The FT, citing sources, reported that Polymetal was considering splitting its Russian and Kazakh businesses and each could have its own listing.

Kazakhstan accounts for about a third of Polymetal’s production. The company expects to produce 1.2 million ounces of gold equivalent in Russia and 0.5 million ounces in Kazakhstan in 2022.

Veles Capital forecast that Polymetal’s Russian operations will generate 68% of consolidated revenue with an EBITDA margin of 38%, compared to 54% in Kazakhstan. The higher margin of the Kazakh operations is achieved thanks to the lower costs in the Central Asian country.

The Russian assets will also take most of the debt burden and 89% of all capital expenditures, analysts said. Veles Capital previously estimated the market value of the equity of Polymetal’s Russian assets at $3.3 billion.

Polymetal has operations in Magadan and Sverdlovsk regions, Khabarovsk Territory, Chukotka, Yakutia and Kazakhstan. Polymetal’s largest shareholders are the ICT Group of Alexander Nesis and his partners with about 24%; and BlackRock funds with about 10%.