Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Two organisers of an initial public offering (IPO) for Russia-focused gold producer Nordgold see its equity value at $5.1-billion to $6.6-billion, three financial market sources told Reuters on Thursday.
Gazprombank put it at $5.1-billion to $6.6-billion, while Renaissance sees it at $5.4-billion to $6.3-billion, the sources said, adding books were expected to open on June 21 and close on June 29.
Nordgold is the latest miner to seek admission in the London Stock Exchange, one of the world’s oldest markets. Canada’s Yamana Gold (TSX: YRI) (NYSE, LON: AUY) listed in the UK last year, while Endeavour Mining (TSX: EDV) will begin trading on the LSE this month.
The Russian gold miner, majority-owned by billionaire Alexei Mordashov and his sons Kirill and Nikita, was previously listed in London but left in 2017.
The company hopes to be able to pay higher dividends than its peers in North America. With four mines in Russia, one in Kazakhstan, three in Burkina Faso, one in Guinea and two more mines under development, Nordgold expects to boost production by 20% over the next five years. In contrast, production at the world’s largest gold miner, Newmont (NYSE: NEM) (TSX: NGT), is set to remain about the same until 2025.
The gold producer aims to pay a minimum dividend of $400 million this year, in two installments. After that it would pay out 50% of its free cash flow, subject to its net debt remaining less than 1.5 times its earnings before interest, tax, depreciation and amortisation.
Polymetal, the largest Russian miner in London with an £8bn market capitalization, churned out 1.4 million ounces of gold last year. Endeavour has forecast 1.5 million ounces output for 2021.
Russian companies returned to global investors’ radar in late 2020, with IPOs slated for this year forecast to raise at least $10 billion, the highest in more than a decade, UBS said in March.
Bacchus Capital Advisers is acting as financial adviser on the IPO, while Citigroup Inc. is the sponsor for the offer. Citigroup, JPMorgan Chase & Co. and VTB Capital are the joint global coordinators and bookrunners for the sale.
(With files from Reuters)
