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.
Polyus PJSC is selling shares worth at least $700 million as Russia’s largest gold producer seeks to meet Moscow’s stock-listing rules and raise cash.
At least 7 percent of the company will be offered through a combination of new and existing shares owned by billionaire Suleiman Kerimov’s family, according to a statement on Monday. Some of the shares will be traded as global depository receipts on the London Stock Exchange, marking a return to the city for Polyus, which withdrew its listing two years ago.
“Polyus really has top-quality assets, which is good for the deal,” George Buzhenitsa, analyst at Deutsche Bank AG, said by phone. “The only thing is that investors will remember the parent company’s past history of delisting.”
The miner’s parent, Polyus Gold International Ltd., delisted from London in late 2015 after the Kerimov family, which controls the company, bought up shares as part of a plan to domicile in Russia. The company is now selling stock to meet Moscow Exchange requirements that it needs more freely traded shares to retain a primary listing. Currently, only about 7 percent of the shares are available on the Russian market.
The price range is expected to be announced around June 16, and the deal may close at the end of the month, according to two people familiar with the company’s plans. The share sale may increase depending on demand and price, they said, asking not to be identified because the details aren’t public.
The stake is worth about $700 million based on Friday’s closing price and Polyus expects to receive $400 million of proceeds. In April, people familiar with the matter said the company had planned to sell up to a 10 percent stake.
Goldman Sachs Group Inc., JPMorgan Chase & Co., Sberbank PJSC, VTB Capital, BMO Capital Markets, Gazprombank PJSC and Morgan Stanley are organizing the deal.
Many Russian firms have pulled out of international markets in recent years due to sanctions, low commodity prices and government backing to move listings to Moscow. Since the end of last year, share sales in both Moscow and London began to return as raw-material markets and Russia’s economy recovered.
“We don’t see any real alternative for Russian players as a platform for additional listing despite the fact there are other potential exchanges like Toronto or Hong Kong,” Pavel Grachev, CEO of Polyus, said in an interview in St. Petersburg on June 1. “London Stock Exchange will definitely remain the main platform after Moscow Exchange.”
Read more: Russian mining tycoons eye return to London market
Separately on May 31, the Kerimov family agreed to sell a 10 percent stake in Polyus to a group led by China’s Fosun International Ltd. The deal valued Polyus at $9 billion and has an option that allows the stake to increase by 5 percent, which would put the worth at $10 billion. The Kremlin-backed Russian Direct Investment Fund also bought 0.3 percent of Polyus last week.
The company has proved and probable gold reserves of 71 million ounces, according to a statement released today, making it the world’s second-biggest producer by attributable reserves after Barrick Gold Corp.
Polyus estimated spending on its Sukhoi Log gold deposit as high as $2.5 billion through 2025, according to the prospectus for the share offering. The ore reserves at the deposit, which the company bought this year, have not yet been estimated.
This year, capital expenditures for the whole group are seen at $781 million. The miner also declared a $354 million dividend on Monday.
