Precious metals producer Polymetal International announced on Monday that it agreed to sell its Russian assets to a Siberian gold miner for nearly $3.7 billion.
According to Reuters, it is a move forced at a knock-down price due to the conflict in Ukraine.
Polymetal International Sells Russian Assets
Polymetal's Russian holdings fell under US sanctions in 2023 following Moscow's military actions in Ukraine, prompting the company to shift its operations to Kazakhstan and list on the Astana International Exchange (AIX) to initiate a sale.
The deal entails Polymetal International selling its Russian division to Mangazeya Plus, a subsidiary of Mangazeya Mining owned by businessman Sergey Yanchukov, for about $3.69 billion, of which $2.21 billion was the Russian operation's net debt.
Polymetal International CEO Vitaly Nesis emphasized the urgency of completing the sale amid deteriorating external conditions, saying that waiting for business conditions in Russia to improve was not a viable option given the current circumstances.
While the deal is considered satisfactory, Nesis told Reuters that it falls short of representing fair value for the assets, with Moscow demanding substantial discounts on foreign asset sales.
Yanchukov confirmed that the existing management team, led by CEO Sergey Cherkashin, would continue to oversee operations.
Since it was formed in 2011, Mangazeya Mining has primarily operated in eastern Siberia and produced 466,00 ounces of gold in 2023 compared with Polymetal's 1.23 million gold equivalent ounces in Russia.
How Much Does the Transaction Cost?
The transaction reportedly comprises a cash component of $1.48 billion, including $1.43 billion in dividends from the Russian business and an additional $50 million.
According to the company, the transaction fully complies with all sanctions, and payments will be made in roubles. Polymetal International intends to utilize $1.15 billion of dividends to repay intra-group debt and allocate part of the $300 million retained in post-tax proceeds to develop the Ertis POX project in Kazakhstan.
Looking ahead, Nesis revealed plans to explore potential M&A deals in Kazakhstan and Tajikistan and eventually return to the London Stock Exchange once the company achieves production of 1 million gold equivalent ounces in three years.
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