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Posts Tagged ‘Polyus Gold’

Polyus set for listing after Kazakh progress

June 24, 2011 Comments off

“Polyus Gold, Russia’s largest gold producer, is poised to come to the London market after a long-delayed merger with Kazakhgold appeared resolved on Friday. The deal, which carries a nominal share-swap value of $13.1bn (£8bn), would create the largest gold miner on the London market in production terms.

Polyus, which has controlled Kazakhgold since 2009, proposed a reverse takeover last year. Polyus was to be bought by its smaller, majority-owned subsidiary, in order to gain access to Kazakhgold’s London listing.”

Source: Financial Times, June 18 2011

Observations:

  • Polyus Gold reached gold production of 1.4Moz last year, which is over 20% of total Russian production and close to 2% of global production. The company operates 9 mines and has 2 development projects at present. Reserves of 78Moz place the company among the gold miners with the largest potential globally.
  • Polyus will get access to the London Stock Exchange by merging with Kazakhgold, which already is listed in London.

Implications:

  • The deal is an example of the trend of Russian miners pursuing a listing on western stock markets (especially London) to enable western investors to invest and make it easier to raise capital for the range of development projects to be undertaken in Russia.
  • Secondary reason to pursue a London listing mentioned by Polyus is the potential for ‘acquisition and consolidation in the industry’, as the listing makes it easier to execute both share-based and cash execute. As Polyus currently is not sitting on a huge war-chest the company will likely stick to organic growth and small acquisitions financed share issuance. Furthermore the company could look around for potential international buyers.

©2011 | Wilfred Visser | thebusinessofmining.com

Severstal plans London gold listing

September 23, 2010 Comments off

“Severstal, the Russian steel company, is preparing to list its gold division in London this year in a deal expected to value the business at about $4bn, several people close to the company have confirmed.
Severstal – majority owned by Alexei Mordashov, a close ally of Vladimir Putin, Russia’s prime minister – plans to retain a stake of 65-70 per cent in the new company.

Nomura analysts this week valued Severstal’s gold division at $3.6bn. One banker involved in the transaction said the valuation was likely to hit $4bn or possibly $5bn as details about the assets and the company’s growth plans were disclosed to the market.”

Source: Financial Times, September 21, 2010

Observations:

  • Severstal has invested heavily in expanding the gold business through M&A and organic growth in the last years, growing into the second largest Russian gold miner (behind Polyus Gold) at 670 thousand ounces annual output.
  • Over 50% of the total exploration expenses in the mining industry are for gold exploration. This surge in exploration has resulted in a long list of deposits that might be developed profitably across the world.

Implications:

  • Severstal is developing projects in Burkina Faso, Guinea and Kazakhstan. The money raised with the IPO may be used to fund these developments, raising the output of the company. However, a major part of the money might be used by the steel division of the company to improve operating performance in steel making, which has been a loss making activity in 2009.
  • The spin-off of the gold division is a logical move of the company at the current demand for gold, which has driven gold prices to stable levels above $1000. Up to a few years ago, most gold mines were using long term gold prices of $300 in the feasibility analysis of mining projects. However, projects are started now that require prices above $600 to be feasible. The Financial Times provides a good overview of the development of gold prices in an interactive graph.

©2010 | Wilfred Visser | thebusinessofmining.com