Polymetal gains control over Baksy copper and gold project

Polymetal International plc, the biggest producer of silver and one of the biggest producers of gold in Russia announced its intention to leave the London Stock Exchange (LSE). The company also said that it has gotten a 75% stake in the copper and gold Baksy project in North Kazakhstan.

«Polymetal International plc is announcing its intention to stop listing on the LSE if shareholders have no objections,» the company said in a statement.

Polymetal’s board of directors believes that the delisting from LSE serves the company’s and its shareholders’ interests. With that in mind, the board has recommended for shareholders to vote for delisting from LSE.

To make this happen, Polymetal needs at least 75% of its shareholders to vote for the move. The voting is going to happen on July 28 at 10:00 British Summer Time.

However, the company’s shares are going to be traded at the LSE until the full completion of the process of redomiciliation from the island of Jersey to the Astana International Financial Center (AIFC), which is expected on July 31.

«The board of directors confirmed that it will continue to negotiate with the Financial Conduct Authority (FCA) about delisting the company’s shares from the LSE as the British legislation requires. The company has already achieved big progress and obtained permission from the FCA to leave the trading platform. Once the redomiciliation process is over, the company will contact the FCA or LSE with a final request about delisting,» the company said in a statement.

Polymetal’s shares are traded for £206 per share, although on January 18, they cost £350 per share. Investors in London were unhappy with the news about redomiciliation from Jersey to AIFC. On January 26, the shares’ price plunged to £220 per share. Later, on February 5, the company’s stock climbed back up to £300 per share and then was traded with mixed success.

In addition, Polymetal said that it has gained control over the copper and gold project of Basy. The company exercised an option and increased its stake from 7.5% to 75%. Kazakhstan’s national company Qazgeology controls the remaining 25% of shares.

«The Basy project is going to be a vital part of our strategy for the development of our copper and gold assets and expand our presence in Kazakhstan. We are planning to continue active geological exploration and evaluation of mineral resources under the JORC standard. We are expecting that a decision about the start of production will be made in 2024,» CEO of Polymetal Vitaly Nesis said.

Polymetal acquired a 7.5% stake in Baksy in 2019 with an option to increase its share up to 75% through the financing of exploration. Over the period from 2019 to 2022, the company drilled 122 wells on a field of 776 square kilometers in the North Kazakhstan region. The company also controls the Varvara field, in the Kostanay region, 300 kilometers away from the Baksy field. The company has everything for its operation including the power grid and railway spur.

According to preliminary estimates, the Baksy field may contain 14,300 tons of copper (percentage of copper at 1.9%) and 68,100 ounces of gold (2.8 grams of gold per ton).

In 2022, Polymetal reported $288 million in losses compared to $904 million in profit in 2021. The company’s revenue in 2022 declined by 3% to $2.8 billion, including $933 million (33%) generated by Kazakhstani assets and $1.9 billion (67%) by Russian assets. At the same time, the average gold and silver prices have slid by 1% and 2%, respectively.

In 2022, the production of gold increased by 2% and reached 1.7 million ounces of gold equivalent. On the other hand, sales of gold dropped by 1% to 1.4 million ounces, while sales of silver soared by 6% to 18.5 million ounces.

The net debt of the group increased to $2.4 billion ($1.6 billion at the end of 2021). The growth of the net debt is driven by lower profitability, increased capital intensity and floating capital of Polymetal.

Given that the debt burden of Polymetal is quite high (net debt to adjusted EBITDA ratio is 2.35х, which is much higher than the target level of 1.5х) and external factors continue to influence the company’s business, the board of directors has decided not to make dividend payouts for 2022 with the purpose of preserving strategic and operational flexibility in the current «extremely unstable and complicated situation.»