Polymetal closes deal to sell its business in Russia

Polymetal International, a gold producer, has closed a deal related to the sale of its Russian assets (100% of shares of Polymetal JSC) to Mangazeya Plus four days after its shareholders approved the deal, the company said in a statement.

«We are glad that our shareholders have supported the sale of our Russian assets. Now, when the deal is closed and all risks are gone, the company’s management is going to reveal a new strategy and capital distribution policy in May,» said Vitaly Nesis, executive director of Polymetal.

The company was evaluated at $3.69 billion. When the deal was closed, Polymetal decreased its net debt by $2.2 billion, fully paid off its internal debt of $1.04 billion and gained $300 million after taxes. The company is going to use this money for the construction of the Irtysh Mining and Metallurgical Complex in Kazakhstan and to improve Polymetal’s liquidity.

As a result, the net cash balance (the gap between monetary means and liabilities) of the group reached the mark of $130 million. All the settlements within the deal were carried out with Russian rubles through entities free of international sanctions.

Within the next five years, Polymetal is expected to allocate more than $1 billion to various infrastructural and exploration projects in Kazakhstan, including the Irtysh MMC. When the MMC is entered into operation, it will provide the company with production capabilities with no dependence on the Amur MMC in Russia. The new mining complex will also bring new economic opportunities for Kazakhstan. In turn, Mangazeya Plus promised to continue processing concentrate from Kyzyl into Dore bead at the Amur MMC (a subsidiary of Polymetal JSC) until the Irtysh MMC in Kazakhstan is fully operational.

Nesis announced Polymetal’s plan to sell its Russian assets in September 2023. On February 19, 2024, Polymetal said that it would sell its Russian assets to a structure controlled by Sergey Yanchukov.

On March 7, shareholders of the company approved the deal with Mangazeya as 96.74% of them voted for the move. The deal was expected to be closed by the end of March. According to Vitaly Nesis, the sale of Russian assets would let the company focus on its business in Kazakhstan, to restore the shareholder value of its Kazakhstani business, mitigate risks and decrease the debt burden for the group’s assets in the country.

Mangazeya Plus has been specially created for the deal. It is a subsidiary of Mangazeya Mining which has been producing precious metals in the Zabaykalsky Krai since 2011. It is part of Mangazeya controlled by Sergey Yanchukov. Mangazeya Mining owns a portfolio of projects with more than 400 tons of gold in reserves. All these projects are at the stage of designing and preparation for construction. According to due diligence carried out before the deal, neither the seller nor the buyer was on the sanction lists by the EU, the U.K., the U.S. or Russia.

Polymetal is the second biggest gold producer in Kazakhstan. It controls two gold mines (Kyzyl in the Abay region and Varvarinskoye in the Kostanay region) and one big development project (the Irtysh MMC). The company is registered with the AIFC (Kazakhstan) and headquartered in Astana.

Maaden International Investment from Oman is the biggest shareholder of the company. It controls 23.9% of the company’s shares, while the remaining 75% of shares are in free circulation on the AIX and MOEX. On March 1, BlackRock decreased its share in Polymetal from 9.9% to 7.5%. In 2023, the company produced 486,000 ounces of gold equivalent in Kazakhstan and gained $0.9 billion in revenue.

In early August 2023, Polymetal completed redomiciliation from the British island of Jersey to the AIFC. Polymetal has been listed on the AIX since August 10, 2023, while also maintaining its listing on the MOEX. In late February, Polymetal said that it wouldn’t pursue delisting from the Moscow Exchange, although it did so on the LSE. On October 2, 2023, Polymetal was added to the AIX Qazaq Index (QI).