Chinese investors buy into Russia's largest gold miner Polyus Gold for $887mn

By bne IntelliNews June 2, 2017

Russia’s largest gold producer Polyus Gold will sell 10% to a consortium of Chinese investors led by Fosun International for $887mn. Other companies participating in the deal include Zhaojin Mining and Hainan Mining.

The deal has been in the works since 2016, and previous reports claimed that China’s Zhaojin Mining Industry, Zijin Mining Group and Fosun International were interested in acquiring a stake of at least 25% in Polyus, which would cost at least $2bn.

China is the world’s top consumer, producer and importer of gold and Chinese companies have been targeting gold mine acquisitions, Reuters noted on May 31.

The consortium retains an option for another 5% in Polyus until May 31, 2018, at a price of $77.66 per share, while the deal took place at $70.6 per share, a statement by Polyus Gold said.

The whole company is valued at about $9bn, given the pricing of the acquisition, according to Polyus. The company still has 1.15% in treasury shares, 6.76% free floated, and 81.88% of shares held by Polyus Gold International Limited (PGIL) controlled by billionaire Suleiman Kerimov.

It is not clear whether Polyus is still considering an SPO, which was planned by the end of spring 2017, according to previous reports.

“We will definitely participate in the SPO [of Polyus Gold] as organisers,” Reuters quoted deputy chair of Russia’s VTB Bank Yuri Solovyev as saying on March 29.

In late January, Polyus was reportedly considering an SPO with one or more anchor investors. Credit Suisse, Goldman Sachs, Sberbank CIB and VTB Capital are possible underwriters of the SPO, Interfax reported, cited unnamed sources.

The free float of the company, which delisted from LSE in 2015, increased to 6.8% after conversion of the part of a sizable treasury shares stock. An SPO could increase the free float to about 10%, according to Reuters.

Standard & Poor’s upgraded its outlook on Polyus Gold and its Eurobond issuer Polyus Gold Intl from stable to positive, the rating agency said on January 18, adding that the rating on both entities was affirmed at a level of ‘BB-’.

The revision reflects a change of the agency’s view on the company’s financial policy as having become more conservative following the adoption of a new dividend policy and a planned SPO, according to S&P.

Polyus Gold increased net IFRS profit 1.5-fold to RUB95.3bn (€1.6bn) in 2016. Revenues increased by 22% year-on-year to RUB163bn.

Most of the revenues came from a 22% increase in gold sales (RUB161bn), while in absolute values the sales grew by 8% to 1.9mn ounces, pointing to gold price growth in 2016. Adjusted Ebitda of Polyus came in at RUB102.2bn in 2016 versus RUB78bn.

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