Polymetal Agrees to Sell Russian Operations to Mangazeya Group for $3.69bn
Polymetal, a leading gold mining company, has announced an agreement to sell its Russian business to Mangazeya Plus, a subsidiary of Sergei Yanchukov's Mangazeya Group. This move is part of Polymetal's strategic reorientation in response to the challenging geopolitical landscape. Mangazeya Group, with interests in gold mining, gas, agro-industry, development, and venture investments, has a significant presence in the precious metals sector, boasting a total gold resource of 282 tonnes as per its website. In 2022, Mangazeya Mining produced 3.26 tonnes of gold.
The deal, valuing Polymetal at $3.69 billion, encompasses $2.21 billion of net debt. Before the transaction's closure, Polymetal will distribute a dividend of nearly $1.43 billion, with $278 million allocated for general corporate purposes and about $1.15 billion for intercompany debt repayment. At closing, Mangazeya Plus JSC will pay $50 million in cash, with all settlements conducted in Russian rubles through non-sanctioned financial institutions.
The transaction's completion is contingent on several conditions, including shareholder and regulatory approvals, with a shareholder meeting slated for March 7. Polymetal anticipates finalizing the deal by the end of March 2024, aiming to mitigate the "unacceptable level of risk" currently posed to the company's shareholder value due to its extensive Russian operations and the ongoing sanctions environment.
This strategic divestment follows significant shareholder changes, with Polymetal's largest shareholder, IST Group, exiting the company's capital by selling its stake to the Mercury Investments International fund, owned by the government of Oman. Additionally, Polymetal has been navigating sanctions challenges, including US sanctions imposed in May 2023 and the company's subsequent re-registration from Jersey to Kazakhstan.
The sale to Mangazeya Plus comes after Polymetal shareholders approved a share exchange initiative in December 2023 to address EU sanctions-related issues, aiming to restore shareholder rights and dividend participation through the AIX exchange in Kazakhstan.
Following the announcement, Polymetal shares experienced fluctuations in trading, reflecting the market's reaction to this significant restructuring move. The sale represents a critical step for Polymetal in adapting to the evolving geopolitical and regulatory landscape, with the company seeking to preserve and enhance value for its shareholders amidst ongoing challenges.
