Polymetal looks to sell its Russian assets to avoid sanctions

By Rhod Mackenzie

Russia's second largest gold miner and largest silver mine Polymetal Int (combines the assets of JSC Polymetal) sees no alternatives for the future of the company, except for the sale of its assets in Russia, Vitaly Nesis, the company's chief executive officer, said during an online conference with investors.

“Being a sanctioned company is not an option for the group to be able to operate fully,” he said. “Because of the sanctions, the company sees no other options. If the business is not sold, the next step could be to sanction the parent company.”

The issue will be submitted for approval by the shareholders, but, according to Nesis, he does not expect a negative response.

"The management and the board of directors are able to extract substantial, if not the total, value from this business. This will not be a sellout or giveaway. We will definitely not accept any deferred payment. The goal is to raise a substantial amount of cash for the parent company ", Nesis emphasized.

Going forward, the company intends to restore its production volumes through organic growth, as well as using mergers and acquisitions. "We are looking at several acquisition targets in Kazakhstan to restore the size of the company. Exploration and M&A are a priority for management," Nesis said.

According to him, the sale of assets can occur within six to nine months, and the proceeds from the sale will be used for dividends and the construction of a POX (hydrometallurgical plant for the processing of gold concentrates) in Kazakhstan. The construction of the POX in Kazakhstan will begin early next year and be completed by 2027.

Earlier Wednesday, the government of Kazakhstan announced that Polymetal plans to invest 347 billion tenge ($778 million) in a project to process 300,000 tons of gold concentrate to produce 15 tons of gold.

Regarding the processing of Kyzyl ore, Nesis said that the company has changed its operating scheme from the sale of concentrate in the Russian Federation to non-paid tolling, until approval is received from OFAC. "The plan is to present to OFAC a decision to sell the sanctioned business and ensure that the deal does not destroy the value of the Kazakh side of the business," he said, noting that negotiations with US regulators are already underway.

Polymetal Int is currently merging the assets of JSC Polymetal, on August 7, 2023, it completed the re-domiciliation of the company from the island of Jersey ( Channel Islands) to the Astana International Financial Center (AIFC) in Kazakhstan. Polymetal had its listing at the London Stock Exchange suspended after Russia's special military operation in Ukraine,plus the sale of Russian gold was banned by US initiated sanctions.