Monday, July 17 2017 20:36
Emmanuil Mkrtchyan

Polymetal International plc has agreed toacquire an additional 7% in the joint venture Nezhdaninskoye gold deposit

Polymetal International plc has agreed toacquire an additional 7% in the joint venture Nezhdaninskoye gold deposit

ArmInfo. Polymetal International plc (LSE, MOEX: POLY; ADR: AUCOY) (together with its subsidiaries – “Polymetal”, the “Company”, or the “Group”) has agreed toacquire an additional 7% in the joint venture Nezhdaninskoye gold deposit (“Nezhda”) from its partner, Ivan Kulakov.Simultaneously, Polymetal has acquired an option to buy out the remaining 75.3% in Nezhda.

A resource estimate for Nezhdahas been prepared in accordance with the JORC Code (2012) and was audited by CSA Global.The resource inventory comprises 71 Mt of mineralized material containing 11 Moz of gold equivalent (GE) at an average grade of 4.8 g/t GE.    

Based on thehighly encouraging resource estimate at Nezhda, Polymetal has decided to increase its share in the Nezhda JV and has been able to renegotiate the key termsandconditions of the previous JV agreement. As such, the existing Nezhda JV agreement and the related earn-in arrangement have been terminated with immediate effect.

Under the new shareholder agreement, Polymetal will acquire an additional7% share in the JV for a cash consideration of US$8million. As a result, Polymetal’s share in Nezhda will increase to 24.7%.Mr. Kulakov’s investment vehicle,Pallavicino Holdings Ltd, will hold 75.3%.

Polymetal has also acquireda call option tobuy out the remaining 75.3% in Nezhda (the “Call Option”) on the following terms:

  • The Call Option premium will comprise US$12million in cash payable upfront;
  • Following the preparation of the initial JORC-compliant ore reserve estimate for the open-pittable reserves, Polymetal will have the option to acquire the remaining stake for US$100 per ounce of attributable gold reserves (equivalent toUS$75.3/oz multiplied by total reserve ounces). The total consideration shall not be less than US$105 million and not more than US$180 million;
  • US$10m of the consideration will be paid in cash, and the remaining amountwill be paid in the Company’s shares (the “Consideration payable in shares”). The number of shares will be determined by dividing the amount of Consideration payable in shares by the unweighted average closing price of Polymetal ordinary shares on the main market of the London Stock Exchange in the 5 trading days ending two trading days before the call option completion date.The consideration shares will be subject to a lock-up period of 180 days;
  • The Call Option is exercisable between 1 February and 1 June 2018 entirely at Polymetal’s discretion;
  • Should Polymetal decide not to proceed with the exercise of the Call Option, Polymetal will have a put option to sell its 24.7% stake to Pallavicino Holdings Ltd at anotional costof EUR 1 thousand.

Completion of the sale and purchase of the additional 7% share in the JV and exercise of the Call Option are subject to approval by the Russian Federal Government’s Commission on Foreign Investments into Companies of Strategic Importance. Exercise of the Call Option is also subject to approval  by the Russian Federal Antimonopoly Service.

In the meantime, Polymetal will continue to advance pre-feasibility activities at Nezhda and aims to publish the initial reserve estimate by the end of 2017.RBC acted as financial adviser to Polymetal.

“Exploration at Nezhda confirmed a very large high-grade property with substantial open-pit potential. The asset fits perfectly with Polymetal’s core competencies in refractory ore processing and remote asset development” saidVitaly Nesis, Group CEO of Polymetal. “We are very pleased that the new terms of the agreement on Nezhdagive us significant decision-making flexibility and offer Polymetal a clear path to consolidating full ownership in thishighly prospective asset.”

The Nezhda Mineral Resources are reported in accordance with the JORC Code (2012) as at 1 July 2017 using US$1,200/oz gold price and US$16/oz silver price. The Mineral Resource statement has been audited by independent consultant CSA Global.

Polymetal completed 42,479 m of diamond drillingin 2015 and 2017 in addition to the 339,392 m of drilling completed by previous owners. Mineral resourceswere estimated with the following classification parameters: Measured Mineral Resources are reported within the first ellipsoid (20 m by 30 m) and Indicated Mineral Resources are reported within the second ellipsoid (40 m by 50 m). The remaining blocks are classified as Inferred. A total of 117 mineralised structures have been identified.Mineral resources for the open pit were estimated up to a depth of 250 m from the surface.

The largest identified mineralised structure is mineralised zone 1 (“MZ 1”) which has a strike length of 4,900m and a downdip extent over 1,800m and comprises 80% of totalMineralResources at Nezhda in terms of gold contained. For MZ 1, top cutting at 80 g/t gold was applied to reduce outlier grade influence on local estimation.

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Issue volume

10 billion

Volume of T-bills for placement

200 million

Volume of submitted competitive applications

200 million

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200 million

Yield at cut-off price

 5.8314%

Maximum yield

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Мinimum yield

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Number of participants

2

The maturity date of T-bills

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