Tuesday, October 30 2018 15:49

ArmInfo. Polymetal International plc has entered into a legally binding agreement with  Chaarat Gold Holdings Limited (AIM:CGH) (together with its  subsidiaries - "Chaarat") for the sale of the Kapan mine in the  Republic of Armenia ("Kapan") for a total consideration of US$ 55  million (the "Transaction"), the press service of the company  informs.

"The sale of Kapan is a step towards shrinking Polymetal's asset base  to focus on large long-life projects", said Vitaly Nesis, Group CEO  of Polymetal. "The transaction will have immediate benefits as it is  expected to improve our cost position and reduce leverage. On behalf  of Polymetal, I would like to thank the team at Kapan for their hard  work and dedication and wish them all the best going forward."

The principal terms of the Transaction are as follows:  ?    The  total consideration payable for Kapan will be US$ 55 million, subject  to working capital and other customary adjustments. This represents  US$ 99 per ounce of gold equivalent (GE) Ore Reserves.

.    The consideration will be payable in cash upon closing of the  Transaction, with an option for Chaarat to elect to satisfy up to US$  5 million of the consideration in Chaarat's 2021 Convertible Notes.

.    The Transaction is conditional upon Chaarat obtaining financing  to satisfy the purchase consideration and certain regulatory  approvals, including anti-monopoly approval from the Republic of  Armenia. Completion of the Transaction is expected to take place in  Q1 2019 but in any event no later than 15 February 2019.

.    A termination fee of US$10 million will be payable to Polymetal  in the event that the Transaction is not completed by 15 February  2019 as a result of any conditions not being satisfied. US$ 5 million  of this fee is to be deposited within 10 working days from signing of  the sale and purchase agreement.  

.    Polymetal will grant Chaarat an exclusive right for a period of  6 months from completion and a right of first refusal for a period of  12 months upon expiry of the exclusivity period in relation to  Polymetal's other interests in Armenia, including the Lichkvaz  deposit.  The sale of Kapan advances the Company's strategy of  focusing on large-scale and long-life operations.  Kapan is the  smallest and highest-cost mine in Polymetal's portfolio,  representing:  ?    3% of the Group's Ore Reserves as at 1 January  2018 (0.5 Moz of GE)

.    3% of the Group's LTM production ending 30 September 2018 (51  Koz GE) and 5% of the Group's expected 2019 production (90 Koz GE)  including feed from Lichkvaz

.    3% of Group's LTM adjusted EBITDA1 ending 30 June 2018 (US$ 22  million) ?    7% of Company's workforce as of 30 September 2018.

In 2017, Kapan's TCC1 of US$ 871/oz and AISC of US$ 1,292/oz were  above Polymetal's average of US$ 650/oz and US$ 877/oz (excluding  Kapan).  Polymetal acquired Kapan in April 2016 for US$ 38 million  including US$ 9 million fair value of the Net Smelter Return royalty  on future gold production. The transaction is expected to result in a  US$ 3 million accounting profit for the Company. Polymetal plans to  use proceeds from the Transaction to reduce debt.

To recall, Polymetal International plc (LSE, MOEX: POLY, ADR: AUCOY)  (together with its subsidiaries - "Polymetal", the "Company", or the  "Group") is a top-20 global gold producer and top-5 global silver  producer with assets in Russia, Kazakhstan and Armenia. The Company  combines strong growth with a robust dividend yield.