Mangazeya Mining LLC completed the acquisition of Joint Stock Company Polymetal from Polymetal International plc.
The Transaction with the Purchaser includes several important provisions that go a long way to meet the Company?s goals of achieving a quick, clean and sanctions-compliant exit from its Russian operations in a manner which assures the commercial efficiency of processing Kyzyl concentrate into gold dore bars. In particular: The agreement includes provisions for the continued use of the Amursk POX processing facility (a subsidiary of Polymetal Russia) to treat Kyzyl refractory concentrate (the "Tolling Agreement?) until the Ertis POX in Kazakhstan is on-line. The Special Committee continues to engage with the U.S. Department of State and OFAC to seek assurance that the continuing Tolling Agreement does not create a risk of US secondary sanctions for the Polymetal Retained Group. The Company has provided the Purchaser with title and capacity warranties only, thus minimizing any exposure to potential warranty claims. The Transaction Agreements comply, and performance thereof will comply, with all Sanctions Laws and Russian Sanctions, and the Purchaser is not subject to any sanctions. The Transaction values Polymetal Russia at 5.3x EV/EBITDA based on Adjusted EBITDA of Polymetal Russia for the 12 months ended 30 June 2023 ($694 million). The Polymetal Group will continue to be closely associated with a US-sanctioned entity and be exposed to continuing sanctions risk. This prevents the appropriate valuation of the Company?s Kazakhstani assets by the market, while depressing liquidity and causing regulatory obstacles for Shareholders. If Completion occurs, the Polymetal Retained Group will remain the second largest gold producer in Kazakhstan with a headcount of over 3,000, a main listing on the Astana International Exchange (AIX) and a secondary listing on Moscow Exchange (MOEX) and the Polymetal Retained Group will focus on strong cash flow generation and a strong balance sheet allowing it to pursue growth opportunities in Kazakhstan and selected Central Asian countries. Post completion of the acquisition, the Russian business will continue to be managed by its current team led by Chief Executive Officer Sergei Cherkashin.
Completion is subject to certain conditions precedent, including receipt of required regulatory approvals and shareholder approvals. In particular, in addition to the approval of the Resolution and other customary conditions, Completion is subject to payment of the dividend and consequent repayment of the Intra-group Debt, regulatory approvals of the Russian Governmental Authorities to be obtained by the Purchaser and the provision of guarantees by the Purchaser of the continued services under the Tolling Agreement. The Board and the Special Committee each considers that the Transaction and the passing of the Resolution are in the best interests of the Company and the Shareholders taken as a whole. The Company not being obliged to seek shareholder approval under the AIFC MAR rules or any applicable regulatory requirements applicable to the Polymetal Group, the Company continues to strive to achieve the highest levels of corporate governance and the Board considers that shareholder engagement, including on major transactions, is a key element of that. The Transaction is conditional upon the resolution being passed by a simple majority of Shareholders who (being entitled to do so) vote in person or by proxy at the General Meeting. The General Meeting will be held at 11:00 a.m. (Astana Time) on Thursday March 7, 2024. The Company anticipates that Completion will occur by the end of March 2024.
The net after-tax cash proceeds from the Transaction receivable by the Polymetal Retained Group are expected to be $300 million following the repayment of the Intra-group Debt owed to Polymetal Russia. It is the Board?s intention to use the proceeds to finance the Ertis POX development project and to improve the Company?s liquidity profile, as well as to fund new projects in Kazakhstan and Central Asia. It is expected that successful completion of the disposal and the consequent significant decrease in the Polymetal Retained Group?s net debt will accelerate the timeline within which the Polymetal Retained Group will be able to resume dividend payments out of free cash flow generated by its Kazakhstan operations, which will remain subject to the Board?s ongoing review. Shareholders of Polymetal have approved the transaction on sale of the company's Russian business to Mangazeya
Astana International Exchange Central Securities Depository Limited acted as depository bank and Panmure Gordon (UK) Limited acted as financial advisor to to Polymetal
Mangazeya Mining LLC completed the acquisition of Joint Stock Company Polymetal from Polymetal International plc on March 11, 2024.