Gold miner Polymetal looks to sell Russian operations for $3.69 billion amid nationalization fears

Gold miner Polymetal International on Monday said it had struck a deal to sell the entirety of its Russian mining business for $3.69 billion, with a view to fully exiting the Russian Federation due to the combined threats of Western sanctions and nationalization by Putin’s government.    

If approved by shareholders, Polymetal will sell the business to Russian mining company JSC Mangazeya Plus, with a view to re-focusing its operations towards Kazakhstan where it currently runs two mines that account for around one-third of its total production. 

The Anglo-Russian gold miner, which was founded in St Petersburg in 1998, said the sanctions-compliant agreement would see JSC Mangazeya Plus pay it $1.48 billion in cash and also agree to settle the Russian segment’s $2.21 billion debts. 

Shares in Polymetal International fell 6% on Monday in Moscow, having lost 11% of their value over the past 12 months and 66% of their value since the start of the Russia’s invasion of Ukraine in early 2022. 

In August 2023, the company abandoned its London listing and re-domiciled from Jersey to Kazakhstan’s capital Astana, with a view to avoiding Russia imposed rules that designated Jersey an “unfriendly jurisdiction” in response to Western sanctions. 

Polymetal said it will let shareholders vote on the agreement at its upcoming annual general meeting on 7 March, as the company said the sell-off would help avoid risks including those posed by the operations being expropriated or nationalized by the Russian government.  

In a statement, Polymetal said it believes a deal to sell its Russian operations “presents the most viable opportunity for the Group to restore shareholder value by removing or substantially mitigating critical political, legal, financial and operational risks.” 

The striking of the deal marks the end of an arduous process faced by Polymetal in finding a sanctions-compliant buyer for its Russian operations, after it vowed to exit that country following the outbreak of war. 

Polymetal’s push to divest from Russia was made more urgent by the U.S. Department of State’s decision to impose sanctions on its Russian subsidiary in May 2023, which blocked U.S. citizens from interacting with that unit. 

The process of selling off its Russian assets has been more difficult due to stringent rules imposed by authorities in both Moscow and Washington on any company looking to exit Russia.

Polymetal said it had received confirmation from the U.S. Office of Foreign Assets Control (OFAC) that those involved in the sale to JSC Mangazeya would not be subject to sanctions, and made clear that any payment would be made via sanctions-compliant financial institutions. 

JSC Mangazeya Plus is the mining subsidiary of the Mangazeya commodities conglomerate, which is controlled by Russian billionaire Sergey Yanchukov, who started his career as an oil trader in Ukraine. 

If completed, the deal will see Polymetal retain its position as the second largest gold miner in Kazakhstan, in controlling two mines with an estimated 11.3 million ounces of gold. 

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