. . . the latest overseas mining company to seek a home on the London stock market.
This week Russia’s largest gold producer announced a $9bn deal to reverse into its 50.1 per cent-owned subsidiary KazakhGold and create a company big enough to qualify for inclusion in the FTSE 100.
And the Norilsk spin-off already has it fans, such as Merrill Lynch:
Russian Gold producer, Polyus, this week announced a transaction which should move it toward inclusion in the FTSE100. We think that Pan-European / UK investors who have some portfolio latitude & risk tolerance and who are positive gold could consider buying Polyus shares in anticipation of possible index inclusion and share rerating. Polyus shares presently trade at 1.3x NPV vs. higher quality, large-cap UK listed names like RandGold & Fresnillo trading at >2.5x NPV.
Polyus is already a gold giant with largest gold production in Russia (1.23 Moz/yr), 11th largest group production in the world (1.46 Moz/yr) and 4th largest JORC proven & probable reserves at 74 Moz. The group plans to double gold production by 2015 by commissioning new key projects: Blagodatnoye (400 koz/yr), Verninskoye (200 koz/yr) & Natalka (1 Moz/yr).
But in common with many Russian companies, Polyus comes with baggage — such as a court case against against five members of the Assaubayev family who were former directors of KazakhGold.
From a recent RNS statement:
In the proceedings, the claimants allege that the former director defendants, among other things, breached their fiduciary duties to, and service contracts with, KazakhGold by misappropriating funds intended for capital expenditures through sham contracts entered into by Kazakhaltyn.
The claimants also allege that the former director defendants deceived Jenington into making the Partial Offer by, among other things, misrepresenting production and sales revenue in 2006-2008 and the amount of capital expenditures made by KazakhGold in KazakhGold’s public disclosures and other disclosures relied upon by Jenington in making the Partial Offer.
The claimants seek damages in excess of USD 200 million in respect of the claims made by KazakhGold and Kazakhaltyn and damages in excess of USD 250 million in respect of the Jenington claims, as well as other remedies. In connection with these proceedings, KazakhGold, Kazakhaltyn and Jenington have obtained freezing orders in various jurisdictions against the assets of the defendants.
A stock for “investors with some portfolio latitude and risk tolerance” indeed.
Just like all those tracker funds who will be forced to buy it if Polyus is allowed into the FTSE 100.
Nice.
Related link:
Kazakhgold agrees $9bn Polyus deal – FT
FSA investigates Polyus Gold after shares spike – FT