Polymetal International, the Anglo-Russian gold miner, has announced plans to sell its Russian mining business for $3.69 billion. The decision comes as a response to the combined threats of Western sanctions and nationalization by the Russian government. Polymetal aims to fully exit the Russian Federation and focus its operations on Kazakhstan, where it currently runs two mines accounting for one-third of its total production.
The deal, if approved by shareholders, will see Polymetal sell its Russian operations to JSC Mangazeya Plus, a Russian mining company. Under the agreement, JSC Mangazeya Plus will pay Polymetal $1.48 billion in cash and assume the Russian segment’s $2.21 billion debts. This move aligns with Polymetal’s strategy to mitigate critical political, legal, financial, and operational risks.
However, Polymetal’s decision to exit Russia has not been without challenges. The company faced difficulties finding a sanctions-compliant buyer for its Russian operations. The U.S. Department of State imposed sanctions on Polymetal’s Russian subsidiary in May 2023, prohibiting U.S. citizens from engaging with that unit. Additionally, stringent rules imposed by authorities in Moscow and Washington made the process of selling off Russian assets more complicated.
To ensure compliance with sanctions regulations, Polymetal received confirmation from the U.S. Office of Foreign Assets Control (OFAC) that those involved in the sale would not be subject to sanctions. The company also emphasized that any payment would be made through sanctions-compliant financial institutions.
The proposed sale marks the end of a challenging journey for Polymetal since it decided to exit Russia following the outbreak of war. The company abandoned its London listing in August 2023 and relocated to Kazakhstan’s capital, Astana, to avoid Russia’s designation of Jersey as an “unfriendly jurisdiction” in response to Western sanctions.
If the deal is finalized, Polymetal will retain its position as the second-largest gold miner in Kazakhstan. The company currently controls two mines in Kazakhstan, estimated to hold 11.3 million ounces of gold. This move aligns with Polymetal’s goal of restoring shareholder value by shifting its focus to a more stable and less politically volatile jurisdiction.
The announcement of the deal has had an impact on Polymetal’s stock price, with shares falling 6% in Moscow on Monday. Over the past year, the company’s shares have lost 11% of their value and 66% since the start of Russia’s invasion of Ukraine in early 2022.
Polymetal’s upcoming annual general meeting on March 7 will allow shareholders to vote on the agreement. The company believes that the sale of its Russian operations presents the most viable opportunity to mitigate risks, including expropriation or nationalization by the Russian government.
In conclusion, Polymetal International’s decision to sell its Russian mining business for $3.69 billion reflects its strategic move to avoid the challenges posed by Western sanctions and potential nationalization by the Russian government. The sale will allow Polymetal to refocus its operations on Kazakhstan, where it currently operates two mines accounting for a significant portion of its production. This decision is aimed at mitigating political, legal, financial, and operational risks and restoring shareholder value.
