Gold mining company Polymetal International announced on Monday its plan to sell its entire Russian mining operation for $3.69 billion, aiming to completely withdraw from the Russian Federation due to the risks of Western sanctions and potential nationalization by Putin’s government.
Subject to shareholder approval, Polymetal intends to sell its Russian business to JSC Mangazeya Plus, a Russian mining firm, as part of its strategy to concentrate on its operations in Kazakhstan, where it currently operates two mines that contribute to approximately one-third of its total production.
Founded in St Petersburg in 1998, the Anglo-Russian gold miner stated that the deal, which complies with sanctions, involves JSC Mangazeya Plus paying $1.48 billion in cash and assuming the Russian segment’s $2.21 billion in debts.
On Monday, Polymetal International’s shares dropped 6% in Moscow, reflecting a 11% decrease over the past year and a 66% decline since the beginning of Russia’s invasion of Ukraine in early 2022.
In August 2023, Polymetal relocated its headquarters from Jersey to Astana, Kazakhstan, and exited its London listing to avoid Russian regulations that labeled Jersey as an “unfriendly jurisdiction” in retaliation to Western sanctions.
Polymetal plans to present the sale agreement for shareholder approval at its upcoming annual general meeting on March 7, stating that the divestiture will help mitigate risks, including potential expropriation or nationalization by the Russian government.
The company believes that selling its Russian operations offers the best chance to restore shareholder value by significantly reducing critical political, legal, financial, and operational risks.
Finalizing this deal concludes a challenging search for a buyer that complies with sanctions, following Polymetal’s commitment to exit Russia after the war began.
The urgency to divest from Russia increased when the U.S. Department of State imposed sanctions on Polymetal’s Russian subsidiary in May 2023, prohibiting U.S. citizens from engaging with it.
Navigating the sale of its Russian assets has been complex due to strict regulations from both Moscow and Washington regarding companies exiting Russia. Polymetal confirmed that the U.S. Office of Foreign Assets Control (OFAC) has assured that those involved in the sale to JSC Mangazeya will not face sanctions, and all payments will be made through financial institutions that comply with sanctions.
JSC Mangazeya Plus, part of the Mangazeya commodities conglomerate owned by Russian billionaire Sergey Yanchukov, will take over the operations. If the deal goes through, Polymetal will maintain its position as the second-largest gold miner in Kazakhstan, controlling two mines with an estimated 11.3 million ounces of gold.
