MOSCOW, March 2. Company Plc Polymetal, Russia’s largest producer of silver and one of the leading gold miners, acquiring existing gold mine in Kapan Armenia for $25 million for the purchase of a second asset of the company in Armenia producing less than 1 ton of gold per year, but high potential, is scheduled to close in the 2nd quarter. This is stated in the message of the company.
In 2015 the field was Kapan extracted and processed 410 and 411 thousand tons of ore, respectively. In the same year sales of 21 thousand ounces of gold (approximately 653 kg) 1 tons of copper, 5 tons of zinc and 0.4 million ounces of silver (12,4 tons). During this period net revenue of the company amounted to $35 million, with EBITDA of $5 million, and the value of the cash cost net of by-products – $709 per ounce sold gold.
“This asset has the potential to significantly superior results of 2015”, – said the General Director Polymetal Vitaly Nesis, adding that the company can turn Kapan from low-profit businesses in “capital-intensive profitable regional processing centre able to provide a significant amount of production”.
After closing the transaction, Polymetal will announce short-and long-term plans for the field.
The terms of the transaction
The seller is the company Dundee Precious Metals Inc. Total consideration for the acquisition includes $10 million in cash and the issuance of new shares of Polymetal for $15 million in addition, Dundee will receive a 2% royalty on net income from future production on the field was Kapan, which amount will not exceed $25 million closing of the transaction depends on obtaining the relevant regulatory approvals including an approval from the Antimonopoly service of the Republic of Armenia.
The value of the gross assets subject to the transaction, on the basis of the accounts for 2015 is $49.8 million, a loss before taxes of $47 million.
Scotiabank Europe Plc acted as financial Advisor to Polymetal on the transaction.
Plans in Armenia
Polymetal will continue to explore opportunities for the acquisition of assets in Armenia and will focus on the creation of a powerful production platform in this country.
“Armenia is for Polymetal strategically attractive country from the point of view of natural resources and environment of doing business. The acquisition of the Kapan Mining is an important step that will allow you to gain more experience in local conditions. We will continue to explore opportunities for the acquisition of assets in Armenia. Our priority will be ensuring synergy with existing processing centre on the basis of the Kapan Mining. But we are open to other ideas,” said Nesis.
Information about the Deposit
Kapan is located in the South-East of Armenia, 320 km from Yerevan. The surrounding area includes a number of other promising fields, including the gold mine Lichkvaz, recently acquired by Polymetal, and is located approximately 70 km from Kapan.
As of the end of 2014, the resources of the Deposit are estimated at 15.9 million tons of ore containing 1.4 million ounces of gold, 24 million ounces of silver, 80 tonnes of copper and 270 tonnes of zinc (2.6 million ounces gold equivalent at an average grade of 5.1 g/t).
Assets include a fully mechanized underground mine with the capacity of 400 thousand tons per year flotation beneficiation plant with a capacity of 750 thousand tons per year and infrastructure. The company produces gold-copper – silver and zinc concentrates for sale to export. Over the last 5 years the previous owner invested in a Deposit more than $ 75 million.
About the company
Registered in Jersey company Polymetal has operations and exploration in four Russian regions – the Magadan and Sverdlovsk regions, Khabarovsk territory and Chukotka, as well as in Kazakhstan. In 2015, the company acquired its first asset on the stage of geological prospecting in Armenia.
ICT group Alexander Nesis is the ultimate beneficiary of about 21% of the share capital of Polymetal, 18% of the company owned by PPF Group NV Czech Petr Kellner, and about 10% Polymetal is controlled by the family of Alexander Mamut.
In addition, about 1% of the share capital and controls the management of the company, the remaining 50% shares are in free float.