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. Last Updated: 07/27/2016

Polymetal to Float 30% of Its Shares

Polymetal, the world's fifth-largest silver miner, will become the latest Russian metals company to float in London and Moscow when it offers 30 percent of its shares in the first quarter of 2007.

Polymetal, also the country's third-largest gold miner, said Tuesday that it had appointed Deutsche Bank, Merrill Lynch and UBS as joint global coordinators and bookrunners for a proposed listing that analysts valued at around $500 million.

"It's a very interesting issue. There aren't many shares from this sector on the market, and silver producers aren't traded at all in Russia," MDM Bank analyst Andrei Litvin said.

Gold rose nearly 23 percent and silver 46 percent in value last year on a commodities boom that spurred Russian metals firms such as Chelyabinsk Zinc, TMK and Severstal to list in 2006.

Polymetal CEO Vitaly Nesis said that about two-thirds of the shares to be floated would be London-listed and that the IPO would allow the company to attract new international and Russian investors.

"The London and Moscow listings will also allow us to continue to advance our expansion programs at existing mines and our exploration and development strategy. In addition, it will provide us with an acquisition currency," Nesis said.

"We're primarily focused on Russia, but we also actively assess different things, particularly in countries of the former Soviet Union and Mongolia," said Bree Schuette, director of international investor relations.

Polymetal, owned by investment company Nafta Moskva, said the stake to be sold would include new and existing shares.

Banking officials had previously stated that an IPO by Polymetal would raise about $500 million.

"It's a conservative enough estimate. They could attract even more," MDM Bank's Litvin said.

But UralSib Bank analyst Kirill Chuiko said the estimate was high, adding that the company would have to display large growth in mining and prices in order to attract such a sum.

Polymetal, which operates four mines in Russia, posted operating income of $77.5 million in the first nine months of 2006, up 45 percent on the same year-earlier period. Revenue grew 29.6 percent to $223.5 million.

Nafta Moskva is headed by Suleiman Kerimov, the 41-year-old billionaire injured in a car crash in France in November. Kerimov is not on Polymetal's seven-man board, which includes Nesis, five other Nafta Moskva executives and Jonathan Best, a former finance director at South Africa's AngloGold Ashanti and most recently a managing director at Trans-Siberian Gold.

St. Petersburg-based Polymetal aims to boost ore processing capacity at Dukat, the world's third-largest silver mine by production, to 1.5 million tons per year in the next two to three years from less than 1 million tons now, Schuette said.

Dukat, in the Far Eastern region of Magadan, is Polymetal's largest operating mine. The company also operates the Lunnoye, Vorontsovskoye and Khakandzhinskoye mines and has acquired several other deposits that it plans to develop in the medium and long term. One of these, Albazino in Khabarovsk region, is scheduled to start operating around 2010.

"In the long term, this is going to require significant capital expenditure," Schuette said.

Polymetal last year agreed to a 50-50 joint venture with AngloGold Ashanti to explore and develop new mines in Siberia and the Far East.

In December, the company signed a deal with Mongolrostsvetmet to develop the Asgat silver deposit in Mongolia.