‘Wave’ of M&A will hit gold mining this year, says Polyus

MINEX Forum | July 3, 2019 | Views: 43 | Source: Financial Times

The gold mining industry is set for a “wave of mergers and acquisitions” as smaller miners seek to consolidate to capitalise on higher prices, according to Polyus.

“The space is clearly open to M&A,” said Mikhail Stiskin, chief financial officer of Russia’s largest gold miner.

The world’s largest gold companies have been busy acquiring rivals this year, with Barrick Gold buying Randgold Resources in January and Newmont Mining acquiring Goldcorp in April.

Mr Stiskin, the 36-year-old former investment banker, said that activity would move down to the mid-tier companies following gold’s rise to a six-year high last week of more than $1,440 a troy ounce.

“There will be consolidation. There are some companies that don’t have the luxury of any projects and they are still driven by egos: this combination will push them towards M&A, especially given the high gold prices. The shareholders will become more supportive.”

Polyus, which is listed in Moscow and London, aims to attract global investors in London following the departure of Africa-focused gold miner Randgold from the city in January.

Investors in Polyus were spooked last year after US sanctions were imposed on Suleiman Kerimov, whose son Said owns a controlling 79 per cent stake in the miner.

However, London-listed shares in the company have recovered by 40 per cent over the past year and Mr Stiskin said risks around Russia had been “exaggerated”, especially when compared with African gold miners.

“We feel that Russian risks are particularly overestimated compared to the African risks,” he said. “Obviously there’s a question of geopolitics and the sanctions but at the same time Russia has had a very stable regulatory regime.”

Mr Stiskin said Polyus also aimed to increase its free float to between 25 and 30 per cent from the current 20 per cent, in a bid to attract larger investors.

In April Mr Kerimov sold a 3.8 per cent stake in the gold miner for $390m, but Mr Stiskin declined to comment on any timetable for future share sales.

Mr Stiskin said Polyus was not looking at any deals since it had more than 100 internal projects to work on.

In 2017 Polyus bought the rights to develop the giant Sukhoi Log gold deposit from the government. Polyus aims to spend $2bn-$2.5bn developing the mine, Mr Stiskin said, and expects the first gold around 2026.

The deposit contains an estimated 63m ounces of gold, which would make it one of the largest mines in the world.

Polyus was also no longer looking for a strategic investor after talks with Chinese conglomerate Fosun collapsed last year, Mr Stiskin added.

“We can self-finance it,” he said. “We may also do project financing, debt financing.”

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