13th Jun 2016 08:16
LONDON (Alliance News) - Petropavlovsk PLC Monday said it is holding talks about the potential to acquire gold assets lying in the far east region of Russia from its largest shareholder.
The company entered into an agreement in late April with Russia's Alliance Mining Group and Lexor Group SA to acquire an established gold company operating in the far east of Russia named Amur Zoloto LLC in an all-share deal worth around USD144.0 million.
On Monday, however, Petropavlovsk said the company, Alliance Mining and Lexor are now holding talks about amending that agreement to include the acquisition of additional gold assets that are owned by the London-listed company's largest shareholder.
Renova Group, a Russian conglomerate focused on various natural resource sectors, is the largest shareholder in Petropavlovsk with a 14.76% stake.
Petropavlovsk now wants to amend its deal with Alliance Mining and Lexor to include the potential acquisition of Renova's gold assets in the Kamatcha region after Renova agreed to discuss potentially selling the assets.
"The board believes that, whilst further analysis of these assets will be required, the addition of Kamchatka Gold may be an attractive opportunity for the group, and accordingly Petropavlovsk, [Alliance Mining, Lexor] and Renova have agreed to undertake further three-way talks to see whether amended terms for the proposed acquisition that will include the acquisition of Kamchatka Gold can be agreed between the three parties," said Petropavlovsk.
Importantly, Renova, Alliance Mining and Lexor are all ultimately controlled by Russian businessman Musa Bazhaev and his associates, and any deal would be classed as a related-party transaction because of Renova's shareholding in Petropavlovsk.
The original deal to acquire Amur Zoloto is already set to see Petropavlovsk issue over 1.43 billion shares in the company to Alliance Mining and Lexor, meaning they are effectively being issued to Bazhaev, meaning the addition of further assets may see that rise further.
Those shares would already represent 30.3% of the enlarged issued share capital of Petropavlovsk.
"We welcome the constructive engagement of Renova and look forward to establishing whether an attractive amended transaction involving our acquisition of both AZ and the Kamchatka Gold can be agreed and put to Petropavlovsk's independent shareholders for approval," said Peter Hambro, the chairman of Petropavlovsk.
"We welcome the opportunity to enter into three-way discussions with Petropavlovsk and Renova. All parties recognise the considerable consolidation opportunities in the region and we look forward to continuing the constructive dialogue," said Bazhaev.
Petropavlovsk said the separate conditional agreement to form a joint venture with GMD Gold in order to finance the construction and commissioning of Petropavlovsk's Pressure Oxidation Hub project at the Pokrovskiy mine is unaffected by the developments unveiled Monday.
Petropavlovsk shares were trading up 1.6% to 8.15 pence per share on Monday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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