22nd May 2014 08:07
LONDON (Alliance News) - Polymetal International PLC Thursday said that it has agreed to acquire the major Kyzyl gold project in Kazakhstan for up USD1.12 billion in cash and shares, a move which will increase its reserves by 50%.
The gold, silver and copper-mining exploration and production company, with operations in Russia and Kazakhstan, said it has entered binding agreements with Sumeru Gold BV and Sumeru LLP for the acquisition of Altynalmas Gold Ltd, the holding company for the Kyzyl gold project.
The Kyzyl gold project is a highly prospective mining area including the Bakyrchik and Bolshevik gold deposits, which Polymetal said would increase its gold equivalent reserves by roughly 50% including a single high grade region holding 6.7 million ounces of gold at 7.5 grams per tonne.
The company also said the Kyzyl Project offers further substantial potential of additions to existing reserves, through conversion of certain inferred resources and further exploration at adjacent properties which are covered by its exploration licences.
Polymetal said it has agreed to purchase the entire issued share capital of Altynalmas Gold from Sumeru, together with shareholder debt owed to Altynalmas Gold from Sumeru.
It will initially pay USD318.5 million in cash and issue USD300 million worth of Polymetal shares to the selling parties before deferred additional cash payments up to a maximum of USD500 million, on the basis of certain conditions being met related to the gold price and Polymetal's share price over the next seven years.
Polymetal said it intends to fund the cash element of the deal from its available undrawn facilities currently totalling USD1.3 billion and to finance the projected capital expenditure with project finance debt and cash flows generated from its existing operations.
The company said the deal is expected to be completed in the fourth quarter with first production from the sites provisionally planned for 2018.
"The Kyzyl Project fully meets our definition of a suitable acquisition opportunity: a large, high-grade asset with a clear path to production and cash flow generation leveraging Polymetal's core strengths in selective mining and refractory ore processing. We believe it is an excellent chance to deploy our skills in a long-term project that can generate substantial value for our shareholders," Chief Executive Vitaly Nesis said in a statement.
Polymetal shares were trading flat at 543.00 pence during early trading on Thursday.
By Tom McIvor; [email protected]; @TomMcIvor1
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