Polymetal owns deposits in Kazakhstan and Russia. Gold production in Kazakhstan is 565-570 thousand ounces. (~34% of total production), and the assets themselves generate ~38-40% of the company’s EBITDA. Recently there was news that Polymetal is considering the sale of Russian assets. We believe that if there is a sale of assets, it will be at a big discount. As an example, consider a deal to sell Kinross assets to Russia for $340 million, which is equivalent to ~40% of the fields’ EBITDA.
We expect FTM EBITDA for the Russian division to reach RUB40.6bn. subject to gold prices at $1,700/oz, silver at $19/oz, and the dollar/ruble exchange rate at RUB60/$. In this case, the sale price, according to our estimates, could be from 20 to 60 billion rubles. (0.5-1.5x FTM EBITDA).
As a result of this sale, the company’s production may be reduced by ~3 times. It is now logical to evaluate Polymetal only for the Kazakhstan division, as well as adjust net debt by the amount of cash from the sale of the asset.
Overall, we do not view Polymetal as an interesting asset due to high uncertainty, namely the possible sale of Russian assets at a large discount due to their toxicity. In addition, according to IR Polymetal, there is no mandatory buyback of shares from dissenting shareholders under UK law, where Polymetal is registered. There is also a risk of delisting the company from the Moscow Exchange. The company will not need to be listed on the Moscow Exchange, since the company will not actually own Russian assets.