Disposal of Non-Core Assets
Petropavlovsk PLC ('the Company' or, together with its subsidiaries, 'the Group') announces that its wholly owned subsidiary, Horatio Limited, yesterday signed a share purchase agreement relating to the sale of 100% of the participatory shares in OOO 'Ilyinskoye' ('Ilyinskoye'), a company which holds the mining license for the Visokoe deposit, to AO 'Yuzhuralzoloto Group of Companies' ('Yuzhuralzoloto').
In addition, the Group intends to imminently dispose of its' 49% interest in ZAO 'Verkhnetisskaya Ore Mining Company' ('Verkhnetisskaya') to an entity associated with the Yuzhuralzoloto group and has entered into an agreement linked to that disposal.
The total cash consideration for the transactions is US$ 20 million.
Yuzhuralzoloto is one of the largest Russian gold miners, both in terms of production and reserves and resources. It has a number of operations in the Krasnoyarsk Region, where the Visokoe deposit is located.
The cash consideration for the transactions will be comprised of the following parts:
Ilyinskoye
§ US$7.5 million receivable by 15 May 2016
§ US$9 million receivable as consideration for the assignment of a loan, which Ilyinskoye received from Group companies, to OOO 'Sovrudnik', a company associated with Yuzhuralzoloto, payable in tranches by 30 July 2016. As security for payments due from OOO 'Sovrudnik' under this assignment, it has been agreed that upon the ownership of the participatory shares in Ilyinskoye passing to Yuzhuralzoloto, these participatory shares will be pledged to Horatio Limited until such time as the payments due to the Group under this assignment are performed in full.
Verkhnetisskaya
§ US $500,000 receivable for Vekhnetisskaya under the share purchase agreement to be entered into by the Group
§ US$3 million receivable as consideration for the assignment of a loan which Verkhnetisskaya received from Group companies, to OOO 'Sovrudnik' payable by 10 June 2016 .
The Group considers these transactions to be commercially linked.
Funds received will be used for general corporate purposes and to reduce the Group's net debt.
About Visokoe
Visokoe is a significant non-refractory gold deposit that is not in production and is located in the Yenisey Ridge area of the Krasnoyarsk region.
The Visokoe site is located c.50km north-west of the village of Teya and c.70km from town of Severo-Yeniseysk. Visokoe contains c.1.2Moz of JORC Probable gold Reserves and c.1.3Moz of Mineral Resources. For a detailed Ore Reserves and Mineral Resources statements please refer to Group's 2015 Annual report. Extensive exploration and test work has indicated ore at Visokoe to be non-refractory and suitable for economic processing in an RIP plant or via heap-leaching. The deposit has a low-strip ratio and is well-suited to open-pit mining.
Gross assets of Ilyinskoye of c. $US19.8 million (as at 31 December 2015) are being transferred as part of the transaction which also contributed c. $US33 million of Loss Before Tax (including US$32.5 million impairment charge referred to below) to the Group's Financial performance in 2015.
A US$32.5 million impairment charge has been recorded against the associated exploration and evaluation assets in the Group's results for the year ended 31 December 2015. No further impairment is expected as a result of this disposal.
About Verkhnetisskaya
Verkhnetisskaya holds two licenses to explore and extract hard-rock gold in the Krasnoyarsk region and both of these deposits are at the exploration stage of development. The Group previously disposed of its 21% interest in Verkhnetisskaya in 2013.
Gross assets of c. $US0.2 million (as at 31 December 2015) related to Verkhnetisskaya are being transferred as part of the transaction which also contributed $USnil of Loss Before Tax to the Group's Financial performance in 2015.
Commenting, Chairman, Peter Hambro said:
'The disposal of these non-core assets falls in line with the Group's revised strategy of debt reduction and focus on our core producing assets. The sale will allow management to dedicate their time and efforts on the most profitable parts of our business portfolio, with the highest margins.'
Enquiries
Petropavlovsk PLC
Alya Samokhvalova
Grace Hanratty
+44 (0) 20 7201 8900
Maitland
Neil Bennett
James Isola
+44 (0) 20 7379 5151