Russian giant prepares golden strategy for FTSE 100 entry
Sunday 17 July 2011
Russia's biggest gold mining company Polyus, which will join the London Stock Exchange this month, is finalising a nine-year strategy to wow its new investors.
The board of Polyus believes that several of the company's gold projects are little known among international investors and analysts, and that the strategy document will help increase the company's valuation.
The group is already expected to be valued at $13bn (£8bn) when it completes the reverse takeover of the London-listed KazakhGold.
The strategy, which should be approved by the board this week, will show that at least four mines have moved from the exploration to the development phase.
It will also detail capital expenditure plans on its flagship Natalka mine, including more than $500m to be spent next year ahead of production in 2013.
The document, which will be detailed up to 2015 and broader brush up to 2020, is important in helping Polyus achieve its ambition of admission to the elite FTSE 100. By size, it should be comfortably within the top 50 firms, but to gain what is known as a premium listing Polyus must first improve corporate governance. Another condition is to incorporate the company in the UK – KazakhGold is domiciled offshore in Jersey.
Bank of America Merrill Lynch and JP Morgan are co-ordinating the move to the FTSE index. Polyus aims to present itself for inclusion either at the end of this year or early next. Changes include rejigging the board, so that there are five independent directors who will be of non-Russian origin, while the auditor, Deloitte, is bringing its accounts up to international standards.
FTSE investors are likely to look kindly on a policy that sees Polyus pay out a dividend of at least 25 per cent of its net income each year. Last year, this dividend was 35 per cent and paid out more than $110m to shareholders.
First, though, the company needs to get 95 per cent shareholder approval for its plans for the reverse takeover of KazakhGold by tomorrow. It is on track to make the deadline, although a slight shortfall should still see the deal almost certainly going ahead.
Polyus also has big acquisition plans. It is currently the world's third-biggest gold company measured by reserves but only the 10th biggest in terms of production. Mikhail Prokhorov, the Russian oligarch who owns 37 per cent of Polyus, and his fellow board members have been open about their desire to conclude an acquisition this year or next that will place the company among the elite handful of producers.
Consideration is also being given to a secondary listing, most probably in Toronto, as it has a tradition of hosting mining stocks.
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