Severstal's Nord Gold unit eyes $1bn London float

Click to follow
The Independent Online

Nord Gold last night became the fourth Russian company to unveil plans for a London listing in recent days, setting the stage for a $1bn (£620m) flotation against the backdrop of strong commodity markets.

The gold producer is expected to end up with a market capitalisation of about $5bn, with the money raised helping to repay debts owed to Nord Gold's parent, the Russian mining giant Severstal and to fund its growth strategy.

A quarter of the company, which earned $485m in revenues in the first nine months of 2010, will be sold via the share offering, raising about $1bn, according to market sources. Some $200m of the listing proceeds will be used to pay off loans and about $300m will be invested back in the business.

The plans come on the heels of listing announcements by a string of Russian companies, including the pump manufacturer HMS Hydraulic Machines and the coking coal and pig iron group KOKS. The steel pipe specialist Chelpipe also launched its initial public offering last week, seeking to raise up to $1bn via a listing of its ordinary shares in Moscow and global depository receipts in London.

Nord Gold's board is led by chairman Philip Baum, a veteran of the FTSE 100-listed mining giant Anglo American, who said: "We will strive to ensure that investors benefit form attractive earnings growth whilst protected by the highest standards of corporate governance."

The group boasts a total of eight producing mines, two development projects and five exploration projects that are at an advanced stage. In addition to Russia, Nord Gold is also active in West Africa and Kazakhstan.

Its chief executive Nikolai Zelenski said almost half of Nord Gold's resources are outside Russia, adding that the company was targeting production of more than one million ounces of gold by 2013.

"From Russian origins we have grown into an internationally diversified gold miner," he said.

The listing comes against the backdrop of booming gold prices, which have risen to about $1,360 per ounce from about $1,100 at the beginning of 2010. Analysts expect prices, which broke through the $1,400 per ounce-mark at one point in November, to continue climbing as interest rates remain low and the global macroeconomic picture remains clouded.

The US Federal Reserve's quantitative easing programme is also expected to play a key part in driving gold prices in coming months.

A recent PwC survey, for example, showed that miners were expecting to see prices of between $1,400 and $3,000 per ounce in 2011. About 40 per cent of respondents expected to see a high of $1,500 per ounce.