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Russian oligarchs betting heavily on gold

Section: Daily Dispatches

Polyus Plans $1 Billion Share Buyback, London Listing

From Reuters
Monday, September 18, 2006

MOSCOW -- Polyus Gold, Russia's largest gold miner, will launch a $1-billion share buyback this month ahead of a planned listing in London by the end of 2006, the company said on Monday. Aiming to be among the world's top five gold miners by 2015, Polyus said it had hired Deutsche Bank for the buyback as it seeks to join a growing number of Russian companies listing on the London Stock Exchange .

The buyback price has yet to be determined, but a source close to the company told Reuters the sum would be enough to buy back between 8 percent and 10 percent of the issued share capital.

"We will start (the buyback) as soon as we have our financials for the first half of the year reviewed by our auditor," Chief Executive Yevgeny Ivanov told a conference call.

"I expect this to happen not later than by the end of this month. As soon as we have them we will place an offering memorandum and start the buyback process. So it will take no more than one and a half months to complete the operation."

Ivanov said the price of the shares for the buyback will be set a few days before the offering memorandum is signed off.

"We would like to make it as close as possible to the decision-making period for investors so that they are able to take into account all the information, financials and the market situation at the moment," Ivanov said.

He also said Polyus would not issue new equity.

"There will be no funds raised. It will be a listing of the existing ADRs, which are available over the counter," Ivanov said, adding that this would make the stock more liquid by opening it up to a wider range of investors.

Spun off from metals giant Norilsk Nickel this year, the company is 54.8-percent controlled by Norilsk's two key shareholders, billionaires Vladimir Potanin and Mikhail Prokhorov, with around 40 percent of its shares in free float.

The plans are part of a broader long-term strategy that Polyus will present to investors during a two-week roadshow that begins on Monday.

The miner's 10-year strategy aims to create a company with a market capitalisation of $14 billion to $16.5 billion and net cash flow of $600 million to $710 million a year by 2015.

Polyus plans a capital expenditure of $3.4 billion by 2015 with the aim of more than tripling gold output to 3.9 million ounces a year. It also plans to boost proven and probable reserves to 68 million ounces from an existing 25.1 million.

An exploration programme would require another $800 million.

A Polyus statement said the company would raise output at existing fields and wanted to buy new deposits in Russia with reserves of at least 2 million ounces and in Central Asia with reserves of at least 3 million.

Mergers and acquisitions would also be considered, it said. Polyus produces about 18 percent of Russia's gold. It has said it plans to raise output to 1.2 million ounces this year from 1.1 million in 2005.

Polyus said in a separate statement that its net profit under International Financial Reporting Standards (IFRS) rose more than 2,000 percent in the first half of 2006 to $1.04 billion.

The statement did not explain the reasons behind the rise. It said Polyus' gold sales were $297 million in the first half of 2006, up from $169 million in the same period of 2005.

But an analyst said that the rise was the result of the sale in the first half of this year of a 20-percent stake in South Africa's Gold Fields for more than $2 billion.

"The stake has been transferred to Polyus at a price equal to around $1 billion, Polyus sold it for over $2 billion. The difference was reflected in the financials," Vladimir Katunin of Aton brokerage told Reuters.

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