Bloomberg News

Norilsk Owner to Buy 20% of Russian Miner From Celtic

February 03, 2006

OAO GMK Norilsk Nickel, which owns Russia's biggest gold miner, is buying full control of the country's second-biggest gold mine from Celtic Resources Holdings Plc, marking Celtic's exit from the nation.

Interros, a holding company which owns Norilsk, will buy 20 percent of South Verkhoyansk Mining Co. from Celtic for $80 million in cash, Moscow-based Interros said in a statement today. South Verkhoyansk owns the license to the Nezhdaninskoye mine in Russia's Far East. Celtic will also get back a $10 million loan it made to South Verkhoyansk.

``We've sold all our Russian assets,'' Leesa Peters, a London-based spokeswoman for Celtic, said today in a telephone interview. Celtic, based in Dublin, had invested $30 million in Nezhdaninskoye.

Celtic will now focus on its Suzdal and Zherek mines in Kazakhstan, where it increased output 17 percent last year, below its forecast. The company said it will use the cash from the sale of its interest in South Verkhoyansk to buy other gold assets in the former Soviet Union.

The sale of the South Verkhoyansk stake is the culmination of three years of legal wrangles over an additional 30 percent interest in the company. The case has now been dropped, because it may have taken as long as another two years to complete, with ``no guarantee of success,'' the company said in a statement.

Shares of Celtic fell 23 pence, or 9.8 percent, to 212 pence as of 12:07 p.m. in London. They have declined 47 percent in the past 12 months, valuing the company at 89 million pounds ($158 million). Shares of Peter Hambro Mining Plc, which also produces gold in Russia, have more than doubled in the past year.

Gold Assets

Norilsk is in the process of spinning off its ZAO Polyus gold arm, a 20 percent stake in Gold Fields Ltd., the world's No. 4 gold producer, and 10 billion rubles ($352 million) in cash to create OAO Polyus Gold. Aton brokerage values the new company, which will be owned by existing Norilsk shareholders, at as much as $4 billion.

Russia plans this year to auction its Sukhoi Log gold site in Siberia, its biggest untapped gold field, which has at least 1,000 metric tons of reserves.

Polyus will bid for Sukhoi Log and the government has said only Russian companies will be able to take part in the auction.

Last year Polyus produced 1.1 million ounces of gold. It wants to triple output by 2010. Norilsk also produces more than half the world's palladium, a fifth of its nickel and 14 percent of its platinum.

To contact the reporter on this story: Samantha Shields in Moscow at sshields2@bloomberg.net

To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net


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