Bloomberg News

Polyus, Polymetal Owners Said to Weigh Russian Gold Merger

February 08, 2012

(Updates with analyst comment in sixth paragraph)

Jan. 26 (Bloomberg) -- Polyus Gold International Ltd.’s and Polymetal International Plc’s billionaire owners are considering merging the Russian gold miners to create the world’s ninth- biggest producer of the metal, two people with knowledge of the matter said.

Any deal may be about $6.9 billion, based the current value of Polymetal on the London stock exchange. Polyus has a market value of about $10 billion. The talks have been between the owners of the companies and not management, the people said, declining to be identified until a decision on whether to pursue the combination is made.

Polyus advanced as much as 11 percent in London trading to $3.55, the highest in four months. Polymetal jumped 10 percent to 1,176 pence, the highest since its October market debut.

Polyus is 78 percent-controlled by billionaires Mikhail Prokhorov and Suleiman Kerimov. A tie-up with FTSE 100 member Polymetal would help Polyus gain a primary listing in the U.K., which has been delayed by a Russian commission headed by Prime Minister Vladimir Putin. Prokhorov and Putin are both running for the presidency in March elections.

Anton Arens, a Polyus spokesman, and Andrey Abashin, a Polymetal spokesman, declined to comment, as did Andrey Belyak, a spokesman for Prokhorov’s Onexim Group holding company, Nesis’s press-office and Anton Averin, Kerimov’s Nafta Moskva spokesman.

‘Huge Resources’

“Such a combination could allow Polyus not only to gain a London primary listing, but also access to Polymetal’s experience in building new mines,” Dmitry Kolomytsyn, a Morgan Stanley analyst, said by phone from Moscow. Polymetal can benefit as it will get access to Polyus’s “huge resources,” he said.

Polymetal, whose owners include Czech billionaire Petr Kellner and Russia’s Alexander Nesis, switched its domicile from Russia to Jersey last year and secured a primary listing in October. The company was included in the FTSE 100 index last month.

Polyus has sought an international merger that would make it one of the largest-ranking gold producers since 2010. Talks on such a transaction were suspended until the redomiciling process is completed, management said in October.

A combination of the two companies may secure ninth place among the world’s largest gold producers, overtaking Phoenix- based Freeport-McMoRan Coper & Gold Inc., according to Bloomberg News calculations from data provided by London-based researcher GFMS Ltd.

Polyus picked Bank of America Merrill Lynch, JPMorgan Chase & Co., VTB Capital and Renaissance Capital to arrange a London share sale to boost its free-float so that it can qualify for inclusion in the benchmark index, people with the knowledge of the matter said earlier this week. An agreement to combine with Polymetal may remove the need for that transaction.

Polyus was at $3.401 at 10:12 a.m. in London, while Polymetal traded at 1,136 pence.

--Editors: John Viljoen, Torrey Clark

To contact the reporters on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net; Yuliya Fedorinova in Moscow at yfedorinova@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net


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