Russian precious metals miner Polymetal is seeking a premium listing on the London Stock Exchange, raising about $500 million in a move it hopes will catapult it into the FTSE 100 blue chip index and hand it currency for acquisitions. Polymetal, which has a market capitalisation of about $7 billion based on its Moscow-listed shares, announced on Friday that it would shake up its structure and transfer its Russian shares and UK securities to London.
The move, opening the miner further to foreign investors, will help it take advantage of acquisition opportunities in conditions that have squeezed smaller producers, Chief Executive Vitaly Nesis told Reuters. "We expect to have a much more attractive and universal acquisition currency for potential M&A transactions," he said. "In terms of M&A activity we definitely intend to stay in our key geography, that is the former Soviet Union, and we remain committed to precious metals - gold and silver." Nesis told investors on a conference call that the company is not looking for any large transformational deals.
Shares in JSC Polymetal and its London-listed global depository receipts (GDRs) will be exchanged for shares in a new Jersey-based holding company, Polymetal International, on a one-for-one basis. It will then seek to delist both its Moscow shares and the GDRs.
The listing plan mirrors measures taken by Russia's top gold miner Polyus Gold , which bought Jersey-registered Kazakh firm KazakhGold to obtain a premium listing. It will also balance of London's blue chip index even further towards emerging markets and resources.
There are 12 miners listed in the FTSE 100, accounting for a 11.66 percent weighting in the index as of September 28, according to FTSE Group. Glencore , the last mining stock to join the top tier, is not fully weighted as it has yet to reach the required 50 percent free float. Polymetal was Russia's fourth-largest gold producer and the country's biggest silver producer in 2010. It aims to produce more than 800,000 ounces of gold and silver this year, up from 753,000 ounces in 2010, and over 1.4 million ounces in 2014.
Polymetal shareholders have long been considering a shift to Britain to increase liquidity, but industry analysts questioned the timing of the deal, which will see one of the world's largest silver miners raising cash while equity and commodity markets are weak and volatile. "We are mindful of market conditions," said Nesis. "If we were a junior company, unknown in the market, that would probably have meant that the transaction would have been postponed."
FTSE 100 Mexican miner Fresnillo has seen its shares drop 26 percent since the start of this month. "It will be very tough," said one mining analyst, declining to be named. He added the company was pinning its hopes on its well-respected CEO and a large free-float of about 50 percent to set it apart from other Russian and emerging market miners.
Polymetal said it would be raising cash primarily to buy out minority shareholders who do not want London shares or cannot invest in them due to fund restrictions. The remainder of the $500 million offering will be used to repay debt. A total of 51.9 percent of shareholders have already agreed to the share swap.