Nordgold considers purchase of its minority shareholders’ stakes or delisting

Nadezhda Ivanova's picture

According to the Kommersant’s sources, Nordgold of Alexei Mordashov (he owns over 90% of the shares) may redeem the minority shareholders’ stakes or delist from the London Stock Exchange (LSE). The company feels undervalued and there is no rotation among key minority shareholders, which would increase the liquidity of the securities, for a long time. If the option with delisting is implemented, Nordgold may return to the market in 2018-2019, when it increases the production. Free-float of the company is estimated at $125 million, but during the buyback it will have to give serious premium, analysts say.

The gold-mining company Nordgold considers the possibility of delisting or the redemption of shares from its minority shareholders, the Kommersant’s sources in the industry, including those who are close to the company, report. In the case of the delisting the company can retain minority shareholders (mostly funds), says one of the Kommersant’s interlocutors. On Friday, such a scenario wasn’t excluded by analysts of BCS, which found that "Alexei Mordashov can decide to make Nordgold a private company because of the weak dynamics of the shares". Nordgold stated to the Kommersant that its Board of Directors "considers various strategic options for the company's development", a regular meeting should be held in February. A representative of Alexei Mordashov declined to comment.

As of January 27th, capitalization of Nordgold was $1.35 billion, thus, the free-float (approximately 9.25%) is estimated at $125 million. The Kommersant’s sources call among minority shareholders Prosperity Capital Management Fund (it declined to comment). GDR of the company are listed traded on the LSE by multiple of 6 P/E – this is fairly low, 60% of the discount to Polymetal, the BCS’ survey informs. The company planned to conduct SPO to increase the free-float to at least 25% and to get a premium listing, the company recalls. Nordgold thinks that one of the main reasons for the low shares liquidity is the absence of rotation of the key minority shareholders, the Kommersant’s sources say. In 2015-2016, the company held two buybacks, bought around 2.5% of the stakes for $30 million, "Now those who are willing to sell (the shares) almost all disappeared," – Nordgold’s general director Nikolai Zelensky noted in summer 2016, added, that "the share is losted well". "The paper costs not so cheap to make its redemption extremely profitable, but taking into account generous dividends of Severstal, it could be more attractive for Alexei Mordashov to place liquidity not on deposits, but in securities of Nordgold," - the Kommersant’s source on the investment market says.

At the end of 2015 – beginning of 2016, the delisting from LSE was held by Polyus Gold - the parent company of the largest Russian gold miner Polyus. Then son of Suleiman Kerimov Said consolidated Polyus, but shares of Polyus are listed on the Moscow Stock Exchange. The company became the head structure of the group, now it plans SPO to comply with the requirements of the first level listing in Moscow, not excluding issue of receipts in London. It is also considered to sell the blocking stake of Polyus to Chinese companies, in particular to Fosun.

The Nordgold’s delisting can also just be a temporary withdrawal from the market, say the Kommersant’s sources. It takes time to build-up assets, they continue: in 2018 the Gross mine in Yakutia will start working (230 thousand ounces of gold per year), mining at Bouly in Burkina Faso will be carried out at the design capacity (118 thousand ounces per year), the operation schedule for Montagne d'Or and Pistol Bay is determined. "It makes sense to conduct the listing on a wave of the new growth already," - says one of the Kommersant’s interlocutors. "After 2018, Nordgold finally should overcome the long time called level of 1 million ounces of the production," - the Kommersant’s source close to the company agrees.

Oleg Petropavlovsky of BCS believes that the low liquidity of Nordgold was largely determined by the course of separation of Severstal’s gold mining as a separate company in 2012 (then Nordgold was valued at $2.8 billion): the listing in London in the form of GDR limited the number of investors, it would be logical to start the parallel trading in Russia. In the case of redemption of the minority shareholders’ stakes Nordgold will have to offer a significant premium, otherwise it could adversely affect the attitude of investors to the main asset of Alexei Mordashov - Severstal, the analyst says.

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