# Polymetal International plc  Disposal of Khakanja advances strategy

- Link: https://www.directorstalkinterviews.com/polymetal-international-plc-disposal-of-khakanja-advances-strategy/412763212
- Published: 2018-12-17T08:02:44+00:00
- Author: Charlotte Edwards

**Polymetal International plc** (LON:POLY) has sold its 100% interest in Khakanja
to a group of unrelated private Russian buyers1 for a total consideration of US$
30 million in cash and assumed debt.

> **Vitaly Nesis, Group CEO of Polymetal said:**
> “The disposal of Khakanja advances our strategy of selling smaller short-lived
> assets. I wish Khakanja employees and its new owners success in bringing down 
> costs and finding new reserve ounces, both needed to extend the life of the operation.”

**TRANSACTION DETAILS**

The assets sold comprise the 600 Ktpa processing plant, other related infrastructure
at Khakanja, and old stockpiles at Khakanja, Avlayakan and Ozernoye deposits with
current ore reserves of approximately 0.1 Moz of GE. The transaction also includes
advanced exploration properties of Kundumi with estimated mineral resources of 140
Koz of GE as of 1 January 2018, and Mevachan. The assets are located in the Okhotsk
and Ayan-May municipal districts of the Khabarovsk Territory in the Far East of 
the Russian Federation.

Polymetal developed Khakanja as a greenfield operation and commissioned the plant
in 2003. The facility produced approximately 2 Moz of GE in 15 years of operation
mostly from 4 deposits (Khakanja proper, Yurievskoye, Ozernoye, and Avlayakan). 
The asset currently employs 480 people.

The gross assets of Khakanja are currently US$ 60 million following the payment 
of a pre-completion dividend to Polymetal. Pre-tax profit of US$ 43 million has 
been attributable to these assets in FY2017. The total consideration for Khakanja
will comprise of US$ 30 million of which US$ 5 million will be payable in cash and
US$ 25 million in the form of assumed net debt with no further recourse to Polymetal.

The loss on the disposal will amount to approximately US$ 15 million based on the
carrying value of the Khakanja operations as at 30 November 2018.

The completion of the transaction will take place upon the statutory registration
procedure, which is expected to occur before year-end. For avoidance of doubt, following
the disposal, the Company will retain full control of its Svetloye operation.

**STRATEGIC RATIONALE**

– Shrinking production profile with 2020E base-case production amounting to approximately
2% of the Group’s total

– High costs with 2019E AISC of more than US$ 1,000 per oz. of GE

– Depleted reserve base with 2 years of mine life based on the current reserve estimate

– Limited near-mine exploration upside

– Significant demand on Polymetal’s management would have been required if Polymetal
had followed the aggressive cost-cutting campaign needed to maintain the asset in
operation or full proper decommissioning

**About Polymetal**

Polymetal International plc (LSE, MOEX: POLY, ADR: AUCOY) (together with its subsidiaries–“
Polymetal”, the “Company”, or the “Group”) is a top-20 global gold producer and 
top-5 global silver producer with assets in Russia, Kazakhstan and Armenia. The 
Company combines strong growth with a robust dividend yield.

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