Polymetal sells Khakanja operation for $15m loss
By Josh White
Date: Monday 17 Dec 2018
(Sharecast News) - Polymetal International has sold its 100% interest in Khakanja - Okhotsk Mining and Exploration Company - to a group of unrelated private Russian buyers, it announced on Monday, for a total consideration of $30m in cash and assumed debt.
The FTSE 250 company said the assets sold comprised the 600 Ktpa processing plant, other related infrastructure at Khakanja, and old stockpiles at Khakanja, Avlayakan and Ozernoye deposits, with current ore reserves of around 0.1 Moz of gold equivalent.
It said the transaction also included "advanced" exploration properties of Kundumi, with estimated mineral resources of 140 Koz of gold equivalent as of 1 January, and Mevachan.
The assets were 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 around 2 Moz of gold equivalent in its 15 years of operation, mostly from four deposits - Khakanja proper, Yurievskoye, Ozernoye, and Avlayakan - with the asset currently employing 480 people.
The gross assets of Khakanja were currently $60m, following the payment of a pre-completion dividend to Polymetal.
Pre-tax profit of $43m had been attributable to the assets in the 2017 financial year.
The total consideration for Khakanja would comprise $30m, of which $5m would be payable in cash and $25m in the form of assumed net debt with no further recourse to Polymetal.
Polymetal said the loss on disposal would amount to around $15m, based on the carrying value of the Khakanja operations as at 30 November.
The completion of the transaction would take place upon the statutory registration procedure, which was expected to occur before year-end.
For the avoidance of doubt, the board confirmed that following the disposal, Polymetal would retain full control of its Svetloye operation.
Its justification for the disposal included the asset's shrinking production profile, with 2020 base-case production amounting to approximately 2% of the group's total.
The company also said the asset carried "high costs", with 2019 all-in sustaining costs of more than $1,000 per ounce of gold equivalent estimated, along with a depleted reserve base, with two years of mine life remaining based on the current reserve estimate.
It had "limited" near-mine exploration upside, with the company saying "significant demand" on its management would have been required if the company had followed the "aggressive" cost-cutting campaign needed to maintain the asset in operation or full proper decommissioning.
"The disposal of Khakanja advances our strategy of selling smaller short-lived assets," said group chief executive officer Vitaly Nesis.
"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."
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