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Polymetal buys rest of Prognoz in $140m share deal
(WebFG News) - Polymetal International has acquired a 50% stake in the Prognoz silver property for $140m in Polymetal shares, it announced on Tuesday, resulting in it now owning 100% of Prognoz.
The FTSE 250 company said total consideration for the 50% stake in Prognoz comprised $140m, paid by the issue of 14,152,668 new ordinary shares.
It explained that the number of consideration shares was determined by dividing $140m by $9.89, the spot price of ordinary shares of the company on the main market of the London Stock Exchange at close on 19 April.
The consideration shares would be subject to a lock-up period of 180 days.
Polymetal also committed to pay a net smelter return royalty in the range of 0.5% to 2.5%, prorated to the 50% stake being acquired and capped at $40m.
The royalty would only be payable if the silver price was $19 per ounce or higher, with the actual royalty rate within the range determined on a progressive scale dependent on the silver price.
As a result of the purchase and preceding transactions, the total upfront consideration for 100% of Prognoz comprised $215m, including $3m paid for the initial 5% and $72m for 45% paid to Polar Acquisition, completed on 13 April 2016, and the $140m for the new 50% paid to Garden Ring Capital.
That amounted to 74 US cents per ounce of silver resource, or $59 per gold equivalent ounce.
Polymetal said the gross assets of Prognoz were $43m, and a reported pre-tax loss of $1.4m was attributable to the asset in 2017.
"We are very satisfied with the consolidation of 100% of Prognoz and the strengthening of our long-term growth pipeline," said Polymetal group CEO Vitaly Nesis.
"Prognoz is a unique silver asset in terms of size and grade and will, in time, supplant Polymetal's Dukat as one of the leading silver mines globally."
Polymetal described Prognoz as the largest undeveloped primary silver deposit in Eurasia, with JORC-compliant indicated and inferred resources estimated by Micon in 2009 of 292 Moz at 586 g/t silver.
It said Prognoz was a "world-class" deposit that fit well with its strategy, given it was a "very large" resource with consistently high grades, and an "outstanding" exploration upside, as only 40% of its known vein outcrop had been tested by drilling.
Prognoz also featured relatively wide veins of three metres on average, with direct surface outcrop that enabled open-pit mining for the significant part of mineralisation. And a conventional sulfide composition with no deleterious elements, which ensured "relatively simple" processing options were feasible, Polymetal explained.
Project activities for 2018 would include 46 km of diamond drilling and extensive in-house metallurgical test work.
The updated JORC-compliant resource estimate was expected in the fourth quarter of 2018, with a pre-feasibility study and JORC-compliant reserve estimate in the third quarter of 2019.
A feasibility study and reserve update in the fourth quarter of 2020 would pave the way for a potential investment decision in 2021, Polymetal explained.
Subject to the positive investment decision, a full run-rate of production could be achieved in 2024.
In a separate announcement on Tuesday, Polymetal said it was also exercising its call option to buy the remaining 75.3% of the Nezhda gold property it didn't already own.