Polyus Gold, Russia’s largest gold miner, is currently in merger negotiations with the world's top gold producers with a plan to create the second largest gold miner globally.
Mikhail Prokhorov, the tycoon-turned-politician who owns 40 per cent of Polyus, said late last month the company was seeking to merge with an international gold mining company before the end of the year, but his comments on Thursday concerning the size of the combined company has got the rumour mill running.
The shortlist of potential partners includes several top 10 companies, but no specific names or selection criteria have been disclosed. Analysts at Troika Dialog have suggested in a research note that Polyus is likely to merge with a company of equal size, with the deal to be completed as an equity swap.
In the bank’s estimation, Canada’s Kinross Gold is the most likely merger candidate as it already has extensive operations in Russia and was reported to be in talks with Polyus several years ago. Other potential, but less likely, alternatives include South African firm Gold Fields, Canada's Agnico-Eagle and Peruvian Minas Buenaventura, according to Troika.
However, Russian business daily Vedomosti reported on Friday that Polyus is in discussions with Newmont Mining, Newcrest Mining and AngloGold Ashanti. But However, Polyus board member Evgeny Ivanov told Reuters on Friday his company was not in negotiations with any of the companies mentioned by Vedomosti.
The Troika analysts also suggested a merger with one of these companies was less likely, given the difference in size with Polyus Gold, but if Prokhorov is serious about creating the second-largest miner by market capitalisation such a deal might make sense.
Polyus ranks eighth globally in terms of current production and ninth by market cap - $13.5bn. The world’s largest gold company, Barrick Gold, has a market cap of $48bn, suggesting a merger with Newcrest ($31.6bn) or Newmont ($27.5bn) would propel Polyus into second place.
The world’s largest gold miners:
Source: Vedomosti - (Column 1: Capitalisation; Column 2: Production, m ounce; Column 3: Reserves, m ounce)
The merger is likely to take place after the completion of a reverse takeover of subsidiary KazakhGold, which is expected to take place in July and result in a London listing for the combined entity, which is to be renamed Polyus International.
See also:
Russia’s top gold miner eyes global merger and London listing - FT Tilt
Russia’s Polyus Gold closer (perhaps) to KazakhGold sale - FT Tilt
Russia’s Polyus held against its will in Kazakhstan - FT Tilt
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