Polymetal plans exile to Kazakhstan as Russia ties cause a London stink

Polymetal’s Dukat Gold Hub in Russia. Credit: Polymetal.

Top-ten gold producer Polymetal (LSE: POLY) on May 10 proposed a plan to shareholders to delist from the London Stock Exchange (LSE) and to redomicile to the Astana International Financial Centre (AIFC) in Kazakhstan as international sanctions against Russia mount.

The Anglo-Russian miner, headquartered in Jersey, says Russia has listed the tax haven as an “unfriendly country” because of the Russia-led conflict in Ukraine that started in February last year. The US, the UK and the EU, Canada, Switzerland, Australia and Japan have each progressively imposed sanctions on certain Russian persons, entities and sectors, prompting Russia to adopt its counter-sanction measures.

Such measures include sanctioning persons and entities within jurisdictions on the “unfriendly countries list” under Russian law.

“The board is of the view that the re-domiciliation is a necessary and critical step to preserve shareholder value,” Polymetal said in a statement. “In determining that the re-domiciliation to the AIFC is the preferred alternative, the principal focus of the board has been on the removal of as many Russian counter-sanction restrictions as possible, in a legal forum that offers shareholders as much similarity to the status quo as possible.”

Polymetal says it considered the Dubai International Financial Centre, the Abu Dhabi Global Market, and Hong Kong as alternatives to the AIFC.

Shareholders will vote on the re-domiciliation proposal on May 30 during the annual general meeting. Should owners approve the move, the company says it can’t guarantee its ongoing ability to meet specific basic requirements for the ordinary shares to continue to be admitted to trading on the LSE mainboard.

According to Polyment, it had also attempted to meet these requirements using depository interests or depositary receipts, but the sanctions proved this was too much of a hurdle to clear.

The company’s strategy to relocate stands in contrast to Kinross Gold’s (TSX: K, NYSE: KGC) June 2022 move to sell its Russia-based assets at all costs in a bid to sidestep the sanctions.

Polymetal also released its operating and financial results for the March quarter, saying output fell 5% year-on-year to 345,000 oz. gold-equivalent, mainly owing to 7% lower head grades at 3.2 grams gold per tonne.

Revenue for the quarter rose by 19% to $733 million as sales channels stabilized, with the company taking full advantage of higher gold prices while reducing its metal stockpiles.

“Q1 saw continued metal inventory release and positive revenue dynamics,” said Polymental CEO Vital Nesis. “Management is optimistic that the unwinding of saleable inventory will be substantially completed by the end of the second quarter of 2023.”

The company’s financials didn’t disclose the quarterly earnings or losses.

Polymetal confirmed full-year guidance of 1.7 million oz. gold-equivalent.

Polymetal operates 10 gold mines in Russia and Kazakhstan, employing 14,700 people.

Russia’s aggression in Ukraine has decimated Polymetal’s London-listed equity, which at £2.25 ($2.82) apiece on Thursday, was down 86% over the past 24 months. It has a market capitalization of £1.5 billion ($1.88 billion).