TIDMPOG
RNS Number : 5330H
Petropavlovsk PLC
25 March 2020
25 March 2020
Petropavlovsk PLC
("Petropavlovsk", the "Group", or the "Company")
Amendment of Option Agreement to Purchase 25% of TEMI LLC
("TEMI")
Smaller Related Party Transaction
In the Company's half year report issued on 10 September 2019
and in a separate announcement by the Company on 23 September 2019,
Petropavlovsk disclosed that it had entered into an option
agreement with Agestinia Trading Limited ("Agestinia") on 22 May
2019 (the "Option Agreement"). Agestinia holds a 25% interest in
TEMI, a 75% owned subsidiary of Petropavlovsk. The Option grants
the Company a discretionary right to purchase Agestinia's shares in
TEMI (the "Option").
TEMI holds licenses relating to a substantial amount of
non-refractory as well as refractory reserves and resources
confined within the Elginskoye, Unglichikanskoye and the smaller
Afanasevskoye deposits neighboring Albyn, one of the Company's
principle mines . Non-refractory reserves are expected to be
suitable for processing via the existing Albyn processing plant and
will become the main feeding source for it. The first production
from Elginskoye is expected in the second half of 2020.
The exercise period for the Option is 730 days from 22 May 2019
with an exercise price of US$60m (the "Exercise Price") or US$53.5m
(the "Reduced Exercise Price") if the Company exercises the Option
on or before 20 May 2020. The Exercise Price or the Reduced
Exercise Price of the Option may be paid in cash or in whole or in
part in Petropavlovsk Ordinary Shares at the discretion of
Petropavlovsk.
In the current period of significant market volatility, in order
to fix the dilution for Petropavlovsk shareholders in the event it
exercises the option, an Amendment Agreement has been agreed.
However, to be effective, it must be executed in front of a notary
and notarised in Russia which has created logistical challenges in
light of the current Covid-19 pandemic. Accordingly, Petropavlovsk
today entered into a supplemental agreement agreeing to attend the
notary on 72 hours' notice to execute the Amendment Agreement,
fixing the price at which any Petropavlovsk shares will be issued
on exercise of the option and the exchange rate when Agestinia can
make arrangements to attend a notary, which it has agreed to use
its reasonable endeavours to do.
Following execution and notarisation of the Amendment Agreement,
if the Company exercises the Option and decides to pay the
consideration in whole or in part in Petropavlovsk Ordinary Shares,
the new Ordinary Shares would be set at a price of GBP0.179 per new
Ordinary Share using an agreed exchange rate of GBP:USD 1:1.3206
(vs. current exchange rate of 1.1774 as at 24 March 2020). The
agreed exchange rate reflects levels at the beginning of January
2020. Applying the agreed exchange rate, as opposed to the current
exchange rate, means that c.28m fewer shares will be issued to
Agestinia .
The price of GBP0.179 per new Ordinary Share represents a 7.2%
premium to the volume weighted average price for an Ordinary Share
over a 90-day period ending on 24 March 2020.
As Agestinia is a substantial shareholder in a subsidiary
undertaking of Petropavlovsk, it is considered a related party of
the Company for the purposes of Listing Rule 11.1. Entry into the
supplemental agreement, pursuant to which Petropavlovsk has agreed
to enter into the Amendment Agreement when required to do so on
notice from Agestinia, is a transaction which falls within Listing
Rule 11.1.10R (modified requirements for smaller related party
transactions) and this announcement is made in accordance with
Listing Rule 11.1.10R(c). The consideration for entering into the
supplemental agreement is a nominal value of GBP1. Petropavlovsk
intends to exercise the option during the period in which the
Reduced Exercise Price applies. It is likely that the transaction
would constitute a Related Party Transaction under Listing Rule
11.1 and, if it does, it will require approval by Shareholders as a
related party transaction. A Circular is being prepared to seek
such authority and will be sent to Shareholders in due course.
Commenting on the amended Agreement, Dr Pavel Maslovskiy, Chief
Executive Officer, said:
"Taking 100% ownership of the TEMI license is an accretive step
for Petropavlovsk in securing a long-life asset and extending the
mine life of Albyn by a minimum of 19 years. Exercising our option
at GBP 0.179 per share under the amended agreement before 20 May
2020 and receiving the requisite shareholder approvals, will reduce
the consideration payable to US$53.5m for the remaining 25% stake
and secures a premium to the recent average share price, which is
important during the current period of significant market
volatility.
Furthermore, the ongoing re-rating of Petropavlovsk's equity
since signing the option agreement on 22 May 2019 has led to a
considerable reduction in the number of shares that will be issued
to consolidate our interest in TEMI. Securing 100% ownership of
this highly prospective asset with known reserves of 1.9Moz and
resources of 4.0Moz of largely non-refractory gold and further
exploration potential would make this a particularly low cost
acquisition for Petropavlovsk.
From the middle of this year, the Elginskoye deposit will enter
production and will replace the Albyn pit as the primary source of
feed for the Albyn plant. Given the scale of the TEMI assets,
spanning over 1,013km(2) , much of which remains underexplored
despite the presence of significant alluvial gold occurrences
within the license, there remains considerable opportunity to
extend the life of mine even further.
We also welcome Agestinia as a new shareholder, with an interest
of approximately 6.4% post completion of the acquisition".
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014.
About Petropavlovsk
With a Premium Listing on the London Stock Exchange,
Petropavlovsk (LSE: POG) is a major integrated Russian gold
producer with JORC Resources of 20.52Moz Au which include Reserves
of 8.21Moz Au.
The Company's key operating mines (Pioneer, Malomir and Albyn)
are in the Amur Region in the Russian Far East and the Company has
produced a total of c.7.6Moz of gold since operations began in
1994. Petropavlovsk has a strong track record of mine development,
expansion and asset optimisation.
The Group recently entered a new era of growth following the
successful commissioning and start-up of its flagship asset, the
Pressure Oxidation (POX) Hub at Pokrovskiy, which enables the
processing of the Company's abundant refractory reserves and
resources.
Petropavlovsk is committed to implementing international best
practices across all areas of sustainable development and is one of
the region's largest employers and contributors to the local
economy.
For More Information
Please visit www.petropavlovsk.net or contact:
Petropavlovsk PLC +44 (0) 20 7201 8900
Patrick Pittaway / Max Zaltsman / Viktoriya TeamIR@petropavlovsk.net
Kim
Peel Hunt LLP
Ross Allister / David McKeown / Alexander
Allen +44 (0) 20 7418 8900
Canaccord Genuity Limited
Henry Fitzgerald-O'Connor / James Asensio +44 (0) 20 7523 8000
Buchanan +44 (0) 20 7466 5000
Bobby Morse / Kelsey Traynor / Ariadna POG@buchanan.uk.com
Peretz
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END
MSCJAMLTMTBTMBM
(END) Dow Jones Newswires
March 25, 2020 05:14 ET (09:14 GMT)
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