Petropavlovsk PLC publication of circular

Fecha : 27/03/2020 @ 10:44
Fuente : UK Regulatory (RNS & others)
Emisora : Petropavlovsk Plc (POG)
Cotización : 26.05  0.6 (2.36%) @ 10:35
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Petropavlovsk PLC publication of circular

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TIDMPOG

RNS Number : 9262H

Petropavlovsk PLC

27 March 2020

27 March 2020

Petropavlovsk PLC

("Petropavlovsk", the "Group", or the "Company")

PROPOSED EXERCISE OF AN OPTION TO PURCHASE 25 PERCENT OF TEMI LLC

PUBLICATION OF CIRCULAR

The Board of Petropavlovsk has today publish ed a circular to shareholders (the " Circular ") in order to convene a general meeting of the Company to be held at 8:30 am BST on 16 April 2020 (the " General Meeting ") in connection with the proposed exercise of an option to acquire a 25 per cent. interest in TEMI LLC (" TEMI "), a 75 per cent. owned subsidiary of Petropavlovsk which in turn holds licences for the Elginskoye Ore Field and Afanasievskaya Prospective Ore Area (the " TEMI Licences ") (the " Option Exercise "), and granting authority to in respect of the allotment of New Ordinary Shares.

The Option Exercise will constitute a related party transaction for the purposes of the Listing Rules of the Financial Conduct Authority (the " Related Party Transaction "). Consequently, the Option Exercise is subject to, and conditional upon, the approval of Ordinary Shareholders at the General Meeting.

Background to and reasons for the 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 (the " 23 September Announcement "), the Company 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 per cent. interest in TEMI, a 75 per cent. owned subsidiary of Petropavlovsk. The Option grants the Company a discretionary right to purchase Agestinia's shares in TEMI (the " Option "). The licences at the Elginskoye and Unglichikanskoye deposits hold a substantial amount of non-refractory reserves and resources which are suitable for processing at the Company's resin-in-pulp plant at Albyn (the " Albyn Plant ").

The option price was US$13 million (the " Option Price "), US$7.0 million of which was paid by the Company to Agestinia in cash on 29 May 2019 and the remaining US$6.0 million was paid in cash on 12 November 2019. As announced by the Company on 5 December 2019, following Agestinia's confirmation that the Company has satisfied its obligations in respect of the Option Agreement and approval from the Russian Federal Antimonopoly Authority that the Company can acquire the Option Shares, the Company now has the option to acquire the Option Shares (the " Option Exercise ").

The exercise price of the Option is US$60.0 million (the " Exercise Price ") or US$53.5 million if the Company exercises the Option on or before 20 May 2020 (the " Reduced Exercise Price "). The Company intends to exercise the Option prior to 20 May 2020 and therefore pay the Reduced Exercise Price. However, the Company retains the discretion to exercise the Option after this date at the Exercise Price.

If Shareholders approve the Option Exercise and the Company exercises the Option, the Company will have complete control over TEMI and the TEMI Licences. This will enable the Company to develop the TEMI Licences or pursue other opportunities in respect of these assets as the Board considers in the best interests of the Company.

Pursuant to a deed of amendment executed on 25 March 2020 and as outlined in the Company's announcement on 25 March 2020, the Exercise Price or the Reduced Exercise Price (as applicable) may be paid in whole or in part in the Company's ordinary share capital . Upon notarisation of the amendment, if the Company exercises the Option and elects to satisfy the Reduced Exercise Price in full in ordinary shares, 226,323,400 fully paid shares in the Company (being the New Ordinary Shares) will be issued and allotted to Agestinia in full satisfaction of the payment of the Reduced Exercise Price . Under the Option, the Company may, at its election, satisfy the Exercise Price, or Reduced Exercise Price, as applicable, in cash or in ordinary shares. Any cash consideration would be likely to be funded using balance sheet cash, new debt facilities or an equity placing. The C ompany intends to exercise the allotment a uthority in respect of the allotment of the New Ordinary Shares and only where the issue price of a New Ordinary Share is equal to or greater than GBP0.179 per New Ordinary Share .

Shareholders are being asked to vote in relation to the Option Exercise as it is with a related party under the Listing Rules. As Agestinia is a substantial shareholder (owning 25 per cent. of the shares) in TEMI, a subsidiary undertaking of the Company, it is considered a related party of the Company for the purpose of the Listing Rules and the Option Exercise is therefore considered a Related Party Transaction. Agestinia is not a related party for any other reason.

The TEMI Licences are of strategic importance to the future operations of the Albyn Plant. The Albyn Plant is expected to become one of the core producing assets of the Group contributing at least 20 percent to the Group's overall production output during the next five years. The ongoing exploration works at the TEMI Licences area may yield a further increase in Reserves & Resources of the asset, which may, in turn, increase the value of the TEMI Licences to the Group. The Option Exercise will ensure that the TEMI Licences are wholly within the control of the Company. In the event that Shareholder approval is not obtained and the Option is not exercised, Agestinia may sell its 25 percent shareholding in TEMI to a third party, an event that the Company considers to be possible . This could indirectly impact the Company's ability to operate the TEMI Licences in accordance with its strategic plan as such third party acquiring a minority interest in TEMI would obtain certain rights as a minority shareholder of TEMI, such as the ability to block share capital increases or request an independent audit of TEMI. This may affect TEMI's ability to raise further capital if required to fund the exploration works under the TEMI Licences and also may prove to be time consuming for management as the Company would have to consult with such third party on matters relating to TEMI, who would not be as familiar with the TEMI Licences as Agestinia.

Information on TEMI and the TEMI Licences

As outlined above, TEMI holds the TEMI Licences. Although there is currently no production occurring on the licences at the Elginskoye and Unglichikanskoye deposits, they hold a substantial amount of non-refractory reserves and resources which are suitable for processing at the Company's Albyn Plant.

As stated in the 23 September Announcement, the TEMI Licences cover an area of 1,013km(2) where extensive alluvial gold deposits have historically been exploited. As at 31 December 2018, TEMI's JORC Measured, Indicated and Inferred Mineral Resources amounted to 4.00Moz of gold contained in hard rock, including 1.95Moz of JORC Proved and Probable Ore Reserves, of which 1.53Moz are classed as non-refractory. The Company expects production to commence at Elginskoye in 2020 to coincide with the depletion of ore currently mined from the main pit at Albyn. Ore mined at Elginskoye will be transported by truck along a c.30km all-season road to the existing processing facilities at Albyn. The Company announced in its 2019 half year report that an in-fill drilling programme has been completed which focussed on the phase 1 pit to increase the accuracy of near and mid-term mining plans. Waste stripping followed by initial ore mining commenced in February 2020. The Company anticipates that gold production from Elginskoye should reach approximately 30koz in 2020, benefitting from the shallow nature of the orebody and low stripping ratio. Production is expected to increase to approximately 142koz in 2021.

In the longer term, Elginskoye is considered highly prospective with recent drilling on the periphery of the known JORC resource model hitting attractive intersections. Unglichikanskoye accounts for 0.58Moz of the total TEMI JORC Resources and 0.46Moz of total non-refractory reserves and is also considered highly prospective, comprising of a series of sub-parallel, relatively narrow, steeply dipping zones, which are proven over a strike length in excess of 5km. Unglichikanskoye is also amenable to development and the Company expects that it will be in production from 2028.

In addition, there are number of promising prospects of which Afanasevskoye, Ulgen, Yasnoye and Leniskoye are the most significant.

As at 30 June 2019, TEMI's gross assets amounted to US$ 77.1 million and the profits before tax (loss) for the year ended 31 December 2018 was (US$ 0.45 million) adjusted for foreign exchange gain on inter-company loans.

General Meeting

A notice convening the General Meeting to vote on the Resolutions to approve the Option Exercise, whether at the Exercise Price or the Reduced Exercise Price, and grant the Directors authority to allot shares to be held at 8:30am BST on 16 April 2020 at Apartment 1, Hill House, Portsmouth Road, Esher, Surrey KT10 9LN is set out in the Circular.

Recommendation and Voting Intentions

The Board, having been so advised by the Sponsor, considers the Option Exercise , whether at the Exercise Price or the Reduced Exercise Price, to be fair and reasonable as far as the Shareholders are concerned. In providing advice to the Board, the Sponsor has taken into account the Directors' commercial assessment of the Option Exercise.

The Board also considers that the passing of each of the Resolutions is in the best interests of the Company and its Shareholders as a whole. Accordingly, the Board unanimously recommends that Shareholders vote in favour of the Resolutions and the Directors that hold Ordinary Shares intend to vote in favour of the Resolutions at the General Meeting in respect of their own shares to which they are legally and beneficially entitled.

Agestinia is not a shareholder of the Company and will therefore not vote on the Resolutions. Agestinia has taken all reasonable steps to ensure that its associates will not vote on the Resolutions.

Publication of Circular

The Company announces that the shareholder circular (the "Circular") relating to the proposed Option Exercise has been approved by the Financial Conduct Authority. Copies of the Circular are being posted to Petropavlovsk's shareholders. The Option Exercise is subject to the approval of Petropavlovsk's shareholders, and accordingly, the Circular contains a notice convening a general meeting of Petropavlovsk's shareholders, which is to be held at 8.30 am BST on 16 April 2020 at Apartment 1, Hill House, Portsmouth Road, Esher, Surrey KT10 9LN . Shareholders may appoint a proxy by completing the form of proxy enclosed with the Circular. Alternatively, proxy appointments may be completed electronically. The procedures and timings for the appointment of a proxy are set out in the notes to the notice of the general meeting at the back of the Circular.

COVID-19

The board takes its responsibility to safeguard the health of its shareholders, stakeholders and employees very seriously and so the following measures will be put in place for the General Meeting in response to the COVID-19 pandemic and the current measures being implemented by the Government in the United Kingdom, which may continue until after the date of the General Meeting.

The formal business of the General Meeting will only be to consider and vote upon the two resolutions set out in the notice of meeting. The holding of the meeting will be kept under review in line with Public Health England guidance. However, based on current measures implemented by the Government in the United Kingdom attendance at the meeting will be limited to two persons, which will be sufficient to make it a quorate meeting. The meeting will not be attended by other Directors of the Company and other officers and professional advisers will not be in attendance. Shareholders are actively discouraged from attending the General Meeting given the current measures being implemented by the Government in the United Kingdom. The Company is taking these precautionary measures to safeguard its shareholders', stakeholders' and employees' health and make the General Meeting as safe and efficient as possible.

Shareholders wishing to vote on any of the matters of business are urged to do so through completion of a proxy form which can be completed and submitted in accordance with the instructions thereon. It is emphasised that any proxy forms being returned via a postal service should be submitted as soon as possible to allow for any delays to or suspensions of postal services in the United Kingdom as a result of measures being implemented by the Government of the United Kingdom. It is strongly recommended that the Chairman of the meeting is appointed as proxy as it is unlikely that any other persons will be admitted to the meeting based on the current measures being implemented by the Government in the United Kingdom. The completion and return of a form of proxy will not preclude a shareholder from attending in person at the meeting and voting should the shareholder wish to do so, subject to the measures implemented by the Government in the United Kingdom at the time in force and any applicable Public Health Guidance.

In line with corporate governance best practice, the Company's practice at recent meetings and in order that any proxy votes of those shareholders who choose to not attend and vote in person are fully reflected in the voting on the resolutions, the chair of the meeting will direct that voting on all resolutions set out in the notice of meeting will take place by way of a poll. However, it is emphasised that given that attendance at the meeting will be limited in accordance with measures being implemented by the Government of the United Kingdom, shareholders should consider whether their attendance is necessary. Under the Company's Articles, votes on a poll may be given personally, by a corporate representative or by proxy. Every shareholder who is present in person or by a corporate representative or by proxy shall have one vote for each share held by them.

In accordance with Public Health England guidance, a shareholder still wishing to attend the meeting in person should not do so if they or someone living in the same household feels unwell or has been in contact with anyone who has the virus or who feels unwell. In accordance with the Company's Articles, the board will put in place security arrangements and to gain entrance to the meeting, any shareholder or their proxy will be required to sign a certificate to confirm that this is the case. In addition, based on the measures currently being implemented by the Government of the United Kingdom it is likely that only one person, other than the Chairman of the meeting will be admitted to the meeting, These requirements and confirmations are subject to change to reflect measures implemented by the Government of the United Kingdom and Public Health England guidance at the time of the meeting.

Petropavlovsk will continue to monitor the impact of COVID-19. Any relevant updates regarding the General Meeting will be available on the Company's website.

Announcements will be made should the measures being implemented by the United Kingdom Government or Public Health England guidance prevent the holding of the meeting in accordance with the notice set out at the end of this document.

A copy of the Circular will be submitted to the National Storage Mechanism and will be available for inspection at www.morningstar.co.uk/uk/NSM. In addition, a copy of the Circular will shortly be available on the Company's website at www.petropavlovsk.net/ .

Expected Timetable

 
 Event                                            Time and/or Date 
--------------------------------------------    ------------------ 
 Publication of Circular and notice                  27 March 2020 
  of General Meeting 
 Latest time and date for receipt of 
  Forms of Proxy or CREST Proxy Instructions      8:30 a.m. BST on 
  for the General Meeting                            14 April 2020 
 General Meeting                                  8:30 a.m. BST on 
                                                    1 6 April 2020 
 

Enquiries

   For more information, please visit www.petropavlovsk.net   or contact: 
 
 Petropavlovsk PLC                       Buchanan 
  Patrick Pittaway                        Bobby Morse 
  Max Zaltsman                            Kelsey Traynor 
  +44 (0) 20 7201 8900                    +44 (0) 207 466 5000 
  TeamIR@petropavlovsk.net                POG@buchanan.uk.com 
 
  Peel Hunt LLP (Sponsor and Corporate 
  Broker) 
  Ross Allister 
  David McKeown 
  +44 (0) 20 7418 8900 
 

Important Notices

This announcement has been issued by and is the sole responsibility of the Company. This announcement is not a circular or a prospectus. The information contained in this announcement is for background purposes only and does not purport to be full or complete. The information in this announcement is subject to change. No representation or warranty, express or implied, is or will be made by, or in relation to, and no responsibility or liability is or will be accepted by any adviser to the Company or by any of their affiliates or agents as to or in relation to the accuracy or completeness of this announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any responsibility or liability therefore is expressly disclaimed.

This announcement is for information purposes only and is not intended to and does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of an offer to purchase, subscribe for or otherwise acquire, any securities in any jurisdiction. Overseas Shareholders may be affected by the laws of other jurisdictions in relation to the distribution of this announcement. Persons who are not resident in the United Kingdom and into whose possession this document comes should inform themselves about and observe any applicable restrictions and legal, exchange control or regulatory requirements in relation to the transaction and the distribution of this document. Any failure to comply with such restrictions or requirements may constitute a violation of the securities laws of any such jurisdiction.

Peel Hunt LLP ("Peel Hunt"), which is authorised by the Financial Conduct Authority (the "FCA"), is acting for the Company and for no one else in connection with the transaction, the content of this announcement, publication of the Circular and other matters described in this announcement and will not regard any other person as a client and will not be responsible to anyone other than the Company for providing the protections afforded to their respective clients, nor for providing advice in connection with the transaction, the content of this announcement publication of the Circular or any other matter, transaction or arrangement referred to in this announcement.

Save for the responsibilities and liabilities, if any, of Peel Hunt under the Financial Services and Markets Act 2000, as amended, or the regulatory regime established thereunder, Peel Hunt assumes no responsibility whatsoever and makes no representations or warranties, express or implied, in relation to the contents of this announcement, including its accuracy, completeness or verification or for any other statement made or purported to be made by the Company, or on the Company's behalf, or by Peel Hunt or on Peel Hunt's behalf and nothing contained in this announcement is, or shall be, relied on as a promise or representation in this respect, whether as to the past or the future, in connection with the Company or the transaction. Peel Hunt disclaims to the fullest extent permitted by law all and any responsibility and liability whether arising in tort, contract or otherwise which it might otherwise be found to have in respect of this announcement or any such statement.

No person has been authorised to give any information or to make any representations other than those contained in this announcement and, when published, the Circular and, if given or made, such information or representations must not be relied on as having been authorised by the Company or Peel Hunt. Subject to the Listing Rules, the Prospectus Rules and the Disclosure Guidance and Transparency Rules of the FCA, the issue of this announcement shall not, in any circumstances, create any implication that there has been no change in the affairs of the Company since the date of this announcement or that the information in it is correct as at any subsequent date.

This announcement contains certain forecasts, projections and other forward-looking statements (i.e., all statements other than statements of historical fact) in relation to, or in respect of the financial condition, operations or businesses of the Group and/or Petropavlovsk. Statements containing the words "expect", "anticipate", "intends", "plan", "estimate", "aim", "forecast", "project" and similar expressions (or their negative) identify certain of these forward-looking statements. Any such statements involve risk and uncertainty because they relate to future events and circumstances and are based on current assumptions and depend on circumstances that may or may not occur in the future and may cause the actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. There are many factors that could cause actual results or developments to differ materially from those expressed or implied by any such forward looking statements, including, but not limited to, matters of a political, economic, business, competitive or reputational nature. Past performance should not be taken as an indication or guarantee of future results, and no representation or warranty, express or implied, is made regarding future performance. No statement in this announcement should be construed as a profit estimate or profit forecast. Neither the Company nor any other person undertakes any obligation to update or revise any forward looking statement to reflect any change in circumstances or expectations.

Capitalised terms used in this Important Notices section and not otherwise defined in this announcement shall be ascribed the meaning given thereto in the Circular.

DEFINITIONS

The following definitions apply throughout this Announcement unless the context otherwise requires:

 
 Agestinia                   Agestinia Trading Ltd, a company 
                              registered in accordance with the 
                              laws of the Republic of Cyprus with 
                              registration number HE 219424 whose 
                              registered office is at 40 Kimonos, 
                              3095, Limassol, Cyprus 
 Board                       the board of Directors of the Company 
 FCA                         the UK Financial Conduct Authority 
 FSMA                        the Financial Services and Markets 
                              Act 2000 
 General Meeting             the general meeting of the Company 
                              to be held at Apartment 1, Hill 
                              House, Portsmouth Road, Esher, Surrey 
                              KT10 9LN at 8:30 am BST on 16 April 
                              2020 (and any adjournment thereof) 
                              for the purposes of considering 
                              and, if thought fit, approving the 
                              Resolutions 
 Listing Rules               the listing rules made by the FCA 
                              under section 73A of FSMA 
 London Stock Exchange       the London Stock Exchange Group 
                              plc 
 New Ordinary Shares         the new Ordinary Shares to be issued 
                              to Agestinia in fulfilment of the 
                              payment of the Exercise Price or 
                              Reduced Exercise Price (as applicable) 
 Notice of General Meeting   the notice of the General Meeting 
  or Notice                   contained in the Circular 
 Ordinary Shares             ordinary shares of GBP0.01 each 
                              in the capital of the Company 
 Related Party Transaction   a related party transaction as defined 
                              in Listing Rule 11.1.5 being the 
                              Option Exercise 
 Resolutions                 the ordinary resolutions proposed 
                              at the General Meeting for Shareholder 
                              approval in respect of the proposed 
                              Option Exercise , whether at the 
                              Exercise Price or the Reduced Exercise 
                              Price , and allotment of the New 
                              Ordinary Shares (and set out in 
                              the Notice of General Meeting) 
 Sponsor or Peel Hunt        Peel Hunt LLP a limited liability 
                              partnership incorporated in England 
                              and Wales with registered number 
                              OC357088, whose registered office 
                              is Moor House, 120 London Wall, 
                              London, United Kingdom, EC2Y 5ET 
 

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.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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