Polymetal completes sale of Dolinnoye stake, terminates deferred Kyzyl consideration

Polymetal shareholders were met with a busy news day from the firm on Friday, as it completed the sale of its interest in the Dolinnoye gold property, and confirmed the early termination of the deferred consideration it owed on its 2014 Kyzyl acquisition.

In its first announcement, the FTSE 250 company confirmed that the sale of its 50% interest in the Dolinnoye gold property to JSC AK Altynalmas had completed.

As it on 14 March, Polymetal and Dolphinflip entered into a binding agreement with Altynalmas for the transfer of their respective 50% interests in the Dolinnoye gold property for a total cash consideration of $33.5m, subject to working capital adjustments.

With the receipt of all regulatory approvals, the transaction had now successfully completed and 100% interest in the Dolinnoye gold property had been transferred to Altynalmas.

Polymetal said the net consideration it received for its 50% stake, including working capital adjustments before tax, amounted to $16.7m in cash.

In its second announcement, the company reported the early termination of the deferred conditional consideration related to the Kyzyl acquisition for $10m in Polymetal shares.

It said the initial Kyzyl acquisition agreement, announced on 22 May 2014, comprised of an immediate consideration of $618.5m in cash and Polymetal shares, and a deferred conditional cash consideration capped at $500m.

The additional consideration was dependent on the relative dynamics of the gold price and the price of Polymetal's shares over a period of up to seven years.

Under the termination agreement, Sky Tower - the current rights holder for the additional consideration - would receive $10m through the issue of 1,015,113 new Polymetal shares in return for the termination of the additional consideration, effective immediately.

The number of consideration shares to be issued was determined by dividing $10m by Polymetal's closing share price on 2 May, the board said.

As at 31 December, the fair value of the contingent consideration liability was estimated at $12m using the Monte-Carlo model.

“We have taken the opportunity to lock in the deferred consideration at an attractive price for shareholders,” said Polymetal CEO Vitaly Nesis.

“The elimination of the liability is an important step in further de-risking the company's cash flow.”