Nordgold won’t sell new shares, but said the IPO would broaden its financing opportunities and help the company to retain key managers.
Bullion prices surge to a record last year, triggering a series of investments and acquisitions in the sector. The metal, however, lost later some of its gains, leading another Russian gold miner, GV Gold PJSC, to put its planned share sale on hold indefinitely in March.
Since then, prices have recovered again as investors buy the metal to hedge against the prospect of rising inflation. Gold is up about 10% since the beginning of March to $1,906 an ounce and the NYSE Arca Gold Bugs index, which tracks shares of gold miners, has climbed 29% over the same period.
“Following a record year in 2020, and with a low cost, low risk development pipeline centred on the highly prospective Gross Region in Russia, now is the right time for Nordgold to seek a premium London listing,” chief executive Nikolai Zelenski said in the statement.
London fever
Nordgold is the latest miner to seek admission in the London Stock Exchange, one of the world’s oldest markets. Canada’s Yamana Gold (TSX: YRI) (NYSE, LON: AUY) listed in the UK last year, while Endeavour Mining (TSX: EDV) will begin trading in the LSE this month.
The Russian gold miner, majority owned by billionaire Alexei Mordashov and his sons Kirill and Nikita, was previously listed in London but left in 2017.
The company hopes to be able to pay higher dividends than its peers in North America. With four mines in Russia, one in Kazakhstan, three in Burkina Faso, one in Guinea and two more mines under development, Nordgold expects to boost production by 20% over the next five years. In contrast, production at the world’s largest gold miner, Newmont (NYSE: NEM) (TSX: NGT), is set to remain about the same until 2025.
The gold producer aims to pay a minimum dividend of $400 million this year, in two installments. After that it would pay out 50% of its free cash flow, subject to its net debt remaining less than 1.5 times its earnings before interest, tax, depreciation and amortisation.
Polymetal, the largest Russian miner in London with an £8bn market capitalization, churned out 1.4 million ounces of gold last year. Upcoming Endeavour has forecast a 1.5 million ounces output for 2021.
Russian companies returned to global investors’ radar since late 2020, with IPOs slated for this year forecast to raise at least $10 billion, the highest in more than a decade, UBS said in March. Bacchus Capital Advisers is acting as financial adviser on the IPO, while Citigroup Inc. is sponsor for the offer. Citigroup, JPMorgan Chase & Co. and VTB Capital are the joint global coordinators and bookrunners for the sale.
