Polyus Gold is hoping investors will look beyond geopolitical tensions with Russia and back its ambitious expansion plans, after staging its first capital markets day in the City.
The company, which raised $400m (£285m) when it relisted in London in 2017 after two years away, is spending $850m on extending its four mines in the far east of Russia this year and is targeting the construction of a vast new mine called Sukhoi Log by 2025.
It also announced plans to diversify into production of antimony, a mineral used to make materials flame retardant, which is a by-product of gold.
Polyus is Russia’s largest gold producer and believes its expansion plans mean it could become the fourth largest globally by 2020.
“Geopolitical tensions – be they in Russia or trade wars or North Korea – are not good for business,” Polyus chairman Edward Dowling told The Telegraph. “But we have to make sure our story is heard. We’re not involved with the Russian government. We’re not sanctioned and no one we work with is sanctioned.”
UK tensions with Russia have risen in recent weeks following the alleged poisoning of a former Russian spy and his daughter in Salisbury and Prime Minister Theresa May’s threat of further sanctions on Russian companies and individuals.
Mr Dowling admitted Polyus traded at a discount to its peers in the gold sector with older, lower-grade mines but added that “London investors understand Russia”.
Polyus is 83pc owned by a company controlled by the Kerimov family. Under Russian law, producers of strategic minerals – including gold – must be at least 51pc owned by Russians. The remaining 17pc of the company’s shares are traded on the Moscow and London stock exchanges.
A deal to sell a 10pc stake to Chinese conglomerate Fosun fell through earlier this year after the Chinese government imposed tighter regulations on foreign investments. Mr Dowling said this block of shares could be released to the market “at the right time”, adding that a free float of around 30pc would be “ideal”.
Separately Glencore has agreed to buy two coal mines from Rio Tinto in Queensland, Australia for $1.7bn (£1.2bn). The deal underlines the diverging strategies of the two FTSE 100 miners, with the former going against the grain in its keenness to buy coal mines and the latter determined to exit the commodity. The agreement will give Glencore, already the world’s biggest exporter of thermal coal, a bigger stake in metallurgical coal, used in steelmaking. The move will also fuel expectations that Rio will return the proceeds to shareholders, as it has done in other recent divestments.