Polyus Gold International Ltd. (PGIL), the biggest Russian gold producer, held discussions with Chinese companies and banks about loans and the potential sale of a stake in a Siberian project, according to people with knowledge of the matter.
Polyus, which is seeking to diversify its lenders, didn’t complete any agreements during the meetings, the people said, asking not to be identified because the information isn’t public.
The gold producer assessed interest among possible Chinese partners in buying a minority stake in the Natalka project in the Magadan region of Russia’s far east, the people said. Sergey Lavrinenko, a spokesman for Polyus, declined to comment.
President Vladimir Putin is stepping up business cooperation with China as U.S. and European sanctions over the Ukraine crisis threaten to narrow access to overseas funding for Russian companies. In May, Putin completed a $400 billion deal to supply gas to China over 30 years.
“Polyus is in line with the recent Russian trend of tapping China for funds and investment, and even if there are no results yet, they may continue these talks in the future,” said Kirill Chuyko, head of equity research at BCS Financial Group in Moscow. “We also think that a direct stake in London-traded Polyus would be more interesting for Chinese investors than a share of the Natalka project.”
Polyus already counts sovereign wealth fund China Investment Corp. among its largest minority investors with a 5 percent stake. The mining company, which had net debt of about $444 million at the end of March, compared with a net cash position of $699 million a year earlier, has about $269 million of debt due this year, a June presentation showed.
Natalka is the biggest gold deposit in Russia and the third-largest globally, holding an estimated 32 million ounces of reserves. Polyus last year delayed the start of the mine with initial capacity at 5 million ounces a year to 2015 because of volatile bullion prices. Polyus estimated in 2013 that the mine would require investment of $1.8 billion.
Polyus dropped 1.8 percent to 191.25 pence in London yesterday, the biggest decline since April 15.
To contact the editors responsible for this story: John Viljoen at email@example.com Reed Landberg