Polymetal International PLC agreed to sell the noncore North Kaluga polymetallic deposit in Russia's Sverdlovsk region to North Kaluga Mining Ltd. for US$27 million in cash and debt assumption plus royalty.
Consideration comprises a US$10.7 million upfront cash payment, a 5% net smelter royalty and a 50% royalty on excess revenue, or the difference of actual revenue minus potential revenue, which is calculated based on actual grades and metal prices of US$5,500 per tonne of copper, US$2,310/t of zinc, US$1,650 per ounce of gold and US$18.70/oz of silver.
The fair value of the royalties is estimated at US$13.5 million, at a 15% discount rate, as of the date of the agreement. Both the NSR and the excess revenue royalty are capped at US$300 million.
Polymetal said May 11 that the new owner will also repay all debt owed by North Kaluga's license holder to Polymetal as of the deal's close. The debt stands at US$2.8 million.
The company said North Kaluga was classified as a noncore asset due to its small size, short mine life and lack of spare capacity at the future flotation circuit at the Voro operation.
VTB Capital recently upgraded Polymetal's stock ratings to "buy" from "hold," citing the "powerful combination" of unprecedented global monetary easing and a much-weakened Russian ruble.