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GV Gold announces intention to conduct IPO and list on Moscow ExchangeNEITHER THIS ANNOUNCEMENT NOR THE INFORMATION CONTAINED HEREIN IS FOR PUBLICATION, DISTRIBUTION OR RELEASE, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, INTO AUSTRALIA, CANADA, JAPAN OR THE UNITED STATES OR TO ANY PERSON IN ANY OF THOSE JURISDICTIONS OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE LAWS OF SUCH JURISDICTION.
GV GOLD ANNOUNCES INTENTION TO FLOAT ON MOSCOW EXCHANGEMoscow, 15 March 2021. GV Gold (Vysochaishy, PJSC), together with its subsidiaries (“GV Gold”, “Vysochaishy” or the “Company”), one of Russia’s largest and fastest-growing gold mining companies, announces its intention to conduct an initial public offering (the “IPO” or the “Offering”) of ordinary shares (the “Shares”) of the Company and to list on Moscow Exchange.
Vladislav Barshinov, GV Gold CEO, said:
“GV Gold offers a unique story of sustainable organic growth. In just 20 years since producing its first gold, the Company has become one of Russia’s largest and fastest-growing gold mining companies. Since Vysochaishy was established, we have built a transparent, flexible and efficient business capable of capitalizing on all of the growth opportunities in the two richest regions of our country for gold mining – Irkutsk Region and Republic of Sakha (Yakutia). The Company’s team of more than 3,500 professionals has repeatedly proven its ability to deliver highly complex projects and create value for shareholders.
“Today, GV Gold has an extensive resource base and high-quality operational assets. In the future we plan to continue developing the potential of our current assets, and to launch two new strategic growth projects – Krasny and Svetlovskoye. The Company has a clear strategy for growth and creating shareholder value, which will support our sustainable growth trajectory and the achievement of our medium-term goal of producing 400 thousand ounces of gold annually by 2025.
“Since the very first day we have seen the future of GV Gold as a publicly traded company. Our proposed listing on Moscow Exchange is testimony to the Company’s impressive scope and results, and of our firm conviction to continue the dynamic growth of the business. An IPO on Moscow Exchange will enable us to take our growth story to a wide range of investors and further diversify our shareholder structure.”
The Company also plans to further evolve its corporate governance structure in line with best international practices. As part of this, an Extraordinary General Meeting of Shareholders scheduled for 19 March 2021 is expected to approve the new composition of the Board of Directors, including three new independent non-executive directors – Lou Naumovski, Alexey Gnedovskiy and Sergey Popov.
Expected details of the Offering
· The Offering will include an offering of Shares by Mr. Sergey Dokuchaev, Mrs. Natalia Opaleva, Mr. Valerian Tikhonov, Mr. Sergey Vasilyev, BlackRock Global Funds and BlackRock Gold and General Fund (together, the “Selling Shareholders”).
· For the purposes of conducting the Offering, the Company will apply for admission of the Shares to trading on Moscow Exchange. The Shares are expected to be included in the Level 1 section of the List of Securities Admitted to Trading on Moscow Exchange. Prior to the Offering, there has been no public market for the Shares.
· In connection with the Offering, each of the Company, the Selling Shareholders, all other shareholders of the Company, as well as management members who are participants in the Long-Term Incentive Programme (LTIP) are expected to agree to customary lock-up arrangements restricting the disposal of the Company’s securities for a limited period of time following completion of the Offering.
· The Company will not sell any Shares in the Offering and will not receive any proceeds from the Offering.
· The Offering comprises an offering of the Shares (i) in the Russian Federation, (ii) otherwise outside the United States in reliance on Regulation S (“Regulation S”, and such Shares, the “Regulation S Offering”) under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and (iii) within the United States to certain qualified institutional buyers (“QIBs”) as defined in, and in reliance on, Rule 144A (“Rule 144A”, and such Shares, the “Rule 144A Offering”) under the Securities Act.
· Goldman Sachs International, SberCIB, UBS Investment Bank and VTB Capital are acting as Joint Global Coordinators and Joint Bookrunners in connection with the Offering. Raiffeisen Bank International and Sova Capital are acting as Co-Bookrunners.
· Any additional details in relation to the Offer will be disclosed in the Prospectus.
GV Gold – overview
· GV Gold is a leading mid-tier Russian gold producer with a high-quality asset base, strong growth outlook and attractive dividend proposition.
· Founded in 1998, the Company has more than 20 years of development history across two production clusters located in Russia's traditional gold mining provinces with established infrastructure (Irkutsk Region and Republic of Yakutia).
· The Company’s reserves base comprises proved and probable (“P&P”) JORC reserves of 5.3 Moz with average grade of 1.2 g/t and measured, indicated and inferred (“MI&I”) resources of 10.8 Moz; GV Gold’s P&P life of mine based on 2020 production stands at 19 years.
· GV Gold has an established track record of successful project delivery with almost twofold production growth during the last 5 years – in 2017, the Company launched the transformational Ugakhan and Taryn projects.
· In 2020, the Company achieved production of 272 koz, having delivered a 2015-2020 CAGR of 8.5%, and is set to continue delivering industry leading growth, with expected production CAGR of over 9% during 2020-2025.
· The Company is positioned in the second quartile of the global cost curve with all-in sustaining costs of US$822/oz as of 2020YE.
· Adjusted EBITDA amounted to US$248m in 2020, with Adjusted EBITDA margin of 53%; 2020 year-end leverage stood at 0.8x Net Debt/Adjusted EBITDA.
· The Company has a sector leading dividend policy which stipulates payment of 40% of EBITDA subject to leverage being not greater than 1.5x.
· Core shareholders are the founders Mr. Sergey Dokuchaev, Mrs. Natalia Opaleva, Mr. Valerian Tikhonov (61.2% in total) as well as Blackrock (18.0%).
GV Gold – investment highlights
• Leading growth-focused gold producer. The Company has historically outperformed the industry by production growth, having delivered a CAGR of 8.5% during 2015-2020. Going forward, GV Gold is expected to deliver a production CAGR of over 9% during 2020-2025, significantly in excess of both Russian peers and international gold producers (as per consensus estimates). The Company is also targeting production growth up to 290-300 koz in 2021.
• Diversified high-quality portfolio. The Company’s assets are strategically located in two gold-rich regions of Russia with well-developed infrastructure, large resource base and vast exploration opportunities. The Company efficiently manages a diversified portfolio of mature, growth and future development projects with total P&P reserves of 5.3 Moz at 1.2 g/t and M,I&I resources of 10.8 Moz. GV Gold has one of the largest ore processing capacities in Russia of 10.6 Mtpa across five mills, which fully meets its needs and facilitates capital light growth leveraging the existing assets base. All assets of the Company are open-pit operations, which results in fewer risks and higher economic efficiency compared to underground mines.
• Track record of project delivery. The Company has successfully developed its assets for more than 20 years and has a strong track record of organic growth and project delivery from discovery to mining and production stage. The Company has consistently enhanced the quality and scale of its operational platform with multi-fold increase in production volumes, processing capacity and reserves base. In 2017, GV Gold successfully launched its transformational projects Ugakhan and Taryn which are on track to become Tier-1 assets. This expertise will be fully leveraged for the new projects Krasny and Svetlovskoye. The Company has achieved industry-leading cost of booking exploration-derived reserves of US$21.3/oz in 2014-2020, which is well below the average for Russian peers and international gold producers.
• Clear growth path. The Company envisages three key production growth factors to drive near term performance on track to 400+ koz production target: (1) pipeline of brownfield projects (including at Ugakhan, Taryn, and Marakan) to expand the processing capacity and production volumes; (2) new growth projects Krasny and Svetlovskoye; and (3) conversion of resources into reserves, extending life-of-mine of the core projects, as well as efficient exploration in its home regions, which continue to be some of the least densely explored regions in Russia with strong potential for discovering substantial additional reserves.
• Superior shareholder returns. The Company has adhered to a conservative capital allocation policy ensuring a balance between investments to support growth, attractive dividend payouts and conservative leverage. The Company has a track record of paying dividends of more than 10 years and has historically delivered a payout as a percentage of EBITDA in excess of levels of other Russian gold producers. GV Gold has one of the most attractive dividend propositions in the industry: a quarterly payout of 40% of EBITDA if net debt/EBITDA is below or equal to 1.5x, and 30% of EBITDA if net debt/EBITDA is below or equal to 2.5x. In July 2021, the Company plans to pay dividends based on the results of Q4 2020 totaling US$37 million2, or 46% of EBITDA for Q4 2020. Total dividends for 2020 will amount to US$99 million3, or 40% of EBITDA for 2020. Also, in July 2021, the Company plans to pay dividends based on the results of Q1 2021 in the amount of 40% of EBITDA for Q1 2021 if net debt/EBITDA is below or equal to 1.5x. The record date for Q4 2020 and Q1 2021 dividend payments will be set for July 2021. Together with an attractive dividend policy, the Company believes that its fast-paced organic growth could further support industry leading shareholder returns.
• Adherence to ESG best practices. The Company is committed to maintaining best practices in ESG. GV Gold has a track record of transparent disclosure including IFRS since 2003 and regular independent audit of reserves and resources in compliance with JORC standards. Following upcoming corporate approvals, the Company expects to have 50% of the Board represented by independent members with extensive experience in the metals and mining sector and finance. Two committees of the Board of Directors (the Audit Committee and the Staffing and Remuneration Committee) are expected to be chaired by independent non-executive directors. The Company is working on establishing the Strategy Committee, which, among other things, is expected to oversee the sustainable development matters. The Company has industry leading ESG performance metrics, including low greenhouse gas (GHG) emissions and efficient use of water and energy. The Company is committed to operating sustainably and in a socially responsible manner, targets consistent improvement of key environmental and health and safety performance metrics, and has a variety of initiatives in place on this front, including planned application for international ESG ratings.
GV Gold - strategy to create a premier Russian gold story
• Pursue fast-paced organic growth. GV Gold demonstrated robust organic production growth over 2015-2020 at 8.5% per annum, and going forward aims to exceed this rate. The medium-term target production level is 400 koz which the Company expects to achieve by 2025 via a balanced mix of sources of growth, including brownfield projects, greenfield projects and exploration at existing assets.
• Enhance resource base. GV Gold has 34 licenses in its regions of presence which are characterized by vast exploration potential. The Company has a leading track record of efficient exploration which it believes provides a competitive advantage for expansion of reserves and resources. The Company has a targeted average cost of US$25 to US$30 per ounce of newly exploration-derived reserves, which is in line with historical performance and below industry average, as well as a target annual exploration expense at 4-5% of revenue. The Company's target replacement ratio is over 100%, which should support its fast and efficient organic growth.
• Continuously improve operational excellence. GV Gold believes it has developed a unique project delivery expertise following launch of Ugakhan and Taryn which were delivered on time and on budget – the Company expects to utilise this expertise for future projects, including Krasny and Svetlovskoye. From operational performance standpoint, the Company has a formalised efficiency improvement programme aimed at adopting cost-saving and revenue enhancing initiatives at existing assets which should support the Company in achieving its goal of delivering superior growth.
• Commitment to superior shareholder returns and industry leading dividend payout. The Company's target is to maintain one of the most attractive dividend propositions in the industry – under its dividend policy, the Company is expected to pay dividends on a quarterly basis of 40% of EBITDA assuming a net debt/EBITDA ratio below or equal to 1.5x, and 30% of EBITDA if net debt/EBITDA ratio is below or equal to 2.5x. GV Gold has maintained conservative leverage profile. Together with an attractive dividend payout, the Company believes that its fast-paced organic growth could further support industry leading shareholder returns.
• Maintain prudent financial policy. The Company has maintained a robust balance sheet and conservative leverage through the cycle, and expects to follow these practices going forward – the medium-term target net debt/EBITDA ratio is below 1.5x. The Company aims to retain a comfortable debt repayment profile, strong liquidity position and access to a broad set of funding sources. The Company exercises strict control over operational and capital costs, which further contributes to its financial stability and efficiency.
• High corporate governance and occupational health and safety standards. The Company is committed to maintaining best practices in corporate governance and transparency, targeting consistent improvement of key environmental and health and safety performance metrics. Among other measures, GV Gold launched a pilot project using artificial intelligence with cameras to ensure workers are wearing their safety equipment, which is set to create a new safety benchmark in the industry. The Company plans to continue enhancing its ESG practices (including disclosure related to these matters through, for instance, preparation of annual sustainability reports, as well expanding one of the Board of Directors committees’ competences to ESG matters, applying for the leading ESG ratings, etc).
• Potential for even higher growth from value accretive M&A. Historically the Company has been fully focused on organic growth. However, following the IPO, M&A may allow GV Gold to pursue even higher future growth rates. At the same time, the Company expects that focus will remain on prudent financial policy and superior shareholder returns, and M&A could be considered only in case of attractive undervalued opportunities.
Further information about the Independent Directors
Mr. Sergey Popov is expected to be confirmed as an Independent Director of GV Gold at the Extraordinary General Meeting of Shareholders scheduled for 19 March 2021. From 2012 to 2020, Mr. Sergey Popov was a member of the Board of Directors, a member of the Board of Directors at the Strategy and Investments Committee of the Company (as a part of the Board of Directors membership), the Chairman of the Board of Directors at Audit Committee of the Company (as a part of the Board of Directors membership). Since 2018 Mr. Popov has been Director at LLC Slavkaliy. From 2012 to 2018, he was the Deputy Chairman for Finance and a member of the Board of Directors at LLC Slavkaliy. Prior to that, in 2011, Mr. Popov was a managing director at CJSC Troika Dialog Investment Company. Mr. Popov graduated from the Lomonosov Moscow State University in 1980 with a degree in Economy.
Mr. Lou Naumovski is expected to be confirmed as an Independent Director of GV Gold at the Extraordinary General Meeting of Shareholders scheduled for 19 March 2021. From January 2017, Mr. Naumovski has been a non-executive director of Trans-Siberian Gold PLC, member of the Board of Directors of Canadian Executive Services Organisation, the adviser in Seequent Limited, the adviser to BRP Europe Nv. He also has been an adviser of the board in Canada Eurasia Russia Business Association (CERBA) since June 2011 and a member of the board of experts since 2017. From June 2018 to January 2020, he was an adviser to McCain Foods Limited. Since March 2019, he was an adviser of the World Gold Council. Mr. Naumovski also was a non-executive director of Amur Minerals Corporation from 2017 to 2020, a non-executive director of Euromax Resources from 2017 to 2019 and an adviser of Kinross Gold Corporation from January 2017 to December 2017. From September 2007 to January 2017, he was a vice president and then the general director of Kinross Gold Corporation (Moscow office). From November 2005 to August 2007, he was a head of business strategy and planning of Visa International Service Association (Central Europe, Middle East and Africa). Mr. Naumovski also held various non-executive positions in a number of other companies. Lou Naumovski graduated from the University of Toronto with a degree in Political Science in 1978 and from the Carleton University with a degree in International Affairs in 1980. He also has MBA from the Georgia Institute of Technology in 1985 and completed management courses in the London Business School and the Schulich School of Business.
Mr. Alexey Gnedovsky is expected to be confirmed as an Independent Director of GV Gold at the Extraordinary General Meeting of Shareholders scheduled for 19 March 2021. From 1995, Mr. Gnedovsky has been a co-owner and the CEO of LLC IC Veles Capital. He also holds a number of key management positions in LLC Veles Management, LLC Veles Trust, Veles International Limited. Since 2019, Mr. Gnedovsky has been a member of the Board of Directors of the National Association of Securities Market Participants. He graduated from the Lomonosov Moscow State University with a degree in Economic Cybernetics in 1991. In 2018, he completed an MBA programme of the Moscow School of Management Skolkovo.
Key operating and financial results
|kt||Year ended 31 December|
Gold production (koz)5
|US$ mln||Year ended 31 December|
|Net Debt / EBITDA, x||1,6x||0,8x|
|Dividends as % of EBITDA||30%||
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