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GV Gold announces intention to conduct IPO and list on Moscow Exchange

NEITHER 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 EXCHANGE

Moscow, 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[1] 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[4] 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    
     2019      2020
        Ore mined       11,341      8,665
        Ore processed      9,986      10,500
        Gold production (koz)5
     260      272
     
      US$ mln         Year ended 31 December   
     2019      2020
         Revenue      335      471
         Adj. EBITDA      120      248
         Net Profit      72      137
         Net Debt      194      191
         Net Debt / EBITDA, x      1,6x      0,8x
         TCC, USD/oz      723      694
         AISC, USD/oz6
     936      822
        Capex      100      109
        Dividends      36      994
        Dividends as % of EBITDA      30%      40%7


Contacts

Investor Relations
Press Office
Elena Romanova

Investor Relations Director

+ 7 495 780 4995


romanova.ev@gvgold.ru

Tatiana Demyanova

Deputy CEO for Public Relations and Corporate Communications 

Director of the GV Gold’s Moscow Representative Office

+ 7 495 780 4995

dtv@gvgold.ru

Communications advisor to GV Gold
EM

Denis Denisov                                  Daria Khilenkova                             Dmitry Zhadan

denisov@em-comms.com         khilenkova@em-comms.com          zhadan@em-comms.com

+7 985 410 3544                               +7 916 805 4926                               +7 916 770 8909



The full text of the release is available at link.

CPR Report as at 01.01.2021 is available at link.



IMPORTANT NOTICE

This press release is an advertisement and not a prospectus and does not contain or constitute an offer of, or the solicitation of an offer to buy or subscribe for, any securities of Public Joint Stock Company “GV Gold” (the “Company” and, the “Securities”, as applicable) or rights to subscribe for the Securities to any person in Australia, Canada, Japan, the United States or in any jurisdiction to whom or in which such offer or solicitation is unlawful. The Securities may not be offered or sold in the United States absent registration under the US Securities Act of 1933, as amended (the “Securities Act”) or another exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Subject to certain exceptions, the Securities may not be offered or sold in Australia, Canada or Japan or to, or for the account or benefit of, any national, resident or citizen of Australia, Canada or Japan. The offer and sale of the Securities has not been and will not be registered under the Securities Act or under the applicable securities laws of Australia, Canada or Japan. There will be no public offer of the Securities in the United States.

This press release is being distributed to and directed at persons in member states of the European Economic Area (“EEA”) who are “qualified investors” within the meaning of Article 2(e) of Regulation (EU) 2017/1129 and amendments thereto (the “Prospectus Regulation”) (“Qualified Investors”). In addition, in the United Kingdom, this press release is being distributed to and is directed only at (i) persons who are outside the United Kingdom or (ii) persons who are investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order or (iv) other persons to whom an invitation or inducement to engage in investment activity (within the meaning of the Financial Services and Markets Act 2000) in connection with the issue or sale of any securities may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as “Relevant Persons”). This communication does not constitute an offer of the securities referred to herein to the public in the United Kingdom and investment or investment activity, or controlled investment or controlled activity to which this communication relates will only be available to and will only be engaged with, Relevant Persons in the United Kingdom and Qualified Investors in any member state of the European Economic Area other than the United Kingdom. No person that is not a Relevant Person should or Qualified Investor may act or rely on this press release or any of its contents.

Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended ("MiFID II"); (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the "MiFID II Product Governance Requirements"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the MiFID II Product Governance Requirements) may otherwise have with respect thereto, the Securities have been subject to a product approval process, which has determined that such Securities are: (i) compatible with an end target market of investors who meet the criteria of professional clients and eligible counterparties, each as defined in MiFID II; and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the "Target Market Assessment").

Notwithstanding the Target Market Assessment, distributors should note that: the price of the Securities may decline and investors could lose all or part of their investment; the Securities offer no guaranteed income and no capital protection; and an investment in the Securities is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Offering. Furthermore, it is noted that, notwithstanding the Target Market Assessment, Goldman Sachs International, SberCIB, UBS Investment Bank, VTB Capital, Raiffeisen Bank International and Sova Capital (together, the "Banks") will only procure investors who meet the criteria of professional clients and eligible counterparties.

For the avoidance of doubt, the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to the Securities.

Each distributor is responsible for undertaking its own target market assessment in respect of the Securities and determining appropriate distribution channels.

These materials do not contain or constitute an offer, or an invitation to make offers, sell, purchase, exchange or transfer any Securities in the Russian Federation, and do not constitute an advertisement of any Securities in the Russian Federation and must not be passed on to third parties or otherwise be made publicly available in the Russian Federation. This communication does not constitute or form part of individual investment advice, investment consulting or personal recommendation (within the meaning of the federal legislation of the Russian Federation (including, without limitation, Federal Law dated April 22, 1996 No. 39-FZ “On the Securities Market”, as amended)).

None of the Banks or the Selling Shareholders nor any of their respective affiliates, directors, officers, employees, advisers, agents or any other person, accepts any responsibility or liability whatsoever for the contents of, or makes any representations or warranties, express or implied, as to the accuracy, fairness or completeness of the information presented or contained in this press release (or whether any information has been omitted from this press release) or any other information relating to the Company, its subsidiaries and their associated companies, whether written, oral or in a visual or electronic form, and howsoever transmitted or made available or for any loss howsoever arising from any use of this press release or its contents or otherwise arising in connection therewith. Accordingly, each of the Banks, the Selling Shareholders and their respective affiliates, directors, officers, employees, advisers, agents and any other person acting on any of their behalf expressly disclaims, to the fullest extent possible, any and all liability whatsoever for any loss howsoever arising from, or in reliance upon, the whole or any part of the contents of this press release, whether in tort, contract or otherwise which they might otherwise have in respect of this press release or its contents or otherwise arising in connection therewith.

Each Bank is acting exclusively for the Company and no one else in connection with the matters referred to in this press release, and will not regard any other person as their respective clients in relation to the matters referred to in this press release and will not be responsible to anyone other than the Company for providing the protections afforded to their respective clients nor for providing advice in relation to the matters referred to in this press release, the contents of this press release or any transaction, arrangement or other matter referred to herein.


Certain statements in this communication are not historical facts and are “forward looking” within the meaning of Section 27A of the Securities Act and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. Forward looking statements include statements concerning our plans, expectations, projections, objectives, targets, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, our competitive strengths and weaknesses, financial position and future operations and development, our business strategy and the trends we anticipate in the industries and the political and legal environment in which we operate and any other information that is not historical information. By their very nature, forward looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that the predictions, forecasts, projections and other forwardlooking statements will not be achieved. Given these risks and uncertainties, you are cautioned not to place undue reliance on such forwardlooking statements. We do not intend and we do not assume any obligation to update any forward looking statement contained herein.


[1] According to JORC classification

[2] Subject to AGM approval, dividends are paid in rubles and calculated based on a RUB-USD exchange rate of 72.15.

[3] Dividends are paid in rubles and calculated based on a RUB-USD exchange rate of 72.15.

[4] Subject to EGM approval

[5] Including gold in concentrate

[6] Recalculated from RUB to USD using average conversion rate being USD 1/RUB 62.7078 in 2018, USD 1/RUB 64.6772 in 2019 and USD 1/RUB 72.1464 in 2020 (calculated as daily average).

[7] Target payout subject to approval by AGM