Polymetal Buys Its First Platinum Field

on Dec 19, 2012

While platinum producers worldwide have been struggling with declining output on account of South African labour unrest, Russia’s largest silver producer, Polymetal International Plc (LON:POLY) acquired its first platinum project,seeing the metal as promising for diversification, Bloomberg reported on December 18.

**Polymetal Acquires Platinum Field**
As noted in the press release of the London-listed Polymetal, the company acquired a 24.99 percent stake in the Svetlobor platinum exploration project from the Cypriot company Ubergot Investments Limited in exchange for 130,053 new ordinary shares in Polymetal. In addition, VTB Capital, a unit of one of Russia’s top lenders, VTB, acquired the remaining 75.01 percent in the project for 390,369 new ordinary shares in Polymetal and has agreed to sell the stake in question to Polymetal for $6.9 million (£4.2 million) plus interest.

The FTSE 100 company Polymetal notes that based on its closing share price on December 17 the total transaction value is approximately £6.1 million, plus interest payable to VTB. The new ordinary shares which will be issued both to Ubergot and VTB Capital, will represent approximately 0.14 percent of Polymetal’s increased ordinary share capital. Bloomberg reports that following the news, the Polymetalshare price rose 0.9 percent to 1,192 pence in London trading.

**The Svetlobor Project**
The deal, which is pending regulatory approval, will see Polymetal hold a mining and exploration licence for the Svetlobor area, valid until 30 November 2031.
Bloomberg quotes Polymetal’s CEO Vitaly Nesis as saying that the Svetlobor project, which is located in the Sverdlovsk region in the Urals, provided the company with “a unique opportunity” on account of the project location in an area where Polymetal has developed infrastructure. The project is in an early stage of geological exploration with about 20 wells drilled in 2005-2010.

!m[Russia’s Largest Silver Producer Sees PGMs Attractive Amid South African Strikes](/uploads/story/1065/thumbs/pic1_52_inline.png)
Polymetal sees platinum as promising for diversification especially given the declining global output resulting from the recent labour unrest in major producer South Africa. In its press release, the company noted that one of the strategic considerations behind the acquisition was gaining “meaningful exposure to platinum” with the metal having limited production outside South Africa and Zimbabwe where “a material risk of significant supply disruptions“ exists.

“We see platinum as attractive metal especially given the recent events in South Africa,” commented Mr Nesis, as quoted by Bloomberg. He, however, also added that while the company would “be glad” to look into other platinum resources, it did not expect that a good opportunity would occur soon.
**Global Output Decline**
Bloomberg quotes data by Johnson Matthey Plc (LON:JMAT) as indicating that platinum output worldwide dropped by about 10 percent, or 600,000 ounces in 2012 through the third quarter, relative to the same period in 2011. More than 500,000 ounces of the decline was observed in South Africa.
“Although this will have next to no impact on the near-term outlook for the company, the potential diversification into platinum is an interesting strategic move,” which also highlights the value potential for platinum assets outside of South Africa or Zimbabwe, Nomura (TYO:8604) pointed out, as quoted by Bloomberg.


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