TIDMPOG
RNS Number : 9439K
Petropavlovsk PLC
19 December 2018
19 December 2018
Petropavlovsk PLC
Update on IRC Loan Refinancing Transaction
Petropavlovsk PLC ("Petropavlovsk" or the "Company" or, together
with its subsidiaries, the "Group") is pleased to make this further
announcement in connection with the proposed refinancing of IRC
Limited's ("IRC") outstanding project finance facility with
Industrial and Commercial Bank of China Ltd ("ICBC") (the "ICBC
Facility"). Petropavlovsk acts as guarantor for the ICBC Facility
and has a 31.1% shareholding in IRC.
Highlights
-- The first stage of Petropavlovsk's plan to reduce its
guarantee to ICBC is completed with IRC entering into a new US$240
million facility (the "New Facility") with Gazprombank (Joint-Stock
Company) ("Gazprombank"). The amount of Petropavlovsk's current
guarantee will initially reduce from US$204 million to US$160
million being a US$120 million corporate guarantee ("the Corporate
Guarantee") and a US$40 million two year fixed guarantee. The
Corporate Guarantee will be released subject to certain operational
conditions of the K&S project being satisfied, which are
expected to be completed within two to three years.
-- The New Facility:
o Provides IRC with an extended period to repay its debt finance
and will mature in 2026.
o Is on more favourable terms than the existing ICBC
facility.
o Consists of two tranches, with the first tranche being
amortised over the life of the loan and the second tranche of US$80
million being payable in full at the end of the term of the New
Facility.
The New Facility is expected to alleviate the cashflow position
of IRC and provide it with a more manageable repayment schedule in
comparison to the ICBC Facility
-- IRC has been granted waivers by ICBC, subject to the
fulfilment of certain conditions precedent, from the obligations to
maintain a debt service reserve account and for K&S and
Petropavlovsk to comply with certain financial covenants until the
earlier of the date on which the security under the ICBC Facility
is released and 21 March 2019.
-- The Board of IRC has today announced that Mr Peter Hambro, a
Non-Executive Director of IRC, has been appointed as Non-Executive
Chairman of IRC with immediate effect. Consequently, Mr Hambro will
no longer act as the Company's nominee director on the IRC Board.
Mr Hambro will continue to be the President of Petropavlovsk and
Senior Adviser to the Board on issues where there is no conflict
with his Chairmanship of IRC.
New Facility
IRC has today advised that its wholly owned subsidiary LLC
Kimkano-Sutarsky Mining and Beneficiation Plant (K&S) has
entered into a new US$240 million facility (the "New Facility")
with Gazprombank (Joint-Stock Company) ("Gazprombank").
The New Facility will consist of two tranches. The principal
under the first tranche amounts to US$160 million with interest
being charged at 5.7% above LIBOR per annum and will amortise over
the life of the loan. The second tranche of US$80 million has an
interest rate of 7.7% above LIBOR per annum and is repayable at the
end of the term of the New Facility.
This is a first stage in Petropavlovsk's plan to reduce its
guarantee exposure to the IRC Group. Under the proposed terms, the
Company will provide the US$120 million Corporate Guarantee and
three US$40 million sequential two year fixed term guarantees and
from the sixth anniversary of first utilisation a further US$120
million guarantee. The total initial guarantee will therefore be
for US$160 million which should reduce to US$40 million subject to
certain operational conditions at the K&S project being met. .
For the final year of the New Facility, the guarantee will increase
to US$120 million to cover the final principal and interest
repayments.
The four fixed term guarantees, the first three with maximum
liability of US$40 million each and the final with maximum
liability of US$120 million, will come into effect consecutively,
commencing on the date of the first utilisation of the New Facility
and will be effective for two years each (the 'Fixed Term
Guarantees').
The provision of the Corporate and Fixed Term Guarantees (the
"Guarantees") will in aggregate constitute a Class 1 Transaction
under the Listing Rules of the Financial Conduct Authority and, as
such, utilisation of the New Facility will be conditional, among
other things, upon the passing of a resolution by Petropavlovsk's
shareholders at a general meeting. It is expected that a circular
setting out details of the New Facility and Guarantees and
convening a general meeting will be distributed to shareholders in
January 2019 with the general meeting taking place in February
2019. On this basis, and subject to shareholder approval, the
replacement of the ICBC Facility is expected to take place in
February 2019, with funds available for draw down later that
month.
In the interim, the Company has agreed to provide IRC with a
further bridging loan, in the amount of US$27 million at an
interest rate of 16% p.a. (the "Bridge Loan") to enable K&S to
pay its half-yearly debt service of interest and principal due
under the ICBC Facility on 20 December 2018. The bridge loan will
be repaid to Petropavlovsk upon full completion of the New Facility
which is expected to be in late February 2019. The Company has also
agreed to extend the existing bridge loan of c.US$30 million to the
later of utilisation of the New Facility and 21 March 2019. Taken
together the two bridge loans due for repayment will amount to
approximately US$57 million. In addition to this IRC will repay to
Petropavlovsk the guarantee fee of approximately US$6 million owed
by IRC to Petropavlovsk in respect of the ICBC Facility and certain
other associated costs.
The Company's liquidity position significantly strengthened
after entering into a number of gold sales contracts with
Gazprombank and is sufficient to finance the second bridge loan to
IRC and for general operational purposes. The arrangements are set
up for the next 24 months and provide the Group with the
flexibility during the POX plant ramp up period.
Following the scheduled 20 December repayment by K&S under
the ICBC Facility, the total amount outstanding under the ICBC
Facility will be c.US$169 million which is expected to be repaid in
full using the New Facility.
ICBC Waiver Update
In addition, IRC has announced today that it has been granted
waivers by ICBC subject to the fulfilment of certain conditions
precedent, which include the payment by IRC of approximately US$5.4
million in favour of ICBC Moscow and the scheduled 20 December 2018
repayment ("Waiver Conditions Precedent") and thus reducing the
total outstanding amount of the debt.
Effective immediately upon fulfilment of the Waiver Conditions
Precedent, ICBC has granted K&S a waiver from the obligations
to maintain a debt service reserve account and for K&S and
Petropavlovsk to comply with certain financial covenants until the
earlier of the date on which the security under the ICBC Facility
is released and 21 March 2019.
CEO's Statement - Dr Pavel Maslovskiy
"Petropavlovsk has taken a decisive step in de-risking the
Company's liability with regard to IRC's debt obligations. The
attractive terms of the New Facility with Gazprombank provide IRC
with the ability to maintain its ramp up to full production,
generating sufficient cash to meet its repayment schedule whilst
Petropavlovsk's guarantee obligations will be reduced.
With the twin events of concluding the restructuring of the IRC
Facility, and with the successful ongoing ramp up of
Petropavlovsk's Pressure Oxidation Hub, the Company is poised to
generate returns for its stakeholders in 2019 and beyond.
We look forward to obtaining shareholder support for the
Guarantee at the forthcoming general meeting."
About Petropavlovsk
With a Premium Listing on the London Stock Exchange,
Petropavlovsk (LSE: POG) is one of Russia's largest gold producers.
The Pioneer, Malomir and Albyn gold mines, as well as the
Pokrovskiy and Blagoveshchensk processing and R&D facilities,
are all located in the Amur Region, the Russian Far East.
With total JORC Resources of almost 21Moz Au and a combined
license area of over 3,000km(2) , the Company has produced
approximately 7Moz of gold since the commencement of its
operations. Petropavlovsk is one of the region's largest employers
and remains one of the largest contributors to the sustainable
development of the local economy.
Gold production is poised to increase following the
commissioning of a technology which will extract gold from the
Company's refractory ore through a pressure oxidation process,
currently nearing completing at Pokrovskiy (the POX Hub). When
fully commissioned, the POX Hub will have the capacity to treat
approximately 500K tonnes of refractory concentrate each year. The
new high grade underground operations at Pioneer and Malomir will
further improve the gold production profile as they reach steady
state over the near term whilst the Company looks to further
increase the life of its mines through exploration.
Petropavlovsk is a shareholder (31.1%) of Hong-Kong listed IRC
Limited, a vertically integrated Russian Far East iron ore
producer. Petropavlovsk is the guarantor of IRC's US$340 million
project finance facility, of which US$204 million was outstanding
as at 30 September 2018.
Enquiries
For more information, please visit www.petropavlovsk.net and
www.ircgroup.com.hk or contact:
Petropavlovsk PLC Buchanan
Max Zaltsman Bobby Morse
+44 (0) 20 7201 8900 Chris Judd
TeamIR@petropavlovsk.net +44 (0) 207 466 5000
POG@buchanan.uk.com
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014
Cautionary note on forward-looking statements
This release may include statements that are, or may be deemed
to be, "forward-looking statements". These forward-looking
statements can be identified by the use of forward-looking
terminology, including the terms "believes", "estimates", "plans",
"projects", "anticipates", "expects", "intends", "may", "will" or
"should" or, in each case, their negative or other variations or
comparable terminology, or by discussions of strategy, plans,
objectives, goals, future events or intentions. These forward- 6
looking statements include all matters that are not historical
facts. They appear in a number of places throughout this release
and include, but are not limited to, statements regarding the
Group's intentions, beliefs or current expectations concerning,
among other things, the future price of gold, the Group's results
of operations, financial position, liquidity, prospects, growth,
estimation of mineral reserves and resources and strategies, and
exchange rates and the expectations of the industry. By their
nature, forward-looking statements involve risk and uncertainty
because they relate to future events and circumstances [outside the
control of the Group. Forward-looking statements are not guarantees
of future performance and the development of the markets and the
industry in which the Group operates may differ materially from
those described in, or suggested by, any forward- looking
statements contained in this release. In addition, even if the
development of the markets and the industry in which the Group
operates are consistent with the forward looking statements
contained in this release, those developments may not be indicative
of developments in subsequent periods. A number of factors could
cause results and/or developments to differ materially from those
expressed or implied by the forward-looking statements including,
without limitation, general economic and business conditions,
demand, supply and prices for gold and other long-term commodity
price assumptions (and their effect on the timing and feasibility
of future projects and developments), trends in the gold mining
industry and conditions of the international gold markets,
competition, actions and activities of governmental authorities
(including changes in laws, regulations or taxation), currency
fluctuations (including as between the US Dollar and Rouble), the
Group's ability to recover its reserves or develop new reserves,
changes in its business strategy, any litigation, and political and
economic uncertainty. Except as required by applicable law, rule or
regulation (including the Listing and Disclosure Guidance and
Transparency Rules), the Group does not undertake any obligation to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise. Past
performance cannot be relied on as a guide to future performance.
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END
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