Russia's Polymetal plans to buy Bakyrchik gold deposit in Kazakhstan for $500 mn

Russian precious metals producer Polymetal is planning to buy a large gold mine in Kazakhstan for around $500 million, the daily Kommersant yesterday reported, citing unnamed sources.

St. Petersburg-based Polymetal is a leading gold and silver mining group, operating in Russia and Kazakhstan. It is planning to buy the Bakyrchik deposit from Altynalmas Gold, part owned by Timur Kulibayev, the billionaire son-in-law of Kazakhstan President Nursultan Nazarbayev.

Altynalmas Gold, in which Canada's Turquoise Hill Resources holds a 50 per cent interest, fully owns the Kyzyl Gold Project in northeastern Kazakhstan.

The Kyzyl Gold Project hosts the Bakyrchik gold mine, which originally commenced production in 1956 to provide gold bearing flux to copper smelters in Ust-Kamenogorsk and later to smelting facilities in Russia, and the Bolshevik Gold Deposit.

The mine has gold reserves of 5.76 million troy ounces and has a life of 25 years with an average annual production of 321koz of gold.

London and Moscow-listed Polymetal would pay $200 million of the $500 million purchase price in its own shares, which in turn would give Altynalmas Gold a 5-per cent stake in Polymetal based on its current market value.

In the six months to June, Polymetal posted a net loss of $255 million compared with a $157 million net profit in first half of last year. Total revenues fell by 6 per cent to $721 million.

Polymetal blamed the weak result largely due to a decline in gold and silver prices. The average price of gold in the first six months fell by 13 per cent and silver prices fell by an average of 18 per cent.