Fox Hu and Bei Hu, (Bloomberg)
Petropavlovsk Plc, Russia’s third- largest gold producer, plans to list its non-precious metals unit in a Hong Kong stock sale that may raise about $500 million, two people with knowledge of the matter said.
The company hired Bank of America Corp.’s Merrill Lynch & Co. and UBS AG to manage the initial public offering, the people said, declining to be identified because the information is private. The London-listed miner filed an application in Hong Kong last month.
Petropavlovsk joins commodity producers including United Co. Rusal, the world’s largest aluminum maker, in seeking funds in Hong Kong as Chinese raw-material demand jumps. Petropavlovsk aims to boost the value of newly acquired iron-ore assets, valued by Goldman Sachs Group Inc. at $1 billion in March.
The company is developing the Russian iron-ore deposits it acquired in April 2009 as part of its 294.5 million-pound ($447 million) purchase of Aricom Plc. Petropavlovsk plans to sell its iron ore to China, given the mines’ proximity to the Chinese border and rising demand for the steelmaking ingredient in the nation, Chief Investment Officer Jay Hambro said last month.
David Simonson, a London-based spokesman for Petropavlovsk, declined to comment. UBS and Merrill Lynch also declined to comment.
Petropavlovsk rose 4.3 percent to close at 1,192 pence in London trading, the biggest gain since May 26, giving the company a market value of 2.2 billion pounds.
Rusal Share Sale
Rusal, based in Moscow, raised net proceeds of HK$16.7 billion ($2.1 billion) in January in Hong Kong to pare debt. China is the world’s largest buyer of iron ore and metals.
Petropavlovsk agreed in March to a loan of about $400 million from Industrial & Commercial Bank of China Ltd. to fund the first stage of its K&S iron ore project in Russia’s Amur region. The mine will produce 3.2 million metric tons of iron- ore concentrate a year starting in 2013.
Production from its Kuranakh mine will be sold to China’s Jianlong Iron & Steel Group, Hambro has said. The company plans to build a third mine at its Garinskoye deposit.
The Asia Resources Fund in Hong Kong is investing $60 million in Petropavlovsk’s iron ore operations, valuing the division at $860 million, the miner said in June.
Petropavlovsk posted a sixfold increase in profit last year on increased output and higher gold prices. Net income rose to $143.2 million, from $22 million in 2008. It produced 486,800 ounces of gold last year and is targeting annual output of more than 1 million ounces in 2013.
--With assistance from Firat Kayakiran in London. Editors: Tan Hwee Ann, Amanda Jordan.