Polymetal International plc — M&A Activity 2020

Mar 19, 2020

News Details

UK Regulatory | 19 March 2020 08:00

Polymetal: Investment to gain 9.1% stake in Tomtor

Polymetal International plc (POLY)

19-March-2020 / 10:00 MSK

Dissemination of a Regulatory Announcement, transmitted by EQS Group.

The issuer is solely responsible for the content of this announcement.

Release time	IMMEDIATE LSE, MOEX , AIX : POLY / ADR: AUCOY
Date	1 9 March 20 20

Polymetal International plc

Investment to gain 9.1% stake in Tomtor

Polymetal is pleased to announce that it has entered into a legally binding agreement to invest US $20 million in exchange for a 9.1% stake in ThreeArc Mining Ltd . (ThreeArc) . ThreeArc own s 100% of the world-class Tomtor niobium and rare-earth metals project (Tomtor) .

TRANSACTION DETAILS

• Polymetal to acquire a 9.1% stake in ThreeArc , 100% owner of the Tomtor project , through a US$ 20 million cash investment into newly issued share capital .
• The pre-money enterprise value is estimated at US$ 259 million.
• The proceeds will be used to complete the Tomtor Pre- Feasibility Study and initial JORC-compliant Ore Reserve and Mineral Resource Estimate.
• Pursuant to FCA Listing Rule 11.1.10R this transaction is classified as a smaller related party transaction as ICT Holding Ltd. (ICT), a substantial shareholder of Polymetal International plc, is also the majority owner of ThreeArc , and this announcement is made in accordance with Listing Rule 11.1.10R (2)(c).
• The completion of the transaction will take place upon the statutory registration procedure, which is expected to occur before the end of March.

“Investment in Tomtor provides us with a high-quality exposure to the EV revolution by establishing strategic beachhead in the Nb and REE markets . Our capital inject ion and our engineering expertise will be key in driv ing the project forward . We intend to consider any further potential steps of Polymetal’s engagement with the asset after the com p letion of JORC-compliant reserve estimate”, said Vitaly Nesis, Group CEO of Polymetal.

ABOUT TOMTOR

Tomtor is located in the north-west of Yakutia. It is one of the largest and highest grade rare earth elements ( REE ) projects in Russia and considered to be the highest grade development stage niobium (Nb) project globally. T he deposit was discovered in 197 7 with initial statutory reserves approved in 1999 . In 201 3 , ICT established ThreeArc which acquired the Tomtor license subsequently . In 2018, s tatutory PFS and updated GKZ reserves were approved totalling 30.5 Mt of ore at 4.0% Nb 2 O 5 [1] +10.6% REO [2] grade containing 1.2 Mt of Nb 2 O 5 and 3.2 Mt of REO.

The project is comprised of the Tomtor open-pit table deposit and the Krasnokamensk Hydromet Facility (KHF) which will be built near the town of Krasnokamensk. Krasnokamensk, located in S outh -Eastern Siberia close to the border with China, is the location of Russia’s largest uranium mine and associated processing and tailings storage infrastructure .

STRATEGIC RATIONALE FOR THE TRANSACTION

The project envisions the following advantages which fits well with the Company’s strategy:

• High- grade
• Large
• Long-lived
• Exposure to green technology with significant potential to contribute to active climate change management
• Leverag ing Polymetal’s leading technical capabilities in hydrometallurgy and already established regional presence in Yakutia

NIO BIUM AND REE MARKET

Niobium is a soft, ra r e, transition metal. Nearly 90% of the Nb demand structure is represented by h igh-strength low-alloy steel (HSLA) which is mostly used in construction as a strengthening sustainable component, automotive industry to strengthen and reduce weight of a car elements and aerospace and defense sector to offer creep strength in super alloys .

Niobium is a relatively scarce resource and there are only three primary niobium mines in the world today , two in Brazil and one in Canada , but growing demand has created a global market value of more than US $ 2 billion [3] . World reserves of Nb are estimated at over 9 Mt . Nb prices are far less volatile than most REEs ‘ which are mostly produced in China and have been exposed to supply constraints during the last 10 years while Nb has been stable .

The global rare earth elements market was valued a t US $ 2. 2 b illio n [3] in 201 9 with the most of the value coming from NdPr. NdPr are used in high- str e ng th magnets in motors in electric vehicles, wind turbines and electronic devices and autocatalysts.

Tomtor is expected to become an alternative source of FeNb and rare earth elements for the growing markets of high-strength steel, permanent magnets and electronics, all critical for modern green-tech technology. Domestic demand for FeNb is expected to demonstrate robust growth, thanks to Ru ssia’s growing steel production , while since domestic REE demand is limited, Tomtor should become a significant supplier of REEs to the global market .

About Polymetal

Polymetal International Plc (LSE, MOEX: POLY, ADR: AUCOY) (together with its subsidiaries – “Polymetal”, the “Company”, or the “Group”) is a top-20 global gold producer and a top-5 global silver producer with assets in Russia and Kazakhstan. The Company combines strong growth with a robust dividend yield.

About Morgan Stanley

Morgan Stanley & Co. International plc acted as sole sponsor and financial advisor to Polymetal and to no one else. In connection with such matters, Morgan Stanley and their respective directors, officers, employees and agents will not regard any other person as its client, nor will it be responsible to anyone other than Polymetal for providing the protections afforded to their clients or for providing advice in connection with the matters described in this announcement or any matter referred to herein.

Enquiries

#### Media		#### Investor Relations
FTI Consulting Leonid Fink Viktor Pomichal	+44 20 3727 1000	Polymetal Evgeny Monakhov Timofey Kulakov Kirill Kuznetsov	ir@polymetalinternational.com +44 20 7887 1475 (UK) +7 812 334 3666 (Russia)
#### Joint Corporate Brokers
Morgan Stanley & Co. International plc Andrew Foster Richard Brown Panmure Gordon James Stearns	+44 20 7425 8000 +44 20 7886 2500	RBC Europe Limited Marcus Jackson Jamil Miah	+44 20 7653 4000

F orward-looking statements

T his release may include statements that are, or may be deemed to be, “forward-looking statements”. T hese forward-looking statements speak only as at the date of this release. T hese forward-looking statements can be identified by the use of forward-looking terminology, including the words “targets”, “believes”, “expects”, “aims”, “intends”, “will”, “may”, “anticipates”, “would”, “could” or “should” or similar expressions or, in each case their negative or other variations or by discussion of strategies, plans, objectives, goals, future events or intentions. T hese forward-looking statements all include matters that are not historical facts. B y their nature, such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the company’s control that could cause the actual results, performance or achievements of the company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. S uch forward-looking statements are based on numerous assumptions regarding the company’s present and future business strategies and the environment in which the company will operate in the future. F orward-looking statements are not guarantees of future performance. T here are many factors that could cause the company’s actual results, performance or achievements to differ materially from those expressed in such forward-looking statements. T he company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in the company’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based .

---

[1] Niobium oxide

[2] Rare earth oxides . Mainly NdPr Oxides: Pr 6 O 11 (Praseodymium oxide) and Nd 2 O 3 (Neodymium oxide)

[3] As per Roskill

---

ISIN:	JE00B6T5S470
Category Code:	MSCM
TIDM:	POLY
Sequence No.:	53287
EQS News ID:	1001289

End of Announcement	EQS News Service