GV Gold is preparing for an IPO on the Moscow Stock Exchange, and investors could be intimidated by the purchase of a "toxic" asset

"Toxic" deal

GV Gold, controlled by the shareholders of Lanta Bank, will not acquire Kamchatka Gold from Renova and its beneficiary Viktor Vekselberg, who were on the US Finance Ministry's Sanction List (SDN) on April 6, . About this RBC told two sources familiar with the course of negotiations.

According to one of the interlocutors of RBC, the deal with the "toxic asset" that the "Kamchatka Gold" company looks like due to US sanctions may scare future investors of GV Gold on the eve of the long-planned IPO.

The representative of GV Gold said that the company does not comment on the rumors. The representative of Renova did not respond to RBC's request.

GV Gold plans to increase production by almost 2.5 times, to 15 tons of gold per year, including through acquisitions, and then conduct an IPO. The general director of the company Herman Pihoya told RBC that she would be ready to place shares on the Moscow stock exchange in 2018. RBC sources reported that in December of last year GV Gold had agreed to purchase the company "Kamchatka Gold" (in 2016 production was 5.5 tons, data for 2017 is not yet available) from Renova for more than $ 500 million, but the agreement was non-binding. In February 2018, the transaction was approved by the Federal Antimonopoly Service (FAS), its authorization is valid for a year, Pihoya said.

Refusing to purchase Kamchatka's Gold, GV Gold will resume negotiations with other gold mining companies on mergers and acquisitions, says the second interlocutor of RBC. Kommersant previously called Lenzoloto among the participants in such discussions (Said Kerimov belongs to Polyus) and Roman Abramovich Highland Gold. The representative of Abramovich told RBC that negotiations with GV Gold are currently not available. Interfax reported with reference to its sources that Polyus was seeking a buyer for alluvial assets in the Irkutsk region, including Lenzoloto sites. But the representative of the "Pole" denied this. The information about the negotiations on the sale of Lenzoloto is untrue, he told RBC.

A representative of GV Gold told RBC that the company "is in a phase of active organic growth, but does not exclude the possibility of acquisitions that meet its development strategy. In this regard, we are constantly studying various options that will allow us to enter the top-5 gold mining companies in Russia in the medium term. " In 2016, GV Gold took the ninth place in Russia for gold mining, and in 2017, according to the Union of Gold Miners, rose to seventh place.

The US intervened

The US Sanctions Act CAATSA, signed by President Donald Trump in August 2017, has seriously changed the rules of the game for bargainers with Russian companies and citizens who are in the SDN: if earlier the ban on deals only extended to citizens and US companies, now secondary sanctions can be subject to any "foreign persons" (physical and legal) involved in "significant transactions" with such persons and companies as Vekselberg or Renova. Russian companies also fell under the risk of secondary sanctions, so now there are questions like "Can Norilsk Nickel pay dividends in favor of UC Rusal, which got under the sanctions?"

The CAATSA law also changed the attitude of investors towards Russian companies, said Alexander Losev, the general director of the Sputnik Management Company. The funds, he said, have long preferred to shy away from companies with uncertainty, choose those stocks whose weight in the MSCI index is significant, and play on dividend stories. "Everybody has an understanding that sanctions are very long, maybe for decades, but their economic effect can be limited due to global supply chains of raw materials, products and financial flows, in which Russian companies are also embedded," - he added.

Renova and GV Gold could have completed the deal on Kamchatka Gold until June 5, minimizing the sanctions risks for this transaction, said the head of the Washington-based law firm Ferrari and Associates, specializing in sanctions, Erich Ferrari. The logic here is this: according to the explanations of OFAC (the US Finance Ministry's sanction bureau), the transaction is not considered significant if for its conduct a natural person or a US legal entity did not need to receive a specific OFAC license. Such a separate permission is not required if there is already a so-called OFAC general license that allows a certain class of transactions. In this case, the general license is: it was issued by OFAC at the same time as the sanctions on April 6 and allows US citizens and companies to complete the transactions initiated before the introduction of these sanctions. In other words, if GV Gold was an American company, it would be able, under this license, to complete the purchase of Kamchatka's Gold by June 5, as the deal was signed in December 2017. With this in mind, GV Gold could be advised to complete the deal before June 5 and thereby minimize the risk that it could be recognized as significant, concludes Ferrari.

The deal with GV Gold is no longer the first problem for Vekselberg, which he owes to the US Treasury. Because of US sanctions, Vekselberg's company had to reduce its stake in the Swiss engineering concern Sulzer to less than 50%, selling about 15% of the company itself. The average weighted value of this stock on the stock exchange as of Thursday, April 12, when this deal was announced, was $ 561 million. This money will be transferred to an escrow account owned by the trustee, but Renova will have access to it only when its will be removed from the SDN sanctions list, Sulzer representative told RBC. The

US sanctions also made uncertainty in the transaction on Vekselberg's sale of a stake in the bank "International Financial Club" (IFC) ONEXIM Mikhail Prokhorov. FAS approved it in March. Vekselberg through the Cyprus Winterlux Limited owned 39.4% of the bank. However, on April 16, his name disappeared from IFC's list of shareholders on the Central Bank's website, as RBC wrote.