Kazakhstan puts Hold on KazakhGold-Polyus Merger
Kazakhstan’s Ministry of Industry has ordered a planned merger between KazakhGold and its parent, Russia’s Polyus Gold, put on hold because of possible irregularities in last year’s sale of KazakhGold to Polyus.
The ministry said it issued the order "due to newly discovered information regarding violations of the law on mineral resources” in the sale. No other details were provided.
The Assaubayev family's Gold Lion Holdings was the main KazakhGold shareholder before Polyus. They deny allegations that former management misappropriated funds or misstated results in connection with the sale to Polyus, which is controlled by Russian billionaires Mikhail Prokhorov and Suleiman Kerimov.
Both KazakhGold and Polyus applauded the Ministry of Industry’s move.
"We welcome the readiness of the relevant Kazakhstan authorities and ministries to investigate the activities of former management," KazakhGold CEO and Polyus Gold General Director Evgeny Ivanov said in a statement.
After Polyus acquired its controlling stake in KazakhGold, it filed a $450 million lawsuit against the Assaubayevs over the deal.
VTB Capital said the Ministry of Industry move creates uncertainty about whether the merger will ever occur.
"Now, after so much work has been put in, we believe it is facing certain risks,” VTB said. “In the longer term, it might undermine Polyus' plans to attract a global player through a merger or acquisition to develop its large reserve base.”
Polyus proposed a reverse takeover transaction this year under which it would turn from the parent of KazakhGold into a subsidiary of the Kazakhstan company.
A Russian government commission on foreign investments signed off on the reverse takeover in April.
The transaction, which would have seen a $307 million firm acquiring a parent company more than 30 times its size, was meant to create a $10.8 billion group that would have become the largest pure gold miner on the London Stock Exchange.
The two companies had planned to close the deal by August 10.
The companies together produced 1.3 million ounces of gold last year, almost double the world’s single largest producer, African Barrick Gold, whose output was 716,000 ounces, according to Reuters.