Exclusive: China Development Bank may finance Fosun's Polyus deal - sources

MOSCOW/HONG KONG (Reuters) - China Development Bank is considering providing financing for a Chinese consortium seeking to buy a stake in Russia's largest gold producer Polyus PLZL.MM, two sources familiar with discussions about the potential deal told Reuters.

The consortium, led by Fosun International Ltd 0656.HK, one of China's most acquisitive conglomerates, has since last year been in talks to buy a stake in Polyus, controlled by the family of Russian tycoon Suleiman Kerimov.

According to one of the sources, the Chinese buyer is also discussing the financing with a few other banks, but the source did not identify them.

The plan under discussion is to sell “well below” a 25 percent stake in Polyus to the Fosun-led consortium, with a potential option to increase the stake later, said one of the sources, who spoke on condition of anonymity. Polyus has a market value of about $10 billion.

Russia has been actively looking for investments in Asia, mainly in China, since the West imposed sanctions on Moscow due to its role in the Ukraine crisis and the annexation of Ukraine’s Crimea peninsula in 2014.

China is the world’s top consumer, producer and importer of gold and Chinese companies have been targeting gold mine acquisitions.

Discussions on the deal are still underway and there is no firm deadline, according to one of the sources familiar with the discussions, and a third source also familiar with the discussions.

Two of Fosun's Chinese affiliates - Zhaojin Mining 1818.HK and Hainan Mining 601969.SS - may join the consortium, the same two sources said.

Fosun and Polyus declined to comment. Reuters’s telephone calls to China Development Bank’s office in Beijing went unanswered. Zhaojin and Hainan did not answer Reuters’s emailed requests for comment.

Polyus is a potentially attractive target because global gold prices XAU= have risen 11 percent so far in 2017, and Polyus this year acquired the giant Sukhoi Log gold deposit in Russia.

Russian First Deputy Prime Minister Igor Shuvalov said on April 12 that Fosun planned to sign an agreement to buy a stake in Polyus.

Russian officials are keen to have the deal ready for when Russian President Vladimir Putin visits China in May, one of the sources familiar with the situation said.


Polyus is also considering launching a secondary share offering (SPO) in London and Moscow in May or June, several sources familiar with planning for the listing said.

The deal will take about one month, including pre-marketing and road-show, but the size of the offer is still under discussion, two of the sources said.

The Polyus SPO does not directly depend on the Fosun deal and Polyus is not in a hurry to do it, but the listing will go ahead anyway, one of the sources familiar with the planning for the offering said.

The aim is to carry out a successful listing with major investors, the source said. “The timing is not crucial to them. The situation is far better than it was three years ago, and everyone is satisfied with the price of gold.”

Western investors, which steered clear of Russian assets after the 2014 annexation of Ukraine’s Crimea, are now making a cautious return to Russia.

The planned share offering is a big strategy switch for Kerimov’s family, who delisted the shares of Polyus’s Jersey-registered parent company from the London Stock Exchange in late 2015 amid Western sanctions imposed on Moscow. Polyus’s return to London may coincide with a potential initial public offering by En+ Group, which manages Russian tycoon Oleg Deripaska’s aluminum and hydro power businesses. Polyus has said that it would place its shares in Moscow as it needs to raise its free float to at least 10 percent to meet a requirement of the Moscow Stock Exchange, and would consider placing global depositary receipts in London.

Polyus’s free float is currently 6.76 percent after the cancellation of some of treasury shares in April, in a move which would technically pave the way for the SPO.

Reporting by Polina Devitt, Julie Zhu, Olga Popova, Yan Jiang, Dasha Afanasieva, Katya Golubkova, Oksana Kobzeva and Darya Korsunskaya; editing by Jane Merriman