Alexei Mordashov changes the gold of Africa

He is preparing his Nordgold for the new M & A.
As found by Kommersant, the gold mining Nordgold Alexei Mordashov can exchange its mines in Africa, which generate two-thirds of the proceeds, for money and shares operating in the region of Endeavor Mining with a capitalization of $ 1.9 billion. According to Kommersant sources, such a proposal was made by the largest shareholder Endeavor Nagib Sawiris, the parties have already hired consultants. Market participants say that the reorganization of Nordgold is long overdue, but the prospects for partnership with Endeavor are not obvious.

Alexei Mordashov intends to intensify the development of his gold mining Nordgold and considers M & A proposals, sources told Kommersant, who are familiar with the situation. According to them, recently the businessman strengthened his team "Nordgroup" foreign manager (the name is not called), which is entrusted to work on M & A issues in addition to the functionality of the general director of Nordgold Nikolai Zelensky, and now Mr. Mordashov is considering specific proposals.

Kommersant's interviewees cite as an example the offer of Egyptian businessman Naguib Sawiris (known primarily for the telecommunications business), whose family through La Mancha Group owns stakes in gold miners Endeavor Mining (30%) and Evolution Mining (15%). According to them, Mr. Saviris invited Alexei Mordashov to exchange Nordgold assets in Africa for money and shares of Endeavor. The sources do not give details of the discussion, but they say that "the parties have already hired investment bankers to consider the topic." Nordgold mines in Africa (primarily Bissa and Bouly in Burkina Faso) provide it with two-thirds of the production and revenues and are generally comparable to the entire Endeavor business. Representatives of Alexei Mordashov, Nordgold, Endeavor refused to comment, it was not possible to contact the representative of La Mancha.

Nordgold owns assets in Africa, Russia, Kazakhstan, North and South America, total reserves - 15.2 million ounces, resources - 33.6 million ounces. Gold production in 2017 - 968 thousand ounces, revenue - $ 1.2 billion, EBITDA - $ 520 million, net profit - $ 167 million.

Endeavor assets are located in Burkina Faso, Mali and Cote d'Ivoire, reserves - 9.1 million ounces, resources - 14.9 million ounces. Gold output in 2017 is 663 thousand ounces, revenue is $ 652 million, adjusted EBITDA is $ 201 million, net profit is $ 66 million. Capitalization on TSX is $ 1.89 billion.

Nordgold carried out delisting with the LSE in 2017, explaining this step with low liquidity of securities and capitalization (about $ 1.4 billion), not corresponding to the fundamental value. Nordgold did not rule out a return to the stock exchange, but Kommersant sources in the industry say that both investors and Alexei Mordashov had an understanding that the company looks too complicated to manage due to geographical diversification and needs reorganization. Nagib Sawiris said in an interview with Bloomberg that he believes in the rise in gold prices to $ 1.8 thousand per ounce (now about $ 1.3 thousand) and is interested in the opportunities to increase positions in the sector (although La Mancha previously reduced the share in Evolution. B "). And the Financial Times in November 2017 reported that La Mancha had invested $ 1.5 billion in gold miners, recalling the failed plans to merge Endeavor and Acacia Mining (Tanzania).

Oleg Petropavlovski from BCS believes that finding a company for a full-fledged Nordgold merger is problematic due to geographical diversification, and local M & A deals will not give synergy. The non-monetary component in the potential deal with Endeavor does not look attractive to Nordgold or Mordashov, the analyst believes: Endeavor shares are traded at high multiples (16 P / E), like all western gold miners, the price of gold is close to maximum, and the prospects for partnership are not clear . In addition, the preservation of Russian assets under Nordgold's wing may be in question, says Mr. Petropavlovski: the operating enterprises have already passed the stage of growth, and from the large there is only the upcoming Gross mine (production of about 200 thousand ounces per year for 17 years). By market multipliers Nordgold can now be estimated at $ 2.5 billion, but the traditional "Russian discount" and the wariness of investors to companies with owners of the "Kremlin report" make the figure of $ 2 billion more likely, says the analyst.

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