[miningmx.com] — RUSSIAN miner Petropavlovsk said it planned to list its non-precious metals division, including its iron ore operations, in an initial public offering (IPO) on the Hong Kong stock exchange in October.
London-listed Petropavlovsk, which said it had reached an advanced stage in its preparations, did not give any guidance on the value of the IPO or say how much it intended to retain.
A group of Hong Kong-based investors in June agreed to take a $60m equity stake, valuing the division at $860m.
Jay Hambro, who will be executive chairman of the division, told Reuters last month a pre-IPO price of $860m set a good floor for a potential IPO valuation.
He also said Petropavlovsk was keen to keep a controlling stake in the division.
Under Hong Kong stock exchange rules, companies need to have 25% of their shares as free float, implying Petropavlovsk would keep a stake of between 51 and 75%.
Andy Davidson, an analyst at Numis Corp, said the widely expected move was positive and had the potential to unlock significant value for Petropavlovsk.
“We currently value the iron ore assets at 184 pence a share ($573m) out of our 625 pence NAV and believe the IPO has potential to double this, given the previous pre-IPO funding,” he said.
Shares in London-listed Petropavlovsk were up 2.2% in early trade in London outperforming an unchanged British mining index and valuing the group at £2.14bn.
Chinese demand
Petropavlovsk said the division had been reorganised under a new subsidiary, IRC Ltd. It will also include the Vanadium Pentoxide joint venture, the Titanium Sponge project, infrastructure projects, and the group’s interest in the Giproruda Technical Institute.
IRC will be headquartered in Hong Kong and will have Yury Makarov as its chief executive.
Petropavlovsk’s iron ore business had been spun off as Aricom, where Jay Hambro was CEO, before being re-acquired in 2009.
The operations, which are estimated to contain over 1 billion tonnes of iron ore, are in the Russian far east, close to China, a key consumer of the steel ingredient.
The company said it expected to buy the shareholdings of the Hong Kong-based investors in IRC at the time of listing to speed up the process and that the majority of investors will instead take part as lead investors in the IPO.
The IPO requires final approval from the Hong Kong stock exchange’s listing committee.
