POLY.L Regulatory News (POLY)

Polymetal International plc

Net settlement of the Kyzyl put option

Polymetal International plc (LSE, MOEX: POLY, ADR: AUCOY) (together with its subsidiaries - "Polymetal", the "Company", or the "Group") has agreed to settle the Kyzyl put option for a net consideration of US$68 million. The Polymetal shares subject to the put option arrangement will be simultaneously transferred from Sumeru Gold B.V. to financial group Otkritie.

Background

Under the terms of the acquisition of Altynalmas Gold Ltd. (the holding company for the Kyzyl gold project in Kazakhstan), Sumeru Gold B.V. (the "Seller" or "Sumeru"), received, along with other consideration, US$300 million payable through the issue to of 31,347,078 new ordinary shares of the Company (the "Consideration Shares"). The share price used to determine the number of Consideration Shares issued was US$9.57 per share (the unweighted mean average closing price of Polymetal shares on the London Stock Exchange in the twelve calendar months ending three trading days before Completion). 

Sumeru also received a put option, giving Sumeru the right, at their sole discretion, to require Polymetal to acquire or procure acquirers for the Consideration Shares during the one-month period commencing 4 September 2015 at a price per Consideration Share equal to US$9.57. Sumeru has exercised this right to require the acquisition of the Consideration Shares.

Net settlement agreement and transfer of consideration shares

The Company has agreed to the following settlement mechanism for the put option:

· Polymetal will settle the full contractual put option liability to the Seller and deliver a cash payment in the amount of US$300 million;

· Simultaneously, Polymetal will transfer the right to receive Consideration Shares to Otkritie Investments Cyprus Limited ("Otkritie"), which is part of financial group Otkritie, in exchange for a cash consideration of US$ 232 million. The cash consideration payable by Otkritie to Polymetal represents the average closing price of the Polymetal shares for the agreed quotation period being one month ended five business days before the date of signing the assignment agreement, which was US$7.41 per share ("Reference Price"), multiplied by the number of Consideration Shares.

The net amount of US$68 million payable by Polymetal represents the difference between the strike price of US$9.57 per share and the Reference Price of US$7.41 per share, multiplied by the number of Consideration Shares. The effect of the above transactions for the Company will be equivalent to the net settlement of the put option liability using the Reference Price.

As a result, Sumeru will cease to be the shareholder of the Company and Otkritie will become the owner of 31,347,078 shares (7.40% of the total issued share capital of Polymetal). It is expected that the transfer of shares from the Seller to Otkritie will not have any impact on the free float of the Company and will not affect the total number of shares in issue. Otkritie Group has agreed not to dispose of any interest in 90% of the Consideration Shares during a lock-up period of six months subject to customary terms and exclusions.

Polymetal will finance the net settlement amount of US$68 million from free cash flow from operations.

As a result of the net settlement, Polymetal will ensure it maintains its strong balance sheet position, allowing it both to maintain regular dividend payments and to consider special dividends for the current year in accordance with its dividend policy. Polymetal's liquidity remains comfortable, with approximately US$1.3 bn of undrawn credit facilities available to the Group.

"I believe that the net settlement of the put option is the best outcome for Polymetal and its shareholders given current market conditions", said Vitaly Nesis, the Group CEO. "We are removing the uncertainty from the Company's capital structure and strengthening the balance sheet. Net settlement significantly increases the likelihood of a meaningful special dividend for the current year whilst ensuring adequate liquidity for the development of the Kyzyl project."

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FORWARD-LOOKING STATEMENTS

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