Petropavlovsk, the Russian gold miner, is spinning off its iron ore division in a Hong Kong listing after becoming the latest mining company to secure Chinese project finance.
The London-listed group – known as Peter Hambro Mining until last year – is planning a listing that could value the iron ore unit at $1.5bn, according to people familiar with the matter. Petropavlovsk declined to comment.
The company’s three early-stage iron ore projects in eastern Russia are close to the Chinese border. These mines will be majority financed and built by Chinese companies, following deals struck last year. Their output will also head to mainland China, where the world’s largest steel industry demands ever more imported iron ore.
Industrial and Commercial Bank of China, the world’s biggest bank by market value, is providing up to 85 per cent of the $500m debt funding for the unit’s second project. ICBC is also in talks to bankroll a third production site.
Petropavlovsk’s spin-off would follow that of UC Rusal, the Russian aluminium giant. Rusal’s Hong Kong listing in January generated significant interest from other resources companies considering the advantages of a Hong Kong listing, said bankers at Renaissance Capital in January.
A listing of the Petropavlovsk ore division – which formerly operated independently as Aricom – would represent another coup for the Hong Kong bourse as it positions itself as the premier financial gateway to China. It would also be the latest twist in the history of Aricom. Petropavlovsk floated Aricom in London in 2003. But it bought back and delisted the company last April in a £295m ($437m) all-share deal. The deal allowed Petropavlovsk to pay down its debt by accessing Aricom’s $257m cash balance.
Jay Hambro, the former chief executive of Aricom who is now Petropavlovsk’s chief investment officer, told the Financial Times he was spending more time in China to strike alliances with banks, contractors and customers. “Our iron ore division is a very China-facing business and it is important to be in the region regularly,” he said.
Chinese finance is chasing early-stage iron ore projects. Chinalco, the state champion in the mining sector, is pairing with Rio Tinto to develop a rich iron ore deposit in Guinea.
In Sierra Leone, China Railway Materials Commercial Corp is financing African Minerals’ Tonkolili mine. Ferrous Resources, the Brazilian iron ore company heading for a London listing later this year, is understood to have been approached by several Chinese companies considering a take-over bid. China is seeking a stable supply stream of iron ore to mitigate pricing shocks for iron ore imported from Brazil and Australia.
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