Gold miners don’t belong here // The second company in the sector postponed its IPO this year

Statements by the US Federal Reserve on the possibility of an accelerated rate hike prevented the gold mining company Nordgold of the Alexei Mordashov family from holding an IPO. Nordgold decided to postpone the placement with a potential volume of more than $ 1 billion due to “uncertainty and volatility in the commodity sector.” This is the second such case for Russian gold miners: in March, Vysochaishy refused an IPO. According to analysts, gold prices are likely to decline in the coming months.

The Nordgold family of Alexei Mordashov decided to postpone the initial placement, it follows from her message. The company with assets in Russia, Africa and Kazakhstan was planning to get a listing on the London Stock Exchange (LSE). Ordinary shares were admitted to trading on the Moscow Exchange.

As part of the IPO, it was planned to place existing shares, the free-float should be at least 25%. As part of the placement, the Mordashov family structures were supposed to offer their securities: Ocean Management Limited, the beneficiary of which is Alexey Mordashov (the total share in Nordgold is 35%), as well as his sons Kirill (32.5%) and Nikita (32.5% ).

According to Reuters, Gazprombank valued the entire company at $ 5.1-6.6 billion, and Renaissance Capital at $ 5.4-6.3 billion.

Nordgold CEO Nikolai Zelenskiy, quoted in a posting on the LSE, explained the decision with recent comments from the US Federal Reserve, pointing to an acceleration in expected interest rate hikes. On June 17, the Fed kept the base rate at 0-0.25% per annum and predicts its increase in 2023. At the same time, St. Louis Fed President James Bullard said in an interview with CNBC that he was expecting a rate hike at the end of 2022. According to Nikolai Zelenskiy, this has created significant uncertainty and volatility in the commodity sector, which affects the gold market and related assets. “Nordgold has determined that it would be unwise to conduct an IPO at this stage,” he said. No new IPO dates have been announced.

This is the second failure of the IPO of a Russian gold mining company in 2021. Trading in Vysochaishy was due to begin on the Moscow Exchange in March this year, but the day before the start of trading, the company decided to postpone the placement “due to increased market volatility in both global and Russian capital markets.” The company promised to hold the new IPO in more favorable conditions.

How US inflation soared in May spurred interest in gold

The gold price is now at $ 1,777 per troy ounce. Gazprombank’s Gold: Long-Term Bullish Trend Slows Down about the possibility of two scenarios… The optimistic one assumes a breakthrough of the gold price above the historical high on the horizon of three months and further growth to the target of $ 2500 per troy ounce. But to implement this scenario, long-term powerful growth drivers are needed, which have not yet been observed. The second scenario assumes the price consolidation at the current levels with the resumption of the fall to the annual minimum of $ 1673.3. According to the bank’s analysts, this will mean the end of the bullish trend in the gold market and the likelihood of such a scenario is quite high.

Evgeny Zainullin

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