Russian gold miner Nordgold has pulled its plan to list in London just two weeks after its announcement, citing volatility in the price of the precious metal.
Nordgold said on Tuesday it would “not be sensible to pursue an IPO at this particular juncture”, following a 6 per cent drop in the gold price since the company announced its intentions on June 3.
The miner, which is owned by the family of billionaire Alexei Mordashov, had planned to sell a 25 per cent stake to investors, including via a secondary listing in Moscow. The company held meetings with 220 investors, according to one person familiar with the deal.
Mordashov had targeted inclusion in the FTSE 100 index and his family were set to make about £1bn from the listing. There was a “strong appetite for gold stocks in the market, also gold stocks from Russia”, he told the Financial Times on announcing the London listing plans.
But the announcement last week by the Federal Reserve that it may raise interest rates in 2023 dented investor enthusiasm for gold, according to the company.
“Recent central bank comments indicating an acceleration in expected interest rate rises have created significant uncertainty and volatility in the resources sector, in particular impacting gold and gold equities,” Nikolai Zelenski, Nordgold chief executive, said in a statement.
Nordgold has nine mines — four in Russia, three in Burkina Faso and one each in Guinea and Kazakhstan. It produces more than 1m ounces of gold a year and reported earnings before interest, tax, depreciation and amortisation in excess of $1bn last year.
Nordgold was previously listed in London but left the exchange in 2017. “We delisted the company always with an intention to float it again under favourable conditions,” Mordashov said in an interview with the FT this month.
Nordgold had hoped to attract investors by paying higher dividends than its peers in North America. It is developing two new gold mines in the Far East of Russia, which will help it boost production by an expected 20 per cent over the next five years.
In contrast, production at the world’s largest gold miner, Newmont, is set to remain roughly flat until 2025.
Nordgold was only planning to sell existing shares and not raise any capital in the listing, which means it can wait for a better listing window, according to people familiar with the deal.
Many investors believe the Fed is in control of inflation and that they do not need gold as a hedge in their portfolio, according to people with knowledge of Nordgold’s listing plans.
Since the Fed’s comments, shares in gold miners as measured by the NYSE Arca Gold Bugs index have fallen 9 per cent.
Shares in Canadian gold miner Endeavour Mining have fallen 4 per cent since the company listed in London last week.