Hong Kong-based electronics firm Kingwell Group Ltd (HKG:1195) announced it had agreed to buy for $13m (€10.4m) a 51% stake in Russian firm Zolotoy Standart, the operator and owner of a gold mine in Russia’s Amur area.
The transaction is in line with the buyer’s recently unveiled plan to evaluate business opportunities within the natural resources and mining sectors as the performance of its electronics business is weakening. Zolotoy Standart holds the exploitation license for a gold mine in Amur’s Zeyskiy region, whose value is at least $19m, according to Kingwell.
As part of the plan, Kingwell is to subscribe for newly issued shares in Zolotoy Standart’s 100% parent company Commerce Prosper Ltd, giving it a 25.5% interest in the company. It is also to buy a 25.5% stake in Commerce Prosper from shareholder Araik Khachatryan. Both transactions will be funded with avalable cash, bank borrowings and the issues of convertible notes, Kingwell said. Commerce Prosper is to use part of the proceeds for general working capital needs, such as the establishment of exploitation and production facilities.
Furthermore, Kingwell will get an irrevocable option to take an additional 14% interest in the target company for $2.66m. The option can be exercised after the first and before the fifth anniversary of the current acquisition deal.