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Polymetal buys into microcap miner

While Cyprus is popular with Russians, this Polymetal investment has come out of left field
Polymetal buys into microcap miner
  • Polymetal takes 22 per cent stake in copper junior for £2m
  • Chesterfield Resources focuses on copper deposits at old mine sites in Cyprus
IC TIP: Buy at 1,611p

Polymetal (POLY) has invested in a minor prospective mining company, in a move distinct from its focus on sizeable gold assets in Russia. The FTSE 100 acquired a 22 per cent stake in Chesterfield Resources (CHF), sparking a 27 per cent rally in the target's valuation to just over £10m.

Chesterfield, which has only recently reached the drilling stage at its project in Cyprus, is looking at previously-identified copper deposits on the Mediterranean island. It listed in 2017, and has since picked up various exploration licences in Cyprus. 

Alongside the Polymetal investment, the junior will raise £400,000 from other shareholders. Chesterfield will also give executive chairman Martin French 1m share options, with an exercise price of 9p. The Financial Conduct Authority has to approve a prospectus for the deal to go ahead. 

A Polymetal spokesperson told Investors Chronicle the deal was in line with the company's "strategy of opportunistic investment in junior miners". 

"We have repeatedly voiced interest in investment opportunities with copper mineralisation and our preliminary assessment shows that this project may have a good exploration potential," the spokesperson said. 

The Russian miner's share price has come down from its 2020 high of over 2,000p as the gold price has fallen, but is still up around 40 per cent in 2020. Its dividend, expansion work and profitability even if the gold price continues to fall all mean one off-piste investment (worth half a per cent of Polymetal's expected 2020 capex of around £400m) does not shift our bullish view of the company. Buy at 1,611p. 

Last IC View: Buy, 1,938p, 26 Aug 2020