Severstal plans London float

RUSSIAN steel group Severstal is expected to launch a float of its gold mining division in London later this year.

Severstal, which owns a portfolio of gold assets in Russia and west Africa, is likely to sell off around 30-35 per cent of the company, retaining a large controlling stake for itself. The float is likely to value the company at as much as $4bn (£2.56bn.

Gold companies have been buoyed recently by a meteoric rise in the price of the precious metal, which has gained 25 per cent in the past year thanks to a declining trend in production and strong demand.

Prices, currently well above $1,250 an ounce and rising, are widely expected by the industry to hit $1,500 an ounce by the end of 2010.

Severstal has already heavily committed itself to a continued rise in gold prices, having upped its stake in Canadian gold miner Crew Gold to 93.4 per cent last week.

News of Severstal’s plans comes after the flotation of African Barrick Gold earlier this year by its parent Barrick Gold, the world’s largest gold miner. ABG raised over £500m from selling off a quarter of the company.

Those involved in the current plans are thought to be confident that the high gold price will shore up demand from investors, who have been wary of other IPOs so far this year.

Severstal declined to comment.