Petropavlovsk summons administrators over Gazprombank debt

  • Petropavlovsk shares suspended
  • Directors called as UK shareholders likely to get nothing

After a near-death experience and three coups in recent years, Petropavlovsk (POG) was entering 2022 as an unlikely survivor, with a market cap of over £1bn. But Russia’s invasion of Ukraine put an end to all that.

The gold miner has now called on administrators after deciding there was no chance he could find $200m (£169m) to pay off Gazprombank, which demanded full repayment of a loan in April. Its actions were suspended Tuesday morning.

Sanctions have limited Petropavlovsk’s ability to move cash and sell gold, although mining has continued amid writing on the wall for its UK listing earlier this month when MHA auditor MacIntyre Hudson resigned after less than a year on the job before signing off on the 2021 accounts.

The remaining shareholders – who have held on as the company’s market capitalization has fallen to less than £50million – are unlikely to get anything given the level of debt.

In a statement, Petropavlovsk said it was still in talks to sell its operating subsidiaries, which own its mines. There is an offer and another interested party, the company said.

“There is no certainty that either will result in a sale and it is highly unlikely that there will be a return to shareholders given the group’s level of debt,” Petropavlovsk said.

There will be a High Court hearing into the administration in London in the coming days.

The probable end of Petropavlovsk comes after 28 colorful years.

Peter Hambro traveled to Russia after the fall of the Soviet Union in search of cheap mines and, together with his partner Pavel Maslovskiy, built a company around the Pokrovskiy gold field in Siberia, which is still part of of his portfolio.

The near-death experience of the 2010s came when the company went into debt just as the price of gold plummeted after the 2011 bull market, which set the previous record high price of over $2,000 l ‘ounce. Debt was raised to build a pressure oxidation (POX) plant, used for harder-to-process refractory ore, but it has kept it running in recent years and boosted cash flow. Thanks to refinancing (net debt peaked at over $1bn despite its market capitalization being below £100m) and a slight rise in the price of gold, the company pulled out of the hole.

Maslovskiy – now accused of fraud by the Petropavlovsk board that replaced him, over dealings between subsidiaries and companies he controlled – served multiple terms as chief executive, stepping down to work as a politician for a time and when new shareholders elected him and Hambro. board in 2017. Maslovskiy was reinstated to the post in 2018, but was kicked out of the board again in 2020 by a group including fellow Russian gold miner UGC and unnamed Russian shareholders who had him supported in the previous vote.

The current management of the company, backed by UGC, came from Highland Gold, a former Aim-listed company whose main shareholder was Roman Abramovich. In recent months, he had signaled to shareholders that a happy ending was unlikely, taking the unorthodox step of retroactively extending his financial year to buy more time to file audited results and therefore continue trading.

In June, the company effectively told shareholders to walk out while they still could, using language similar to Tuesday’s announcement: “It is highly unlikely that any return will be assured for shareholders at the Following [a sale process] given the company’s level of indebtedness.

Carol M. Barragan