Russian miner collapses as sanctions take toll
PETROPAVLOVSK collapsed into administration as it became the latest Russia-focused firm to be felled by sanctions imposed after the invasion of Ukraine.
The gold miner, which is based in the UK but has most of its operations in Russia’s Far East, has asked the High Court to appoint administrators and also requested its shares be suspended from trading on the London Stock Exchange.
The group has also asked for its shares to be suspended on the Moscow market.
Prior to the war, Petropavlovsk was one of the biggest gold producers in Russia and was previously on the cusp of joining the FTSE 100 index.
It was founded in 1994 by Peter Hambro, a member of a British banking dynasty, and Russian businessman Pavel Maslovskiy, who is languishing in a Russian jail after being arrested on fraud charges in 2020.
The firm gained a reputation for boardroom turmoil as several oligarchs and businessmen battled for control of the company. But its share price has collapsed by over 90pc in the months following the invasion of Ukraine as sanctions raised doubts about its ability to continue trading.
The stock began the year valued at around 19p but in its last session prior to its suspension it was changing hands at 1.2p.
Pressure on the company intensified after its sole lender and gold buyer Gazprombank, an offshoot of Russian energy giant Gazprom, was slapped with sanctions by the Government and had its assets frozen.
The move effectively blocked Petropavlovsk from paying down its loans and selling its gold, leaving it scrambling to find new buyers and other sources of funding. Gazprombank then demanded the company repay around £169m in debt owed to it by the firm. But Petropavlovsk admitted it was ‘unable’ to repay the loans due to the restrictions. The firm is also struggling to refinance a £252m bond which is due to mature in November.
While the company was in talks with two potential buyers for its operations in Russia, it warned there was ‘no certainty’ a sale would be completed and it was ‘highly unlikely’ shareholders would receive any return due to its debt levels. According to evidence filed to the High Court, the firm had assets worth around £1.4bn and debts of £843m at the end of May.