Gold: Petropavlovsk plans to sell its mines in Russia and collapses in London

Posted 14 April, 2022

The mining company Petropavlovsk, based in London but specializing in gold extraction in the Russian Far East, lost more than 20% on Thursday morning on the London Stock Exchange after announcing that it was studying the possibility of separating from its operational subsidiaries. because of the consequences of the sanctions.

Petropavlovsk's operational assets consist in particular of three mines and a processing plant in an area bordering China in eastern Russia, she said.

The company explains that it is particularly affected by the British sanctions, which do not target it directly but affect the Russian bank Gazprombank, with which it sells its gold production and has credit facilities.

Petropavlovsk says it has appointed management consultancy AlixPartners to help it “explore its options,” including “selling all of the company's interests in its operating subsidiaries as soon as possible,” according to a statement.

But “it is not currently clear” (to know) how much these asset sales could bring to the shareholders or to the creditors, or even if they will bring something, continues the press release.

Petropavlovsk fell 20.33% to 2.39 pence on the London Stock Exchange on Thursday shortly after 10:00 GMT, after having lost more than 87% of its value since the start of the year.

The Russian bank Gazprombank was placed on the list of establishments sanctioned by the United Kingdom on March 24, a month after the Russian invasion of Ukraine.

The consequence for Petropavlovsk: the payment to Gazprombank of interest of around 500,000 dollars and debt repayment of 9.5 million dollars could not be made.

The sanctions also prevent the sale of gold to the bank and the group says it is "exploring its options, including with other potential buyers".

But "the price at which the Russian Central Bank buys gold, which effectively constrains the prices offered by commercial buyers, is set at levels generally lower" than the London market, posing a risk to the group's cash flow, according to the press release.

The company also warns of the legal difficulties in getting cash out of Russia, which could seriously complicate the payment of some of its creditors.

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