Russian gold miner Petropavlovsk collapses as sanctions claim major scalp

After being hit hard by Western sanctions, a London-listed Russian miner has been forced to go bankrupt.

Petropavlovsk has reported that its share price fell 94pc in the past year. It will now apply for administration at The High Court.

It also requested that trading in its shares and convertible bonds be suspended on the London Stock Exchange.

Due to Russian sanctions, Petropavlovsk is having difficulty repaying nearly $300m to Gazprombank, its largest lender.

Due to the ban on Russian firms being offered services by City firms, it has seen a significant exodus in its advisers.

Although the miner claimed it had received an offer from one party, and another proposal for acquisition, it warned that it was unlikely there would be any returns to shareholders if a deal is made due to its high debt levels.

The Board will seek a hearing of the administration application at the High Court in London in the coming days. There will be a further announcement when the date of the hearing is known.

POG has also requested the halting of trading on the Moscow Exchange.

Petropavlovsk PLC (LON:POG) Q1 2022 Production and Sales Report

Official Update 

In light of the above, the Company has requested a suspension from listing of the Company’s ordinary shares from the premium listing segment of the Official List and of the guaranteed convertible 8.25% bonds due 2024 issued by Petropavlovsk 2010 (the “Convertible Bonds”) from the Official List, and a suspension of trading on the London Stock Exchange. A request is also proposed to be made for the cessation of trading of ordinary shares on the Moscow Exchange in due course and for the suspension of trading of the US$500 million 8.125% guaranteed notes 2022 issued by Petropavlovsk 2016 Limited the “Notes”) from the Irish Global Exchange Market.

As announced on 20 April 2022, Gazprombank (“GPB”) demanded immediate repayment of approximately US$201.0m (including accrued interest) due under the Company’s Committed Term Facility Agreement (the “Term Loan”) with GPB, and subsequently assigned all its rights under the term loan to Joint Stock Company UMMC-INVEST. The Company is unable to repay the Term Loan at the present time and, for a number of reasons (including the difficulties previously announced), the Board considers it very unlikely that it will be able to refinance the Term Loan in the short term and has to date been unable to do so. The Board is also mindful of the Group’s obligations to the holders of the Notes and the Convertible Bonds (in respect of which US$304 million and US$33 million, respectively, remains outstanding).

As previously announced, the Company engaged advisers to assist the Board in exploring a sale of the Company’s entire interests in its operating subsidiaries. The Company has received an offer from one party to acquire and a proposal from another party expressing an interest in the acquisition of those subsidiaries. Discussions with both parties are ongoing. There can be no certainty that either will result in a sale and it is highly unlikely that there will be any return to shareholders given the level of the Group’s indebtedness.

The evidence to be filed with the High Court includes the following statements:

Having consulted with Mr Stanislav Ploshchenko, the Group’s Chief Financial Officer (“CFO”), and to the best of my knowledge, information and belief, as at 30 June 2022, the Company had assets (listed at book value) amounting to approximately US$1,619 million; liabilities (including contingent and prospective liabilities) of US$1,703 million; and net liabilities of US$84 million. Meanwhile, the Group had assets (listed at book value) amounting to approximately US$1,675 million; liabilities (including contingent and prospective liabilities) of US$1,002 million; and net assets of US$673 million, all as at the end of May 2022. I am not aware of any material changes in assets or liabilities since that date.

These figures are management estimates and have not been audited or independently reviewed. The information about assets and liabilities represents the Company’s standalone (not consolidated) estimated position.

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