Billion-Pound Miner Petropavlovsk Now a Penny Stock Due to War

(Bloomberg) — Russian miner Petropavlovsk Plc extended a slump that has wiped out more than 90% of its value this year after warning that U.K. sanctions against its main lender, Gazprombank, mean it is currently unable to sell gold.

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Gazprombank, which was added to Britain’s sanctions list on Thursday in response to Russia’s invasion of Ukraine, acts as an off-taker of 100% of the company’s gold production under the conditions of two loans, Petropavlovsk said in a statement Friday. Restrictions on purchasing and selling gold in Russia may make it “challenging” to find an alternative buyer, it also said. The London-listed shares fell as much as 33% to a record low of 1.2 pence.

Petropavlovsk has been hit particularly hard by the rout in Russian stocks following Moscow’s invasion of Ukraine and subsequent sanctions. A market capitalization of just under a billion pounds ($1.32 billion) only five months ago has since crumbled to about 65 million pounds.

The selloff has made the stock one of the cheapest in London, trading at 0.9 times forward earnings — a big discount to the FTSE 100’s 11.4 times.

Petropavlovsk also warned on Friday that sanctions mean it cannot make an interest payment of $560,000 due today under the terms of a $200 million term loan with Gazprombank. It is a condition of that loan and $86.7m in revolving credit facilities that Gazprombank acts as off-taker of all the company’s gold production.

“This asset freeze and the complications it introduces to POG’s operation mean the potential longer-term value we can see in the group looks under considerable jeopardy,” Peel Hunt analysts Peter Mallin-Jones and Tim Huff wrote in a note.

Petropavlovsk is one of just a few Russian stocks still trading in London after the London Stock Exchange halted trading of Russian depositary receipts earlier this month in order to maintain an orderly market.