For a company on its knees at the start of the year, shares in gold miner Petropavlovsk (POG) have responded very well to a major refinancing. Anyone who participated in the rights issue at 5p per share will have made 45% profit on their investment in just three months as the shares now trade at 7.24p.
But that gain is unlikely to be enough to offset the losses most shareholders will have nursed prior to the refinancing when the stock was priced to go bust. The metals producer is now trying to prove to the market that the financial injection wasn't just a quick fix and that the business has a viable long-term future.
Analysts have been on a trip to Russia to get a feel for how the business is being realigned in a lower gold price environment. Canaccord Genuity has now raised its price target for the stock from 10p to 12p following a tour of Petropavlovsk's four mining operations in the Amur region. 'We believe that the return of Pavel Maslovskiy as Chief Executive (from November 2014) is a positive move (he was a Senator in the Russian parliament between 2012 and 2014) as was the appointment of Dmitry Chekashkin as Chief Operating Officer in 2013,' says Canaccord. 'The company has a credibility issue to overcome in the market, but if it can hit its anticipated production and cost targets, aided by further non-refractory exploration success and a positive decision on underground development at Pioneer then we believe that a positive re-rating of the shares is possible.'
There's big news scheduled for August when Petropavlovsk announces its revised reserve and resource statement. Expect to see the miner have bigger volumes of non-refractory ore which should keep existing processing facilities ticking over; thereby further delaying the need to complete POX processing facilities. The latter is the expensive set-up required to treat complex refractory ore. Such news would be well received by the market, so perhaps the stock isn't a complete write-off if it can deliver operational excellence. That said, high debt still lingers in the background.
