A reassuring update from Russian gold miner Polymetal (POLY) helped lift its shares 15.9% to 392.9p while a much more gloomy assessment of the immediate future from its counterpart Petropavlovsk (POG) saw its stock slump 6.5% to 4.66p.
While both are down by similar amounts (more than 60%) since Russia’s invasion of Ukraine, recent signs that Polymetal is in a better place are helping its share price achieve a slightly more meaningful recovery.
Its latest statement showed it is still able to sell its Russian gold output, with strong demand from the domestic market, and the company retains the ability to export the precious metal to Kazakhstan and ‘East Asia’ too.
The company is being affected by increased freight and logistics costs but, with assets in Kazakhstan, it does also benefit from some diversification.
Polymetal has appointed a new board, after a wave of resignations, with shareholders set to vote on the appointments at an investor meeting on 25 April, when there may be some attention on a recently mooted plan to spin-off the Kazakh assets.
PETROPAVLOVSK CAN’T SELL GOLD
Production guidance remains in place and projects nearing completion are continuing. Other developments have been suspended and dividends are off the table for now with net debt increasing from $1.65 billion as at 31 December to $1.94 billion.
The company can point to $400 million in cash deposited with non-sanctioned financial institutions and $500 million of undrawn credit from non-sanctioned Russian banks.
The situation for Petropavlovsk looks less encouraging. The company’s close relationship with Gazprombank, which has had its assets frozen by sanctions, means it is unable to pay its debts to the Russian lender.
Because the latter is also the off-taker of Petropavlovsk’s gold production (under the loan agreement struck between the two parties) the company is effectively prevented from selling its gold.
A debt restructuring is looming, with the firm consulting its advisers, and this could result in further losses for shareholders.
