RUSSIAN GOLD MINER IS BANKRUPT

Western sanctions in response to Russia’s invasion of Ukraine have pushed a major Russian gold miner into bankruptcy. Petropavlovsk Plc, one of Russia’s biggest gold producers, with mines in the country’s Far East, has filed in London for “administration”— the British equivalent of U.S. Chapter 11 bankruptcy. The company’s stock has been delisted from the London Stock Exchange, where its shares had traded, and the company is now negotiating the sale of its subsidiaries.

Ironically, it was Western sanctions against Russian banks that inflicted the greatest damage on Petropavlovsk, more so than sanctions on the sale of Russian gold.

Under terms of two loans, Petropavlovsk was required to transfer all its gold production to Russia’s Gazprombank, after falling into default on $288 million of debt in April. Petropavlovsk was unable to refinance, as sanctions have tightened credit conditions in Russia. 

The company says it is in talks with two parties interested in buying its assets. Petropavlovsk warns, though, that shareholders are not likely to receive any returns due to the company’s high level of debt.

Just a decade ago, Petropavlovsk was the biggest gold miner listed on the London Exchange and was on the verge of being included in the prestigious FTSE 100 Stock Index. But management missteps, battles for control of the company, and allegations of embezzlement against co-founder Pavel Maslovskiy all damaged Petropavlovsk’s stability. 

Maslovskiy was arrested last December on fraud charges and is in a Moscow jail, though he says he is innocent. He founded the gold miner in 1994 with London businessman Peter Hambro, whose family made its fortune in banking.