London-listed miner Petropavlovsk says sanctions prevent it from selling gold | Mining

The Russia-focused mining company Petropavlovsk has said it is unable to offload its gold or repay a loan because of the inclusion of Gazprombank on the UK’s sanctions list after the invasion of Ukraine.

Shares in the London-listed company tumbled by a fifth in early trading on Friday after Petropavlovsk revealed it was “urgently” assessing its business operations and financing arrangements as a result.

“The group has substantial commercial and financial relationships with Gazprombank and its subsidiaries,” said Petropavlovsk, whose market value has fallen by more than 90% since the invasion last month.

“The company is urgently considering with its advisers the implications for the group’s activities and financing arrangements resulting from Gazprombank being designated for the purpose of an asset freeze.”

The FTSE 250 company said its relationship with Gazprombank included a $200m (£151.6m) loan, a $86.7m revolving credit facility and it had been forced to halt a $560,000 interest payment due on Friday.

The financial relationship also means Gazprombank acts as an “off-taker of 100% of the group’s gold production”.

Petropavlovsk said: “Gazprombank’s designation under regulations for the purposes of asset freeze prohibits further sales of gold by the group to Gazprombank at present. Restrictions on purchasing and selling gold in Russia may make it challenging to find an alternative purchaser for the group’s gold output.”

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Petropavlovsk, which said none of its subsidiaries faced any sanctions from the EU or the UK, US or other countries, plans to make another announcement in due course.

This month, the Russian billionaire Sergey Sudarikov, who part-owns the sanctioned Credit Bank of Moscow, bought a 29% stake in Petropavlovsk.

Sudarikov, who is behind the Region financial group, bought the stake from Konstantin Strukov, who owns the gold miner UGC, and is the largest shareholder in the company.

Petropavlovsk was founded as Peter Hambro Mining in 1994. Peter Hambro was ousted in 2017 after an attempted boardroom coup.

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