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Petropavlovsk hit by sanctions on Gazprombank

The crisis facing Russian miner Petropavlovsk has deepened today as UK sanctions against its main lender left the London-listed company without a buyer for its production.

Gazprombank had an agreement to buy everything Petropavlovsk produces, but the restrictions mean the miner must find a new buyer. However, she admits that this will be difficult due to the restrictions on buying and selling gold in Russia.

Shares in London-listed Petropavlovsk, one of Russia’s largest gold miners, fell another 11% today to 1.6 pence. The formerly FTSE 250 stock was trading at 16p prior to the Russian invasion of Ukraine.

Analysts at Peel Hunt said, “Petropavlovsk has just seen its operations become significantly more complex.”

The broker said the freeze on Gazprombank’s assets effectively prevented Petropavlovsk from servicing its outstanding debt, including an interest payment due today.

As the company evaluates its options for both financing and gold sales, the broker said the Central Bank of Russia could emerge as the buyer of last resort for Petropavlovsk’s gold.

The developments came with gold prices still near a yearly high of $1950 an ounce. It was a mixed session for other mining stocks today, with copper specialist Antofagasta down 4% on the FTSE 100 index after UBS downgraded the stock to “sell”.

UBS said: “In our view, the risk of higher taxes in Chile is no longer adequately priced and copper is likely to benefit the least from supply disruptions.”

Its new target price is 1350p, which compares to today’s 1706p after a fall of 75.5p.

The Swiss bank is more bullish on Rio Tinto after withdrawing its “sell” rating on expectations that iron ore prices will hold in 2022. Shares rose 3p to 5860p during a lackluster session for the London market as the FTSE 100 fell 3.66 points to 7463.72.

Smiths Group, the engineering and airport scanner business, fell 24p to 1494p, although half-year results showed underlying profit up 10% to £171m.

The FTSE 250 index rose 75.68 points to 20,968.87, with home repair business Homeserve rising a further 41p to 847.5p. It rose 15% yesterday after news that Canadian company Brookfield Asset Management was considering a takeover bid.