Russian gold miner Petropavlovsk axed its production forecasts for this year and delayed the full commissioning of a key project, stoking concerns over a company already beset by feuds between its leading shareholders.
The miner, which is a member of the London’s FTSE 250 index and one of the biggest gold producers listed in the City, said it expected to produce 560,000 to 600,000 ounces of gold in 2020, down from a previous prediction of 620,000 to 720,000 ounces.
It blamed the shortfall on “logistical issues” associated with the pandemic and lower-grade metal from both third parties and its own gold production.
Shares in Petropavlovsk dropped 6 per cent to 30.75p in early trading on Friday. They have tumbled 20 per cent since hitting a seven-year high of almost 40p in July.
The weaker production outlook comes days after the Financial Times revealed that the miner’s interim chief executive Maxim Meshcheryakov had to force his way into the company’s Moscow office last month following a stand-off with staff, who remain loyal to his predecessor Pavel Maslovskiy.
“This smacks of a management team that does not have a handle on operations,” said one analyst. “There is little positive in this release,” strategists at Berenberg added.
Petropavlovsk was plunged into fresh corporate turmoil in June when UGC, a rival Russian miner, and a group of other investors ousted half of the company’s board, including Mr Maslovskiy.
A move to reinstate Mr Maslovskiy and four other directors by Prosperity Capital Management, a Russia-focused asset manager that controls a large stake in Petropavlovsk, was defeated in August. Mr Meshcheryakov was subsequently appointed interim CEO a week later, a surprise given his lack of experience in the gold industry.
Directors of four Petropavlovsk subsidiaries recently wrote to the company’s board to raise concerns about Mr Meshcheryakov’s credentials and his independence. The company claims he has 17 years’ experience in the mining industry. Petropavlovsk plans to publish its interim results this month following the appointment of MHA MacIntyre Hudson as its new auditor.
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Traders said Friday’s update — the first since June’s boardroom coup — could be an attempt to “clear the decks” before the publication of half-year figures.
In the update, Petropavlovsk also said it would not complete work on a new flotation plant at its Pioneer mine in Russia’s Far East Amur region until the second quarter of next year because of a “desire to avoid full commissioning during the winter months”.
The new facilities at Pioneer — considered one of the largest gold mines in Russia — are needed as Petropavlovsk starts to mine non-refractory ore, which it plans to process as its state-of-the art pressure oxidation hub.
Commissioned in late 2018, the so-called pox hub allows Petropavlovsk to produce gold from refractory ore, which is difficult to process but abundant in Russia.
The company also flagged higher capital expenditure, which it expected to come in at $90m to $100m, against previous guidance of $70m to $80m, as well as increased costs from its own production.
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