Almost six months after Russia's invasion of Ukraine, the initial sell-off has largely been proved prudent as companies go bust because of sanctions and others struggle to keep trading even while maintaining a London listing.
This week, administrators and a court confirmed the sale of delisted gold miner Petropavlovsk, which went under because sanctions blocked its ability to pay off a loan from Gazprombank, which demanded full repayment in April.
The $600mn (£494mn) sale price from Ural Mining & Metallurgical Co (UMMT) will go to creditors, not shareholders, however. "The administrators anticipate that the sale proceeds will be sufficient to pay the creditors in full but without any return for shareholders," said Opus Business Advisory Group. Opus partner Allister Manson said last month a sale of Petropavlovsk's assets would mean the board had "fulfilled its duty to deliver the best outcome for UK creditors and western bond holders".
Unlike Petropavlovsk, Evraz (EVZ) has been able to stay in business, although its shares are suspended in London. In its half-year results this week the company said it was facing “significant corporate governance and operating challenges”. The former includes a board of only two people, the chief executive and CFO, no broker and Computershare Investor Services cutting its services as of 19 August.
This means Evraz will have to maintain its own register of shareholders, and can no longer use the Crest electronic transfer system. “To secure title to the company’s shares, shareholders may wish to convert their electronic shares into physical paper shares,” the company said.
The steel and coal giant scraped into a first-half profit, of $6mn (down from $1.2bn last year), and cash profits were actually stronger year on year. But even Glencore (GLEN) levels of profit would not mean much to remaining UK shareholders, as sanctions mean it could not pay out dividends.
Meanwhile, gold miner Polymetal (POLY) is still trading in London but working on a sale as sanctions and services company exits from Russia make life difficult.
“We, as the board … need to take a very close and serious look at what the strategic opportunities are for the company, given the unprecedented level of external challenges and external restrictions, which impact the business of the company,” said chief executive Vitaly Nesis.
The options are to sell the company to a Russian buyer, arrange a management buyout, or split the company up. Initially, a spin-off of the Kazakh assets was seen as the most likely option.
Nesis said last week on a call with analysts that gold sales to Asia had continued, although Covid-19 restrictions had limited these in the first half.
Selling to the Russian central bank is also possible, but means a big discount for the seller and potentially breaching more sanctions rules. Polymetal’s non-precious metals inventories also climbed in the first half because it bought up much of the stocks of mining services companies that quit Russia in response to the war.
When the invasion happened, many investors bought into Polymetal as it had already announced a dividend and so its yield skyrocketed – this bet did not pay off, however, as the final dividend was cancelled. Nesis told investors not to hope for an interim payout, either, saying it was “more or less impossible to pay a dividend” given various sanctions.
His own holding is blocked from a payout as well, as it is in the form of National Settlement Depository (NSD) shares: “Wiping out NSD shareholders definitely is something that would worry me personally very much, because a substantial chunk of my personal net worth is in that format of shares, even at these depressed price levels,” he said.
