Next Friday (29 June), for the second year in a row, the fate of Petropavlovsk’s (POG) board will be decided at an annual general meeting (AGM). Shareholders have a straight choice: back the victors of last year’s coup and a chief executive three months into the job on the one hand, or co-founder Pavel Maslovskiy and ex-directors Sir Roderic Lyne and Robert Jenkins on the other.
The motions to overhaul the gold miner’s leadership were tabled in May by investors CABS and Slevin, who collectively own around 9.1 per cent of the company. They have since received support from Kazakh oligarch Kenges Rakishev, who became the company’s largest investor when he bought a 22 per cent stake from Viktor Vekselberg’s Renova Holdings at the end of 2017.
Ahead of the AGM, the stand-off has become increasingly acrimonious. Petropavlovsk has accused the requisitioning shareholders of hiding behind a “cascade of shell companies and offshore trusts”, which casts “a veil of secrecy over their intentions”, and cited a conflict of interest in removing Bektas Mukazhanov, Mr Rakishev’s non-executive appointee to the board. The miner has also accused CABS and Slevin of failing to engage with the board, questioned the independence of Sir Roderic and Mr Jenkins, and pointed to a 96 per cent share price decline in the five years before last year’s boardroom overhaul as evidence of a lacklustre management team. All this noise, we understand, has also hampered refinancing efforts.
In turn, the Russian miner has received backing from investors including 11 per cent-shareholder Sothic Capital, as well as proxy advisory firms Glass Lewis and Institutional Shareholder Services.
For their part, the requisitioning shareholders accuse the incumbent management of failing to provide leadership, and cite the apparent dissatisfaction of the workforce. A letter from a trade union representing more than 2,000 employees, seen by the Investors Chronicle, paints a picture of a remote leadership no longer trusted by staff. It also reiterates worker calls for the return of Dr Maslovskiy. The proposed board says that can only occur with the removal of the current directors, who the ex-chief executive says scrubbed mention of a proposed $500m bond issue from the minutes of a meeting last June, shortly before his resignation as chief executive.
Though the timing and drafting of the board minutes are disputed by the company, a Petropavlovsk spokesperson said the bond proposal was taken seriously, and only decided against after a study that took several weeks to complete.
Though focused on the boardroom, this amounts to a battle for the final-stage commissioning of a long-awaited pressure oxidation (POX) hub. Petropavlovsk is confident it has the personnel, skill and workforce engagement to go it alone; the proposed board argues the chance of failure will be high without the expertise and loyalty marshalled by the former chief executive. At stake is a good chunk of the company’s future net present value, as the POX hub will allow Petropavlovsk to process its 4m ounces of refractory ore reserves and make the most of the underground operations being developed at Pioneer and Malomir.
