New Petropavlovsk management fighting rebels

Petropavlovsk (POG) is a company in transition, with the new management reporting major profit and production increases achieved by executives it ousted from the company in August. 

Since the removal of several directors and former chief executive Pavel Maslovskiy, the gold miner has cut guidance and upped expected costs, but the strong gold price and completion of the pressure oxidation processing plant (POX) saw production climb strongly year on year.

Petropavlovsk’s operating profit jumped from $3m (£2.3m) to $146m in the first half. However, due to a $122m non-cash impairment relating to the conversion of bonds to equity, pre-tax profit came in at just $17m. The company said this effect would likely be reversed in the full-year results. 

Now two months after the shareholder vote, new chairman James Cameron has said not all Petropavlovsk employees are following directions from the new bosses. 

“[A] lack of co-operation is still continuing from a very small number of senior employees and officers of the company's subsidiaries, who appear to have been subjected to pressure to withhold certain documents and operational data from the board and to disregard the board's instructions in certain respects,” he said. 

Mr Cameron said the structure of more than 30 Petropavlovsk subsidiary companies in Russia was unwieldy, and also called the previous 2020 production and cost guidance overly optimistic. 

The company now expects to produce between 395,000 ounces (oz) and 415,000oz, at a cash cost of around $800-850 an oz, compared to 430,000 - 460,000oz previously.  The company did not give an all-in sustaining cost (AISC) estimate, but this was up almost a fifth in the first half to $1,220 an oz. 

Earlier this month, Petropavlovsk told investors interim chief executive Maksim Meshcheryakov was under investigation by the  Investigative Committee of Russia’s Moscow branch after he called police to help him force his way into the office in late August.  The chairman said Mr Meshcheryakov was currently recovering from Covid-19. 

The company is also carrying on with a forensic investigation into all related-party transactions of the past three years, as voted for in the August shareholder meeting. 

Consensus estimates see final year earnings per share climbing from 1¢ last year to 4¢. 

Petropavlovsk remains a house divided. Recent months have been shambolic, and the further share price fall following the release of these results aptly reflects this. Sell.