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No problem Rusty and well said. Cheers DK.
Thank you Dark Knight 2020.
Not a lot we did not know, most important sentence right at the bottom.
“If someone is keen to get control they should do it via either a tender offer or negotiation with the board, not in any underhand way.”
So my message to UGC, Put up, Or, SHUT UP. And let the board run the company, for the benefit of ALL stakeholders, and not just a chosen few.
Thank you, Hitman10
UGC said the pox hub was a “high quality asset” but that it was not confident Petropavlovsk had the right strategy because it was “still running below 100 per cent utilisation and it is dependent on buying refractory concentrate from third parties”.
It added that it was concerned about the company’s record on cost control and strategic investments, and that a board with greater independence was needed.
“Petropavlovsk still remains a fundamentally undervalued company,” it said. “Due to the increase in the gold price, the company’s shares have risen, but fundamentally very little has changed.”
For Mr Branis, it is of “paramount importance” that Petropavlovsk maintains a strong, independent board. To that end Prosperity has also requested a general meeting to appoint five former directors to the board along with two new independent non-executive directors.
While its resolution will need the support of other shareholders to pass, analysts expect a higher turnout than at the AGM, when only 73 per cent voted.
“Investors will be fully aware of the decisions they are making this time,” said Mr Branis, adding that Petropavlovsk should not be “subordinate to anyone” as long as it remains a public company.
“If someone is keen to get control they should do it via either a tender offer or negotiation with the board, not in any underhand way.”
It now has just four board directors, one of whom is a UGC-appointed nominee.
UGC, which is owned by billionaire Konstantin Strukov and claims to be one of Russia’s five top gold companies with production of more than 450,000 ounces last year, has strongly denied claims it engineered the AGM vote by working in concert with Nikolai Lioustiger, who controls 12 per cent of Petropavlovsk.
However, it has not said why it backtracked on promised support for the board — and until now said nothing on the strategic thinking behind its 22 per cent stake, which it bought in February from billionaire businessman Roman Trotsenko to become Petropavlovsk’s biggest shareholder.
“We are a strategic investor in gold,” UGC said. “We acquired a stake in Petropavlovsk after analysis of publicly available information and having a clear belief that the company has good potential.”
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UGC’s holding has changed hands several times over the past three years, each time leading to boardroom upheaval.
In 2017 it was used by Viktor Vekselberg, another Russian billionaire, to remove Mr Hambro as chairman. That led to Mr Maslovskiy’s resignation as chief executive but a year later the same stake was used by Kazakh businessman and cryptocurrency entrepreneur Kenes Rakishev to reinstate him.
Following last month’s boardroom bloodbath, UGC has said it will support an interim board including Mr Hambro as chairman until Petropavlovsk can hold another general meeting to elect a new slate of directors.
However, Mr Lioustiger has launched legal action to have the interim directors removed.
In court documents seen by the Financial Times, Mr Lioustiger, who has been a shareholder since 2018, claimed Petropavlovsk had tried to “subvert” shareholder democracy with the appointment of the temporary board” and could use an acquisition or convert a bond to dilute his holding.
Gervais Williams, fund manager at Premier Miton Investors, which owns shares in Petropavlovsk, said he was “confused” about the motivation for the recent boardroom ructions, saying Mr Maslovskiy had done “an outstanding job”.
“Maybe there is some aspect of UGC’s operation that would like to have access to pox hub,” he said. “It’s the only rationale I can think of.”
UGC said the pox hub was a “high quality asset” but that it
Petropavlovsk shareholders thought the company had turned a corner after years of infighting in which a series of Russian and Kazakh billionaires fought for control.
But after a stellar year in which the London-listed but Russia-focused gold miner’s shares soared 150 per cent, pushing it into the FTSE 250, its stock and reputation are on the line again following the latest boardroom bloodbath.
After chief executive Pavel Maslovskiy and six other directors were ousted at the end of last month in a coup the company claims was orchestrated by a rival Russian miner and 22 per cent shareholder UGC, its stock price sank 20 per cent, although they have since recovered a large chunk of the losses.
For long-suffering investors the turmoil at a company that was finally hitting the good times thanks to a rising gold price and a state of the art processing plant is a reminder of the difficulties of doing business in Russia without the protection of a controlling shareholder.
Founded in 1994 by Mr Maslovskiy and Peter Hambro, a scion of the London banking dynasty, Petropavlovsk was once worth £2.5bn before it almost collapsed in 2015 under a mountain of debt.
A relatively high-cost producer, it has spent most of the past decade working on plans for a state of the art pressure oxidation plant, one of just two in Russia.
Commissioned in late 2018, the so-called pox hub allows it to produce gold from refractory ore, which is difficult to process but abundant in Russia. Including third party feed, the hub is expected to produce around 365,000 ounces of gold this year, worth more than $650m at current prices.
“It is a very valuable asset,” said Alexander Branis, chief investment adviser at Prosperity Capital Management, a Russia focused asset manager that controls a 20.5 per cent stake in Petropavlovsk. “Russian gold producers used to export concentrate to China for processing but this is becoming more and more difficult for environmental reasons.”
Sam Catalano, analyst at Canaccord Genuity, said the pox hub development?“provides a key strategic advantage for Petropavlovsk not only to treat its own significant refractory reserve base but to process previously under-appreciated or ‘stranded’ refractory orebodies”.
Petropavlovsk said that had investors known UGC and three other shareholders intended to use their combined 39 per cent stake to in effect gain control of the board, more would have voted at last month’s annual meeting and the move could have been blocked.
It now has just four board directors, one of whom is a UG
@RustyBucket, you can access FT articles if you search for the headline page on Google search and click on through there. One of the ways to get around the FT firewall.
Dark Knight 2020 that just brings up a subscription page. ?
https://www.ft.com/content/aaa3c0cc-f496-4e37-8744-52399d6c91ec