Petropavlovsk investor calls for probe into deals
Big shareholder urges independent review to end turmoil at London-listed gold miner
A forensic examination of all deals and transactions involving Petropavlovsk over the past three years is needed to help end the stand-off that has rocked the Russia-focused gold miner, one of the company’s biggest shareholders has said.
Nikolai Lioustiger, a businessman who controls 12 per cent of the company through investment vehicles Slevin and Everest, said an independent investigation by one of the UK’s Big Four auditors would help “clear the waters” and “restore” shareholder confidence.
“Everest sincerely hopes that by raising its concerns it will motivate as many shareholders as possible to vote at the upcoming general meeting and exercise their right to hold management to account,” Mr Lioustiger said in his first comments on the shareholder dispute.
Petropavlovsk, which owns a state of the art processing plant in Russia, was one of the best-performing stocks in London over the past year.
Aided by a rising gold price, its shares have soared 190 per cent, giving it a market value of almost £1bn and a place in the FTSE 250 index.
However, it was plunged into corporate turmoil last month when its chief executive and co-founder Pavel Maslovskiy and six other directors were ousted by Mr Lioustiger and two other shareholders: UGC, a privately owned Russian gold miner, and Fortiana, an investment vehicle controlled by Russian businessman Vladislav Sviblov.
The company is aiming to hold a general meeting next month to appoint a new board.
Mr Lioustiger said he was concerned by Petropavlovsk’s refusal to explain the strategic rationale for the proposed buyout of its Temi subsidiary as well as Deloitte’s decision to stop auditing the company.
Deloitte chose not to seek reappointment as Petropavlovsk’s auditor because of its length of service and concerns about the “limitations” of the company’s “internal controls and systems for financial reporting”, according to a shareholder circular.
Mr Lioustiger, who has taken legal action to stop the appointment of four interim directors, said that while Deloitte’s decision was itself worrying, he was also puzzled by the company’s continued refusal to explain the details of the Temi transaction.
“If the transaction goes ahead, the company will pay tens of millions more to an unknown counterparty for an asset which does not appear to be worth anything like the amount being paid for it,” said Mr Lioustiger.
He added that “a thorough investigation conducted by a reputable and, most importantly, independent firm would in Everest’s view go a long way to clear the waters and restore shareholder confidence”.
Peter Mallin-Jones, analyst at Peel Hunt, said Mr Lioustiger’s call for an investigation was an attempt to “muddy the waters” around Petropavlovsk and stir up investor concerns ahead of the upcoming general meeting
Petropavlovsk said the rationale behind the Temi deal had been well communicated to investors as an “accretive step” for securing a long-life asset and extending the life of its Albyn mine by a minimum of 19 years.
It added that Deloitte had been the external auditor for the company since 2009 and a process for a new auditor started in 2019. “In their resignation letter Deloitte did mention certain limitations in Company’s financial reporting due to heavy reliance on Excel. [The] previous Board has acknowledged that and as mentioned in the Audit Committee report has fully addressed that point,” it said
Separately, Bonum Capital, a private investment vehicle that declared a 3.5 per cent stake in Petropavlovsk last month, “called for strong and effective management”.
“[We] are against any corporate conflicts that can ruin the capitalisation of Petropavlovsk,” said Murat Aliev, owner of Bonum.