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Petropavlovsk hit with sanctions against Gazprombank

The crisis facing Russian miner Petropavlovsk deepened today as British sanctions against its main lender left the London-listed company without a buyer for its output.

Gazprombank had an agreement to buy everything Petropavlovsk produced, but the restrictions mean the miner must find a new taker. However, he admits it will be difficult due to restrictions on buying and selling gold in Russia.

Shares of London-listed Petropavlovsk, which is one of Russia’s biggest gold mining companies, fell another 11% to 1.6p today. The former FTSE 250-listed stock was at 16p before Russia invaded Ukraine.

Peel Hunt analysts said: “Petropavlovsk has just seen its operations become significantly more complex.”

The broker said the freezing of Gazprombank’s assets effectively prevented Petropavlovsk from being able to service its debt, including an interest payment due today.

As the company reviews its options for funding and selling gold, the broker said Russia’s central bank could become a buyer of last resort for Petropavlovsk gold.

The developments came as the price of gold was still near a one-year high of $1,950 an ounce. It was a mixed session for other mining stocks today, with copper specialist Antofagasta down 4% in the FTSE 100 index after UBS downgraded the stock to ‘sell’.

UBS said: “In our view, the risk of higher taxes in Chile is no longer properly discounted and copper is likely to benefit the least from supply disruptions.”

Its new price target is 1350p, which compares to today’s 1706p after a 75.5p drop.

The Swiss bank is more bullish on Rio Tinto after removing its ‘sell’ recommendation on expectations that iron ore prices will hold up in 2022. Shares rose 3p to 5,860p in a lackluster session for the London market while the FTSE 100 fell 3.66 points to 7463.72.

Smiths Group, the engineering and airport scanners business, fell 24p to 1,494p despite its half-year results showing a 10% rise in underlying profit to £171m.

The FTSE 250 index edged up 75.68 points to 20,968.87, with home repair firm Homeserve rising another 41p to 847.5p. It rose 15% yesterday after news broke that Canadian firm Brookfield Asset Management is considering a takeover bid.

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