Shares in Russia-focused gold mining company Petropavlovsk plummeted 15 per cent yesterday on news the indebted miner was seeking a rights issue to placate its senior lender banks and bond holders.
A decline in the price of gold in recent years has hit the London-listed miner, which had net debt of $924m (£568m) as of June this year.
Yesterday, Petropavlovsk said the “current market and geopolitical environment” had hit its aim to achieve full repayment of its existing bonds upon maturity.
Petropavlovsk said it would seek to refinance $310.5m of convertible bonds due in February 2015, and has had “detailed discussions” with bondholders on its proposals.
Petropavlovsk also said its senior lenders, Russian banks Sberbank and VTB, had made clear they wanted a refinancing agreed “as soon as possible”.
The banks had indicated, however, to Petropavlovsk that they would be willing to relax covenants on loans due at the end of this year as a refinancing proceeds.
Canaccord Genuity analysts said: “Management has to chart a difficult course between raising sufficient funds to reduce the debt level to something manageable without diluting shareholders too much.”
Concerns on investments in Russia have risen this year as political relations have soured with the west, but Petropavlovsk stressed it had not been directly affected by either sanctions on Russia or the Ukraine conflict, with the mining company’s main operations in the Amur region in eastern Russia.
Petropavlovsk has a five-year plan in place to achieve repayment of its total debt by 2019.