Russian mining companies on the London Stock Exchange have been hit hard by the risk of sanctions. Today I want to look at three LSE shares that have each fallen by around 80% over the last month.
Coal and steel group Evraz (LSE: EVR) said on Wednesday that it didn’t believe it should be affected by UK sanctions against Russia.
Even so, Evraz’s board then decided to cancel the interim dividend it had declared on 25 February.
On Thursday morning, things got really serious. The government added Roman Abramovich, the company’s largest shareholder, to the UK’s sanction list. Evraz shares were suspended from London trading.
I can’t emphasise enough how quickly things happened. I saw the news about Abramovich at 10.48 on a newspaper’s live news page. At 11am, the London Stock Exchange suspended Evraz shares.
What happens next? Evraz shareholders won’t receive the March dividend. Although UK shareholders will continue to own the stock, they can’t sell it.
Evraz shares might return to trading at some point. Personally, I think a more likely scenario is that the company’s LSE shares will be cancelled. This would probably leave Evraz shares listed on the Moscow Stock Exchange only.
If this happens, I’d guess that most UK shareholders would be unable to sell and would have to write off their investment.
Polymetal: LSE shares at risk?
Will gold miner Polymetal International (LSE: POLY) follow Evraz into suspension?
The company said on Wednesday that it “doesn’t consider itself” to be owned or controlled by Russian shareholders. I looked at Polymetal’s ownership in more detail here.
Polymetal’s management say that sanctions have had a limited impact on its mining operations and sales. But they’ve warned that financial restrictions could affect future dividend payments and limit access to bank facilities.
The board declared a final dividend for 2021 on 2 March. They haven’t cancelled it yet. But Wednesday’s statement included a reminder that the board “retains the discretion” to withdraw its dividend recommendation ahead of the group’s AGM on 25 April.
What happens next? I think Polymetal is likely to cancel its dividend to preserve cash.
I also suspect the company will find it easier to operate normally under sanctions if it withdraws from western financial markets. For this reason, I expect Polymetal to cancel its LSE share listing at some point.
Will POG shares be suspended?
Gold miner Petropavlovsk (LSE: POG) said on Wednesday that events in Ukraine had not interrupted its operations in the Far East of Russia. However, the company admitted that some of its Russian shareholders “may be restricted” under sanction regulations.
Having taken legal advice, Petropavlovsk says that it does not believe its LSE shares should be affected by sanctions. This is because its Russian shareholders control less than 50% of the company’s stock.
What happens next? POG shares rose following yesterday’s news but are down today. If operations remain unaffected then this stock could be very cheap, on less than two times 2022 forecast earnings.
However, buying POG shares looks like a big gamble to me. This company sells its gold within Russia and might choose to list domestically. Tighter sanctions could force a share suspension or delisting. Petropavlovsk is too risky for me to buy.