Some dogs bark incessantly. Toy breeds are said to be the noisiest.
Gold miner Petropavlovsk, nicknamed unkindly Pog the Dog, is one small mutt, with a market capitalisation of £274m.
Pet psychologists say excessively vocal dogs suffer from anxiety or senility or dislike being played with like a toy. Pog suffers from being a UK-listed company extracting gold in a province in Russia east of Mongolia and north of China that has become the plaything for Russian and Kazakh billionaires.
The snapping began this year when Kenges Rakishev, tycoon and chairman of Kazakhstan’s largest lender, who owns 22 per cent of Pog, ranged himself behind attempts by two investors to oust Pog’s board. CABS Platform and Slevin, which own 9 per cent of Pog, are proposing to reinstate Pavel Maslovskiy, former chief executive and Pog’s co-founder, as well as two former directors. Next week, Pog’s shareholders must vote yes or no. That has made some investors, including Sothic Capital Management, a London-based fund owning a tenth of Pog, barking mad.
The latest hullabaloo comes less than a year after the last one. Then Sothic teamed up with fellow fund managers at M&G and DE Shaw to oust the then chairman Peter Hambro, who co-founded Pog with Mr Maslovskiy in 1994. The fund management trio were backed by Viktor Vekselberg, the Russian billionaire and Fabergé egg fancier who owned just over a fifth of Pog.
They succeeded and Mr Hambro was voted out in June last year. Mr Maslovskiy quit as chief executive shortly after. And then Mr Vekselberg sold his stake to Mr Rakishev. And now Mr Rakishev is backing calls for Mr Maslovskiy’s return as chief executive.
By 2012 the group had borrowed more than $1bn — as the gold price began to soften and production costs rose. The money was earmarked for building a Pox Hub that would use the extremely complex process of pressure oxidation to extract gold from tricky places deep underground. But it was as much as the board could do to contain the debt. There were refinancings and a rescue rights issue. The mines were starved of capital. Shareholders were starved of dividends and the group’s gold production nearly halved between 2013 to 2017. The company restructured its borrowings late last year. But Pog is still labouring under more than $500m of debt.
Pog’s founders also agreed to stand behind the entire $340m debt of IRC, an iron ore project of which Pog owns a third and which is chaired and managed by Hambro-Maslovskiy progeny. That raised more than a few eyebrows. This month IRC said it could not meet its payments and Pog has shelled out $29.75m as a bridging loan while it tries to renegotiate loan terms. Roman Diniskin, chief executive since April, is clear that when the refinancing is agreed, he wants shot of Pog’s stake in IRC.
By then the Pox plant should be up and running — it is expected to start this year. It will have cost $400m-plus but could double production, lower costs and improve ore grade. And then Pog can start paying down its legacy debt. Who knows — Pog might even pay a dividend after that. Shareholders just need to leave Mr Diniskin to get on with his job, which, says the board, won’t happen if the old board is voted back in and Mr Maslovskiy takes executive control. And Sothic, Pog’s second-largest investor, and DE Shaw with 8 per cent, agree.
The argument would be a tad more convincing if Pog’s shares weren’t still lingering at about 8p. The company is better placed than it was. Glass Lewis and fellow voting adviser ISS point out the group has outperformed the gold index as well as other miners also hit by Russian sanctions.
Even so, the current board will struggle to win next week. For all the snapping and snarling, it is Mr Rakishev and his allies, who between them own more than 30 per cent, who have the bite.
