If a week is a long time in politics, six months is an age in a public company. And as 2017 Full Year Production Results & 2018 Guidance is published today, ordinary shareholders at Petropavlovsk (LSE: POG) may be beginning to question if the intentions behind last year’s messy coup were entirely honest.

To recap: after an astonishing 20-year run at Petropavlovsk, in which veteran gold-bug Peter Hambro weathered the storms of a collapsing gold price and an increasingly impatient shareholder base, the City mainstay finally returned the company to its first profit in January 2017. Shortly thereafter, he was booted out of his own company by a rag-tag bunch of mining dilettantes, with distressed debt funds Sothic and M&G playing monkey, and Renova Group grinding the sorry organ.

We covered each twist and turn of the dispute here at Mining Feeds, exploring the real intentions of Renova Group, the rumours surrounding dormant assets in their portfolio and the toothless City Takeover Panel that wouldn’t know a takeover by stealth if it slapped them in the chops. Shrugging off allegations of impropriety, the repeated justification for the brazen coup, parroted by all three activist shareholders, was that ‘corporate governance’ issues had fallen short of the mark at Petropavlovsk under the leadership of Messrs Hambro and Maslovskiy. A justification made early and repeated often.

Speaking to the Financial Times, City AM, The Times and Reuters, M&G and Sothic repeatedly criticised corporate governance failings at Petropavlovsk and called for greater transparency at board level. [1], [2] Shareholders took them at their word and at the company’s AGM, the old board were fired. Not that a single one of the new Directors turned up to grab the baton, of course. So, it has now been seven months since they took over: how are shareholders being rewarded?

In short, they’re not.

The first act of the new board was to claim credit for Petropavlovsk’s best results: a 166% lead in H1 profits, a 150% increase in net cash from active operations and a 20% boost to sales. The trouble was, the ‘strong set’ of results praised by new Chairman Ian Ashby were solely due to the efforts of the outgoing board. As Alistair Osborne in The Times of London concluded at the time, perhaps the intentions of the insurgents weren’t quite as honourable as claimed. “Corporate governance? Yeah, right.” [3]

Shortly afterwards, Renova Group promptly sold up their controlling stake in Petropavlovsk to an interesting entrepreneur from Kazakhstan. So, having kicked up a shareholder storm at Petropavlovsk, stacked the board with a bunch of directors who don’t know the first thing about mining and given next-to-no indication of how they intended to grow the company they’d fought so hard to control, Renova cut and ran. Exemplary corporate governance…

Kenes Rakishev, the Kazakh businessman who bought Renova’s stake, fortunately has quite a bit of experience in mining having been a part of Central Asia Metals Plc (AIM:CAML), a copper, zinc and lead production and exploration company, for several years.[4]

But in fairness to the new board at Petropavlovsk, they are nothing if not consistent. Not content with claiming credit for the company’s first profits since 2015, they promptly pushed the company back into worrying territory with a sorry set of H2 production results. Announcing with some aplomb that the company had boosted production by as much as 10%, Ian Ashby failed to note that the company’s H2 production results were a whole 11% lower than the impressive results of the first half of 2017.[5] So, a downturn in fortunes presented as cause for celebration? The new board is fast being characterised by new standards for deceit, not transparency.

So, what good news can come of the mess? Well, in interviews given to Reuters, The Daily Telegraph and the Financial Times, new investor Kenes Rakishev has proposed bringing back some of the top team responsible for the recovery at Petropavlovsk. Ahead of a visit to London to meet shareholders earlier this month, Rakishev told reporters of his wish to reinstate former CEO, Pavel Maslovskiy.[6] And to boot, his wishes for the company have already attracted plaudits from industry influencers, with Investors Chronicle praising Rakishev’s ‘conviction bet’ for possible rebranding and M&A action.[7]

The loyalty of Petropavlovsk’s ordinary shareholders has hardly been rewarded by the activism of its majority owners in the past 12 months, and that will sting. Rakishev is an exciting new prospect for Petropavlovsk’s fortunes, and we will be watching his next steps at the company with hopeful anticipation.

Sources:

[1] http://www.cityam.com/266007/peter-hambro-faces-war-two-fronts-petropavlovsk-row-heats

[2] https://uk.reuters.com/article/petropavlovsk-agm/shareholders-de-shaw-mg-sothic-say-petropavlovsk-needs-change-idUKL8N1JB3WO

[3] https://www.thetimes.co.uk/article/interesting-times-for-the-governor-033rk25vc

[4] https://www.ft.com/content/c8e245d8-0060-11e8-9650-9c0ad2d7c5b5

[5]http://www.lse.co.uk/AllNews.asp?code=8vtjwb51&headline=Petropavlovsk_Forecasts_Flat_2018_Production_As_POX_Hub_Completes

[6] https://uk.reuters.com/article/us-russia-petropavlovsk-shareholders/kazakh-tycoon-wants-petropavlovsk-ex-ceo-back-sees-ma-opportunities-idUKKBN1F71L8

[7] https://www.investorschronicle.co.uk/shares/2018/01/24/petropavlovsk-another-year-another-shake-up/