Petropavlovsk PLC shareholders sue UMMC and Moscow Exchange
Russian minority shareholders of the British gold mining company Petropavlovsk PLC have filed a lawsuit against the Ural Mining and Metallurgical Company (UMMC), the Moscow Exchange and Gazprombank, Kommersant reports. According to the newspaper, the court has accepted the filing and a preliminary hearing is scheduled for 28 October.
Last year, minority shareholders of Petropavlovsk and the Association of Retail Investors (ARI) asked UMMC to buy out their shares. UMMC had acquired Petropavlovsk's gold mining assets in September 2022 and, as stated in the shareholders' claim, the transaction affected a wide range of retail investors who bought the company's shares on the Moscow Exchange. UMMC has not responded to the claim, according to Kommersant.
A representative of the plaintiffs told Kommersant that the lawsuit is aimed at protecting the investors' rights and obtaining information on the transactions that led to the loss of control over Petropavlovsk's Russian assets. The key objectives of the lawsuit are to challenge the Moscow Exchange's decision to delist Petropavlovsk shares, and to request documents on transactions involving the assignment to UMCC of Petropavlovsk's debt to Gazprombank and UMCC’s acquisition of Petropavlovsk's production assets in Russia.
Petropavlovsk, a holding company registered in England and Wales and comprising Pioneer, Malomyr and Albyn mines, was one of Russia's major gold mining corporations, but its position deteriorated sharply after the outbreak of hostilities in Ukraine and sanctions. Gazprombank was the company's main creditor, and under the terms of an agreement it bought all of Petropavlovsk's gold. Due to sanctions against the bank, Petropavlovsk lost the ability to sell the metal and make its loan repayments. In April 2022, Gazprombank transferred to UMMC-Invest its claim rights under the Petropavlovsk companies' loan, amounting to $201 million including interest, and in July of the same year Petropavlovsk initiated insolvency proceedings and suspended its listing on the London Stock Exchange. At the same time, the company's securities ceased to be traded on the Moscow Exchange. In July 2022, external administration was imposed on the Petropavlovsk Group in the UK, and in August 2022, Petropavlovsk and its external administrators agreed to sell its assets to UMMC for more than $600m. Petropavlovsk is now in liquidation. The Russian assets previously owned by Petropavlovsk have been merged into Atlas Mining.
Lawyers interviewed by Kommersant assessed the plaintiffs' chances as minimal, particularly because Petropavlovsk PLC, being registered in the UK, is not subject to Russian legal provisions on the forced buyout of shares, and UMMC acquired assets, not the issuer which had the obligations to investors.