The Petropavlovsk (LSE: POG) share price slumped by 15% when the market opened Friday. The gold miner’s shares are now down more than 90% since the start of 2022.
The overall reason is obvious. It’s the Russian invasion of Ukraine. Investors will fear that if Petropavlovsk is sanctioned and delisted from the London Stock Exchange, they could lose their money.
Share trading in steel maker Evraz is suspended, and there’s a possibility the same will happen to other companies associated with Russia.
But what if Petropavlovsk is not sanctioned? What might happen to POG shares when the war is over? I wonder if I’m seeing a tantalising possibility here?
The latest POG share price dip comes on the back of the UK government having added Gazprombank to its list of sanctioned Russian banks. In a statement Friday, Petropavlovsk outlined its “substantial commercial and financial relationships” with Gazprombank and its subsidiaries.
Loans and gold sales
There’s a couple of problems here for Petropavlovsk, with one of them potentially pretty serious. Petropavlovsk has a $200m loan from the bank. There’s a $560,000 interest payment due Friday, which the company is now prohibited from making. And if that’s not enough to damage the Petropavlovsk share price, there’s more.
As part of the loan agreements, Gazprombank acts as the off-taker for 100% of Petropavlovsk’s gold production. And UK sanctions rules prohibit any further sales of gold to the bank. The company adds that “restrictions on purchasing and selling gold in Russia may make it challenging to find an alternative purchaser for the group’s gold output“.
Uncertain future
So what’s going to happen? Erm, well, we don’t know yet. The company is consulting with advisers, and a “further announcement will be made in due course“.
The risks of investing right now are clear. Petropavlovsk has confirmed that none of the companies in the group have been included in any sanctions against Russia. So that immediate worry is off the table, at least for now. But not being able to trade with its only gold customer… that’s a biggie.
But with big risk comes big opportunity, right? What if the company finds an alternative outlet for its gold? It’s not like nobody wants gold. What if POG should come out of the other end of the Ukraine war intact and with business as usual?
Tempting POG share price
Today, we’re looking at a Petropavlovsk share price of 1.6p. A year ago, it stood at 24p. Even if it gets back to half that level, I could be looking at a very nice profit.
Going for POG shares now would be very much against my Foolish long-term buy-and-hold strategy. I put my investing cash into quality shares I want to hold for decades, not short-term punts in a chase for quick profits. No, in my experience, such profits are usually outnumbered by quick losses.
But that doesn’t mean I can’t gamble a small amount on the POG share price, if it’s a sum I can afford to lose. I probably won’t, but it is tempting.