By Yadarisa Shabong

(Reuters) – Russian gold miners Polymetal, Petropavlovsk made Wednesday a warning about increasing obstacles in business. These included higher operating costs as well as continued difficulties repaying bank loans.

Petropavlovsk stated that it had begun talks with Gazprombank (a sanctioned Russian bank), to restructure the debt. Also, it has not been able to sell its gold.

Sergey Sudarikov is the Russian billionaire who owns the company’s top shareholder. He stated that any restructuring of debt must be done within the restrictions of sanctions.

Petropavlovsk’s spokesperson said that the bank was currently in discussions with Gazprombank, its advisors and it wasn’t too soon to make any comment about how things will go forward.

Polymetal stated that delays in some of its gold projects ranged from three months to one year. Polymetal is cutting exploration budgets due to higher freight costs.

It stated that local retail investments have boosted Russia’s demand for gold.

Because of sanctions in Russia, there’s been a spike in interest and purchases of physical gold during the past four week. A spokesperson said that the removal of value-added taxes on yellow gold purchases has boosted demand.

In response to Russia’s invasion of Ukraine, Western sanctions against Russia have caused disruption to many Russian businesses and lives. This has made it difficult for non-sanctioned Russian firms to try to circumvent these new regulations.

Since Russia’s “special military operations” in Ukraine, more than a month ago, shares in London-listed Polymetal & Petropavlovsk fell by over 60%

A.J. stated that Petropavlovsk is facing an “existential crisis” while the other miners were experiencing “contrasting fortunes.” Russ Mould, a London-based Bell analyst

A gold producer that can’t sell its gold is not a sustainable business model. “Having Sudarikov as such a dominant shareholder doesn’t seem to help the company in the near term,” Mould stated about Petropavlovsk.

According to regulatory filings, Sudarikov had disclosed earlier this month a mere 29% stake through REGION. According to Refinitiv Eikon data, REGION also holds a stake in the Moscow-sanctioned Credit Bank of Moscow.

Polymetal shares fell 7% after early gains, and Petropavlosk shares tumbled 21%

Polymetal announced that it has resumed sales of gold in Russia, a good development. The company had stopped selling logistics services after the initial shipment was damaged.

The company, partly owned by Alexander Nesis (Russian businessman), stated that the sanctions had not had any material effect on business. However, it did not exclude the possibility of sanctions being imposed on the company.

Polymetal holds $500 Million of unrawn credit lines from Russian lenders.