Deloitte has resigned as inspector of mining polymetals, which could lead to the expulsion of the Anglo-Russian group from the London Stock Exchange if it does not find a new entity to examine its accounts.
Polymetal said on Friday that Deloitte had resigned because it would not be able to complete its auditing after it split from its operations in Russia, where most gold producers are based.
The company’s London listing would be threatened if it does not find a replacement for signing off its accounts, which requires disclosure and transparency rules from the Financial Conduct Authority.
Finding another firm with the size and skills to replace Deloitte could be a daunting task, as the firm’s Big Four rivals, EY, KPMG and PwC, have announced that they will also split from their Russian member firms.
The LSE has suspended the business of more than two dozen Russian companies, including Sberbank, Gazprom, Lukoil and Polyus, since the invasion of Ukraine, but no one has been expelled.
Polymetal was removed from the FTSE 100 last month when index provider FTSE Russell decided to remove four Russia-based companies after some brokers refused to trade their shares.
However, investors have stopped the potential threat of expulsion. Despite falling as much as 6 percent after opening, shares of Polymetal recovered late in the morning to trade 3 percent higher at 298.7p. They have sunk nearly three-quarters since Russia began its invasion of Ukraine.
Polymetal has already begun searching for a new auditor after Deloitte’s resignation took effect on Thursday, the company said.
Deloitte announced last month that the war in Ukraine would separate it from locally owned Russian and Belarusian businesses in its global network of national accounting firms, which share branding and technology.
Mid-level auditors Grant Thornton and BDO have removed their Russian counterparts from their global network. Mazars, another medium-sized auditor, is currently working in Russia but says it will not accept new clients.
Deloitte’s resignation will renew the focus on whether EY will continue to audit EY London-listed steel company Oligarch Roman Abramovich as its largest shareholder under sanctions.
Another Russian-based company listed in London is Petropavlovsk Gold Mining, which has been blocked from repaying a loan to its main lender, Gazprom Bank.
Two-thirds of Polymetal’s assets are with its management team in Russia, based in St. Petersburg.
The remainder of its business is in Kazakhstan where it operates two mines that produced the equivalent of 550,000 ounces of gold last year and generates enough cash to cover its dividends.
The company is considering shutting down Kazakh operations from the rest of the company in an effort to separate the division from the knock-on effects of Western sanctions.
The largest shareholder in the company is a company whose founder is associated with Alexander Nessis, the brother of Vitaly, the CEO of Polymetal.
Last month, the agency hired Ricardo Orsell as chair after he left the boardroom. Formerly head of global banking at VTB Capital, the investment banking arm of Russia, Russia’s second-largest lender. It has also appointed five independent directors
Although the agency is not subject to any sanctions, it has been subject to harsh sanctions imposed on Moscow.
With the effective ban on the sale of Russian gold in London, Polymetal has been forced to find new buyers for its bullion. The country’s central bank has started buying gold again, despite discounts on global benchmark prices.
