Investors selling off Russia-focused metals and mining entities following the country's invasion of Ukraine have sharply lowered valuations, while companies with fewer direct ties to Russia have started evaluating their own investments.

Companies have been left to make their own decisions on Russian investments. Global governments, while willing to restrict Russia's financial operations, have avoided direct sanctions of commodities to prevent disruptions since Russia supplies such a large volume of metals. But businesses are receiving intense pressure from investors, banks and members of the public who oppose the invasion. Mining majors such as Glencore PLC and Rio Tinto Group announced plans to review their investments, while gold miner Kinross Gold Corp. suspended operations in the country. Metal consumers are also feeling the pressure, including The Boeing Co., which stopped buying Russian titanium March 7.

Some companies with deeper ties to Russian assets have recorded steep drops in their stock prices as investors bail.

"Having assets in or significant business with Russia would be seen by investors and banks as inappropriate, creating a reputational issue," said Jean-François Lambert, founder and managing partner of Lambert Commodities, a consultancy focused on trade flows. "The pressure could, therefore, become very heavy and compelling."

Pressure on for companies linked to Russian assets, figures

Stock prices of metals businesses with links to Russia, but which are more geographically diversified or have taken steps to placate investors, have held relatively steady or recorded gains during the period as metals prices surged.

Mining giant Glencore volunteered a statement on the conflict and announced a review of its businesses in Russia, including an 11% interest in En+ Group International PJSC and a 0.5% stake in oil company PJSC Rosneft Oil Co. Glencore declined further comment. Between Feb. 23, the day before Russia's incursion into Ukraine, and March 7, Glencore's stock price climbed 8.5%.

Toronto-based Kinross suspended its Udinsk and Kupol gold operations in Russia on March 2, about a week after saying it was unaffected by sanctions. Kinross investors were seemingly unfazed, with the company's stock price holding relatively flat in recent weeks. Kinross did not respond to a request for comment.

The Australasian Centre for Corporate Responsibility publicly called on London-based diversified miner Rio Tinto to review its relationships with Russia. Rio Tinto owns 80% of Queensland Alumina Ltd. in Australia, a joint venture with Russia's UC Rusal IPJSC. Russian oligarch Oleg Deripaska owns a 44.5% stake in En+ Group, which in turn owns 56.9% of Rusal, and subsidiaries controlled by Russian oligarch Viktor Vekselberg own nearly one-third of Rusal.

Cooperation with Russian oligarch-owned companies "legitimizes [Vladimir] Putin's regime," Dan Gocher, director of climate and environment at the Australasian Centre for Corporate Responsibility, said in a statement.

"The world has spoken, and the strategy now is to isolate Russia completely," Gocher said.

A Rio Tinto representative did not comment on the mining giant's investments linked to the oligarchs but said the company condemned the Russian government's invasion of Ukraine and was "shocked by the senseless act of military aggression."

"Rio Tinto has no operational assets or staff located in Russia or Ukraine," the representative said. "We are closely monitoring the situation and related implications of trade sanctions, which we are committed to complying with."

Between Feb. 23 and March 7, Rio Tinto's stock price rose by 2.1%.

Airplane maker Boeing, a major consumer of metals and the largest exporter in the U.S., stopped its purchases of Russian titanium on March 7 as the invasion continued. Boeing's stock price has been declining in recent days, but the company said it began to diversify its sources of titanium years ago.

"Our inventory and diversity of titanium sources provide sufficient supply for airplane production, and we will continue to take the right steps to ensure long-term continuity," a Boeing representative said in an emailed statement.

Companies closer to Russia hammered by investors

The stock price of London-headquartered steelmaker Evraz PLC was down 73.6% as of March 7 compared to the company's stock price Feb. 23, despite the company announcing $3.11 billion in 2021 profits in late February. Evraz is 28.6%-owned by Roman Abramovich, the Russian oligarch with a professional soccer team in the U.K. Evraz has assets in Russia as well as steelmaking operations in the U.S. and Canada.

The stock price of Cyprus-headquartered Polymetal International PLC crashed 84.9% from Feb. 23 to March 7 as investors sold shares of the gold and silver producer with mines in Russia and Kazakhstan. CEO and Executive Director Vitaly Nesis said on a March 2 earnings call that sanctions did not directly impact the company and that operations continued normally. Despite the rest of the world imposing restrictions on the country, Nesis said Polymetal has sufficient sales channels to maintain liquidity and solid financial footing.

Both Polymetal and Evraz lost their spots within the U.K.'s FTSE 100 Index due to the heavy financial losses in recent days. Neither company responded to a request for further comment.

PJSC Severstal Chairman Alexey Mordashov was also among the targets of EU sanctions, and the Russian steelmaker's stock price was down 99.7% as of March 7 compared to the day before Russia entered Ukraine. On March 3, Severstal announced that four directors resigned from its board due to the current geopolitical situation.

Mordashov owns a 76.9% stake in Severstal through a private investment company. In a Feb. 28 statement, the executive called the conflict between Russia and Ukraine a "tragedy for two fraternal nations."

"I have absolutely nothing to do with the emergence of the current geopolitical tension, and I do not understand why the EU has imposed sanctions on me," Mordashov said in the statement.

Nickel mining giant PJSC MMC Norilsk Nickel's share price deflated by 92.9% from Feb. 23 to March 7. A representative of Norilsk Nickel said its operations are proceeding as usual and the company is meeting its contractual obligations but declined to comment in further detail.

Russia too big to ignore

Russia is a major supplier of key metals such as aluminum, palladium, steel and titanium, and governments have tried to minimize the disruption of critical commodity supply chains by avoiding sanctions on commodities. The automotive market could also prove sensitive to any potential disruptions in Russia. The country's vast production of nickel, palladium and high-quality iron ore pellets means it is a crucial piece of the supply chain for electric vehicles, combustion engine vehicles and steel.

"As a major producer of precious, base and industrial metals, the impact of Russian sanctions could have prominent effects on several industries, commodity markets and global efforts focused on energy transition and decarbonization," said Sean Decoff, a senior mining and metals analyst with S&P Global Commodity Insights.

While the market has dropped the valuations of many Russian companies, the underlying assets still contain the same gold, alumina, diamonds and other commodities. That might be a tempting buy for some, but current and potential sanctions would complicate any transactions, said Russ Mould, investment director at London-based AJ Bell.

Russian state-owned companies and companies doing business in the country are struggling to find willing buyers or to agree on a price and arrange payments. The "unseemly scramble to dump Russian assets at almost any price" before the London market suspended trading last week suggests there is little interest in Russian assets at the moment, Mould said.

"It is unlikely that any Western firms would want to be seen to be providing support to Russian firms or its economy in the short term, and even if a diplomatic solution is found, it would be logical to expect caution to prevail," Mould said.

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