The Polymetal share price is down 80%! Will it make a comeback?

The Polymetal share price has plunged in value and it does not look as if the market sentiment is going to change anytime soon.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The Polymetal (LSE: POLY) share price has plunged a staggering 80% over the past year.

The stock was already on the back foot before the awful tragedy began to unfold with Russia’s invasion of Ukraine and the subsequent flurry of economic sanctions placed on the country’s economy. Between the end of May 2021 and the beginning of February this year, shares in the gold miner fell 40%.

Changed dramatically

The environment for the company has changed dramatically over the past couple of days. It operates eight mines and processing plants in Russia and Kazakhstan.

Historically, it has sold most of its gold production to Russian banks. These have then disposed of the asset on the international markets. 

Sanctions on Russian banks and the Russian economy will make it virtually impossible for these buyers to sell their gold onto the global market. 

However, that does not mean it will be impossible for Polymetal to make money. The company also sells ore to buyers in China. And just because Russian banks cannot sell gold on the international markets does not necessarily mean they will stop buying. 

Indeed, Russia’s central bank on Sunday said it would resume gold purchases two years after it ended a long-running buying spree that helped prop up local producers.

Put simply, I do not think it is likely Polymetal will go out of business anytime soon as it is likely the company will continue to find buyers for its gold. 

Nevertheless, I am worried about further sanctions and restrictions the company could face. Polymetal ended 2021 with net debt of $1.7bn. It may struggle to pay these borrowings if it has to accept rubles from Russian buyers. It may also struggle to acquire new machinery and parts. An increasing number of enterprises are avoiding dealing with Russian businesses. 

Polymetal share price risks

Then there is the chance the Russian state could decide to nationalise any businesses with Western connections. This is not an unprecedented move, and it is unlikely shareholders would receive any compensation.

This is the worst-case scenario. In the best-case scenario, Russia and the West will work out their differences over the next couple of years. The company will be able to resume gold sales to international buyers, and the Polymetal share price will recover. 

Unfortunately, I think the chances of this latter scenario playing out are relatively slim. Even if Russia and Ukraine agree on a ceasefire, the damage to both economies has already been done. For companies like Polymetal that have significant operations within Russia, I think the next few years are going to be very difficult. 

With this being the case, I think it is unlikely the Polymetal share price will recover to previous highs any time soon. Considering all of the risks the company is going to have to deal with over the next couple of years, I will be steering clear of this business. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »

Investing Articles

3 ideas to help investors aim for a million-pound Stocks & Shares ISA

The UK has a growing number of Stocks and Shares ISA millionaires, and this plan may be one of the…

Read more »

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »