The Polymetal share price is bouncing — is it time to buy?

The Polymetal share price is roaring back following a confident statement from the company. Roland Head asks if he should buy the shares.

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The Polymetal International (LSE: POLY) share price closed at 95p on Tuesday. As I write on Wednesday morning, shares in this Russian gold miner are up by over 40% at 132p.

Polymetal issued a statement this morning saying it doesn’t expect to be affected by the current sanctions against Russia. I think this is why the share price is rising. In this piece, I’ll explain more and reveal whether I’d buy the shares now.

Not a Russian company?

UK sanctions are targeting companies that are controlled by Russians and have a presence in the UK. London-listed Polymetal owns gold and silver mines in Russia and Kazakhstan. But today’s statement indicates that the company is not controlled by Russian shareholders.

Polymetal’s largest shareholder is ICT Holding Ltd, a company incorporated in Cyprus. ICT Holding holds 23.9% of Polymetal shares. ICT Holding is owned by another Cyprus company, in which Polymetal founder Alexander Nesis  has a 47.3% shareholding. According to Polymetal, Nesis is a Swiss resident with citizenship of Israel, Malta, and Russia.

The next largest shareholder is US asset management giant Blackrock, with a 10.1% stake.

Nesis’ brother, Vitaly, is chief executive of Polymetal. However, he does not appear to have a major shareholding. In total, Polymetal says ICT and other insiders own less than 25% of the group’s shares.

As a result, the company says it does not believe it should be affected by current UK sanctions. I think this is one of the reasons why the Polymetal share price is bouncing back today.

Dividend at risk?

Polymetal says all of its mines are operating without disruption. Most exports are continuing as normal. Some operations in Russia have been adjusted to comply with sanctions.

I think the company’s mines will be able to keep operating. What worries me are the financial risks for UK shareholders. If I buy shares in Polymetal International, I’m investing in the group’s Channel Islands holding company.

When Polymetal pays a dividend to UK shareholders, it is effectively passing on dividends it has received from operating companies in Russia and Kazakhstan. Polymetal’s management says there’s a risk that future dividends from Russian subsidiaries could be blocked by sanctions.

The company plans to pay the final dividend for last year, but says it may reconsider the dividend ahead of the AGM if needed.

On balance, I think there’s a high risk that future dividends to UK shareholders will be cut, or suspended.

Polymetal share price: what I’m doing

I think it’s possible Polymetal shares are extremely cheap and could bring me huge returns. But I think it’s more likely that the shares will fall again and will eventually be delisted or suspended from trading in London.

Although today’s statement on sanctions and the company’s ownership seems reassuring, my feeling is that the situation is still very risky.

I think it’s worth remembering that Polymetal shares are still down by 90% this year. In addition, six of Polymetal’s non-Russian directors resigned at the end of last week.

For me, buying Polymetal shares today would be a gamble on geopolitical risks that are outside my control. For this reason, I won’t be buying Polymetal shares for the foreseeable future, regardless of what happens to the share price.

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.

Roland Head 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.

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