The recent military action in Ukraine sent stock markets into freefall. Several companies operating in Russia, like Polymetal International (LSE:POLY), Evraz, and Eurasia Mining saw their market values collapse. The Polymetal share price, in particular, declined massively. I own shares in this company and I want to investigate the recent price surge. Should I be adding to my current position? Let’s take a closer look.
Why the Polymetal share price plummeted
Following Russia’s invasion of Ukraine over a month ago, most stocks tumbled as investors panicked and sold. The Polymetal share price collapsed by 91%. It currently trades at 377.9p, down 73% in the past year.
This was due to a number of factors. Firstly, there was widespread concern that Western sanctions would target persons or entities associated with the gold mining firm. This would negatively impact the company’s ability to carry out business due to frozen assets.
The iron ore company Evraz suffered this fate, as Western countries sanctioned its owner, Roman Abramovich. Shares in this company are still suspended on the London Stock Exchange.
Secondly, there was worry that the circumstances would make it difficult for Polymetal to sell its gold. This could have sent revenue plummeting and the firm would have been left with vast amounts of metals to store.
Owing to the massive fall in market value, however, Polymetal was removed from the FTSE 100 index in March 2022.
How is the company responding?
Most investor concerns failed to come to fruition. Since the invasion, the company has released three statements on how it is responding to the situation. These have generally resulted in increased investor confidence in the business and a 246% rise in the share price in the past five days.
On 9 March, the firm announced that operations continued undisrupted during the military action. It also sought to calm concerns by categorically stating that nobody in the company had been targeted with sanctions. It stated that around 48% of the firm’s earnings originated in Kazakhstan and were not connected with Russia.
Furthermore, a news release from 29 March announced that the company may split its Kazakh and Russian businesses to shield shareholders from potential future trouble in Russia.
In addition, on 30 March, Polymetal kept its production guidance and continued to state that its operations were still running smoothly. Sales are also running normally in Kazakhstan and East Asia. It is also possible, however, that tensions in the region will escalate further and have a negative impact on the share price.
I have previously written about how the underlying financial state of the business is strong. While the situation remains precarious, the company’s operations and sales are still functioning with relative normality. While I won’t be adding to my position, I won’t rule out a further purchase in the near future.
