The Polymetal (LSE: POLY) share price crashed in March, but it did pick up towards the end of the month. I’m thinking it might just be oversold, despite good reasons for the fall.
Although a 60% slump in March is a shocker, the picture is actually a bit worse than that. Polymetal shares are now down 77% over the past 12 months, and they have been even lower during the past month.
But since the recent depths, the Polymetal share price has been recovering strongly. Those who got in at the bottom are already sitting on good profits. But I reckon there could be more gains to come.
Polymetal share price collapse
The reason for the Polymetal share price crash, of course, is the Russian invasion of Ukraine, and the sanctions swiftly applied to companies operating there. Just look at Evraz to see how badly things could turn out. In the space of a few weeks, Evraz went from being the biggest dividend payer in the FTSE 100 to having trading in its shares suspended.
But Polymetal has not been sanctioned, and nor have any of its key people. And it has managed to maintain its mining operations and the sale of its gold.
The latest update, on 30 March, has boosted investor confidence. The company told us that “Polymetal operations in Russia and Kazakhstan continue undisrupted.” The company expects to produce 1.7 Moz of gold equivalent in 2022, in line with earlier guidance.
Sales remain strong
Polymetal is selling the shiny stuff just fine too. It said sales from Kazakhstan continue as normal. And that in Russia, “sales of gold and silver concentrates continue normally to East Asia and Kazakhstan.”
Apparently, the Central Bank of Russia has said it will buy gold at a fixed price. But Polymetal says that “is not expected to affect group’s sales price materially as gold continues to be sold at global market price, both for exports and to satisfy physical retail demand.“
This all makes the Polymetal share price look too low to me, and I’m tempted to go for it. But there are some significant downsides, and not just the big one about simply being in Russia.
Who will borrow my roubles?
The bulk of Polymetal’s debt is in US dollars. But lending by Russian banks is in roubles only, carrying interest rates of around 23-25%. Ouch.
The company is only “utilising these facilities occasionally for short-term working capital financing“. But it does make me twitchy. And it will inevitably pile uncertainty on Polymetal’s dividend prospects.
And back to the political situation, it appears more sanctions against Russia might be on the way. It comes as growing allegations of war crimes emerge.
On balance, no, I will not buy Polymetal shares right now. I do, though, think there’s a strong chance I’ll be missing out on further Polymetal share price gains over the rest of 2022.
