Down 75%, can the Polymetal share price recover from the slump?

Although the Polymetal share price has fallen significantly, do recent revenue and production figures indicate that the company can weather the storm?

| 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.

A beach at sunset where there is an inscription on the sand "Breathe Deeeply".

Image source: Getty Images

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.

Key Points

  • The Polymetal share price plummeted after Russia's invasion of Ukraine
  • Revenue for the first three months of 2022 was 4% greater than the same period in 2021
  • The company maintained its full-year production target of 1.7m ounces of gold

The Polymetal International (LSE:POLY) share price has endured a torrid time recently. Prior to Russia’s invasion of Ukraine, the shares were trading at around 1,000p. They’re down about 75% since the war began, currently trading at 270p. This was to be expected to some degree however, as the company operates gold mines in Russia and Kazakhstan. I currently own shares in this firm, but should I be adding to my holding? Let’s take a closer look.

Ongoing conflict

Polymetal’s presence in Kazakhstan may end up being its saving grace. It derives around 50% of its gold, and 50% of its sales, from operations there. 

This seems to give the firm a sizeable advantage over other mining companies that have a larger chunk of their business in Russia, like Evraz and Petropavlovsk.

On 29 March, Polymetal announced that it was exploring the possibility of a demerger of its Russian assets. 

This could shield shareholders from any future problems with the Russian part of the company.

It does, however, mean that re-ratings may take place based solely on Polymetal’s Kazakhstan assets. 

Investment bank Berenberg, for instance, recently lowered its price target from 500p to 300p for this reason.   

It’s also possible that people or entities associated with the firm could be the target of Western sanctions at a future time.

Operations and the Polymetal share price

Polymetal has not been operationally impacted by the war in Ukraine. In two statements in March, the company emphasised that mining and production were continuing uninterrupted. 

Despite this, production fell by 6% for the first three months of 2022, on a year-on-year comparison. 

In a very interesting move, the firm also confirmed that it was maintaining its full-year production target of 1.7m ounces of gold. As a shareholder, this was encouraging because management clearly believes that production will continue with a large degree of normality for this year. 

This makes me confident that the Polymetal share price has the potential to recover. 

Furthermore, revenue for the three months to 31 March increased by 4%. While this was partially due to higher gold prices, it also shows that the company is still productive despite the ongoing conflict.

The problem with a recovery, however, is that the share price is almost totally correlated to the prospect of peace in Ukraine. While the war is ongoing, a prolonged conflict is in nobody’s interests. 

Sanctions are hitting Russia and energy prices are spiking in many Western states, so it’s conceivable that an end to hostilities may come sooner rather than later. This would not only be good news for civilians, but also for the Polymetal share price.

Overall, the situation remains uncertain. Despite this, an end to the conflict would likely lead to a Polymetal share price recovery. With encouraging revenue and production figures, I think it’s a good time to add to my current holding to lower my average weighted price. I will buy more shares in this company soon.

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.

Andrew Woods owns shares in Polymetal International. 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

pensive bearded business man sitting on chair looking out of the window
Investing Articles

Would a stock market crash matter?

Christopher Ruane explains why a stock market crash could turn out to be positive, not negative, for a private investor…

Read more »

Investing Articles

Has the Rolls-Royce share price peaked?

After a strong 2023 performance and (so far) in 2024, the Rolls-Royce share price has stuttered in recent days. Christopher…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Turning a £20k ISA into a £13,900 yearly second income? It’s possible!

By investing a £20k ISA now using certain basic principles, our writer thinks he could set up a second income…

Read more »

Fans of Warren Buffett taking his photo
Investing Articles

With no savings, I’d follow Warren Buffett’s number one rule to build wealth

Can this one piece of Warren Buffett wisdom really help our writer as he aims to build wealth in the…

Read more »

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings
Investing Articles

A second income of £1k a month from just £10 a day! How would I do that?

Mark David Hartley considers how to build a second income stream starting from just £10 a day. Is £1,000 a…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Turn £8,900 into a £24k annual passive income? Here’s how!

Christopher Ruane applies some investing lessons from billionaire Warren Buffett when explaining how he'd aim to earn sizeable passive income…

Read more »

Young Caucasian woman holding up four fingers
Investing Articles

7%+ dividend yields! 4 FTSE 100 shares for investors to consider buying in April

These FTSE shares offer dividend yields comfortably above the index average of 3.7%. Here's why they could be good passive…

Read more »

Dividend Shares

£10k in an ISA? Here’s how to generate a ton of passive income

Passive income can provide a lot more financial freedom and security. Here’s an easy way to generate some within an…

Read more »