The Polymetal International (LSE: POLY) share price had been climbing in the first weeks of 2023. But it declined sharply again in response to full-year production results. The update pointed out that “2022 presented unprecedented challenges for our company.”
When Russian tanks started rolling in during February, shares in the precious metals miner collapsed. Polymetal has a couple of gold and silver mines in Kazakhstan, but the majority of its operations are in Russia.
Heading towards the anniversary of the invasion, Polymetal shares are showing a 12-month fall of 75%.
Production, however, remains strong. Despite sanctions, there’s no shortage of customers in Russia itself and in parts of Asia. Gold production for the 12 months to December 2022 increased by 2%, with silver up 3%.
Revenue declined a little, down 3%, and net debt climbed 45% to $2.4bn (£2bn). But debt did drop 14% in the final quarter. It’s still a big chunk of debt for a company with a £1.2bn market cap, though. But Polymetal is targeting free cash flow generation in 2023, so it should hopefully continue to reduce.
It’s hard to put a share valuation on Polymetal based on any of the usual fundamentals. In the first half, statutory earnings per share (EPS) came in negative, but we saw a modestly positive underlying EPS figure. If the second half turns out better, as the company appears to believe, I could see a full-year price-to-earnings (P/E) ratio in single digits.
Generally, I’d say the year-end financial situation looks reasonably promising in the circumstances. And it must be tempting to think Polymetal can survive until the end of the war. After that, if sanctions are lifted, maybe it will get back to a higher valuation?
Polymetal shares were gaining in the run-up to the update. So why the sudden crunch again? It appears it’s nothing financial. The announcement spoke of “a potential re-domiciliation of the parent company, Polymetal International plc, to jurisdiction deemed to be ‘friendly’ by the Russian Federation.”
Right now, Russia won’t let Polymetal sell its gold and silver to any countries it does not consider friendly. Any move looks unlikely to happen before 2024, so the danger does not appear to be imminent. But the board is eyeing up Astana, Kazakhstan as its new corporate home.
If that happens, the stock’s main listing seems likely to move from the London Stock Exchange to Kazakhstan. What would that do to current shareholders? Will they get some sort of equitable deal? Might they end up with something priced in Kazakhstani Tenge and hope there’s some way of getting it out? Could they simply lose their investments?
There’s simply no way to tell right now.
Polymetal shares might well look good to investors who can tolerate high risk. And I wouldn’t be surprised if some are tempted by a small investment. But for me it would be a complete gamble, so I’ll stay well clear.