The Polymetal International (LSE: POLY) share price plunged 26% this week.
The drop came after the company announced its plan on 10 May to delist from the London Stock Exchange (LSE) and move to the Astana International Exchange (AIX) in Kazakhstan.
The move followed a promising period for the mining firm. Shares had shot up 39% since March.
What’s going on here? And does this uncertainty offer a rare opportunity to pick up shares on the cheap?
The Russian connection
Polymetal extracts precious metals from mines in Russia and Kazakhstan. Its access to these vast resources in Central Asia makes it a top-10 producer of gold and a top-five producer of silver worldwide.
The key detail here is that while the firm is headquartered in Jersey and was even a member of the FTSE 100, it was founded in Saint Petersburg.
This association with Russia meant that 2022 threw massive problems at the Anglo-Russian miner. As Russian tanks rolled into Ukraine, the company lost 89% of its value inside a month.
Surprisingly, Polymetal sustained near-£3bn in revenues, but a variety of sanctions slashed the firm’s margins. Ultimately, the company posted a loss for the first time in eight years.
| 2018 | 2019 | 2020 | 2021 | 2022 | |
| Revenue | £1.7bn | £2.2bn | £2.9bn | £2.9bn | £2.8bn |
| Net income | £355m | £480m | £1086m | £904m | (£288m) |
| Net margin | 20.80% | 21.40% | 37.90% | 31.30% | -10.30% |
The result was that the firm – which boasted a strong annual yield of 7% in 2021 – cancelled dividends for the year.
2023 resumption of cash flows
Good news arrived recently in the miner’s March 16 annual report.
The important line, I think, was that “disruption was largely eliminated in Q4 2022”. The company sounds confident that problems from the Ukraine war had been overcome.
In fact, management expects “the resumption of free cash flows” in 2023.
An 89% discount
The opportunity here seems obvious to me. I could pick up shares today for £2.42 each – an 89% discount on the all-time high of £20.28.
Better still, the company’s market cap is down to just £1.15bn. That makes the price-to-book ratio just 0.63 which would give me a huge margin of safety. That’s like getting £1 in assets for every 63p I invest.
If cash flows get back to normal, this would surely be one of the most undervalued stocks around.
17 July delisting
The big problem for me is Polymetal’s recent announcement that it will move its listing from the LSE to AIX.
Doing this would allow the company to split its Russian and Kazakhstani mines into separate entities. Then, the Kazakhstani side of the business could neatly sidestep all sanctions.
The danger is that it won’t be easy for me to buy and sell shares. Right now, there aren’t any UK brokers that facilitate trading on the AIX.
The planned date for Polymetal to delist from the LSE is 17 July. After that date, the future of any shares I own becomes uncertain.
One option is to find a way to transfer them to another broker based in the EU or in Asia that allows AIX trading.
If I can’t, I may be forced to sell them or be offered warrants or bonds.
Am I buying?
All in all, I do think Polymetal looks undervalued right now. But the uncertainty around delisting from the LSE puts me off opening a position in the firm.
