What’s going on with the Polymetal share price?

The Polymetal share price has been on a rollercoaster ride in recent months. What’s happened with it, and should I take the chance to buy in?

| 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.

Chalkboard representation of risk versus reward on a pair of scales

Image source: Getty Images

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.

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. 

Net income£355m£480m£1086m£904m(£288m)
Net margin20.80%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.

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.

John Fieldsend has no position in any of the shares mentioned. 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

Newspaper and direction sign with investment options
Investing Articles

When cheap markets meet favourable conditions, sentiment flips very quickly

London’s stock market is cheap — some sectors, even cheaper. Given a change in sentiment, the uprating could be substantial.

Read more »

Investing Articles

Empty Stocks and Shares ISA? I’d snap up these 3 stocks to start with!

Sumayya Mansoor explains how she would start to build wealth from scratch with an empty Stocks and Shares ISA and…

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

7.7% yield and going cheap! Why is this unknown FTSE 250 stock flying?

It's no household name, but there's one FTSE 250 stock with a high dividend yield and booming profits that looks…

Read more »

Photo of a man going through financial problems
Investing Articles

I’d stop staring at the Nvidia share price and buy this FTSE 100 stock instead

This writer reckons there is a smarter way to invest in Nvidia today without taking on stock-specific risk. Here is…

Read more »

Young lady working from home office during coronavirus pandemic.
Top Stocks

5 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Young Asian man drinking coffee at home and looking at his phone
Dividend Shares

These 3 FTSE 250 stocks offer me the highest dividend yields, but should I buy?

Jon Smith considers FTSE 250 shares with a very high yield, but questions whether the income is going to be…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Is FTSE 100 takeover target DS Smith a great buy?

A mega-merger between FTSE 100 giants DS Smith and Mondi has the City abuzz. But is there any value in…

Read more »

Young Black man sat in front of laptop while wearing headphones
Investing Articles

The WPP share price dips as profits fall. Here’s why it could be a top dividend buy

I'm starting to think the WPP share price undervalues the stock, especially if the long-term dividend outlook comes good.

Read more »