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He international polymetal (LSE: POLY) share price had been rising in the first weeks of 2023. But it fell sharply again in response to full-year production results. The update noted that “2022 presented unprecedented challenges for our company.”
When the Russian tanks started arriving in February, shares in the precious metals miner collapsed. Polymetal has a couple of gold and silver mines in Kazakhstan, but most of its operations are in Russia.
On the way to the anniversary of the invasion, Polymetal’s shares show a 75% drop in 12 months.
Production
Production, however, remains strong. Despite the sanctions, there is no shortage of customers in Russia itself and in parts of Asia. Gold production for the 12 months to December 2022 increased 2%, and silver 3%.
Revenues were down a bit, down 3%, and net debt increased 45% to $2.4bn (£2bn). But the debt fell 14% in the last quarter. However, it is still a large chunk of debt for a company with a market capitalization of £1.2bn. But Polymetal is targeting free cash flow generation in 2023, so expect it to continue to shrink.
Valuation
It’s hard to put a valuation on Polymetal’s stock based on any of the usual fundamentals. In the first half, statutory EPS was negative, but we did see a moderately positive underlying EPS number. If the second half turns out better, as the company seems to believe, it could see a price-earnings (P/E) ratio for the full year in the single digits.
Overall, I would say that the year-end financial picture looks reasonably promising given the circumstances. And it must be tempting to think that Polymetal can survive until the end of the war. After that, if the sanctions are lifted, maybe I’ll have a higher valuation again?
price drop
Polymetal shares were gaining in the lead up to the update. So why the sudden creaking again? It seems that it is nothing financial. The ad spoke of “a possible re-domiciliation of the parent company, Polymetal International plc, to a jurisdiction deemed “friendly” by the Russian Federation.”
At this time, Russia will not allow Polymetal to sell its gold and silver to any country it does not consider friendly. It seems unlikely that any movement will occur before 2024, so the danger does not appear to be imminent. But the board is eyeing Astana, Kazakhstan, as its new corporate home.
Current shareholders?
If that happens, it is likely that the main price of the stock will move from London Stock Exchange to Kazakhstan. What would that do to current shareholders? Will they get some kind of equitable deal? Could they end up with something priced at Kazakhstani Tenge and hope there is some way to get it out? Could they just lose their investments?
There’s just no way to know now.
Polymetal shares could well look good for 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 away.
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