Polymetal (LON: POLY) shares are one of the anomalies in the current troubled times. Polymetal is a gold miner with large Russian operations and so we might expect sanctions to hit the company hard. On the other hand, it’s actually a Jersey company and so legally not Russian at all. Further, none of the major shareholders nor management are directly impacted by sanctions.
So, this makes Polymetal hugely different from Evraz, where Abramovich is directly sanctioned and the FCA has suspended trading in the shares. Petropavlovsk might seem similar, but there the business is entirely within Russia. Polymetal has close to 50% of the business outside Russia, in Kazakhstan. It’s also true that Polymetal does not refine up to gold bar, so is not affected by the London Bullion Market’s insistence that Russian refiners are no longer good delivery. Indeed, much of their concentrate is refined in China and Kazakhstan, places that have not imposed sanctions upon such concentrates.
So, it’s possible to think that sanctions will not affect Polymetal. Except there is still considerable risk of course.
The first set of risks comes from what authorities here might do. There is no direct claim that sanctions must be imposed given current rules. But those rules can change, politics can expand them. So, any position in Polymetal could end up being locked in – it’s how probable that is that must be considered such is the state of the current world.
The other side of this is what might Russia do to the operations inside the country. At which point of course all are facing radical uncertainty. For it’s simply not possible to know what might be done about exports of gold and silver concentrates, or even foreign ownership of mineral assets and mines. If action is taken then Polymetal is clearly still worth something as a result of the Kazakh assets. But even then it’s not really possible to know how much. For it depends upon the distribution of Polymetal’s debt burden between the Russian and Kazakh assets, or perhaps all are owed by the top-level, listed, company?
As an ongoing business Polymetal is clearly worth more than the current share price. But the uncertainty is about whether it will be able to continue, in its current form, as an ongoing business. Everyone’s caught in that thing that Macmillan talked about concerning politics – events, dear boy, events. Are outside Russia sanctions going to be expanded? What will be the Russian response to the assets inside Russia?
Other than these sorts of possibly unwelcome shocks the next big event is the dividend. Polymetal has declared a 52 US cents per share dividend and currently states that it intends to pay it. But there’s still some time before the ex-dividend date itself and more before the payment date. They’ve also stated that events might make them change their minds.
The price until then is likely to move both with those events and the varying market estimations of them. This is a high-risk situation.
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Tim Worstall is a freelance writer specialising in economics and the financial markets.