On Tuesday morning, the Anglo-Russian miner, Polymetal released a statement addressing possible restructures focused on improving shareholder sentiment as the company has faced serious consequences of the Russia-Ukraine war such as heavily imposed sanctions and being booted off the FTSE 100 last Monday.
Russian companies saw investors withdraw from their shares as the tensions grew between Russia and Ukraine and Polymetal was at one pint down over 90% YTD.
Polymetal shares faced serious scrutiny from investors as Russian sanctions were imposed by the West. However, shares have since rebounded and investors will be asking; ‘can Polymetal shares return to 1,000p’?
A Polymetal share price of 1,000p will by no means represent a complete reversal, but it is a significant psychological level for investors.
When the markets started dropping Polymetal shares with the g invasion of Ukraine, the company released a press statement addressing the sanctions and how Polymetal was shielded from the impact.
The company informed investors that Russian sanctions will not disrupt Polymetal’s operations in Russia and Kazakhstan. Apart from the sale of gold bullions being hurt by Russian sanctions, the company’s production guidance is unhindered.
Polymetal assured the markets that they are equipped to handle all liquidity issues that may arise and have stockpiled resources to ensure no disruption is caused to operational activities, at least for the next three months.
The Russian miner’s shares have nosedived 70% to 375p YTD despite their attempts to reassure investors at every stage of the war. Polymetal shares had peaked at 1,729p early June 2021.
Currently, the company has a market cap of £1.1bn with a forward P/E ratio of 1.5, the lowest amongst all LSE listed peers. This alone suggests an inherent value to the shares, despite a heavy discount attributed to Polymetal by the market.
However, Polymetal does have a dividend cover of 30x and a ROCE of 28x, representing the company’s capabilities are in place to handle returns to investors despite times of uncertainty.
On March 2 2022, the miner did announce a proposed final dividend payment of $0.52 will be paid to shareholders in May 2022. The final dividend reduced from $0.89 in 2020 as geopolitical tensions beat up Polymetal’s fiscal position.
Not too long ago, six directors, including chair Ian Cockerill, resigned from the board in an attempt to abandon a potentially sinking ship.
Polymetal have since hired Riccardo Orcel as an independent non-executive chair and installed some stability to the company after a turbulent month. The board now consists of 8 members as Polymetal replace 4 non-executive directors.
Kazakhstan
Polymetal has been analysing the possible divestment of its operations in Kazakhstan as per the request of a group of investors on Monday.
Polymetal produced 1.7 million troy ounces of gold equivalent in 2021, of which 558,000 ounces were produced by its two mines in Kazakhstan.
On Tuesday, the mining group addressed ongoing media speculation regarding a possible change in the company’s corporate structure. The group said they are “evaluating various options that could maximise shareholder value.” The statement was meant to relieve investors of their worry and ask them to hang tight while Polymetal figures it out.
Polymetal shares on Wednesday gained 10% as the company presented a fresh outlook for the rest of 2022, before falling back to finish negative.
On Wednesday, Polymetal reported an increase in net debt from $1.6bn to $1.8bn which it will use towards its seasonal working capital and resource procurement.
Currently the miners have short-term capital financing from Russian banks and is waiting for additional liquidity in Q2 2022.
The company has $0.4bn cash held by institutions which are not subject to Russian sanctions along with a $0.5bn undrawn line of credit.
The company reinterated in the statement that Russian and Kazakhstanian operations are unhindered, and projects in the advance stages of development are back on schedule.
Logistical challeneges having impacted Polymetal’s POX-2 project causing a 3-6 month slippage and early stage projects are delayed by a year.
Pacific POX project is suspended indefinitely while the company look for re-site alternatives for the venture in Kazakhstan.
Junior JVs of the company will suffer due to 50% cuts in the budget of Greenfield exploration.
Polymetal said that its Brownfield explorations schedule and volumes will remain unaffected.
Riccardo Orcel said, “It is my opinion that investors, private and institutional, that collectively control over 75% of this company deserve a Board that will lead the company through this turbulent time, preserving and hopefully rebuilding the value of their investment as well as protecting the livelihood of thousands of employees, contractors, suppliers and other stakeholders.”
The Polymetal share price was up 11% at the time of writing on Thursday.
