Polymetal, POLY, Defers Dividend – What Does This Mean?

Polymetal (LON: POLY) shares are in something of a strange place. The are the events in Russia and Ukraine, which do not, in fact, affect the company’s gold mining at all. There are no sanctions against Polymetal, nor against any controlling shareholders. Changes in gold ingot export rules or the Russian central bank buying in gold make no difference – Polymetal exports concentrates.

Polymetal also has about half the business in Kazakhstan, entirely outside the problematic areas. There is exploration of the idea of splitting the company into Russian and Kazakh parts and so on. The gold price is up reasonably, given uncertainty more generally. And yet, clearly, Polymetal is affected as the price is down 80% or so from the starting point.

On the other hand, as a Jersey company with the primary listing in London, the Polymetal share price has not gone to zero, as a number of the GDRs of Russian companies have – effectively zero, as they can’t be traded. On sanctions, Polymetal isn’t facing the problems Petropavlovsk is. Where that gold miner finds that its bank, Gazprombank, is sanctioned so it can’t repay the working capital loan, can’t refinance it, but also cannot meet the terms of the loan by delivering gold.

Also Read: The Pros And Cons Of Trading Gold

So, Polymetal looks to be in, as far as current circumstances will allow, in a good position. There’s the minor issue of having to find a new auditor, but that seems manageable.

There is though, this issue of the dividend. This was announced before this all started and is fairly chunky at $0.52 a share. With the Polymetal share price at £2.50 or so today, that is a darn good yield – especially as the company traditionally pays an interim as well as a final.

However, today Polymetal has said that it is deferring the decision on whether to pay the dividend or not. Given the uncertainty about the wider picture, this might not be all that bad an idea.

There is an apparent arbitrage available in that Polymetal trades at 900 rubles and above in Moscow, on MOEX. And that £2.50 in London. Buy in one, sell in the other, the two stocks are wholly and entirely fungible. While it might be worth asking around, it’s near-certain that no broker will enable that trade so while it appears to be there, it almost certainly isn’t.

Which leaves us with the prospects for Polymetal shares themselves. The result of today’s announcement is that August is going to be an interesting and volatile time for them. For this is a deferral of the dividend. The decision as to whether to pay that 52 cents will be made alongside the decision on any interim dividend in August 2022. That’ll lead to considerable speculation leading up to that about whether there will be two, one or no dividend payable.

Trading positions will need to be set dependent upon views of which of those three answers is going to be the correct one.