Key points:
- Polymetal has solved its auditor problem
- Sanctions seem to be having marginal effects on operating costs, no more
- The big decision will be whether they pay the final dividend, announce an interim
Polymetal (LON: POLY) shares have suffered badly from the Russian sanctions. As was likely to happen, the company being a Russia and Kazakhstan-based gold and silver miner. This despite Polymetal not actually being directly affected by sanctions itself, unlike Petropavlovsk (LON: POG).
Polymetal‘s problems are the secondary effect of sanctions, not the primary. So, as they announce today, sanctions on the imports of advanced technology into Russia are affecting the ability to build out mining operations, just as one example. The manipulation of the ruble's value is of course affecting operating costs – as is inflation in that currency.
One problem they had was that their previous auditor resigned, on the basis that they couldn't work in Russia any more (or, more accurately, their local offices were no longer part of the international network) but Polymetal has been able to solve this problem: “the appointment of MHA MacIntyre Hudson LLP is not contradictory to any applicable sanctions”. So, that's one potential problem solved – for of course without an auditor then the listing could not be maintained.
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There are still small other problems. There's no domestic to Russia market for silver bullion nor developed export one so production of that is simply being stockpiled – but that's also only 5% of group revenue. Financing costs are rising, as we'd expect them to be.
But production is as with earlier forecasts. Polymetal as an operating business might see some shaving of margins but it remains a decent scale gold miner able to export its production and get paid for it in hard currency.
POYYF and AUCOY, the two US derivatives of the POLY shares, have been suspended but holders can convert to the London underlying if they wish.
Which brings us to the big question – are Polymetal shares only worth 15% of what they were a year ago? Yes, of course, there's the addition of some risk but most of those risks seem to be solvable – indeed, are being solved. The big issue therefore is the dividend. That brings us to the next two big decision points for Polymetal shares.
The first is on July 21 when they will announce the Q2 2022 production numbers. That will tell us of the effects of capital and equipment costs on production. But the big data point is 22 September. That's when they will announce 1H 2022 results. And, much more importantly for the Polymetal share price, their dividend decision.
The company has a policy of paying out generous dividends, as a mature gold miner probably should. But the last final dividend was announced and then suspended. As was also probably right given circumstances. That 22 Sept date is when they'll give the decision upon that. Will the final divvie be paid? And what will be the 1H 2022 interim? Going by past dividend rates those two together could be a substantial portion of the current share price. They might pay the old dividend, might cut it to be more consistent with the current share price or might skip it altogether given events.
That's the trading decision in Polymetal. What are they going to do about the dividends and how do we want to be positioned ahead of the September announcement?
