The Polymetal (LSE: POLY) share price fell 25% at one point Wednesday morning, giving up some of its recent recovery. The price had dipped below 100p in March, before bouncing back above 350p. Now it’s down below 220p again, I think I might be looking at a fresh buying opportunity.
But what’s behind the Russian gold miner’s latest slump?
Polymetal avoided the sanctions problems faced by Russia-based steel producer Evraz. But it still faces a serious squeeze. And on Wednesday, the company announced the postponement of its 2021 final dividend.
It’s all down to the “mounting uncertainty with availability of funds due to sanctions on Russian banks and economy“, it explained.
The liquidity strain has led to a need to retain more working capital, and the firm’s balance sheet has been hit by higher funding costs on top of reduced credit availability.
Liquidity pressures
That alone would be enough to put pressure on the Polymetal share price, even without the bad news about the dividend.
There was a spark of hope in the announcement, as the dividend has not actually been cancelled. No, Polymetal has “decided to postpone the decision on the dividend payment to August 2022 (along with interim dividend decision for 1H 2022)“.
It’s not just the dividend that has been postponed, it’s the decision on the dividend. But while there is hope, there’s still a chance it will end up not being paid.
Chair of the board Riccardo Orcel offered an upbeat note, saying that the company is “hoping that stability is restored, improving visibility which would allow us to return to our cash distribution policy.”
Auditor shock
This isn’t the only recent bad news. Only five days earlier, Polymetal told us its auditor, Deloitte LLP, had resigned with immediate effect. Deloitte is splitting from its member firms in Russia and Belarus, and says that means it will no longer be able to carry out an audit of assets in those countries.
So why might I buy Polymetal shares with all these problems? For one thing, I have often thought I’d like to own shares in a gold miner, but I have rarely seen them going at attractive prices.
Is the Polymetal share price attractive now? I really think it could be, but that will depend on what the company looks like further down the road. It doesn’t operate only in Russia and Belarus, but also has a very attractive operation in Kazakhstan.
Rump Polymetal share price
If it splits, could we be left with a rump company listed in London based only on the Kazakhstan assets? That’s one possible plan. And if it should come off, I reckon there’s a good chance that Kazakhstan production would be enough to get us back to a healthy dividend yield. Even at the current Polymetal share price.
But there’s one enormous risk. Polymetal might fail to find a new auditor, and might end up delisted from Western markets and listed only in Russia. And if I buy now, my shares could end up worthless.
So no, I will not buy, even though I do find Polymetal shares tempting.