Down 48%, is it time to buy more Polymetal shares?

I bought Polymetal (LSE:POLY) shares around three months ago. With the outbreak of hostilities between Russia and Ukraine, I thought the share price of this former FTSE 100 Russian gold miner dropped too low to miss. Currently trading at 230p, should I now be thinking about adding more shares to lower my average weighted price? Let’s take a closer look.

Why did I buy?

Shares in the gold mining firm fell from around 1,000p to 500p when it became clear that war was on the horizon. I bought at 420p with the belief that the conflict would be short and decisive.

I also knew that Polymetal was a solid company, with strong historical results and a relatively low price-to-earnings (P/E) ratio. But more about that later.

Having held the position for some months, I’m now down around 48%. However, I’m not panicking, because the underlying business still looks sound.

Although the share price is correlated to the war, a prolonged conflict is in nobody’s interests. In Europe, the war is causing higher energy prices and surging oil prices globally. In addition, sanctions are biting Russia. 

An end to the war may come sooner rather than later, and this would only be good news for Polymetal. 

However, the war may simply continue without any end in sight, and this could ultimately place the firm in a difficult position further down the line. 

A solid business and potentially cheap shares

One major advantage of having invested in the company over a competitor, like Petropavlovsk, is that around half of Polymetal’s operations and sales take place in Kazakhstan. 

This means that shareholders are partially protected from the impact of the sanctions on Russia. Most of the sales from the Kazakh business have continued uninterrupted to the Far East.

In another display of confidence by the board, it maintained its production guidance of 1.7m ounces of gold in 2022. 

As a current shareholder, this was important to see because it suggests that the management doesn’t believe the war will interfere with day-to-day operations. 

This makes me think that it could be a good idea for me to pick up more shares at these low levels.

While the share price may appear low to me, it might also in fact be cheap. By using forward P/E ratios, I can better understand if a company is under- or overvalued.

Polymetal’s forward P/E ratio is 2.03. This is lower than competitors, including Petropavlovsk and Central Asia Metals. Given recent share price falls, however, P/E ratios may not be the most accurate metric of cheapness.

Overall, the situation remains uncertain. With a solid underlying business, however, I think I would benefit from loading up on more Polymetal shares given the beaten-down price. I will be adding more shares soon.