The Polymetal (LSE:POLY) share price is now just a fraction of its pre-war value. The gold mining stock is currently trading around 200p a share, down from highs around 1,500p in 2021.
So let’s take a closer look at what’s been moving the Polymetal share price and see whether this Anglo-Russian miner might be worth the risk.
War has been bad for business
Russia’s invasion of Ukraine has brought death and destruction, but it’s also negatively impacted the domestic economy of both nations.
Polymetal has not been the subject of Western sanctions, but it has been impacted by them. Early on in the war, the gold miner, which has operations in both Russia and Kazakhstan, highlighted uncertainty around funding as a result of sanctions placed on Russian banks and the state as a whole.
At the time, fellow Russian miner Petropavlovsk said that its sales had fallen after its main customer, Gazprombank, was placed on a European sanctions list.
And this appears to have impacted Polymetal too. In its September report, the firm said that gold sales were lagging production.
Into the red
In late September, Polymetal said it had swung to a half-year loss. Gold sales were down 23%, while silver sales increased 9%. Revenues fell 18% to $1.05bn in the six months.
The company’s average realised gold prices rose 4% while silver fell 14%. But this was in line with the wider market. Adjusted EBITDA fell 35% to $426m.
Polymetal declared a net loss of $321m, against a net profit of $419m a year previously. Meanwhile, net debt surged to $2.8bn from $1.6bn a year ago. None of this is positive.
However, Polymetal’s management remained optimistic. “The gap between sales and production is expected to start closing during the third quarter, as the company ramps up exports sales to various Asian markets“, the company said.
Improving outlook?
There are some positives. Production is broadly in line with where management expected it to be. The miner still has said it expects to produce 1.7m ounces of gold this year — 1.2m oz in Russia and 500,000 oz in Kazakhstan.
And, as noted in the update, Polymetal is looking to find new buyers in Asian markets, and that should help the business recover.
Of course, by some metrics, Polymetal looks quite attractive as well. It has a price-to-sales ratio of around 0.5 — that’s very low. But the figure is not truly reflective of the challenging operating environment.
While the war is ongoing and Russia escalating the situation by annexing four regions, Polymetal’s prospects largely hinge on its ability to sell its gold and silver to new customers, without providing sizeable discounts.
I already owned Polymetal shares before the war. And with the share price down 84% over the past year, it’s not been good for me. Would I buy more? Well I already have at the discounted share price, but I’m happy with my current exposure. So I won’t be buying more. There’s clearly plenty of risk here.