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.

The price-to-sales (P/S) metric indicates a company’s revenue against its value. The ratio is calculated by taking a company’s market capitalisation and dividing it by the firm’s revenue over the past year.

The metric is normally used when a company isn’t making a profit. For example, I may use this more often when I’m looking at growth stocks. Tesla is one of the few companies making a profit in the EV industry, so using the P/S ratio, I can easily compared Tesla’s valuation against its peers.

Meanwhile, the price-to-earnings (P/E) ratio is more frequently used and is calculated by dividing the market value by the company’s earnings.

So, let’s take a look at the cheapest UK-listed shares using these metrics.

Polymetal

Polymetal (LSE:POLY) is an Anglo-Russian mining stock and its share price tanked after the Russian invasion of Ukraine. Sanctions have made it hard for the company to continue operating as normal.

The mining group has highlighted uncertainty around funding as a result of sanctions placed on Russian banks and the state as a whole.

It may also struggle to sell its main product, gold. Fellow Russian Petropavlovsk said that its sales fell after its main customer, Gazprombank, was placed on the European sanctions list. 

It’s fair to say that gold mining stocks should be doing pretty well this year, but Polymetal isn’t. It’s down 89% over the past 12 months.

Following a solid showing in 2021, the company now trades with a P/E ratio of 1.1. Meanwhile it has a P/S ratio of 0.3. Both of these figures are exceptionally low, correctly suggesting that something is wrong.

On the plus side, Polymetal expects to produce 1.7m ounces of gold this year — 1.2m oz in Russia and 500,000 oz in non-sanctioned Kazakhstan.

Ferrexpo

Ferrexpo (LSE:FXPO) is a Swiss-based miner with operations in Ukraine. The stock also collapsed following Russia’s invasion of Ukraine. It’s down 76% over the past 12 months.

Some 70% of Ferrexpo’s mines are in Ukraine. Last week, the firm announced that total iron ore pellet production fell 27% on the year to 2.1m tonnes during the second quarter. First-half sales were down 21% on the year to 4.4m tonnes.

The fall is production was naturally attributed to the war. However, the company vowed to continue its operations despite a very difficult operating environment.

Iron ore prices have been pretty strong throughout most of the year, so I’d expect Ferrexpo to be doing pretty well if it wasn’t for the war.

Currently Ferrexpo is trading with a P/E ratio of 0.85. It has a P/S ratio of 0.25. Once again, these are exceptionally low figures that correctly indicate that something isn’t right.

Would I buy either of these stocks?

I actually owned Polymetal shares before the war, and I bought some more when the stock collapsed as a very speculative investment.

Based on the same logic, of a speculative approach, I’d also put a limited amount of money into Ferrexpo shares too.

But it would be a huge gamble. It’s not so much about the assessing the fundamentals of these companies. Instead it’s about predicting or guessing when the war will be over and when sanctions may be removed. That’s a tough call.

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.

The share price is down 86% over the past year, but has stabilised in recent months. So, should I take a risk and buy more Polymetal stock?

Why did the share price fall?

Polymetal is an Anglo-Russian precious metals mining company registered in Jersey. Its assets are split between Russia and Kazakhstan.

So, when Russia invaded Ukraine and the West introduced sanctions on Moscow and the Russian economy, the Polymetal share price sank.

The gold miner has highlighted uncertainty around funding as a result of sanctions placed on Russian banks and the state as a whole. Polymetal had previously warned about the impact of inflationary pressure on its operations. Constraints on the balance sheet have exacerbated issues relating to access to funding.

There are also concerns that Polymetal may struggle to sell its gold and silver. Fellow Russian miner Petropavlovsk has already said that its sales have fallen after its main customer, Gazprombank, was placed on a European sanctions list. 

Polymetal has also suspended its dividend in an effort to improve the stability and liquidity of the business.

Investors have also been concerned that Polymetal could find itself on the sanctions list too.

Is it looking cheap?

Polymetal certainly looks cheap if we take its price-to-earnings ratio, which is just over one. The firm made $1.16bn in pre-tax profit for the year ending 31 December, but is only valued at £1.1bn.

But obviously that’s not reflective of its potential future performance.

Polymetal’s management has actually been pretty upbeat on its 2022 forecast. Production fell 6% in the three months to 31 March, but higher prices meant revenue increased 4% year on year. The miner still expects to produce 1.7m ounces of gold this year — 1.2m oz in Russia and 500,000 oz in Kazakhstan. That’s the same as 2021, and gold prices are currently above the 2021 average.

I’m eagerly awaiting the next production update to see if Polymetal is actually producing in line with expectations. If it is, I think we’ll see the share price shoot up despite the risks.

Should I buy more Polymetal stock?

Will I buy more? I actually doubled my holding in April as I was reassured by Polymetal’s updates. I may even buy more at the current price, but I do accept the risks here.

The company also has an attractive portfolio of assets that should be hugely profitable right now. Mining firms, with the exception of those with sizeable exposure to Russia or Ukraine, have gone from strength to strength this year on the back of higher commodity prices.

In fact, if it wasn’t for the war, I’d expect Polymetal to be doing very well right now.

Polymetal

Polymetal shares sank in February and March. The UK-listed gold miner has highly profitable assets in Russia and Kazakhstan. However, the firm has highlighted concerns about access to funding after Russia and Russian banks were hit by sanctions. Despite this, the Anglo-Russian miner is operating close to 2021 levels. It’s also benefiting from higher prices for its gold and silver.

Polymetal will remain a top-10 global gold producer and top-five global silver producer if operations aren’t impacted. Production fell 6% in Q1 but the company is still forecast to produce 1.7m ounces of gold this year. That’s the same as 2020, and with higher prices, it could even be a more profitable year for Polymetal.

I owned Polymetal stock before the war and recently doubled my holding as I think there’s a huge growth opportunity here. Based on last year’s earnings, it currently has a price-to-earnings (P/E) ratio of just 1.5. Despite this, I accept that there’s a lot of risk here including the possibility that Polymetal could be sanctioned if the war escalates further in Ukraine.

Ferrexpo

On the P/E metric, Ferrexpo looks even cheaper. The miner has a P/E ratio of just 1.2 after its share price tanked this year. The stock is down 69% over 12 months despite despite iron ore – Ferrexpo’s main product – increasing in value during 2022. Some 70% of Ferrexpo’s mines are in war-torn Ukraine and the firm is seemingly not operating at full capacity.

Ferrexpo recently announced that Q1 iron ore pellet production came to 2.7m tonnes. The figure is in line with the same period in 2021, but 11% below the previous quarter due to “operational and logistical constraints“. However, according to Liberum, the miner’s production levels suggested that it was operating at 70% of capacity during March. 

I’m looking to add Ferrexpo to my portfolio but the ongoing nature of the war presents a huge risk.

Petropavlovsk

Petropavlovsk is a London-based gold mining company with operations in Russia. However, I foresee more challenges for it than for Polymetal. The company is in a catch-22 situation with sanctioned Gazprombank demanding immediate repayment of approximately $201m due under its committed term facility agreement. Despite production increasing, the miner is also struggling to sell its gold, primarily because its main customer, Gazprombank, was sanctioned. These factors, coupled with $300m owed to Western investors, are making it increasingly likely that Petropavlovsk will default on its debts. I’m keeping Petropavlovsk on my watchlist because its trading at a fraction of its pre-war price, but for now, I’m giving this one a miss.

I held Polymetal shares before the war started and given the strength of mining stocks this year, I think the investment would have been doing well. However, I’ve recently bought more Polymetal stock, doubling my holding in the miner. Here’s why.

It’s looking very cheap

Polymetal has a price-to-earnings (P/E) ratio of just 1.7. This looks incredibly cheap, or more probably suggests that something is wrong. In this case, the low P/E reflects the concern investors hold about the firm’s capacity to carry on operating.

The miner has highlighted uncertainty around funding due to sanctions placed on Russian banks. Balance sheet constraints have exacerbated funding issues. Another concern is that as Russia becomes increasingly isolated, Polymetal may find it hard to sell its gold and other products. Russian miner Petropavlovsk has demonstrated this. Petropavlovsk said that sales had fallen after its main customer, Gazprombank, was sanctioned. There’s also the very real risk that Polymetal could be sanctioned too.

Based on the previous annual dividend, I could expect a near-30% yield from Polymetal if I bought at the current price. However, the share price took a tumble last month when chairman Riccardo Orcel announced the decision to postpone dividend payments for the foreseeable future. The decision was made to sustain the stability and liquidity of the business. However, as an investor, the dividend would have helped cover my losses on this stock.

Strong Prospects

The reason I’ve bought more is that I’ve seen enough data to make me think Polymetal can continue to operate successfully. Polymetal will remain a top-10 global gold producer and top-five global silver producer if operations aren’t impacted by the current situation. Production was only down 6% in Q1, which I don’t think is too much to be worried about. In fact, the fall might not be indicative of the sanctions-related pressure anyway. Polymetal has maintained its annual production guidance of 1.7m ounces of gold and said operations in Russia and Kazakhstan continue undisrupted. Q1 revenue actually rose 4% during the period driven by higher gold prices.

Finding buyers for its gold might be the biggest issue if production remains on track. But in the long run, Polymetal has an attractive portfolio of assets located across Russia and Kazakhstan. These mines are expected to yield high long-term returns. 

Moreover, Polymetal derives around 50% of its gold, and 50% of its sales, from its operations in Kazakhstan. The firm even said it was mulling splitting its Russian and Kazakh businesses. This could shield shareholders from Russia-related issues.

Why did I buy?

I bought more because the prospects outweigh the risks, in my opinion. The stock is looking very cheap but almost everything I’ve seen suggests the miner should be able to continue operating as usual. It’s also more sheltered than other miners given its 50% exposure to Kazakhstan.

Centamin

Mining stocks have done well this year as commodity prices soared. However, the past year has not been kind to Jersey-registered Centamin. The share price, which stood at over 200p a share in 2020, is now just 87p. In April, it said full-year profits had halved on the back of forecast lower revenue and an impairment on assets in Burkina Faso.

However, 2021 performance was roughly in line with pre-pandemic figures after a bumper 2020. And more positively, 2022 is forecast to be a better year. Gold production is set to rise this year having fallen to 415,370 ounces for 2021. Centamin said production is expected to be between 430,000 ounces and 460,000 ounces in 2022, with cash costs of $900-$1,000 per ounce produced.

Projected cash costs are roughly in line with 2021. Fourth quarter cash costs stood at $972 per ounce produced, and all-in sustaining costs were $1,256 per ounce sold. Profits will depend on gold prices but the current spot price is higher than the average price achieved in 2021.

The falling share price has made the firm, which operates the massive Sukari gold mine in Egypt, look more attractive to me. It has a P/E ratio of just 12.2 and offers a dividend yield of 8%. Falling gold prices could hurt profitability here – we may see commodity prices fall on the back on sustained lockdowns in China. Meanwhile high inflation levels, globally, could increase costs. Despite this, I’m backing Centamin and will look to add it to my portfolio.

Polymetal

Based on the previous year’s performance data, Polymetal has a P/E ratio of just 1.7. That’s either astoundingly cheap, or an indication that something isn’t right. In this case, the incredibly low ratio reflect the risks associated with its ability to operate as usual following Russia’s invasion of Ukraine.

Polymetal, which has mines in Russia and Kazakhstan, has highlighted uncertainty around funding as a result of sanctions placed on Russian banks and the state as a whole. Balance sheet constraints have exacerbated funding issues. There are also concerns that as Russia becomes more isolated, Polymetal may find it hard to sell its gold and other products. Fellow Russian miner Petropavlovsk has already noted issues selling its gold after its main customer, Gazprombank, was placed on a European sanctions list.

However, I’m bullish on Polymetal. Despite these issues, it should remain a top-10 global gold producer and top-five global silver producer if it can continue producing at the same levels. The miner said it expects to produce 1.7m ounces in 2022 — a figure similar to 2021. It has an attractive portfolio of assets and these are expected to yield high long-term returns. 

In the first quarter, production fell 6% but revenue rose 4% year-on-year to $616m, driven by higher prices. It may well be the case that the fall in production wasn’t a result of the geopolitical situation. Petropavlovsk actually announced that production had increased, despite the war. 

I held Polymetal shares before the war but recently doubled my holding after the price collapsed.

Ongoing conflict

Polymetal’s presence in Kazakhstan may end up being its saving grace. It derives around 50% of its gold, and 50% of its sales, from operations there. 

This seems to give the firm a sizeable advantage over other mining companies that have a larger chunk of their business in Russia, like Evraz and Petropavlovsk.

On 29 March, Polymetal announced that it was exploring the possibility of a demerger of its Russian assets. 

This could shield shareholders from any future problems with the Russian part of the company.

It does, however, mean that re-ratings may take place based solely on Polymetal’s Kazakhstan assets. 

Investment bank Berenberg, for instance, recently lowered its price target from 500p to 300p for this reason.   

It’s also possible that people or entities associated with the firm could be the target of Western sanctions at a future time.

Operations and the Polymetal share price

Polymetal has not been operationally impacted by the war in Ukraine. In two statements in March, the company emphasised that mining and production were continuing uninterrupted. 

Despite this, production fell by 6% for the first three months of 2022, on a year-on-year comparison. 

In a very interesting move, the firm also confirmed that it was maintaining its full-year production target of 1.7m ounces of gold. As a shareholder, this was encouraging because management clearly believes that production will continue with a large degree of normality for this year. 

This makes me confident that the Polymetal share price has the potential to recover. 

Furthermore, revenue for the three months to 31 March increased by 4%. While this was partially due to higher gold prices, it also shows that the company is still productive despite the ongoing conflict.

The problem with a recovery, however, is that the share price is almost totally correlated to the prospect of peace in Ukraine. While the war is ongoing, a prolonged conflict is in nobody’s interests. 

Sanctions are hitting Russia and energy prices are spiking in many Western states, so it’s conceivable that an end to hostilities may come sooner rather than later. This would not only be good news for civilians, but also for the Polymetal share price.

Overall, the situation remains uncertain. Despite this, an end to the conflict would likely lead to a Polymetal share price recovery. With encouraging revenue and production figures, I think it’s a good time to add to my current holding to lower my average weighted price. I will buy more shares in this company soon.

Right now, based on the previous year’s data, Polymetal has a price-to-earnings ratio of just 1.6. That’s incredibly low.  In most cases I’d say that’s astoundingly cheap, or most probably, that something must be wrong. The figure reflects the fact that the stock is currently valued at £1.18bn while the company made $1.16bn in pre-tax profit for the year ending December 31. So, what’s behind the low P/E ratio and should I buy?

Why is the P/E so low

Investors are obviously concerned about the company’s capacity to carry on operating. Polymetal has highlighted uncertainty around funding as a result of sanctions placed on Russian banks and the state as a whole. Balance sheet constraints have exacerbated funding issues. 

Moreover, as Russia becomes more isolated, Polymetal may find it hard to sell its gold and other products. In April, Russian miner Petropavlovsk said it had seen sales fall after its main customer, Gazprombank, was placed on a European sanctions list. 

If the war in Ukraine escalates, there’s also the very real risk that the miner could be sanctioned too.

Polymetal has also announced that it will be postponing its dividend payments for the foreseeable future. Chairman Riccardo Orcel said the decision was made to sustain the stability and liquidity of the business.

What’s the upside?

I still see quite a lot of upside here. Firstly, the miner said it still expects to produce 1.7m ounces in 2022 — a figure similar to 2021. Q1 data was positive too. Despite a fall in production, revenue for the three months to March 31 rose 4% year-on-year to $616m. This was driven by higher prices. Production was only down 6%, which I don’t think is too much to be worried about. It may well be the case that the fall in production wasn’t a result of the geopolitical situation. Petropavlovsk actually announced that production had increased despite the war.

If operations continue relatively uninterrupted, Polymetal will remain a top-10 global gold producer and top-five global silver producer. It has an attractive portfolio of assets located across Russia and Kazakhstan. These assets, which should be very profitable right now, are expected to yield high long-term returns. 

One for my portfolio?

I actually owned Polymetal before the war, which probably would have worked out for me as mining stocks have done very well this year. However, the war started and the value of my holdings crashed. I’ve been keeping a very close eye on this one and recently decided to double my holdings. I’ve seen enough data to suggest the firm can continue operating profitably. Yes, there certainly are risks as detailed above, but I decided it was a risk worth taking.

Concerns

The gold and silver miner wasn’t afflicted by the same sanctions-related challenges that hit Russia-based steel producer Evraz. However, its stock price collapsed. There are several reasons for this.

Polymetal has highlighted growing uncertainty around funding due to sanctions placed on banks in Russia, as well as the wider economy. Balance sheet constraints have exacerbated funding issues. 

It will find it increasingly hard to secure funding and possibly sell its gold if the war continues and Russia becomes more and more isolated. Fellow Russian miner Petropavlovsk recently said it has seen sales fall after its main customer, Gazprombank, was placed on a European sanctions list. But Petropavlovsk also announced that production had increased despite the war.

There’s also the very real risk of the company being sanctioned. If the war escalates even further, we may seen Western nations apply blanket sanctions that could cripple the firm’s ability to sell its product. Even if Polymetal isn’t sanctioned itself, it may find it increasingly hard secure funding.

The upside

Polymetal is one of the biggest gold and silver producers in the world. On Monday, the firm reported a rise in first-quarter revenue, driven by higher prices and despite a fall in production. Revenue for the three months to March 31 rose 4% year-on-year to $616m. However, production of gold equivalent was down 6% to 372,000 troy ounces. Polymetal said it still expected to produce 1.7m ounces in 2022 — a figure similar to 2021.

Polymetal’s assets are located in Russia and Kazakhstan and are expected to yield high long-term returns. It should be a very profitable business, especially when commodity prices are elevated. In March, it said that bullion sales remained unaffected by sanctions.

So, it’s clear that the firm can remain profitable despite the challenging geopolitical situation. The company has even suggested spitting its Russian business off to protect its Kazakh operations from the effects of sanctions.

Should I buy more?

Amid sky-high commodity prices, Polymetal could well benefit as long as it can sustain production levels and find customers for its gold. I’ve been unsure about whether to buy more Polymetal shares for a while now. But as I see more and more evidence that the business is continuing to operate as usual, I’ve become increasingly keen on buying. I am currently looking to add more Polymetal stock to my portfolio.