New Speculation: Polymetal
Posted: August 19th, 2022, 5:24 pm
I think I wrote a post about POLY a few months ago. Today, I took the plunge & bought some equity.
Bought on 19th Aug for £2.38 per share (mkt cap just under £1B).
I have invested 1/2 a unit. If it continues to perform as expected I may increase my holdings by another 1/2 unit in the future.
What is it? A Jersey-based gold/silver miner that is listed in London, though the mines are situated in Russia & Kazakhstan.
Previously a member of the FTSE100, In late 2020 the shares peaked at over £20 per share (mkt cap of £9.5B). It's price collapsed after the Russian invasion of Ukraine earlier this year, falling as low as £1.21 per share. The dividend was suspended earlier this year, however operations in both countries have continued largely unaffected with 1.7 million ounces of gold continuing to be produced per year. (They are one of the top 10 gold producers in the world).
There were threats of delisting from the LSE & around having access to banking services. These seem to have receded now, with the shares up 28% in the past month. The board also announced in late July that they are exploring splitting the Russian operation off from the Kazakhstan to realise value to POLY holders.
They've also experienced some supply chain issues due to Covid restrictions in China.
Why buy it?
It is now on an incredibly low P/E ratio. If it can maintain earnings, we should see a substantial price increase as this normalises over time. You're getting a cheap Khazakh mining operation, with the entire Russian mining operation thrown in for free (two-thirds of the mining operations are in Russia).
Their main markets aren't in the EU, or US. There's always willing buyers of gold; Russia, China, India & other countries continue to stockpile the metal.
If geo-political tensions continue to increase, gold may shoot up in value as a safe asset.
If they resume dividends at their previous rate of £1.32 a share, it would be giving yield above 50%! This is probably unlikely to happen, more likely they will restart divi payments at a lower rate & de-risk by holding more cash on hand. However, divi resumption should signal to the market that 'normal service has resumed' and may cause a substantial revaluation to the upside.
If/when the Ukraine conflict ends we should see a gradual normalisation of relations, & removal of sanctions against Russia over time.
It's a bet that the stock is priced too low due to emotions, rather than because of future prospects.
My expectations & when I'll sell:
This isn't something that I want to put in the sock drawer & forget about for a decade. I'll consider selling once the share price starts to normalise against it's peers. If this plays out as hoped, I may end up with a multi-bagger.
What if I'm wrong?
A sudden de-listing, or an increase in sanctions, or political pressure causing problems around banking would be the largest risks I'd say. That's why I'm only committing 1/2 an investing unit.
Hornblower
Bought on 19th Aug for £2.38 per share (mkt cap just under £1B).
I have invested 1/2 a unit. If it continues to perform as expected I may increase my holdings by another 1/2 unit in the future.
What is it? A Jersey-based gold/silver miner that is listed in London, though the mines are situated in Russia & Kazakhstan.
Previously a member of the FTSE100, In late 2020 the shares peaked at over £20 per share (mkt cap of £9.5B). It's price collapsed after the Russian invasion of Ukraine earlier this year, falling as low as £1.21 per share. The dividend was suspended earlier this year, however operations in both countries have continued largely unaffected with 1.7 million ounces of gold continuing to be produced per year. (They are one of the top 10 gold producers in the world).
There were threats of delisting from the LSE & around having access to banking services. These seem to have receded now, with the shares up 28% in the past month. The board also announced in late July that they are exploring splitting the Russian operation off from the Kazakhstan to realise value to POLY holders.
They've also experienced some supply chain issues due to Covid restrictions in China.
Why buy it?
It is now on an incredibly low P/E ratio. If it can maintain earnings, we should see a substantial price increase as this normalises over time. You're getting a cheap Khazakh mining operation, with the entire Russian mining operation thrown in for free (two-thirds of the mining operations are in Russia).
Their main markets aren't in the EU, or US. There's always willing buyers of gold; Russia, China, India & other countries continue to stockpile the metal.
If geo-political tensions continue to increase, gold may shoot up in value as a safe asset.
If they resume dividends at their previous rate of £1.32 a share, it would be giving yield above 50%! This is probably unlikely to happen, more likely they will restart divi payments at a lower rate & de-risk by holding more cash on hand. However, divi resumption should signal to the market that 'normal service has resumed' and may cause a substantial revaluation to the upside.
If/when the Ukraine conflict ends we should see a gradual normalisation of relations, & removal of sanctions against Russia over time.
It's a bet that the stock is priced too low due to emotions, rather than because of future prospects.
My expectations & when I'll sell:
This isn't something that I want to put in the sock drawer & forget about for a decade. I'll consider selling once the share price starts to normalise against it's peers. If this plays out as hoped, I may end up with a multi-bagger.
What if I'm wrong?
A sudden de-listing, or an increase in sanctions, or political pressure causing problems around banking would be the largest risks I'd say. That's why I'm only committing 1/2 an investing unit.
Hornblower