Polymetal shares have crashed 80% in 12 months! Is it time to bag myself a bargain?

For a short period of time on February 17, 2022, Polymetal (LSE:POLY) Shares changed hands for 1,221p. Less than three weeks later, on March 8, the company’s shares closed at 92p. The drop of more than 90% is a direct result of the Russian invasion of Ukraine. Rarely has a stock been more affected by a single event.

As Polymetal owns eight gold and silver mines in Russia, and two in Kazakhstan, it is not surprising that the company’s share price has been affected by war sanctions and export bans.

The share price has since recovered slightly to around 244p. And for the past nine months, it has been pretty stable.

This makes me wonder what shares are now a bargain. Is this the perfect time to buy shares that in the past year were members of FTSE 100?

All that glitters…

To my surprise, the company’s production was not affected by the international sanctions imposed on Russian exports. Production during the last quarter of 2022 was 15% higher than a year ago.

Last week, the FT report that there is something new”increase“in the number of Russian retail investors who bought gold. Sales to the Asian market were also largely unaffected by the ban. This helped the company to reduce the stockpile of the metal that had accumulated during the previous quarter.

But the company’s financial performance has suffered.

Revenue in the first half of 2022 was down 18% compared to the previous year. And, the company reported a net loss of $321m in H1, compared to a profit of $660m during the same period last year. However, this is mainly due to the loss (by $689m) of Russian assets. This is a non-cash accounting entry that can be reversed if the sanction is reduced.

An alternative – and more popular – measure of profitability is EBITDA (earnings before interest, taxes, depreciation and amortization). This was $426m in the six months to 30 June 2022, although it was 35% lower than in H1 2021.

Should I invest?

Gold is currently trading at around $1,930 an ounce. Predicting future commodity prices is difficult and subject to many influences. But Fitch’s solution The gold price forecast for the next four years is $1,850 (2023), $1,750 (2024), $1,700 (2025) and $1,690 (2026). If true, and based on current production levels, future profits at Polymetal will fall.

However, the biggest concern is that the company is considering moving its main stock exchange listing from London to Kazakhstan.

Currently, the Russian government only allows exports of precious metals to ‘friendly’ countries. By moving its domicile from Jersey, it is hoped that the company’s Russian operations can be incorporated into a separate legal entity. This can then facilitate exports to more countries.

The move won’t take place until 2024, but it’s still unclear how it will affect shareholders in existing businesses. For this reason, I will not invest.