After briefly falling below 100p in early March, the Polymetal International (LSE: POLY) share price has tripled. Shares in the Russian gold miner ended last week close to 300p — down by around 75% so far this year.
I can still see plenty of potential value in Polymetal’s gold mines. But I’m worried that shareholders could lose access to these assets as a result of news released last week. If this happens, Polymetal’s UK shares might be left worthless.
Companies listed on the stock market are required to have an auditor to sign off their accounts each year. Unfortunately, Polymetal’s auditor resigned last week. I fear this could be the beginning of the end for the gold miner’s UK share listing.
What’s happened and why?
Until last week, Polymetal’s accounts were audited by Deloitte, one of the big four global accounting groups.
Deloitte has decided to separate from its member firms in Russia and Belarus. As a result, Deloitte says that it won’t be able to audit Polymetal’s operations in Russia anymore, so has resigned.
Polymetal’s board is looking for a replacement auditor. But they’ll need to find a reputable company that’s still able and willing to operate in Russia, the EU, and the UK. I think that could be difficult. Most of Deloitte’s rivals are also exiting Russia.
The London Stock Exchange will suspend trading of Polymetal shares if the company can’t find a new auditor. The stock could even be expelled from the market, although so far this hasn’t happened to any Russian firms.
A split could deliver 20%+ yield
If the UK shares are delisted, shareholder could face a total loss. So why would anyone buy shares in Polymetal?
For me personally, the opportunity lies in the group’s Kazakhstan operations. These mines have low costs and generate a substantial amount of surplus cash each year.
Polymetal is considering moving its Kazak operations into a new company. The idea is that this spin-off business would be able to operate normally in international markets.
Based on last year’s results, my sums suggest that Polymetal’s Kazak mines might be able to support a dividend of $1 per share. That could give a 25% dividend based on the current Polymetal share price.
My concern with this plan is that any split might just look like Polymetal is trying to evade sanctions. It might not be accepted by any western stock markets.
Polymetal share price: what I’ll do
I think there’s a growing risk that Polymetal will be forced to withdraw from western stock markets and rely on its Moscow Stock Exchange listing.
This might not be a big problem for founder Alexander Nesis, who controls nearly 24% of Polymetal shares. But I’d guess that the UK shares would become worthless for an investor like me, who would be unable to trade in Moscow.
I suspect that the next big turning point for Polymetal shares is now approaching. I don’t know what will happen next. But for me, this situation is too risky and speculative. I’ll be avoiding this fallen stock, despite the tempting value on offer.
