Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Merry Christmas everyone, hope you all have a good one
https://www.polymetalinternational.com/upload/iblock/311/vu5mk0a70k3ycn39mm99cv0oaf9x0pjl/2022_09_Polymetal_financial_results_H1-2022.pdf
If you go back to the beginning of this thread Dunno posted the above link. If you look at the last page it informs you the effect A 1 RUB/USD movement or a $100 oz movement in gold price has on EBITDA and Free Cash Flow.
In the Q2 presentation Nesis stated the company would remain profitable if gold was $1,200 p/oz and 50RUB/USD, however since the Q2 presentation gold has increase to over $1800 and rubble has weakened to 72 RUB/USD which gives Polymetal a nice positive effect on EBITDA and FCF. If the gold price stays above $1,800 and rubble stays at 72 or higher going into Q1, we should have a good start to 2023 on reducing the net debt.
Westy did you read Maxim Nazimok’s interview with Interfax last week. In one of the answers he talked about the exchange rate and gold price.
Reports of a number of gold miners of the Russian Federation for the third quarter show a rather dramatic decrease in margins.
Nazimok’s response was ‘It's a macroeconomic vise. In the III quarter, two factors coincided: a drawdown of gold to the levels of $1,600 and a very strong ruble. And we have not yet touched the inflationary and logistical components, which, too, of course, play a role. Plus, if we talk about profitability, this can be seen even from our semi-annual reporting, when you do not sell everything you produce, fixed costs are distributed unevenly and, of course, marginality falls.
At the end of the year, our results will be more or less even, given that the implementation has fully entered the rhythm and working capital is being cleared, the ruble has slightly weakened compared to August-September, and gold has grown. Of course, these will not be last year's indicators, but quite normal profitability.’
Buy sell Repeat “Current plan envisages distribution of shares as dividend in specie and for both shares to retain listing on LSE."
As Westy stated yesterday 'Dividend in specie' is Where a dividend is declared in cash, but satisfied by a transfer of assets.
We should get an update on this by Q2 2023, however this is my opinion (please feel free to share your opinions if different to mine). Once they relocate the domicile of the Company to a more "Friendly" country to Russia, (hopefully we will get an update in Q1) they will then have the option of splitting the Russian and Kazakhstan assets. If they do spilt the company into Poly (R) and Poly (K) whenever that may finally happen, Polymetal International will have the Kazakhstan assets and still be on the LSE, in order for distribution of shares in Poly Russia (R) I believe they will declare a special dividend which would be declared in cash, but instead of shareholders getting the cash from the dividend we will get shares in Poly (R) (satisfied by a transfer of assets), therefore all shareholders will then have shares in both companies and both companies to retain listing on LSE. However, the plan is subject to regulatory approvals and as such may change.
Once we have shares in both companies it will be up to the shareholder whether they hold both, one or no shares at all by selling/buying on the open market.
We are still on course to meet its production targets of 1.7Moz of GE for this year, end of Q3 they had 198k oz of inventory, which they plan to sell in Q4 and into Q1 2023. Gold is back up over $1800 and hopefully will keep increasing which will be good for the average gold price going forward and silver near $24 and the USD/RUB fx rate saw the Rub weaken to nearly 64 and is weakening daily, which should help bring down the debt to your predicted debt of $2B by the end of the year. They will announce our key FY2022 operating numbers, including net debt, on 25th of January 2023.
CR888 good article you have posted, regarding Covid restrictions in China easing, still looks bad in the UK media, Polymetal have stated they are on course to sell their metal inventory, but as far as concentrate inventories are concerned – they are proving a lot more difficult to move. COVID restrictions in China and environmental penalties being the primary culprits. Hopefully that has changed in Q4.
Looking forward to the FY2022 results on the 25 Jan 23, should see a good price rise.
RGP007 Yes it looks like they are still waiting upon the relaxation of the restrictions before the First Exchanged Shares can be processed.
From the November update we were aware 10.5% of all company's shares had been submitted for the ************** and yesterday's RNS confirms that 8% of the company's shares (these were shares that were held on the National Settlements Depository in Russia) have been swapped out for paper certificates issued by the company.
The offer has been extended to allow shareholders that tendered their shares for the exchange to complete necessary regulatory and legal requirements. This has not affected their plans to change domicile. The BoD are looking at a relocation of the domicile of the Company to a more "Friendly" country to Russia and if that happens they will then have the option of splitting the Russian and Kazakhstan assets. We should get confirmation this may happen by Q2 2023. Current plan envisages distribution of shares as dividend in specie and for both shares to retain listing on LSE. However, the plan is subject to regulatory approvals and as such may change. It will be up to the shareholder whether they hold both, one or no shares at all by selling/buying on the open market.
They continue to plan for the Board to review dividend distribution in March 2023 before our FY2022 results are published.
Gold is back up near $1800 and silver above $23. China is slowly opening up apparently which will improve logistics. The Company and its BoD remain unsanctioned and refuse to sell to Russian Banks. The USD/RUB fx rate saw the Rub weaken slightly to 63 (Pre invasion levels were somewhere between 70 and 75) which is starting to bring prices down for the company in currency terms. They plan to announce our key FY2022 operating numbers, including net debt, on 25th of January 2023.
The company has reinforced its production targets at 1.7Moz of GE for this year, 2023 and 2024 with an update on costs moving forward in Jan or March next year.
The CEO has stated that new sales channels are now fully operational and that 198k oz of inventory will be moved by year end and into the 1st quarter of next year, reducing the accumulated debt to below the $2bn level from the half year figure of $2.8bn.
Kazakhstan operations have, by and large remained unaffected by the war.
They are currently having no problems getting loans in RUB and also in USD and are also actively exploring new Yuan-denominated debt facilities, however, they have stated they are not close to pulling the trigger on borrowing in Yuan yet.
The threats to the business remain as they have always been since the invasion started, sanctions/counter-sanctions, refinancing costs, logistics etc. Generally speaking there is a much better mood within the company than there was 6 months ago.
Westy I also like your comment which is suited for this thread so I have copied it here. Nobody knows when this will be over £3 but things to look forward to:
1. Peace in Ukraine
2. Increase in gold price and revenues
3. Increase in Rub/USD fx back to 70RUB/USD
4. Re-domiciling the Company
5. Re commencement of dividends
6. Restarting trading in US ADR’s
7. Splitting of assets (Rus & Kaz)
Once any of the above happens we should see the share price improve. The more of the above that happens the higher the price will go.
I still think there is a risk with this share, but hopefully its getting less riskier as the months have gone by. The reward you need to take in mind is the great dividend yield on offer at todays price, as if dividends do get announced next year I can guarantee the SP will be a lot higher.
Good luck all and DYOR
Westy did you write that peace (same surname) on stockopedia? Great overview of current business if you did.
My opinion is they can’t talk about dividends or a split until the re-registration to a friendly jurisdiction. Forbes.kz addressed the company's representatives with a question about when it is planned to divide assets into Kazakh and Russian.
"The company refused to sell Russian assets. The basic plan now is the re-registration of the parent Polymetal International from Jersey to another jurisdiction (the decision on it has not yet been made, consultations are underway). And only after that the division of assets into Russian and Kazakh can follow," the press service of Polymetal replied.
It is very clear the board are taking their time to make sure they are fully compliant with all the relevant sanctions, hence why the gold inventory didn't start to get sold until September. They mentioned they are fully compliant with all relevant sanctions a few times.
It looks like January is going to be an important month:
- Update on the redomicile to another jurisdiction (more than likely Kazakhstan)
- 2022 full year production results
- Cost guidance for 2023
They state number 1 method to regain shareholder value is to start paying dividends.
However Q2, 2023 we are likely to expect a definite answer regarding if a split is going to happen or not. It could be 2024 before the split actually happens.
If the split happens I don’t think we would be diluting our shares as someone asked on another thread, if they do split it would be 2 separate companies. Poly (R) would be a newly established company and shares for this company will be more than likely distributed to us as a dividend in specie which we can then hold, sell or buy more shares of Poly (R)
This was posted on stockopedia yesterday which sums up the current position of Polymetal:
‘In the latest update (November) the CEO has stated that new sales channels are now fully operational and that stockpiled product will be moved by year end and then into the 1st quarter of next year, reducing the accumulated debt to below the $2bn level from the half year figure of $2.8bn. Following a stock swap which is due to end on Dec 16th half of the company's 22% of shares held on the National Settlements Depository in Russia will have been swapped out for paper certificates issued by the company. This opens the door for a return to dividend discussion in March 2023. The BoD are looking at a relocation of the domicile of the Company to a more "Friendly" country to Russia and if that happens they will have the option of splitting the Russian and Kazakhstan assets. The news on this is that it may happen in Q2 2023. Shares will be offered like for like in both companies and it will be up to the shareholder whether they hold both, one or no shares at all by selling/buying on the open market. It is I understand hoped that both companies will be listed on the LSE. Gold is back up above $1800 and silver above $23. China is slowly opening up apparently which will improve logistics. The Company and its BoD remain unsanctioned and refuse to sell to Russian Banks. The USD/RUB fx rate saw the Rub weaken slightly to 62 this week (Pre invasion levels were somewhere between 70 and 75) which is starting to bring prices down for the company in currency terms. Kazakhstan operations have, by and large remained unaffected by the war. The company has reinforced its production targets at 1.7Moz of GE for this year, 2023 and 2024 with an update on costs moving forward in Jan or March next year.
The threats to the business remain as they have always been since the invasion started, sanctions/counter-sanctions, refinancing costs, logistics etc. Generally speaking there is a much better mood within the company than there was 6 months ago.’
Hopefully we should see a nice steady rise over the next couple of months.
Big Blue I would suggest you go on their website and look for yourself what gold and silver was sold for. I have copied it for you but you can look for yourself.
2021
Average realised gold price for Poly was $1792
Average LBMA gold price $1799
Average realised silver price $24.8
Average LBMA silver price $25
So only 7 cents below full market price in gold and only .02 cents on silver suggests it’s pretty much in line with current gold and silver price.
22/9 RNS half year report states ‘Average realised gold and silver prices tracked market dynamics’
I would also suggest watching Nesis’s latest webcast either again from their website or YouTube. Nesis “We have started the full-blown sales of gold bullion a bit later than we originally planned, hence, the move of the target date to sell all of the accumulated bullion. This is not related to pricing. This is related to the compliance considerations. Now we wanted to ensure that we sell gold in such a way that there is absolutely no sanctions compliance risk. And right now we are selling our gold and our silver with no discount to gold prices. And we will not consider a price cut. We believe our current sales channels, multiple sales channels now provide us with ample opportunity to sell our product at full price.” If you don’t believe the quote watch it for yourself.
I personally believe by reading the companies website, RNS’s and listening to the CEO they are selling gold and silver pretty much very close to market price.
Big Blue have you any evidence that they are not selling at market price or is that just your opinion?
The board replacements are to replace the 2 board members that left in September (RNS 29 Sept). The replacements were expected as they stated in their last presentation 2 board members would be appointed soon.
I’ll go for £2.80 by Christmas, hopefully we should have sold majority of the inventory by then and should be near to $3b in revenue by the end of the year.
Now we are in positive free cash flow hopefully we can keep a steady rise and into the New Year
Bankruptcy- Have you watched the last few webcasts from the CEO and CFO, both said they hope to pay dividends from next year which they said will be number 1 method to regain shareholder value.
From Q4 they are now positive free cash flow, therefore they can pay down the debt and also pay dividends.
Cheers JAB, good read and reiterates what was said in the Q3 webcast, hence why the SP has been rising. Looking forward to the updates in Jan - March regarding reducing the debt, unlocking the shares on NSD and paying dividends ‘Because of both seasonal cash inflows and the continued unwinding of inventory, it is projected to further come down during Q4 2022. The objective is to get the total debt below the $2 billion mark by 2023, and the net debt over EBITDA ratio below 2x, which management believes is a realistic objective’
Still a great opportunity to buy shares at the current price. Who knows what the SP will be come March when the board will discuss paying dividends
Ramp the SP has been steadily rising since Maxim Nazimok’s webcast on the 3 October (SP was approx £2 on that date) said the inventory was now being sold from October. This was confirmed in the Q3 update and had being rising since. Even after a few panic sells today & day traders selling its holding at £2.40. I can’t say I remember them saying anything about positive cash flow for Q2 or for Q3, they have actually been very honest with all their presentations and stated more debt in Q2 and Q3 and that the peak debt would be end of September / start of October until the inventory was being sold, hence the positive cash flow now as we have now had confirmation gold is being sold. I still think this will keep steadily rising until January now. Then depending on the updates end of Jan to March who knows what the SP will be on news of a split and dividends being paid.
Exactly Ray, hopefully the support level has gone up from £2 pre the Q3 update to £2.40 today. It was a strong update as they stayed on track to meet their full year guidance of 1.7 Moz GE. The Company has successfully completed the restructuring of its sales channels and started to unwind accumulated inventory. We expect strong positive free cash flows in Q4. This says it all really, despite very significant challenges affecting the company this year they are still on course to meet guidance.
No issues paying back loans / debt.
Gut feeling dividends will be paid next year Nesis said.
No longer selling the Russian assets and optimal scenario now is to split the company. More news on this in January.
January should be a big month with positive news. Revenue should be near $3b for the year. Net debt decreasing and now we have positive free cash flow from this quarter. Update of splitting the assets and then talks of Dividends in March.
I still think this is well undervalued if you refer back to the Q3 update. Revenue for the third quarter of 2022 is down 13% to $714 m from $819 m a year ago, attributable to "inventory accumulation as well as lower metal prices". However, gold equivalent production during the period grew by 7.2% to 490k oz from 457k oz. Says revenue for the nine months ended on September 30 at $1.76 billion, down 16% from $2.09 billion a year ago. (However we know the inventory is now being sold).
CEO Nesis says: "In Q3, Polymetal stayed on track to meet our full-year guidance of 1.7 m oz of gold equivalent. The company has successfully completed the restructuring of its sales channels and started to unwind accumulated inventory. We expect strong positive free cash flows in Q4".
Reading the above statement is why I believe this is still undervalued. Despite operating in a persistently challenging external environment, having significant disruption in traditional supply chains and sales channels which has constrained cash flow generation and led to an increase in net debt, revenue only fell by 13%. However, production grew 7.2% in Q3 and so far, production has only reduced by 2% Jan - Sep and stayed on track to meet our full year guidance of 1.7 Moz GE.
We now have confirmation inventory is being sold and net debt decreasing, hence the SP movement. I still think January will be a good month for the SP, full year results and hopefully revenues will have increased back to last years levels $3b for the year. Should get update of any split which will again increase the SP. Then in March any talk of dividends should increase the SP even further.
Polymetal International plc (POYYF) Q3 2022 Earnings Call Transcript | Seeking Alpha
Polymetal does not abandon plans to divide assets into Kazakhstan and Russian — Forbes Kazakhstan
Kazakhstan remains a likely place of re-registration of Polymetal | Inbusiness.kz
Above are a couple of articles over the last few days and a transcript of the Q3 Earnings call.
Forbes.kz addressed the company's representatives with a question about when it is planned to divide assets into Kazakh and Russian.
"The company refused to sell Russian assets. The basic plan now is the re-registration of the parent Polymetal International from Jersey to another jurisdiction (the decision on it has not yet been made, consultations are underway). And only after that the division of assets into Russian and Kazakh can follow," the press service of Polymetal replied.
Polymetal International with assets in Russia and Kazakhstan is among the top 10 gold producers and the top 5 silver producers in the world.
After reading the transcript, it is very clear the board are taking their time to make sure they are fully compliant with all the relevant sanctions, hence why the gold inventory didn't start to get sold until September. They mentioned they are fully compliant with all relevant sanctions a few times.
It looks like January is going to be an important month:
- Update on the redomicile to another jurisdiction (more than likely Kazakhstan)
- Update on the **************, so far 10.5% have been submitted for the **************.
- 2022 full year production results
- Cost guidance for 2023
Re: the Q3 update, November and December to be strong in terms of free cash flow generation.
Dividends to recommence in 2023
Production guidance for 2023 & 2024 to be 1.7Moz of gold
Optimistic Net debt to be close to $2B at the end of 2022
Accelerate the 2nd stage of Southern Urals mine - Mineral Resources for this mine 2.4Moz at 8 g/t average
Next mine is Veduga, realistic start up now 2027. This is a 4 Moz asset at 3.9 g/t average.
Confirmation selling gold & silver at market price and no discounts.
They believe all payments due in 2023 and beyond will be paid.
Jan - Sept produced 1,014k of gold and sold 816k. Should have inventory of 198k that will be sold in Q4 and into Q1 2023.
Polymetal is not a get rich overnight share, for me it’s all about accumulating shares while the price is low. In two more quarters Poly could be in a financial position to start paying dividends and the SP should then be a lot higher than it is now once talks of dividends to be paid.
Carl - Name another company that will be paying dividends next year and the potential to double your money in 6 months time?
This would be good news for Polymetal if the NSD wins the appeal, it could start paying dividends to the shareholders if NSD holders are not sanctioned. Maybe this is the start of the process to challenge the sanctions.
MOSCOW. Nov 3 (Interfax) - Russia's National Settlement Depository (NSD), a division of the Moscow Exchange Group , has filed an appeal with the Council of Europe as part of an administrative procedure to challenge the decision to include the NSD in the European Union's sanctions list on June 3, the depository said in a press release.
Work on the appeal to the Council of Europe is being done concurrently with an appeal against the EU sanctions in the European General Court.
The NSD filed requests for licenses on September 30 with the financial authorities of Belgium and Luxembourg. They are being reviewed; responses have not been received yet.