Member Info for urai5

We know that there is no alternative: Polymetal International must and will sell the assets in Russia. The question arises: what can be solved and what value will the assets in Kazakhstan have. There are (as is well known) various methods for the valuation: e.g. asset value, earnings value, cash flow.

The simplest is the net asset value method. This is based on the balance sheet of the last annual statement(s). This method does not include future prospects. In addition, the reserves and resources of a miner must be capitalized.

In the case of Polymetal International, the sanctions penalty must also be taken into account for the assets from Russia. And then a buyer is not willing to pay the full value. Times are bad. That's why I'm assuming an estimated 50%.

According to the 2022 financial statements, the key figures in USD are as follows:

Net equity: 2.2 billion

This is the assets minus debts = net equity. I didn't find a breakdown in the quick review to Russia and Kazakhstan. The debts are mainly in Russia. It is also unclear how the (unfinished) POX-2 was evaluated in Russia. I'll assume a ratio of 1 (Russia) to 3 (Kazakhstan):

Russia: 550M

Kazakhstan: 1.65 billion

Reserves and Resources: 27moz P&P and 26moz M+I+Inf. Total 53moz AuEq.

I leave out PGM and Cu. fluctuation reserve. Would also be a few more moz AuEq.

Now the big question is always: How much is an ounce of AuEq valued. I assume (from experience) $100 for reserves and $20 for resources. The breakdown between Russia and Kazakhstan is as follows:

Russia:

16moz P&P: 1.6 billion

22.5moz M+I+Inf: 500M

Kazakhstan:

11.3moz P&P: 1.1bn

3.3moz M+I+Inf: 66M

Company value Russia. Total: 3.3 billion

Of which 50%: 1.65 billion. Of this, 1 billion must be reserved for development in Kazakhstan. The new POX (autoclave) to be built alone costs many hundreds of millions of USD. That leaves 650M or just over $1 per share for a dividend.

Company value Kazakhstan. Total: 2.8 billion

These assets are the ones that make up the market capitalization. That would be around $6 per share (474M) plus $2 from the proceeds from the Russian assets for the investments. Total $8. But the market value will also be based on future profitability and the ability to pay dividends. Without Russian assets, I see POLY-K's business positively. So a medium-term price target of USD 10 could be assumed.

Conclusion:

The current fair value of an integrated Polymetal International without sanctions penalty would be around 6.1 billion. $13 per share, respectively.

Under the circumstances, it looks like this: $1 exRussia dividend and a fair value of $8 per share. $10 price target in one year; If everything goes well.

urai5

PS This is my personal rudimentary calculation. It does not claim to be fulfilled. But for us DACHlers (Germany, Austria, Switzerland) our hands are tied anyway, either with Taby's app or with a collective certificate in the vault of the custodian bank.

"And as for the fantasy $10 valuation, based on what assets?" Of course @big-blue - your objection is justified:

Here is the hypothetical (but realistic) calculation for a $10 price target after selling the Russian asset:

The following assumptions for Kazakhstan:

- Debt free

- Net cash sufficient to finance POX with attractive credits

- >500koz AuEq p.a.

- Au Price $2,000/oz

- EBITDA margin 70%

- EBITDA 700m$

- 474m shares

- EBITDA per share $1.50

- Net income $1

- P/E 10 for a growth company

- Price target $10

- Dividend $0.50

- Yield 5%

In a year we will see whether these assumptions are confirmed or not. But it doesn't matter to me and many shareholders from DACH: We have not been able to trade Polymetal International since the end of February 2022. The re-domiciliation and the prospect of dividends is already much better than the past 1.5 years.

​

Sorry, I forgot: Current price 4.50 USD

https://www.polymetalinternational.com/en/investors-and-media/shareholder-centre/stock-chart/#accordion-aix

Very well recognized @big-blue.

500koz AuEq p.a. and debt free in Kazakhstan without sanctions with great exploration potential and capable of paying dividends is extremely attractive. Price target after selling Russian assets 10 USD. More after the (new) listing on the LSE.

@profitissanity

Thanks for your feedback.

I don't know the tax legislation in Romania. Of course, no profit tax has to be paid if there is no profit. In the case of the miners, however, the state royalty must be paid in any case - even in the event of a loss.

PS

Of course, I recognize the potential and low valuation of Vast Resources. However, I got out again a few weeks ago after the return of the diamonds was (had) been massively delayed.

Thank you @asimpleinvestor for the clarification. I understood that very well. I just wanted to point out that Vast is (probably) mathematically unlikely to get full price for copper metal. So the gross income is under $1.5m. According to the OPEX costs of the mine are now covered.

But that still doesn't mean profitable. The overhead expenses alone are probably around $10m p.a. Then there are interest, depreciation and taxes plus the sustaining costs.

Sorry folks, but did you really understand and calculate the RNS?

Around 172 tons of copper were sold for the first semester. Even with a payability of 100% (which it is not, because the smelter process also costs) that would be almost 1.5 million USD in revenue. The costs are then deducted from this. Nothing is left for the company.

Normally the RNS would be negative. But in the current situation, I judge them neutral to rather positive. Because I assume a (very) good second quarter of 2023. A publication BEFORE the re-domicilation and BEFORE trading on the LSE was suspended would really make no sense.

PS The schedule looks like this:

- Wednesday, July 26, 2023: AGM for fiscal year 2022

- Friday, 7/28/2023: GM to approve the delisting of POLY shares from the LSE.

- Saturday, July 29, 2023: Suspension of trading on the MOEX

- Tuesday, August 1st, 2023: Last trading day on the LSE

- Wednesday, August 2nd, 2023: Suspension of trading on the AIX

- Monday, August 7th, 2023: Entry into force of the re-domicile to Kazakhstan

- followed by resumption of trading on the AIX and the MOEX

- Wednesday, August 9, 2023: Publication of production results for the second quarter of 2023

I would say August 7th, 2023 golden age for Polymetal International. Current price on the AIX $3.23 or £2.50.

On July 27, 2023, Polymetal will publish the production results for the second quarter of 2023. I assume increased profitability.

Only shareholders holding paper certificates will be able to transfer their holdings to the

AIX CSD through Tabys. Upon the transfer, certificates will be converted into paperless

shares.

1. Firstly, you need a unique access code to register in the application. To get the code, please send the following details to redom@polymetalinternational.com with the subject “Tabys access code request”:

• First name

• Last name

• Date of birth

• Mobile number with a country code

• E-mail

2. You will receive an access code soon after the General Meeting (30th of May 2023), and will need to follow this guide and register in the Tabys application using this code (step 5 below).

3. After you complete registration, an account in AIX CSD will be created in your name

https://www.polymetalinternational.com/files/en/Tabys_guide.pdf

But @CWWX it's exactly about shareholders who bought on the MOEX and these shares are with the Russian depositary NSD. Russian resident shareholders will not be able to apply for certificates until Polymetal International no longer has its legal place of business in an "unfriendly" country. After the Re-Dom to Kazakhstan, the blocking of receiving dividends from the NSD will no longer apply.

Read carefully the RNS of September 22, 2022.

https://www.polymetalinternational.com/en/investors-and-media/news/press-releases/22-09-2022-b/?search_type=all

And now the RNS of September 16, 2022 again.

https://www.polymetalinternational.com/en/investors-and-media/news/press-releases/16-06-2023/?search_type=all

urai5

Today Polymetal International announced that the deadline for shareholders from Russia, who had bought the shares on MOEX, will be extended by 3 months until mid-September to exchange the shares for certificates.

POLY assumed 22% of the 473.6m shares. About 104m shares are therefore "blocked" by the National Settlement Depository NSD. 39m shares could be converted. Once the re-domiciliation is completed, the shares will be de-blocked by NSD. This means that then all shareholders resident in Russia who bought on MOEX will be able to convert them.

As is known, shares purchased from a German-speaking custodian bank are blocked by the collective depository Clearstream. We do not receive any certificates and a transfer to another broker is also not possible.

The re-domiciliation is absolutely central/crucial for Polymetal, then with it the Russian mines could be sold. Kazakhstan is not an "unfriendly" state from Russia's point of view. But a primary listing on the AIX in Kazakhstan makes little sense for Polymetal in the longer term. The volume there is much too low for such a large group.

Considering the above, I would prefer the following scenario:

1. Re-domiciliation to AIX, Kazakhstan

2. Sale of the Russian assets

3. Delisting on MOEX

4. Re-re-domiciliation! to the LSE London

5. Secondary listing on the AIX

Upon return to the LSE London, New-POLY-K would still have plus/minus 40% of its business with it. But depending on the success of the sale of the Russian mines and the POX, POLY could have enough capital (possibly also new debt, since the Russian debt is gone) to acquire interesting projects in the Central Asian metropolitan area. Does not have to be "only" gold. Future metals would also be a very good option. For example projects/mines with copper, vanadium, molybdenum.

urai5

Sorry, but once again, it's not the broker's problem. The problem is Clearstream as the depository. And they have blocked Polymetal International since the end of February 2022. This means that all transactions are excluded: Buying/Selling, transferring to another broker, receiving certificates for registration at AIX.

The only solution remains: Redom, then split, relisting POLY-K on the LSE, followed by deblocking.

All shareholders with a custodian bank in German-speaking countries (Germany, Austria, Switzerland, DACH) have this problem. The compliance department of Clearstream is responsible for the blocking. This is a private company and belongs to Deutsche Börse and is mandated for collective custody by the DACH-banks. Although Polymetal International was not sanctioned, these people seem to make an example here. I am in contact with IR of POLY with this issue.

The most likely scenario is the following: POLY redom to AIX Astana. Legal split. POLY-K re-listed (without Russian mines) on the LSE London. Clearstream deblocked. Share price of POLY-K approx. 5 to 6 USD.

urai5

P.S. In German-speaking forums we discuss and inform about it.

Translated with www.DeepL.com/Translator (free version)

There the sensitivity between ruble and dollar is described (slide no. 12):
A 1 RUB/USD movement in domestic currency: Effect on EBITDA $17-21 mln.
https://www.polymetalinternational.com/upload/ib/1/23-03-02/2022_09_Polymetal_financial_results_H1-2022.pdf

Here is the guidance with the 2023 budget: 65 rubles/USD. (Slide 18)
https://www.polymetalinternational.com/upload/ib/1/23-01-25/2023_01_25_Polymetal_CMD.pdf

Current USD/Ruble rate: 1:82. If the course stays at least that way, there will probably be >200m USD more EBITDA.

Plus the higher price of gold. Higher gold price impact on EBITDA: $100/oz = $170m USD. At 2'000 USD/oz and a guidance of 1'800 USD/oz this means at least 300m USD.

Thanks for your feedback @investor6

I wrote a post on Friday about a possible dividend for fiscal 2023:
Potential dividend for FY 2023: 0.60 USD/share, Fri 09:43

POLY's business is seasonal, with the 2nd half generating more revenue than the 1st half. I'm assuming an interim dividend of $0.2. Payable in Q4 2023.

@investor6 - On net debt and EBITDA:

as of December 31, 2022, POLY had a debt of USD 2.4 billion. With a gold price of $1,900/oz AuEq and a ruble rate of 1:78, the hypothetical EBITDA is at least $1.3 billion.

The debt built up in 2022 as working capital had to be increased: stocks of capital goods, higher costs in Russia due to the massively higher ruble exchange rate.

These effects should normalize again in 2023; in particular, the ruble rate is currently falling dramatically; which is very positive for POLY. A ratio of 1.5x between EBITDA and net debt is absolutely possible. This means a net debt of around $2 billion at the end of the year.

No @Investor 6 - It is exactly the other way around! The value of the ruble drops. In 2022, Poly received 65 rubles for 1 USD; Now Poly is getting 77,28 rubles for 1 USD.

In Russia, Poly receives income in USD and pays the costs in ruble.

According to PPT from September 23, 2022, Slide No. 12, a change in the exchange rate ratio from a ruble has an impact on the EBITDA from USD 17 to 21m.

Specifically: Higher dollar course to ruble from 12,28 rubles means (at 19m USD/1 rubles):
> $ 200m higher EBITDA.

I once calculated the potential possible dividend for FY 2023 (hand-knitted, milk booklet):

For this I made the following assumptions:
- Gold price: 1'900$/oz
- Production: 1.7moz AuEq
- Revenue/EBITDA (base) margin: 36% (2022:Dollar/Ruble 68.6)
- Dollar/Ruble: 1:76.2
- EBITDA/Net Earnings Margin 43%.

Here are the numbers and formulas:

2022 (Invoice)
Revenue, US$m, 2,801
Adjusted EBITDA2, US$m 1,017
EBITDA margin 36%.

2023 (Assumption):
Revenue, US$m, 3,230
Adjusted EBITDA, US$m 1,163 (at margin of 36%).

Adjustment due to better dollar/ruble exchange rate:
Annual Report page 108: 12. Currency risk (...) The average exchange rate in 2022 was at 68.6 RUB/$ (...)

Current ruble rate: 76.20. Difference 7.6 rubles. Costs in Russia are in rubles. Revenues logically in USD.

https://www.polymetalinternational.com/upload/ib/1/23-03-02/2022_09_Polymetal_financial_results_H1-2022.pdf

Slide 12:
A 1 RUB/USD movement in domestic currency: Effect on EBITDA $17-21 mln.

Let's take the average of $19m per ruble: potentially $144m higher EBITDA. That would be hypothetical about 1'300m USD EBITDA for 2023.

Reminder dividend policy:
Minimum final dividend of 50% of underlying net income (...) subject to absolute net debt/Adjusted last twelve months EBITDA ceiling of 2.5x.

Hypothetical dividend calculation (assumption ratio debt/EBITDA below 2.5):
Ratio 2022 between (Adjusted EBITDA, US$m 1,017) and (Underlying net earnings, US$m 440) = 43%.

560m$ (43% of 1'300m US$) resp. 50% of it with a dividend of 280m$.
With 474 million shares: 0.60$.

urai5
P.S. We shareholders from the DACH region have not been able to trade POLY shares for over a year - neither buying nor selling.

Translated with www.DeepL.com/Translator (free version)

Sorry @Pecten11 - but with your answer you make it clear that you have not understood the valuation of a mining company. Insitu Value can never approximate market capitalization.

The discounted Net Present Value NPV would be decisive. However, we can only calculate it when we have the CAPEX with the mine plan and, above all, the AISC and the exact reserves - not resources.