Polyus, which fell under US sanctions, at the last moment refused to pay dividends already recommended by the board of directors for 2022. This is a landmark decision for the market, as Polyus was the last major public player in the mining industry that was still planning to make payments. The gold miner’s decision surprised the market, as the impact of the sanctions on the company was assessed as moderate, and the increase in gold prices should have a positive impact on operating and financial results.
The largest gold mining company in the Russian Federation, Polyus, suddenly decided to refuse to pay dividends for 2022. The annual meeting of shareholders, where this decision should be approved, did not take place due to the lack of a quorum. At the same time, the board of directors recommended that the repeat annual meeting of shareholders, scheduled for July 7, not pay dividends.
The previous recommendation was to pay 436.79 rubles. per share, or 59.4 billion rubles.
The reason for this decision was the US sanctions imposed against the company in mid-May. In accordance with the general license issued by OFAC, holders of shares and debentures of Polyus must curtail all their work with the company by August 17. The UK and Australia also imposed sanctions against Polyus. The largest shareholder of Polyus before the outbreak of hostilities in Ukraine was Said Kerimov, the son of businessman Suleiman Kerimov, but in May he announced his withdrawal from the company’s capital. Now the largest shareholders are the Fund for the Support of Islamic Organizations (46.35%) and the Akropol group of Akhmet Palankoev (29.99%). Free float is 22.5%.
Polyus also decided to revise the list of candidates for election to the Board of Directors, refusing to nominate independent candidates to it.
Earlier, the head of the Union of Gold Producers of Russia Sergey Kashuba, the managing director of the investment banking department of Renaissance Capital Andrey Volkovsky and the head of the Center for Responsible Nature Management of the Institute of Geography of the Russian Academy of Sciences Evgeny Schwartz were nominated in this capacity.
Polyus was the last major public mining and metals company to maintain plans to pay dividends. Last year, the largest ferrous metallurgy companies Severstal, NLMK, MMK and Evraz refused payments for an indefinite period. In mid-March, Chairman of the Board of Directors of MMK Viktor Rashnikov said that the plant could return to discussing payments no earlier than December 2023. “Not about dividends, we need to make an investment program,” he said. This example was followed by the coal companies Raspadskaya and Mechel. Some of the hopes of investors were associated with non-ferrous and precious metals, where the market conditions were better, but Norilsk Nickel, RUSAL, Alrosa and Polymetal also refused to pay. On May 10, the head of Polymetal, Vitaly Nesis, stated that the company aims to pay dividends before the separation of Russian and Kazakh assets, which is scheduled for the second half of 2024.
The market did not expect such a decision by the Polyus shareholders, as it was believed that the sanctions would have a very moderate impact on the company’s business.
Analysts from Sinara Investment Bank noted that over the past year, Polyus was able to adapt to restrictions in terms of the supply of necessary equipment and the sale of gold. Now Polyus sells most of its gold on the domestic market, exporting nothing to the EU, the UK and the US, and has independently created export channels to friendly India, China, the UAE and Turkey, Sinara said in a comment.
Analysts of the My Investments Telegram channel are negative about Polyus’ refusal to pay dividends, but believe that the company will be able to return to them in the near future. “Mid- and long-term outlook remains positive on the stock due to our bullish view on gold and also due to an attractive valuation: at current prices, Polyus is trading at 4.8x on 12M EV/EBITDA, which means a more than 30% discount against the average historical estimate,” the analysts write. Sinara also maintains a positive view on Polyus shares, which it believes will benefit from high gold prices and a weaker ruble in 2023.