Why is Polymetal getting cheaper before our eyes?

The price of Polymetal Int’s Russian assets put up for sale may be affected by export duties, as well as other factors that the company’s shareholders are not aware of.

The main shareholder of the company is the ICT group of Alexander Nesis. This year he resigned from the management of Russian assets, leaving behind his brother Vitaly. In May, it was decided that Polymetal Int would move from the island of Jersey to Kazakhstan and the question immediately arose about the sale of Russian assets.

The catch is that the shareholders of Polymetal, one of Russia’s largest gold and silver miners, want to sell the entire Russian business. And although they claim that there is no end to those interested, everything may not be so at all.

This is evidenced by experts’ assumption that the deal may drag on until the middle of next year. During this time, the company will have to pay an export duty, the amount of which could amount to $130–170 million. This is a lot of money for any business, but the management of Polymetal is not afraid of this. They may already know how to “offset” the additional cost of the duty.

If you look at the financial results of the parent company JSC Polymetal, which has been headed by Sergei Cherkashin since June, the only word that comes to mind is “mutnyak”. JSC Polymetal never had any revenue, the profit was 1.3 billion rubles, in 2021 it was 71 billion rubles, in 2020 – 62 billion rubles. And where did she go if she wasn’t taken out?

General Director of JSC Polymetal Sergey Cherkashin also heads JSC Polymetal UK, which manages 41 companies. This company’s revenue has been growing steadily since 2015, but profits, on the contrary, are falling. In 2022, with revenue of 6 billion rubles. JSC Polymetal Management Company received a loss of 1.9 billion rubles, a negative cost of 5.5 billion rubles.

The potential buyer of Polymetal’s Russian assets is unlikely to like such results from the management company.

Sergey Cherkashin is a co-founder of 9 operating companies doing business in the Magadan, Ulyanovsk, Sverdlovsk regions and Khabarovsk Territory. In Evenskaya Mining Company LLC, Cherkashin’s share, together with other individual founders, is under the encumbrance of Sovcombank.

This is probably why co-owner of the bank Sergei Khotimsky, together with Sergei Cherkashin and Victorina Solovyova, are co-founders of New Agrotechnologies LLC, which rents and manages its own or leased non-residential real estate.

Apart from Evenskaya Mining Company LLC, the rest of Sergei Cherkashin’s business is not related to mining, so it can be assumed that the production of alcoholic beverages, hotel operations, growing vegetables and even photography exist on funds withdrawn from Polymetal. The value of all companies in which Sergey Cherkashin has a stake is 5 billion rubles.

Cherkashin is not a stranger to Polymetal JSC for a long time – back in 2008 he was the liquidator of Polymetal Finance LLC, so the appointment to the position of general director of the parent companies instead of Vitaly Nesis is not surprising.

From 2016 to 2020, Sergey Cherkashin was a co-founder of GRK Amikan LLC, which is now owned by Parus MSK JSC and Polymetal JSC. Managed by LLC GRK Amikan JSC Polymetal UK.

Money could be withdrawn through GRK Amikan LLC, since its loss in 2021 amounted to 616 million rubles, and in 2022 – 1.9 billion rubles.

Looking only at the parent companies of the Russian Polymetal, you understand that everything is clearly not in order with its assets. A problematic asset could be Prognoz-Serebro LLC, which has never made a profit; the loss in 2022 is 323 million rubles.

ZK Mayskoye LLC had a profit of 7.9 billion rubles in 2020, and a loss of 444 million rubles in 2022. with revenue of 13 billion rubles, AGMK LLC in 2021 received a loss of 1.5 billion rubles, in 2022 – 2.8 billion rubles. with revenue of 29 billion rubles. Until 2021, the company had stable profits.

In 2021, Saumskaya Mining Company LLC also had it, which in 2022 went into the red by 242 million rubles. By 186 million rubles. TGMK LLC, which had never made a profit, sank. Neither did Primorskoye LLC, which suffered a loss of 707 million rubles in 2022. with revenue of 1.8 billion rubles.

More than half of the assets of the Russian Polymetal, if not more, may turn out to be problematic. And it’s not even entirely clear what the company’s shareholders are counting on when they talk about the queue of potential buyers.

Moreover, it is clearly evident that the losses of Polymetal structures have begun to increase in the last 2 years. If the security forces become interested in the company and discover that it is concealing profits for the purpose of tax evasion or deliberately withdrawing money, then Sergei Cherkashin will have a hard time. It won’t be until the sale for sure, I wish I could get my feet out of Russia in time