There’s a lot to like about Polyus Gold:
Polyus (PLZL, on the LSE) is the largest Russian gold mining company.
In 2020 polyus came 4th place in gold production globally, that’s quite a big deal, and polyus is in the process of building out new infrastructure at its 7 Siberian mines to increase production going forward.
All 7 of Polyus’s mines and several more exploration projects, and all mining activities are in Russia, specifically in Siberia, which gives Polyus somewhat of a simpler focus and increased profits, than having mines spread internationally.
Polyus is majority owned by a Russian businessman named Suleiman Kerimov who has close ties to the Russian government, this is not necessarily a bad thing as we can be sure the Russian government will look favorably on Polyus’s business practices, the remaining ownership is through its public offering of stock shares. (Including our selves)
Polyus is the lowest-cost producer among the majors in the gold industry at an all-in sustaining cost (AISC) of $574 per ounce of gold, Low costs allow Polyus to have one of the best EBITDA margins in the sector (67% in 2019 vs. sector average of 42%).
In 2019 Polyus was the in third place in terms of gold reserve and resource base globally, with 21 years of reserve life, which is double the average of the top ten global peers. The grade of the reserves of 1.8 g/T is much higher than the sector average of 1.3 g/T.
If that’s not good enough to add Polyus to our portfolios, it gets even better!
Just a few months ago Polyus became the world’s largest gold minor by reserves after its total proved and probable ore reserves rose by 71% to 104 million ounces of gold at the end of 2020 due to the inclusion of reserves at its giant Sukhoi Log deposit now under development.
All of the above key points make Polyus one of the most undervalued gold mining companies on the planet, with a current market cap of just under $30 billion and a EBITDA of 67%, a price to earnings ratio of 11.8 and a price to sales ratio of 5.6
Polyus is very undervalued in today’s market, why?
Polyus is Russian, many investors view Russian companies as a no go zone, due (in their view) to having significant political risk for the sole reason of American politics, which when you think about it, makes no sense at all considering the political risk associated with American politics to American companies is greater than any Russian political risk, yet we’re all happy to pile into American companies. Personally I view all countries to have serious political risk, governments in every country around the world will always do their upmost to take your money and tax corporations as much as possible, and it’s important to understand that Russia has always been Pro the mining industry, so it’s unlikely that Polyus will suffer politically,
It might take a little time, but Polyus has so much going for it, investors can’t help but take notice, even investors who wouldn’t normally consider Russian companies will want to take advantage. I’d be very surprised if it’s share price didn’t move up much in the coming years. It could go a lot higher from here and it will!
We have taken our first position in Polyus and believe Polyus has a bright future, (Polyus also pays a 4.5% per share dividend which is a plus!)
Action to take-
Buy Polyus (PLZL) on the London stock exchange (LSE) as of this write up Polyus is trading at $109 a share, our buy up to price is $130 a share, we intend to hold Polyus long term and expect a double at minimum over time.
Happy hunting. May 27th 2021
Francis Holmes
