By Royston Wild
Polymetal International is a company whose share price outlook is looking pretty rosy for the coming days. A recent upsurge in gold-buying activity has driven the mining giant to 18-month highs in end-of-week trading, and more chubby rises could be just around the corner.
I’ve mentioned before that both macroeconomic and geopolitical conditions are ripe for gold values to rise over the medium term, and chiefly because of the botched Brexit progress and the potential for a subsequent upheaval in regional economies. Indeed, the huge pick-up in bullion buying over the past week illustrates the growing angst in financial markets that could keep fuelling share price gains at the likes of Polymetal.
The Pure Gold Company for one has seen sales of its physical bars and coins to first-time investors explode 374% during the past seven days versus the broader 2019 average, a move which the retailer believes reflects fears that “geopolitical tensions may provoke a global financial meltdown.”
“65% of our clients over the last week have come from financial services,” chief executive Josh Saul of The Pure Gold Company notes. “They’re panicked that systemic global risks resulting from Brexit uncertainty, the US/China trade wars, strained US/Mexico relations and tension between the US and Iran are likely to continue to shake the markets.”
A ‘Boris Brexit’ Scares Markets
Whilst there’s been no direct progress on the UK’s European Union withdrawal this week — and none during the final weeks of Theresa May’s lame duck premiership is expected, either — the chances of an economically-destructive ‘no deal’ Brexit have risen markedly. Why? The rallying of support for Boris Johnson to become the next Tory leader and Prime Minister from MPs and party members alike.
He‘s streets ahead of his nearest rivals, polling more than twice the number of votes from Conservative MPs in the first round of voting than the candidate in second place. There’s a long way to go still but it seems to be Johnson’s race to lose, a contender who has committed to plucking Britain out of the EU by October 31 at whatever cost.
The other major powder keg for gold prices in the coming sessions is the political fallout over the attacks on two oil tankers in the Gulf of Oman. US secretary of state Mike Pompeo has already laid the blame firmly at the feet of Iran, worsening the diplomatic strain between Washington and Tehran and seemingly jettisoning any chances of fresh talks over Iran’s nuclear programme.
One For The Future
Gold’s currently dealing around four-month highs around $1,340 per ounce, and while additional gains could be in store I’d say that Polymetal isn’t just a great stock to buy for the here and now.
Production levels are booming, the company digging record amounts of metal out of the ground in the first quarter, whilst the immense quality of its Russian assets should set it on course to keep delivering brilliant quantities of metal. Just this week Polymetal doubled the amount of ore reserves at its Veduga gold deposit, for example, to 2.8 million ounces following recent exploration work.
It’s no wonder that City analysts are pretty upbeat over the mining play’s profits picture, then, beginning with expected bottom-line rises of 7% and 9% in 2019 and 2020 respectively. Accordingly annual dividends are predicted to keep improving, too, meaning chubby yields of 4.7% for this year and 5.1% for next year.
At current prices Polymetal changes hands on a forward P/E ratio of just 10.6 times. Such a low rating provides boatloads of brilliant value, in my opinion, not to mention the possibility of additional share price rises in the event of more gold price increases in the days ahead.