The Polymetal (LON: POLY) share price is currently at 142p, down 93% from its August 2020 high of 2,028p, and down from 1,098p the day before Russia invaded Ukraine a fortnight ago.

Last week, FTSE Russell confirmed that the miner will be exiting the FTSE 100 for the FTSE 250 due to its market cap collapse.

In recent days, Polymetal has exhibited wild swings that seem set to continue; yesterday, the London Stock Exchange halted trading and cancelled some trades after an order was put in about 700% higher than its price at the time.

Today alone, Polymetal shares have swung between 195p and 125p, as investors weigh the potentially lucrative rewards against the risk of sanctions and delisting.

Polymetal share price: solid fundamentals

Polymetal’s current share price is indicative of political instability rather than mining fundamentals. FY21 revenue was at a stable $2.9 billion, with gold equivalent production rising 2% year-over-year to 1,677 Koz1, and 24% year-over-year in Q4.

CEO Vitaly Nesis argues that ‘Polymetal beat production guidance, maintained solid safety track record, and paid record dividends… the Company remains on its path to consistent and significant long-term growth.’

Polymetal shares had previously closely followed the price of Gold, which at $2,000/oz is at near record highs. Moreover, Polymetal’s proposed 2022 dividend of 40p represents nearly 50% of Tuesday’s 95p closing price. The right entry point could be tempting for speculative retail investors.

However, top 10 shareholders including Norway’s Sovereign Wealth Fund and BlackRock are both selling their stakes, as pressure on institutions to exit Russia continues to grow.

High risk, high returns

Positively, Polymetal has confirmed ‘it does not consider itself to be an entity owned by or acting on behalf or at the direction of a ‘person connected with Russia as defined in Regulation 19A2 of The Russia (Sanctions) (EU Exit) Regulations 2019,’ considering itself outside of the scope of some sanctions.

It’s also released a statement to calm investors, saying ‘Polymetal operations in Russia and Kazakhstan continue undisrupted. In 2021, Kazakhstan operations generated 43% of the Group’s Adjusted EBITDA and 48% of its net earnings.’ This is important because Kazakhstan revenue is less likely to be impacted by further restrictions on trading. Moreover, its contracts to sell gold and silver to China and Kazakhstan ‘continue in good standing.’

And with $0.4 billion in cash, $1 billion in undrawn credit lines, and ‘significant free cash flows coming from the Company’s Kazakhstan operations, Polymetal has enough buffer’ to continue to fulfil its financial obligations for the next 12 months. It also believes Russia’s new capital controls are ‘not expected to have a material impact on the Company other than the impact on intragroup dividends.’

Moreover, while gold sales in Russia have been impacted by western sanctions, the company says ‘domestic physical demand for gold in Russia has been supported by the decision of the Russian Central Bank to resume gold purchases in the domestic market.’

However, Ukrainian Central Bank governor Kyrylo Shevchenko has protested that the ‘Central Bank of Russia supports military invasion and thus is also guilty, responsible in deaths of civilians in Ukraine.’

This leaves Polymetal indirectly funding the Russian war effort. And after fellow Russian miner Evraz had its shares suspended earlier today, the likelihood of Polymetal being delisted is increasing.

Like Evraz, Polymetal has refused to condemn Russia for its invasion of Ukraine, saying only that ‘the unfolding tragedy in Ukraine is horrifying and heartbreaking. We mourn the loss of life, and call for a lasting peaceful resolution of the conflict.’

But even if Polymetal escapes delisting, it admits ‘the scope and impact of any new potential sanctions (and any countersanctions) are yet unknown… they might further affect key Russian financial institutions as well as mining companies.’ Moreover that ‘targeted sanctions on the company remain unlikely but are not impossible.’

Meanwhile, Russia has promised to nationalise foreign assets of firms who stop doing business in the country. As the Rouble collapses, this could extend into a mass nationalisation programme in the former communist state.

And six board members including the Chairman have stepped down after pressure from the Institute of Directors. The company previously said that the Ukraine crisis would require ‘a lot of management efforts to maintain company performance.’

The miner is in a difficult catch-22. If it condemns Russia, it could have its assets seized by the Russian government. If it doesn’t, it faces delisting in London and will be at the mercy of a closed Moscow stock exchange. But if hostilities cease, the Polymetal share price could skyrocket.

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