Gold-silver miner Polymetal International (POLY) is considering a move into rare earth minerals (REMs), according to the FTSE 250 group’s chief executive. In an exclusive interview with the Investors Chronicle, Vitaly Nesis cautioned that his thinking to expand beyond precious metals was at an early stage, and not yet part of company strategy.
But speaking ahead of his company’s AGM in London, Mr Nesis (pictured) said he was increasingly interested in REMs, given growing demand for their use in magnets within electric vehicle motors. The chief executive is also keen to find ways to apply the group’s specialisation in pressure oxidation – a form of extraction that leaves sulphide ore amenable to cyanide leaching – to metals other than gold.
Mr Nesis said any push into REMs was likely to concentrate on former Soviet states and Russia, currently home to Polymetal's existing operations and which, according to the US Geological Survey, is home to one of the world’s largest reserves of rare earths.
For several years, the Russian government has made efforts to lower its dependence on Chinese production of rare earths, which dominates global supply. Earlier this year, metals consultancy Roskill reported that Russian company Rostec and investor ICT Group had received state backing to develop a rare earth deposit in Yakutia, at an estimated cost of $1.3bn (£930m).
ICT was founded by Mr Nesis’ older brother, Alexander, and is a 15 per cent shareholder in Polymetal.
Asked whether other shareholders might be put off by a pivot away from gold and silver, Mr Nesis commented that “most investors hold us for income rather than exposure to precious metals prices”, and pointed to the group’s moves to develop its first platinum group metals (PGM) project at Viksha in north-west Russia.
While suggesting Polymetal might struggle to fund a copper mine with the economic scale to meet the company’s investment criteria, the chief executive said zinc projects might be considered in the future. The company already produces small amounts of zinc concentrate at Kapan, an Armenian underground mine acquired in 2016.
Mr Nesis also spoke about a dramatic month for the company’s London-listed shares. On 9 April, the value of the miner’s stock fell by as much as a fifth, amid a wholesale sell-off in Russian stocks after the US drew up a list of fresh sanctions against various oligarchs, companies and associates of the Kremlin.
Neither Polymetal nor its shareholders were targets of the sanctions, although this didn’t stop several major long-only US funds from piling out of the precious metals miner in the trading sessions immediately after the Treasury Department announcement.
“We saw a lot of churn in the shareholder base,” observed Mr Nesis, suggesting that several London-based hedge funds were prepared to take on positions dumped by nervy investors who have since returned to the stock. “Bulls make money, bears make money, and pigs get slaughtered,” added Mr Nesis, recalling one of the first aphorisms he picked up as a young analyst at Merrill Lynch in New York.
Asked for his outlook on precious metals this year, Mr Nesis said he was “a silver bull, and a gold agnostic”, highlighting a contraction in the supply of the grey metal, and increasing silver demand from the solar industry.
