27th Aug 2015 08:08
LONDON (Alliance News) - Petropavlovsk PLC on Thursday said it swung to a pretax loss in the first half of 2015 after production, sales and gold prices all fell, but the company said its costs will continue to fall in the second half whilst production is expected to rise.
The Russian miner reported a USD26.0 million pretax loss in the first six months to June 30, swinging from the USD8.3 million profit a year earlier, after revenue plummeted to USD297.3 million from USD453.0 million.
Earnings before interest, tax, depreciation, amortisation, finance, foreign exchange and impairments fell 35% to USD90.0 million from USD139.2 million.
Its financial results were hampered by a combination of lower gold prices, sales and production. Petropavlovsk produced 22% less gold, totalling 240,200 ounces compared to 306,400 ounces a year earlier, which was in line with its expectations, whilst gold sales fell 26% to 229,700 ounces from 310,700 ounces.
Gold prices fell 12% year-on-year, averaging USD1,221 per ounce from the USD1,386 per ounce achieved in the first half of 2014.
Gold was trading at around USD1,127 per ounce on Thursday morning.
Offsetting the price falls was a reduction in costs. All-in sustaining costs dropped 5% to USD983 per ounce from USD1,036 per ounce and all-in costs fell to USD1,031 per ounce from USD1,198 per ounce.
Petropavlovsk said it expects costs to fall further in the second half and for production to increase, especially at the Pioneer mine in Russia.
Capital expenditure in the first half came in at USD17.8 million, a huge drop from USD70.2 million a year earlier. For the full year, capital expenditure has been restricted to USD35.0 million.
Petropavlovsk managed to substantially reduce its net debt to USD696.1 million at the end of June, from USD929.7 million at the end of December, after refinancing its debt in the period, but its cash balance also fell to USD31.1 million from USD48.1 million.
At the end of 2015, the company said it is expecting its net debt figure to have fallen to around USD600.0 million.
The miner plans to achieve a gross margin of USD500 per ounce based on current gold prices by further reducing cash costs. At its two major Russian mines, Pioneer and Albyn, cost savings have already been achieved, it said, and it plans to push costs even further down in the second half of 2015.
"We expect these achievements to enable us to fulfil our commitments to senior lenders and, thus, achieve our targeted decrease in net debt by the end of 2015," said Chairman Peter Hambro.
In the first quarter of 2016, the company expects to provide an exploration update which will entail an updated reserves and resources report, it said.
By Joshua Warner; [email protected]; @JoshAlliance
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