25th Aug 2015 10:43
LONDON (Alliance News) - Russia-focused gold and silver miner Polymetal PLC on Tuesday said its pretax profit came in higher in the first half of 2015 after it managed to pull down its costs sufficiently to offset a fall in revenue caused by lower gold and silver prices.
The FTSE 250-listed miner also maintained its dividend, reiterated its production guidance and said its operating costs will be lower for the full year than originally expected.
Polymetal said its pretax profit for the six months to the end of June was USD157.7 million, up from USD141.4 million, as the group managed to cut costs successfully to offset its revenue falling to USD648.0 million from USD726.9 million.
Earnings before interest, tax, depreciation, amortisation and exceptional items totalled USD297.0 million in the half, falling 4% from USD310.0 million a year earlier despite its Ebitda margin improving to 46% from 43%.
Polymetal said the revenue decline was caused by the gold price falling 7% year-on-year to an average of USD1,207 per ounce from USD1,297 and silver prices dropping 18% to USD15.7 per ounce from USD19.1.
Gold sales were flat year-on-year at 354,000 ounces and silver sales rose 1% to 14.0 million ounces from 13.9 million ounces, but it sold 4% less gold equivalent totalling 537,000 ounces compared to 560,000 ounces.
Gold production in the half was down by 4% to 371,000 ounces from 386,000 ounces, while silver production rose 1% to 16.0 million ounces from 15.5 million ounces. Gold equivalent production fell 3% to 633,000 ounces from 652,000 ounces.
Copper production plunged to almost nothing, due to the temporary shutdown of the group's flotation circuit at the Varvara project in Kazakhstan in 2014. The circuit only started operations again in June 2015.
Offsetting falls in production and prices, the company said its total cash cost of production in the first half was down by 14% against the second half of 2014 and down 12% year-on-year to USD522 per ounce, driven by a strong operating performance across its portfolio and the significant depreciation of the ruble against the US dollar, which offset inflation in Russia and a shift in the gold-silver price ratio.
All-in sustaining cash costs for the half were down by 16% year-on-year to USD786 per ounce, primarily thanks to the total cash cost fall, but also by falls in capital expenditure at the group's operating mines.
Polymetal reaffirmed its production guidance for the full year of 1.35 million ounces of gold equivalent and has pulled down its total cash cost guidance to USD525 to USD575 per ounce from its previous guidance of USD575 to USD625, and all-in sustaining cost guidance to USD700 to USD750 per ounce from its previous forecast of USD750 to USD800 per ounce on the back of the savings achieved in the first half and the anticipated continued weakness of the ruble.
The group has proposed an interim dividend of 8.0 US cents per share, flat from a year earlier.
Net debt at the end of June stood at USD1.23 billion, experiencing a small drop from USD1.24 billion at the end of December.
Capital expenditure in the half fell by 16% year-on-year to USD97.0 million from USD115.0 million. Most of that expenditure was invested in the Okhotsk and Kyzyl mines. Exploration expenditure also fell to USD29.0 million from USD35.0 million.
For the full year total capital expenditure including exploration is forecast to total USD240.0 million.
"I am pleased to report robust cost performance and cash flow generation in these challenging market conditions," said Vitaly Nesis, Polymetal's chief executive. "With strong operational delivery and financial strength in the current environment, we remain focused on free cash flow generation and providing dividends while progressing steadily on the development of the next generation of assets, including the Kyzyl project."
Polymetal shares were down 0.7% to 468.80 pence per share on Tuesday morning.
By Sam Unsted; [email protected]; @SamUAtAlliance. Updated by Joshua Warner; [email protected]; @JoshAlliance
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