Depressed rouble keeps Polymetal strong

Polymetal swung into positive net earnings territory in 2015, with the Russian precious metals producer reporting solid numbers for the calendar year on Tuesday thanks to a seriously devalued rouble.

The company’s revenue decreased 15% for the year to $1.44bn, which it blamed on average realised gold and silver prices, which dropped by 8% and 17% respectively year-on-year. Polymetal’s gold sales of 864 kilo ounces were down 8% on the prior year, while silver sales of 31.2 million ounces were up 6%, in line with production volume dynamics.

Total cash cost was reported as $538 per gold equivalent ounce, down 15% on 2014 levels and below the original guidance, driven by significant Russian rouble depreciation against the greenback more than offsetting the combined negative impact of domestic inflation and changes in the gold/silver price ratio.

All-in sustaining cash costs decreased 18% to $733 per gold equivalent ounce, also below original guidance.

"I am pleased to report robust cost performance and cash flow generation in these volatile market conditions", said Vitaly Nesis, the Group CEO.

Polymetal’s board posted EBITDA of $658m, down just over 4% year-on-year, with net earnings totalling $221m against a $210m loss in 2014. Underlying net earnings were $296m, up 5% and driven by depreciation of local currencies.

Capital expenditure totalled $205m, below original guidance of $240m, with the company generating $263m in free cash flow against $306m in 2014. It paid $127m in special dividends as a result of the strong cash flow.

Net debt on 31 December was $1.3bn, an increase of 4%, mainly as a result of the net settlement of the Kyzyl put option in September and other cash-based acquisitions. Polymetal’s net debt-adjusted EBITDA ratio sat at 1.97x.

"Our strong operational delivery and financial strength in the current environment allows us to focus on development of the next generation of assets, including Kyzyl and other longer-term projects, while generating free cash flow and paying substantial dividends to shareholders,” Nesis explained.

The board proposed a final dividend of 13 cents per share, representing 30% of the group’s underlying earnings for the second half, in accordance with its dividend policy.