Polymetal makes solid first half production progress

Polymetal International produced 278 Koz gold equivalent in the second quarter, it said on Tuesday, which was a 6% improvement year-on-year.

The FTSE 250 company said “strong” performances at Varvara and Kapan, as well as contributions from the Svetloye heap leach at Okhotsk “more than offset” a planned grade decline at Dukat, as well as the impact of a scheduled maintenance shutdown at the Amursk POX plant, which was successfully completed in May.

Gold equivalent production for the first half to 30 June was 558 Koz, up 7% year-on-year and in line with the 2017 production plan.

"Polymetal has delivered a solid operational performance in the second quarter, and is on track to meet its full year 2017 guidance", said Vitaly Nesis, group CEO of Polymetal.

"In addition, it is great to see that our recent acquisitions, Komar and Kapan, are demonstrating strong results."

Polymetal said “materially stronger” production was expected in the second half, and would be driven by the seasonal concentrate de-stockpiling at Mayskoye, heap leach production at Svetoye, and higher throughput at the Amursk POX plant.

Gold production for the quarter was 190 Koz, up 12% over the previous year, while silver production was down 6% to 6.6 Moz.

The company said gold and silver sales for the quarter increased by 29% and 19% respectively, generating $385m in revenues, an increase of 26% over the previous year, while the timing gap between production and sales was largely eliminated over the first half.

At Kyzyl, full-scale construction activities were progressing in line with the project schedule, the company said.

During the quarter, foundations for the mill and other processing equipment had been completed, and the tailings facility diversion dike was finalised, with activities now focused on lining of the tailings pond.

The project remained on track to produce first concentrate in the third quarter of the 2018 financial year.

“We regret to report the death of one of our employees at Varvara as a result of a fire that broke out in the laboratory on 30 April,” Polymetal’s board said in its statement.

“Guidelines and procedures are now in place to prevent similar occurrences.”

Net debt increased marginally to $1.58bn on 30 June from US$1.51bn on 31 March, while the Company paid out $77m in final dividends for the 2016 financial year - or 18 cents per share - and had “actively invested” in construction of Kyzyl.

As in prior years, Polymetal said free cash flow generation would be “significantly stronger” in the second half of the year, driven by higher production and the traditional seasonal working capital drawdown.

The company said it remains on track to meet its 2017 production guidance of 1.4 Moz of gold equivalent at total cash costs of$600-650 per gold equivalent ounce, and an all-in sustaining cost of $775-825 per gold equivalent ounce.

Polymetal said the cost guidance remained contingent on the rouble-to-dollar exchange rate dynamic that had a significant effect on the group's rouble-denominated operating costs.

The board said it would announce its half-yearly financial results on 29 August.