Polymetal pleased with revenue and earnings improvements

Polymetal International reported a 4% improvement in revenue to $1.88bn in its preliminary results on Monday, which it said was primarily driven by gold equivalent production growth of 9%.

The FTSE 250 company said gold sales in the year ended 31 December were 1,198 Koz, up 10% year-on-year, while silver sales were down 3% to 25.7 Moz, in line with production volume dynamics.

It said average realised prices “largely tracked” market dynamics.

Group total cash costs for the full year were $649 per gold equivalent ounce, which was down 1% year-on-year and just below the bottom of the range of the group's initial cost guidance of between $650 and $700 per gold equivalent ounce.

Its all-in sustaining cash costs amounted to $861 per gold equivalent ounce, which was also below the lower end of its cost guidance of between $875 and $925, and was a decrease of 4% year-on-year.

Adjusted EBITDA was ahead 5% compared to 2017 at $780m, which was mostly driven by higher production volumes and stable cost performance, the board said.

Polymetal’s adjusted EBITDA margin was at 41.4% for the year, slightly ahead of the prior year, when it was 41.0%.

Net earnings stood at $355m, rising from $354m year-on-year, with basic earnings per share falling to 78 US cents per share from 82 cents per share.

Underlying net earnings increased by 19% to $447m, which was driven by EBITDA growth and lower depreciation and income tax expenses.

The company’s capital expenditure totalled $344m for the year - a reduction of 10% compared to 2017.

Polymetal said that with the addition of loans that were extended to Nezhda and Prognoz before consolidation of those assets, capital expenditure comprised $395m, which was below the original guidance of $400m.

The group had successfully completed and launched the Kyzyl project ahead of its original schedule, with cumulative project capex of $319m, below the original budget of $325m.

Net debt widened to $1.52bn during the year, from $1.42bn at the end of 2017, with the total representing a net debt-to-adjusted EBITDA ratio of 1.95x, rising from 1.91x.

Despite investments in the Amursk POX debottlenecking and Kyzyl projects over the course of 2018, as well as start-up working capital at Kyzyl, the firm said it continued to generate meaningful free cash flow that amounted to $176m - up from$143m year-on-year, while maintaining stable net cash operating inflow of $513m, down slightly from $533m.

The board proposed a final dividend of 31 cents per share, totalling $146m or 50% of the group's underlying net earnings for the second half of 2018, in accordance with the company’s dividend policy and while complying with the hard ceiling of net debt-to-adjusted EBITDA ratio of below 2.5x.

That would bring the total dividend declared for the 2018 full-year to $223m, up from $196m, or 48 cents per share, rising from 44 cents per share.

“2018 was a year of strong operating and financial results, including solid cost performance and smooth ramp-up of Kyzyl,” said Polymetal group chief executive officer Vitaly Nesis.

“We have also advanced our long-term development pipeline, continued to generate free cash flows and pay substantial dividends.”

In a separate announcement on Monday, Polymetal also announced the appointment of Ian Cockerill as an independent non-executive director , with effect from 23 April, with the intention for him to succeed chairman Bobby Godsell as chair of its board.