Polymetal revenue, earnings surge in 2020

Polymetal reported a 28% improvement in its revenue for 2020 on Wednesday, to $2.87bn, as its average realised gold and silver prices rose 27% for both metals during the year.

The FTSE 100 miner said gold sales totalled 1,392 Koz, up 2% year-on-year, while silver sales were down 13% to 19.3 Moz, largely in line with production volume trends.

Group total cash costs for the full year came in at $638 per gold equivalent ounce, down 3% year-on-year, and 2% below the lower end of its full year guidance of $650 to $700 per gold equivalent ounce, mostly due to a weakness in the Russian rouble and the Kazakh tenge, which outweighed additional Covid-related costs and a price-driven increase in royalties.

All-in sustaining cash costs remained “broadly unchanged” from 2019 at $874 per gold equivalent ounce, up 1% year-on-year and within its full-year guidance of $850 to $900 per ounce, as the company accelerated pre-stripping and mine fleet renewals against a backdrop of higher commodity prices.

Adjusted EBITDA improved 57% to $1.69bn, which the board said was driven by higher production volumes, higher commodity prices, and lower cash costs.

Its adjusted EBITDA margin increased by 11 percentage points and reached an all-time high of 59%.

Net earnings also reached a record at $1.09bn, with basic earnings per share coming in at $2.30 per share, up from $1.02 per share in 2019 and reflecting its increase in operating profit.

Underlying net earnings were ahead 82% at $1.07bn.

Capital expenditure for the year totalled $583m, up 34% compared to 2019 and 8% above guidance.

As Polymetal had previously announced, that increase was mainly related to accelerated spending across the project portfolio in a bid to neutralise the impact of the pandemic on project schedules, and an increase in capitalised underground development and pre-stripping, aimed at ensuring operational flexibility against the backdrop of heightened epidemiological risks.

The group said it was on track for development activities at both POX-2 and Nezhda.

Net debt widened to $1.35bn during the period from $1.48bn at the end of 2019, representing a bet debt-to-adjusted EBITDA ratio of 0.80x, compared to 1.38x in 2019 and “significantly below” the group's target leverage ratio of 1.5x.

The company generated “significant” free cash flow of $610m, up from $256m year-on-year, supported by a net cash operating inflow of $1.19bn, rising from $696m in the prior year.

In view of the strong balance sheet and its underlying business performance in 2020, the board said it was proposing a final dividend of 89 cents per share, including 74 cents per share representing 50% of underlying net earnings for the second half, and a discretionary payment of 15 cents per share adjusting the total dividend for 2020 for 100% of free cash flow for the financial year, in accordance with its revised dividend policy.

That would bring the total dividend declared for the 2020 financial year to $608m, rising from $385m in 2019, and representing $1.29 per share, up 57% compared to the prior year.

"We are pleased to report record net earnings for the year amidst a challenging global backdrop,” said chief executive officer Vitaly Nesis.

“A strong operating performance, a favourable commodity price environment and stable cost performance underpinned a significant increase in the group's cash flow and dividends whilst achieving a material reduction in leverage.

“We also achieved our target of zero fatalities and have importantly been able to minimise the impact of the Covid-19 pandemic on our people, communities, and operations.”

At 0835 GMT, shares in Polymetal International were up 2.5% at 1,475p.