Polymetal's gold production increases, on track to meet full year targets

Polymetal International’s first quarter gold production increased following recent acquisitions as the miner remains on track to deliver its production and cost targets for the full year.

In the quarter ended 31 March, 280 thousand ounces (Koz) of gold equivalent was produced, which is an 8% increase over last year, due to a strong performance at the Omolon hub in Russia and contributions from its newly acquired mines, Komar (Varvara) and Kapan.

Gold production rose 18% in 2016 to 199 Koz, while silver production fell 15% - as expected - due to the grade decline at the Dukat mine.

Gold and silver sales in the quarter lagged production due to the traditional shutdown of Russian refineries in January, and a seasonal increase of concentrate in transit from Dukat to off-takers, which is expected to reverse by the fourth quarter of 2017.

At the Kyzyl site, construction and pre-stripping activities are on schedule and the mine is on track to produce its first concentrate in third quarter next year.

By the end of the quarter, the company’s net debt had widened to $1.5bn from $1.32bn due to the lag between production and sales, seasonal advance purchases of diesel fuel, and increased spending at Kyzyl.

Polymetal said that its free cash flow generation is skewed towards the second half of the year with input from Mayskoye concentrate sales and seasonal heap leach production at the Svetloye site.

Its production guidance for the 2017 financial year is maintained at 1.40m ounces of gold equivalent with costing between $600 to $650 per ounce and all-in sustaining cash costs between $775 to $825 per ounce.

The FTSE 250 company stressed that its cost cost guidance is contingent on the exchange rate dynamic between the ruble against the dollar, which affects its ruble-denominated operating costs.

Chief executive Vitaly Nesis said: "We are pleased to report a strong start to the year with a solid set of production results that were further enhanced by our recently acquired assets.

“We remain on track to deliver on our production and cost targets for the current year".

Shares in Polymetal International were down 1.4% to 1,054p at 0818 BST.