Canaccord Genuity raises target on Petropavlovsk amid rapid de-risking

A raft of positive factors, including an "aggressive" target for own mine gold output in 2020, a successful ramp-up of its pressure oxidation project, and a higher price for the 'yellow metal' in international markets had all contrived to push its share price above that of its 2019 convertible debt issue of about 10.4p.

All of the above meant that Petropavlovsk would be able to reduce debt through conversion, further reducing the broker's concerns on that front.

That was a far cry from the situation that the miner was in five years beforehand, with the POX project halted due to low gold prices and a heavy debt load that needed refinancing, analyst Nick Hatch said in a research report sent to clients.

The POX hub added optionality to the company's business case, allowing it to purchase and refine third-party concentrate, although that would add to the volatility in output from one quarter to the next and entailed its own set of risks Hatch explained.

In any case, the outfit had avoided the start-up issues at the POX hub that had dogged some of its rivals.

"We expect to see increasing volumes of bonds converted if the share price remains around current levels. Given the historical challenges that POG had with debt, this should help to reduce concerns further. In our view, POG is de-risking rapidly," the broker said.

Canaccord stayed at a 'buy' on Petropavlovsk.