Polymetal on target for full-year production after good first half

The FTSE 250 company said volumes at Svetloye and Amursk POX, combined with improved grades at Omolon, drove that strong performance.

Gold production for the quarter was 232 Koz, up 22% year-on-year, and silver production grew by 2% to 6.8 Moz year-on-year.

It said gold equivalent production for the first six months was 619 Koz - an 11% increase year-on-year and fully in line with guidance.

Stronger production in the second half would be driven by traditional seasonal concentrate de-stockpiling at Mayskoye, as well as first contributions from the recently launched Kyzyl operation, the board claimed.

Kyzyl produced its first concentrate in June, one month ahead of schedule.

Polymetal said the operation was expected to ramp up to full throughput capacity of 150 Kt per month, and reach design recoveries of 86%, by October.

The company said it planned to produce 80 Koz of payable gold at Kyzyl this year.

Gold sales for the quarter increased 17%, which the company said largely offset a 7% decline in silver sales as it generated a total of $435m in revenues - up 13% compared to previous year.

During the quarter, Polymetal generated “significant” free cash flow, the board said, while net debt increased by about $75m as it paid $129m of final dividends for the 2017 financial year of 30 US cents per share.

As in prior years, the board said it expected “significantly stronger” free cash flow generation in the second half of the year, on the back of higher production volumes and seasonal working capital drawdowns.

Polymetal also reported that nil fatalities occurred in the quarter.

The group said its lost-time injury frequency rate (LTIFR) improved to 0.17, compared to 0.19 in the second quarter of 2017.

It explained that, as part of a “continuous effort” to improve across health and safety metrics, it implemented two new standards of voice reporting of near-misses to improve communication underground, and an incident recording system to improve the efficiency of preventive measures in the second quarter.

Polymetal said it remained on track to meet its full-year production guidance of 1.55 Moz of gold equivalent at total cash costs of between $650 and $700 per gold equivalent ounce, and all-in sustaining costs of between $875 and $925 per gold equivalent ounce.

Due to the seasonality of revenues, both total cash costs and all-in sustaining costs were expected to be at the higher end of the guidance range for the first half of the year.

The board said its cost guidance remained contingent on the rouble-dollar exchange rate dynamic, which has a significant effect on its rouble-denominated operating costs.

“Another strong quarter puts us into a very comfortable position vis-a-vis our guidance for 2018", said group CEO Vitaly Nesis.

“With Kyzyl launched ahead of schedule, the focus is now on its smooth ramp-up and the completion of the POX debottlenecking project.”

Polymetal said it would announce its half-yearly financial results on 22 August.