Having narrowly avoided a liquidation of its assets earlier this year, Petropavlovsk (POG) is now focused on restoring its balance sheet to health. But the latest figures suggest the Russia-focused gold miner will have to work hard to meet its residual debt obligations through organic cash flow. The group generated net cash of $11.5m (£7.4m) from operations in the half year, against $80.8m in the corresponding period in 2014.
Admittedly, management is committed to optimising cash flow in the long run through a more flexible attitude towards production rates and capital expenditure, so the dramatic contraction in net cash flow may be a short-term effect as the group streamlines its business model. The miner said it remains on track to reduce net debt to around $600m by the year-end, which is achievable if, as expected, recovery rates and grades pick up across its four pits in the second half.
The group recorded an operating profit of $14.5m, compared with $44m a year ago. Sales volumes were down by a quarter on the 2014 half year, while the average price per ounce fell 12 per cent to $1,221. All-in sustaining cash costs were reduced to $983 an ounce, but that doesn't leave much headroom compared with the current gold price. Production is expected to rise substantially in the second half, which should help to generate scale-linked cost reductions.
Taking account of long-term debt obligations, Canaccord Genuity gives a net asset value of 17p a share.
PETROPAVLOVSK (POG) | ||||
---|---|---|---|---|
ORD PRICE: | 6p | MARKET VALUE: | £197m | |
TOUCH: | 5.85-6p | 12-MONTH HIGH: | 16.1p | LOW: 2.2p |
DIVIDEND YIELD: | nil | PE RATIO: | na | |
NET ASSET VALUE: | 21¢ | NET DEBT: | 82% |
Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
---|---|---|---|---|
2014 | 453 | 8.3 | -10.0 | nil |
2015 | 297 | -26.0 | -2.0 | nil |
% change | -34 | - | - | - |
£1=$1.55 |