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Petropavlovsk still on a tightrope

It may have got its refinancing out of the way, but times are still tight at the Russian gold miner.
April 28, 2017

There's no denying Petropavlovsk (POG) chairman Peter Hambro's observation that 2016 was the year when the Russian gold miner "returned to profitability". But this landmark should come with caveats that can also help to explain the shares' inability to re-rate above 9p. Firstly, the period didn't quite match the barnstorming production promises made this time 12 months ago. In fact, total gold production fell 17 per cent due to a mix of inclement weather and a focus on more profitable drilling.

IC TIP: Hold at 7.5p

On the plus side, the strategic mining plan contributed to an 8 per cent drop in all-in sustaining costs to $807 (£629) an ounce. That, together with deferred tax credits and a 96 per cent reduction in net losses at iron ore holding IRC, meant net profit came in at $31.7m.

Liquidity issues were again a major sap on management time and, although a December refinancing deal extended maturities to 2022 and allowed the leverage ratio to fall to a more respectable level, the group is still on the hook for $85.3m this year. Given rising costs and projected capital expenditure of $110m, it promises to be a fine balancing act.

According to Bloomberg, market consensus is for pre-tax profit of $32.7m and adjusted EPS of 0.5¢ in 2017.

PETROPAVLOVSK (POG)

ORD PRICE:7.5pMARKET VALUE:£244m
TOUCH:7.4-7.7p12-MONTH HIGH:9pLOW: 5.8p
DIVIDEND YIELD:nilPE RATIO:10
NET ASSET VALUE:16.2¢NET DEBT:109%

Year to 31 DecTurnover ($bn)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (p)
20121.2040.0na12*
20131.20-523-259nil
20140.86-14.3-94nil
20150.60-142-7.0nil
20160.5427.01.0nil
% change-10---

Ex-div: na

Payment: na

£1=$1.28

*Includes 5p a share scrip dividend.