Shares in gold miner Petropavlovsk (POG) plunged 17 per cent following the release of these abysmal half-year results. The lower gold price forced the debt-laden Russian gold producer to book $691m (£443m) of impairment charges - making Petropavlovsk the latest miner to announce huge write-downs this year.
The company's early hedging strategy proved to be a modest success, earning Petropavlovsk an additional $25m in revenues during the period. Overall, though, there were probably more negatives than positives on an operating level.
Gold production increased 6 per cent year on year to 294,700 ounces, yet an astounding 54 per cent hike in average cash costs to $1,136 an ounce slashed cash profits by a half to $102m. Chairman Peter Hambro says "costs are expected to be lower in the second half as grades will be higher and stripping volumes reduced" - and they better had be. The company desperately needs to start earning money to pay down its substantial debts, which amounted to $1.15bn as of 30 June.
Analysts from JPMorgan Cazenove say: "At or around current gold prices we continue to forecast a covenant breach and funding gap for POG's $380m convertible [bond] at year-end 2014". They estimate Petropavlovsk's net present value at 200p a share, but set a price target of just 70p - reflecting their "concerns for recapitalisation risk in 2014".
PETROPAVLOVSK (POG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 107p | MARKET VALUE: | £211m | |
| TOUCH: | 107-108p | 12-MONTH HIGH: | 464p | LOW: 63p |
| DIVIDEND YIELD: | 6.5% | PE RATIO: | na | |
| NET ASSET VALUE: | 436¢ | NET DEBT: | 103% | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 547 | 49 | -8 | 5.0 |
| 2013 | 597 | -768 | -357 | nil |
| % change | +9 | - | - | - |
£1=$1.56 | ||||
