Join our community of smart investors

Polymetal emerges from the rouble

A falling rouble put a big non-cash dent in Polymetal's net profits last year, but is also generating big cost savings.
March 31, 2015

A $559m (£378m) non-cash charge for the revaluation of dollar-denominated loans pushed the bottom line at Polymetal (POLY) into the red last year. But the underlying picture at the Russian precious metals miner was far more favourable, as a decline in cash costs - particularly in dollar terms - mitigated declines of 7 and 18 per cent respectively in the average gold and silver prices realised. At $685m, cash profits were 15 per cent up on last year on a margin of 41 per cent, against 35 per cent in 2013.

IC TIP: Hold at 560p

A ramp up at the Mayskoye gold deposit, and improved operational performance at the Dukat and Omolon mines, helped bump up gold (equivalent) production to 1.43m ounces - a 12 per cent increase over 2013 and well ahead of guidance. This rising production, coupled with falling rouble-denominated expenses, drove down cash costs by 15 per cent to $634 an ounce. Looking ahead, Polymetal is aiming to produce around 1.35m ounces this year within a reduced cost range of $575-$625 per ounce.

The miner's ore reserves increased appreciably following the September acquisition of the Kyzyl gold project in Kazakhstan, but the deal also increased net borrowings by around a fifth. Société Générale predicts net income of $150m in 2015, on revenues of $1.73bn.

POLYMETAL INTERNATIONAL (POLY)
ORD PRICE:560pMARKET VALUE:£2.4bn
TOUCH:559-661p12-MONTH HIGH:634pLOW: 440p
DIVIDEND YIELD:4.9%PE RATIO:na
NET ASSET VALUE:207¢NET DEBT:134%

Year to 31 DecTurnover ($bn)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
20100.9030667.0nil
20111.3040979.020
2012 (restated)1.90651110.031 †
20131.71-158-51.09
20141.69-138-53.041
% change-1--+356

Ex-div: 30 Apr

Payment: 29 May

£1 = $1.49. †Excludes special dividend of 50¢