Join our community of smart investors

Petropavlovsk profits but big hurdles remain

The Russian gold miner is meeting all of the objectives it set out in 2015. Now it must navigate a huge refinancing and severe flooding in the Amur region.
September 28, 2016

Despite a drop in production, Petropavlovsk (POG) squeaked through to post-tax profit of $9.2m (£7.1m) in the six months to June, the first time the gold miner has recorded a positive half-year financial performance since 2012. And with the average realised price of gold 2 per cent lower in the period, the company was forced to cut capital expenditure by a third to $11.9m, reverse impairments and reduce central administration expenses by 17 per cent.

IC TIP: Hold at 7.5p

A decline in the rouble also helped, bringing total cash costs down by 14 per cent to $663 per ounce (oz), although the currency's volatility also resulted in a foreign exchange loss of $5.9m in the period. Other hurdles await. At present, $344.2m of debt needs to be repaid before June 2017, although chairman Peter Hambro expects to have concluded a refinancing with Russian lenders by the end of October. Meanwhile, severe flooding in the Amur region, which is home to Petropavlovsk's four producing mines, is causing something of an operational headache and has already resulted in a drop in this year's production guidance to the lower end of the previously flagged 460,000-500,000 oz range.

To continue reading...
REGISTER FOR FREE TODAY
  • Read 3 articles for free each month
  • Educational articles and topical investment guides
  • In-depth podcast episodes by our writers and industry professionals
  • Interactive live webinars on investment themes that matter
Have an account? Sign in