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Polymetal rolled by stronger rouble

Costs and working capital both edged up for the miner at the half-year
August 29, 2017

The market returned from its bank holiday this week to find gold prices at a year high of $1,325 (£1,022) an ounce. Amid the fallout from Hurricane Harvey and North Korea’s latest provocation, Polymetal International (POLY) could not have wished for a better time to release its half-year numbers, which contained operational details that might otherwise have tested investors’ patience  

IC TIP: Buy at 977p

Shareholders in the precious metals company won’t have been especially disappointed. Gold sales jumped 19 per cent year on year, while management reiterated production guidance for 1.4m ounces of gold equivalent. Confidence that this target will be met, and that costs will be contained, also supported a step up in the half-year dividend.   

But construction at the Kyzyl project has brought with it costs. Intensive capital expenditure there, together with a seasonal working capital increase in the six months to June, pushed up net debt by 19 per cent and resulted in negative free cash flow of $163m. Additionally, a stronger rouble pushed up all-in sustaining costs by a fifth to $906 per ounce of gold equivalent year on year, although management does not expect the 2017 average to exceed $825 an ounce.

On average, analysts expect full-year adjusted pre-tax profit of $542m and EPS of 99.5¢, against $564m and 97.8¢ in 2016.

POLYMETAL INTERNATIONAL (POLY) 
ORD PRICE:977pMARKET VALUE:£4.2bn
TOUCH:977-978p12-MONTH HIGH:1,109pLOW: 712p
DIVIDEND YIELD:3.7%PE RATIO:15
NET ASSET VALUE:254¢NET DEBT:145%
Half-year to 30 JunTurnover ($m)   Pre-tax profit ($m)Earnings per share (¢)Dividend share (¢)
201659323839.09.0
201768315028.014.0
% change+15-37-28+56
Ex-div:7 Sep   
Payment:29 Sep   
£1=$1.30