Petropavlovsk moves to loss after turbulent year

Petropavlovsk (POG) managed to add to the drama of 2020 - ergo a new record gold price and pandemic - with the removal of its board, rebellion at subsidiaries and clamour about a backdoor takeover. Amid all this, the gold miner managed to keep producing gold and its underlying cash profits for the year climbed a third to $351m (£249m).

Petropavlovsk has its own mines and also buys third-party concentrate (a step along from ore in the production process). The company bought more than triple the third-party concentrate in 2020 than the year before in order to keep feeding its POX plant. This saw costs climb because of the higher gold price, to an all-in sustaining cost of $1,312 per ounce (oz), while overall gold production climbed 6 per cent to 548,000oz. 

New chief executive Denis Alexandrov told Investors’ Chronicle that 2020 had been a difficult year and he was now looking at a new “development strategy and financial model” for the company. 

There has been a rush of Russian miners bought out in the past year, including Alexandrov’s former company Highland Gold Mining, and 24 per cent shareholder UGC has long been held up as a likely buyer of Petropavlovsk. Alexandrov said it was “too early” to talk about a combination of the companies, and Petropavlovsk was focused on organic growth. UGC was a key player in the board coup last year. 

Peel Hunt forecasts a 9 per cent dip in adjusted earnings per share this year, to 2.1¢, before recovering to 6.2¢ in 2022. Petropavlovsk still has some major question marks in terms of stability, so we would not recommend investors dive back in yet. Sell. 

Last IC View: Sell, 26p, 30 Oct 2020