ArmInfo. Polymetal International plc announced yesterday Group's financial results for the six months ended 30 June 2018.
According to official press service received by ArmInfo revenue in 1H 2018 increased by 16% to US$ 789 million compared to 1H 2017 ("year-on-year"), primarily driven by gold equivalent (GE) production growth of 11%. Gold sales were 445 Koz, up 17% year-on-year, while silver sales were down 2% to 12.1 Moz, in line with production volume dynamics.
Average realized prices largely tracked market dynamics: gold was up 6% year-on-year, while silver was down 4%.
Group Total cash costs were US$ 683/GE oz for 1H 2018, up 4% year-on-year, and well within the Company's guidance of US$ 650-700/GE oz. All-in sustaining cash costs amounted to US$ 893/GE oz, decreasing by 1% year-on-year. Both cost measures are expected to decline in 2H on the back of seasonally higher production and sales, notably at Mayskoye and Svetloye.
Adjusted EBITDA was US$ 305 million, an increase of 19% year-on-year, mostly driven by higher production volumes and commodity prices. The Adjusted EBITDA margin increased by 1% to 39% (1H 2017: 38%)
Net earnings were US$ 175 million versus US$ 120 million in 1H 2017, reflecting an increase in EBITDA. Underlying net earnings1 increased by 32% to US$ 155 million (1H 2017: US$ 117 million).
Regular dividends for 2017 of US$ 0.30 per share (total of US$ 136 million) were paid in May 2018. An interim dividend of US$ 0.17 per share (1H 2017: US$ 0.14 per share) representing 50% of the Group's underlying net earnings for 1H 2018 has been proposed by the Board in accordance with the dividend policy, while complying with the hard ceiling of 2.5x Net debt/Adjusted EBITDA .
Net debt increased to US$ 1,652 million during the period (31 December 2017: US$ 1,420 million), representing 2.08x of last twelve months Adjusted EBITDA, driven by a seasonal working capital increase. As in prior years, stronger production and a traditional seasonal working capital drawdown should drive stronger free cash flow generation in 2H 2018.
Polymetal remains on track to meet its 2018 production guidance of 1.55 Moz of gold equivalent. TCC and AISC are expected to be within the guidance range of US$ 650-700/GE oz and US$ 875-925/GE oz, respectively. This guidance remains contingent on the RUB/USD exchange rate that has a significant effect on the Group's Rouble-denominated operating costs
"I am delighted to report strong earnings on the back of solid operational delivery in the first half of the year", said Vitaly Nesis, Group CEO of Polymetal, commenting on the results. "We expect stronger production and free cash flow generation for the second half and remain focused on steadily progressing our further growth pipeline, including full ramp-up of Kyzyl, while generating meaningful dividends to our shareholders".
To recall, Polymetal started operating in Armenia in 2015 with the acquisition of shares in Lichkvaz CJSC, which has the subsoil use right in respect of the Lichkvaz-Tey gold mine. The company purchased Kapan mining and processing plant in April 2016. The plant includes an underground mine, a processing plant and a flotation infrastructure facilities.
According to the financial report, in H1 2018 revenue in Kapan was $ 29 million, compared to $ 20 million for the same period last year, having increased by 45%.The volume of sales from Kapan amounted to 24 thousand ounces of gold equivalent, which is 42% higher than the result of the first half of last year. As indicated in the report, in Kapan cash costs were US $ 919 per ounce of gold equivalent, an increase of 16% over the same period last year and 2% compared to the previous half-year. The increase in costs is due to a decrease in gold content as a result of a change in the method of excavation from manual to mechanized to improve safety, which has led to increased dilution.
Adjusted EBITDA for the Kapan deposit increased by 14% over the reporting period, from $ 7 to $ 8 million on average. The capital expenditure level in Kapan decreased from $ 13 to $ 3 million, which is related to the completion of the upgrade at the minefield.
Polymetal (Polymetal) is one of the world's largest producers of primary silver, is one of the three leading gold mining companies in Russia. It conducts extraction of precious metals and geological exploration in Russia, Kazakhstan and Armenia. Polymetal Int independently carries out the whole complex of works on the development of ore deposits - from geological exploration to operation. The key element of the strategy is the creation of processing centers (hubs), which allow the most effective and responsible use of financial and human resources, contribute to achieving higher returns on invested capital. In November 2011, Polymetal Int was the first Russian company to receive a premium listing on the London Stock Exchange (ticker POLY).