Polymetal International Half-yearly report for the six months ended 30 June 2021

[idpickering]

FINANCIAL HIGHLIGHTS

•Revenue in 1H 2021 increased by 12% to US$ 1,274 million compared to 1H 2020 ("year-on-year") driven by higher metal prices. Average realised gold and silver prices tracked market dynamics and increased by 8% and 59%, respectively. Gold equivalent ("GE") production was 714 Koz, a marginal decrease of 1% year-on-year. Gold sales remained stable year-on-year at 595 Koz but lagged production by 40 Koz mainly due to concentrate in transit build-up at Kyzyl. Silver sales were down 19% to 8.0 Moz, due to a lag between silver concentrate production and sales, which is expected to close in 2H 2021.
•Group Total Cash Costs ("TCC")1 were US$ 712/GE oz for 1H 2021, within the Company's guidance of US$ 700-750/GE oz, and up 12% year-on-year due to above-CPI inflation in the mining industry and full-period impact of COVID-related costs, as well as planned decline in grades processed at Kyzyl and Albazino.
•All-in Sustaining Cash Costs ("AISC")1 amounted to US$ 1,019/GE oz, up 16% year-on-year, reflecting investments at Omolon (power complex, filtration building and mining fleet renewals) and Kyzyl (mining fleet), as well as accelerated stripping at Voro (Pescherny and Saum deposits) and Omolon (Burgali deposit). AISC are expected to decline in the second half of the year on the back of seasonally higher production and sales to meet the full year guidance of US$ 925-975/GE oz.
•Adjusted EBITDA[1] was US$ 660 million, an increase of 8% year-on-year, driven by higher commodity prices against the backdrop of stable production. The Adjusted EBITDA margin decreased to 52% (1H 2020: 54%).
•Net earnings[2] were US$ 419 million (1H 2020: US$ 376 million), with basic EPS of US$ 0.89 per share (1H 2020: US$ 0.80 per share), reflecting the increase in operating profit. Underlying net earnings1 increased by 15% to US$ 422 million (1H 2020: US$ 368 million).
•Capital expenditure was US$ 375 million[3], up 55% compared to US$ 242 million in 1H 2020, reflecting the construction at POX-2, Nezhda and Kutyn, combined with stripping at Veduga[4], Voro and Omolon. Capital expenditure levels were also affected by inflationary pressures and COVID-related costs.
•Given the continuing macroeconomic pressures, materials and wage inflation, as well as scope changes approved by the Board, including costs of the feasibility study for POX-3 and acceleration of Veduga and Prognoz projects, Polymetal revises its FY 2021 capex guidance to US$ 675-725 million (previously US$ 560 million). The guidance for 2022-2025 will be updated during the Company's capital markets day in November 2021.
•An interim dividend of US$ 0.45 per share (1H 2020: US$ 0.40 per share) representing 50% of the Group's underlying net earnings for 1H 2021 has been approved by the Board in accordance with the dividend policy. A final dividend for 2020 of US$ 0.89 per share (total of US$ 421 million) was paid in May 2021.
•Net debt1 increased to US$ 1,827 million during the period (31 December 2020: US$ 1,351 million), representing 1.05x of the last twelve months Adjusted EBITDA, significantly and favourably below the Group's target leverage ratio of 1.5x. The increase in net debt was mainly driven by accelerated capital expenditures combined with seasonal working capital build-up.
•Operating cash flow increased by 22% year-on-year to US$ 358 million, however free cash flow ("FCF")3 represented a US$ 27 million outflow, compared to a US$ 54 million inflow a year earlier, driven by higher capital expenditure. As usual, FCF is expected to be stronger in the second half of the year due to seasonally higher production and working capital release.
•Polymetal is on track to meet its 2021 production guidance of 1.5 Moz of gold equivalent. The company maintains its 2021 guidance range of US$ 700-750/GE oz and US$ 925-975/GE oz for TCC and AISC, respectively. This guidance remains contingent on the RUB/USD and KZT/USD exchange rates which have a significant effect on the Group's local currency denominated operating costs.

https://www.investegate.co.uk/polymetal ... 0008EFKVE/

I last put my HYP up here on 09 July 21 here; viewtopic.php?f=15&t=30244 on perusal of which it can be seen that I hold BHP Group and Rio Tinto already. However, I've been interested in maybe adding Polymetal International to my mining shares pot. OK, they're a miner, but focusing elsewhere in their activities, as noted on the respective company page on HL here;

Polymetal International PLC is a Cyprus-based precious metals mining group. The Group has a portfolio of nine producing gold and silver mines and 3 development projects across Russia and Kazakhstan. The Group has four geographical segments: Magadan, Ural, Khabarovsk and Kazakhstan. Each segment is engaged in gold, silver or copper mining and related activities, including exploration, extraction, processing and reclamation.

https://www.hl.co.uk/shares/shares-sear ... nformation

Poly offer a yield of 6.2% currently. I suspect other HYPers hold these perhaps, so this item may be of interest to them?

Ian.

[minerjoe]

Polymetal isn't a Rio or BHP - Gold moves in almost a totally divergent direction to base metals. Also Polymetal is almost entirely exposed to Russia and the CIS so this impacts the political implications and its funding options. They will give you a pretty direct exposure to the gold price, which has been trending downwards over the last few months. However they have a very good AISC (all in sustaining cost) and I've actually been to one of their operations near Yekaterinburg. By all standards it was a very well run mine

[moorfield]

A note of caution on the dividend history which you can see from the chart was doubled last year.

https://www.dividenddata.co.uk/dividend ... ?epic=POLY

Do you think it is sustainable at the current level? If you don't, then the 6.2% yield is deceptive.

[minerjoe]

Do you think it is sustainable at the current level? If you don't, then the 6.2% yield is deceptive.

Its entirely depending on the gold price as it seems to be 50% of underlying earnings. Of course the more they mine, the more they will earn and they are opening a couple of new mines.

[moorfield]

Do you think it is sustainable at the current level? If you don't, then the 6.2% yield is deceptive.

Its entirely depending on the gold price as it seems to be 50% of underlying earnings. Of course the more they mine, the more they will earn and they are opening a couple of new mines.

So it's a volatile/cyclic dividend then ... rather than a steady plodder.

[minerjoe]

So it's a volatile/cyclic dividend then ... rather than a steady plodder.

No more so than any other miner - just these are very exposed to gold price. But you could say Rio/BHP are 80-90% exposed to Iron Ore... I have no issues with gold miners when they are making nearly $1000 profit per oz after cost - not too shabby, just not as good as Iron Ore margins

[idpickering]

No more so than any other miner - just these are very exposed to gold price. But you could say Rio/BHP are 80-90% exposed to Iron Ore... I have no issues with gold miners when they are making nearly $1000 profit per oz after cost - not too shabby, just not as good as Iron Ore margins

Indeed, thanks minerjoe. The more I think about it, the more I like the idea of diversifying within the overall mining sector. In fact, for that 6.2% yield as of now with Poly, it seems more like a no-brainer. Hmm...? We'll see?

Ian.