Polymetal keeps a lid on costs in 2012

Polymetal, the Russian gold producer and one the world's largest silver miners, managed to hold back on costs in 2012 despite a strong rise in revenue, prompting the firm to raise its payout ratio to shareholders.

Polymetal, the Russian gold producer and one the world's largest silver miners, managed to hold back on costs in 2012 despite a strong rise in revenue, prompting the firm to raise its payout ratio to shareholders.

Polymetal saw 40% growth in revenues from $1,326m to $1,854m (Credit Suisse: $1,843m), which was driven mainly by a 33% increase in gold equivalent sold. The company said that in addition to "robust" production growth, metal sales exceeded output for both gold and silver due to destockpiling of concentrate inventories at the Dukat project.

Total gold equivalent production was up 31% year-on-year at 1.06m ounces, exceeding the original guidance of 1.0m by 6.0%.

"These excellent results were driven by stable performance at all mature mines, with a notable improvement achieved at Dukat, and successful ramp-up at Omolon and Albazino," the company said.

2013 guidance is for 1.2m ounces of gold equivalent production.

The firm's Amusk POX hub, Polymetal's largest project, poured first gold in 2012 and is currently undergoing the ramp-up period but this process has been slower than planned due to "certain problems". The POX plant is expected to reach full capacity by the fourth quarter.

Cash costs over 2012 remained broadly flat at $703/GE oz "as a result of intense management focus on cost control despite external and inflationary cost pressures".

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) jumped 47% year-on-year to $918m, above of Credit Suisse's $909m forecast. However, basic earnings per share were 103 cents, up 30% from 79 cents the year before but under forecasts as the company booked tax provisions of $116m in respect of prior years.

The company declared a final dividend of 31 cents per share in 2012 (2011: 20 cents), representing 30% of net earnings, up from the 20% payout ratio indicated the year before. The company also paid a 50 cents special dividend in January.

"We have demonstrated strong financial performance for the year driven by excellent operational performance and tight cost and capital discipline", said Vitaly Nesis, Chief Executive Officer.

"This success is marked by stable total cash costs, increasing margins and returns on capital, as well as increased free cash flow generation on the back of completion of our major growth projects. We are committed to delivering the value created to shareholders, by proposing a final dividend which, combined with special dividends, will result in a sector-leading yield combined with solid growth profile".

Recommended

The MoneyWeek Podcast: picking stocks is fun, but you need to do your homework
Investment strategy

The MoneyWeek Podcast: picking stocks is fun, but you need to do your homework

John Stepek talks to Steve Clapham, investor, analyst and author of The Smart Money Method, about the dangers in picking individual stocks and why you…
8 Apr 2021
BP looks set to return more money to shareholders as it beats expectations
Energy stocks

BP looks set to return more money to shareholders as it beats expectations

Oil major BP is to embark on a share buyback programme after significantly reducing its debts. Saloni Sardana looks at what it means for your portfoli…
6 Apr 2021
Deliveroo has hit the market – but it’s not getting the warmest welcome
UK stockmarkets

Deliveroo has hit the market – but it’s not getting the warmest welcome

Food delivery company Deliveroo made its debut on the stockmarket this morning. But with the share price sliding by 30% straight away, it’s not made t…
31 Mar 2021
Three stocks to buy now that will come back stronger after Covid-19
Share tips

Three stocks to buy now that will come back stronger after Covid-19

Professional investor Ed Wielechowski of Odyssean Capital, chooses three compelling stocks that should thrive in a post-pandemic world.
29 Mar 2021

Most Popular

The bitcoin bubble will burst: here’s how to play it
Bitcoin

The bitcoin bubble will burst: here’s how to play it

The cryptocurrency’s price has soared far beyond its fundamentals, says Matthew Partridge. Here, he looks at how to short bitcoin.
12 Apr 2021
Central banks are rushing to build digital currencies. What are they, and what do they mean for you?
Bitcoin

Central banks are rushing to build digital currencies. What are they, and what do they mean for you?

As bitcoin continues to soar in value, many of the world’s central banks are looking to emulate it by issuing their own digital currencies. But centra…
8 Apr 2021
Four investment trusts for income investors to buy now
Investment trusts

Four investment trusts for income investors to buy now

Some high-yielding listed lending funds have come through the crisis with flying colours. David Stevenson picks four of the best.
12 Apr 2021