Shares in precious metals giant Polymetal jumped on Monday after the company boosted its dividend by over a half following strong profits growth and cash control in 2012.
The group, a leading Russian gold producer and one the world's largest silver miners, raised its final dividend per share (DPS) to 31 cents, up from 20 cents in 2011, lifting its payout ratio (dividends as a percentage of net earnings) from 20% to 30%. This comes after a 50 cents special DPS paid to shareholders in January.
The stock was up 5.13% at 881p before the close of trade.
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"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 (FCF) 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".
Revenues meet forecasts, profits surprise to the upsidePolymetal saw 40% growth in revenues from $1,326m to $1,854m, more or less in line with estimates, 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.
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, some 5.0% above of the consensus 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.
2013 guidance is for 1.2m ounces of gold equivalent production.
Polymetal's Amusk POX hub, the firm'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.
Analysts hail FCF generationAnalysts at Cancaccord Genuity reiterated their 'buy' rating for the stock on Monday, praising the group's FCF generation. Polymetal produced $139m in free cash, above the $104m Canaccord estimate
"The group passed a significant threshold during 2012, with a switch to becoming FCF positive, following a 22% reduction in capex from the peak level in 2011," the broker said.
Cancaccord said that this provides Polymetal with a "solid platform" to face the current challenges at the Amursk POC facility.
Analysts said that the stock is currently trading at a premium to the sector - relative to spot gold prices - but this is warranted "given the higher grade production, capital discipline and FCF generation".
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