Polymetal ups 2012 production guidance

The third quarter of 2012 was a strong one for mining firm Polymetal International, prompting the company to revise up its 2012 production guidance.

Quarterly gold equivalent production hit a new high of 317,000 ounces, and was up 48% on the corresponding quarter of 2011 and up 7% on the previous quarter of 2012.

Gold equivalent production for the first nine months of 2012 was 818,000 ounces, up 46% year-on-year. The improvement was driven by continued strong production growth at Omolon, further progress at Albazino-Amursk, and improved grade profile at Khakanja.

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The group has revised its full year production guidance to 1.05m ounces of gold equivalent from its previous guidance of 1.0m ounces.

In 2013, the company expects to produce in the region of 1.2m ounces of gold equivalent, including some 0.76m - 0.80m ounces of gold and around 23m - 24m ounces of silver and 5,000 - 6,000 tonnes of copper.

The 2012 - 2013 production guidance has been revised cumulatively down by 50,000 ounces of gold equivalent, or about 2%, mostly due to the delay in the expected commissioning of Mayskoye concentrator. Production guidance for 2014 remains unchanged at 1.4m ounces of gold equivalent.

"Sales were ahead of production, most importantly for silver, representing an expected reduction in inventory (most importantly, at Omolon and Dukat) and thus contributing to stronger operating cash flows," the company said.

The board has approved changes to the company's dividend policy, raising the minimum payout ratio to 30% of net earnings, albeit with the caveat that the ration of net debt to adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) does not exceed 1.75. The company will also start paying interim dividends, and instituting a special dividend to be considered at the end of each financial year.

"During this quarter we have essentially closed the gap between production and sales, resulting in stronger than expected cash flow performance" said Vitaly Nesis, Chief Executive Officer of Polymetal. "The new dividend policy adopted by the board will ensure sound capital discipline and consistent decision-making in allocation of our financial resources," he added.

Sales of gold in the third quarter were up 77% from a year earlier to 197,000 ounces from 112,000 ounces. Sales of silver jumped 61% to 7.6m ounces from 4.7m ounces while sales of copper surged 121% to 1,506 tonnes from 683 tonnes.

Revenue in the quarter totalled $530m, up 42% from $374m in the same quarter of 2011.

JH