Swann Collins, investor and consultant in international affairs – Eurasia Business News, December 4, 2021
PJSC Polyus (LSE, MOEX: PLZL) released on November 23 its gold production and gold revenue results for the third quarter and first nine months of 2021.
Revenue was $1,400 million in Q3 2021, a 12% increase compared with Q2 2021.
Total gold sales of the Russian mining company amounted in Q3 2021 to 776,000 ounces, a 14% increase compared to Q2 2021. This reflects the seasonal increase in production at the mining sites, as well as an increase in production of refined gold in almost all ore assets.
Polyus Group Total Cash Costs (TCC) for Q3 2021 rose 9%, from $ 390 per ounce in Q2 to $ 427 per ounce. This is due to a seasonal increase in production from alluvial deposits with higher costs, as well as continuing inflation in consumables and oils prices.
Additional pressure on the TCC indicator resulted from an increase in the Mineral Extraction Tax rate for Verninsky gold mine (from 2.4% to 6%) after the termination of its status as a regional investment project.
Group total cash costs (TCC) for 9 months of 2021 amounted to $ 403 per ounce. Based on current Polyus estimates confirms its forecast for TCC at $ 425- $ 450 per ounce. In assessing the TCC indicator, the Company continues to rely on the forecast of the exchange rate of the national currency at 65 rubles per U.S. dollar. On December 4, one U.S. dollar is worth 73.94 Russian rubles.
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Adjusted EBITDA for Q3 2021 amounted to $ 986 million, 10% more than $ 899 million in Q2 2021. This growth is the result of increasing gold sales volumes in the reporting period.
Capital expenditures in Q3 2021 increased to $ 233 million (up from $ 179 million in Q2) due to an increase in the capex program in the reporting period.
Capital expenditures of Polyus for 9 months of 2021 amounted to $ 539 million. The Russian mining giant expects an increase in its capex program in the fourth quarter of this year. Polyus maintains its forecast for the current year in terms of capex in the range of $ 1,000- $ 1,100 million. (Forecast based on exchange rate of RUB 65 per U.S. dollar.
The ratio of net debt (including derivatives) to adjusted EBITDA decreased to 0.5x at the end of the reporting period, from 0.6x in the previous quarter. This happened against the background of a decrease in net debt.
In August, the Company’s Board of Directors recommended paying dividends for the 1st half of 2021 at the level of RUB 267.48 per ordinary share. (=3.61 U.S. dollar as of December 4, 2021).
The dividend amount is equivalent to approximately $ 3.69 per ordinary share, or $ 1.84 per depositary share (two depositary shares correspond to one ordinary share), as of November 23. The total recommended dividend payments for the first six months of 2021 is approximately $ 502 million, which complies with the dividend policy of the Company. The payment of dividends was approved at an extraordinary general meeting of shareholders of the Company on September 29, 2021. The register of persons entitled to receive dividends was closed on October 11, 2021.
The situation with COVID-19
In Q3 2021, Polyus Group allocated $ 14 million to implement measures to prevent the spread of COVID-19. An amount of $ 7 million was attributed to the “cost of gold sales” (additional personnel costs due to an increase in the duration of the shift) and another $ 7 million was attributed to “other expenses” (purchase of tests for COVID-19, medical care and support for regional medical institutions). Costs related to COVID-19 that have been attributed to cost of gold sales have not been included in the metrics calculation of TCC (total cash costs) and AISC (All in Sustaining production and maintenance costs). All COVID-19-related expenses in the income statement have not been included in the calculation of Adjusted EBITDA, reported Polyus.
For first nine months of 2021, Polyus has allocated $ 74 million to implement measures to prevent the spread of COVID-19. Based on current estimates, the gold mining company confirms its outlook for COVID-19-related costs of approximately $ 100 million in 2021.
Pavel Grachev, CEO of PJSC Polyus since 2013, commented the Q3 2021 results :
“Based on the results of the third quarter, Polyus showed strong financial results, demonstrated revenue and EBITDA growth of more than 10% in quarterly terms. Free cash flow has also grown compared to the previous quarter. All this against the backdrop of high production rates. The company achieved these results despite the expected growth in TCC, which was dictated by the seasonal increase in alluvial production and inflationary pressures.
Polyus continued to implement development projects. At ZIF-5 “Blagodatnoye”, our key development project, we signed an agreement with the general contractor and made the first down payment. In addition, Polyus has completed site preparation for the implementation of cyclical flow technology (IPCC) and has advanced in the construction of a warehouse for crushed ore. As part of the Sukhoi Log development project, we have completed a program of exploratory drilling on the flanks and deep horizons, and we are continuing to develop a bank feasibility study (BFS) of the project.”
The Russian mining company Polyus is the world’s fourth-largest gold mining company by production volumes and the largest gold miner in terms of attributable gold ore reserves (proven and probable reserves according to the international classification are 104 million ounces).
The main facilities of the company are located in the Krasnoyarsk Territory, Irkutsk and Magadan regions, as well as in the Republic of Sakha (Yakutia) and cover five operating mines and a number of projects under construction and development.
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© Copyright 2021 – Swann Collins, investor and consultant in international affairs.