Polymetal Presents Preliminary Results for 2013
OREANDA-NEWS. April 04, 2014. Polymetal International plc (LSE, MOEX: POLY, ADR: AUCOY) (together with its subsidiaries – “Polymetal”, the “Company”, or the “Group”) is pleased to announce the Group’s preliminary results for the year ended 31 December 2013.
Revenue in 2013 decreased by 8% to USD 1,707 million compared to 2012 (“year-on-year”) as a result of average realised gold and silver prices decreasing 19% and 28% respectively year-on-year. This unprecedented price decline was to a large extent offset by 14% growth in the volume of gold equivalent sold during the period.
Group Total cash cost1 was USD 745/ gold equivalent ounces (“GE oz”), up 8% compared to 2012 level. Cash costs were negatively affected by an elevated level of unit costs and lower recoveries during the ramp-up at the Amursk POX facility and at the newly launched Mayskoye mine, while the mature mines demonstrated resilient cost performance. Total cash costs in the second half of the year decreased by 8% versus the first half of 2013 to USD 721/ GE oz driven by operational improvements at the Albazino/Amursk, where cash costs decreased by 27% half-on-half to USD 707/GE oz, and Omolon, where as a result of mine plan revision a 32% cash cost reduction to USD 756/GE oz was achieved.
All-in sustaining cash costs comprised USD 1,086/GE oz and increased slightly by 3% year-on-year, driven mostly by an increase in total cash costs during the period, which was largely offset by production growth and reduction of per ounce sustaining capital and exploration expenditure at our operating mines.
Adjusted EBITDA1 was USD 598 million, a decrease of 36%, driven mainly by a decline in commodity prices. Adjusted EBITDA margin was 35% compared to 50% in 2012;
A non-cash pre-tax impairment charge of USD 366 million for the year resulting from the decline in gold and silver prices was recorded as at 31 December 2013, mainly due to the write-off of goodwill and mining assets at Varvara, Khakanja and low-grade ore stockpiles at Omolon. The post-tax amount recorded was USD 315 million. The impairment calculations were performed using conservative price assumptions of USD 1,200/oz for gold and USD 18/oz for silver, which are meaningfully below current spot prices.
Underlying net earnings (adjusted for the after-tax amount of impairment charges) were USD 117 million. As a result of lower price-driven EBITDA, non-cash foreign exchange losses and impairment charges, the Group recorded a loss for the year of USD 198 million in 2013, compared to a USD 428 million profit in 2012.
The Group’s liquidity profile remained comfortable. Net debt was USD 1,045 million and remained almost flat compared to the 2012 level of USD 1,037 million, supported by strong free cash flow generation capacity despite challenging market conditions. Free cash flow1 for the year was USD 138 million, remaining flat year-on-year, of which USD 263 million was recorded in 2H 2013 on the back of increased production, significant destockpiling, and lower operating and capital expenditure levels.
A final dividend of USD 0.08 per share representing 30% of the Group’s underlying net earnings for 2H 2013 is proposed by the Board in accordance with the Company’s dividend policy, based on Net Debt1 / Adjusted EBITDA as at 31 December 2013 of 1.75 (31 December 2012: 1.1).
Polymetal exceeded its original annual production guidance and produced 1.28 Moz of gold equivalent in 2013, up 21% year-on-year. This achievement was driven by the successful ramp-up at Amursk POX and Mayskoye and strong operational delivery at the Dukat hub. During the year, the Amursk POX plant successfully ramped up to design throughput and recovery (averaging 93% in Q4), an important strategic milestone for the Company which now possesses a unique competitive advantage in the Former Soviet Union (“FSU”).
The Company re-iterates its production guidance of 1.3 Moz of gold equivalent for 2014 and 1.35 Moz for 2015. In 2014, Polymetal expects total cash costs of USD 700-750/ “GE oz, all-in sustaining cash costs of USD 975-1025/ GE oz, and capital expenditure of USD 250 million (including exploration and capitalised stripping).
In 2013, Polymetal’s Ore Reserves decreased by 12% to 13.3 Moz of “GE, while Mineral Resources (additional to Ore Reserves) declined by 11%. The declines were driven mostly by more stringent economic evaluation with the same prices of USD 1300/oz gold and USD 22.5/oz silver used to estimate both Reserves and Resources. Material additions to Ore Reserves during 2014 are expected at Svetloye (Q2), Albazino (Q4), and Kutyn (Q4), with further likely additions at near-mine properties at Omolon and Voro.
“I am pleased to report robust cost performance and cash flow generation in a year which was so challenging in terms of market conditions”, said Vitaly Nesis, CEO of Polymetal, commenting on the results. “This resilient performance, combined with our strong balance sheet position, allows us to progress on further growth opportunities while generating meaningful cash returns to our shareholders”.