Polymetal production above guidance as costs increase
By Josh White
Date: Thursday 27 Jan 2022
(Sharecast News) - Polymetal International reported a 2% improvement in gold equivalent production for 2021 on Thursday, at 1,677,000 ounces - 5% above its original production guidance of 1.6 million ounces.
The FTSE 100 miner said fourth quarter output was up 24% year-on-year, driven by the release of concentrate stockpiles at Kyzyl, high grades at Dukat and first production at Nezhda.
Nezhda successfully ramped up to its full design throughput and recovery within three months of first concentrate production, the company confirmed.
Following that, the board approved a $471m investment in the four million ounce Veduga project, which would produce 200,000 ounces of gold per year on average over a 21-year mine life.
Construction would begin in the third quarter of 2022, with production scheduled to begin in the second quarter of 2025.
Revenue in 2021 was stable year-on-year at $2.9bn, while fourth quarter revenue was down 6% year-on-year at $0.8bn on the back of lower commodity prices.
The company said the lag between silver production and sales originating from "very strong" December production at Dukat will be closed in the first half of 2022.
Polymetal said it was expecting full-year total cash costs to be within the original guidance of $700 to $750 per gold equivalent ounce.
Capital expenditure for the full year was expected to be around 5% above the upper end of its previous guidance for $675m to $725m.
All-in sustaining cash costs were also expected to be 5% above the upper end of its guidance range of $925 to $975 per gold equivalent ounce
In the fourth quarter, Polymetal generated "exceptionally strong" free cash flows, with net debt falling to $1.65bn by the end of 2021, and the net debt-to-EBITDA ratio expected to be about 1.1x.
For the full year, net debt expanded by $296m, while the firm paid $632m in dividends in 2021.
On the pandemic front, Polymetal said that after a slowdown in the fourth quarter, Russia and Kazakhstan encountered a rise in Covid-19 infection rates at the beginning of 2022.
Among Polymetal employees, the number of active cases presently stood at about 130, with three people hospitalised.
The firm said it had reintroduced remote work for some off-site personnel, while operations and projects continued undisrupted.
Looking ahead, Polymetal reiterated its current production guidance of 1.7 million gold equivalent ounces for 2022, and 1.75 million ounces for 2023.
Operations in Kazakhstan had not been affected by recent events, the company confirmed.
Total cash costs in 2022 were expected to be in the range of $850 to $900 per gold equivalent ounce, for a 20% increase versus 2021.
Polymetal said the growth would be driven by a "significant increase" in consumer prices in Russia and Kazakhstan to around 8.5% driving wage and salary increases, as well as commodity-driven inflation including diesel fuel, gas and steel prices.
A "manifold increase" in both bulk and container sea freight rates would also have an impact.
Capital expenditures in 2022 were expected to total around $700m, with the $90m increase from previous guidance driven by advance payments for electrical excavators and mining trucks for Veduga and other projects in anticipation of increasing lead times for such equipment, and accelerated construction of Kutyn and Urals flotation projects to bring forward commissioning and first production by three to six months.
The decarbonisation of on-site power supply infrastructure was also affecting costs.
As a result, Polymetal's all-in sustaining costs for 2022 were expected to average $1,100 to $1,200 per gold equivalent ounce.
"In 2021, we continued to deliver on our promises despite persistent challenges," said group chief executive officer Vitaly Nesis.
"Polymetal beat production guidance, maintained a solid safety track record, and paid record dividends."
Nesis said the successful ramp-up of Nezhda and steady progress on POX-2 "paved the way" for the approval of Veduga and ensured the company remained on its path to "consistent and significant" long-term growth.
"2022 should see another step-up in Polymetal's output at competitive costs."
At 0943 GMT, shares in Polymetal International were down 3.46% at 1,116p.
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