Shares of Polyus PJSC ADR (MIC:PLZL) are up 0.31% to $34.84 per share after the company released strong financial results for the second quarter of fiscal 2018.
The Russian gold producer – one of the largest in the world in terms of proven and probable gold reserves held – delivered 11% year-over-year growth in revenue to $692 million and 21% growth in adjusted Ebitda of $457 million.
Improved turnover and adjusted Ebitda were essentially the result of a higher volume of gold placed on the market during the second quarter and a higher gold price.
The company reported a substantial improvement in costs as a consequence of fixed costs spread over a larger throughput. The antimony project was also supportive, and Polyus closed the quarter with a 9% decline in the total cash cost of $345 per ounce of metal and a 5% decline in the all-in sustaining cost of $601 per ounce. The antimony project refers to the processing of the high-grade antimony-rich mineral that the miner started at Olimpiada in the Eastern Siberian region of Krasnoyarsk in the first three months of 2018. The first sale of the metal to foreign purchasers was in May, approximately one month later the company received the license to trade the antomony abroad.
For full fiscal 2018 Polyus forecasts a total cash cost of $425 per ounce.
For the remainder of 2018, I expect further increases in the total gold output of the company. Let’s take a closer look at the catalysts: The facility mill at Natanka is operating at 90% of its total design capacity, and it is close to completing its production ramp-up, which is expected during the second part of this year.
Natanka, together with the increase in the expansion of the processing capacity of other Polyus’ mill facilities and the upgrade of management and control systems over the entire line of the company’s core operations, should result in a higher gold output over the following quarters as well.
Therefore, the company is confident in reaching a gold output level of 2.375 million to 2.425 million ounces for the entire year of 2018.
In addition, the net cash flow from operations increased by 40% to $376 million. The amount of funds used as capital expenditures was $219 million, a 15% increase from the analogous quarter of 2017.
The balance sheet as of the second quarter of 2018 indicates that the liquidity available in cash on hand is $908 million and that it takes 1.8 years of operations to cover the net debt with the trailing-12 months Ebitda.
Wall Street is suggesting buying Polyus, with a target share price of $46.94 per share.
The average target price represents a 44.2% increase from the current share price.
Disclosure: I have no positions in any security mentioned in this article.
