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Alberto Abaterusso
Alberto Abaterusso
Articles (1339) 

Polyus Increases Gold Production Guidance

The Russian operator is positioned to reach 2.8 million ounces in 2019

February 11, 2019 | About:

Before the opening bell on Monday, Polyus PJSC (MIC:PLZL) released its results for fourth-quarter and full-year 2018.

In the final quarter of the year, revenue jumped 4% to $774 million, adjusted earnings before interest, taxes, depreciation and amortization climbed 4% to $484 million and adjusted net earnings grew 20% to $291 million from the prior-year quarter.

For the full year, the company recorded a substantial 13% increase in production to 2.44 million ounces and 10% growth in adjusted EBITDA to $1.865 billion thanks to its focus on organic growth.

As a result of higher sales volumes, the Russian miner's total revenue was $2.915 billion in 2018, which was a 7% increase from 2017. The adjusted EBITDA margin, which is a measure of profitability, advanced 100 basis points to 64%. This is compared to an industry median that usually stands between 23% and 25%.

Even though the year has been very intense concerning the total amount of funds employed as capital expenditures, Polyus was able to maintain low operating costs, which translated into 49.2% year-over-year growth in free cash flow to $728 million in 2018.

Another sign of strong operations was the net debt-to-adjusted EBITDA ratio of 1.7 times. The ratio improved 556 basis points from the final quarter of 2017 despite a slight increase in net debt that, as of Dec. 31, stands at $3.086 billion.

Looking ahead to 2019, Polyus guided for 2.8 million ounces in gold production, reflecting a nearly 15% upside from full-year 2018, at a total cash cost of less than $425 per ounce of metal. The production growth will be driven by the Natalka open-pit mine and by ongoing expansion projects at several other properties.

The proven and probable gold reserves of the Russian operator, which operates in the Magadan and Siberian regions of Irkutsk and Krasnoyarsk, are approximately 60 million ounces. 

On Friday, the stock was trading around 5,440 roubles ($82.47) per share on the Moscow Interbank Currency Exchange. The market capitalization is approximately $10.8 billion.

For the 52 weeks through Friday, the stock has climbed 25%%, outperforming the VanEck Vectors Gold Miners ETF (GDX).

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The company distributes dividends to shareholders every six months. For the second half of 2018, Polyus' board of directors recommended a dividend of $2.2 per ordinary share. The record date should be sometime in May. The forward dividend yield is 5.3% as of Friday. 

Disclosure: I have no positions in any securities mentioned in this article.

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About the author:

Alberto Abaterusso
If somebody asks what being a value investor means, Alberto Abaterusso would answer, “The value investor is not just the possessor of the security that represents the company, but he is the owner of that company. As an owner of the company the value investor is actively involved in the dynamics of that company and his first concern is how to have sales progressively growing. Also, the value investor is probably one of the most demanding persons in the world concerning sales.”

Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds an MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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