For investors who want to gain exposure to gold, Polyus Public Joint Stock Company (PLZA.L, Financial) an attractive option.
The Moscow-based Russian gold producer, which is a subsidiary of Polyus Gold International Limited, is engaged in the mining and sale of the yellow metal.
The company’s main producing assets are located in Eastern Siberia and the Far East. Polyus is one of the largest producers of the yellow metal in the world thanks to operations that are run in one of the most prolific mining areas of the Russian Federation. The company extracts gold from mineral reserves which are ranked very highly in the world.
Polyus runs operations at six mines. The Olimpiada and Blagodatnoye mines are located in the Krasnoyarsk region of eastern Siberia territory. The Verninskoye and Alluvials are situated in the Irkutsk region of eastern Siberia. The Kuranakh mine is based in northeast Siberia, while the Natalka mine is in the Magadan region of the far east territory. Natalka is currently milling at around 80% of its processing capacity of 10.1 million tons of material per annum (mtpa). The full production ramp up is expected to be reached sometime in the second six months of 2018.
Polyus’ processing capacity ranges between 2.7 mtpa and 12.2 mtpa with an average of approximately 7.5 to 7.7 mtpa.
The metal is extracted through open pit mining activities across the entire line of operations and from a total of nearly 60 million ounces of gold which are nestled in proven and probable mineral reserves.
Public joint stock company Polyus is also engaged in the research, exploration activities and development of assets it acquires.
The company has informed the shareholders about financial and operating results for the first trimester of 2018 on May 30.
In the first quarter of fiscal 2018, revenues came in at $617 million. Compared to a year ago, that was a 1% increase. The Russian miner placed on the market approximately 459,000 ounces of gold, which was a 6% year-over-year decrease. Due to lower sales volumes of gold, higher energy costs and local currency appreciation, the company’s total cash cost (TCC) went 1% up to $383 per ounce sold and all-in sustaining cost (AISC) increased by 17% to $684 per ounce of metal sold. With 507,000 ounces, the total production of gold went up in the first quarter of fiscal 2018 compared to a first quarter 2017 gold output of 450,266 ounces.
At 63% rate, the adjusted earnings before interest taxes depreciation and amortization margin was flat compared to the prior-year quarter.
Despite a decrease in the operating profit, net earnings – adjusted to one-time charges – went up 10% to $223 million.
In the first quarter of 2018, Polyus generated cash flow of $261 million from its operations, a $21 million decrease on a year-over-year basis. The Russian gold producer used funds of $182 million for operations maintenance and growth purposes. That was 39% higher than capital expenditures for the first quarter of 2017.
Polyus’ balance sheet is characterized by $1.095 billion in cash on hand and equivalents and a net debt position of $3.08 billion.
The net debt-to-adjusted Ebitda ratio decreased by 0.2 times to 1.8 times in the first quarter of 2018.
The stock is trading cheaply and at these levels it present an appealing choice for investors. Of course the metal needs to stay supportive also in the remainder part of 2018.
Disclosure: I have no positions in any security mentioned.
