Polymetal 1Q2017 production results

Dias KabyltayevApril 19, 2017

Polymetal has set a strong start in 2017, which primarily reflects the growth in revenue by 4% yoy due to an increase in the average price of gold by 4.6% yoy and in production by 8% yoy

According to the 1Q2017 results, Polymetal produced 280koz in gold equivalent, which is 8% higher yoy. Excellent production results were mainly attributed to the increase in Omolon, the Komorovo and Kapan production volumes. As planned, silver production decreased by 15% yoy due to the grade decline in Dukat.

At Kyzyl, construction and pre-stripping activities are progressing in line with the project schedule. Kyzyl is on track to produce its first concentrate in 3Q2017.

Revenue in 1Q2017 grew by 4% yoy to $298 m due to a more favorable average selling price and increased production, amounting.

As a result of lag between production and sales, seasonal advance purchases of diesel fuel and increased spending at Kyzyl, the net debt of the Company increased by 13% yoy reaching $1506 m as of March 31, 2017.

The Company confirms its production plan for 2017 in the amount of 1.40koz, as well as the forecast in terms of all-in sustaining cash costs of $775-825 per ounce of gold equivalent.

Our opinion

Polymetal has set a strong start in 2017, which primarily reflects the growth in revenue by 4% yoy due to an increase in the average price of gold by 4.6% yoy and in production by 8% yoy. At the moment, we maintain our "Buy" recommendation with 12M TP of GBp 1271 per share, based on the expectations of the gold price continued increase in 2017, confidence in the ability of the delivery of the production plans by the Company and significant progress at the Kyzyl project.