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Polymetal expects to boost output by over 20% in next 2 years

Polymetal expects to boost output by over 20% in next 2 years

March 12, 2018

 

Russian miner’s forecast driven by ramp-up of critical new gold project and other investments

 

Polymetal, one of Russia’s biggest gold and silver miners, expects to increase output by more than 20 per cent over the next two years in a sign of renewed confidence in the country’s metals and mining industry.The company’s output forecast is driven by the start-up of its most critical new project and also other new investments — in silver, platinum and processing assets.Metal prices, which crumbled between 2011 and 2016, have steadily recovered over the past year, boosting major producers such as Russia and encouraging spending on new projects.Polymetal, Russia’s third-largest gold and biggest silver producer, will launch its new Kyzyl gold mine in Kazakhstan later this year and look to commit to two new projects by the end of 2018, as it aims to increase output to 1.70m ounces of gold equivalent in 2019, up from 1.43m last year.“Fundamentally, growth is driven by Kyzyl. For Polymetal, the successful ramp-up of the project is the key event for the next three years,” said Vitaly Nesis, the company’s chief executive.

 

“[This year] is something of a coming of age in terms of long-term visibility, large assets, stable strategy,” Mr Nesis added, speaking on the 20th anniversary of the company’s formation. “We are no longer an upstart. We are an established player.”Polymetal’s investment in major new output comes as Polyus, Russia’s top gold producer, begins full production at its newly-commissioned Natalka project, one of the country’s largest gold deposits.Russian steelmaker Severstal said it would spend Rbs49.5bn ($885m) on new capital investment projects this year, and miner Norilsk Nickel increased 2017 capital expenditure 17 per cent to $2bn.I’m optimistic about the investment decisions being taken this year, as I am a firm believer in the very high quality of these projectsAlongside Kyzyl’s start-up, Mr Nesis hopes to give a green light to two other projects by the end of the year — the Nezhda gold deposit and a second production line at an existing gold processing plant.

 

“I’m optimistic about the investment decisions being taken this year, as I am a firm believer in the very high quality of these projects. First we need to complete and ramp up Kyzyl, and then commit to a new round of capital expenditure,” he said.“This is more a matter of financial and execution prudence rather than some kind of doubt about the quality of projects. The game plan is very simple: Kyzyl goes online, starts producing cash flow, and then these two projects go for board approval.”The company is also investing in initial investigations at Prognoz, Russia’s largest silver deposit, and Viksha, a platinum project that would be the company’s first step into the metal. Heavy spending on new projects has made a mark.Capital expenditure in 2017 rose 41 per cent to $383m, while free cash flow fell 44 per cent to $143m. Its ratio of net debt to adjusted earnings before interest, taxation, depreciation and amortisation inched up to 1.91 by the end of the year, from 1.75 12 months previously.

 

Source: https://www.ft.com/c