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recommendation.
4Q20 earnings in line. 4Q20 EBITDA of $1.09bn (including COVID-19 costs) matched our and consensus expectations. FCFE was $589mn, also in line with us.
Positive surprise in dividends. Polyus announced FY20 dividends of $693mn (or $5.1/share), which were above our expectations due to a slightly higher payout (32% of 2H20 EBITDA vs. the base level of 30%).
2021 outlook in line, except for capex. The company expects 2021 production to decline 4% y/y to 2.7mnoz on the start of the cutback at the Olimpiada mine, delayed from previous years, which would reduce mining volumes and increase low-grade feed from stockpiles. However, Polyus expects higher grades at Olimpiada in 2022-2023. This matches our expectations. We treat TCC guidance of $425-450/oz as matching our forecast, adjusted for the company’s assumption of RUB$65 and a $1,300/oz gold price. However, capex guidance of $1.0-1.1bn excluding capitalised stripping is above our previous estimates by 60%, mainly due to the addition of the Blagodatnoye project, but also higher capex on Natalka.
Decrease 12-m TP on lower gold price forecast. We mark-to-market our gold price assumptions, lowering our 2021F forecast by 5%, as a gold price rise on the acceleration of inflation in major currencies has not happened as soon as we had expected. This reduces our EBITDA and FCFE forecasts accordingly, additionally incorporating higher capex. Were therefore cut our 12-month Target Price 5% to $180/share, which is set based on a blended Target 2021F EV/EBITDA and P/NAV approaches. We remain positive on the gold price, though, expecting acceleration in inflation and declining real yields to be the main driver for the Polyus investment case.
Petropavlovsk’s shareholders in the Pokrovsky mine have approved the new composition of the Board of Directors. The board now includes the new CEO of Petropavlovsk, Denis Aleksandrov, as well as four new top managers of the company. Aleksandrov also became CEO of Pokrovsky. Alexandrov had previously been appointed CEO of the Malomyr and Albyn subsidiaries, and an executive director of the Pokrovsky mine (for details, see our Morning Comment, of 1 February). We note that this measure lowers the risk of operational disruptions during the management team changes, and might mean the completion of an important stage in the process of changing the team. The news is positive for sentiment, in our view.
Alrosa has decided to bring the Severalmaz processing plant back into operation on 1 March 2021, one month ahead of the planned restart date due
152 RUSSIA Country Report March 2021 www.intellinews.com