Page 153 - RusRPTNov20

(alluvials) led to a 7% y/y drop in 3Q20 production volumes (75koz). We noted a shrinkage of gold in flotation concentrate volumes (-32% y/y, 70koz), a lower stripping ratio (3.5x vs. 4.0x in 3Q19) and improved recovery rates (84% vs. 82% in 3Q19), all of, which point to better operational efficiency.
In 3Q20, Polyus reported a 36% y/y revenue growth that was driven by the growth in sales (+6% y/y) and the appreciation in the gold price (+30% y/y). Gross debt declined 20% y/y to $3.9bn (-5% y/y) and net debt was down 32% y/y (-8% q/q) to $2.3bn. The debt maturity profile remains manageable, with payouts of $258mn and $499mn scheduled for 2021 and 2022, respectively.
The holding company​ ​Polyus Gold​ International Limited (PGIL, controlled by Said Kerimov, the son of senator and billionaire Suleiman Kerimov) raised $1bn from Russia's largest bank ​state-controlled Sberbank, RBC business portal and Interfax reported on October 12 citing the financial records of the company. PGIL controls 76.8% in Russia's largest gold producer Polyus Gold and collateralised 7.74% in the company with Sberbank. The loan matures in 2022 and carries 4.41% annual interest. As of end of 2019 PGIL owed Sberbank $3.7bn, with about 58% of shares of Polyus Gold already collateralised in the bank. RBC reminds that on the gold prices rally in August the fortune of Kerimovs as estimated by Forbes jumped to $24.7bn. RBC also reminds that PGIL has recently cut its capital by $1.5bn (from $2.9bn to $1.4bn), while PGIL has also paid about $0.5bn in dividends. Thus, the Kerimovs could consolidate up to $3bn in Polyus-related capital together with Sberbank loan. Analysts surveyed by RBC believe that the funds could be used for investment in mining related segments, or new industries.
Polyus Gold​’s Sukhoi Log’s maiden JORC reserves stand at 40mnoz at 2.3g/t. ​Additionally, it increased JORC resources 6% to 67mnoz, lowering the grade 10% to 1.9g/t, according to a company press-release. The increase in resources is in line with the increase in assumed gold prices from $1,500/oz in its 2019 report to $1,650/oz as of May 2020. However, we note that the 69% of resource estimate is in the Indicated category, as opposed to 45% before (0% in the Measured category, as before), meaning that the majority of resources is estimated with a reasonable level of confidence. The company converted 60% of resources into Probable reserves, which is slightly better than recent projects in Russia and our general 50% assumption in gold models. The company is using a conservative gold price of $1,350/oz and RUB$of 65 in reserves, while it applies a 1.0g/t cut-off grade (vs. 0.75g/t in resources), which is a driver behind the higher reserve grade of 2.3g/t (vs. Polyus’ average of 1.8g/t). We note that management plans to upgrade the reserves to the Proven category (which we think will be connected with a resources upgrade to the Measured category) by the start-up of mining. Overall, we treat the news as slightly positive, as the project is moving gradually ahead to its start-up date in
153 ​RUSSIA Country Report​ November 2020 www.intellinews.com