Page 119 - RUSRptSept18

offset the higher costs at Blagodatnoye. At the same time, reported TCC (accounts for antimony sales of 1.5kt) were higher than we expected due to the lag in antimony sales. FCFE lower on working capital build-up. Despite better earnings, FCFE of $118mn was lower than we expected due to the $60mn working capital build-up because of gold concentrate accumulation (the concentrate release has been delayed to the second half of 2018 and 1Q19). At the same time, IFRS capex of $207mn was slightly below our estimates. Natalka capitalisation stopped in August, as the mine ramps up. Management confirmed that Natalka was well on track with ramping up. Indeed, during the conference call management announced that capitalisation of the mine’s financial results ended on 1 August, meaning that it is now to be included into P&L. 2018 capex might exceed guidance. Despite the somewhat faster than expected Natalka ramp-up and respective end of earnings capitalisation, the company reiterated its 2018 capex guidance of $850mn (under management accounts), noting that a slight overrun might take place due to carry-over of capex from upcoming years and additional investment projects being undertaken. The company also notes that the the first half of 2018 working capital build-up is to be only partly reversed in the second half of 2018 due to the timing of concentrate sales.
Russiangoldminer P olymetal hasreportedneutralthefirsthalfof2018 earnings , as EBITDA matched consensus estimates. The company’s FY18 guidance is starting to look conservative, supported by the smooth ramp-up of Kyzyl and local currency depreciation. The second half of 2018 earnings upside and attractive valuation support analysts positive view on the name. VTBC’s 12-month Target Price remains unchanged at GBP840 (36% ETR); Buy reiterated. Earnings in line, with slightly better costs. the first half of 2018 EBITDA of $305mn matched both our and consensus expectations. TCC of $676/oz was 2% below our estimate, with was offset by higher SG&A costs (incl. attributable to Kyzyl start-up). AISC was 7% under our estimate, largely on lower maintenance capex in the first half of 2018. Net income was stronger due to the one-off gain on Prognoz revaluation. Capex lower, offset by exploration on long-term projects. The company positively surprised on capex, with $169mn coming 15% below our forecast. The decrease comes as the company reduced its operational exploration and completed the Kapan fleet upgrade. Better cash generation was offset by $27mn of exploration for Nezhda and Prognoz (long-term projects) and hence FCFE of $91mn was only slightly higher than we had estimated. The company announced an interim dividend of $77mn (2.0% interim yield), in line with dividend policy. Kyzyl is ramping-up smoothly, management said (to reach nameplate capacity and recoveries as early as in October). The company targets 25% of its concentrate to be directed to the debottlenecked Amursk POX (deliveries to start in September), with the remainder going for off-take; the company reiterated the 50/50 split from 2019. Guidance becoming conservative. During the conference call, management said that guidance for 2018 (production, costs and capex) was looking conservative, given the smooth ramp-up of Kyzyl and ongoing $RUB depreciation. Indeed, TCC and AISC guidance of $650-700/oz and $875-925/oz, respectively, and $400mn capex, are based on RUB58/$and KZT 320/$, suggesting mid-single digit downside to cost and capex guidance, as well as to our forecasts.
Russian uncut diamond monopoly Alrosa reported second-quarter revenues to RUB72.2bn ($1bn), inching up by 2% year-on-year and narrowly beating consensus by 1%. The company saw a 38% quarter-on-quarter decline in sales of gem-quality stones, which was offset by improving product mix and rising prices. At the same time company's Ebitda was up by 10% and beat the expectations by 11%, on the back of cost improvement coupled with stronger prices, with margins up by 7pp q/q to 57%. The company's free cash flow (FCF) for the quarter gained 33% y/y, but slipped by 49% q/q attributed by Aton Equity on August 24 to softer earnings, a seasonal RUB2bn increase of capex, and a RUB6bn hike in the working capital. "While FCF was in line with our estimates, we expect further healthy
119 RUSSIA Country Report September 2018 www.intellinews.com