Page 139 - RusRPTDec20

expectations ​of flat m/m or higher sales, given that a portion from the September trading session was included into October. The figure is up 18% y/y, but still 6% below the historical average for October. Market comments highlight a further recovery of demand, as seen in previous months, but do not provide more clarity on the coming months (see our Morning Comment as of 8 October). The figure is supportive for our 4Q20F sales expectations of $830mn Alrosa is due to report its 3Q20 earnings on Thursday, which we expect to post a strong recovery q/q. Given that the November trading session has already begun, management might already have some initial colour on whether the demand recovery is set to continue in the last two months of the year.
Polyus Gold​ released the results of the pre-feasibility study for its flagship greenfield project Sukhoi Log on November 12. ​Most of the parameters improved from the scoping study. Polyus decided to increase its processing plant capacity 10% to 33.2 mtpa. The average LOM grade increased 15% compared to the scoping study, to 2.3 g/t. Following changes in the flowsheet with the addition of flash flotation (successfully used at other Polyus assets) and after the testing of 64 samples of ore from different parts of the mine, Polyus's average LOM recovery rate estimate increased from 88-90% in the scoping study to 92%. These improvements led to an increase in the average annual production over the first 15 years of 18%, from 1.9 moz to 2.3 moz, while LOM average TCC decreased 12% to $390/oz (in real terms, as of 2020). All these parameters were better than what we had in our model, which was built based on the scoping study results. On the flipside, the startup capex estimate was increased by 47% to $3.3 bln (10% higher than in our model) in real 2020 terms.
Polyus Gold​ reported in-line 3Q20 IFRS results. EBITDA grew 28% q/q to a record high of $1.1bn, exceeding the consensus estimate ​by 3% and our estimate by 1%. TCC in 3Q20 grew 9% q/q to $369/oz (though 3% below our estimate), which was driven by seasonal factors such as the increase in output at the high-cost alluvial operations and higher MET due to a higher realized gold price. Polyus posted a $14/oz by-product credit to TCC for antimony sales and guides a similar level of antimony by-product credit in 4Q20. Polyus lowered its 2020 TCC guidance by 6% to $375-425/oz, though TCC in 9m20 was even below the updated guidance at $366/oz. Reported Covid-related expenses in 3Q20 came in at $50mn ($46mn in opex and $4mn in capex). This brings total Covid-related expenses for 9m20 to $106mn, which is already 88% of the $120mn full-year guidance. The company accounts for Covid-related opex below EBITDA so that these expenses do not lower the dividend base. The Covid-19 outbreak in 2Q20 at the Krasnoyarsk hub that resulted in a temporary interruption of mining could lead to lower gold output in 2021 and 2022. The company will release the estimates of the impact in 1Q21. We model 2.7 moz in gold production in 2021, which would be slightly lower y/y. FCF in 3Q20 came in at $720mn, up 61% q/q, and just slightly above our estimate. Capex (as guided, i.e. not including capitalized stripping) came in flat
139 ​RUSSIA Country Report​ December 2020 www.intellinews.com