Page 141 - RusRPTAug21

Alrosa resumed mining operations at Zarnitsa open-pit mine on 1 July. The mine was suspended in 2020 due to challenging market conditions caused by COVID-19. The c0.7mt of ore classified as balance reserves is expected to be mined in 2021 and processed in 2022. Thus, production outlook will not be affected by the resumption, said Sergey Pavlenko, head of Udachny Division. He added that expected production volume in 2022 will be c0.6mn ct and starting from 2022, annual ore production will reach 2.5mt.
Petropavlovsk’s own gold output was down 37% y/y in June to 26.5koz, reports Interfax.
Coupled with the previously announced figures for April and May, we estimate 2Q21 production from own ore declining 25% y/y to 76koz, which would be slightly better than the 27% y/y decline in 1Q21, but still well short of the flat y/y guidance of 370-390koz in 2021. The figure would also come 16% below our initial expectations for 2Q21. As such, we think the 2021 production guidance might be missed by 7%, even assuming a recovery in production at Albyn and the new Pioneer flotation plant ramping up to full capacity at the end of 3Q21.
The figures do not include gold produced at POX from third party concentrate, but we do not expect much improvement q/q, given the previously highlighted issues with concentrate availability at Polyus (one of the key suppliers). Nevertheless, even accounting for this, we think that the lower boundary of the company's third party gold guidance (60-80koz) is achievable.
As such, we treat the news as negative, with lower production in 2Q21 suggesting mid-single digit downside to our 2021 EBITDA.
Polymetal has reported a modest 2Q21 trading update: despite production being in line with expectations, cash generation suffered as COVID-related disruptions in logistics stretched the company’s inventory cycle. However, a reversal of this portion of the working capital build-up might occur in 2H21, subject to improvement of the COVID situation.
Management reiterated its production and cost guidance, while capex upside for 2022 onwards, which the company had previously highlighted, is likely to be realised, given inflationary pressures/logistical issues in the sector and the priority on the timing of key investment projects. Nevertheless, Polymetal is on track for strong 1H21 earnings (to be reported on 26 August), helped by higher volumes and prices, only partly offset by higher costs. Buy reiterated based on an unchanged 12‐m TP of GBp 3,500/share on our positive gold price outlook.
Production in line, stronger outlook on 2H21. 2Q21 gold output of 331koz was generally in line with our expectations, with lower output at Albazino and Dukat offset by higher output at Varvara, Voro and Omolon. The reduced output at Dukat and Albazino was grade-driven; the company expects Dukat grades to recover in 2H21 thanks to mining higher grade zones; however, Albazino is struggling due to challenging geotechnical conditions, which might delay grade recovery
141 RUSSIA Country Report August 2021 www.intellinews.com