Page 120 - RusRPTDec19

Palladium (firm decision yet to be taken on the latter). 25% metals volumes increase on new 2030F guidance from growth projects, upside on South Cluster profitability. The company reiterated its target to reach 26mnt of ore mined by 2026F (earlier guidance was 25mnt in 2025+). The new 2030F target for the company’s own operations (excluding Arctic Palladium) implies an additional 4mnt to reach almost 30mnt, thanks to the ramp-up of South Cluster to 9mnt and a new set of growth projects at the core Talnakh deposit. While earlier 2025F guidance aimed adding 17% higher volumes on average vs. 2018, 2030F adds another 8pp, on our numbers, making 2018-2030 volume growth 25% (excluding Arctic Palladium.) Arctic Palladium development decision is to follow. The base case growth optionality does not include new volumes under Arctic JV, which might boost the company's long-term PGMs output CAGR from 2.5% to 4.4% (Figure 2). While Phase 1 (out of 3) is slated to start in 2024F, the project is still subject to BoD approval, with JV structure finalisation planned for 2020 only.
● Other
Russian aluminium major ​Rusal​ reported $76mn loss user IFRS in 3Q19,​ missing the estimates of the analysts on higher than expected tax expense. The company’s revenues in the reporting quarter declined by 3% quarter-on-quarter to $2.5bn due to lower prices. The Ebitda dived by 22% q/q, in line with consensus driven mainly by the weaker top line, falling realised premiums over LME prices and declining margins due to seasonally higher shipment to Russia, BCS Global Markets commented on November 8. Poor market environment could ​compromise the possible dividend payment​. Rusal was believed to pay a dividend for 3Q19 and 2019 depending on the financial results, Interfax reported in September citing En+ independent board member Andrei Sharonov, which is the controlling shareholder. Rusal also planned to tap debt markets again, as its credit ratings have remained intact, and has completed re-registration in a "Russian offshore" or Special Administrative District (SAR or SAD) of Oktyabrsky Island
Indebted Russian metals major ​Mechel​ posted 5% year-on-year revenue decline to $1.16bn and 9% Ebitda decline to $221mn in 3Q19 ​under IFRS due to both lower sales volumes and coal prices. The company's bottom line was just above breakeven at $2mn in the reporting quarter. As reported by bne IntelliNews,​ Mechel ​renewed negotiations with its main creditor banks​, doubting its ability to service debt in 2020. The company also has to ​recover the stake in its main mining asset Elga​ from Gazprombank under the risk of having it sold to third parties, while its owner Igor Zyuzin reportedly ​asked for state support​. As of the end of 3Q19 the net debt decreased slightly to $6.4bn, while Net Debt/EBITDA grew to more than 7x versus 6.6x seen in 2Q19. In addition to financial problems Mechel's performance deteriorated on falling coking coal prices and lower steel sales, BCS Global Markets commented, expecting the financials to worsen, as coal prices have slumped further.
Russian steel pipemaker ​TMK​ reported net profit drop of 60% quarter-on-quarter to $27mn in 3Q19 under IFRS​, with revenues down by 16% q/q to $1.10bn missing consensus expectations by 5%. Ebitda was down 29% q/q to $139mn, missing the expectations by 10%. As reported by ​bne IntelliNews,​ TMKpreviously​reportedweakoperatingresultsforthequarter​, following ​weakness in other metals and steel names​ such as NLMK and MMK. Moreover, TMK in particular is seeing additional pressure from ​increased competition in the seamless steel segment​. The decline in earnings and the
120​ RUSSIA Country Report​ December 2019 ​ ​www.intellinews.com