Page 126 - RusRPTMay20

more ESG-friendly story. Meantime, we update our model for the new negative market realities and derive an updated 12-month target price of RUB 1.00, suggesting an ETR of 17%. We therefore lower our recommendation to Hold from Buy.
9.2.11 ​Metallurgy & mining corporate news
● Gold & Diamonds
Polyus Gold​ discussed potential provision of gold to foreign counterparties. ​Interfax reported. The company stated that it is discussing potential supplies with several foreign counterparties, commenting on the possibility of granting manufacturers general licenses for the export of refined gold. When deciding on export sale, Polyus will focus on the netback price, taking into account logistics and other costs. For now, gold companies can export gold only under one-time licenses, tied to specific contracts. However, the Russian government is seen to allow goldminers to export gold under general licenses, which is to equalize them in rights with commercial banks.
Polymetal released 1Q20 trading update. ​The results showed a decline in gold sales y/y volumes due to COVID-related slowdown of concentrate shipments to China, which have stabilized now. Revenue on the other hand, rose on higher gold prices y/y, while guidance on production and cost was maintained. Gold sales fell 7% y/y to 271ko due to COVID-related slowdown of concentrate shipments to China, which have fully normalized since early March Silver sales were flat q/q at 4.7mn oz. Dukat silver production remained flat y/y at 4.8mn oz. Revenue grew 9% y/y to $494mn on the back of higher gold prices. Gold equivalent production grew 5% y/y to 391koz, as the strong performance of Kyzyl, Svetloye and Varavara offset the planned decline in grade at Omolon and Voro Sales and refining activities remain unaffected. Concentrate shipments to China by sea and by rail are back to regular schedule after the temporary suspension of shipments in February. The company notes that, although Central Bank of Russia decided to temporarily suspend gold purchases, commercial banks in Russia continue to buy bullion. No negative signs of demand repercussion for domestic producers are present. The company also maintains the ability to direct export bullion abroad The company confirms its 2020 production guidance of 1.6mn oz of gold equivalent (GE) On the cost side, although acknowledging material devaluation of Russian ruble and Kazakh tenge, the company maintains full-year guidance of $650-700/GE oz for TCC and $850-900/GE oz for AISC – this guidance will be revisited along with 1H20 results
Polymetal​ announced that VTB will acquire a 25.7% stake from minority shareholders of Veduga for $36mn ​and then invest $35mn in new shares to increase its stake to 40.6% on April 17. Polymetal will have a call option at a fixed IRR from VTB for four years and nine months; VTB will have a put to Polymetal at a fixed IRR between years 3-5 from the deal signing. Veduga is a high-grade refractory gold deposit located in Krasnoyarsk Region, Russia. The project comprises four licensed plots with a total area of 18 km2. The property is accessible by an all-year road and has direct access to the federal power grid. In 2019, Polymetal more than doubled the deposit's ore reserves to 2.8 moz of gold at an average grade of 4.6 g/t and said there is significant upside upon further exploration. Currently, mining at Veduga is mainly high-grade open-pit with the ore processed at other Polymetal assets and concentrate
126​ RUSSIA Country Report​ May 2020 ​ ​www.intellinews.com