Page 161 - RusRPTDec21

projects de-risking, though FCF and DY for 2022-23 might come 1.0-1.5pp below our estimates.
Current project pipeline update. The company has increased its 2022-23 capex guidance USD 110mn and USD 80mn, respectively, mainly on the back of higher than initially expected spending on POX-2, but also because of faster Veduga execution. In 2024-25, however, capex was lowered due to the faster Veduga construction and the simplification of Prognoz processing (utilising the Nezhda plant for Prognoz ore). Meanwhile, the company has upgraded the 2024-25 production guidance for its mines on the back of Prognoz starting up and the better performance from its current operating assets. The CMD also shed light on significant project de-risking: the Nezhda ramp-up to full capacity by 6 November (we project a stage factor of 80% in our model), the Veduga Board approval (stage factor of 20% in our model) and Prognoz simplification (stage factor of 10% in our model). While the capex increase creates a downside risk of some 1.5% to our NAV, the higher production guidance and project de-risking more than offsets this. Thus, in total, there is a mid-single-digits upside risk to our NAV estimate.
The net profit of Russian gold producer Polyus soared to US $1.757bn in January–September from $811mn in the same period of 2020, as calculated under International Financial Reporting Standards (IFRS), the company said in a statement on Tuesday. Revenue gained 5% to $3.673bn, and adjusted earnings before interest, taxes, depreciation, and amortization rose by 3% to $2.624bn. The EBITDA margin shrank to 71% from 73%. Capital expenditures of Polyus amounted to $539mn in the period, and the company maintained its forecast for capital expenditures in 2021 at $1–1.1bn.
Alrosa reported October rough sales of $293mn – +1.4% m/m, -2% y/y. October rough sales were 8% above the average level for 2017-19. Polished diamond sales proceeds amounted to $15mn, thus total diamond sales fell just slightly y/y (-1%), rising by 3.4% m/m to $308mn – 9% higher than the pre-COVID average of 2017-19. Jewelry demand in key markets continues to show double digit growth vs the high levels of 2018-19. In the last few months, rough diamonds have been in short supply amid structural cuts in diamond production (-20% vs the pre-COVID level). Taking into account persistently strong end-consumer demand for diamond jewelry, Alrosa aims to gradually restore the supply-demand balance, despite limited capacities to increase output, said Evgeny Agureev, Deputy CEO.
● Other
En+ published a press release on November 2 stating that En+ and SUAL Partners (controls 25.7% of Rusal) jointly support the idea of a demerger of Rusal's higher-carbon assets. Such a plan had been announced by Rusal in May. Subject to the necessary corporate, shareholder and regulatory approvals, the demerger is expected to be completed in 2H22, at which time an application will be made for the new demerged company to be listed on the Moscow Exchange. The press release does not contain specific details about the potential demerger. We recall that in May Rusal announced a reorganization plan that entailed the following allocation of assets between
161 RUSSIA Country Report December 2021 www.intellinews.com