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good year for GV Gold, which has been enjoying faster than average growth for several years now. Profits were up 90% in 2020 and Ebitda more than doubled compared to 2019.
“It was a combination of factors. Production rose by 4.8% in 2020, the costs (AISC) fell by 12% year on year due to operating efficiency” says Schetinsky. The company reported an impressive set of results for 2020 as reported by BCS Global Markets.
• Total gold sales stood at 276 koz, up 14% y/y.
• Revenue reached $471mn (+41% y/y).
• Total cash costs decreased by 4% y/y to $694/oz, driven mainly by the 14% y/y increase in total gold sales, the completion of the Taryn Mine open- cast reconstruction project and the depreciation of the Russian ruble.
• Adjusted Ebitda doubled, achieving the record-breaking $248mn on
the back of larger tonnages of gold produced and higher gold prices, as well as the effect of the operating efficiency improvement programme.
• Adjusted Ebitda margin reached one of the highest levels in the company’s history, 53%, having risen by 17 pp y/y.
• Net profit grew by 90% y/y and totalled $137mn.
• Capital expenditures increased to $109mn (+9% y/y) due
to investments in open-cast development at the Golets Vysochaishy and Ugakhan Mines.
• Net debt decreased by 6% y/y and totalled $191mn as of 31 December, 2020. The net debt/adjusted Ebitda ratio declined significantly from 1.69x to 0.77x.
The company has followed a strategy of increasing its production steadily and plans a rise from the 272,200 oz in 2020 to more than 400,000 oz by 2025 via organic growth from the existing assets.
“That is a compound average growth rate (CAGR) of 8.5% over the last five years – much higher than our peers and a rate of growth we intend to maintain for the next five years,” says Schetinsky. “There would be a steady increase in growth every year as we invest mostly into brownfield projects.”
And GV Gold has at least two new projects due to be developed – Svetlovsky and Krasny – that should boost production further.
Part of the reason for this faster growth is GV Gold has focused on developing smaller deposits than its rivals, starting with around 1mn oz of recoverable gold, versus the 3mn oz that Polyus Gold
and Polymetal – the two other big gold companies in Russia – look for. These are big deposits by Russian standards.
Polyus scored a big victory in improving its asset base when it won the licences to exploit the Sukhoi Log, one of Russia’s biggest gold deposits that has been lying in limbo for decades, in early 2017.
Another really big gold deposit may come under the gavel soon: the Kuchus gold deposit is due to be auctioned off by the Federal Agency on Subsoil Use (Rosnedra). However, Schetinsky says
been largely drawn from the retained earnings. Indeed, in 2020 the net debt to Ebitda ratio fell significantly from 1.6x to only 0.8x – a very low number.
All in all, the company has invested around $550mn over the last five years into developing its assets. And the capex requirements for further developments are modest. The two new deposits at Svetlovsky and Krasny will each cost similar amounts to Ugakhan Mine (circa $165mn), being split over several years.
Earning strong profits, GV Gold has been able to return significant profits to its shareholders and paid out over $250mn as dividends over the last five years.
The anticipated rising profits have bought space to improve the dividend payments of the company further; a new policy to raise dividends to 40% of Ebitda was recently introduced – one of the most generous rates in the industry.
“We expect to pay around $100mn in dividends for 2020 to our shareholders and we have already paid out $63mn on the first nine months,” says Schetinsky.
And soon international investors may be able to avail themselves to the company’s largesse. GV Gold remains a privately
“That is a compound average growth rate (CAGR) of 8.5% over the last five years – much higher than our peers”
the government has not even started the bidding process yet, nor announced a date for the auction, but GV Gold would be interested in taking part
once the deposit is put on offer.
The price might be an issue, as GV Gold's historical cost of reserves replacement
is around $21.3/oz, which is about $10 less than that of its closest peers among Russian gold miners, and one of the advantage of going after the mid-size deposits is there is less competition.
Funding for development so far has
owned company, but as bne IntelliNews reported, there was talk of an IPO in 2018 and those plans may be back on.
“An IPO is one option we are looking at and the market conditions are good; the demand is there,” says Schetinsky.
Despite being privately owned the company has already made most of
the reforms needed to clear the way
for a floatation in terms of corporate governance and business processes. If the management decide to pull the trigger the IPO could happen very quickly.
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