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bank said. However, the company’s output matched the management guidance: in 4Q18 output of 10.3mnct was up 2% y/y, putting the FY18 figure in line with guidance. “We once again (as in 3Q18) note the outperformance of the Aikhal and Severalmaz divisions thanks to higher grades, which offset the slow ramp-up of the Udachny underground mine,” VTBC said. The company slightly increased its FY19 output target, from 37.5mnct to 38mnct, and that now matches VTBC estimates. Lower average realised price implies 3% downside risk to FY18F EBITDA. With the headline rough diamond sales figure of $825mn already having been reported before, we note that sales volumes exceeded our expectations, while the average realised price, on the contrary, was some 10% below VTBC estimates. “That said, we think this reflects the large amount of lower-priced stones sold to the market (the share of gem-quality stones in the sales mix was below our expectations) and suggests a decreased outlook on profitability in 4Q18 (we see some 3% downside risk to our 2018F EBITDA estimate),” the bank added.
Russia’s diamond mine monopoly Alrosa is setting up a subsidiary in Zimbabwe and will start exploration in February, Bloomberg reported on January 15. Geologists and mining engineers from Alrosa are to arrive in Zimbabwe in the next month to start operations. “The project is at an early stage, and so we do not see any significant capital expenditures on it, or revenue stream from it, in the near term. As we have previously noted (see our Morning Miner of 6 December) Zimbabwe plans to allow more private companies to explore and mine diamonds in the country. However, for now it is unclear whether the country plans to lift the foreign ownership cap (now at 49%),” VTB Capital (VTBC) said in a note. Alrosa trades at 2019F EV/EBITDA of 4.9x and offers a 14% FCFE yield, according to VTBC, which has a buy rating on the stock.
● Metal
Indebted Russian steel-maker Mechel has refinanced a syndicated pre- export finance foreign investors pool of $1bn, according to a report of mining and metallurgical company, Vedomosti reported on January 23. This was made possible by the opening of a credit line in euro by Russian state- owned bank VTB with repayment due in April 2022. The grace period for repayment of the principal debt will last until April 2020. Refinancing the loan reduced the share of Mechel’s unstructured debt from 22% to 8%, reduced the number of foreign lenders, synchronized the terms and conditions of debt repayment, and reduced borrowing costs, notes Nelli Galeeva, the company’s financial director. Mechel intends to complete debt restructuring before the end of the year. Redemption of debt from creditors allowed Mechel to earn income of about RUB13bn in 2018, the company said. One of Russia’s largest companies, Mechel has been battling bankruptcy for several years. In 2018 it started to make some progress after debt restructuring deals were done and high commodity prices allowed the company to go back into the black.
9.2.13 Other sector corporate news
Russian private healthcare MD Medical Group growing in 4Q18 with regional hospitals Leading Russian private healthcare company MD Medical Group (MDMG) reported solid 4Q18 figures on January 25. Specialising in natal and mother and child care, the business saw a pick-up in the number of deliveries after opening new regional hospitals ramped up. During the quarter, the flagship segment was up 10% y/y vs. 7% y/y in the previous quarter and
129 RUSSIA Country Report February 2019 www.intellinews.com