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Polymetal expects improved efficiency after asset sales to boost FY'19 earnings

Polymetal International PLC expects improved efficiency following recent asset sales to boost the company's yearly earnings, but there will "definitely not be another [50%]" profit growth in 2019, the Financial Times reported, citing CEO Vitaly Nesis.

Polymetal divested its Khakanja mine in Russia and Kapan mine in Armenia in 2018 as part of a strategy to concentrate on core assets, which will help the company offset a fall in production, the executive said.

"We forecast a decline in output due to the asset disposal, but one [should not] forget those assets had the highest cost," Nesis said, adding that the company expects "a noticeable decline in production cost, which will allow us to maintain positive profit dynamics."

The Russian gold and silver miner's gold equivalent output is forecast to slip by 0.8% to around 1.6 million ounces due to the asset sales. The company booked a 9% year-over-year increase in its full-year 2018 production.

Polymetal reported full-year 2018 net earnings of US$355 million, compared with US$354 million in 2017. Nesis attributed the slowdown to a weaker Russian ruble, which caused US$40 million in foreign exchange losses, and write-downs on noncore assets sales or planned sales.

"We sold Khakanja below its balance cost," he said. "And even though we sold Kapan rather close to the balance cost, we wrote down to zero the carrying value of our remaining asset in Armenia [the Lichkvaz mine], as we have no plant to process its ore."

The company's focus will be on its most promising projects in Russia and Kazakhstan.