Polymetal International Plc expects to produce 1.55 million ounces of gold equivalent in 2018 from 1.43 million ounces in 2017, driven by the ramp-up of operations at the Kyzyl project, CEO Vitaly Nesis said on an earnings call March 12.
The Kyzyl gold asset is in northeastern Kazakhstan and is the company's main development project. Polymetal said it is on track with the asset's ramp-up for the second half.
Addressing investor skepticism over the economic viability of the project, Nesis said that once the Kyzyl project is brought online, it should unlock value in its share prices.
"Quite a lot of investors remain somewhat skeptical about our ability to make money out of that operation. As we demonstrate our approach has worked, this will de-risk our equity story," he said.
He said CapEx in 2017 climbed 41% from the previous year to US$383 million due to construction at Kyzyl and increased exploration. In 2018, CapEx is expected to amount to about US$400 million.
"This will include roughly US$100 million of capital expenditure required to complete the construction of Kyzyl and the construction of Amursk POX plant," he said, adding that the company will allocate US$85 million to exploration.
Based on the company's financial results, Polymetal recommended a final dividend for 2017 of 44 U.S. cents per ordinary share, amounting to US$189 million. This compares to a payout of 42 cents per share in 2016. Company CFO Maxim Nazimok said debt is not a top priority for the use of free cash flow and Polymetal will instead focus on shareholder returns.
"[W]e are comfortable with the current level of leverage, so there is no intent on the management side to pay down debt at the current macroeconomic conditions," Nazimok said. He expects a rise in EBITDA for 2018 to decrease its leverage ratio, "which is and will remain quite comfortable."
Significant ruble appreciation in 2017 had a notable impact on Polymetal's financials. The company's net profit dropped year over year to US$354 million from US$395 million, and adjusted EBITDA fell to US$745 million from US$759 million. Conversely, revenue rose 15% year over year to US$1.82 billion. Gold sales volumes were up 24%, hitting a total of 1.09 million ounces.
At the end of 2017, net debt stood at US$1.42 billion, up 7% on the previous year.
Polymetal also communicated board changes.
The company said Manuel De Sousa-Oliveira has been appointed a senior independent director, effective April 25. He serves as senior independent director at Antofagasta Plc and will replace Christine Coignard as senior independent director at Polymetal. Coignard will remain an independent nonexecutive director on the Polymetal board.
Russell Skirrow and Len Homeniuk do not plan to stand for re-election to the board at the upcoming meeting of shareholders.
