Did production of Petropavlovsk fall during Q1 FY21?

Summary

  • Petropavlovsk PLC had shown a decline of around 49% in the total gold production for Q1 FY21 from the comparative period of the prior year.
  • The Company had anticipated total gold production ranging from 430 koz (kilo ounces) to 470 koz during FY21.
  • POG had a cash balance of USD 7.50 million as of 31 March 2021.

Petropavlovsk PLC (LON: POG) is the LSE listed mining stock. POG’s shares have generated a return of around 12.05% in the last 12 months. The Company is also listed on the Moscow Exchange.

Company Overview

Petropavlovsk PLC is an FTSE 250 listed Company, which is focused on the mining of precious and non-precious metals. It has operated continuously in the Far East of Russia since 1994 and produced over 8.2 million ounces (Moz) of Gold to date. Moreover, the Company has three primary operating mines - Pioneer, Malomir and Albyn.

(Source: Company presentation)

A brief about Gold industry

Gold remained one of the best performing major assets during 2020, driven by high risk, low-interest rates and positive price momentum built during the second half of 2020. There is still uncertainty about how gold prices would perform during 2021, but recovery in mine production is expected after showing a decline in 2020. Furthermore, the performance of gold is dependent on four sets of drivers – Economic expansion, Risk & Uncertainty, Opportunity Cost and Momentum. The Gold prices have tumbled recently due to rising US Treasury yields amid stimulus optimism, successful rollout of the Covid-19 vaccine and expectation of higher inflation. However, the stagnation in US Treasury yield may open the door for an increase in the gold price in the coming months.

Q1 FY21 Production Update (for the three months ended 31 March 2021, as of 20 April 2021)

POG had reported a decline of around 49% in the total gold production during Q1 FY21 as compared to Q1 FY20. The total gold production remained around 95.6 koz during Q1 FY21. Moreover, the total gold sales were 95.6 koz during Q1 FY21, and the average realized gold price remained 14% higher at USD 1,789 per ounce. The debt principal outstanding was USD 538 million as of 31 March 2021, while the cash balance was USD 7.50 million as of 31 March 2021. 

Share Price Performance Analysis of Petropavlovsk PLC

 

(Source: Refinitiv, Thomson Reuters)

POG shares were trading at GBX 27.10 and were up by close to 1.12% as of 20 April 2021 at 02:01 PM GMT. POG’s 52-week Low and High were GBX 22.10 and GBX 41.60, respectively. Petropavlovsk PLC had a market capitalization of around £1.05 billion.

Business Outlook

The Company had anticipated total gold production ranging from 430 koz to 470 koz during FY21, representing own gold production in a range between 370 koz and 390 koz, and 3rd party gold production ranging from 60 koz to 80 koz. Moreover, POG had expected a total capex of USD 140 million, which consisted of sustaining and development capex of USD 120 million and exploration expenditure of USD 20 million. Furthermore, the production from the Pioneer facility would increase during FY21, while the production from Albyn would be expected to remain lower as compared to FY20 levels. Overall, the Company has a world-class asset with the incremental capacity to generate sustainable and significant shareholder value.

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