Polymetal retains annual guidance despite continued sanction pressure

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Polymetal International PLC on Thursday said its sales of gold from Kazakhstan and Russian mines continue to proceed as usual, but admitted that logistics remained challenging due to China's Covid restrictions, and sanctions imposed on Russia since March.

Although the sale of gold have continued as usual, the St Petersburg, Russia-based miner said its silver inventory has continued to accumulate, as a result of a lack of reliable export channels and a near non-existent domestic market.

Polymetal has started discussions with several potential commercial and industrial international buyers, but noted that silver accounted for less than 5% of its expected sales in 2022.

As a result of the restriction in China and the sanctions, Polymetal had noted slow inventory turnover and higher selling costs, and expects the gap between production, sales and the resulting finished inventory to reach its peak in September.

In spite of this, Polymetal's operations continue undisrupted, and the company has retained its annual production guidance of 1.7 million ounces in gold equivalent.

The group's medium-term development project progress as planned, even as capital expenditure remains under significant pressure, due to a sharp Russian rouble appreciation and logistical challenges.

As a result of higher working capital needs, the company's net debt as at June 1 rose to $2.3 billion from $2.0 billion at the end of March.

‘The group complies rigorously with all relevant legislation and is implementing comprehensive measures to observe all applicable international sanctions. The scope and impact of any new potential sanctions (and any countersanctions) are yet unknown. However, they might further affect key Russian financial institutions as well as mining companies. Polymetal believes that targeted sanctions on the company remain unlikely, but are not impossible. Contingency planning has been initiated proactively to maintain business continuity,’ Polymetal stated.

Polymetal International will publish its second quarter production results on July 21.

Shares in Polymetal were up 2.3% at 184.00 pence on Thursday morning in London, but have fallen 89% in value over the last 12 months.

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