Petropavlovsk production dips but profits boosted by cost-cutting

Petropavlovsk's shares dipped on Wednesday after the gold miner reported a drop in annual revenues on the back of a decrease in gold sales and production, though results were still ahead of expectations.

The Russia-focused miner said revenue for 2018 came in at $499.8m, down from $587.4m for the previous year, as the total amount of gold produced dropped by 4% to 422.3koz, including 51.2koz of gold contained in refractory concentrate stockpiles for later processing, and underlying EBITDA fell by 27% to $143.0m.

Even so, profit before tax increased by 68% to $82.4m as a 26% drop in operating expenses to $388.6m more than offset lower revenue.

Production continued to flag in the new year, with first quarter output down by 4% to 107.7koz as production at the Pioneer mine fell 46% to 21.9koz, dropping below expectations due to a combination of delays in the underground workings caused by the persistence of underground water and lower grade material from the open pit.

Nevertheless, total first quarter gold sales of 107.7koz were slightly above management's expectations following a "strong" contribution from underground mining at Malomir, with the London-listed company remaining confident on its full-year outlook.

Pavel Maslovskiy, chief executive of Petropavlovsk, said: "We remain on target to meet guidance of between 450 - 500koz sales for 2019 with an increasing contribution from processing refractory concentrates. This guidance excludes the processing of third party concentrates and I look forward to updating the market during the year on our progress on this area of potential upside."

Maslovskiy went on to call the completion of Petropavlovsk's POX Hub, a gold processing plant completed in November, the "principal highlight of the year", with recoveries at the Hub already consistent at 91% in March and on track to meet the 94% target set for June.

Analysts from Canaccord said the results were "generally better than consensus expectations" and argued that reductions in gold sales merely reflected the build up in gold in concentrate at year end as the POX plant was ramping up.

Petropavlovsk's shares were down 8.97% at 7.60p at 0831 BST.