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Polymetal - mining sector shocker: underpromising and overdelivering

By Chris Bailey | Wednesday 27 June 2018


Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


Tuesday's update from London-listed, but Russia-focused, gold and silver producer Polymetal (POLY) was unusual in a couple of respects.

The first was that the company's Kyzyl operation had 'successfully produced first gold concentrate' on Monday 'one quarter ahead of the original schedule that had been announced in 2014...Project Capex is expected to be approximately 3% below the original US$ 325 million budget'. That's underpromising and overdelivering!

Now this is very unusual for any company but especially a mining company, an area which many would agree Mark Twain was on the money with the observation that a mine is a 'hole in the ground owned by a liar'. Of course operating in Russia has its own challenges and threats - and it can be a desperately dodgy place to operate but, as I discussed a few weeks ago here, Polymetal has made a bit of a habit of surprising people - and the above is pretty consistent and par for the course with its corporate realities of the last few years.

And, of course, this is the second surprise. It is good to see that Polymetal plans to produce 80 koz of payable gold at Kyzyl, ramping up production to 280 koz in 2019 and 330 koz thereafter at an all-in cost of approximately US$ 500-550/oz. Not too shabby for a nine or ten year mine life operation 'followed by further 14 years of underground mining'.

Since my first tip above the share is actually down a bit but my view remains unchanged that below 700p a share it is worth a buy. In today's crazy world having a bit of gold in your portfolio still makes a bit of sense.


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