The Russian mining groups, Evraz and Polymetal addressed the impact of sanctions on their businesses to reinstate investor confidence.
Evraz and Polymetal shares have seen increased volatility over the ongoing Russia-Ukraine war.
Polymetal shares
Polymetal shares skyrocketed 44% to 132p after the mining company said that their operations in Russia and Kazakhstan are ongoing without any disruptions.
Operations in Kazakhstan contributed to 48% of the net earnings in 2021. The mines in Kazakhstan produce 40% of the gold reserves for the company.
Regardless, the group is working on operations that will not require large amounts of capital to ensure that they are liquid. Due to stockpiling during covid times, the company has surplus supplies to fall back on if there were any inventory issues.
Russian legal entities are currently banned from paying out dividends to international investors which is a grey area for Polymetal. In terms of dividend, the company may reassess their business’ liquidity prior to paying out the proposed final dividends.
Income from existing contracts will still stand with the sale of silver to Kazakhstan and gold concentrate to China. However, sales within Russia have been subject to sanctions. In order to curb the sanctions loss, the Russian Central Bank will begin purchasing the gold.
The group has access to an untouched credit line $1bn from a financial institution that is not subject to sanctions. The group also have $400m cash secured in a similar bank. From the income of the operations in Kazakhstan, the company is in a good financial position to meet any fiscal obligations.
The net debt was impacted by seasonal productions and increased to $1.8bn in 2022. 96% of the company’s debt is recorded in US$. The interest rate on borrowings is 2.9% but is expecting a rise for debt in Russian roubles. However, 27% of the net borrowings will be paid back over the next 12 months.
EVRAZ shares
Evraz shares rose 25% to 97.5p as mining company confirms ‘no material direct impact on day-to-day operations’.
The mining company acknowledged that the sanctions imposed are getting into the way of Evraz’s functionings in terms of logistics, but confirmed that there isn’t any direct impact on their operations.
The company said they could not conclude relationships between Russian shareholders, including Roman Abramovich, to Putin and Russia. The company did go on to say that no loans were given out in any form to these shareholders.
The company acknowledges that though they are not acting on behalf of any Russian influence currently, if in the future that were to change, they would be subjected to the Russian sanctions too.
The previously announced potential demerger by Evraz of PJSC Raspadskaya, the company’s coal assets portfolio, was still being monitored.
