Polymetal silver stocks accumulate on lack of sales options

Polymetal shares rose 4% to 187.2p in early morning trading on Thursday after the company reported a business update announcing its gold bullion concentrate sales continued as usual from Kazakhstan.

However, the mining group confirmed that its silver bullion accounted for less than 5% of its estimated 2022 sales, due to a lack of export channels. Polymetal said discussions were underway with a selection of commercial and industrial buyers to offload its accumulating silver inventory.

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Polymetal mentioned a net debt increase to $2.3 billion on 1 June 2022 compared to $2 billion on 31 March 2022, which was reportedly driven by large working capital increases and accelerated procurement. The company said 74% of the total debt was denominated in US dollars.

The company added it had approximately $300 million in cash deposited with non-sanctioned financial institutions, alongside the maintenance of $400 million in undrawn credit lines from non-sanctioned banks, which is projected to cover expected debt repayments in the next six months.

Polymetal said it was currently financing short-term working capital requirements with US dollar-denominated debt at lower interest rates, and had recently secured $200 million in new revolving credit lines, with plans to sign an additional $300 million revolving credit facility in June.

The mining firm noted its operations in Kazakhstan and Russia continued without disruption with a production guidance of 1.7 moz for 2022, and its medium-term development projects POX-2, Kutyn, Urals Flotation and Prognoz were on track.

However, the company highlighted that sharp rouble appreciation and continued logistical challenges were contributing significant upward pressure on capital expenditures.

Polymetal also confirmed its 110-kV line linking its Nezhda mine to the regional grid had been successfully commissioned.

The group emphasised the difficulty of its situation concerning shareholder payouts, and commented that the board viewed share buybacks as unwise given the company’s current liquidity challenges and trading uncertainties.

Polymetal reported its dividend would be informed by its delays in establishing new sales channels and its resulting decline in operating cash flows, with its HY1 dividend scheduled to be announced with its results on 22 September 2022.

The company also announced the appointment of MHA MacIntyre Hudson LLP as a group auditor jointly with AO Business Solutions and Technologies as a component auditor for Polymetal. The group confirmed that the company was not subject to any sanctions currently in action against Russia-affiliated entities.

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