Polyus boasted a billion-dollar profit. But he is not going to pay dividends
Gold mining company Polyus reported on its results for the first half of the year.
Judging by the data, the gold miner spent the first six months of 2023 productively and profitably, but in the fall the company will have to feel the consequences of a massive buyback of its own shares.
Powerful report
At the end of August, Polyus presented operating and financial results for the first half of the year. The company significantly increased gold production (by 36% year-on-year), and also increased sales of the precious metal (plus 24% year-on-year). Amid strong operating results, the gold miner’s revenue rose 29% to $2.4 billion. Net profit in the first half of the year increased by 33%, to one billion dollars.
The gold miner was also able to significantly reduce production costs – Polyus reduced cash costs by 8%, from $435 to $400 per ounce of gold (31.1 grams). The main reason for the cost reduction is the increase in gold content in the ore at the company’s largest deposits, Olimpiada and Blagodatny, which are located in the Krasnoyarsk Territory.
However, despite strong operating and financial results, Polyus shares are not showing growth. On August 29, the company’s securities ended the main trading session on the Moscow Exchange in the red – minus 0.24% compared to the previous close. What’s the matter?
Consequences of buyback
According to Forbes magazine, in the reporting section devoted to events after the reporting date, Polyus mentioned the share repurchase program (buyback), which was announced in July.
Let us recall that the gold miner announced plans to buy back almost 30% of the shares at a price of 14,200 rubles per share, more than a third higher than the market price at the time of the announcement of the buyback. It is known that the repurchase of shares was carried out with borrowed funds, so in the future this will significantly put pressure on Polyus’s performance. In total, the company spent almost 580 billion rubles on repurchasing its own shares.
– In terms of financial indicators, the buyback will lead to an increase in net debt to approximately eight billion dollars. With such a debt load, the company will focus on paying off debt and will not pay dividends this year,” Forbes cites the opinion of Sergei Zhitelev, a financial analyst at Veles Capital Investment Company.
At the same time, the fate of the purchased stake remains unclear. Previously, Polyus said the shares could be sold, used for transactions, placed on the capital market or used for other corporate purposes.
One of the specific goals of consolidating the stake was the desire of Polyus to acquire the Russian assets of Polymetal (a mining company engaged in the extraction of silver, gold and copper). But, as market experts point out, Polymetal is considering options for selling it specifically for cash, and not in exchange for shares.
As a result, Polyus’s semi-annual report added a clarification that the company may consider redeeming shares “if specific purposes for their use are not identified in the medium term.”