Russian gold producer Petropavlovsk PLC (LON:POG) returned to profitability in 2016, helped by the gold price rally and lower than projected cash costs.
The company reported a profit before tax of US$31.7mln, compared to a loss of US$297.5mln the year before.
Underlying earnings (EBITDA) improved to US$200.1mln in 2016 from US$172.8mln in 2015, despite revenue easing to US$540.7mln from US$599.9mln.
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Total attributable gold production in 2016 was 616,300 ounces, compared to 504,100 ounces the year before.
Gold sold clocked in at 399,900 ounces, down from 481,900 ounces the preceding year.
The average realised gold price rose to US$1,222 an ounce from US$1,178 in 2015.
Total average cash costs fell to US$660 an ounce from US$749 the year before, while all-in-sustaining costs (AISC) improved to US$807 an ounce from US$874 a year earlier.
This marked the fourth consecutive annual reduction in total cash costs and AISC representing a 35% reduction since 2013, due to cost optimisation measures and the positive effect of the Rouble's depreciation.
2016 a transformational year
Chairman Peter Hambro was justified in calling 2016 a transformational year, as the company refinanced its debt and proceeded with several major production initiatives, including its pressure oxidation (POX) processing hub.
“Looking ahead the group is well positioned to execute on its long term corporate strategy and to create value through organic growth and delivering sustainable cash flow," Hambro declared.
The group had forward contracts to sell 50,000 ounces (oz) of gold at an average price of US$1,303/oz as at the end of 2016, and 547,000 oz of gold at an average price of US$1,253/oz as at 26 April 2017.
Net debt at the end of 2016 had narrowed to US$598.6mln from US$610mln a year earlier, paring the net debt to EBITDA ratio to 3.1.
“It remains our intention to deliver a meaningful share of the cash flow to shareholders as soon as the debt burden is substantially reduced,” Hambro said in his chairman's statement.
“The advent of our underground operations in the nearest future and that of our production from the refractory ores is scheduled to do this,” he added.
As well as operating one of the largest gold mines in Russia, Petropavlovsk owns a 31% stake in IRC Limited, a vertically integrated iron ore producer and developer in the Russian Far East and North Eastern China.
IRC's net loss in 2016 narrowed substantially to US$18.2mln from US$509.0mln, and Hambro was happy to reports that in the first quarter of 2017 the company was “a cash generative operation”.
“With the development of our POX Hub and underground firmly underway, as we emerge from a period of introspection and optimistically look ahead, 2017 is set to be another pivotal building block towards achieving our vision of being a mid-tier producer of refractory and non-refractory ore from 2019,” predicted Pavel Maslovskiy, Petropavlovsk's chief executive officer.
Shares in the company were up 4.3% at 7.61p in mid-morning trading.