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Polymetal warns of write-downs despite production record

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Polymetal (LON:POLY) hit a production record in its latest quarter, but cautioned weak gold and silver prices will mean up to US$340mln of impairment charges.

The Russian miner produced 323,000oz of gold equivalent in the three months to June, a 37% increase on the previous quarter and 9% better year-on-year.

Strong performances from the Dukat hub of mines, the Albazino concentrator and POX (pressure oxidation) facility at Amursk boosted output.

Gold production jumped 23% in the quarter to 190,000 ounces and was 22% higher in the first six months of 2013.

Polymetal, which is 17.7% owned by billionaire Alexander Nesis, added it is currently "testing its assets for impairment at lower commodity prices" and expects to take a charge of between US$280 and US$340mln in the half year figures.

Revenues in the latest quarter rose by 8% to US$399 mln, but were 3% lower over the half year at US$740mln.

Guidance for the full year was maintained at 1.2 mln oz gold equivalent, boosted by sales of Mayskoye concentrate and ongoing improvements at the Amursk POX.

Broker Canaccord Genuity estimates average all-in costs this will  be US$1180/oz compared to US$1270/oz for the average of its peers.

With an improving grade profile, Polymetal is better placed than its peers to weather the current low gold price environment, adds the broker.

Polymetal is not along in writing down the value of its assets.

Some US$15bln has been written off the value of their assets by miners to precious metals sector due the 20% slump in the price of gold.

Quick facts: Polymetal International PLC

Price: 1169.5 GBX

LSE:POLY
Market: LSE
Market Cap: £5.5 billion
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