Polymetal International PLC (LSE:POLY) suggested its dividends for 2021 and 2022 would be affected by a decline in operating cash flows amid logistical and cost issues related to Russian sanctions and Covid restrictions in China.
But the Russia- and Kazakhstan-based group, whose shares have been one of the most popular for retail investors in recent months after a near 90% plunge after the invasion of Ukraine, said its gold and silver mining operations continue “undisrupted” in recent months, with sales of gold continuing to Asian markets.
However, logistical difficulties due to international restrictions and Covid restrictions in China were resulting in slower inventory turnover and higher selling costs, while there was “significant” upward pressure on capital expenditure from the appreciation of the Russian rouble and the logistical challenges.
The gap between production and sales and the resulting finished goods inventory are expected to peak in September, Polymetal said.
There was a “significant” Covid-related slowdown in sales of gold bullion and concentrates in April and May but a more regular schedule was reported to have returned.
Silver is a different story, with talks are underway with commercial and industrial international buyers amid a lack of “reliable export channels and non-existent domestic market”, meaning silver bullion inventory has accumulated further.
Silver bullion accounts for less than 5% of its expected sales in 2022, the company said.
As for its finances, net debt increased to US$2.3bn at the end of June from US$2.0bn three months earlier, with debt repayments covered by roughly US$0.3bn of cash and US$0.4bn of available credit with non-sanctioned financial institutions. It plans to obtain further debt at lower interest rates.
After the European Union effectively blocked Russia from the Euroclear system earlier this month, the company said it has been advised that this development “makes it impossible” for the holders of the circa-22% of shares held in the Russian National Settlement Depositary (NSD) to receive dividends or take part in any corporate actions.
Polymetal said it was consulting to confirm the outcomes of these sanctions and measures that could be taken to secure shareholders’ rights, with share buybacks seen as “presently inappropriate given short-term liquidity challenges, grave business uncertainties, and NSD challenges outlined above”.
Shares in Polymetal rose 2.5% to 184.39p on Thursday morning.