Polymetal International PLC (LSE:POLY) said it is under “tremendous pressure” from the war in Ukraine and western sanctions as the Russia-based precious metals miner reported a 6% decline in first-quarter production.
It retained its FY2022 output guidance, but raised its production costs per ounce guidance due to the various impacts of economic sanctions against Russia, including domestic inflation, a sharp escalation of logistical costs and the need to shift to suboptimal supply sources, said the London-listed miner.
The "devastating war in Ukraine and immense sanctions put tremendous pressure on Polymetal in Q1”, said chief executive Vitaly Nesis.
“The company continues to operate safely and profitably and is fully focused on ensuring business continuity and long-term viability. It is with these objectives in mind that the board was forced to postpone [the] dividend decision and rationalize investment plans," he said.
Polymetal previously announced that it would postpone its decision on a final dividend until August.
READ: Polymetal International shelves dividend over impact of Russia sanctions
"The board and management continue to actively explore options to adjust company asset ownership structure to preserve shareholder value and address the needs of other stakeholders."
The company lost six independent members of its board in early March following Russia’s invasion of Ukraine and was ejected from the FTSE 100 index.
Its first-quarter gold equivalent production fell 6% to 372,000 ounces (oz) as a planned grade decline at Albazino and Svetloye outweighed the first material contribution from Nezhda.
Sales were lower by 50,000 oz primarily due to concentrate inventory accumulation at Nezhda and Kyzyl, however the group’s revenue rose 4% year on year to US$616mln partly helped by higher gold prices.
It retained its gold equivalent production guidance for FY2022 of 1.7 million ounces (Moz): 1.2 Moz from Russia and 0.5 Moz from Kazakhstan.
The company revised its total cash cost guidance for the year to US$850-950 per ounce, compared with the previous guidance of US$850-900, and lifted its all-in sustaining cost (AISC) guidance to US$1,200-1,300 an ounce from the earlier guidance of US$1,100-1,200.
Net debt rose to about US$2.0bn on the back of higher working capital needs.
Following a project review, the company said it also decided to suspend indefinitely its Pacific POX project and is currently evaluating options to re-site the facility in Kazakhstan. The start of the Veduga construction as well as a number of other smaller-scale projects have also been delayed by 12-18 months.
As result, its capital expenditure guidance for the full year has been revised to US$650mln due to the shrinking investment programme and inflationary pressures.
Medium-term production guidance now stands at 1.65 Moz for 2023, 1.7 Moz for 2024, 1.7 Moz for 2025 and 1.8 Moz for 2026, it said.