30 Sep 2009 13:11

Polymetal more than halves H1 US GAAP earnings to $19 mln

MOSCOW. Sept 30 (Interfax) - Polymetal more than halved net profit to US GAAP in the first six months of 2009 to $19 million, from $43 million a year earlier, the No.1 Russian silver producer said in a statement.

Sales revenue fell 15% to $220 million and adjusted earnings before taxes, depreciation and amortization (EBITDA) fell 24% to $92 million.

Net debt grew 8% to $336 million during H1 2009. Capex grew to $86 million, from $63 million a year previously.

"Financial results for the first six months of 2009 bear witness to the remarkable resilience our business has demonstrated in the wake of the global financial crisis," said Vitaly Nesis, CEO of Polymetal.

"Despite significant weakening of silver price and credit becoming more expensive, Polymetal continues to generate sizable operating cash flows sufficient to continue the implementation of our ambitious growth program," Nesis said.

Cost of sales fell 6% year-on-year to $112.4 million.

General, administrative, and selling (GA&S) expenses fell from $58.8 million to $26.7 million, mostly as a result of the non-cash employee stock option compensation expense of $31.9 million in 2008. Excluding the impact of stock options, GA&S remained virtually unchanged.

Personnel costs increased by 12% as the impact of ruble depreciation was outweighed by increase in headcount both at headquarters and at operations level, mostly related to Albazino-Amursk and Mayskoye projects. Costs of services included in GA&S declined by a third from $9.4 million to $6.3 million due to ruble depreciation and aggressive cost-cutting.

Interest expense more than doubled to $14.4 million from $6.9 million, mostly reflecting significant increases in average interest rates. Exchange losses of $5.5 million sharply reversed last year's gains of $11 million as ruble depreciated in H1 2009 by 6%. Approximately half of company's debt balances is denominated in rubles.

The company said it had successfully extended maturities on the part of its debt portfolio from December 2009 to June 2010. Negotiations are ongoing on further extending the duration and lowering the interest rates on company's debt. The decision on the ultimate debt strategy will be taken after the results of the ongoing preemptive-rights subscription for Company's shares become known in early October. Up to date the Company has already received approximately $9.3 million from its shareholders subject to pre-emptive rights.

Presently the company is fully meeting its capital expenditure requirements from operating cash flows.

Polymetal cut gold production 3% year-on-year in H1 2009 to 133,000 oz and silver production 2% to 8.6 million oz. Gold production fell 11% year-on-year in Q2 to 68,000 oz but silver grew 2% to 4.2 million oz.

The company has said the decline in output could be attributed to lower grades of metal in ore at the Dukat and Khakanja fields in the second quarter. Polymetal expects considerable improvements in the third quarter due to higher heap leach grades at the Voro field and increased throughput at Dukat processing plant.