Petropavlovsk ( formerly Peter Hambro Mining ) is Russia’s second largest gold miner. Five year ago its shares were 1000p, 3 years ago they were 400p, a year ago 26p and today they stand at 6.12p which is well off the March low of 4.41p.
Last year there was grave uncertainty as to whether the company could continue after 31st December and the expected breach of its banking covenants. But survive it did and it has today promised shareholders that at the end of this year net debt will be down by over a third to $600m. compared to last Decembers crushing $932m. and that it expects to stay within its financial covenants. The targeted repayments schedule has been met
POG has survived by concentrating on mining and production of ounces with the highest profit margin, completely excluding those where were only marginally profitable. Capital expenditure and costs have been slashed.
Targets were set for survival and have been met. Third quarter gold production is on target, albeit at 114,500 oz. it is down 24% on the third quarter of 2014.
For the first nine months of the current year, production is also on target at 354,500 oz compared to last years 460,900 oz. whilst the average realised price was $1180 per oz. In the first half of 2015 POG made a small operating profit despite those planned cuts in production and the fall in the price of gold.
A rise in the price of gold would transform the company’s future but even without that it is beginning to be talked of as a possible recovery stock, albeit at present, a highly speculative one.
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