Polyus: A Gold Producer With A $600/Oz AISC And A Positive PFS On A 67M Oz Deposit

Summary

  • Polyus Gold will likely release an excellent Q4 result as it has sold more gold.
  • Trading at an anticipated free cash flow yield of 9-10% using $1800 gold makes the company attractive.
  • The icing on the cake is the 67 million ounce Sukhoi Log gold project with an anticipated annual production of 2.3Moz at a sub-$400/oz cash cost.
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Introduction

Polyus (OTCPK:OPYGY) is one of the world’s largest gold producers with an output of almost 3 million ounces of gold per year. As this is a Russian company with a primary listing in Moscow, a secondary listing in London while its US listing is just tertiary and less relevant than the two aforementioned main markets, the company tends to fly under the radar despite its output and market cap (of in excess of $25B).

ChartData by YCharts

The shares in the US are trading with OPYGY as the ticker symbol and each GDR trading at around $90 represents ½ of an underlying share. Polyus is trading in Moscow with PLZL as its ticker symbol and is currently trading at about 13,660 Rubles which is approximately $185 at the current exchange rate. 1 GDR thus currently has a fair value of approximately $92.50. As the US listing is quite illiquid, the London listing of Polyus may be more helpful as the GDRs tend to have a higher volume there, with in excess of 100,000 GDRs traded on Feb. 18.

The Q4 production report came in a bit lower than expected but the gold price will make up for it

While the company hasn’t published its full-year financial results yet, it did already publish a 14-page trading update which contained the production results as well as the detailed breakdown per project. The total amount of refined gold produced in the fourth quarter was approximately 688,000 ounces which is down 2% compared to Q3 due to the simple fact the production of alluvial gold obviously nosedives in the winter months. In Q1 2020 there was virtually no alluvial gold production and that likely won’t be different this year.

Source: trading update FY 2020

However, despite the lower production results, the revenue will likely exceed

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This article was written by

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We zoom in on capital gains and dividend income in European small-caps
As I'm a long-term investor, I'll highlight some stockpicks which will have a 5-7 year investment horizon. As I strongly believe a portfolio should consist of a mixture of dividend-paying stocks and growth stocks, my articles will reflect my thoughts on this mixture.

Disclosure: I am/we are long OPYGY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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