Polymetal has raised its annual dividend by more than half largely bucking an industry-wide trend of falling dividends and profits.
The Russia-focused FTSE 100 precious metals miner proposed a 55 per cent increase in the final dividend to 31 cents a share as pre-tax profits for last year rose 51 per cent to $617.3m due to a jump in gold and silver production and relatively flat costs.
Vitaly Nesis, chief executive, said the dividend increase was part of the company’s new policy to pay out 30 per cent of net earnings back to shareholders. The company had already announced a special dividend of 50 cents a share.
Revenues rose 40 per cent to $1.8bn as Polymetal reported a 31 per cent rise in production to just over 1m gold equivalent ounces as both gold and silver production increased by a third. Cash costs per ounce rose by $2 to $703 – a small increase relative to many industry peers whose profitability has been dented by rising input costs, labour inflation and impairment charges.
Edmund Salveson, an analyst at Brewin, said the results had beaten analysts’ consensus.
“The numbers were better than expected after the additional tax provision has been removed,” he said. “There is significant free cash flow projected for 2013 based on lower capital expenditure and improving revenues but Polymetal’s net debt is still quite high compared to other precious metal peers.”
A 6 per cent rise in the average gold price to $1,668 an ounce helped offset a 12 per cent fall in silver prices to $31 an ounce and an additional tax hit of $52.6m.
Mr Nesis said the year’s “excellent” results had been achieved amid careful cost control.
“Group total cash cost remained almost flat as a result of intense management focus on cost control,” he said. “Strong operating performance resulted in increased average [mineral ore] grades processed and increased volumes of production.”
Diluted earnings per share rose from $0.74 to $1.03 while the company reported an 18 per cent rise in net debt to $1bn.
The company projected 1.2m ounces of gold equivalent production for 2013.
Polymetal said it was not considering a rumoured tie-up with Polyus Gold, one of Russia’s biggest gold producers, “in the foreseeable future”. However, Mr Nesis said he would be potentially interested in acquiring projects within the former Soviet Union.
In November 2011 Polymetal switched its main listing from Moscow to London as it raised £491m.
Shares in Polymetal rose 5.2 per cent, or 44p, to 882p.