Polyus Adds New Metal, More Gold to Shake `Russian Discount'
Polyus CFO Pavel Grachev discusses gold and the possible impact from geopolitical risks.Polyus PJSC is targeting more than just gold to help challenge the “Russian discount” it says is tainting its share price.
The Russian precious metals miner plans to sell shares on the market and boost gold production, which could vault it into the top five biggest miners in the world as early as next year from seventh now. It’s also developing markets for a mining by-product that can be used for gasoline and hybrid car batteries. And that while retaining one of the highest dividend yields in the industry.
"We are trying to expand output of existing assets as much as possible and at the same time return all free cash flow to our shareholders," Chief Executive Officer Pavel Grachev said in an interview in Moscow ahead of the company’s first capital markets day in London after relisting shares in the U.K. city last year. "We won’t spend on acquisitions. Organic growth and cutting costs is the main focus."
Yet even as Polyus shares gained 22 percent since the sale of more than $800 million of stock in June -- compared with a 6 percent advance in gold prices -- Russia’s biggest miner of the metal trades at a discount to its foreign peers relative to earnings before interest, taxes, depreciation and amortization.
Russia Discount
Incidents like the poisoning of a Russian double agent and his daughter near London this month and the detention by French authorities of billionaire Suleiman Kerimov, the father of Polyus’s main shareholder, last year contribute to a "Russian discount" that damps the stock prices of all Russian companies, Grachev said.
Without the perceived risk, “we cannot explain why Polyus is traded at 7.5 times Ebitda, while companies with high production costs, lower reserves, no growth history and assets in Africa are traded at 10 to 11 times Ebitda,” Grachev said.
Polyus is presenting its updated strategy to investors in London Tuesday in an attempt to narrow the discount, according to Grachev.
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