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Shares of Russian gold mining group, Petropavlovsk (LSE:POG), gained 32.90p, increase of 8.64%, to 413.80 by mid-morning today on the London Stock Exchange. Investors were apparently happy with the company’s half-year Trading Update released this morning.
Sometimes All that’s Gold Doesn’t Glitter
The company’s share price has been in a slump, as have other commodity stocks, but it took some hard hits over the last ten days beginning on 16 July when Goldman Sachs slashed its full-year price estimate for Petropavlovsk from 980 to 520 pence. The share price was 452 at the time of the announcement, closing that day at 439.90. The price continued to decline to 416.80 on 19 July; then HSBC adjusted its target from 850 to 800, rating the stock as overweight. That announcement exacerbated the impact of the first, hastening a further retreat to 400.50 on the 20th. The stock opened this morning at 384.00.
Sometimes All the Glitter is Gold
When the company announced this morning that its first half production increased by 27% to 279,000 ounces, investor response reversed the trend, moving the share price well over the 400 pence mark once again. Sales also increased by 8% to 286,000 ounces. A 13% increase in the average price per ounce sold during the first half from US$1,455 to US$1639 compounded the increase in revenue. The company said the operating costs have generally remained “marginally in line” year-on-year. Petropavlovsk will issue its half-year results on 23 August and an exploration update within the same month.
Chairman Peter Hambro indicated that the results confirm that Petropavlovsk is on track to meet its revised production target of 700,000 ounces, especially as the newest processing lines at their Pioneer and Albyn facilities were commissioned ahead of schedule, increasing the production capacity at both mines. He said that, “Our focus for the second half of the year will remain on tight cost control and an increase in operational efficiencies.”
Company Spotlight
Petropavlovsk was founded in 1994 to develop a greenfield gold deposit in the Amur Region in Russia’s Far East. Over the ensuing 18 years, the company has produced over 1 million ounces of gold from what is now known as the Pokrovskiy mine. Petropavlovsk is one of the three largest producers of gold in Russia. The company holds over 100 licences, all of which are in Russia, and employs nearly 11,000 people. The company’s vision is to maintain exploration simultaneous with production. It has 4 operating mines with active exploration in close vicinity to each.
