Polymetal International FY20 Earnings Analysis


Polymetal Stock Analysis

Catalysts


  • Increased in worldwide money supply might increase demand for Gold and Silver

  • Silver is the best electrical conductor and widely used in Solar panels

  • Company has one of the lowest AISC in the industry and expected to further go down

  • Reserves of company still growing

  • Potential Palladium and Platinum mining

  • Nezhda mine and POX-2 Refining facilities will lower AISC


Financial Analysis


  • GE Production of 1,559 Koz in 2020 up 4% YoY

  • Ores Reserves of 27.9 Moz in 2020 up 10% YoY

  • Gold prices increased by 24% while Silver prices increased by 47% in 2020

  • Revenues of $2.86 billion in 2020 up 28% YoY

  • AISC of $874 up 1% YoY

  • Total Cash Cost of $638 down 3% YoY

  • Net income of $1.072 billion up 83% YoY

  • EPS of $2.28 up 82% YoY

  • Dividends per share of $1.29 up 57%

  • Capex of $538 million up 38% YoY

  • FCF of $610 million up 138 YoY

  • Net debt of $1.35 billion down 9% YoY


Valuation


  • My personal Biases

  • Bullish on gold and silver

  • Lived in Russia for 5 years

  • 5.1% of portfolio, holding since October 2019


  • Assumptions

  • Looking at conservative base case

  • Gold prices of $1600

  • AISC falls to $800

  • Production remains at same level

  • This will lead to about $1.03 billion in operating cash flow per year

  • $450 million on average in CapEx, giving us $580 million in FCF per year

  • Discount rate of 15% to account for all political, currency and commodity risks

  • Terminal Growth rate of 3%, about world GDP Growth


Polymetal Stock Analysis
  • Let’s look at exit multiples based on gold prices and P/FCF Ratio

  • Bull case: CapEx falls to $350 million in 2025 with production up 10% from current level; Bear case: CapEx of $550 million in 2025 with production down by 5% from current level.

  • AISC remains at $800 in all cases

Polymetal Stock Analysis

Conclusion

  • Above intrinsic value at current price but still good potential returns if gold prices do increase

Full Analysis: https://ishfaaqpeerally.teachable.com/courses/662813/lectures/30988867

Polymetal Stock Analysis

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