U.K.-registered gold producer Petropavlovsk Plc, which operates in Russia, can start paying dividends after 2018, CEO Pavel Maslovsky declared.
The company set a condition that dividend payments would start once a debt to EBITDA (earnings before interest, taxes, depreciation and amortization) ratio is below 2 to 1, in December 2014 during loan refinancing.
“Now the debt to EBITDA ratio is a bit higher than 3 to 1. But we hope that we will reach a 2 to 1 ratio already in 2018,” Maslovsky said, adding that the company would define the dividend policy after the ratio is attained, taking into consideration the absolute amount of the debt.
Maslovsky said that Petropavlovsk took a gold price of $1,200 per ounce as guidance while planning the budget for 2017 and tested the budget at a $1,100 price. But he said he expected a $1,400 per ounce price on average in 2017 because actions of the new U.S. president “worry the market.”
The CEO said that Petropavlovsk planned to produce 420,000-460,000 ounces of gold in 2017, including underground production.
Petropavlovsk will retain an opportunistic approach to hedge contracts and has no plans to avoid this instrument in 2017, he said.
The company will return to discussion of mergers with Amur Zoloto, owned by Russian Platinum, and Zoloto Kamchatki owned by holding Renova.
“We have been considering the opportunity of a merger with Amur Zoloto. I see big synergy in this deal, I like the asset, and the zone is close to the Amur region, it is our neighbor. I think that this is an interesting asset, and we will return to this conversation one day unconditionally,” Maslovsky said.
The possible synergy with Zoloto Kamchatki is less noticeable but Renova is preparing materials to continue the negotiations.
Maslovsky said he thought that now was not the best time to pay for assets with shares because the capitalization of Petropavlovsk had a potential to increase.
He said that there were no immediate plans to list shares on the Moscow Exchange.
“The situation is the following: there are no opportunities to raise capital for a company of our scale on the Moscow Exchange. There are no such stories, and liquidity is so-so. We have been monitoring the process long ago,” he said.
Petropavlovsk has high hopes for construction of an autoclave, he said. “I think that after bond restructuring, after loan restructuring our spirits will be higher. An autoclave is, in fact, a new life for the facility. More than half of our reserves are refractory ore. It is profitable to extract and process it with an autoclave because extraction costs are low, we have massive ore bodies and a low uncovering coefficient.”
A contract to build an autoclave was signed in 2016 with GMD Gold. Petropavlovsk later said that after debt restructuring it would cope with building equipment on its own. Maslovsky said that the autoclave was to be launched in October-December 2018.
But Petropavlovsk is ready to discuss alternative cooperation terms with GMD Gold, such as a temporary provision of capacities of Petropavlovsk to process GMD Gold’s concentrates or building two more autoclaves for Petropavlovsk’s facilities by GMD Gold. (Prime/Ukrainian metal)