Tuesday, 25 August 2015

Polymetal - reiterating the stock as my second favourite gold miner

I last wrote about the Polymetal back in March.  Back then I wrote positively about the Russian focused but (at least for the shares I hold) the London-listed precious metals producer. Unsurprisingly given the fall in precious metals prices the shares have fallen since then and my previous observation that below 500p indicated value has been tested...although not by that much:

The fundamentals for the company remain akin to those I have observed previously in terms of good cash cost control and free cash flow generation...  

....as the company noted in supplementary charts in the presentation document. First on cash costs (where ruble costs and US dollar revenues were clearly a helpful combination)...

...and then on the cash flow / dividend payment side (on the latter aspect the company's board will decide at the end of the financial year whether another special dividend will be granted to help boost the total shareholder yield to 4-5%).  

I even note as per the above that Polymetal at least on the free cash flow yield during the first half of 2015 even bettered the superlative (and my #1 gold sector holding Randgold - who I last wrote up here noting their scope for a 5%+ free cash flow yield generation).  You always have to be slightly careful with a very short-term period (Kinross for example is not a gold company I am very excited about) but nevertheless consistent with the aforementioned dividend policy and ok-to-good balance sheet (even adjusting for future exploration/development spend) Polymetal is a good cash flow generator. 

They also gave solid guidance which historically they have slightly low-balled on.  

 Overall I still remain comfortable with Polymetal as my second favourite gold play.  On any reasonable recovery of the gold price the shares will trade nicely above that aforementioned 500p level.

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