Polymetal International PLC (LON:POLY) beat production guidance and reported more strong cash flow at the end of 2020 but said costs for 2021 will be higher than expected as coronavirus drives up the price of labour.
The Russia and Kazakhstan-based precious metals miner reduced the number of fatal accidents among its mining workforce and contractors last year, after three fatalities in 2019, but said five of its employees have died from coronavirus since last March, with 80 80 active cases of COVID-19 as of this week.
The “epidemiological situation in the company remains under control,” it said in the year-end statement, with operations and development projects “unaffected so far”.
Mandatory isolation of new arrivals and restrictions on meetings and travel has been maintained at all production sites and offices, with these restrictions expected to continue until Russia’s Sputnik-V vaccine becomes more broadly available.
“2020 was a successful year for Polymetal despite the COVID pandemic,” said chief executive Vitaly Nesis, adding that in 2021, the FTSE 100-listed company “will make every effort to minimize the impact of the second wave of the pandemic on our safety, production, and cash flows”.
Production of gold and silver for the past year amounted to 1.6mln oz of gold equivalent, a 4% increase on the previous year above the original production guidance of 1.5mln oz.
The mining giant said it expects to produce 1.5mln oz of gold equivalent for 2021, as guided previously, but with capital expenditure US$75mln higher to US$560mln.
Polymetal blamed “limited availability and sharp increases in construction labour costs”, which it said is “driven by COVID-related travel restrictions with Central Asian countries, a traditional source of the majority of construction workforce”.
It also estimates COVID-related cash expenses in 2021 at approximately US$5mln per month with the majority recorded as operating costs.
But the operational business plentiful cash generation in recent quarters continued, with net debt reduced to US$1.35bn at the end of December, down by US$128mln over the year, while dividends of US$480mln were paid.