Polymetal said gold production had shot up by 32% y-o-y in 2Q 2008, citing improved ore quality at the Dukat, Voro and Kakanya mines and higher ore output from the Voro and Dukat mines. The successful implementation of a production expansion program is another factor behind output growth at Dukat and Voro. Silver output shrank by 7% y-o-y, as the silver content in ore extracted from the Dukat and Lunnoye deposits decreased. On the whole, gold production growth and precious metal price rises have made it possible for the company to boost its quarterly and semiannual sales.
Table: Polymetal: production in 2Q and 6M 2008
| Indicator | Unit of measure | 2Q 2008 | 2Q 2007 | 2Q2008/2Q2007 | 6M2008 | 6M2007 | 6M2008/6M2007 |
|---|
| Total ore extraction | thous. tons | 602 | 897 | -33% | 1273 | 1544 | -18% |
| - open-cast mining | thous. tons | 443 | 747 | -41% | 948 | 1257 | -25% |
| - underground mining | thous. tons | 159 | 150 | 6% | 235 | 287 | 13% |
| Ore processing | thous. tons | 1034 | 871 | 19% | 1607 | 1373 | 17% |
| Production | | | | | | | |
| Gold | thous. ounces | 76 | 58 | 32% | 136 | 113 | 20% |
| Silver | mn ounces | 4.1 | 4.4 | -7% | 8.8 | 7.9 | 11% |
| Total sales | mn USD | 150 | 79 | 90% | 258 | 137 | 88% |
| Gold | thous. ounces | 71 | 46 | 54% | 121 | 94 | 29% |
| Silver | mn ounces | 5 | 6.7 | -25% | 7.9 | 8.4 | -6% |
Source: company data
In FY 2008, the company aims to produce 250,000 to 270,000 ounces of gold and 17 million to 18 million ounces of silver. The management foresees record production growth and financial results in 2008. The start of the Albazino project in 4Q 2008 and the active prospecting phase of a project in Kubaka, whose first results are to be released to JORC standards in 1Q 2009, are two more factors benefiting the company.
We retain our positive outlook on the company and assign a HOLD recommendation on its stock, with a target price for the shares of USD 9.05 per share.
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