Polyus CEO Discusses Future Plans Amid Rising Capex and Market Challenges
In a recent interview, Alexey Vostokov, the CEO of Polyus, Russia's leading gold mining company, shared insights into the company's strategic direction amidst rising capital expenditures and the complexities of the current geopolitical and economic landscape. Vostokov highlighted that Polyus is entering a phase of increased capital investments, particularly due to the Sukhoi Log project, with capital expenditures expected to peak between 2025 and 2027.
Polyus anticipates a significant uptick in capital expenditures for 2024, forecasting a more than 50% increase to between $1.55 and $1.7 billion. This surge is attributed to the natural investment cycle, preparations for the commencement of the Dry Log project, and inflationary pressures impacting both operating and capital costs. Vostokov pointed out that this period of heightened capital expenditure coincides with a challenging environment characterized by reduced accessibility to debt financing and an increase in the cost of borrowing.
Addressing the issue of dividends, Vostokov mentioned that the company's approach to liquidity management and dividend distribution must be prudent, especially considering the forthcoming investment demands. The decision to resume dividend payments will depend on the board's confidence in the company's cash flow adequacy for both its investment program and debt obligations.
When asked about potential new share buybacks and the utilization of previously repurchased shares, Vostokov stated that no new buybacks are currently under discussion. However, he noted that the repurchased shares could serve various purposes, including financing development projects, M&A transactions, or being redeemed.
For 2024, Polyus projects a slight decrease in production to 2.7-2.8 million ounces, with no expected growth in production until the launch of Sukhoi Log. The production cost is anticipated to rise from $389 to $450-500 per ounce due to inflation and higher costs for materials and equipment. Vostokov also discussed the challenges Polyus faces, including the impact of the ruble exchange rate stabilization and the anticipated decrease in grades for the group as a whole.
Regarding potential acquisitions, Vostokov expressed that Polyus prefers to acquire licenses and develop assets from scratch, focusing on projects that align with its strategic direction and competitive advantages.
Vostokov confirmed that Polyus is working on updating the project parameters for Sukhoi Log, which is considered the world's premier greenfield gold mining project. He also addressed the possibility of new bond issuances and other public debt instruments, mentioning that the debt capital market appears attractive for financing the company's upcoming capital expenditures.
