Transcript ЗАГОЛОВОК ПРЕЗЕНТАЦИИ

CERBA Russia/CIS Mining Conference:
Russian Gold Overview
9 March 2011
Robert Mantse, Director & Senior Metals and Mining Analyst
Gold – price performance
Gold price, 1970-2011, $/oz
Gold price, 2000-2011, $/oz
1,400
1,400
1,200
1,200
1,000
1,000
800
800
600
600
400
400
200
200
0
0
3/ 31/ 1970
9/ 30/ 1977
Source: Bloomberg
•
•
•
3/ 31/ 1985
9/ 30/ 1992
3/ 31/ 2000
9/ 30/ 2007
1/ 3/ 2000
9/ 3/ 2001
5/ 3/ 2003
1/ 3/ 2005
9/ 3/ 2006
5/ 3/ 2008
1/ 3/ 2010
Source: Bloomberg
We believe that a combination of factors will continue to support the gold price growth in the medium-term (next 2-4
years).
We predict the gold price will average $1,400/oz in 2011 and $1,350 in 2012.
However, there are a number of factors that can easily top the gold price to 1,500/oz or even higher .
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2
Russian gold
Russia gold mine production, 2000-2010, kt
185
169
159
157
1,500
1,386
1,300
165
1,100
900
150
739
700
105
507
500
100
444
301
300
170
137
123
115
Sovrudnik*
169
152
192
Susumanzoloto*
170
Vysochaishy
170
Highland Gold
200
Russia’s leading gold producers, 2010, koz
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Severstal
Polymetal
2010
Source: Russian Union of Gold Miners
Russia is the fifth largest gold producing country in the
world. In 2010 192 t of gold were produced in Russia.
This represents approximately 8% of total production
worldwide and a 4% increase on 2009, when 185 t
were produced.
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Petropavlovsk
Kinross Gold
-100
50
Polyus Gold
100
*annualized
Source: Company data
Polyus Gold is Russia’s largest gold producer, with
1,386 koz of gold production in 2010. In second place is
the Kupol mine, which constitutes the Russian operations
of Kinross Gold (75% equity stake in Kupol). Petropavlovsk,
Nord Gold (Severstal), and Polymetal round out Russia’s
top five producers.
3
Russian production
Major producing gold mines and deposits
Gold production structure by size of mines, 2008
2%
100%
6%
13%
90%
80%
18%
32%
14%
16%
11%
70%
60%
5%
5%
25%
50%
40%
30%
71%
20%
65%
74%
20%
10%
23%
0%
Russia
South Africa
>6 t
3-6 t
1-3 t
USA
Ghana
<1 t
Source: Petropavlovsk
Source: Company data, Russian Union of Gold Miners
Many of Russia’s gold mines are concentrated in the central
and eastern parts of the Amur Region. The Amur region has
a long gold-mining history, hence its well-developed
infrastructure and highly skilled workforce create favorable
conditions for companies to work and develop their projects.
Only 23% of the gold mined in Russia comes from large
mines (over 41 t of production). This contrasts sharply
with other large gold producing countries, such as South
Africa and the US, where larger mines produce the majority
of their gold.
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Silver - price performance
Silver price, 1970-2011, $/oz
Silver price, 2000-2011, $/oz
40
50
35
30
40
25
30
20
20
15
10
10
5
0
12/ 29/ 1970
0
6/ 29/ 1978
Source: Bloomberg
11/ 29/ 1985
5/ 29/ 1993
11/ 29/ 2000
5/ 29/ 2008
1/ 3/ 2000
1/ 3/ 2002
1/ 3/ 2004
1/ 3/ 2006
1/ 3/ 2008
1/ 3/ 2010
Source: Bloomberg
Since 1Q10, silver has traded in a tight price range ($17-$19/oz) and has moved in tandem with gold. However, a pickup in
investor interest occurred when the gold price surged in December, pushing silver to a 30-year high of $34/oz. This reflects a
substantial rise in the price of silver since 2000, when it traded at approximately $5/oz. A decade later, the price has climbed
380%.
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Silver - production
World silver production by country, 2009
50
37.9
30
23.0
21.2
18.8
17.7
17.6
17.3
16.9
Kazakhmys plc
Peru
19%
38.7
JSC Polymetal
42.0
40
Sumitomo Corp.
Turkey
2%
Coeur d'Alene Mines
Kazakhstan
3%
Poland
6%
Argentina
3%
Hochschild Mining
Canada
3%
World largest silver producers, 2009
20
United States
6%
10
Source: The Silver Institute
Cia. Minera Volcan
China
14%
Pan American Silver
Australia
8%
Fresnillo plc
Russia
7%
Bolivia
7%
0
BHP Billiton
Mexico
16%
KGHM Polska Miedź
Chile
6%
Source: The Silver Institute
Peru is the largest silver producing country, followed by Mexico, China, Australia and Bolivia with Russia in sixth place. Of the ten
largest silver miners globally, five are primary silver producers.
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Silver – demand and supply
Global silver supply 2007-2014E, t
Global silver demand 2007-2014E, t
29,200
30,000
24,200
25,000
19,200
20,000
15,000
14,200
10,000
9,200
5,000
4,200
0
-800
2006
Mine production
2007
2008
2009
Net government sales
2010E
2011E
Old silver scrap
2012E
2006
2013E
Producer hedging
Source: GFMS
According to GFMS, global silver mine production was
up nearly 2% to 21,645 t (673 million oz) in 2009. In
2010, silver mine production is expected to be 1.4%
higher – raising production to 21,951 t (683 million
oz).
2007
Industrial fubrication
2008
2009
Photography
2010E
2011E
2012E
2013E
Jewellery, silverware and coins
Source: GFMS
The demand for silver in the photography sector in 2009
continued its downward trend, decreasing 17% YoY. In
2009, scrap sales decreased slightly and central bank sales
were down by 3% vs. 2008. Industrial demand for silver
decreased from 13,909 t to 11,150 t a 20% decrease.
Compared to 2008, there was a small recovery in demand
for jewelry/ornaments, while coin minting saw a strong rise.
Most importantly, silver demand from investors rose to
4,112 t.
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Russian silver
Russian silver production, t
Russian’s leading silver producers, 2009
1,800
1,539
1,600
1,400
1,316
1,382
1,282
1,250
GMK Dalpolymetal
2%
Other companies
16%
Safiyanovskaya
Med - Medin
3%
1,200
1,200
Polymetal
39%
Gorevskiy GOK
3%
1,000
800
Siberia-Polymetals
4%
Gayiskiy GOK
5%
600
400
Norilsk Nickel
7%
200
0
2004
2005
2006
2007
2008
Uchalinskiy Gok
8%
2009
Chukotskaya GGK
13%
Source: USGS, MinFin
Source: Rosnedra
Russia is the sixth largest silver producing country in the
world, with its volume of silver production rising 11% YoY in
2009 to 1,539 t.
Polymetal is the largest overall silver producer in Russia.
With its silver assets such as Dukat, Lunoye, and
Goltsovoye, it accounts for about 39% of silver production
in the country. Mining companies like Norilsk Nickel, Gaisky
GOK, Uchalinskiy GOK, and Gorevsky GOK produce much of
the country’s remaining silver volumes, mainly as a byproduct.
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Shares price performance
Shares price performance, Jan 2008 – Feb 2011
Shares price performance, YTD 2011
40
110%
35
105%
30
100%
25
95%
20
90%
15
10
85%
5
80%
75%
0
1/ 2/ 2008
9/ 2/ 2008
Highland Gold
Source: Bloomberg
5/ 2/ 2009
Polyus Gold
1/ 2/ 2010
Polymetal
9/ 2/ 2010
Petropavlovsk
1/ 4/ 2011
1/ 19/ 2011
Highland Gold
2/ 3/ 2011
Polyus Gold
Polymetal
2/ 18/ 2011
Petropavlovsk
Source: Bloomberg
In 2008, we saw record gold equity prices in the first half of the year. During the second half of the year, there was a collapse in prices
due to the financial crisis – which began in September. Share prices bottomed out in November – before beginning there rebound.
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Polyus Gold
Main assets location
Production growth, moz
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2009
Blagodatnoye
2010E
Lenzoloto
2011E
Kuranakh
2012E
Natalka
Olympiada
2013E
Zapadnoye
2014E
KazakhGold
Source: Company data
Source: Company data
Polyus Zoloto OAO (Polyus Gold OJSC) is a Russia-based
company, which is involved in the mining and production of
gold.
The Company’s operating mines and exploration projects
are located in the gold mining regions of Russia: the
Krasnoyarsk, Irkutsk, Magadan, Amur Regions and the
Republic of Sakha (Yakutiya).
It also owns 50.1% of KazakhGold (3 operating mines in
Kazakhstan).
Polyus Gold has ambitious plans to increase production to 3
mozs annually by 2013.
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Target price,
$/share
Current price,
$/share
Upside potential
Rating
40.0
33.6
19%
BUY
10
Polyus Gold
Top five global mining companies by P&P reserves, mozs
Polyus’s Gold Capex program, 2009-2014E, $m
800
160
140
700
140
600
120
500
92
100
79
80
74
71
400
300
60
200
40
100
20
0
0
Barrick Gold
corporation
Newmont Miining
Corporation
Gold Fields
Polyus Gold
AngloGold Ashanti
2009
Blagodatnoye
2010E
Lenzoloto
2011E
Kuranakh
Natalka
2012E
Olympiada
2013E
Zapadnoye
Other
2014E
KazakhGold
Source: Company data
Source: Company data
While Barrick Gold is the world leader in both reserves (140
mozs) and production (7.4 mozs in 2009), Polyus Gold has
the largest gold reserves in Russia and the fourth largest
reserves in the world. With its 74 mozs of proven and
probable reserves (including 50.1% of 4 mozs of reserves
at KazakhGold).
For 2009 and 2010, the largest share of the company’s
Capex was spent on the Blagodatnoye mine. The mine
consumed 47% of FY09 Capex of $325m, and 34% of its
projected FY10 Capex of $596m. Going forward, the Natalka
project will start to consume the bulk of Polyus Gold’s
Capex: 70% in 2011, 64% in 2012, and 58% in 2013.
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11
Polymetal
Main assets location
Gold equivalent production growth, moz
1,600
Mayskoye
Chukotka
Region
1,400
1,200
Omolon
1,000
Dukat
Magadan
Region
Sverdlovsk
Region
800
600
Voro
RUSSIA
Khakanja
400
200
Varvara
Albazino
Khabarovsk
Amursk POX
Region
KAZAKHSTAN
Production
Development
0
2009
2010E
Albazino
Dukat
2011E
Khakanja
Kubaka
2012E
Mayskoye
2013E
Varvarinskoye
2014E
Vorontsovskoye
Source: Company data
Source: Company data
Polymetal is a Russian gold and silver producer. It has
mining and exploration operations in four Russian regions
the Magadan region, the Sverdlovsk region, the Khabarovsk
territory and Chukotka plus Kazakhstan. The main
customers for its precious metals, both in Russia and
abroad, are financial institutions.
By 2013, Polymetal aims to increase its gold production by
more than 200% to 977 koz from 311 koz in 2009 and its
silver production by 40% to 24.1 moz from 17.3 moz in
2009.
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Footer
Target price,
$/share
Current price,
$/share
Upside potential
Rating
18.7
18.9
-1%
HOLD
12
Polymetal
Polymetal’s Capex program, 2009-2014E, $m
P&P reserves
Degtyarskoye
1%
Varvarinskoye
10%
300
250
Sopka Kvartsevaya
4%
200
Dukat
39%
Albazino
19%
150
100
Yurievskoye
0%
50
Khakanja
7%
Arylakh
2%
0
2009
Lunnoye
5%
Vorontsovskoye
13%
Albazino
2010E
Dukat
Khakanja
2011E
Kubaka
2012E
Mayskoye
2013E
Varvarinskoye
2014E
Vorontsovskoye
Source: Company data
Source: Company data
Polymetal uses JORC standards to estimate its reserves and
mineral resources. As of 1 January 2010, Polymetal had 7.2
mozs of gold and 365 mozs of silver P&P reserves (this
equates to 13.2 mozs of gold equivalent reserves, using a
gold:silver ratio of 60:1).
Polymetal’s Capex program is projected to peak in 2010 as the
company prepares its Albazino and Mayskoye mines for
production and the Amursk hub moves towards completion.
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13
Petropavlovsk
Main assets location
Production growth, moz
1,400
1,200
1,000
800
600
400
200
0
2009
2010E
Pokrovskiy
2011E
Pioneer
Malomyr
2012E
Albyn
Tokur
2013E
Yamal
Other
2014E
JV's
Source: Company data
Source: Company data
Petropavlovsk is the third largest gold producer in Russia.
Commencement of the Pioneer and Malomir projects will
help Petropavlovsk realize its ambitious production
expansion plans. The company intends to boost annual
output from 491,300 ounces (in 2009) to 1.1m oz. in 2013.
The main gold-mining assets are located in the Amur Region
and are concentrated in two areas: Pokrovskiy and Pioneer
are situated in the center of the region, while - Malomir,
Albyn and Tokur are in the east. Petropavlovsk also has
projects on the Yamal Peninsula and in the Magadan region.
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Target price,
$/share
Current price,
$/share
Upside potential
Rating
19.8
17.6
12%
BUY
14
Petropavlovsk
Petropavlovsk Capex program, 2009-2014E, $m
P&P reserves
Tokur
2%
Pokrovskiy
10%
350
Albyn
19%
300
250
200
Pioneer
36%
150
100
50
Malomir
33%
0
2009
2010E
Pokrovskiy
Source: Company data
According to the company’s 2009 annual report,
Proved and Probable reserves calculated under the
JORC Code are 6.65 moz. The two jewels in the
company’s portfolio are the Pioneer and Malomir
mines.
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2011E
Pioneer
Malomyr
2012E
Albyn
2013E
Tokur
Yamal
2014E
2015E
Other
Source: Company data
Capital expenditures will peak in 2011 at $300m (our estimate).
In the following two years investment will gradually decline, as
the majority of necessary investments in the commissioning of
new capacities will already have been completed.
In 2014 and 2015, we expect a sharp reduction in investment,
since the end of 2013 should see current projects reaching full
capacity.
We assume that Petropavlovsk will announce new projects that
Require financing, but at the moment we there is no data on
this, hence we do not include such additional expenditures in
our estimates of the company's investment program.
15
Highland Gold
Main assets location
Production growth, moz
400
350
300
250
200
RUSSIA
150
100
MNV
KAZAKHSTAN
Zabaykalsk
Region
Novoshirokinskoye
Unkurtash
KYRGYZSTAN
Operating Mine
Development Project
Exploration
Blagodatnoye
Belaya Gora
Iska
Khabarovsk
Region
Taseevskoye
Lyubov
50
0
2009
2010E
2011E
Mnogovershinnoye
2012E
2013E
Novoshirokinskoye
2014E
Taseevskoye
2015E
2016E
Belaya Gora
Source: Company data
Source: Company data
Highland Gold is a relatively small gold-mining company,
with about a 2.5% share of total Russian gold production. Its
main assets are located in the Chita and Khabarovsk regions.
Highland Gold is is going to the launch Taseevskoye and
Belaya Gora deposits thereby production will more than
double by 2016. This year will already see a notable ncrease
in output due to the initiation of mining operations on the
Novoshirokinskoe and Belaya Gora deposits.
The main asset of the company is the Mnogovershinnoe
ine (MNV), with annual output around 160,000 oz of gold.
17.07.2015
Target price,
$/share
Current price,
$/share
Upside potential
Rating
2.6
3.0
-11%
HOLD
16
Highland Gold
P&P reserves
Highland Gold Capex program, 2010-2014E, $m
180
160
MNV
30%
140
120
100
80
60
40
20
Novoshirokinskoye
70%
0
2010E
2011E
Mnogovershinnoye
Source: Company data
•
P&P reserves of the company according to the JORC
classification at YE09 amounted to 1.3m oz of gold
resources.
•
In terms of reserves, the main source of gold for
Highland Gold is Mnogovershinnoe mine, with the
Taseevskoye mine set to replace it after 2016.
•
In 2010, total output will increase by 25% to 204,000 oz
of gold thanks to the beginning of operations on new
deposits.
17.07.2015
2012E
2013E
Novoshirokinskoye (50%)
2014E
Taseevskoye
2015E
2016E
Belaya Gora
Source: Company data
The Capex for its two main projects, Taseevskoye and
Belaya Gora, is around $385m. Capex is projected to peak in
2012 as these projects two projects near completion in the
following year. Beyond 2014, Capex should be much lower
as the emphasise will be on maintenance and some
exploration work.
17
Peers comparables
Polyus Gold OJSC
Polymetal JSC
Petropavlovsk PLC
Highland Gold Mining Ltd
High River Gold Mines Ltd*
KazakhGold Group Ltd*
Average
Senior gold producers
Agnico-Eagle Mines Ltd
AngloGold Ashanti Ltd
Barrick Gold Corp
Goldcorp Inc
Kinross Gold Corp
Newcrest Mining Ltd
Newmont Mining Corp
Average
Mid- tier gold producers
African Barrick Gold
Centerra Gold Inc
Eldorado Gold Corp
Harmony Gold Mining Co Ltd
Iamgold
Northgate Minerals Corp
Randgold Resources Ltd
Yamana Gold Inc
Average
International silver producers
Hochschild Mining PLC
Fresnillo PLC
Coeur d'Alene Mines Corp
Silver Standard Resources Inc
Silver Wheaton Corp
Pan American Silver Corp
Average
17.07.2015
Share
price, $
33.8
19.1
17.7
3.0
1.0
3.2
MktCap,
$, mn
12,886
7,608
3,317
962
877
388
25,651
2010E
26.0
31.8
13.0
9.5
7.7
n/ a
17.6
72.1
49.1
53.8
49.4
15.1
38.8
56.1
9.4
18.0
17.2
11.8
21.0
2.9
82.0
12.9
9.9
25.9
32.9
28.2
43.6
39.9
-
12,173
18,698
53,692
39,400
17,072
29,675
27,291
179,304
3,873
4,252
9,446
5,047
7,863
853
7,468
9,573
33,881
3,341
18,576
2,942
2,248
15,375
4,301
46,783
24.9
12.8
12.7
23.1
21.9
23.5
12.7
18.8
20.0
14.2
25.3
2.5
15.6
39.7
22.6
13.3
19.1
26.1
24.0
15.1
n/ a
57.0
18.2
28.1
P/ E
2011E
14.0
14.4
8.8
9.4
6.9
n/ a
10.7
22.2
13.9
12.5
19.1
15.5
17.4
11.9
16.1
15.3
9.6
17.8
1.7
16.4
58.6
15.3
13.4
18.5
18.8
19.5
12.1
39.0
28.8
17.2
22.6
2012E
11.5
12.5
6.0
21.9
7.6
n/ a
11.9
21.0
n/ a
12.1
18.5
18.0
15.4
13.8
16.5
12.0
10.2
n/ a
n/ a
16.3
14.4
15.0
15.7
14.6
20.6
13.6
11.9
26.2
29.2
25.5
21.1
2010E
16.2
20.4
8.1
4.9
4.1
0.9
9.1
12.6
7.7
7.2
12.4
8.3
12.0
5.2
9.4
10.2
8.4
14.0
1.2
8.4
4.8
11.9
7.4
9.0
10.6
13.4
6.0
160.3
47.2
8.9
41.1
EV/ EBITDA
2011E
9.5
10.1
5.9
4.7
3.8
0.7
5.8
11.2
8.3
6.9
10.3
6.8
9.3
4.8
8.2
8.7
6.0
10.6
0.9
9.3
7.0
9.1
6.9
8.1
6.4
6.5
5.3
14.9
24.8
8.6
11.1
2012E
7.8
8.8
4.2
7.6
4.1
0.5
5.5
11.9
n/ a
6.9
10.1
6.9
8.4
4.3
7.8
6.2
6.0
n/ a
n/ a
9.7
3.9
9.1
6.9
7.8
n/ a
7.2
7.4
5.9
11.3
24.8
12.1
11.4
18
Contact Information
Robert Mantse
Director & Senior Metals and Mining Analyst
Equity Research
Direct: +7 (495) 213 1832
Fax: +7 (495) 777 5614
Mobile: +7 (965) 396 0682
OTKRITIE Bank (JSC)
105064, Russia, Moscow, Yakovoapostolsky pereulok, 12/1
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