Will Polymetal International PLC outperform Rio Tinto plc and BHP Billiton plc after 2017 results?

Does Polymetal International PLC (LON:POLY) (POLY.L) have more investment appeal than Rio Tinto plc (LON:RIO) (RIO.L) and BHP Billiton plc (LON:BLT) (BLT.L)?

Polymetal International PLC
Polymetal International PLC

Polymetal International PLC (LON:POLY) (POLY.L) has released full year results today. They show that revenue increased by 15% in 2017. This was driven by gold equivalent production growth of 13%. Average realised gold and silver prices were largely unchanged from their 2016 levels.

Total cash costs of $658/GE oz were 15% higher than in the previous year. However, this was towards the bottom end of the company’s updated guidance. The strengthening of the Russian Rouble was the principal reason for the higher costs.

Adjusted EBITDA was 2% lower than in the previous year, with higher costs being the key reason. However, I feel that 2017 was generally a successful year for Polymetal. It was able to increase production levels, with strong operational performance being recorded.

The company has reiterated its production guidance for 2018 and 2019 of 1.55 Moz and 1.7 Moz of gold equivalent. It expects production to be skewed towards H2 in both years due to seasonality.

In the last year the Polymetal share price has fallen 15%. That’s a worse performance than other FTSE 100 mining stocks such as Rio Tinto plc (LON:RIO) (RIO.L) and BHP Billiton plc (LON:BLT) (BLT.L). The Rio Tinto share price has risen 12%, while BHP Billiton has moved 10% higher during the same one year time period.

In my view, Polymetal continues to make good progress. A rise in production indicates that it is making improvements to its operational performance. Although costs were higher, the company’s overall outlook for profitability remains upbeat according to my research.

The gold price could move higher over the medium term in my opinion. The prospect of higher global inflation may increase demand for the precious metal and lead to a higher price. This could provide a catalyst to the company and also to the wider gold mining sector. Therefore, I’m optimistic about its future investment potential.

About Robert Stephens 3630 Articles
Robert Stephens is a CFA Charterholder and an Equity Analyst by trade. He is a passionate private investor who has been buying and selling shares for many years, owning a wide range of UK shares in the process. He has written for Citywire and The Motley Fool US and now runs his own business. To contact Robert, please email info@investomania.co.uk or use one of the other contact methods available on the 'Contact Us' page