LONDON (Alliance News) - Petropavlovsk PLC Wednesday said its pretax loss narrowed in 2014 as it slashed costs across the board, offsetting a revenue decline due to lower production, and the company said it expects to increase production and reduce costs further in a heavily second-half weighted 2015.
The Russia-focused miner reported a pretax loss of USD347.7 million in 2014, less than half the USD713.2 million loss it reported in 2013, even though revenue fell to USD864.9 million from USD1.19 billion.
Its operating expenses fell to USD816.2 million from USD1.66 billion, improving the company's operating profit which stood at USD51.7 million in 2014 compared with a USD467.7 million loss in 2013.
Antofagasta said it has not disclosed its cash costs previously, but said it has made a 22% reduction in all-in sustaining cash costs to USD970 per ounce from USD1,248 an ounce, whilst all-in costs fell 24% year on year to USD1,088 an ounce from USD1,439 an ounce.
"This year, we are publishing our all-in sustaining cash cost for the first time. I am pleased to note that, in spite of the reduced number of ounces produced, our AISC at USD970 ounce compares well with our peers, especially when adjusted for absolute production numbers, and represents a 22% reduction on our capital intensive year in 2013," said Chairman Peter Hambro.
Antofagasta also reduced central administrative costs by 17% to USD38.2 million from USD45.8 million and capital expenditure for its gold division was slashed by 60% to USD97 million from USD237.0 million in 2013, in line with the company's guidance.
The company's results also benefited as investment income rose to USD1.7 million, from only USD888,000 in 2013, and as interest expenses fell to USD67.7 million from USD75.3 million.
Antofagasta said it plans to cut a further 10% to 15% of operating costs in 2015 by creating an "optimal, sustainable operating model" for each individual mine whilst being careful with capital allocation.
Production in 2014 reached 624,500 ounces of gold, hitting the company's target, and Antofagasta said gold production at the Albyn mine was up 38% year on year, adding that it will be the "backbone" of the company's future production expansion.
"The group's successful operational performance in 2014 was masked by the publicity surrounding its refinancing so it is worth reminding ourselves that in 2014, we produced 624,500 ounces of gold, in line with previously stated guidance. Partly due to the sale of its Berelekh operation during the third quarter of 2013, which operated high-cost alluvial operations in the Magadan region, 2014 production was lower than the 741,200 ounces of gold produced in 2013," said Hambro.
Antofagasta also released production figures for the first quarter of 2015. Production in the quarter fell to 112,800 ounces of gold compared with 159,100 ounces a year earlier due to a "scheduled" decrease in average grades while the mine sites focus on stripping high grade areas which will be mined in the second-half of the year.
Looking to the rest of 2015, Antofagasta is aiming to increase full year production by 9% to 10% to hit between 680,000 to 700,000 ounces of gold, mainly driven by the higher grade material it plans to mine in the second half of the year.
Gold sales in the first quarter of 2015 totalled 110,600 ounces, down 31% year on year due to lower levels of production. Gold prices have also fallen in the period to an average of USD1,217 per ounce from USD1,403 an ounce a year earlier.
Antofagasta plans to continue cutting costs, with capital expenditure falling to USD35 million, split as USD24 million on exploration and USD11 million on development and maintenance whilst cash costs are set to fall below USD700 per ounce due to cost cutting measures and the depreciation of the Russian rouble.
"Overall, I am extremely encouraged by the developments at Petropavlovsk over the past year and believe we have now established a far stronger operational and financial platform that will enable us to exploit our excellent resource base and deliver significant returns to our shareholders over the coming years," said Hambro.
Petropavlovsk shares were up 0.5% to 5.88 pence per share on Wednesday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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