Petropavlovsk to cut costs as gold plummets

GOLD miner Petropavlovsk said yesterday that it is reviewing its capex strategy after the 15 per cent drop in gold prices this year.

However, the company said the review will not affect its production.

“The focus for 2013-14 has been to complete our major capital spending programmes and then commence the process of driving down the debt incurred to pay for those projects,” Peter Hambro, chairman of Petropavlovsk, said in a statement.

The company, whose net debt stood at $1.2bn (£790m) at the end of March, has prepared for the current volatility in the gold price via forward sales contracts.

Almost half of its production over a period of 14 months ending March 2014 is hedged at $1,663 per ounce.

Its gold production in the first quarter of 2013 rose 13 per cent over the same period a year ago to 136,800 ounces.

The firm also said it was on track to produce its target of 760,000 to 780,000 ounces of gold this year.

“Hambro said the sharp reduction in the gold price, which has fallen from approximately $1,700 an ounce at the beginning of January to a recent low of $1,380 an ounce, is causing the miner to review short to medium term strategy,” said Ronnie Chopra, head of strategy at Tradenext.

“Of course if gold does recover, or even climbs back above $1,500, at 90 per cent off their peak, the shares could easily double from current levels. I think the results today will re-iterate a positive spin on the company and highlight the low share price as unjustifiable. In short Petropavlovsk is a pure play on the gold price,” he added.