Russia's Polyus Reports Record EBITDA of $5.7 Billion in 2024

Russia's Polyus, the country's largest gold producer, has reported a record EBITDA of $5.7 billion in 2024, marking a significant increase from the previous year. The company's strong performance was driven by higher gold sales volumes and more favorable gold prices. Polyus' EBITDA margin in 2024 was 70.30%, which is significantly higher than the industry average of around 40-50% for gold mining companies. This indicates a strong operational performance compared to its peers.

Polyus' exceptional EBITDA growth in 2024 was driven by several key factors:

1. Increased gold sales volumes: Polyus sold 1,263 thousand ounces of gold in the first half of 2024, which was broadly flat compared to the same period in 2023. However, the company accumulated inventories of around 210 thousand ounces of gold content, mainly in the form of floatation concentrate, which will be sold throughout the second half of the year. This will contribute to higher gold sales volumes and, consequently, higher EBITDA in the full year of 2024.
2. Higher average realized refined gold price: The average realized refined gold price in the first half of 2024 was higher compared to the same period in 2023. This increase in the average gold price positively impacted Polyus' revenue and, ultimately, its EBITDA.
3. Rouble depreciation: The depreciation of the Russian rouble during the reporting period had a positive effect on Polyus' EBITDA. A weaker rouble makes exports more competitive, which can lead to higher sales and profits for the company.
4. Higher head grades at certain mines: Polyus noted higher head grades at Blagodatnoye, Natalka, and Kuranakh, which contributed to lower cash costs and higher EBITDA.

However, the sustainability of these factors in the long term is uncertain:

* Gold sales volumes: While Polyus has accumulated inventories of gold content, these inventories are not infinite. Once they are sold, the company will need to maintain or increase its production levels to sustain higher gold sales volumes.
* Gold price: The gold price is subject to market fluctuations and is influenced by various global factors. While Polyus may benefit from higher gold prices in the short term, there is no guarantee that this trend will continue in the long term.
* Rouble depreciation: The rouble's value is influenced by various economic and political factors. While a weaker rouble can be beneficial for Polyus, a significant and sustained depreciation could also lead to higher input costs, potentially offsetting the benefits.
* Head grades: Head grades can vary from year to year and are influenced by the mining sequence and the depletion of high-grade ore bodies. Polyus has already indicated that it expects a planned decline in grades in ore mined at Olimpiada, which could negatively impact its cash costs and EBITDA in the future.

In conclusion, while the factors contributing to Polyus' exceptional EBITDA growth in 2024 are significant, their long-term sustainability is uncertain and will depend on various internal and external factors. Investors should closely monitor the company's performance and the broader gold market to assess the potential for continued growth and value creation.