http://www.kitco.com/charts/livegold.html

cheers GF.

Petropavlovsk Bullish on Gold but Works to Cut Costs

By Iain Packham (Dow Jones)

LONDON--"Peter Hambro, chief executive of one of Russia's largest gold miners, Petropavlovsk PLC (POG.LN), remains bullish on the future of the precious metal, despite the recent drop in price which has forced the company to seek cost cuts and hedge almost 50% of its planned 2013 gold production.

"It doesn't matter whether you talk about confiscation of people's deposits in Cyprus, or the impossibility of paying back much of the world's debt, or a Japanese determination to devalue their currency, there are such a huge list of things that are bad news, I'm sure that the gold price won't go down substantially," Mr. Hambro told Dow Jones Newswires in an interview.

The CEO said the company is forward-selling 46% to 47% of its forecast production to "relationship banks" over a period of 14 months ending March 2014. The forward sales contracts will be settled with cash at an average price of $1,663 an ounce.

The company is targeting production of 760,000 to 780,000 ounces of gold in 2013.

Gold was trading at $1,425 an ounce on the spot market Tuesday morning. So far in 2013, it has hit a high of $1,692 an ounce and a low of $1,378 an ounce, according to FactSet.

Despite Mr. Hambro's bullish outlook for the gold price, Petropavlovsk is working to cut costs in light of major upcoming capital spending programs and debt tests.

In a note to investors, JP Morgan estimates that gold will need to average over $1,400 an ounce for the rest of 2013 and exceed $1,500 an ounce in 2014 to avoid breaching Petropavlovsk's covenant of four times net debt to earnings before interest, tax, depreciation and amortization.

The group's estimated net debt at March 31 was $1.2 billion, about 10% higher than at Dec. 31, 2012 and in line with the profitability profile of the group, which is skewed towards the second half of the year, and its continuing investment program.

"The whole purpose of our re-examination of what we're doing and how we're planning the future is to be sure that we don't breach covenants, Mr. Hambro said, adding: "We've got a whole army of people sitting in Blagoveschensk coming up with a strategic plan that will change the profile of the company."

Currently, the group's plan is to either to conserve cash while concentrating on moving newly discovered resources into mineable resources, or a temporary slowdown of projects in order to free cash and repay the debt earlier.

Mr. Hambro expects to announce the results of its strategy review towards the end of May. "

"Petropavlovsk has investors worried about its ability to finance growth despite a falling gold price. After all, net debt for the group stands at about £787m compared with its market capitalisation of £250m. Nevertheless, The Telegraph's Questor team believes the company's Chief Executive was probably right when he told the newspaper that such fears are wide of the mark. Yes, the outfit will take longer to pay back its debt but access to financing is not such a problem in Russia and half of this year's production is hedged against price fluctuations. "Trading on an earnings multiple of just 4, falling to 3 next year, the shares are a buy for the more speculative part of your portfolio," Questor says."

Canaccord Genuity Buy 140.10 137.40 600.00 510.00 Reiterates

Amazing how consensus can differ (nasty oxymoron). The bit "the shares are a buy for the more speculative part of your portfolio" seems about right to me!

Harry - amazing about sums it up, I can't remember seeing so much diverse opinion before.

Was thinking it may be worth having for the divi which is due 26th june (ex) but I see it's only 2p this time. Interim divi is better in Oct.

I've got them via S/B but am thinking of buying a few - hmmm!

Chart forming a nice solid base between 130 - 140p? Lots of things to consider here, not least where you think the gold price is going. Assuming many western economies stay weak for the rest of the year, I can't see gold falling far, but a real shame POG hasn't any other strings to it's bow. Too tied to gold spot price after march 2014.

Canaccord comment today:
"Petropavlosvk shares, in our view, are trading as if the company will sleepwalk into debt covenant test failures. At the current gold price we estimate the group will just creep under its covenants. The company is already showing signs of cost and cash discipline, which we believe will help as management engages with lenders to ease/ waive covenants. Given the hedge in place for 2013/14, we estimate US$1,370/oz is the minimum gold price needed from now to avoid a covenant breach. We also estimate management could realise up to US$40M pa in cost/capex savings and up to US$555M in disposal proceeds. This could allow management to negotiate temporary waivers of its debt covenants, reducing the pressure weighing on the name. POG shares are trading at 5.1 times 2013E and 2.7 times 2014E EV/EBITDA. Our unrisked NAV is 706p, and at spot gold and a 5% discount rate it is 584p. At 0.23 times our spot NAV the shares are the cheapest of the large gold producers listed in London. This highlights the value on offer to investors as management plots its route to reduce debt through 2014 and 2015."

Citigroup Sell 150.15 142.80 141.00 132.00 Reiterates

sp up 9% Citigroup really know their onions!

POG has a very poor record for all sorts of reasons .... as you should know, once a company loses the confidence of the market, it is very hard for it to regain its credibility

Date Broker New target Recomm.
25 Apr Citigroup 132.00 Sell
24 Apr Canaccord... 510.00 Buy
24 Apr JP Morgan... 420.00 Overweight
24 Apr Westhouse... 250.00 Buy
23 Apr Liberum Capital N/A Buy
23 Apr Canaccord... 600.00 Buy
23 Apr Westhouse... 365.00 Buy
23 Apr Bank of... 530.00 Buy
17 Apr Westhouse... 365.00 Buy

Nevertheless, all other brokers are positive!

no one ever believed Cassandra either ..... no, i don't mean rodney's gf/wife!

No you're right, though many of her predictions were correct. She was murdered in the end, having previously predicted the fall of Troy. I hope you are not alluding to any similarities with POG!!! ;o)

cynic recent news from POG confirms production is on target, all gold mining shares have fallen in line with the drop in the gold price caused by short selling, maybe Citi are jumping on the vampire squids band wagon.

harry - your story about cassandra is about as accurate as some of fred's posts! :-)

hali - i'm a holder of these too, but their performance over recent years has been more than tiresome

It was very brief, with many omissions, but not inaccurate methinks!

do i really have to teach you :-) ??

in a nutshell .....

cassandra was the daughter of king priam of troy
she upset apollo who then cursed her with the gift of perfect foresight but also of never being believed
following the fall of troy, she was abducted to become the concubine of king agamemnon of mycenae
clytemnestra, who was agamemnon's wife, then had both cassandra and agamemnon murdered


like i said, you were about as accurate as some of fred's posts!