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UPDATE 1-Russia's Petropavlovsk hit by loss, write-offs
August 29, 2013 / 7:32 AM / 4 years ago

UPDATE 1-Russia's Petropavlovsk hit by loss, write-offs

* Petropavlovsk posts H1 net loss of $742 million

* Expects demand for physical gold to underpin prices

* On track to reduce net debt to below $1 billion

* Shares down 7 percent, underperforms FTSE Gold Mines Index

MOSCOW, Aug 29 (Reuters) - Russia-focused gold miner Petropavlovsk posted a first-half net loss after a gold price slump forced it to take about $600 million of impairment charges, sending its London-listed shares sharply lower.

Precious metals producers have had to write down billions of dollars after gold price fell 15 percent since the start of the year.

“These (impairments) have severely affected our earnings,” Peter Hambro, Chairman of Petropavlovsk, said in a statement.

Petropavlovsk recorded a net loss of $742 million in the first half of 2013 compared to an $11 million profit for the same period last year. Its revenue was up 9 percent at $597 million.

Petropavlovsk is the hardest-hit by write-offs among Russian gold producers, after its rival Polymetal took an impairment of $305 million. Russia’s top gold miner, Polyus Gold , has warned of that write-offs could hit $480 million.

Petropavlovsk shares were down 7 percent by 0702 GMT, compared with a 2 percent fall in the FTSE Gold Mines Index .

The company has factored in gold price of $1,300 per troy ounce for write-offs compared to a current market price of around $1,411 per ounce.

“I have reason to believe that demand for physical gold - as opposed to paper promises of gold - is strong and that this will, as a minimum, underpin the gold price in the coming year,” Hambro added in the statement.

The company also maintained 2013 production target of 760,000-780,000 ounces on Thursday and added that it had $59 million in cash and equivalents and $123 million in undrawn facilities at the end of 2013.

Its net debt is expected to be less than $1 billion by year-end, down from $1.15 billion as of June 30.

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