Polymetal (MCX:POLY) reaffirmed its 2022 production guidance of 1.7 million gold equivalent ounces, the company said in a statement.

“Due to COVID-related restrictions in the PRC, as well as the impact of sanctions, significant sales logistics challenges remain, resulting in slower inventory turnover and higher selling costs. The Group expects the sales backlog to lag behind production and, following this, finished goods inventory levels to peak in September,” the press release reads.

“Sales of gold bars and concentrate from Russian operations to various Asian markets have returned to normal after significant declines in April and May related to quarantine restrictions,” the company said.

The terms of sales are the same as before. At the moment Polymetal neither directly nor indirectly sells its products to the Central Bank of Russia or its affiliates.

Sales of gold bars and concentrate produced in Kazakhstan continue as usual.

Works on medium-term development projects (AGMK-2, Kutyn, Krasnoturyinsk-Polymetal flotation plant, Prognoz) are progressing according to the previously announced plans. At the same time, the sharp strengthening of the ruble and ongoing logistical challenges are putting significant pressure on capital expenditures, the company said.

The company will announce its Q2 2022 production results on July 21.

The company continues to accumulate stocks of silver bars due to the lack of reliable export channels and domestic sales opportunities. Supply negotiations with international commercial and industrial entities are underway. The share of silver bars in the sales structure is expected to be less than 5% in 2022.

The company’s net debt increased to $2.3 billion as of June 1 from $2 billion as of March 31, 2022, mainly due to a large increase in working capital and accelerated purchases. 74% of the debt is denominated in dollars.

The company has approximately $0.3 billion of cash on deposit with non-sanctioned financial institutions. In addition, the company has $0.4 bln of unused credit lines from non-sanctioned banks. In aggregate, this covers the expected debt repayments in the next 6 months, the gold miner said.

Polymetal currently uses dollar loans with lower interest rates to finance short-term working capital needs. The company recently opened new revolving credit facilities for $0.2 bln and plans to sign an additional $0.3 bln revolving credit facility in June.

Polymetal continues to adapt purchases to current realities, systematically replacing sanctioned equipment and consumables with Russian and foreign analogs. Most of the existing contracts with foreign suppliers continue to be fulfilled, and the company maintains a significant stock of critical consumables and spare parts.

Commenting on the possibility of share repurchase, the company stated that “the board of directors and management believe that a share repurchase is not appropriate at this time due to short-term liquidity constraints, significant uncertainty in the business environment and the situation with NSD.”

The company will announce its decision to pay an annual dividend for 2021 and an interim dividend for 2022 on September 22 during the announcement of its financial results for the first half of 2022. “In making this decision, the group will take into account key factors such as the significant challenges and delays in establishing new sales channels, and the resulting lower cash flows from operations,” the gold miner explained.

The Board of Directors approved the appointment of MHA MacIntyre Hudson LLP (an independent member of Baker Tilly International Limited) as the Group’s auditor together with JSC Business Solutions and Technologies (formerly JSC Deloitte & Touche CIS) as auditors of significant components of the group.