Yuzhuralzoloto: Examining the Company’s Shares
YuGK ranks among Russia’s top 6 gold producers and sellers. The company’s primary assets are situated in the Chelyabinsk region, forming the Urals hub, as well as in the Krasnoyarsk region and the Republic of Khakassia, comprising the Siberian hub.
Initially, the group’s fields (Svetlinskoye and Kochkarskoye) were located in the Chelyabinsk region. From 2001 to 2019, the company expanded its fields predominantly within the Siberian hub. Currently, three projects are in the active implementation phase simultaneously: the Kurasan mine, the Vysokoye mine, and the expansion of the Kommunar mill.
Konstantin Strukov has been the company’s main shareholder since 1997, with YuGK being his primary asset. Since 2008, he has served as the President of UK YUGK LLC and Chairman of the Board of Directors of Yuzhuralzoloto Group of Companies.
The company’s Board of Directors comprises 9 members, including Strukov, and two independent members chair the Remuneration and Nomination and Audit and Risk Committees. The top management and the board collectively possess an average industry experience of over 20 years and an average experience at SUTC of over ten years.
With an average size and cost level, the company envisions robust growth ahead. As a top 6 gold producer in Russia, it aims for a stable 15-20% annual growth in group production from 2024-2027, driven by three growth projects.
SouthGC intends to expand its operations in both main regions – the Chelyabinsk region (Ural hub, one growth project) and the Krasnoyarsk region (Siberian hub, two growth projects). The Siberian Hub’s contribution to production is projected to increase from 45% in 2022 to 58% in 2027. The group’s production is expected to rise from 430 kg in 2023 to nearly 740 kg in 2026 and 900 kg in 2028.
On the global Total Cash Costs curve, the company is positioned just above the midpoint of the third quartile.
We anticipate that capacity growth will not impact SouthGC’s position on the cost curve, and the EBITDA margin will remain within the historical range of 45-50%, owing to a moderate increase in the average gold grade to slightly over 1 g/t (2022: 0.94 g/t). The company’s resource base can sustain over 50 years of production at 2022 levels.
In conclusion, Yuzhuralzoloto stands out as a formidable player in the gold production industry, with promising prospects for growth and expansion.
The company’s robust strategy and its significant projects in the pipeline underscore its potential to maintain a steady growth pace. The blend of experienced management, geographical diversity, and a strong resource base augments its competitive edge, positioning it for longevity in the market.
The company’s dedicated efforts toward increasing production while maintaining a steady EBITDA margin reflect its commitment to profitability and sustainable operations. Thus, with its strategic plans and a strong foothold in the industry, Yuzhuralzoloto is set to uphold its place as a prime choice for investors.