LONDON (Alliance News) - Trans-Siberian Gold PLC Thursday said the devaluation of the rouble, a rise in production and lower costs all helped to offset lower gold prices, multiplying pretax profit in 2015 five times over from 2014.
Even so, Trans-Siberian shares were down 6.9% to 37.70 pence per share on Thursday morning.
The miner produces both gold and silver from its flagship Asacha mine in the Kamchatka peninsula of the Russian Far East. It has been up and running under the company's control for around four years, and although production rose in 2015, it was a reduction in costs that pushed the profit up, as commodity prices declined.
Revenue in the year fell to USD44.1 million from USD46.2 million as the price of gold and silver were both noticeably lower in 2015 than in 2014, but a large reduction in costs allowed Trans-Siberian to push its gross profit for 2015 up to USD14.6 million from USD10.4 million.
Expenditure on administration and finance both fell year-on-year and the loss on foreign exchange also declined, helping to contribute toward the higher pretax profit for the year of USD6.6 million compared to USD1.3 million last year.
Asacha produced 5.3% more gold in 2015 than in the previous year, totalling 37,984 ounces, whilst production of silver was 11% higher year-on-year at 49,398 ounces. The plant at the mine processed an average of 13,437 tonnes of ore per month, a 3.0% lift.
Silver and gold go hand-in-hand, as they are often found together, but silver is mainly seen as a by-product as the value of each ounce is so much lower than gold, but the two prices are still intertwined, meaning the fall in gold prices in 2015 also impacted silver.
The average gold price in 2015 that the company received was USD1,146 per ounce compared to USD1,256 per ounce in 2014, an 8.8% drop, whilst silver prices fell almost 17% to USD15 an ounce from USD18.
Although that offset the rise in production, Trans-Siberian took enough action to counter those price falls by reducing its production costs, which will also mean the company is likely to benefit from the rally in gold prices since the start of 2016.
Trans-Siberian's cost of sales was over 9.0% lower year-on-year, boosted by the depreciation of the Russian rouble, whilst cash costs were 13% lower.
The company said Asacha, based on a gold price of USD1,200 per ounce, which is lower than current spot prices, would have life of mine cash costs of USD620 per ounce and a cash cost including royalties and taxes of USD703 per ounce, adding that the cost rises to USD1,009 per ounce one depreciation, capital expenditure and other costs are taken into account.
Overall, that means Trans-Siberian earns a margin of USD191 per ounce at a USD1,200 gold price. But based on the spot gold price Thursday of USD1,258 per ounce, the miner would be able to achieve a margin of USD249 per ounce.
Gold prices have soared by 18% since the beginning of 2016, boosting the value of gold miners and going against the declining trend experienced between 2014 and 2015.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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