NKMK received its first rating from Standard & Poor’s. Details on the status of the largest companies in Uzbekistan

S&P Global Ratings, an international rating agency, gives Navoi Mining and Metallurgical Consortium its first credit rating GaveUzbekistan’s largest companies received a “BB-” rating with a “stable” outlook, which corresponds to Uzbekistan’s sovereign rating.

S&P analysts rated the company’s credit portfolio at ‘bb+’ but noted that the company is fully state-owned, has strong representation on the board and is the company’s largest source of government revenue, so there is a risk of potential negative government intervention.

In 2023, NKMK’s gold production was 2.9 million troy ounces (90.2 tons), ranking fourth in the world. It is planned to reach 3.1 million troy ounces (96.4 tons) by 2024 and 3.5 million troy ounces (108.8 tons) by 2030.

The price of processed gold at NKMK is $745 per ounce (the precious metal is sold on the world market for more than $2,360). This is one of the lowest indicators in the world (representative of the combine harvester) That’s it ——is the lowest).

These low costs are due to cheap labor, mainly open-pit mining, high-quality ore, a well-developed production base, and transportation and maintenance infrastructure (including railways).

The company’s mineral resources are estimated at around 148 million ounces (4,600 tonnes), which will allow it to remain the world’s largest gold miner for many years. Meanwhile, 60% of production goes to the largest mine, Muruntov-Mutenbey, one of the largest in the world, but any major incident there could severely affect the plant’s performance and cash flow.

Given the current favorable gold price environment, NKMK expects to achieve strong operating and financial performance in the coming years: S&P-adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $3.3 billion in 2024 and $3.3 billion in 2023. 9-4 billion US dollars.

This is largely due to the agency’s forecast that the average gold price will rise from $1,944 per ounce in 2024 to $2,150 in 2023. The analysts expect gold prices to fall from a record $2,000 in 2025 to $1,700 in 2026 and beyond, pushing EBITDA to between $3.5 billion and $3.6 billion in 2025, $2.6−2 in 2026, and possibly as low as $7 billion.

Still, the company can easily fund relatively modest capital expenditures of $450-550 million per year, which should ensure continued growth in organic production.

NKMK is the largest source of revenue for the state budget – 16.7% of all revenue came from royalties, income taxes and dividends in 2023. The company distributes more than 100% of its revenue to shareholders representing the state (for example, by providing financial support to the state, as in the case of Almalik KMK in 2022).

Meanwhile, the company’s own cash reserves are estimated at just $2 million – “an extremely small amount for a company of this size.”

“We understand that NKMK pays all cash it collects as dividends to the government on a monthly basis, which results in it facing liquidity shortages in the event of operational disruptions. Over time, we expect NKMK to develop a history of more prudent liquidity management and financial stewardship and access to capital markets, thereby reducing its reliance on cash flows for liquidity,” the report said.

Gold mining involves the use of large amounts of energy, chemicals and water. Given that NKMK’s production facilities are located in the Kyzyl Kum Desert, water is a particularly sensitive issue.

Much of Uzbekistan, along with several neighboring countries, relies on water from just two rivers, the Amu Darya and Syr Darya, and their tributaries. A rapidly growing population, intensive agricultural and industrial use, and huge losses and glacial infusions into the rivers could make water a major scarce resource in Uzbekistan in the coming years, S&P said.