Polyus Gold International Ltd. (PLZLY) is decoupling from the metal as the stock gets dragged down by concern Russian President Vladimir Putin will fail to deliver on his pledge to diversify the economy.
The 120-day correlation coefficient of Polyus and gold futures fell to 0.16 yesterday, the lowest in a month, after the Russian producer sank 2.3 percent in August as the metal gained 4.6 percent. Barrick Gold Corp. (ABX), the world’s largest producer of the metal, surged 15 percent last month. The Bloomberg Russia-US Equity Index (RUS14BN) of the most-traded Russian companies in New York increased 3.3 percent to 92.93 in August. The RTS stock-index futures gained 0.2 percent to 140,730 yesterday.
Gold rose 1.8 percent on Aug. 31 after Federal Reserve Chairman Ben S. Bernanke didn’t rule out more stimulus to boost the economy in his speech in Jackson Hole, Wyoming. Polyus, controlled by Russian billionaires Mikhail Prokhorov and Suleiman Kerimov, holds the world’s third-largest gold reserves with over 90 million ounces, according to the its website. Russian stocks have trailed peers this year on concern Putin won’t undertake the changes necessary to reform the economy.
“The stock has been suffering from perception of Polyus as a Russian company, rather than a global gold producer,” Nikolay Sosnovskiy, an analyst at VTB Capital, said by phone on Aug. 31 from Moscow. “It’s changing now. The outlook for Polyus is very good and it has every chance to rise at a faster pace than gold.”
U.S. markets were closed for the Labor Day holiday yesterday. The stock’s 60-day correlation with gold reached -0.02 on Aug. 30, the lowest level in a year, before rebounding to 0.27 yesterday.
Moving to U.K.
Gold surged 70 percent from the end of December 2008 to June 2011 as the Federal Reserves kept borrowing costs at a record low and bought $2.3 trillion of debt in two rounds of quantitative easing. Polyus gained 39 percent over the same period of time.
Bernanke, speaking on Aug. 31, two weeks before the next meeting of the Federal Open Market Committee, emphasized that a new round of bond purchases is an option.
Polyus moved its domicile to Jersey in the U.K. from Moscow last year to broaden its investor base and bolster its value. The company’s shares were admitted for premium listing on the London Stock Exchange in June.
“Those who invest in gold producers, rather than those who invest in Russia, should be looking at Polyus after it has moved it domicile, that’s the idea behind the move,” Valentina Bogomolova, an analyst at UralSib Financial Corp. in Moscow, said by phone on Aug. 31. “That would increase their correlation with gold and away from the correlation with other Russian stocks.”
Putin, who returned to presidency last month after four years as premier, spoke in favor of state assets sales to create a “new, modern” economy at a time investors are fleeing his nation. The government will tackle corruption and ease an energy reliance after Russia got almost 50 percent of budget revenue from oil and gas sales last year, he said on June 22 at the St. Petersburg International Economic Forum.
Russia’s Micex Index has gained 2.6 percent this year, lagging behind the MSCI Emerging Markets Index’s 4 percent jump and the Standard & Poor’s 500 Index’s 12 percent rally.
Polyus is keeping its full-year production target of 1.5 million ounces of gold, Chief Executive Officer German Pikhoya said in an Aug. 30 interview in Moscow.
First-half adjusted earnings before interest, taxes, depreciation and amortization rose 59 percent to $634 million, beating the $606 million estimate of five analysts surveyed by Bloomberg News. Net income more than doubled to $426 million, Polyus said in a statement on Aug. 30.
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