Not so long ago investors favouring gold turned their noses up at gold miners, which regularly wasted shareholder funds and left little income behind. All has changed. Shares in the largest producers, including Russia’s Polymetal, increasingly outpace the gold price and pay decent dividends as well. Polymetal’s first-half results on Wednesday came with even better news — a doubling of its interim dividend over last year, implying a yield over 5 per cent. Gold bulls, even those reticent to invest in Russia, must admire the miner’s success.

It does have a fair wind behind it, never mind the gold price. That has surged by a quarter this year. Weaker exchange rates — in both Russia and Kazakhstan — have pushed down all-in costs by 3 per cent to $880 an ounce, very low among its peers. Together with higher gold and silver prices, first-half operating cash flow more than doubled to $300m.

Having said that, the big dividend increase boosted net debt. Although the miner did report some free cash flow, the surge in dividend outflow to $291m and a seasonal pick-up in working capital — which also drains away cash flow — meant net debt has risen above ebitda. That should not continue in the second half since the bulk of the dividend payout comes at the interim, and working capital should decline.

Yet all this depends on gold prices staying strong. As academics at Duke university point out, gold’s value, adjusted for inflation, has returned to the peaks of the 1970s stagflation era. As other economically sensitive commodities such as copper and oil rebound, gold should lose its lustre. At least Polymetal has placed sensible limits on its largesse, promising to pay half of its free cash flow in dividends only if net debt stays below 2.5 times ebitda.

Gold bugs will like that Polymetal can promise both production growth — 17 per cent by 2025 — and income. But even those who have doubts should take comfort in the company’s well-run finances.

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