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Aton - GAISKY GOK: 2009 RAS Financials Exceed Expectations - May 25, 2010.

We have analysed Gaisky GOK's (GGOK) FY09 and 1Q10 results, which were published in a report dated 13 May 2010. The results for FY09 exceeded our expectations, which is positive news for the share price, and supportive of our forecasts. The 2009 results were ahead of our expectations in terms of both EBITDA and net income.

(To view the full report please click here:

EBITDA for the year was $106mn, 16% above our forecast of $91mn, largely due to a substantial reduction in costs (down 27% YoY) and a slightly higher sales figure than we had expected. The EBITDA margin in 2009 expanded to 36% vs 23% for FY08.

Net income in 2009 was $41mn, also 16% ahead of our $35mn estimate. This was almost four times higher than in 2008. The net margin thus jumped from 3% in FY08 to 14% in FY09.

GGOK's YE09 gross debt was in line with our expectations, at $231mn. However, thanks to higher EBITDA last year, the FY09 gross debt/EBITDA ratio declined to 2.2x from 3.2x at YE08. Our estimate for YE09 was 2.5x. On a slightly negative note, working capital grew more than we forecast, rising by $53mn vs an estimated $33mn. This was predominantly due to a quicker reduction in accounts payable than we forecast.

The company also reported RAS financials for 1Q10. Net income for the quarter was $25mn, resulting in a net margin of 24%, in line with our expectation of an average net margin of 23% for 2010.

Current forecasts for GGOK unchanged. However, we believe that GGOK's FY09 and 1Q10 results provide strong support for our forecasts for 2010.



- GGOK is the second-largest copper concentrate producer in Russia after Norilsk Nickel. Copper concentrate and gold bars are its major products, which we expect to contribute up to 86% of sales in 2009. GGOK has an attractive opportunity to grow organically by increasing its enrichment plant capacity to allow it to process higher ore volumes (up 33%, from 6 mntpa of ore processing currently to around 8 mntpa by YE13). The significant upside offered by this growth option is well reflected in our DCF calculation. In addition, Russian copper producers are significantly undervalued vs global peers. Finally, the copper price has recovered to its pre-crisis levels, while the stock is still trading far below its previous maximums.

Aton OOO (LLC)

27 Pokrovka str., bld.6, 105062



(495) 777-66-77

(495) 228-38-99

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Publication:Russian Banks and Brokers Reports
Date:May 25, 2010
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