EBITDA . Petropavlovsk 's ( above market ) in 2011 beat Alpha's forecast and consensus by 14% and 10%, respectively The strong EBITDA result was not reflected in DP due to higher-than-expected growth in capital expenditure and working capital, which led to an increase in the net debt/EBITDA ratio. Management forecasts that costs will increase by 30-45% in 2012 due to a 27% decline in average ore grade. Lower metal grades mean higher ore production, which significantly increases operational risk and poses a risk to the company's production outlook. The cost outlook will likely cause us to revise our 2012 EBITDA guidance by approximately $100 million.

EBITDA exceeded the consensus forecast by 10%. EBITDA was $597 million, beating the consensus and our estimates by 10% and 14%, respectively. The main reason for the outperformance was a 5% decrease in production costs in the second half of 2011, while metal content doubled. We expected some smoothing of costs from 2011 to 2012, however, to the management's credit, this step was not taken.

An increase in debt against the backdrop of an increase in the outflow of personal loans. Record capital expenditures of $800 million and working capital growth of $250 million contributed to net debt rising to $787 million, pushing the net debt/EBITDA ratio to 1.3x from 0.9x in 2010.

Cost growth forecasts. Management forecasts that gold costs will increase by 30% to 45% primarily due to a 27% decline in average ore grades. Refining volumes should increase by 45%, which increases operational risks.

The forecast for 2012 has been confirmed. The company reiterated its forecast of 680,000 ounces and provided separate mine guidance. This forecast is conservative and, according to our calculations, includes only 9% of the planned expansion of capacity by 3.8 million tons at the Pioner and Albyn fields. Our production forecast, which is currently below the company's forecast, has some upside potential.

Positive news regarding the autoclave oxidation plant. The equipment will be delivered at the end of 2012E, which means that commissioning is possible at the beginning of 2014E. We are pleased with this announcement as it suggests that a delay in the start of production is unlikely.

Capital costs will decrease. Capital expenditure in the gold segment will decrease by $200 million to $350 million in 2012E, with further declines in 2013E. This reflects the fact that most major projects have been completed.

Dividend yield 2%. Management announced a total dividend of £12 per share, implying a yield of 2%. Management also said dividends could rise in the future due to lower capital expenditures.

Production and profit forecasts may fall short. Our initial estimate is that rising costs will reduce our 2012 EBITDA forecast by approximately $100 million.

Alfa Bank: Petropavlovsk has strong results, but a weak forecast