Credit Suisse has kept an 'underperform' rating on FTSE 250 gold miner Polymetal, saying that the company's recent acquisition of the Kyzyl gold project hasn't changed its cautious view.

The investment case is "primarily driven by our negative gold price outlook", the bank said.

Polymetal said in May that it was acquiring Altynalmas Gold, the holding company for the Kyzyl project in north-eastern Kazakhstan, for $618.5m in cash and shares plus a deferred consideration of $500m contingent on certain conditions.

The project is estimated to increase mine life across the group and will improve Polymetal's long-term production profile to 1.5-1.6m ounces, from 1.1-1.3m ounces previously, Credit Suisse said.

However, the bank's estimates give Kyzyl a net present value of just $700m, though upside risk may come from exploration.

"In our view, there is a good chance that this acquisition would be value accretive, but it does not seem to be significantly so.

"The value, if any, is likely to stay locked in for a long time as detailed visibility is unlikely to come until the fourth quarter of 2015 when the new feasibility study is planned to be released."

Meanwhile, Credit Suisse said it doubts that Polymetal will pay special dividends in the medium-term, leaving the dividend yield at just 1-2%.

The bank's 520p target price for the stock remained unchanged.

The shares were down 2.6% at 571p by 11:35 on Monday.

BC

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