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Gold and precious metals producer Polymetal International plc (LSE:POLY) lost a tax dispute case and was ordered by the Russian Supreme Arbitration Court to pay 883 million rouble or US$27 million in additional tax, including fines and accrued interest, the Jersey-incorporated company said today.
The case, decided on 10th July 2012, was in relation to the group’s sale of silver in 2007, which was claimed by tax authorities to be 30-45% below market price and thereby lowering the group’s tax base.
However, the group’s defence that the price in question was in relation to the forward contract sales at the then current market price provision of a bank loan in 2004 was overruled.
“The decision of the SAC supports the tax authorities…and this ruling is not subject to appeal,” Polymetal disclosed.
The eighth largest producer of silver in the world, which also announced the full consolidation of JSC Polymetal today, said it did not allot any amount for the settlement of the case in its 2011 financial year, as the group may have anticipated winning the case based on successes in the lower courts.
“The Board concluded that the payment of the amounts claimed by the tax authorities was not probable, and accordingly no provision had been created in the financial statements as at 31 December 2011.”
The group paid $11 million in taxes for 2011, down 22% from 2010 reported at $14.5 million.
“The additional tax charges according to the SAC decision (approx. US$27 million) will be reflected as an expense in the financial statements for the six months ended 30 June 2012 and are due to be paid in July 2012,” Polymetal declared.
Shares of the FTSE 100 mining company closed at £8.34 a share, losing 4.9% or 43 pence, trading on the London Stock Exchange.
Company Spotlight
Polymetal International plc, which joined the London Stock Exchange on 2 November 2011, is the fourth largest producer of gold in Russia by production volume and the country’s largest producer of silver. The company also has operations in Kazahkstan.
In 2011, the group sold $1.326 billion worth of copper, silver, and gold and posted adjusted EBITDA of $624 million and net income of $290 million.
