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Q4 and full year 2017 production results

Polymetal International plc (LSE, MOEX: POLY; ADR: AUCOY) (together with its subsidiaries – “Polymetal”, the “Company”, or the “Group”) is pleased to report the Group’s production results for the fourth quarter and twelve months ended December 31, 2017.

HIGHLIGHTS

  • Polymetal produced 405 Koz of gold equivalent (GE) in Q4 2017, an 8% increase over the same period in the previous year. Total GE production for FY 2017 increased 13% year-on-year to 1,433 Koz, 2% above our initial production guidance of 1,400 Koz. The strong finish to 2017 was driven by contributions from the fully ramped-up Svetloye heap leach (Okhotsk hub), as well as a strong performance at Komar (Varvara hub), Omolon and Amursk-Albazino.

  • Gold production in Q4 was 317 Koz, an 11% increase year-on-year, while silver production was down 6% to 6.6 Moz due to the planned grade decline at the Dukat underground mine. Full year gold production totaled 1,075 Koz, a 21% increase year-on-year, allowing Polymetal to join the prestigious 1Moz club, the second LSE premium-listed gold company to achieve this important milestone.

  • The Kyzyl project is progressing on schedule with commissioning expected to start in July and first concentrate expected in mid-August 2018. During the quarter, the Company completed the tailings storage facility and installed the ROM ore crusher unit. First ore has been mined from the open pit in January, ahead of schedule.

  • Net debt stood at US$ 1,421 million as of December 31, 2017. This represents a substantial US$ 178 million decrease compared with the previous quarter end as free cash flows benefited from the traditional seasonal de-stockpiling at a number of operations.

  • In 2017, Polymetal paid out US$ 138 million in dividends, translating into a 2.7% dividend yield based on the average share price for the year. The Board has decided that there will be no special dividend for 2017 as free cash flow will be distributed to shareholders through the regular dividend at an increased pay-out ratio of 50% of underlying net income. The final dividend for 2017 will be proposed by the Board in March 2018 based on final financial results.

  • Polymetal regrettably reports one fatal accident in the quarter that occurred as a result of a rock mass fall at Omolon, on 20 October 2017. While the total number of fatalities for the year has halved to two compared to 2016, we view this result as unsatisfactory. The Company plans to implement additional safety measures in 2018 with a particular focus on smaller operating units, especially at remote locations.

  • Polymetal provides an updated cost guidance for FY 2017:

-       Based on the actual 2017 average exchange rate of 58.3 USD/RUB, total cash costs (TCC) are expected to be in the range of US$ 650-675/ GE ounce, as opposed to the initial guidance of US$ 600-650/ GE oz (based on the exchange rate of 60 USD/RUB). The increase in TCC was driven by rising domestic diesel fuel prices and the strengthening of the Russian rouble on the back of the recent oil price rally.

-       All-in sustaining cash costs (AISC) are expected to be in the range of US$ 850-900/GE oz, compared to the initial guidance of US$ 775-825/ GE oz. In addition to exchange rates and diesel prices, AISC was impacted by significantly increased exploration spending across the portfolio.

-       Capital expenditure for 2017 is expected at around US$ 415 million, 12% above the original guidance of US$ 370 million. This is primarily driven by accelerated pre-stripping and construction at Kyzyl, higher expenditures at Nezhda and Prognoz on the back of positive drilling results, as well as increased brownfield exploration spend across the operating assets portfolio.

2018 OUTLOOK

  • The Company reiterates its production guidance for 2018 and 2019 of 1.55 Moz and 1.7 Moz of gold equivalent, respectively. The main growth drivers will be the ramp-up of Kyzyl, re-commissioning of the oxide circuit at Mayskoye, and incremental improvements at Varvara and Kapan. This should offset anticipated grade declines at Khakanja and Voro. As in prior years, production in both years will be weighted towards 2H due to seasonality.

  • TCC in 2018 are expected to be in the range of US$ 650-700/ GE oz while AISC are expected to average US$ 875-925/ GE oz. The anticipated increase in costs is due to rising domestic diesel prices and expected strengthening of the Russian rouble. Cost guidance remains contingent on the Rouble/Dollar exchange rate dynamic that has a significant effect on the Group’s operating costs.

  • The capital expenditure in 2018 is expected to be slightly lower compared to 2017 at roughly US$ 400 million. Significant investments will be directed towards completion of Kyzyl and POX debottlenecking projects. The Company also plans to advance feasibility studies for Nezhda and POX-2 projects. Exploration spending is expected to stay elevated as Polymetal will continue its aggressive drilling campaign at the Prognoz silver project.

“Polymetal delivered a strong finish to 2017 and exceeded production guidance for the 6th year in a row”, said Vitaly Nesis, Group CEO of Polymetal, commenting on the results. “We have an important year ahead of us with first production from Kyzyl paving the way for investment decisions on Nezhda and POX-2. All the while, we will continue to deliver positive free cash flow and prioritise dividends in our capital allocation process”.

 

 

3 months ended Dec 31,

% change

12 months ended Dec 31,

% change1

 

2017

2016

2017

2016

 

 

 

 

 

 

 

Waste mined, Mt

29.3

24.0

+22%

114.0

82.1

+39%

Underground development, km

31.5

23.9

+32%

115.4

92.2

+25%

Ore mined, Kt

2,945

4,186

-30%

12,589

13,380

-6%

Open-pit

1,864

3,058

-39%

8,241

9,506

-13%

Underground

1,081

1,128

-4%

4,347

3,874

+12%

Ore processed, Kt

3,026

2,824

+7%

13,037

11,417

+14%

Production

 

 

 

 

 

 

Gold, Koz

317

285

+11%

1,075

890

+21%

Silver, Moz

6.6

7.0

-6%

26.8

29.2

-8%

Copper, Kt

0.8

0.2

+332%

2.7

1.5

+87%

Zinc, Kt

1.2

0.9

+39%

4.8

2.9

+66%

Gold equivalent, Koz2

405

375

+8%

1,433

1,269

+13%

Sales

 

 

 

 

 

 

Gold, Koz

356

319

+12%

1,099

880

+25%

Silver, Moz

8.3

9.4

-12%

26.5

30.7

-14%

Copper, Kt

1.3

1.2

+8%

2.6

1.6

+57%

Zinc, Kt

1.2

1.3

-3%

4.7

2.8

+67%

Revenue, US$m3

586

524

+12%

1,815

1,583

+15%

Net debt, US$m4

1,421

1,599

-11%

1,421

1,329

+7%

Safety5

 

 

 

 

 

 

LTIFR

0.18

0.22

-18%

0.15

0.19

-21%

Fatalities

1

2

-50%

2

4

-50%

Notes:     (1) % changes can be different from zero even when absolute numbers are unchanged because of rounding. Likewise, % changes can be equal to zero when absolute numbers differ due to the same reason. This note applies to all tables in this release.

                (2) Based on 1:80 Ag/Au, 5:1 Cu/Au and 2:1 Zn/Au conversion ratios.

                (3) Calculated based on the unaudited consolidated management accounts. Concentrate sales are recorded based on forward prices for the expected dates of final settlement and concentrate revenue is presented net of refining and treatment charges.

(4) Non-IFRS measure based on unaudited consolidated management accounts. Net debt equals to current and non-current borrowings less cash and cash equivalents and includes the liability for dividend payable. Comparative information is presented for 30 September 2017 (for the 3 months period) and 31 December 2016 (for the 12 months period).

                (5) LTIFR = lost time injury frequency rate per 200,000 hours worked.

              

PRODUCTION BY MINE

 

3 months ended Dec 31,

% change

12 months ended Dec 31,

% change1

 

2017

2016

2017

2016

 

 

 

 

 

 

 

GOLD EQ. (KOZ)2

 

 

 

 

 

 

Dukat

81

89

-9%

322

369

-13%

Albazino-Amursk

71

54

+32%

269

244

+10%

Mayskoye

35

47

-27%

124

116

+7%

Omolon

64

61

+3%

202

170

+19%

Voro

31

35

-13%

120

129

-7%

Varvara

42

28

+52%

130

85

+54%

Okhotsk

70

53

+33%

217

131

+65%

Kapan

13

7

+73%

50

26

+94%

TOTAL

405

375

+8%

1,433

1,269

+13%

Notes:     (1) % changes can be different from zero even when absolute numbers are unchanged because of rounding. Likewise, % changes can be equal to zero when absolute numbers differ due to the same reason. This note applies to all tables in this release.

                (2) Based on 1:80 Ag/Au, 5:1 Cu/Au and 2:1 Zn/Au conversion ratios.

 

CONFERENCE CALL AND WEBCAST

Polymetal will hold a conference call and webcast on Wednesday, January 24, 2018 at 12:00 London time (15:00 Moscow time).

To participate in the call, please dial:

8 800 500 98 63 access code 22542091# (free from Russia), or

+44 20 3009 2480 (free from the UK), or

1 646 722 4915 (free from the US), or 

follow the link: http://www.audio-webcast.com/cgi-bin/visitors.ssp?fn=visitor&id=5237

Please be prepared to introduce yourself to the moderator or register.

Webcast replay will be available on Polymetal’s website (www.polymetalinternational.com) and at http://www.audio-webcast.com/cgi-bin/visitors.ssp?fn=visitor&id=5237. A recording of the call will be available immediately after the call at +44 20 3364 5147 (from within the UK), 1 646 722 4969 (USA Toll Free) and +7 495 249 16 71 (from within Russia), access code 725805#, from 15:00 Moscow time Wednesday, January 24, till 15:00 Moscow time Wednesday, January 31, 2018.

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Investor Relations Contacts

Tel. +44.2070.169.506

Evgenia Onuschenko

Tel. +44.20.7016.9503

Maryana Nesis

Tel. +7 812 313 5964

Michael Vasiliev
ir@polymetalinternational.com Media Contacts

Tel. +44.2037.271.000

Leonid Fink
Viktor Pomichal