Preliminary results FY 2018

• Full version of press-release, related to Preliminary results for the year ended 31 December 2018 is available via the link.
• You can also download FY2018 Preliminary results presentation and explore webcast record.

FINANCIAL HIGHLIGHTS

• In 2018, revenue increased by 4% over 2017 to US$ 1,882 million, primarily driven by gold equivalent (GE) production growth of 9%. Gold sales were 1,198 Koz, up 10% year-on-year, while silver sales were down 3% to 25.7 Moz, in line with production volume dynamics. Average realised prices largely tracked market dynamics.

• Group Total cash costs¹ (TCC) for the full year were US$ 649/GE oz, down 1% year-on-year and just below the bottom of the range of the Group’s initial cost guidance of US$ 650-700/GE oz. All-in sustaining cash costs¹ (AISC) amounted to US$ 861/GE oz, also below the lower end of the Group’s cost guidance of US$ 875-925/GE oz, a decrease of 4% year-on-year.

• Adjusted EBITDA¹ increased by 5% over 2017 toUS$ 780 million, mostly driven by higher production volumes and stable cost performance. The Adjusted EBITDA margin was at 41.4% (2017: 41.0%).

• Net earnings² were US$ 355 million (2017: US$ 354 million), with basic EPS of US$ 0.78 per share (2017: US$ 0.82 per share). Underlying net earnings¹ increased by 19% to US$ 447 million driven by EBITDA growth and lower depreciation and income tax expenses.

• Capital expenditure was US$ 344 million³, down 10% compared to 2017. With the addition of loans that were extended to Nezhda and Prognoz before consolidation of these assets, capital expenditure comprised US$ 395 million, below the original guidance of US$ 400 million. The Group has successfully completed and launched the Kyzyl project ahead of the original schedule with cumulative project capex of US$ 319 million, below the original budget of US$ 325 million.

• Net debt¹ increased to US$ 1,520 million during the period (31 December 2017: US$ 1,420 million), representing a Net debt/Adjusted EBITDA ratio of 1.95x (2017: 1.91x). Despite investments in the Amursk POX debottlenecking and Kyzyl projects over the course of 2018 as well as start-up working capital at Kyzyl, the Company continued to generate meaningful free cash flow¹ that amounted to US$ 176 million (2017: US$ 143 million), while maintaining stable net cash operating inflow of US$ 513 million (2017: US$ 533 million).

• A final dividend of US$ 0.31 per share (approx. US$ 146 million) representing 50% of the Group’s underlying net earnings for 2H 2018 has been proposed by the Board in accordance with the dividend policy while complying with the hard ceiling of Net debt/Adjusted EBITDA ratio below 2.5x. This will bring the total dividend declared for FY 2018 to US$ 223 million (2017: US$ 196 million), or US$ 0.48 per share (2017: US$ 0.44 per share).

OPERATING HIGHLIGHTS

• Polymetal delivered a robust operational performance in 2018: annual GE production of 1,562 Koz was up 9% year-on-year exceeding our original production guidance of 1,550 Koz, on the back of the full ramp-up at Kyzyl, as well as a strong performance at Albazino/Amursk and Svetloye.

• Full year gold production totalled 1,216 Koz, a 13% increase year-on-year. Gold sales generally followed production dynamics. Silver production was down 6% to 25.3 Moz compared to 2017.

• Polymetal regrettably reported one fatal accident at Kapan underground mine in 2018. While full year safety statistics demonstrated a meaningful improvement year-on-year, we are yet to achieve our principal goal of zero fatalities at all operations. The Company has implemented additional safety measures aimed at mitigating the risks associated with air quality and efficiency of ventilation in underground mines.

• The Company reiterates its current production guidance of 1.55 Moz and 1.6 Moz of GE for 2019 and 2020, respectively. Traditionally, production in both years will be weighted towards 2H due to seasonality.

• TCC in 2019 is expected to be in the range of US$ 600-650/ GE oz while AISC is expected to average US$ 800-850/ GE oz, with the decrease to be driven by the fully ramped-up Kyzyl operation and the disposal of higher cost Kapan and Okhotsk mines. The cost guidance is contingent on the Rouble/Dollar exchange rate and Brent oil price.