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Preliminary results for the year ended 31 December 2018

11 March 2019

Polymetal International plc (LSE, MOEX: POLY, ADR: AUCOY) (together with its subsidiaries – “Polymetal”, the “Company”, or the “Group”) is pleased to announce the Group’s preliminary results for the year ended 31 December 2018.

“2018 was a year of strong operating and financial results, including solid cost performance and smooth ramp-up of Kyzyl”, said Vitaly Nesis, Group CEO of Polymetal, commenting on the results. “We have also advanced our long-term development pipeline, continued to generate free cash flows and pay substantial dividends”.

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.

Financial highlights4

2018

2017

Change, %

 

 

 

 

Revenue, US$m

1,882

1,815

+4%

Total cash cost, US$ /GE oz

649

658

-1%

All-in sustaining cash cost, US$ /GE oz

861

893

-4%

Adjusted EBITDA, US$m

780

745

+5%

 

 

 

Average realised gold price, US$ /oz

1,226

1,247

-2%

Average realised silver price, US$ /oz

14.8

16.1

-8%

 

 

 

 

Net earnings, US$m

355

354

+0%

Underlying net earnings, US$m

447

376

+19%

Return on Assets, %

17%

18%

-1%

Return on Equity (underlying), %

16%

16%

-

 

 

 

 

Basic EPS, US$ /share

0.78

0.82

-5%

Underlying EPS, US$ /share

1.00

0.88

+14%

Dividend declared during the period, US$ /share5   

0.47

0.32

+47%

Dividend proposed for the period, US$ /share6

0.48

0.44

+9%

 

 

 

 

Net debt, US$m

1,520

1,420

+7%

Net debt/Adjusted EBITDA

1.95

1.91

+2%

 

 

 

 

Net operating cash flow, US$m

513

533

-4%

Capital expenditure, US$m

344

383

-10%

Free cash flow7, US$m

176

143

+23%

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CONFERENCE CALL AND WEBCAST

Polymetal will hold a conference call and webcast on 11 March 2019 at 11:00 London time (14:00 Moscow time), where senior management will discuss the results.

To participate in the call, please dial:

8 800 500 98 63 access code 48861556# (free from Russia), or
+44 203 009 24 76 (free from the UK), or
+1 646 502 51 26; (free from the US), or

follow the link: http://polymetal110319-live.audio-webcast.com/ Please be prepared to introduce yourself to the moderator or register.

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 418835942#, from 14:30 Moscow time Monday, 11 March, till 14:30 Moscow time Monday, 18 March, 2019.

A webcast replay will be available on Polymetal’s website (www.polymetalinternational.com) and at http://polymetal110319-live.audio-webcast.com

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1The financial performance reported by the Group contains certain Alternative Performance Measures (APMs) disclosed to compliment measures that are defined or specified under International Financial Reporting Standards (IFRS). For more information on the APMs used by the Group, including justification for their use, please refer to the “Alternative performance measures” section below. The definition and calculation of non-IFRS APMs used in this report, including Adjusted EBITDA, Total cash costs, All-in sustaining cash costs, Underlying net earnings, Net debt and Free cash flow are explained in the “Financial Review” section below.
2Profit for the financial period.
3On a cash basis, representing cash outflow on purchases of property, plant and equipment in the statement of consolidated cash flows.
4Totals may not correspond to the sum of the separate figures due to rounding. % changes can be different from zero even when absolute amounts are unchanged because of rounding. Likewise, % changes can be equal to zero when absolute amounts differ due to the same reason. This note applies to all tables in this release.
5FY 2018: final dividend for FY 2017 declared in May 2018 and interim dividend for the 1H 2018 declared in September 2018.
FY 2017: final dividend for FY 2016 declared in May 2017 and interim dividend for the 1H 2017 declared in September 2017.
6FY 2018: interim and final dividend for FY2018. FY 2017: interim and final dividend for FY2017.
7Net cash generated by operating activities less net cash used in investing activities excluding acquisitions of joint venture and associate, loans forming part of net investment in joint ventures and proceeds from disposal of subsidiaries.


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Polymetal International plc (LSE, MOEX: POLY, ADR: AUCOY) (together with its subsidiaries — “Polymetal”, the “Company”, or the “Group”) is a top-20 global gold producer and top-5 global silver producer with assets in Russia and Kazakhstan. The Company combines strong growth with a robust dividend yield.
THIS RELEASE MAY INCLUDE STATEMENTS THAT ARE, OR MAY BE DEEMED TO BE, “FORWARD-LOOKING STATEMENTS”. THESE FORWARD-LOOKING STATEMENTS SPEAK ONLY AS AT THE DATE OF THIS RELEASE. THESE FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY, INCLUDING THE WORDS “TARGETS”, “BELIEVES”, “EXPECTS”, “AIMS”, “INTENDS”, “WILL”, “MAY”, “ANTICIPATES”, “WOULD”, “COULD” OR “SHOULD” OR SIMILAR EXPRESSIONS OR, IN EACH CASE THEIR NEGATIVE OR OTHER VARIATIONS OR BY DISCUSSION OF STRATEGIES, PLANS, OBJECTIVES, GOALS, FUTURE EVENTS OR INTENTIONS. THESE FORWARD-LOOKING STATEMENTS ALL INCLUDE MATTERS THAT ARE NOT HISTORICAL FACTS. BY THEIR NATURE, SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER IMPORTANT FACTORS BEYOND THE COMPANY’S CONTROL THAT COULD CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH FORWARD-LOOKING STATEMENTS ARE BASED ON NUMEROUS ASSUMPTIONS REGARDING THE COMPANY’S PRESENT AND FUTURE BUSINESS STRATEGIES AND THE ENVIRONMENT IN WHICH THE COMPANY WILL OPERATE IN THE FUTURE. FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE. THERE ARE MANY FACTORS THAT COULD CAUSE THE COMPANY’S ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN SUCH FORWARD-LOOKING STATEMENTS. THE COMPANY EXPRESSLY DISCLAIMS ANY OBLIGATION OR UNDERTAKING TO DISSEMINATE ANY UPDATES OR REVISIONS TO ANY FORWARD-LOOKING STATEMENTS CONTAINED HEREIN TO REFLECT ANY CHANGE IN THE COMPANY’S EXPECTATIONS WITH REGARD THERETO OR ANY CHANGE IN EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH ANY SUCH STATEMENTS ARE BASED.
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