Preliminary results for the year ended 31 December 2017

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 2017.

FINANCIAL HIGHLIGHTS

• In 2017, revenue increased by 15% over 2016 to US$ 1,815 million, primarily driven by gold equivalent (GE) production growth of 13%. Gold sales were 1,090 Koz, up 24% year-on-year, while silver sales were down 14% to 26.5 Moz, in line with production volume dynamics. Average realised gold and silver prices remained largely unchanged from 2016 at US$ 1,247/oz and US$ 16.1/oz respectively.

• Group Total cash costs¹ (“TCC”) were US$ 658/GE oz for the year, up 15% from 2016 levels and at the lower end of the Company’s updated guidance of US$ 650-675/GE oz. The increase in TCC was predominantly driven by the strengthening of the Russian Rouble (by 15% from an average rate of 67.1 RUB/USD in 2016 to 58.3 RUB/USD in 2017) on the back of the recent oil price rally and stabilising macroeconomic conditions in Russia. All-in sustaining cash costs¹ (“AISC”) amounted to US$ 893/GE oz, also within the Company’s updated guidance, an increase of 15% year-on-year, driven mostly by the same factors, as well as significantly increased exploration spending across the portfolio.

• Adjusted EBITDA¹ was US$ 745 million, down 2% compared to 2016, as increased costs incurred due to a stronger Russian Rouble largely offset the production growth. The Adjusted EBITDA margin was at 41% compared to 48% in 2016.

• Net earnings² were US$ 354 million versus US$ 395 million in the prior year, reflecting the decrease in EBITDA and the impact of foreign exchange gains on 2016 earnings. Underlying net earnings¹ were US$ 376 million (2016: US$ 382 million).

• Capital expenditure came in at US$ 383 million³, up 41% compared to 2016 due to accelerated pre-stripping and construction at Kyzyl, as well as an increased brownfield exploration spend across the operating assets portfolio. The Group is on track with the commissioning of Kyzyl and the ramp up of the debottlenecked POX plant in the second half of 2018.

• Net debt¹ increased to US$ 1,420 million during the period (31 December 2016: US$ 1,330 million), representing a Net debt/Adjusted EBITDA ratio of 1.91x. Despite intensive construction activities at Kyzyl in the course of 2017, the Company continued to generate meaningful free cash flow¹ that amounted to US$ 143 million (2016: US$ 257 million), while maintaining stable net cash operating inflow of US$ 533 million (2016: US$ 530 million).

• A final dividend of US$ 0.30 per share (approx. US$ 129 million) representing 50% of the Group’s underlying net earnings for 2H 2017 has been proposed by the Board in accordance with the revised dividend policy and in compliance with the hard ceiling of Net debt/Adjusted EBITDA ratio below 2.5x. This will bring the total dividend declared for the period to US$ 189 million.

OPERATING HIGHLIGHTS

• Polymetal delivered a strong operational performance in 2017: total GE production 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.

• Full year gold production totalled 1,075 Koz, a 21% increase year-on-year. Gold sales generally followed production dynamics. Silver production was down 8% to 26.8 Moz compared to 2016.

• Polymetal has increased production materially over the 20 years since the Company’s inception, delivering a compound annual growth rate of 24%

• Polymetal regrettably reports two fatal accidents in 2017. While the total number of fatalities for the year has halved compared to 2016, we view this result as unsatisfactory. The Company has commenced implementing additional safety measures in 2018 with a particular focus on smaller operating units, especially those in remote locations.

• The Company reiterates its production guidance for 2018 and 2019 of 1.55 Moz and 1.7 Moz of gold equivalent, respectively. As in prior years, production in both years will be skewed towards the 2H due to seasonality.

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

“I am delighted to report strong operational delivery and robust earnings for the year”, said Vitaly Nesis, Group CEO of Polymetal, commenting on the results. “While we have reached peak capital expenditure during 2017 ahead of the launch of the Kyzyl project in Q3 2018, the Group continued to deliver positive free cash flow and generate meaningful cash returns to our shareholders”.

Financial highlights4	2017	2016	Change, %
Revenue, US$m	1,815	1,583	+15%
Total cash cost, US$ /GE oz	658	570	+15%
All-in sustaining cash cost, US$ /GE oz	893	776	+15%
Adjusted EBITDA, US$m	745	759	-2%
Average realised gold price, US$ /oz	1,247	1,216	+3%
Average realised silver price, US$ /oz	16.1	16.3	-1%
Net earnings, US$m	354	395	-10%
Underlying net earnings, US$m	376	382	-1%
Return on Assets, %	18%	26%	-8%
Return on Equity (underlying), %	16%	18%	-2%
Basic EPS, US$ /share	0.82	0.93	-12%
Underlying EPS, US$ /share	0.88	0.90	-3%
Dividend declared during the period, US$ /share5	0.32	0.37	-14%
Dividend proposed for the period, US$ /share6	0.44	0.42	+5%
Net debt, US$m	1,420	1,330	+7%
Net debt/Adjusted EBITDA	1.91	1.75	+9%
Net operating cash flow, US$m	533	530	+1%
Capital expenditure, US$m	383	271	+41%
Free cash flow7, US$m	143	257	-44%

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CONFERENCE CALL AND WEBCAST

Polymetal will hold a conference call and webcast on Monday, 12 March 2018 at 09:00 London time (12:00 Moscow time).

To participate in the call, please dial:
8 10 800 500 98 63 access code 50622354# (free from Russia), or 
+44 20 3009 2483 (free from the UK), or
+1 646 722 4912 (free from the US), or 

or follow the link: http://www.audio-webcast.com/cgi-bin/visitors.ssp?fn=visitor&id=5403

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=5403. 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 418742254#, from 12:30 Moscow time Monday, 12 March, till 12:30 Moscow time Monday, 19 March, 2018.

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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. Total capital expenditure including loans advanced on capital spending at Nezhda and Prognoz joint ventures comprised US$ 435 million.
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 2017: final dividend for FY 2016 declared in May 2017 and interim dividend for the 1H 2017 declared in September 2017. FY 2016: final dividend for FY 2015 declared in May 2016, interim dividend for the 1H 2016 declared in September 2016, and special dividend declared in December 2016.
⁶FY 2017: interim and final dividend for FY2017. FY 2016: interim, final and special dividend for FY2016.
⁷Net cash flows from operating activities less cash flows used in investing activities excluding acquisition costs in business combinations and investments in associates and joint ventures.