Preliminary results for the year ended 31 December 2023

Polymetal International plc (“Polymetal”, the “Company” or the Group) announces the Group's preliminary results for the year ended 31 December 2023.

“In 2023 Polymetal managed to stay profitable and reduce leverage despite persistent geopolitical headwinds. Robust production and stable cost performance coupled with favorable commodity price dynamics drove improvement in financial results. In 2024, after the sale of the Russian assets is completed, the Company will pursue long-term growth while ensuring long-term free cash flow potential of the existing assets in Kazakhstan”, said Vitaly Nesis, Group CEO of Polymetal International plc, commenting on the results.

FINANCIAL HIGHLIGHTS

• In 2023, revenue increased by 8% year-on-year (y-o-y), totalling US$ 3,025 million (2022: US$ 2,801 million), of which US$ 893 million (30%) was generated from operations in Kazakhstan and US$ 2,132 million (70%) from operations in the Russian Federation. Average realised gold price increased by 9% while silver price increased by 4%, both closely tracking market dynamics. Gold equivalent (GE) production was stable at 1,714 Koz y-o-y. Gold sales increased by 2% y-o-y to 1,400 Koz, while silver sales decreased by 10% to 16.6 Moz. Significant tightening of concentrate exports regulations in Russia led to material accumulation of concentrates in sea ports.

• Group Total Cash Costs (TCC)¹ for 2023 were US$ 861/GE oz, down 9% y-o-y, and 9% below the lower end of the Group’s guidance of US$ 950-1,000/GE oz. This was predominantly on the back of a weaker Rouble which outweighed inflationary pressures. In Kazakhstan, TCC were US$ 903/GE oz, up by 24% y-o-y, on the back of a planned grade decline combined with a 14% decrease in sales volumes and inflationary headwinds. Across the Group’s Russian mines, TCC were at US$ 845/GE oz, down by 19% y-o-y, mainly on the back of Rouble depreciation.

• All-in Sustaining Cash Costs (AISC)¹ amounted to US$ 1,276/GE oz, down 5% y-o-y, 2% below the lower end of the Group’s guidance of US$ 1,300-1,400/GE and driven by the same factors. In Kazakhstan, AISC increased by 18% to US$ 1,263/GE oz, mostly driven by a decrease in sales volume. In Russia, AISC decreased by 13% to US$ 1,281/oz, on the back of a sales increase coupled with lower stripping volumes after completion of large stripping campaigns in 2023.

• Adjusted EBITDA¹ was US$ 1,458 million, 43% higher than in 2022, on the back of higher commodity prices and lower cash costs. Of this, US$ 439 million (30%) was earned from operations in Kazakhstan and US$ 1,019 million (70%) earned from operations in the Russian Federation. The Adjusted EBITDA margin increased by 12 percentage points to 48% (2022: 36%).

• Underlying net earnings² increased by 40%, totalling US$ 615 million (2022: US$ 440 million), with a basic EPS of US$ 1.11 per share. Reflecting the increase in operating profit, the Group recorded a net profit³ of US$ 528 million in 2023, compared to a net loss of US$ 288 million due to one-off impairment charges in 2022.

• Capital expenditure was US$ 679 million⁴, down 14% compared with US$ 794 million in 2022 and 3% below the lower end of the guidance range of US$ 700-750 million, as a result of the substantial positive impact of Russian Rouble devaluation on local-currency costs.

• Net operating cash inflow was US$ 575 million (2022: US$ 206 million). The Group reported negative free cash flow¹ of US$ 128 million in 2023, which is still a significant improvement over the 2022 negative free cash flow of US$ 445 million.

• Net debt² was largely stable at US$ 2,383 million (US$ 174 million in Kazakhstan and US$ 2,209 million in Russia), compared with US$ 2,393 million as at 31 December 2022 (US$ 277 million in Kazakhstan and US$ 2,117 million in Russia). This represents 1.64x of Adjusted EBITDA and is significantly below the 2022 leverage ratio of 2.35x.

Notes:
(1) The financial performance reported by the Group contains certain Alternative Performance Measures (APMs) disclosed to complement 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.
(2) Adjusted for the after-tax amount of impairment charges, write-downs of metal inventory, foreign exchange gains/losses and other change in fair value of contingent consideration.
(3) Profit for the year.
(4) On a cash basis, representing cash outflow on purchases of property, plant and equipment in the consolidated statement of cash flows.

• On 19 February 2024, the Group announced its intention to sell 100% of JSC Polymetal and its subsidiaries to JSC Mangazeya Plus for an effective total consideration of approximately US$ 3.69 billion, valuing JSC Polymetal and its subsidiaries at 5.3x EV/EBITDA based on Adjusted EBITDA of JSC Polymetal and its subsidiaries for the 12 months ended 30 June 2023 (US$ 694 million) and at 3.6x based on an full year 2023 Adjusted EBITDA of JSC Polymetal and its subsidiaries (approximately US$ 1.0 billion). On 7 March 2024 the transaction was approved by the Shareholders General Meeting and, following receipt of required regulatory approvals, was completed on the same day.

• Following the disposal, the Group’s net cash position of approx. US$ 130 million.

•  No dividend will be proposed for the full year 2023. Following the recent completion of the divestment of the Russian business, the Board will actively reconsider the dividend policy and intend to share an update in first half of 2024.

Notes:
(1) Totals 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.
(2) Defined in the “Alternative performance measures” section below.
(3) Allocation factors for corporate costs were revised in 2023, previous periods were restated accordingly.
(4) In accordance with IFRS, revenue is presented net of treatment charges which are subtracted in calculating the amount to be invoiced. Average realised prices are calculated as revenue divided by gold and silver volumes sold, without effect of treatment charges deductions from revenue.

OPERATING HIGHLIGHTS

• No fatal accidents among the Group’s employees and contractors occurred in 2023 as well as no lost time injuries were recorded in Kazakhstan. Lost time injury frequency rate (LTIFR) among the Company’s workforce for the full year decreased by 30% y-o-y to 0.07. Two serious and eight minor lost-time accidents were recorded in 2023, all in Russia. Days lost due to work-related injuries (DIS) increased by 32% y-o-y to 1,156, also relates to Russia.

• The Company’s 2023 GE production was stable at 1,714 Koz, including 486 Koz in Kazakhstan and 1,228 Koz in Russia, and in line with the original production guidance of 1.7 Moz.

• The Company has successfully secured a land plot for the Ertis POX project in the Pavlodar Special Economic Zone in Kazakhstan.

Notes:
(1) Based on 80:1 Au/Ag conversion ratio and excluding base metals. Discrepancies in calculations are due to rounding. Mayskoye production reporting approach was amended to record production as soon as the ownership title for gold is transferred to a buyer at the mine site’s concentrate storage facility. Previous periods were restated accordingly.
(2) Company employees only are taken into account.
(3) The average number of personnel was revised versus the number reported in January 2024 to include average headcount of all assets in Russia that were deconsolidated during the reporting year and were not part of Group as at 31 December 2023, for the period they were part of the Group.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”) HIGHLIGHTS

• Our 2023 group-wide direct and indirect energy-related emissions (Scope 1 and Scope 2) increased by 5% compared to 2022. In Kazakhstan our Scope 1 and Scope 2 emissions increased by 10% compared to 2022 mainly due to the legislative changes in the energy market and the resulting inability to purchase green electricity from the grid. We are currently focusing our efforts on the Kazakhstan segment and on designing our own solar power plants with a total capacity of up to 40 MW at Varvara and Kyzyl to minimize our dependence on grid electricity.

• We continue to reforest territories equal to those that had been disturbed by our activities. In 2023, we planted 430 thousand saplings on almost 200 hectares of land in Russia and were implementing a voluntary pilot project to plant a new forest not far from Varvara site in Kazakhstan.

• In 2023, we decreased our fresh water intensity for ore processing by 53%, compared with 2019, to 125 m³/1,000 t (2022: 49%). In Kazakhstan, we have also continued to decrease our fresh water intensity as the majority of the water we use in ore processing at our cites in Kazakhstan is circulated in closed water cycles. Overall, 90% of our on-site water consumption in Kazakhstan is via a closed cycle of treated waste.

• Polymetal’s social investments amounted to US$ 17.6 million in 2023, including US$ 7.3 million in Kazakhstan, and were targeted to projects in education, local infrastructure, sports and culture.

2024 OUTLOOK FOR KAZAKHSTAN BUSINESS

• The Company expects its Kazakhstan assets to deliver stable production at 475 Koz of GE.

• Costs are estimated in the ranges of US$ 900-1,000/GE oz for TCC and US$ 1,250-1,350/GE oz for AISC¹. A y-o-y increase is expected mostly due to sharp increases in power and railway tariffs in Kazakhstan.

• Capital expenditures are expected to be approximately US$ 225 million including US$ 60 million for Ertis POX.

Note:
(1) Based on 500 KZT/USD and 13% inflation in Kazakhstan.

Conference call and webcast

The Company will hold a webcast on Friday, 15 March 2024, at 16:00 Astana time (11:00 London time).

To participate in the webcast, please register using the following link:

https://streamstudio.world-television.com/1451-2739-39231/en

Webcast details will be sent to you via email after registration.