Q4 and full year 2019 production results

Polymetal reports strong production results for the fourth quarter and twelve months ended December 31, 2019. 

“A strong Q4 allowed Polymetal to exceed both original and updated guidance for the eighth year in a row. Robust production and positive gold price dynamics drove strong free cash flow generation”, said Vitaly Nesis, Group CEO of Polymetal. “Stable operating performance should ensure steady and significant dividend flow while planned progress with execution of Nezhda and POX-2 projects will enable us to resume production growth in 2022“.

HIGHLIGHTS

• The Company’s FY2019 gold equivalent (“GE”) production amounted to 1,614 Koz, an increase of 3% over 2018 and 4% above the original production guidance of 1.55 Moz. A strong contribution from Kyzyl more than compensated for disposals against the backdrop of stable results from the rest of the portfolio. Production from continuing operations grew by 14% year-on-year to 1,609 Koz GE.

• Safety performance in 2019 deteriorated both in terms of frequency of lost-time injuries and the number of fatalities. Management expects the Board to consider and approve significant safety-related changes to the remuneration structure for all levels of the Company management together with a comprehensive action plan focused on impacting the behavior and attitudes of the employees. Our goal remains zero fatalities.

• Q4 GE output was 383 Koz, 15% below Q4 2018 production from continuing operations, mainly as a result of limited throughput at the POX plant in the reporting quarter due to scheduled downtime which was part of the POX-2 project activities.

• Gold production for the full year was up 8% while silver output contracted by 15% on the back of asset disposals and planned grade decline at Dukat.

• Full-year revenue jumped by 19% to reach US$ 2.2 billion on the back of higher volumes and metal prices. Q4 revenue increased by 1% to US$ 643 million as lower volumes were offset by increasing prices.

• The Company expects full-year costs to be close to the top of the range of its cost guidance of US$ 600-650/GE oz for Total Cash Costs (“TCC”) and US$ 800-850/GE oz for All-in Sustaining Cash Costs (“AISC”). The main factors driving this guidance are: stronger Rouble, higher royalties driven by higher metal prices, and higher domestic diesel prices.

• In Q4, Polymetal generated strong free cash flow resulting in Net Debt reduction to US$ 1.48 billion as at the end of 2019. The Company expects Net Debt/EBITDA ratio to be lower than the target level of 1.5x.

2020 OUTLOOK

• The Company reiterates its current production guidance of 1.6 Moz of GE for each of FY2020 and 2021.

• TCC in 2020 is expected to be in the range of US$ 650-700/GE oz while AISC is expected to average US$ 850-900/GE oz. The expected increase over 2019 cost levels is driven by the current appreciation of the Russian rouble and increased domestic diesel fuel price, as well as increased royalties on the back of continued strong gold and silver price performance. The guidance remains contingent on the Rouble/Dollar exchange rate and Brent oil price.

• Capital expenditures in 2020 are expected to be approximately US$ 475 million. The US$ 50 million increase compared to the previous estimate is driven by accelerated pre-stripping at Nezhda, several environmentally driven investments, as well as stronger Rouble.

 

	3 months ended Dec 311,		% change2	12 months ended Dec 311,		% change2
	2019	2018		2019	2018
Waste mined, Mt	39.7	32.2	+23%	158.6	126.7	+25%
Underground development, km	25.6	33.2	-23%	105.8	130.0	-19%
Ore mined, Mt	4.2	3.8	+11%	17.2	14.0	+23%
Open-pit	3.1	2.6	+19%	13.0	9.3	+40%
Underground	1.1	1.1	-6%	4.2	4.7	-10%
Ore processed, Mt	3.5	3.7	-6%	15.0	15.2	-1%
Production
Gold, Koz	312	414	-25%	1,316	1,216	+8%
Silver, Moz	5.2	5.9	-11%	21.6	25.3	-15%
Copper, Kt	0.5	1.3	-66%	2.5	3.9	-37%
Gold equivalent, Koz3	383	497	-23%	1,614	1,562	+3%
Sales
Gold, Koz	374	432	-13%	1,366	1,198	+14%
Silver, Moz	5.7	8.3	-31%	22.1	25.7	-14%
Copper, Kt	0.8	1.4	-42%	2.8	3.3	-15%
Revenue, US$m4	643	634	+1%	2,245	1,882	+19%
Net debt, US$m5	1,479	1,702	-13%	1,479	1,518	-3%
Safety
LTIFR6	0.18	0	NA	0.19	0.09	+111%
Fatalities	0	0	NA	2	1	+100%

Notes:
(1) Including discontinued operations.
(2) % 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.
(3) Based on 1:80 Ag/Au, 5:1 Cu/Au, 2:1 Pb/Au and 2:1 Zn/Au conversion ratios.
(4) Calculated based on the unaudited consolidated management accounts.
(5) Non-IFRS measure based on unaudited consolidated management accounts. Comparative information is presented for 30 September 2019 (for the three months period) and 31 December 2018 (for the twelve months period).
(6) 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,		% change
	2019	2018		2019	2018
GOLD EQ. (KOZ)1
Kyzyl	90	86	+4%	343	96	257%
Dukat	70	75	-7%	302	306	-1%
Albazino-Amursk	30	67	-55%	241	308	-22%
Omolon	57	58	-3%	205	195	5%
Varvara	35	39	-9%	149	142	5%
Mayskoye	52	70	-25%	129	117	10%
Svetloye	27	23	14%	134	136	-1%
Voro	22	29	-23%	107	107	-1%
TOTAL (continuing operations)	383	448	-15%	1,609	1,407	+14%
Okhotsk	-	35	NA	-	104	NA
Kapan	-	13	NA	5	51	-90%
TOTAL (including discontinued operations)	383	497	-23%	1,614	1,562	+3%

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

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CONFERENCE CALL AND WEBCAST

The company will hold a conference call and webcast on Thursday, 23 January 2020 at 11:00 London time (14:00 Moscow time).

To participate in the call, please dial:

From the UK:
+44 330 336 9411 (local access)
0800 279 7204 (toll free)

From the US:
+1 929 477 0324 (local access)
800 458 4121 (toll free)

From Russia:
+7 495 646 9190 (local access)
8 10 8002 867 5011 (toll free)

To participate from other countries, please dial any of the local access numbers listed above.

Conference code: 9191693

To participate in the webcast follow the link: https://webcasts.eqs.com/polymetal20200123. 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 7660 0134 (from the UK), +1 719 457 0820 (from the USA) and 8 10 8002 702 1012 (from Russia), access code 9191693, from 17:30 Moscow time Thursday, 23 January, till 17:30 Moscow time Thursday, 30 January, 2020. Webcast replay will be available on Polymetal’s website (www.polymetalinternational.com) and at https://webcasts.eqs.com/polymetal20200123.