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Q2 2020 production results

23 July 2020

Polymetal reports strong production results for the second quarter and the six months ended June 30, 2020.

“Q2 saw a continued steady performance of the Group”, said Vitaly Nesis, Group CEO of Polymetal. “We have been taking a range of measures aimed at protecting our employees and contractors in light of the COVID-19 pandemic, while allowing our operations and projects to proceed without interruptions or delays to date”.

HIGHLIGHTS

  • There were no fatal accidents during the first half of the year within Polymetal and the Company’s contractors. LTIFR for the period improved by 70% year-on-year (y-o-y) to 0.07 as only four minor injuries were recorded.

  • The Company’s Q2 gold equivalent (“GE”) production (based on 120:1 Au/Ag ratio1) increased by 2% y-o-y to 358 Koz driven by a strong performance at Kyzyl which compensated for the planned decline at Svetloye. GE output for H1 stood at 723 Koz, an increase of 4% y-o-y.

  • Revenue for Q2 increased by 30% y-o-y to reach US$ 641 million on the back of higher gold prices and sales volumes. H1 revenue amounted to US$ 1,135 million, up 20% y-o-y. There was a lag between gold production and sales due to Varvara concentrate sales, which is expected to close in H2 2020.

  • Polymetal generated significant free cash flow in the reporting period. Net debt was largely unchanged relative to Q1 2020 at US$ 1.69 billion, while the Company paid US$ 197 million of final dividends for FY 2019 or US$ 0.42 per share. As in previous years, free cash flow generation will be weighted towards the second half of the year on the back of seasonal working capital drawdown.

  • Construction and development activities at Nezhda and POX-2 progressed on schedule. COVID-related restrictions and cautionary measures have not slowed down execution progress of these projects.

  • The Company confirms its full-year 2020 production guidance of 1.5 Moz of GE. It also for now maintains its cost guidance, as depreciation of the Russia Rouble and Kazakh Tenge is currently counterbalanced by COVID-related costs. However, TCC, AISC and CapEx guidance will be updated along with H1 financial results on August 26.

COVID-19 UPDATE

Health and safety

  • No material COVID-19 outbreaks have so far occurred at our operations. Multiple employees tested positive for the virus with the vast majority of confirmed cases occurring during intra-shift breaks away from mines or during mandatory observatory period.

  • Health and safety of our employees and other people is our top priority. Strict precautionary procedures are maintained at all production sites despite gradual relaxation of state quarantine requirements in Russia. The procedures include daily temperature checks, regular medical surveillance and 14-day isolation of new shifts with COVID tests performed twice – first upon arrival and then before allowing to proceed to work on-site. Polymetal has organised isolated accommodation space for placement of potentially infected employees, enhanced hygiene protection in public spaces and increased control over disinfection and sterilisation measures. Adequate medical supplies are in place at all locations.

  • Personnel at off-site offices in Russia who report to work are tested on a rolling 2-week basis. Personal meetings and business trips are limited. Management offices in Kazakhstan continue to work remotely.

Business continuity

  • Russian regions are relaxing lockdown measures in respect of retail and other activities. The scope and pace, however, vary across regions. In Kazakhstan, a new quarantine was introduced from the 5th of July after the country had started experiencing the second wave of infections. Continuous operations and strategic industrial companies (including Polymetal) in both countries are allowed to continue operating at regular capacity.

  • In both countries, Polymetal has had no interruptions either in production or supply chain. The vast majority of operating consumables and spares are sourced domestically and from China.

  • Sales and refining activities remain unaffected. Refineries in Russia and Kazakhstan continue to operate normally.

Assistance to communities

  • Polymetal continued to provide financial support to all regions of operations in Russia and Kazakhstan in order to prevent the spread of the COVID-19 pandemic. The Company has been purchasing critical medical equipment such as mobile X-Ray and anesthetic-respiratory machines, oxygen concentrators, ventilators, ultrasound machines, pulse oximeters, personal protection gear and other medical supplies for 25 regional and municipal hospitals, and volunteers. The total amount of donations in H1 amounted to RUB 129 million (US$ 1.8 million).

  • Polymetal remains committed to supporting local communities and investing in their health and safety especially during the pandemic. The Company will maintain its assistance to medical and dedicated volunteer institutions at all levels.

1Following consistent change of the market price ratio, Polymetal has decided to use gold/silver ratio of 120:1 (previously 80:1) for presentation of its gold equivalent production data and guidance. Simultaneously, base metal by-products have been excluded from gold equivalent production data and guidance due to insignificance. The new ratio is applied from 1 April 2020. Comparative data for previous periods has been restated accordingly.


 

 

3 months ended June 30,

% change1

6 months ended June 30,

% change1

 

2020

2019

2020

2019

 

 

 

 

 

 

 

Waste mined, Mt

39.2

40.0 

-2%

79.1

77.6

+2%

Underground development, km

23.2

26.1

-11%

46.4

54.3

-15%

Ore mined, Mt

4.1

4.3

-5%

8.1

8.6

-6%

Open-pit

3.1

3.3

-6%

6.0

6.5

-7%

Underground

1.0

1.0

-1%

2.0

2.1

-2%

Ore processed, Mt

4.3

4.1

+4%

7.8

7.6

+3%

Average GE grade processed, g/t

3.8

3.5

+8%

4.0

3.7

+7%

Production

 

 

 

 

 

 

Gold, Koz

318

302

+5%

642

602

+7%

Silver, Moz

4.9

6.0

-19%

9.8

11.0

-11%

Gold equivalent, Koz2

358

352

+2%

723

694

+4%

Sales

 

 

 

 

 

 

Gold, Koz

324

314

+3%

595

604

-2%

Silver, Moz

5.2

5.6

-8%

9.9

10.3

-4%

Revenue, US$m3

641

492

+30%

1,135

946

+20%

Net debt, US$m4

1,690

1,661

+2%

1,690

1,479

+14%

Safety5

 

 

 

 

 

 

LTIFR

0.08

0.22

-64%

0.07

0.23

-70%

Fatalities

0

1

 

0

2

 


Notes:
(1) % 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.
(2) Based on 120:1 Au/Ag conversion ratio (Polymetal previously used 80:1 Au/Ag ratio) and excluding base metals (previously were included). Comparative data for 2019 restated accordingly.
(3) Calculated based on the unaudited consolidated management accounts.
(4) Non-IFRS measure based on unaudited consolidated management accounts. Comparative information is presented for 31 March 2020 (for the three months period) and 31 December 2019 (for the six months period).
(5) LTIFR = lost time injury frequency rate per 200,000 hours worked.


PRODUCTION BY MINE

 

3 months ended June 30,

%

change

6 months ended June 30,

%

change

 

2020

2019

2020

2019

 

 

 

 

 

 

 

GOLD EQ. (KOZ)1

 

 

 

 

 

 

Kyzyl

104

81

+28%

213

159

+33%

Albazino

62

55

+13%

140

136

+2%

Dukat

52

55

-6%

104

108

-4%

Omolon

46

43

+7%

88

95

-8%

Varvara

41

36

+14%

84

70

+21%

Svetloye

31

52

-41%

52

61

-15%

Voro

22

29

-24%

42

56

-25%

Mayskoye

1

-

NA

1

5

-79%

TOTAL (continuing operations)

358

352

+2%

723

691

+5%

Kapan

-

-

NA

-

3

-100%

TOTAL (including

discontinued operations)

358

352

+2%

723

694

+4%

Notes: (1) Based on 120:1 Au/Ag conversion ratio (Polymetal previously used 80:1 Au/Ag ratio) and excluding base metals (previously were included). Comparative data for 2019 restated accordingly.

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CONFERENCE CALL AND WEBCAST

Polymetal will release the Group’s Q2 2020 Production results on Thursday, July 23.

The Сompany will hold a conference call and webcast on Thursday, 23 July 2020 at 12:00 London time (14:00 Moscow time).

To participate in the call, please dial:

From the UK:
+44 330 336 9125 (local access)
0800 358 6377 (toll free)

From the US:
+1 646 828 8143 (local access)
800 263 0877 (toll free)

From Russia:
+7 495 213 1767 (local access)
8 800 500 9283 (toll free)

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

Conference code: 3221219

To participate in the webcast follow the link: https://webcasts.eqs.com/polymetal20200723.

Please be prepared to introduce yourself to the moderator or register.

A recording of the call will be available at +44 207 660 0134 (from the UK), +1 719 457 0820 (from the USA) and 8 10 800 2702 1012 (from Russia), access code 3221219, from 17:30 Moscow time Thursday, 23 July, till 17:30 Moscow time Thursday, 30 July 2020. Webcast replay will be available on Polymetal’s website (www.polymetalinternational.com) and at https://webcasts.eqs.com/polymetal20200723.

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Polymetal International plc (together with its subsidiaries — “Polymetal”, the “Company”, or the “Group”) is a top-10 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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2019