Half-yearly report for the six months ended 30 June 2019

“Our strong earnings during the period reflect solid operational delivery, and most notably excellent results from Kyzyl”, said Vitaly Nesis, Group CEO, commenting on the results. ”Traditionally, we expect seasonally lower costs, higher production and materially stronger cash flow generation in the second half of the year, allowing us to meet our full year cost and production guidance”.

FINANCIAL HIGHLIGHTS

• Revenue in 1H 2019 increased by 20% to US$ 946 million compared to 1H 2018 (“year-on-year”), primarily driven by gold equivalent (GE) production growth of 22%. Gold sales were 604 Koz, up 36% year-on-year, while silver sales were down 15% to 10.3 Moz, in line with production volume dynamics. Average realised prices largely tracked market dynamics: gold prices achieved were broadly flat year-on-year, while silver prices were down 7%.

• Group Total cash costs (“TCC”)¹ were US$ 667/GE oz for 1H 2019, down 3% year-on-year, and 3% above the Company’s full year guidance of US$ 600-650/GE oz owing to the seasonality of sales. All-in sustaining cash costs (“AISC”)¹ amounted to US$ 904/GE oz, increasing by 1% year-on-year due to one-off investments at Varvara (locomotive and mining fleet) and Dukat (scheduled tailings storage facility upgrade). Both cost metrics are expected to decline in the second half of the year on the back of seasonally higher production, notably at Svetloye and Mayskoye, and due to a closer alignment of sales to production at Dukat and Kyzyl.

• Adjusted EBITDA¹ was US$ 403 million, an increase of 34% year-on-year, mostly driven by higher production volumes. The Adjusted EBITDA margin increased by 5 p.p. to 43% (1H 2018: 38%), reflecting a successful launch and ramp-up of Kyzyl delivering at full capacity during the period.

• Net earnings² were US$ 153 million versus US$ 175 million in 1H 2018, mostly impacted by the foreign exchange loss on USD denominated intercompany loans between entities with different functional currencies. Underlying net earnings¹ increased by 21% to US$ 188 million (1H 2018: US$ 155 million) on the back of higher operating profit.

• A final dividend for 2018 of US$ 0.31 per share (total of US$ 146 million) was paid in May 2019. An interim dividend of US$ 0.20 per share (1H 2018: US$ 0.17 per share) representing 50% of the Group’s underlying net earnings for 1H 2019 has been approved by the Board in accordance with the dividend policy, while complying with the hard ceiling of 2.5x Net debt/Adjusted EBITDA .

• Net debt¹ increased to US$ 1,698 million during the period (31 December 2018: US$ 1,520 million), representing 1.92x of last twelve months Adjusted EBITDA, driven by a seasonal working capital increase and payment of FY 2018 final dividend. Seasonally higher production and a working capital drawdown are expected to drive stronger free cash flow generation in 2H 2019.

• Polymetal remains on track to meet its 2019 production guidance of 1.55 Moz of gold equivalent. TCC and AISC are expected to be within the guidance range of US$ 600-650/GE oz and US$ 800-850/GE oz, respectively. This guidance remains contingent on the RUB/USD and KZT/USD exchange rates that have a significant effect on the Group’s local currency denominated operating costs.

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) Profit for the financial period.

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) For more information on the APMs used by the Group refer to the “Alternative performance measures” section below.
(3) Restated on Dukat’s TCC including the effect of concentrate treatment charges. Previously reported TCC for 1H 2018 were US$ 683/GE oz.
(4) 1H 2019: Final dividend for FY 2018 paid in May 2019. 1H 2018: Final dividend for FY 2017 paid in May 2018.
(5)As at 31 December 2018.
(6) On a last twelve months basis. Adjusted EBITDA for 2H 2018 was US$ 475 million.
(7) NM – Not meaningful.

CONFERENCE CALL AND WEBCAST

Polymetal will hold a conference call and webcast on Tuesday,
27 August 2019 at 12:00 London time (14:00 Moscow time).

To participate in the call, please dial:
8 800 500 98 63 access code 2361298# (free from Russia), or
44 203 009 24 83 (free from the UK), or
1 646 502 51 26 (free from the US), or
follow the link: https://webcasts.eqs.com/polymetal20190827. 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 https://webcasts.eqs.com/polymetal20190827. 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 418870681#, from 14:30 Moscow time Tuesday, 27 August, till 14:30 Moscow time Tuesday, 3 September, 2019.