Q4 and full year 2020 production results

29 January 2021

Polymetal reports strong production results for the fourth quarter and twelve months ended December 31, 2020.

“2020 was a successful year for Polymetal despite the COVID pandemic. We improved our safety performance and, crucially, achieved zero fatalities. The Company beat production guidance, enjoyed record free cash flow and continued to execute development projects on schedule”, said Vitaly Nesis, Group CEO of Polymetal. “In 2021, we expect first ounces from Nezhda and will make every effort to minimize the impact of the second wave of the pandemic on our safety, production, and cash flows”.

HIGHLIGHTS

  • No fatal accidents among Group workforce or its contractors occurred in 2020 (compared with two employee fatalities and one contractor fatality in 2019). Lost time injury frequency rate (LTIFR) among the Group’s employees decreased by 37% year-on-year (y-o-y) to 0.12.

  • In 2020, the Company started to use the DIS metric (days lost due to work-related injuries) as the main Health and Safety KPI. For the full year, DIS amounted to 1,583 days, a 10% decrease compared to 2019. Polymetal will also continue to report its LTIFR going forward.

  • The Company’s FY2020 gold equivalent (“GE”) output amounted to 1,559 Koz, a 4% increase y-o-y and 4% above the original production guidance of 1.5 Moz. Strong contribution from Kyzyl, Varvara and Albazino offset planned grade declines at Svetloye and Voro. Q4 GE production was roughly stable y-o-y and stood at 358 Koz.

  • Revenue in 2020 jumped by 28% to reach US$ 2.9 billion while Q4 revenue was up 31% y-o-y to US$ 0.8 billion on the back of higher gold sales and higher metal prices. The lag between gold production and sales has been closed.

  • The Company expects full-year Total Cash Costs (“TCC”) to be below the original guidance of US$ 650-700/GE oz. Sharp devaluation of domestic currencies (RUR and KZT) outweighed additional COVID-related costs and price-driven increase in royalties. All-in Sustaining Cash Costs (“AISC”) are expected to be within the guidance range of US$ 850-900/GE oz as the Company has accelerated pre-stripping and mine fleet renewals against the backdrop of higher commodity prices.

  • Polymetal generated strong quarterly free cash flow resulting in Net Debt reduction to US$ 1.35 billion as at the end of 2020, Net Debt/EBITDA is expected to be below 1x. For the full year, Net Debt decreased by US$ 128 million and the Company paid US$ 480 million of dividends implying record annual FCF.

  • Construction and development activities at Nezhda and POX-2 progressed on schedule despite significant challenges posed by COVID-related disruptions and slowdowns. At Nezhda, processing plant building was completed and most of the key equipment installed. Ore mining is ongoing. At POX-2, the autoclave building framework, concentrate storage facility and the majority of concrete work for desorption/electrolysis building and oxygen station were completed.

  • In 2020, the Board approved construction of the Voro flotation plant (start-up in Q1 2023) and Kutyn heap leach project, a part of Albazino operations (start-up in Q2 2023).

  • CAPEX for the full year is expected to amount to approximately 10% higher than guidance at US$ 590 million. The increase is mostly related to:

    • Accelerated spending across project portfolio in a bid to neutralize the impact of the pandemic on project schedules and

    • Substantial increase in capitalized stripping aimed at ensuring operational flexibility and production stability against the backdrop of heightened epidemiological risks.

2021 OUTLOOK

  • The Company reiterates its current production guidance of 1.5 Moz of GE for FY2021 and 1.6 Moz of GE for FY2022.

  • TCC in 2021 is expected to be in the range of US$ 700-750/GE oz. The y-o-y TCC increase will be driven by:

    • Rouble and Tenge appreciation compared to average 2020 levels.

    • Increasing domestic diesel fuel price driven by higher Brent oil prices.

    • Above-CPI wage inflation in the mining industry.

    • Full-year impact of COVID-related measures.

    The guidance remains contingent on the Rouble/Dollar and Tenge/Dollar exchange rates and Brent oil price.

  • Capital expenditures in 2021 are expected to be approximately US$ 560 million. A US$ 75 million increase compared to the previous guidance is driven by:
    • Limited availability and sharp increases in construction labor costs. This factor is driven by COVID-related travel restrictions with Central Asian countries, a traditional source of the majority of construction workforce.

    • Sharp increases in domestic diesel fuel and steel prices.

    • Higher EUR/USD exchange rate (imported processing and mining equipment mainly sourced from the EU).

    • Construction of on-site observatory facilities for personnel at remote sites.

    As a result, AISC in 2021 is expected to average US$ 925-975/GE oz. The Company will continue to prioritize timely project execution over cost optimization in its projects.

COVID-19 UPDATE

  • There were 80 active cases of COVID-19 as at 25 January 2021 across the Group. We regret to report that five of our employees (four in 2020 and one in 2021) died of the disease or its consequences.

  • Epidemiological situation in the Company remains under control. Operations and development projects are unaffected so far.

  • Strict precautionary procedures which were previously implemented including mandatory isolation of new arrivals and restrictions on meetings and travel, are maintained at all production sites and offices. These restrictions are currently expected to continue into full year of 2021.

  • Polymetal is prepared to start vaccination of its employees and is currently awaiting for the Russian Sputnik-V vaccine to become broadly available.

  • Polymetal continues to provide varied financial and operational support to healthcare facilities across all regions of its presence with US$ 3.4 million spent in 2020. The main areas of assistance include purchasing PPE, medical supplies, and specialized diagnostic equipment.

  • The Company estimates COVID-related cash expenses in 2021 at approximately US$ 5 million per month with the majority recorded as operating costs. This translates into approximately US$ 35 per GE ounce in AISC.

COVID-19 STATISTICS AS OF 25.01.2021

Employees

Russia

Kazakhstan

Group

 

 

 

 

Tests administered

31,679

16,521

48,200

C-19 positive tests

1,120

331

1,451

Active cases

48

32

80

Died

4

1

5

In hospital

1

1

2

Hospitalised since the start of the pandemic

187

20

207

Average headcount

9,432

2,633

12,065

 

OPERATING HIGHLIGHTS

 

3 months ended Dec 31,

% change1

12 months ended Dec 31,

% change1

 

2020

2019

2020

2019

 

 

 

 

 

 

 

Waste mined, Mt

44.0

39.8

+10%

166.8

158.6

+5%

Underground development, km

22.6

25.6

-12%

90.0

105.8

-15%

Ore mined, Mt

3.54

4.21

-16%

15.76

17.22

-8%

Open-pit

2.49

3.13

-20%

11.60

13.02

-11%

Underground

1.05

1.07

-2%

4.17

4.20

-1%

Ore processed, Mt

3.7

3.5

+3%

15.4

15.0

+3%

Average GE grade processed, g/t

3.9

4.0

-3%

3.9

3.8

+2%

Production

 

 

 

 

 

 

Gold, Koz

322

312

+3%

1,402

1,316

+6%

Silver, Moz

4.4

5.2

-16%

18.8

21.6

-13%

Gold equivalent, Koz2

358

355

+1%

1,559

1,496

+4%

Sales

 

 

 

 

 

 

Gold, Koz

386

374

+3%

1,392

1,366

+2%

Silver, Moz

5.2

5.7

-9%

19.3

22.1

-13%

Revenue, US$m3

846

643

+31%

2,865

2,245

+28%

Net debt, US$m4

1,351

1,610

-16%

1,351

1,479

-9%

Safety5

 

 

 

 

 

 

LTIFR (Employees)

0.16

0.18

-11%

0.12

0.19

-37%

DIS (Employees)6

 

 

 

1,583

1,760

-10%

Fatalities

 

 

 

 

 

 

Employees

0

0

NA

0

2

-100%

Contractors

 

 

 

0

1

-100%

Average headcount

 

 

 

12,065

11,611

+4%


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 (prior to Q2 2020, Polymetal used 80:1 Au/Ag ratio) and excluding base metals (previously were included). Historical comparative data restated accordingly.
(3) Based on the unaudited consolidated management accounts.
(4) Non-IFRS measure based on unaudited consolidated management accounts. Comparative information is presented for 30 Septemeber 2020 (for the three months period) and 31 December 2019 (for the twelth months period).
(5) LTIFR = lost time injury frequency rate per 200,000 hours worked.
(6) DIS – days lost due to work-related injuries.

PRODUCTION BY MINE

 

3 months ended Dec 31,

%

change

12 months ended Dec 31,

%

change

 

2020

2019

2020

2019

 

 

 

 

 

 

 

GOLD EQ. (KOZ)1

 

 

 

 

 

 

Kyzyl

67

90

-25%

382

343

+11%

Albazino

56

30

+88%

261

241

+8%

Omolon

57

54

+6%

210

196

+7%

Dukat

48

47

+2%

199

206

-3%

Varvara

28

33

-14%

159

137

+16%

Mayskoye

61

52

+16%

139

129

+8%

Svetloye

28

27

+7%

120

134

-11%

Voro

12

22

-46%

89

106

-16%

TOTAL (continuing operations)

358

355

+1%

1,559

1,493

+4%

Kapan

-

-

NA

-

3

-100%

TOTAL (including
discontinued operations)

358

355

+1%

1,559

1,496

+4%

Notes: (1) Based on 120:1 Au/Ag conversion ratio (prior to Q2 2020, Polymetal used 80:1 Au/Ag ratio) and excluding base metals (previously were included). Historical comparative data restated accordingly.

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CONFERENCE CALL AND WEBCAST

The Company will hold a conference call and webcast on Friday, 29 January 2021 at 11:00 London time (14:00 Moscow time)..

To participate in the call, please dial:

From the UK:
+44 (0) 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 10 800 2867 5011 (toll free)

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

Conference code: 3973919

To participate in the webcast follow the link: https://www.webcast-eqs.com/polymetal20210129.

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 3973919, from 17:30 Moscow time Friday, 29 January, till 17:30 Moscow time Friday, 5 February 2021. Webcast replay will be available on Polymetal’s website (www.polymetalinternational.com) and at https://www.webcast-eqs.com/polymetal20210129.

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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