Q4 and full year 2020 production results

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

OPERATING HIGHLIGHTS

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

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.