Report on payments to governments for the year 2020

30 June 2021

Polymetal issues the report on payments to government for the year ended 31 December 2020.

INTRODUCTION

This Report provides an overview of the payments to governments made by Polymetal International plc and its subsidiary undertakings (hereinafter referred to as “Polymetal”) for the year 2020 as required under the UK’s Report on Payments to Governments Regulations 2014 (as amended in December 2015). These UK Regulations enact domestic rules in line with Directive 2013/34/EU (the EU Accounting Directive (2013)) and apply to large extractive companies, whose securities are publicly listed on a UK-regulated stock market, that are involved in the exploration, prospection, discovery, development and extraction of minerals, oil, natural gas deposits or other materials. This Report is also intended to satisfy the requirements of the Disclosure and Transparency Rules of the Financial Conduct Authority in the United Kingdom. 

BASIS OF PREPARATION

Legislation

This report is prepared in accordance with The Reports on Payments to Governments Regulations 2014 as enacted in the UK in December 2014 and as amended in December 2015.

Reporting entities

This Report includes payments to governments made by Polymetal. Payments made by entities over which Polymetal has joint control or significant influence are excluded from this Report.

Activities

Payments made by Polymetal to governments arising from activities involving the exploration, prospection, discovery, development and extraction of minerals are disclosed in this Report. It excludes payments related to refining activities made to the refineries owned by the government agencies and any payments which are not directly attributable to the production and exploration activities.

Government

Government includes any national, regional or local authority of a country, and includes a department, agency or entity that is a subsidiary of a government.

Project

Payments are reported at project level except that payments that are not attributable to a specific project are reported at legal entity level. Project is defined as operational activities which are governed by a single contract, or licence agreement, and form the basis for payment liabilities with a government. If such agreements are substantially interconnected, those agreements are to be treated as a single project.

“Substantially interconnected” means forming a set of operationally and geographically integrated contracts, or licence agreements that are signed with a government giving rise to payment liabilities. Indicators of integration include, but are not limited to, geographic proximity, the use of shared infrastructure and common operational management.

License agreements are aggregated for the purposes of reporting as a single project only when those legal agreements have substantially similar terms and are both geographically and operationally integrated.

Payments

The information is reported under the following payment types:

Income taxes

These are taxes paid by Polymetal on its income and/or profits in accordance with legislation enacted in the applicable jurisdiction. Payments are reported net of refunds. Value added tax, personal income taxes, social taxes, property taxes are excluded.

The maximum income tax in Russia is set at a rate of 20% and is allocated between federal budget and the budgets of the relevant constituent regions. In 2020 and 2019 the following proportion was applied: 3% allocated to the federal budget, whereas 17% allocated to the regional budgets. From 1 January 2017 Omolon Gold Mining Company LLC and Magadan Silver JSC are entitled to the decreased statutory income tax rate of 17% for the operations held in the Special Economic Zone of the Russian Far East, as well as decreased mining tax rate (paying at 60% of the standard mining tax rates). In return for obtaining this tax relief the members of the regional Special Economic Zone are obliged to invest 50% of their tax savings each year in the Special Economic Zone Development Program. From 1 January 2017 Svetloye LLC is subject to tax relief as a participant in a Regional Investment Project and is entitled to the statutory income tax rate of 0% up to 2021 and 10% from 2022 to 2026, as well as decreased mining tax rates.

In Kazakhstan income tax is set at a rate of 20% and there is no allocation for regional or local income taxes in this country.

Mining tax

Mining tax is a royalty payable in Russian Federation and Kazakhstan, which is calculated based on the value of the precious metals extracted in the period. In Russia this value is usually determined based on the realised selling price of precious metals or, in case if there were no sales during the period, cost of production of metals extracted. In Kazakhstan the value is determined based on the market price whether or not there were sales during the period.

Mining tax in Russia is levied at federal level, and then is reallocated between federal and respective regional budgets based on the following proportion: 40% of total tax collected is transferred to the federal budget, 60% to regional budgets. Mining tax and royalties in Kazakhstan are levied at republican level.

Licence fees

These are fees and other sums paid as consideration for acquiring a licence for gaining access to an area where extractive activities are performed. Administrative government fees that are not specifically related to the extractive sector, or to access to extractive resources, are excluded.

Rental fees

The land in the Russian Federation and Kazakhstan on which the Group’s production facilities are located is owned by the state. The Group leases this land through operating lease agreements.

Other payments

Other payments include payments made and social commitments in accordance with subsoil contracts attributable to the Kyzyl project and investment in the Special Economic Zone Development Program of Omolon Gold Mining Company LLC and Magadan Silver JSC.

Cash and in-kind payments

Payments are reported on cash basis. No in-kind payments were made during years ended 31 December 2020 and 31 December 2019.

Materiality Level

Any payment, whether made as a single payment or as a series of related payments, below GBP 86,000 within a financial year is excluded from this Report.

Payments made to governments by joint ventures or associates of the Group in proportion to the company’s interest in the respective venture or associate are insignificant to this Report based on materiality level set.

Exchange Rate

Relevant payments are made by Polymetal in Russian Rubles and Kazakh Tenge and for the purpose of this Report are translated to the US Dollar based on the foreign exchange rate at the relevant monthly average rate. 

PAYMENTS PER GOVERNMENT
FOR THE YEAR 2020
Government
000’$
Income tax Mining tax Rental fees Licence fees Other Total
Russia 158,843 86,066 2,588 1,220 12,6681 261,385
Kazakhstan 87,813 39,241 —  3,668 8,7712 139,493
Total 246,656 125,307 2,588 4,888 21,439 400,878
PAYMENTS PER PROJECT
Entity
000’$
Project Country/ Government Region Income tax Mining tax Rental fees Licence fees Other Total
Gold of Northern Urals CJSC Voro Russia Svedlovskaya oblast’ 27,298 10,016 —  —  497 37,811
Svetloye LLC Svetloye Russia Khabarovskiy Kray —  2,504 354 592 —  3,450
Magadan Silver JSC Dukat Russia Magadanskaya oblast’ 38,962 16,995 665 628 7,1761 64,426
Mayskoye Gold Mining Company LLC Mayskoye Russia Chukotka Autonomous Okrug 13,975 17,288 —  —  —  31,263
Omolon Gold Mining Company LLC Omolon Russia Magadanskaya oblast’ 41,148 13,427 262 —  4,7941 59,631
Albazino Resources Ltd Albazino Russia Khabarovskiy Kray 36,239 23,980 703 —  201 61,123
GRK Amikan LLC Veduga Russia Krasnoyarskiy Kray 1,221 1,856 285 —  —  3,362
South-Verkhoyansk Mining Company JSC Nezhda Russia Yakutia —  —  319 —  —  319
Varvarinskoye JSC Varvara Kazakhstan n/a 28,707 —  —  —  605 29,312
Komarovskoye Mining Company LLC Komar Kazakhstan n/a 3,811 9,845 —  —  1,169 14,825
Bakyrchik Mining Venture LLC Kyzyl Kazakhstan n/a 55,177 29,396 —  3,668 6,9972 95,238
Inter Gold Capital LLC Kazakhstan n/a 118 —  —  —  —  118
Total 246,656 125,307 2,588 4,888 21,439 400,878

Notes:
(1) Includes payments under Special Economic Zone Development Program of $4,492 thousand for Omolon Gold Mining Company LLC and $6,465 thousand for Magadan Silver JSC.
(2) In accordance with a memorandum with East-Kazakhstan Oblast Administration (local Kazakhstan government) Polymetal participates in financing of certain social and infrastructure development project of the region. During the year ended 31 December 2020 Polymetal paid $4,576 thousand under this programme.

PAYMENTS PER GOVERNMENT
FOR THE YEAR 2019
Government
000’$
Income tax Mining
tax
Rental
fees
Licence fees Other Total
Russia 84,619 70,396 2,553 - 12,0341 169,602
Kazakhstan 19,054 45,326 - - 7,9912 72,371
Total 103,673 115,722 2,553 - 20,025 241,973
PAYMENTS PER PROJECT
Entity
000’$
Project Country/ Government Region Income tax Mining
tax
Rental
fees
Licence fees Other Total
Gold of Northern Urals CJSC Voro Russia Svedlovskaya oblast’ 26,568 9,101 - - - 35,669
Svetloye LLC Svetloye Russia Khabarovskiy Kray - 2,189 348 - - 2,537
Magadan Silver JSC Dukat Russia Magadanskaya oblast’ 27,962 15,881 747 - 7,9701 52,56
Mayskoye Gold Mining Company LLC Mayskoye Russia Chukotka Autonomous Okrug - 12,38 - - - 12,38
Omolon Gold Mining Company LLC Omolon Russia Magadanskaya oblast’ 11,39 10,45 319 - 3,8251 25,984
Albazino Resources Ltd Albazino Russia Khabarovskiy Kray 16,007 18,94 608 - 239 35,794
GRK Amikan LLC Veduga Russia Krasnoyarskiy Kray 2,692 1,455 265 - - 4,412
South-Verkhoyansk Mining Company JSC Nezhda Russia Yakutia - - 266 - - 266
Varvarinskoye JSC Varvara Kazakhstan n/a 15,528 3,791 - - 556 19,875
Komarovskoye Mining Company LLC Komar Kazakhstan n/a 3,076 7,483 - - - 10,559
Bakyrchik Mining Venture LLC Kyzyl Kazakhstan n/a 450 34,052 - - 7,4352 41,937
Total 103,673 115,722 2,553 - 20,025 241,973

Notes:
(1) Includes payments under Special Economic Zone Development Program of $3,522 thousand for Omolon Gold Mining Company LLC and $7,945 thousand for Magadan Silver JSC.
(2) In accordance with a memorandum with East-Kazakhstan Oblast Administration (local Kazakhstan government) Polymetal participates in financing of certain social and infrastructure development project of the region. During the year ended 31 December 2019 Polymetal paid $5,000 thousand under this programme.

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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.
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2019