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Q4 and full year 2018 production results

31 January 2019

Polymetal International plc reports record production for the fourth quarter and twelve months ended December 31, 2018. 

“The Company had a very strong Q4. Full-year production of 1.56 Moz of gold equivalent (GE) exceeded the original guidance for the seventh year in a row”, said Vitaly Nesis, Group CEO of Polymetal. “Successful execution at Kyzyl and the POX debottleneck have already translated into significant production and free cash flow generation“.

HIGHLIGHTS

  • The Company’s Q4 production jumped 23% year-on-year to a record 497 Koz of GE on the back of the full ramp-up at Kyzyl. FY2018 GE production of 1,562 Koz was up 9% year-on-year exceeding our original production guidance of 1,550 Koz.

  • Following a very smooth ramp-up, Kyzyl delivered a total of 96 Koz of gold following its launch in June, well above the original 80 Koz guidance. 2019 will be the mine’s first full-year of operation at full capacity, with targeted production of more than 300 Koz.

  • In Q4 net debt fell by US $301 million to US$ 1,518 million. Strong cash flow from seasonal de-stockpiling at Mayskoye supported first revenues from Kyzyl as well as proceeds from the disposal of non-core assets.

  • Following Board approval and the receipt of all necessary government approvals, open-pit mining and construction have commenced at Nezhda. First production is expected in Q4 2021.

  • Polymetal had no fatalities or major accidents in Q4. Full year safety statistics also demonstrate a meaningful improvement year-on-year.

  • Based on the actual 2018 average Rouble and Tenge exchange rates against the US dollar, the Company expects full year costs to come in close to the bottom of the range of its initial cost guidance of US$ 650-700/GE oz for Total Cash Costs (“TCC”) and US$ 875-925/GE oz for All-in Sustaining Cash Costs (“AISC”).

  • The Board has decided that there will be no special dividend for 2018 as free cash flow will be fully distributed to shareholders through the regular dividend at a payout ratio of 50% of underlying net income. A final dividend for 2018 will be proposed by the Board in March 2019 based on full-year financial results.

  • The Company will host a POX workshop on 11 February 2019 in London to provide an update on the Amursk POX-2 project and an overview of the POX technology.

2019 OUTLOOK

  • The Company reiterates its current production guidance of 1.55 Moz and 1.6 Moz of GE for 2019 and 2020, respectively. The first full-year of production at Kyzyl and an increase in grades at Omolon are expected to offset planned grade declines at Albazino, Voro and Dukat. Traditionally, production in both years will be weighted towards 2H due to seasonality.

  • TCC in 2019 is expected to be in the range of US$ 600-650/ GE oz while AISC is expected to average US$ 800-850/ GE oz. The anticipated decrease in costs will primarily be driven by the increasing share of low-cost production from Kyzyl, as well as the disposal of high-cost Kapan and Okhotsk. The cost guidance is contingent on the Rouble/Dollar exchange rate and Brent oil price.

  • Capital expenditures in 2019 are expected to be approximately US$ 380 million, in line with the previous guidance. Nezhda and POX-2 (subject to Board approval) will consume roughly half of the capex budget with the second half assigned to maintenance capital, capitalised stripping and exploration.

 

 

3 months ended Dec 31,

% change1

12 months ended Dec 31,

% change1

 

2018

2017

2018

2017

 

 

 

 

 

 

 

Waste mined, Mt

32.2

29.3

+10%

126.7

114.0

+11%

Underground development, km

33.2

31.5

+5%

130.0

115.4

+13%

Ore mined, Mt

3.8

2.9

+29%

14.0

12.6

+11%

Open-pit

2.6

1.9

+42%

9.3

8.2

+13%

Underground

1.1

1.1

+6%

4.7

4.3

+7%

Ore processed, Mt

3.7

3.0

+24%

15.2

13.0

+16%

Production

 

 

 

 

 

 

Gold, Koz

414

317

+31%

1,216

1,075

+13%

Silver, Moz

5.9

6.6

-11%

25.3

26.8

-6%

Copper, Kt

1.3

0.8

+65%

3.9

2.7

+43%

Zinc, Kt

1.0

1.2

-12%

5.4

4.8

+12%

Gold equivalent, Koz2

497

405

+23%

1,562

1,433

+9%

Sales

 

 

 

 

Gold, Koz

432

356

+21%

1,198

1,099

+9%

Silver, Moz

8.3

8.3

+0%

25.7

26.5

-3%

Copper, Kt

1.4

1.3

+11%

3.3

2.6

+30%

Zinc, Kt

1.2

1.2

-3%

5.6

4.7

+20%

Revenue, US$m3

652

586

+11%

1,882

1,815

+4%

Net debt, US$m4

1,518

1,819

-17%

1,518

1,421

+7%

Safety5

 

 

 

 

 

 

LTIFR

0

0.18

-100%

0.09

0.15

-40%

Fatalities

0

1

-100%

1

2

-50%

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 1:80 Ag/Au, 5:1 Cu/Au and 2:1 Zn/Au conversion ratios. 
(3) Calculated based on the unaudited consolidated management accounts. 
(4) Non-IFRS measure based on unaudited consolidated management accounts. Comparative information is presented for 30 September 2018 (for the three months period) and 31 December 2017 (for the nine months period). 
(5) LTIFR = lost time injury frequency rate per 200,000 hours worked.

PRODUCTION BY MINE

 

3 months

ended Dec 31,

%

change1

12 months

ended Dec 31,

%

change1

 

2018

2017

2018

2017

 

 

 

 

 

 

 

GOLD EQ. (KOZ)1

 

 

 

 

 

 

Kyzyl

86

-

NA

96

-

NA

Dukat

75

81

-7%

306

322

-5%

Albazino-Amursk

67

71

-5%

308

269

+15%

Omolon

58

64

-8%

195

202

-4%

Mayskoye

70

35

+102%

117

124

-6%

Varvara

39

42

-8%

142

130

+9%

Voro

29

31

-6%

107

120

-10%

Svetloye

23

22

+7%

136

106

+28%

Okhotsk

35

48

-25%

104

111

-7%

Kapan

13

13

+6%

51

50

+3%

TOTAL

497

405

+23%

1,562

1,433

+9%

Notes: (1) Based on 1:80 Ag/Au, 5:1 Cu/Au and 2:1 Zn/Au conversion ratios.

CONFERENCE CALL AND WEBCAST

Polymetal will hold a conference call and webcast on Thursday, 31 January 2019 at 9:00 London time (12:00 Moscow time). 

To participate in the call, please dial:
8 800 500 98 63 access code 58246440# (free from Russia), or
+44 203 009 24 75 (free from the UK), or
+1 646 502 51 26; (free from the US), or

follow the link: http://polymetal310119-live.audio-webcast.com 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 http://polymetal310119-live.audio-webcast.com. 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 418825014#, from 12:30 Moscow time Thursday, 31 January, till 12:30 Moscow time Thursday, 7 February, 2019.

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Polymetal International plc (LSE, MOEX: POLY, AIX: POLY, ADR: AUCOY) (together with its subsidiaries — “Polymetal”, the “Company”, or the “Group”) is a top-20 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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Michael Vasiliev

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