Top-line indicator, heavily depends on commodity prices but also driven by delivery of production volumes.
In 2017, revenue increased by 15% over 2016 to US$ 1,815 million, primarily driven by gold equivalent (GE) production growth of 13%. Gold and silver sales were in line with production volume dynamics.
+15% (US$/GE oz)
High-grade, full capacity utilisation and continued operating improvement, as well as foreign exchange rates and oil price are the key drivers of total cash costs (TCC) per ounce.
TCC were US$ 658/GE oz for the year, up 15% from 2016 levels and at the lower end of the Company’s updated guidance of US$ 650-675/GE oz. The increase in TCC was predominantly driven by the strengthening of the Russian Rouble on the back of the recent oil price rally and stabilising macroeconomic conditions in Russia.
+15% (US$/GE oz)
Our focus on high grade and low capital intensity ensures a low level of all-in sustaining cash costs (AISC).
AISC amounted to US$ 893/GE oz, also within the Company’s updated guidance, an increase of 15% year-on-year, driven mostly by the same factors, as well as significantly increased exploration spending across the portfolio.
Adjusted EBITDA is a key measure of the Company’s operating performance and cash generation capacity (excluding impact of financing, depreciation and tax) and a key industry benchmark allowing to perform peer comparison.
Adjusted EBITDA was US$ 745 million, down 2% compared to 2016, as increased costs incurred due to a stronger Russian Rouble largely offset the production growth.
A key indicator in any business. Generating a healthy free cash flow enables us to provide significant cash returns for shareholders.
Company continued to generate meaningful free cash flow1 that amounted to US$ 143 million (2016: US$ 257 million), while maintaining stable net cash operating inflow of US$ 533 million (2016: US$ 530 million).
Our aim is to deliver substantial dividends to our shareholders at all stages of both the commodity cycle and our investment cycle.
A final dividend of US$ 0.30 per share (approx. US$ 129 million) representing 50% of the Group’s underlying net earnings for 2H 2017 has been proposed by the Board in accordance with the revised dividend policy and in compliance with the hard ceiling of Net debt/Adjusted EBITDA ratio below 2.5x. This will bring the total dividend declared for the period to US$ 189 million.
Our rigorous approach to all investment decisions ensures tight controls on capital expenditure, boosting return on invested capital for shareholders and sustainable development for the business.
Capital expenditure came in at US$ 383 million, up 41% compared to 2016 due to accelerated pre-stripping and construction at Kyzyl, as well as an increased brownfield exploration spend across the operating assets portfolio.
Underlying net income is a comprehensive benchmark of our core profitability excluding foreign exchange gains/losses and impairments.
Underlying net earnings (adjusted for the after-tax amount of write-down of metal inventory to net realisable value, foreign exchange gains/losses and change in fair value of contingent consideration liability) were US$ 376 million (2016: US$ 382 million).
Annual targets for gold equivalent production are an indicator to the market of our confidence in our operating performance — and one that we regularly exceed.
Polymetal delivered a strong operational performance in 2017: total GE production increased 13% year-on-year to 1,433 Koz, 2% above our initial production guidance of 1,400 Koz. The strong finish to 2017 was driven by contributions from the fully ramped-up Svetloye heap leach (Okhotsk hub), as well as a strong performance at Komar (Varvara hub), Omolon and Amursk/Albazino.
Both extending mine life through near-mine exploration and new discoveries from greenfield exploration contribute to the Company’s long-term growth prospects.
The Company increased its Ore Reserves by 5% to 20.9 Moz of gold equivalent (GE) on the back of successful exploration at Albazino, Komar and Dukat, as well as initial reserve estimates at Kapan and Nezhda.
Our commitment, above anything else, is to have no fatalities. Despite some improvements over previous years, we regrettably failed in that objective in 2017, with two fatalities, and it is clear we have more work to do in this area. Safety begins with preparation: anticipating incidents before they happen, and improving ongoing training to identify risks and respond appropriately when the unexpected happens.
Nevertheless, we have seen a visible improvement in our health and safety performance, with a 21% reduction in LTIFR compared to 2016, and a decrease in the number of fatalities from four to two. The Company believes these improvements are attributable to our efforts such as the implementation of our Critical Risks Management System, reducing risks, and our commitment to the ultimate goal of zero fatalities at our operations.
-7% (CO2 equivalent tonnes per 10 Kt of ore processed)
Finding renewable energy sources is a priority if we are to lower our greenhouse gas (GHG) emissions and manage carbon emissions. Heat and electricity from our diesel generators, as well as our mining fleet operations, produce GHG emissions. The burning of natural gas and coal and the use of landfill also contribute to our GHG footprint. We measure and monitor our CO2 emissions using established international methodology.
To effectively manage our greenhouse gas emissions, we conduct an inventory assessment each year and report both direct and indirect emissions. In 2017, direct GHG emissions amounted to 281 Kt, compared to 268 Kt in 2016. In 2017, we introduced a number of measures to reduce GHG emissions, including converting all lighting to LED, and equipping diesel-powered generators with a heat recovery system. We also began to develop our Climate Management System.