REG - PJSC Polyus Polyus Finance PLC - Financial results for the first half of 2022

Bank Of New York MellonAnnouncement

21/09/2022 08:15

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RNS Number : 1144A  PJSC Polyus  21 September 2022

 

Press Release
                                                                              21
September 2022

PJSC Polyus

Financial results for the first half of 2022

 

PJSC Polyus (LSE, MOEX - PLZL) ("Polyus", the "Company", and together with the
Company subsidiaries, the "group") has today released its consolidated
financial results for the first half of 2022.

Key highlights

1.   Total gold sales volumes in the first half of 2022 amounted to 1,015
thousand ounces, down 19% compared to the corresponding period of the previous
year.

2.   Revenue for the reporting period totalled $1,852 million, down 19%
compared to the first half of 2021.

3.   The group's TCC for the first half of 2022 increased 12% year-on-year
to $435 per ounce. This reflects lower average grades in ore processed at
Olimpiada, Blagodatnoye and Natalka, ongoing inflation in consumables and wage
indexation. An increase in the MET rate applied to Verninskoye due to the
conclusion of the regional investment project ("RInvP") regime also impacted
TCC.

4.   Adjusted EBITDA for the reporting period amounted to $1,215 million, a
26% decrease compared to $1,638 million in the first half of 2021, as result
of lower gold sales volumes and higher TCC on a per ounce basis.

5.   Capital expenditures ("capex") for the first half of 2022 rose to $384
million, from $306 million in corresponding period of the previous year. This
increase reflects higher capital spending across nearly all business units.

6.   The net debt (incl. derivatives)/adjusted EBITDA ratio increased to
0.8x in the first half of 2022, compared to 0.6x in the second half of 2021,
reflecting a higher net debt position and decline in adjusted EBITDA over the
last twelve months.

Eurobonds

In March 2022, the group repaid the principal amount and accrued interest of
its Notes due 2022 for total consideration of $494 million from its own cash.

In June 2022, the group launched consent solicitation process for its
outstanding Notes due 2023, Notes due 2024 and Notes due 2028 in order to
approve the amendment and waiver of certain terms of the Trust Deeds, Paying
Agency Agreements and Terms and Conditions of these Notes and the replacement
of BNY Mellon Corporate Trustee Services Limited with the new trustee.

Acquisition of the Chulbatkan deposit

In June 2022, the Company acquired 100% stake in the Chulbatkan gold deposit
from the Highland Gold Mining group of companies. Consideration for the
transaction was US$140 million, subject to further certain post-completion
adjustments.

Events after the reporting date

Eurobonds

As of September 2022, Consents from the Noteholders of the 2023 Notes, 2024
Notes and 2028 Notes were obtained, amendments to the documentation have been
approved and I2 Capital Trust Corporation Ltd started to act as the new
trustee in respect of the Notes.

CNY bond issue

In August 2022, the Company completed a debut 5-year yuan-denominated bonds
offering (CNY 4.6 bln with a coupon rate of 3.80% per annum). The Company
intends to use proceeds from the issue for general corporate purposes and
investment projects.

Comparative financial results

 $ million (if not mentioned otherwise)               1H 2022  1H 2021  Y-o-Y       2H 2021  H-o-H
 Operating highlights
 Gold production (koz) 1                              1,068    1,263    (15%)       1,454    (27%)
 Gold sold (koz)                                      1,015    1,248    (19%)       1,488    (32%)
 Financial performance
 Total revenue                                        1,852    2,273    (19%)       2,693    (31%)
 Operating profit                                     1,036    1,365    (24%)       1,594    (35%)
 Operating profit margin                              56%      60%       (4) ppts   59%       (3) ppts
 Profit for the period                                1,387    1,093    27%         1,185    17%
 Earnings per share - basic (US Dollar)               10.26    8.11     27%         8.71     18%
 Earnings per share - diluted (US Dollar)             10.24    8.08     27%         8.69     18%
 Adjusted net profit 2                                792      1,051    (25%)       1,236    (36%)
 Adjusted net profit margin                           43%      46%       (3) ppts   46%       (3) ppts
 Adjusted EBITDA 3                                    1,215    1,638    (26%)       1,880    (35%)
 Adjusted EBITDA margin                               66%      72%       (6) ppts   70%       (4) ppts
 Net cash flow from operations                        701      1,379    (49%)       1,557    (55%)
 Capital expenditure 4                                384      306      25%         622      (38%)
 Cash costs
 Total cash cost (TCC) per ounce sold ($/oz) 5        435      388      12%         420      4%
 All-in sustaining cash cost (AISC)                   825      655      26%         765      8%

per ounce sold ($/oz) 6 
 Financial position
 Cash and cash equivalents                            780      1,532    (49%)       1,343    (42%)
 Net debt (incl. derivatives) 7                       2,452    2,366    4%          2,197    12%
 Net debt (incl. derivatives)/adjusted EBITDA (x) 8    0.8      0.6     33%          0.6     33%

 

Total Cash Costs

In the first half of 2022, the group's TCC increased 12% to $435 per ounce
compared to $388 per ounce in the first half of 2021. This reflects lower
average grades in ore processed at Olimpiada, Blagodatnoye and Natalka (in
line with the mining plan), ongoing inflation in consumables and wage
indexation. An increase in the MET rate applied to Verninskoye due to the
conclusion of the RInvP regime also impacted TCC.

 

TCC performance by mine, $/oz

               1H 2022  1H 2021
 Olimpiada     433      383
 Blagodatnoye  405      355
 Natalka       382      373
 Verninskoye   404      330
 Kuranakh      645      551
 Alluvials     1,123    887

 

In the reporting period, TCC at Olimpiada increased to $433 per ounce, a 13%
increase compared to the first half of 2021, which, in addition to
afore-mentioned factors, was driven by a decrease in by-product credit of
antimony-rich flotation concentrate ($3 per ounce in the first half of 2022
compared to $13 per ounce in the first half of 2021). TCC at Blagodatnoye rose
14% year-on-year to $405 per ounce due to scheduled maintenance works. TCC at
Natalka increased to $382 per ounce, up 2% year-on-year, driven by
afore-mentioned factors, which was partially offset by the higher recovery
rate. TCC at Verninskoye amounted to $404 per ounce, driven by an increase in
the MET rate (from 2.4% to 6%) due to the conclusion of the RInvP regime
applicable for the deposit. At Kuranakh, TCC rose to $645 per ounce, up 17%
compared to corresponding period of the previous year, driven by scheduled
maintenance works. At Alluvials, TCC stood at $1,123 per ounce.

All-in sustaining costs (AISC)

In the first half of 2022, the group's AISC increased to $825 per ounce, up
26% compared to the first half of 2021, reflecting higher TCC and sustaining
capital  expenditures across all deposits as well as higher levels of
stripping activities in line with the mining schedules at Blagodatnoye,
Natalka and Verninskoye.

Despite an increase in TCC and AISC, Polyus still resides in the first decile
of the global cash cost curve amid inflationary pressures in global mining
industry.

Debt management

The Company's gross debt decreased to $3,232 million, compared to $3,540
million as at the end of 2021.

As at 30 June 2022, the Company's estimated cash position declined to $780
million (31 December 2021: $1,343 million; 30 June 2021: $1,532 million).
The Company's estimated net debt stood at $2,452 million (31 December 2021:
$2,197 million; 30 June 2021: $2,366 million).

Among other factors, the change in cash position mainly reflects a redemption
of Notes due 2022 (in a total amount of $494 million) as well as acquisition
of 100% stake in the Chulbatkan gold deposit for total consideration of $140
million.

 

Debt maturity schedule (as at 30 June 2022)(( 9 )), $ million

 2022  2023  2024   2025  2026  2027  2028
 12    346   2,049  22    0     0     700

 

Capex

In the first half of 2022, capital expenditures increased to $384 million,
from $306 million in the first half of 2021, reflecting higher capital
spending across almost all business units.

The Company continues to progress its growth projects. Key highlights:

·    At Blagotadnoye, the main contractor for the Mill 5 project was in
the final stage of the closure of the thermal envelope of the buildings of
comminution and hydromet circuits. Polyus is currently advancing the
installation of the SAG-mill. Foundation works for an in-pit crushing and
conveying (IPCC) system are also in progress.

·    At Kuranakh, Polyus entered an active phase of construction
activities under the Kuranakh mill expansion to 7.5 mpta (stage 4) project.
Reconstruction of the tailings storage facilities is ongoing.

·    At Sukhoi Log, the Company is proceeding with project design having
completed mine planning and processing plant design and progressed with the
general layout, infrastructure and tailings storage facility design. The
Company has defined the parameters of the main technological equipment, and
also commenced analysis of alternate equipment suppliers and flowsheet
parameters to accommodate for the possible supply chain restrictions as well
as restrictions on engaging international engineering companies.

 

Capex breakdown

 

 $ million                                                                1H 2022  1H 2021  Y-o-Y  2H 2021  H-o-H
 Olimpiada                                                                64       64       -      133      (52%)
 Blagodatnoe                                                              76       67       13%    171      (56%)
 Natalka                                                                  46       45       2%     65       (29%)
 Verninskoye                                                              29       29       -      50       (42%)
 Kuranakh                                                                 39       25       56%    69       (43%)
 Sukhoi Log                                                               31       22       41%    47       (34%)
 Alluvials                                                                13       10       30%    17       (24%)
 IT capex                                                                 34       16       N.A.   35       (3%)
 Other 10                                                                 52       28       86%    35       49%
 CAPEX                                                                    384      306      25%    622      (38%)
 Items capitalised 11 , net                                               118      96       23%    131      (10%)
 Change in working capital for purchase of property, plant and equipment  49       15       N.A.   (40)     N.A.
 Purchase of PP&E                                                         551      417      32%    713      (23%)

 

In the first half of 2022, the total cash amount spent on the purchase of
PP&E increased to $551 million, compared to $417 million in the first half
of 2021.

http://www.rns-pdf.londonstockexchange.com/rns/1144A_1-2022-9-21.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/1144A_1-2022-9-21.pdf)

 

Enquiries:

 

Investor and Media contact

Victor Drozdov, Director Communications & Investor Relations (CIR)
Department

+7 (495) 641 33 77

drozdovvi@polyus.com (mailto:drozdovvi@polyus.com)

 

Forward looking statement

This announcement may contain "forward-looking statements" concerning Polyus
and/or Polyus Group. Generally, the words "will", "may", "should", "could",
"would", "can", "continue", "opportunity", "believes", "expects", "intends",
"anticipates", "estimates" or similar expressions identify forward-looking
statements. The forward-looking statements involve risks and uncertainties
that could cause actual results to differ materially from those expressed in
the forward-looking statements. Forward-looking statements include statements
relating to future capital expenditures and business and management strategies
and the expansion and growth of Polyus' and/or Polyus Group's operations. Many
of these risks and uncertainties relate to factors that are beyond Polyus'
and/or Polyus Group's ability to control or estimate precisely and therefore
undue reliance should not be placed on such statements which speak only as of
the date of this announcement. Polyus and/or any Polyus Company assumes no
obligation in respect of, and does not intend to update, these forward-looking
statements, except as required pursuant to applicable law.

(#_ednref1) (1) Gold production is comprised of 1,064  thousand ounces of
refined gold and 4 thousand ounces of gold in flotation concentrate in the
first half of 2022.

 2  Adjusted net profit is defined by the group as net profit / (loss) for the
period adjusted for impairment loss / (reversal of impairment), unrealised
(gain) / loss on derivative financial instruments, foreign exchange (gain) /
loss, gain on acquisition of subsidiaries and associated deferred and current
income tax related to such items.

 3  Adjusted EBITDA is defined by the group as profit for the period before
income tax, depreciation and amortisation, (gain) / loss on derivative
financial instruments (including the effect of the disposal of a subsidiary
and subsequent accounting at equity method), finance costs, interest income,
foreign exchange loss / (gain), impairment loss / (reversal of impairment),
(gain) / loss on property, plant and equipment disposal, expenses associated
with an equity-settled share-based payment plan, expenses associated with
covid-19, gain on acquisition of subsidiaries and special charitable
contributions as required to ensure calculation of the Adjusted EBITDA is
comparable with the prior period.

 4  Capital expenditure figures are presented on an accrual basis.

 5  TCC is defined by the group as the cost of gold sales, less property,
plant and equipment depreciation and amortisation and change in allowance for
obsolescence of inventory, expenses associated with covid-19 and adjusted by
non-monetary change in inventory. TCC per ounce sold is the cost of producing
an ounce of gold, which includes mining, processing and refining costs. The
group calculates TCC per ounce sold as TCC divided by total ounces of gold
sold for the period. The group calculates TCC and TCC per ounce sold for
certain mines on the same basis, using corresponding mine-level financial
information.

 6  AISC is defined by the group as TCC plus selling, general and
administrative expenses, stripping activity asset additions, sustaining
capital expenditures, unwinding of discounts on decommissioning liabilities,
provision for annual vacation payment, employee benefit obligations cost, and
change in allowance for obsolescence of inventory less amortisation and
depreciation included in selling, general and administrative expenses. AISC is
an extension of TCC and incorporates costs related to sustaining production
and additional costs which reflect the varying costs of producing gold over
the life-cycle of a mine. The group believes AISC is helpful in understanding
the economics of gold mining. AISC per ounce sold is the cost of producing and
selling an ounce of gold, including mining, processing, transportation and
refining costs, general costs from both mine and alluvial operations, and the
additional expenditures noted in the definition of AISC. The group calculates
AISC per ounce sold as AISC divided by total ounces of gold sold for the
period.

 7  Net debt is defined as non-current borrowings plus current borrowings less
cash and cash equivalents and bank deposits. Net debt also includes assets and
liabilities under cross-currency and interest rate swaps at the reporting
date. Net debt excludes derivative financial instrument assets/liabilities
other than cross-currency and interest rate swaps, site restoration and
environmental obligations, deferred tax and other non-current liabilities. Net
debt should not be considered as an alternative to current and non-current
borrowings, and should not necessarily be construed as a comprehensive
indicator of the group's overall liquidity.

 8  The group calculates net debt (incl. derivatives) to Adjusted EBITDA as
net debt (including derivatives) divided by Adjusted EBITDA for the last
twelve months

 9  The breakdown is based on actual maturities and excludes $37 million of
banking commissions and lease liabilities recognised under IFRS 16 as of 30
June 2022 in amount of $140 million (the remaining $2 million of the total
amount of lease liabilities of $142 million presented in the Note 16 and
included in the bridge).

 10  Reflects expenses related to exploration business unit and other
unallocated CAPEX.

 11  Including capitalised stripping costs.

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