REG-Polymetal International plc Polymetal: Business update

Polymetal International PKAnnouncement

23/06/2022 07:15

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   Polymetal International plc (POLY)
   Polymetal: Business update

   23-Jun-2022 / 09:00 MSK
   Dissemination of a Regulatory Announcement, transmitted by EQS Group.
   The issuer is solely responsible for the content of this announcement.

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   Release IMMEDIATE                                                       
   time    LSE, MOEX, AIX: POLY / ADR: AUCOY
   Date    23 June 2022

    

    

   Polymetal International plc

   Business update

   Polymetal provides an update on its business, including the current impact
   of sanctions against Russia.

   At the time of writing, the Group states that:

   Sale of bullion/concentrate

     • Sales of gold  bullion and  concentrates from  Kazakhstan continue  as
       usual.
     • Sales of gold bullion and  concentrates from Russian mines to  diverse
       Asian  markets  returned   to  regular   schedule  after   significant
       COVID-related slowdown  in  April  and May.  The  sales  terms  remain
       broadly consistent with  those received  earlier. Polymetal  currently
       does not  sell any  of its  products to  Russian Central  Bank or  its
       affiliates, directly or indirectly.
     • Silver bullion  inventory  continues  to  accumulate  absent  reliable
       export channels  and  non-existent domestic  market.  Discussions  are
       under way with  a variety of  commercial and industrial  international
       buyers. Silver bullion accounts for less than 5% of Company’s expected
       sales in 2022.
     • Sales logistics continue to  experience significant challenges due  to
       the COVID restrictions in China  and impact of the sanctions,  leading
       to slower inventory turnover and higher selling costs. The gap between
       production and sales  and the resulting  finished goods inventory  are
       expected to peak in September.

   Liquidity & net debt

     • Net debt increased to US$ 2.3 billion as of 1 June (31 March 2022: US$
       2.0 billion) driven by large working capital increase and  accelerated
       procurement. 74% of the total debt is denominated in US$.
     • The Group has  approximately US$  0.3 billion in  cash deposited  with
       non-sanctioned  financial  institutions.  In  addition,  the   Company
       maintains US$ 0.4 billion of undrawn credit lines from  non-sanctioned
       banks. This amount, combined, covers  the expected debt repayments  in
       the next 6 months.
     • Lending in Russia is available in both RUB and USD. RUB interest rates
       decreased significantly  to 11-12%  following Russian  Central  Bank’s
       benchmark rate decrease to 9.5%.
     • Polymetal  is  currently  financing  its  short-term  working  capital
       requirements with USD-denominated  debt at lower  interest rates.  The
       Group has recently  secured US$  0.2 billion in  new revolving  credit
       lines and plans to sign an additional US$ 0.3 billion revolving credit
       facility in June.

   Operations and development projects

     • Polymetal operations in  Russia and  Kazakhstan continue  undisrupted.
       Production guidance of 1.7 Moz for 2022 is maintained.
     • Medium-term  development  projects  (POX-2,  Kutyn,  Urals  Flotation,
       Prognoz) progress as previously  reported.  Sharp rouble  appreciation
       and continued logistical  challenges are  exerting significant  upward
       pressure on capital expenditures.
     • The 110-kV line linking Nezhda mine  to the regional grid, powered  by
       the combination of hydro and gas, has been successfully  commissioned.
       Previously operating diesel-powered gensets  have been transferred  to
       stand-by emergency mode.

     • The Company will announce its Q2  2022 production results on the  21st
       of July 2022.

   Inventories & supplies

     • Since the previous update, Japan joined western countries and  imposed
       additional sanctions against Russia prohibiting exports of  industrial
       goods and technologies. Procurement continues to adapt to the  current
       environment  with   orderly  replacement   of  sanctioned   equipment,
       consumables and  supplies  with  alternatives from  Russia  and  other
       countries. The majority of  existing contracts with foreign  suppliers
       continue to be honoured and  the Company maintains significant  safety
       stock for critical consumables and spares.

   Securities and dividends

     • The  Board  and  the   management  continuously  evaluate   stability,
       liquidity and solvency of the  business in light of multiple  external
       uncertainties. The  Company  will  announce  its  full-year  2021  and
       interim 2022  dividend  decisions  at  the time  of  1H  2022  results
       publication on  the  22nd  of September.  Significant  challenges  and
       delays in establishing new sales channels and the resulting decline in
       operating cash flows will be the key factor informing these decisions.
     • On the 3rd of June the European Union imposed sanctions on the Russian
       National  Settlement   Depositary  (NSD)   effectively  blocking   the
       operations between Euroclear and NSD. The Company is advised that this
       development makes it impossible for those shareholders who keep  their
       shares in NSD (~22% of our share capital) to receive dividends  and/or
       take part in any Company’s corporate actions. Polymetal is  consulting
       with its  legal advisors  and regulators  to confirm  the outcomes  of
       these  sanctions  and   measures  that  could   be  taken  to   secure
       shareholders’ rights.
     • The Board and the management strongly believe that share buy-backs are
       presently inappropriate given  short-term liquidity challenges,  grave
       business uncertainties, and NSD challenges outlined above.
     • Following the Executive  Order 14066, 14068,  or 14071 and  subsequent
       clarification of the scope of the legislation by by Office of  Foreign
       Assets  Control,   trading  in   Polymetal’s  ADR   program   (tickers
       AUCOY/POYYF)  has  been  halted  since  15th  of  June,  even   though
       Polymetal’s shares have  not been  issued by a  Russian entity.  After
       consulting with the depositary bank administering the program and  our
       legal advisors regarding  the situation the  Company confirms that  no
       shareholder rights  are affected  by this  event, including  right  to
       receive dividends  and voting  rights. Shareholders  holding ADRs  can
       apply for conversion and receive underlying shares. 

   Auditor

     • The Borad has approved the appointmet of MHA MacIntyre Hudson LLP  (an
       independent member of  Baker Tilly International  Limited) as a  group
       auditor  jointly   with  AO   Business  Solutions   and   Technologies
       (previously AO Deloitte & Touche  CIS) as a component auditor.  Please
       see the press release on the topic at the  1 link for more details.

   Sanctions compliance

     • Sanctions announced in the period between 9 March and the date of this
       press release did not have a direct material impact on the business of
       the Group. The Group complies rigorously with all relevant legislation
       and is implementing comprehensive  measures to observe all  applicable
       international sanctions. The  scope and  impact of  any new  potential
       sanctions (and any  countersanctions) are yet  unknown. However,  they
       might further affect  key Russian  financial institutions  as well  as
       mining companies. Polymetal  believes that targeted  sanctions on  the
       Company remain unlikely, but are not impossible. Contingency  planning
       has been initiated proactively to maintain business continuity.

   Capital controls

     • In June, the Russian Government revoked a requirement for exporters to
       sell 50% of their foregn  currency revenue, while transborder  capital
       flow restrictions (including dividends) remain in place.

   Further updates will be  provided in due course.  Previous updates can  be
   found at the  2 link.

   Enquiries

       Investor Relations
   Polymetal         3 ir@polymetalinternational.com

   Evgeny Monakhov  +44 20 7887 1475 (UK)

   Timofey Kulakov   

   Kirill Kuznetsov +7 812 334 3666 (Russia)

   Forward-looking statements

   DUE TO THE  RECENT MASSIVE DDOS  ATTACKS, OUR WEBSITE  MAY BE  TEMPORARILY
   UNAVAILABLE, THOUGH WE WILL CONTINUE  DISTRIBUTION AND PUBLISHING ALL  OUR
   ANNOUNCEMENTS THERE. THEY WILL BE FULLY AVAILABLE WHEN THE SITE RETURNS TO
   NORMAL OPERATION.

   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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   ISIN:           JE00B6T5S470
   Category Code:  MSCM
   TIDM:           POLY
   LEI Code:       213800JKJ5HJWYS4GR61
   OAM Categories: 3.1. Additional regulated information required to be
                   disclosed under the laws of a Member State
   Sequence No.:   170055
   EQS News ID:    1381749


    
   End of Announcement EQS News Service

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    4 fncls.ssp?fn=show_t_gif&application_id=1381749&application_name=news&site_id=refinitiv2

References

   Visible links
   1. https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=redirect&url=a1b231956552126e58c9be231f728e0e&application_id=1381749&site_id=refinitiv2&application_name=news
   2. https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=redirect&url=a1b231956552126e58c9be231f728e0e&application_id=1381749&site_id=refinitiv2&application_name=news
   3. mailto:ir@polymetalinternational.com


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