REG-Polymetal International plc Polymetal: Half-year report for the six month ended 30 June 2022
22/09/2022 07:15
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Polymetal International plc (POLY)
Polymetal: Half-year report for the six month ended 30 June 2022
22-Sep-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 time IMMEDIATE LSE, MOEX, AIX: POLY
Date 22 September 2022 ADR: AUCOY
Polymetal International plc
Half-year report for the six month ended 30 June 2022
“Polymetal continued to maintain operational stability in 1H 2022 despite
operating in a persistently challenging external environment. Significant
disruption in traditional supply chains and sales channels constrained
cash flow generation and led to an increase in net debt. The management
team continues to focus on ensuring long-term business viability and value
creation”, said Vitaly Nesis, Group CEO, commenting on the results.
FINANCIAL HIGHLIGHTS
• In 1H 2022, revenue decreased by 18%, totalling US$ 1,048 million (1H
2021: US$ 1,274 million), of which US$ 443 million (42%) was generated
from operations in Kazakhstan and US$ 605 million (58%) from
operations in the Russian Federation. Average realised gold and silver
prices tracked market dynamics: gold price increased by 4% while
silver price decreased by 14%. Gold equivalent (“GE”) production was
697 Koz, a 7% decrease year-on-year. Gold sales decreased by 23%
year-on-year to 456 Koz, while silver sales increased by 9% to 8.7
Moz. Gold sales lagged production due to the bullion inventory
accumulated across the Group’s mines located in the Russian
Federation. This gap between sales and production is expected to
start closing during Q3 as the Company ramps up export sales to
various Asian markets.
• Group Total Cash Costs (“TCC”) 1 1 for 1H 2022 were US$ 853/GE oz,
at the lower end of the Group’s full-year guidance of US$ 850-950/GE
oz, while being up 20% year-on-year, predominantly due to the sharp
increase in domestic inflation and escalation of logistical costs,
combined with the planned grades decline in ore processed at Albazino
and Kyzyl. Cost performance was significantly affected by the
Rouble/USD exchange rate fluctuations, with average rate of 76.2
RUB/USD versus the current level of 60 RUB/USD. Exchange rate dynamics
will drive cost performance for H2 2022, as inflationary pressures in
the Russian Federation cool down.
• All-in Sustaining Cash Costs (“AISC”)1 amounted to US$ 1,371/GE oz, up
34% year-on-year, 6% above the upper end of the full-year guidance
range of US$ 1,200-1,300/GE. The increase above TCC dynamics reflected
the Group’s need to shift to suboptimal equipment supply sources,
coupled with inflationary pressures and accelerated procurement of
equipment and critical spare parts. Year-on-year dynamic was also
impacted by capitalised stripping at the newly launched Nezhda mine,
as well as accelerated stripping at Omolon (Burgali deposit) and
Albazino (Kutyn development).
• Adjusted EBITDA1 was US$ 426 million, a decrease of 35%, against a
backdrop of higher costs and lower sales volumes. Of this, US$ 270
million (63%) was earned from operations in Kazakhstan and US$ 156
million (37%) earned from operations in the Russian Federation.The
Adjusted EBITDA margin decreased by 11 percentage points to 41% (1H
2021: 52%).
• Underlying net earnings 2 2 were US$ 203 million (1H 2021: US$ 422
million). As a result of lower EBITDA and non-cash impairment charges
(the post-tax amount of US$ 564 million), the Group recorded a net
loss for the period of US$ 321 million in 1H 2022, compared to a US$
419 million profit in 1H 2021.
• Capital expenditure was US$ 373 million 3 3 , marginally lower
compared with US$ 375 million in 1H 2021 but above original
expectations, reflecting accelerated purchases and contractor advances
for ongoing projects (most notably, POX-2), combined with inflationary
and logistical pressures on the sustaining capex (US$ 178 million in
1H 2022 compared with US$ 127 million in 1H 2021). This was partially
offset by the shrinking investment scope, suspension of Pacific POX
project and revision of execution timeline for Veduga. The Company
currently expects its FY2022 capex to be in the range of US$ 725-775
million.
• Net operating cash outflow was US$ 405 million (1H 2021: US$ 358
inflow), on the back of working capital build-up of US$ 624 million.
This includes positive cash flow of US$ 140 million from operations in
Kazakhstan and negative cash flow of US$ 545 million from operations
in the Russian Federation. The Group reported negative free cash flow1
of US$ 630 million (1H 2021: US$ 27 million).
• Net debt1 increased to US$ 2,800 million during the period (31
December 2021: US$ 1,647 million), representing 2.27x of the LTM
Adjusted EBITDA (1H 2021: 1.05x). The increase in net debt was driven
by unsold metal inventory accumulation, accelerated purchases of
equipment and spares, funding of the critically important contractors
and suppliers, and upward US$ re-valuation of Rouble-denominated debt.
• Polymetal continues to target its original 2022 production guidance of
1.7 Moz of gold equivalent. The key risk to production guidance is
represented by COVID-related lockdowns and logistical constraints in
China. On the back of the significant change in exchange rate
assumptions (from 70 RUB/USD to 60 RUB/USD for the rest of the year),
the Company updates its FY 2022 cost guidance range to US$
900-1,000/GE oz and US$ 1,300-1,400/GE oz for TCC and AISC,
respectively.
DIVIDENDS AND PROPOSED EXCHANGE OFFER
The Board has carefully evaluated the liquidity and solvency of the
business in light of multiple external uncertainties. Taking into account
significant decline in operating cash flows, challenges in establishing
new sales channels and the short-term liquidity headwinds, the Board
decided to permanently cancel full-year 2021 dividend. Given the
continuing impact of these external uncertainties, the Board does not
propose any interim 2022 dividends to allow the Group to strengthen its
cash position and enhance its resilience in a highly volatile environment.
Payment of dividends in the future will also depend on the ability to
unblock shares which are currently held through the National Settlement
Depositary (NSD), which the Company estimates to be, in aggregate,
approximately 22% of the Company’s issued share capital. Until a solution
is found, the Board is not minded to propose any corporate action or
dividend in which such a sizeable proportion of the Company’s shareholder
base cannot participate.
Polymetal has today announced its intention to conduct an exchange offer.
The exchange offer invites shareholders whose rights have been affected by
the sanctions imposed on NSD, subject to fulfilling eligibility criteria,
to tender such shares for exchange, in consideration for the issuance of a
certificated share, on a one-for-one basis.
The exchange offer is subject to shareholder approval at a General Meeting
which will be held at 10am (BST) on Wednesday 12 October 2022 at
etc.venues Fenchurch Street, 8 Fenchurch Place, London.
Further details of the exchange offer can be found in the Company’s
announcement in connection with the exchange offer, as well as the
shareholder circular and notice of General Meeting, which has been
published today.
UPDATE ON THE POTENTIAL MODIFICATION OF ASSET HOLDING STRUCTURE
As previously announced, the Company has been considering a potential
modification of its asset holding structure which would ensure distinct
ownership in the various jurisdictions in which the Company operates.
On 19 July 2022, the Company announced that it was evaluating the
potential disposal of the Company’s assets located in the Russian
Federation (the Potential Transaction), with the primary objective of
restoring shareholder value by seeking to allow the market
to appropriately value the Company’s Kazakhstani assets and de-risk its
ongoing operations.
On 5 August 2022, a Decree of the President of the Russian Federation #520
(the Decree) was issued. The Decree imposes a prohibition, unless explicit
presidential authorisation is obtained, on the sale of certain Russian
assets, including all gold mining companies, if such assets are owned or
controlled by residents of countries which the Russian Federation
considers “unfriendly”. The jurisdiction of Jersey, where Polymetal
International plc is incorporated, is currently included in the list of
jurisdictions deemed to be ”unfriendly” by the Russian Federation.
The Company has taken steps to analyse the impact, including any legal
implications, that the Decree may have on the Company’s ability to proceed
with the Potential Transaction. Following initial discussions with its
legal advisers, management believes that the Decree has added significant
restrictions on its ability to execute such a transaction.
The Company continues to evaluate all available options to modify its
asset holding structure in order to maximise shareholder value. Potential
transaction structure include, among others, a potential re-domiciliation
of the parent company, Polymetal International plc, to a “friendly”
jurisdiction, a move which could unblock the ability to execute further
corporate actions. No decision has been made in relation to the various
options available to the Company.
The Company confirms that any actions will be compliant with all
applicable international sanctions, counter-sanctions and regulatory
requirements.
A further announcement will be made as appropriate.
Financial highlights 4 4 1H 2022 1H 2021 % сhange
Revenue, US$m 1,048 1,274 -18%
Total cash cost 5 5 , US$ /GE oz 853 712 +20%
All-in sustaining cash cost2, US$ /GE 1,371 1,019 +34%
oz
Adjusted EBITDA2, US$m 426 660 -35%
Average realised gold price 6 6 , US$ 1,864 1,793 +4%
/oz
Average realised silver price3, US$ /oz 22.9 26.5 -14%
Net (loss)/earnings, US$m (321) 419 n/a
Underlying net earnings2, US$m 203 422 -52%
Return on Assets2, % 7% 24% -17%
Return on Equity (underlying)2, % 10% 24% -14%
Basic (loss)/earnings per share, US$ (0.68) 0.89 NM
Underlying EPS2, US$ 0.43 0.89 -52%
Dividend declared during the - 0.89 -100%
period 7 7 , US$ /share
Dividend proposed for the period 8 8 , - 0.45 -100%
US$ /share
Net debt2, US$m 2,800 1,647 9 9 +70%
Net debt/Adjusted EBITDA 2,27 10 10 1,136 +102%
Net operating cash flow, US$m (405) 358 n/a
Capital expenditure, US$m 373 375 -1%
Free cash flow2, US$m (630) (27) n/a
Free cash flow post-M&A2, US$m (658) (29) n/a
OPERATING HIGHLIGHTS
• No fatal accidents occurred among Group workforce and contractors
during the first half of the year (consistent with 1H 2021). Lost time
injury frequency rate (LTIFR) for 1H 2022 decreased by 53%
year-on-year (y-o-y) to 0.08 (0.17 in H1 2021).
• The Group’s 1H 2022 gold equivalent (“GE”) production decreased by 7%
year-on-year to 697 Koz. Lower grades and planned long maintenance
shutdown at the Amursk POX reduced output from Kyzyl and Albazino,
more than offsetting fresh contribution from Nezhda. Stronger
production forecast in the 2H 2022 will be driven by seasonal
concentrate de-stockpiling at Mayskoye, as well as release of
accumulated metal inventory at Omolon, Dukat and Svetloye. The Group
remains on track to meet its FY2022 production guidance of 1.7 Moz of
gold equivalent.
• At POX-2, installation of concentrates pulp blending vessels,
intensive cyanidation reactor and slurry cooling section was complete.
Thickener installation continues. The plant start-up is expected Q2
2024 according to the revised schedule.
1H 2022 1H 2021 % сhange
Waste mined, Mt 110.0 98.0 +12%
Underground development, km 48.9 46.3 +6%
Ore mined, Mt 9.4 7.5 +26%
Open-pit 7.4 5.6 +33%
Underground 2.0 1.9 +5%
Ore processed, Mt 8.4 7.6 +11%
Average grade processed, GE g/t 3.4 3.8 -11%
Production
Gold, Koz 587 635 -8%
Silver, Moz 8.8 9.4 -6%
Gold equivalent, Koz 11 11 697 753 -7%
Sales
Gold, Koz 456 595 -23%
Silver, Moz 8.7 8.0 +9%
Gold equivalent, Koz 12 12 573 721 -21%
Health and safety
LTIFR 13 13 0.08 0.17 -53%
Fatalities - - n/a
Conference call and webcast
The Company will hold a conference call and webcast on Thursday, 22
September 2022 at 12:00 London time (14:00 Moscow time).
To participate in the call, please dial:
From the UK:
+44 330 165 4012 (local access)
0800 279 6877 (toll free)
From the US:
+1 929 477 0324 (local access)
0800 458 4121 (toll free)
If you wish to join the call from Russia please use the webcast link
below.
To participate in the call from other countries please choose one of the
local lines above.
Conference code: 2499630
To participate in the webcast follow the link:
14 https://www.webcast-eqs.com/polymetal2022092212.
Please be prepared to introduce yourself to the moderator or register.
A recording of the call will be available at +44 (0)330 165 3993 (from the
UK), +1 719 457 0820 (from the USA), access code 2499630, from 15:00
London time Thursday, 22 September, till 15:00 London time Thursday, 29
September 2022. Webcast replay will be available on Polymetal’s website
(www.polymetalinternational.com) and at
15 https://www.webcast-eqs.com/polymetal2022092212.
Enquiries
Investor Relations
Polymetal 16 ir@polymetalinternational.com
Evgeny Monakhov +44 20 7887 1475 (UK)
Timofey Kulakov
Kirill Kuznetsov +7 812 334 3666 (Russia)
FORWARD-LOOKING STATEMENTS
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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17 1 The financial performance reported by the Group contains certain
Alternative Performance Measures (APMs) disclosed to compliment measures
that are defined or specified under International Financial Reporting
Standards (IFRS). For more information on the APMs used by the Group,
including justification for their use, please refer to the “Alternative
performance measures” section below.
18 2 Adjusted for the after-tax amount of impairment charges,
write-downs of metal inventory, foreign exchange gain and other change in
fair value of contingent consideration.
19 3 On a cash basis, representing cash outflow on purchases of
property, plant and equipment in the consolidated statement of cash flows.
20 4 Totals may not correspond to the sum of the separate figures due
to rounding. % changes can be different from zero even when absolute
amounts are unchanged because of rounding. Likewise, % changes can be
equal to zero when absolute amounts differ due to the same reason. This
note applies to all tables in this release.
21 5 Defined in the “Alternative performance measures” section below.
22 6 In accordance with IFRS, revenue is presented net of treatment
charges which are subtracted in calculating the amount to be invoiced.
Average realised prices are calculated as revenue divided by gold and
silver volumes sold, excluding effect of treatment charges deductions from
revenue.
23 7 1H 2021: Final dividend for FY 2020 paid in May 2021.
24 8 1H 2021: Interim dividend for FY2021.
25 9 As at 31 December 2021.
26 10 On a last twelve months basis. Adjusted EBITDA for 2H 2021 was
US$ 805 million.
27 11 Based on 80:1 Au/Ag conversion ratio and excluding base metals.
Comparative data for 2021 restated accordingly (120:1 Au/Ag conversion
ratio was used previously).
28 12 Based on actual realised prices.
29 13 LTIFR = lost time injury frequency rate per 200,000 hours worked.
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Attachment
File: 30 Polymetal: Half-year report for the six month ended 30 June 2022
══════════════════════════════════════════════════════════════════════════
ISIN: JE00B6T5S470
Category Code: IR
TIDM: POLY
LEI Code: 213800JKJ5HJWYS4GR61
OAM Categories: 1.2. Half yearly financial reports and audit
reports/limited reviews
Sequence No.: 189700
EQS News ID: 1447785
End of Announcement EQS News Service
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