Half-year report for the six months ended 30 June 2024

“Solidcore Resources reports robust financial results, demonstrating growth in sales and positive free cash flow in the first half of the year, underpinned by reliable operating performance and inventory release against the backdrop of strong commodity prices. Despite limited available bank funding this strong financial footing allows the Company to finance substantial capital expenditures, which are expected to exceed US$ 285 million in 2024, above our initial estimates. In 2025-2029, the Company’s investment programme will top US$ 1 billion with a large part of it going towards our ambitious Ertis POX project”, said Vitaly Nesis, Group CEO of Solidcore Resources plc, commenting on the results.

FINANCIAL HIGHLIGHTS

The discussion below covers the results of continuing operations. The comparatives are restated in the same way. Cash flows include amounts of discontinued operations, as required by IFRS 5, unless otherwise stated.

• In 1H 2024, revenue increased by 79% year-on-year (y-o-y), totalling US$ 704 million (1H 2023: US$ 393 million). The average realised gold price increased by 17%, tracking market dynamics. Gold equivalent (“GE”) production was 252 Koz, an 18% increase y-o-y on the back of higher concentrate shipment volumes to China and production from toll-treated concentrate at Kyzyl. Gold equivalent sales increased by 56% y-o-y to 321 Koz due to substantial progress in unwinding of Kyzyl concentrate stockpiles, previously accumulated due to logistical challenges.

• Group Total Cash Costs (“TCC”)¹ for 1H 2024 were US$ 960/GE oz, within the Group’s full-year guidance of US$ 900-1,000/GE oz, while being up 10% y-o-y, owing to continuously high domestic inflation.

• All-in Sustaining Cash Costs (“AISC”)¹ remained broadly unchanged at US$ 1,281/GE oz, and within the full-year guidance range of US$ 1,250-1,350/GE, while also reflecting the increase in sales volumes, driven by de-stockpiling and resulting in the spread of sustaining capital expenditure over a larger amount of ounces sold.

• Adjusted EBITDA¹ was US$ 346 million, an increase of 73% y-o-y, driven by higher sales volumes and higher commodity prices. The Adjusted EBITDA margin decreased by 3 percentage points to 49% (1H 2023: 51%).

• Underlying net earnings² increased by 72% to US$ 243 million (1H 2023: US$ 141 million). Net earnings³ were US$ 238 million (1H 2023: US$ 272 million due to large forex gains).

• Capital expenditures on continuing operations were US$ 107 million⁴, up 25% compared with US$ 85 million in 1H 2023. The increase is mainly related to the Ertis POX development project. Full-year capex is expected to be approximately US$ 60 million above the original guidance of US$ 225 million, due to prepayments for the green energy projects (solar and gas power plants at Varvara).

• The Company confirms its earlier announced plans for a massive investment programme exceeding US$ 1 billion in 2025-2029, which will be focused on the implementation of the Ertis POX project.

• Net operating cash inflow from continuing operations increased by 86% to US$ 344 million (1H 2023: US$ 184 million). The Group reported positive free cash flow¹ of US$ 47 million on continuing and discontinued operations, a significant improvement over 1H 2023 negative FCF of US$ 341 million. Free cash flow from continuing operations excluding disposal of Russian business amounted to US$ 240 million (1H 2023: US$ 101 million).

• Given the cash proceeds from the disposal of the Russian business and strong cash inflow from the sale of inventory, the Company recorded a net cash position of US$ 357 million versus pro forma net debt of US$ 174 million at the end of 2023.

• The Company notes that financing from Western banks remains constrained with small or no credit limits offered to borrowers in Kazakhstan due to long onboarding duration and existing compliance hurdles. As a result, the Company estimates that its cost of debt is set to rise from its current levels and considers other available options for funding its investment programme.

• The Company reiterates its full-year guidance for production and costs: production of 475 GE Koz, TCC in the range of US$ 900-1,000/oz and AISC in the range of US$ 1,250-1,350. However, the management does not expect comparable half-on-half results in H2 2024, given the following detrimental factors: high base effect of de-stockpiling, which is not likely to be repeated in the near future, stronger than budgeted year-to-date KZT/USD rate, inflationary pressures, shortage of railcars and congestions of eastbound railroads.

Notes:
(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.
(2) Adjusted for the after-tax amount of impairment charges, write-downs of metal inventory, foreign exchange gains/losses and other change in fair value of contingent consideration.
(3) Profit for the period.
(4) On a cash basis, representing cash outflow on purchases of property, plant and equipment in the consolidated statement of cash flows.  

Notes:
(1) 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.
(2) The amounts were restated to reflect adjustments made in connection with presentation of discontinued operations.
(3) Defined in the “Alternative performance measures” section below.
(4) Allocation factors for corporate costs were revised, 1H 2023 were restated accordingly.
(5) 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, without effect of treatment charges deductions from revenue.
(6) As at 31 December 2023.
(7) On a last twelve months basis. Adjusted EBITDA for 2H 2023 was US$ 239 million.

OPERATING HIGHLIGHTS

• No fatal accidents occurred among the Group’s workforce and contractors in H1 2024 as well as no lost time injuries were recorded (consistent with H1 2023).

• GE output for H1 was up by 18% y-o-y to 252 Koz.

Notes:
(1) Based on 80:1 Au/Ag conversion ratio and excluding base metals. Discrepancies in calculations are due to rounding.
(2) LTIFR = lost time injury frequency rate per 200,000 hours worked. Company employees only are taken into account.

CONFERENCE CALL AND WEBCAST

The Company will not hold a webcast in relation to 2024 half-year financial results.

The Company’s Investor Relations team will be available for all questions related to its financial results disclosure. Please see the contacts below.