27 January 2022

Polymetal reports solid production results for the fourth quarter of 2021.

“In 2021, we continued to deliver on our promises despite persistent challenges. Polymetal beat production guidance, maintained solid safety track record, and paid record dividends. The successful ramp-up of Nezhda and steady progress on POX-2 paved the way for the approval of Veduga and ensured the Company remains on its path to consistent and significant long-term growth”, said Vitaly Nesis, Group CEO of Polymetal. “2022 should see another step-up in Polymetal’s output at competitive costs”.

HIGHLIGHTS

  • No fatal accidents among the Group’s employees occurred in 2021 (nor any in 2020). As reported earlier, a contract driller lost his life in July at Saum, part of the Voro hub (no fatalities among contractors in 2020). Lost time injury frequency rate (LTIFR) among the Group’s employees was stable at 0.12. Days lost due to work-related injuries (DIS) for the full year decreased by 10% y-o-y to 1,516.

  • The Company’s FY2021 gold equivalent (“GE”) production amounted to 1,677 Koz1, a 2% increase y-o-y and 5% above the original production guidance of 1.6 Moz. Q4 GE output grew by 24% y-o-y driven by concentrate stockpile release at Kyzyl, high grades at Dukat and first production from Nezhda.

  • Nezhda smoothly ramped up to full design throughput and recovery within three months of first concentrate production, a testament to high quality of in-house engineering and construction. Consequently, the Board approved US$ 471 million investment in the 4 Moz Veduga project which will produce 200 Koz of gold per year on average over 21-year mine-life. Construction will commence in Q3 2022, with start of production scheduled for Q2 2025.

  • Revenue in 2021 was stable y-o-y at US$ 2.9 billion, while Q4 revenue was down 6% y-o-y to US$ 0.8 billion on the back of lower commodity prices. The lag between silver production and sales originating from very strong December production at Dukat will be closed in H1 2022.

  • The Company expects full-year Total Cash Costs (“TCC”) to be within the original guidance of US$ 700-750/GE oz. CAPEX for the full year is expected to be approximately 5% above the upper end of the previous guidance range of US$ 675-725 million. All-in Sustaining Cash Costs (“AISC”) are also expected to be c. 5% above the upper end of the guidance range of US$ 925-975/GE.

  • In Q4, Polymetal generated exceptionally strong free cash flows with Net Debt falling to US$ 1.65 billion by the end of 2021, Net Debt/EBITDA is expected to be approximately at 1.1x. For the full year, Net Debt increased by US$ 296 million. The Company paid US$ 632 million in dividends in 2021.

  • In 2021, Polymetal received further external recognition of its ESG efforts with improved ratings and scores by MSCI ESG Ratings, Sustainalytics, Vigeo Eiris, ISS ESG Corporate Rating. The Company announced a target to cut GHG emission intensity by 30% by 2030 and is developing the plan to achieve carbon neutrality (to be announced in Q4 2022).

  • After a slowdown in Q4, Russia and Kazakhstan encountered a rise in C-19 infection rate at the beginning of 2022. Among Polymetal employees, the number of active cases presently stands at approximately 130 with three people hospitalized. The Company re-introduced remote work for some off-site personnel. Operations and projects continue undisrupted.

Note:
(1) Based on 80:1 Au/Ag conversion ratio and excluding base metals. Comparative data for 2020 and guidance for 2021 restated accordingly (120:1 Au/Ag conversion ratio was used previously).

2022 OUTLOOK

  • The Company reiterates its current production guidance of 1.7 Moz of GE for FY2022 and 1.75 Moz of GE for FY2023. Operations in Kazakhstan have not been affected by recent events.

  • TCC in 2022 is expected to be in the range of US$ 850-900/GE oz (approximately 20% increase versus 2021). The y-o-y TCC dynamics will be driven by:

    • A significant increase in CPI in Russia and Kazakhstan (to approximately 8.5%) driving wage and salary increases;

    • Commodity-driven inflation including diesel fuel, gas (with impact on explosives and cyanide), and steel prices;

    • A manifold increase in both bulk and container sea freight rates.

  • Capital expenditures in 2022 are expected to be approximately US$ 700 million. The US$ 90 million increase compared to the previous guidance is driven by:

    • Advance payments for electrical excavators and mining trucks for Veduga and other projects in anticipation of increasing lead times for such equipment;

    • Accelerated construction of Kutyn and Urals flotation projects with the goal to bring forward commissioning and first production by 3-6 months compared with original plan (H2 2022 in both cases);

    • Decarbonization of on-site power supply infrastructure following the agreement for 3rd-party investment in the grid line to Albazino.

  • As a result, AISC in 2022 is expected to average US$ 1,100-1,200/GE oz.·   

   

OPERATING HIGHLIGHTS

 

 

3 months ended Dec 31,

% change1

12 months ended Dec 31,

% change1

 

2021

2020

2021

2020

 

 

 

 

 

 

 

Waste mined, Mt

53.9

44.0

+23%

205.9

166.8

+23%

Underground development, km

25.0

22.6

+11%

95.5

90.0

+6%

Ore mined, Mt

4.1

3.4

+20%

15.6

15.4

+2%

Open-pit

3.0

2.4

+28%

11.7

11.2

+4%

Underground

1.1

1.0

+0%

4.0

4.2

-5%

Ore processed, Mt

4.1

3.7

+12%

15.8

15.4

+2%

Average GE grade processed, g/t

4.0

4.1

-3%

3.8

4.1

-8%

Production

 

 

 

 

 

 

Gold, Koz

385

322

+20%

1,422

1,402

+1%

Silver, Moz

6.5

4.4

+48%

20.4

18.8

+8%

Gold equivalent, Koz2

467

377

+24%

1,677

1,637

+2%

Sales

 

 

 

 

 

 

Gold, Koz

384

386

-1%

1,386

1,392

-0%

Silver, Moz

4.9

5.2

-7%

17.5

19.3

-10%

Revenue, US$m3

798

846

-6%

2,890

2,865

+1%

Net debt, US$m4

1,647

1,897

-13%

1,647

1,351

+22%

 

 

 

 

 

 

 

LTIFR (Employees)5

0.16

0.16

-

0.12

0.12

-

DIS (Employees)6

 

 

 

1,516

1,679

-10%

Fatalities

0

0

NA

1

0

NM

Employees

0

0

NA

0

0

NM

Contractors

0

0

NA

1

0

NM

Average headcount

 

 

 

13,268

12,065

+10%

Notes: (1) % changes can be different from zero even when absolute numbers are unchanged because of rounding. Likewise, % changes can be equal to zero when absolute numbers differ due to the same reason. This note applies to all tables in this release.
(2) Based on 80:1 Au/Ag conversion ratio and excluding base metals. Comparative data for 2020 restated accordingly (120:1 Au/Ag conversion ratio was used previously).
(3) Calculated based on the unaudited consolidated management accounts.
(4) Non-IFRS measure based on unaudited consolidated management accounts. Comparative information is presented for 30 September 2021 (for the three months period) and 31 December 2020 (for the twelve months period).
(5) LTIFR = lost time injury frequency rate per 200,000 hours worked.
6) DIS – days lost due to work-related injuries.

PRODUCTION BY MINE

 

3 months ended Dec 31,

%

change

12 months ended Dec 31,

%

change

 

2021

2020

2021

2020

 

 

 

 

 

 

 

GOLD EQ. (KOZ)1

 

 

 

 

 

 

Kyzyl

85

67

+26%

360

382

-6%

Dukat

96

66

+46%

291

275

+6%

Albazino

59

56

+5%

249

261

-5%

Omolon

55

58

-4%

217

213

+2%

Varvara

40

28

+42%

198

159

+24%

Mayskoye

54

61

-11%

139

139

+0%

Svetloye

26

28

-10%

109

120

-9%

Voro

30

12

+153%

93

89

+5%

Nezhda

21

-

NA

21

-

NA

TOTAL

467

377

+24%

1,677

1,637

+2%

Notes: (1) Based on 80:1 Au/Ag conversion ratio and excluding base metals. Comparative data for 2020 restated accordingly 120:1 Au/Ag conversion

CONFERENCE CALL AND WEBCAST

The Company will hold a conference call and webcast on Thursday, 27 January 2022 at 11:00 London time (14:00 Moscow time).

To participate in the call, please dial:

From the UK:
+44 203 984 9844 (local access)
+44 800 011 9129 (toll free)

From the US:
+1 718 866 4614 (local access)
+1 888 686 3653 (toll free)

From Russia:
+7 495 283 9858 (local access)

To participate from other countries, please dial any of the local access numbers listed above.

Conference code: 785872

To participate in the webcast follow the link: https://mm.closir.com/slides?id=785872.

Please be prepared to introduce yourself to the moderator or register.

A recording of the call will be available at the same numbers and webcast link listed above within an hour after the call and until 3 February 2022.

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