Press Release                                                                                            15 March 2023

PJSC Polyus

Financial results for the second half of 2022 and full year 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 2H 2022 and FY 2022.

FY 2022 highlights

1.   Total gold sales volumes in 2022 amounted to 2,423 thousand ounces of gold, down 11% compared to the previous year. This was primarily driven by lower production volumes at Olimpiada, Blagodatnoye and Natalka. A difference between sales and the total gold output (2,541 thousand ounces) mainly reflects the accumulation of gold contained in concentrate produced in the fourth quarter of 2022. Sales of flotation concentrate have been typically lagging behind production for several months. Inventories of concentrate will be sold and reflected in the group's financials in 2023.

2.   Revenue for the full year amounted to $4,257 million, a 14% decrease year-on-year. This was driven by the aforementioned decline in production volumes as well as by the lower average realised refined gold price compared to the previous year.

3.   The group's TCC for the full year 2022 rose by 28% to $519 per ounce, compared to 2021. This reflects lower average grades in ore processed at almost all hard-rock deposits. The consumables prices inflation, wage indexation and rouble appreciation have also negatively impacted the Company's cost performance in 2022.

4.   Adjusted EBITDA in 2022, stood at $2,584 million, a 27% decrease compared to the previous year, due to lower gold sales volumes and higher TCC on a per ounce basis.

5.   Capital expenditures ("capex") for the full year 2022 increased from $928 million in the previous year to $1,119 million. The increase was driven by higher capital expenditures across all business units.

6.   The net debt (incl. derivatives)/adjusted EBITDA ratio increased to 0.9x compared to 0.6x at the end of 2021, reflecting a higher net debt position and adjusted EBITDA decline over the last twelve months.

2H 2022 highlights

1.   Total gold sales volumes in the second half of 2022 amounted to 1,408 thousand ounces, up 39% compared to the first half of 2022 due to the higher gold production across all operating assets of the group.

2.   Revenue for the second half of 2022 totalled $2,405 million, up 30% compared to the first half of 2022. The average realised refined gold price declined compared to the first half of 2022.

3.   The group's TCC for the second half of 2022 increased to $580 per ounce, from $435 per ounce in the previous half of the year. This growth was attributable to a seasonal increase in output at the structurally higher-cost alluvial operations, ongoing inflation in consumables, wage indexation, as well as lower average grades in ore processed at Natalka and Verninskoye and rouble appreciation. These factors were partially offset by higher head grades at Olimpiada, compared to the first half of 2022.

4.   Adjusted EBITDA in the second half of 2022 increased 13% to $1,369 million, compared to $1,215 million in the first half of 2022, reflecting higher gold sales volumes during the reporting period.

5.   Capital expenditures ("capex") for the second half of 2022 amounted to $735 million, compared to $384 million in the first half of 2022, as Polyus has accelerated its capex spending programme.

OUTLOOK FOR 2023

Production guidance

Polyus anticipates gold production for the full year of 2023 to reside within the range of 2.8 - 2.9 million ounces. The year-on-year increase in production is expected to be mainly driven by higher grades in ore processed at Olimpiada since Polyus will be mining rich gold-bearing zones of the Vostochny pit.

TCC guidance

Polyus expects to contain its TCC at 2022 levels and sets the 2023 TCC guidance range of $500-$550/oz. The Company anticipates that the improvement in cost performance at Olimpiada on the back of an increase in head grades and higher antimony by-product credit as well as ongoing cost-containment initiatives across the asset portfolio will mitigate inflationary factors in key consumables and labour.

Capex guidance[1]

The Company sets its capex guidance in the range of $1,300-1,400 million.

In addition to the existing project pipeline, the capex guidance for 2023 also reflects:

·    Implementation of recently announced brownfield initiatives at Kuranakh and Natalka, including:

§ Kuranakh heap leaching capacity expansion from 1.5 mtpa to 5.0 mtpa;

§ Engineering and preconstruction works at the new 12.5 mtpa Kuranakh heap leaching complex;

§ Introduction of a flotation circuit at Natalka;

·    Tailings storage facility expansion at Verninskoye.

Please refer to the Polyus 2022 financial results presentation for more details on new development projects (https://polyus.com/ru/investors/results-and-reports/).

Dividend update

The Board of Directors (the "Board") of Polyus emphasizes the Company's adherence to its existing dividend policy and is yet to come up with the final decision on the dividend recommendation for the full year 2022 ahead of the Annual General Meeting of Shareholders ("AGM"). The AGM date as well as the dividend recommendation will be announced upon the Board decision over the course of the next several months in accordance with the Russian law.

In making the recommendation on dividends, the Board will take into account constantly changing economic environment and its impact on the Company's business.

Events after the reporting date

Eurobonds

In February 2023, the group repaid the principal amount and accrued interest on its 5.25% Notes due 2023 (the "Notes") for the total consideration of $340 million from its own cash.

This repayment consisted of two transfers:

·    The funds earmarked for coupon payments due on August 7th, 2022 and February 7th, 2023, as well as the principal payment for the Notes were delivered to the group's Principal Paying Agent (the Bank of New York Mellon). The Principal Paying Agent subsequently transferred these funds to the international clearing systems for further distribution to the holders of the Notes whose rights are accounted for within the international clearing systems.

·    The group transferred the Russian Rouble-denominated funds as the coupon and principal payment to the holders of the Notes, whose rights are accounted for within the Russian custodian infrastructure.

Following the completion of the aforementioned transfers by the group, which were conducted in accordance with the modified Notes documentation as a result of a successful consent solicitation process held in 2022, the group's obligations to both domestic and non-resident holders of the Notes were fulfilled.

Rouble bond issue

In February 2023, the Company completed a 5-year rouble-denominated bonds offering (Rub 20 bln with a coupon rate of 10.40% per annum). The Company intends to use proceeds from the issue primarily for general corporate purposes and investment projects.

Depositary receipts programs

The Company is currently at the final stage of negotiations with a prospective candidate for the role of successor depositary for its Rule 144A, Regulation S, and Level I depositary receipts ("DR") programs to replace the resigning depositary, The Bank of New York Mellon.

Polyus reiterates its intention to maintain the DR programs admitted to trading on recognized stock exchanges.

Comparative financial results

Total Cash Costs

In the second half of 2022, the group's TCC increased to $580 per ounce, from $435 per ounce in the previous half of the year. This growth was attributable to a seasonal increase in output at the structurally higher-cost alluvial operations, ongoing inflation in consumables, wage indexation, as well as lower average grades in ore processed at Natalka and Verninskoye and rouble appreciation. Those factors were partially offset by higher head grades at Olimpiada, compared to the first half of 2022.  

In 2022, the group's TCC increased by 28% to $519 per ounce compared to 2021. This reflects lower average grades in ore processed at almost all hard-rock deposits. The Company notes that the consumables prices inflation, wage indexation and rouble appreciation have also negatively impacted the Company's cost performance in 2022, and those factors were common to all operations of the group.

TCC performance by mine, $/oz

In the second half of 2022, TCC at Olimpiada rose to $563 per ounce, up 30% compared to the first half of 2022. In addition to the aforementioned factors, TCC were also affected by scheduled maintenance works at Mill 1 and Mill 2, while higher grades in ore processed partially offset the impact of negative factors in the second half of 2022. In 2022, TCC at Olimpiada totalled $509 per ounce, compared to $369 per ounce in 2021. This growth was also attributable to a decline in sales of the antimony-rich flotation concentrate. The latter resulted in a lower by-product credit ($4 per ounce in 2022, compared to $18 per ounce in 2021).

TCC at Blagodatnoye in the second half of 2022 amounted to $455 per ounce, up 12% on the previous half of the year. The rouble appreciation, inflationary pressures and wage indexation were the key negative factors impacting cost performance at Blagodatnoye in the second half of 2022. This was partially offset by an increase in head grades (1.59 grams per tonne in the second half of 2022 compared to 1.48 grams per tonne in the first half of 2022). In 2022, TCC at Blagodatnoye increased 18% year-on-year to $434 per ounce.

In the second half of 2022, TCC at Natalka increased to $493 per ounce, up 29% compared to the first half of 2022 reflecting, among other factors, higher maintenance expenses and a lower recovery rate. TCC for the full year amounted to $441 per ounce, a 20% increase on a year-on-year basis. Similarly to Olimpiada and Blagodatnoye, an increase in TCC at Natalka was mainly driven by lower average grades in ore processed, rouble appreciation, inflation across the key consumables and wage indexation.

TCC at Verninskoye in the second half of 2022 totalled $500 per ounce, up 24% compared to the first half of 2022, due to the aforementioned common factors and higher maintenance expenses. In 2022, TCC at Verninskoye increased 27% year-on-year to $456 per ounce. In addition to factors common to all operations, an increase in TCC at Verninskoye reflects an increase in the MET rate (from 2.4% to 6%) due to the conclusion of the regional investment project regime for the deposit. The improvement in the hourly throughput of the mill (468 t/h, a new record high), as well as a higher utilization rate of equipment resulted in the achievement of an annualized throughput capacity of 3.8 million tonnes per annum. This mitigated the impact of factors that negatively affected TCC in 2022.

At Kuranakh, TCC in the second half of 2022 rose to $716 per ounce, up 11% compared to the previous half of the year. Due to a seasonality of heap leaching activities, the share of lower-cost gold produced from the heap leaching facilities in total volumes of gold sold increased in the second half of 2022. This supported cost performance at Kuranakh and partially offset the increase in maintenance expenses as well as consumables prices inflation, wage indexation and rouble appreciation. In 2022, TCC at Kuranakh amounted to $684 per ounce, up 20% on the previous year.

In the second half of 2022, TCC at Alluvials amounted to $1,244 per ounce. In 2022, TCC at Alluvials totaled $1,234 per ounce, a 30% increase on 2021.

All-in sustaining costs (AISC)

In the second half of 2022, the group's AISC increased to $1,095 per ounce, up 33% compared to the first half of 2022, reflecting higher TCC per ounce and higher sustaining capital expenditures across all deposits.

In 2022, the group's AISC amounted to $981 per ounce, a 37% increase year-on-year. In addition to higher TCC and higher sustaining capital spending, an increase in the group's AISC on year-on-year basis was also driven by lower gold sales volumes, compared to 2021.

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

Debt management

The Company's gross debt increased to $3,586 million, compared to $3,540 million as at the end of 2021 (30 June 2022: $3,232 million).

As at 31 December 2022, the Company's estimated cash position declined to $1,317 million from $1,343 million at the end of 2021 (30 June 2022: $780 million). The Company's estimated net debt increased from $2,197 million in 2021 to $2,269 million in 2022, (30 June 2022: $2,452 million).

Among other factors, the change in cash position reflects a redemption of Notes due 2022 (in the total amount of $494 million), as well as the acquisition of a 100% stake in the Chulbatkan gold deposit for cash consideration of $140 million. The cash outflows were offset by the issue of 5-year yuan-denominated bonds (CNY 4.6 billion with a coupon rate of 3.80% per annum).

Debt maturity schedule (as at 31 December 2022)[10], $ million

Capex

In the second half of 2022, capital expenditures amounted to $735 million, a 91% increase compared to $384 million in the first half of 2022, as the Company accelerated its capex programme.

In 2022, capital expenditures increased to $1,119 million, from $928 million in the previous year. This increase reflects higher capital expenditures across all business units.

·    At Olimpiada, the Company improved the BIO complex efficiency by launching four additional reactors at BIO-2. Polyus completed its deep-level and flank drilling campaign at Olimpiada. The Company also finished construction and installation works at the service complex for truck maintenance.

·    At Blagodatnoye, Polyus completed the closing of a thermal envelope of the buildings. Major parts of the foundation works for an in-pit crushing and conveying (IPCC) system were completed during 2022. Polyus also finished the installation of the SAG-mill and desorption site equipment. The construction of the Yenashimo river bridge was finalized.

·    At Natalka, the Company completed the construction of the first and second tiers of the main tailings storage facility dam. Polyus also conducted pilot testing of the flotation technology at the Natalka mill. Based on positive results, the Company decided to introduce a flotation circuit at the Natalka mill.

·    At Verninskoye, the Company proceeded with the development of a new tailings storage facility project. In 2022, the Company completed comprehensive engineering studies and started the construction of drainage canals and backfilling of the dam.

·    At Kuranach, Polyus is at an active phase of construction activities under the Kuranakh mill expansion to 7.5 mtpa project. Most of long-lead key technological equipment, including components for the ball mill, were delivered to the site. The Company completed construction works at thickeners, commissioned new compressor stations, and finished the installation of 16 sorption columns. The Company also finalized the technical solutions to expand throughput capacity at Kuranakh' existing heap leaching facilities aimed at increasing capacity from 1.5 million tonnes to 5.0 million tonnes per annum. In addition, Polyus proceeded with the engineering of a new project that envisages the construction of a 12.5 million tonnes per annum heap leaching facility at Kuranakh's Southern group of deposits. 

·    At Sukhoi Log, the Company progressed with the construction project for the Vitim substation and 220 kV gridline, which are within the Polyus project scope for the technical connection of Sukhoi Log to the existing power grid. In addition, Polyus completed the project design documentation for the warehousing storage capacity expansion at Taksimo Yard, and started preparatory works for construction. In 2022, the Company also completed a general project layout and is progressing on the design documentation for the auxiliary infrastructure and tailings storage facility. As the Company discontinued working with a few international processing equipment manufacturers, Polyus has already identified alternative suppliers for the project. Polyus' engineering team now proceeds with amendments to the initial project design with a focus on the mill reconfiguration, including the redesign of the mill's building and foundation, with reference to the updated equipment list.

Capex breakdown[11]

In the second half of 2022, the total cash amount spent on the purchase of PP&E increased to $804 million, compared to $551 million in the first half of 2022. This mainly reflects the respective increase in total capital expenditures outlined above.

In 2022, the total cash amount spent on the purchase of PP&E increased to $1,355 million, compared to $1,130 million in 2021.

http://www.rns-pdf.londonstockexchange.com/rns/1059T_1-2023-3-15.pdf

http://www.rns-pdf.londonstockexchange.com/rns/1059T_2-2023-3-15.pdf

Enquiries:

Investor and Media contact

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

+7 (495) 641 33 77

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.