Financial results for the six months ended 30 June 2013

For immediate release

Polyus Gold International Limited

Financial results for the six months ended 30 June 2013

Polyus Gold International Limited (LSE – PGIL, OTC (US) – PLZLY, “PGIL”, “Polyus Gold” or the “Company”), today releases its unaudited IFRS financial results for the first half of 2013.

Highlights

Total revenue of USD 1.0 billion (H1 2012: USD 1.2 billion), reflecting an 8% decrease in the realised gold price and a 5% decrease in gold sold;
Non-cash impairment charge of USD 469 million relating to the reassessment of the future prospectivity of the exploration and evaluation asset portfolio and reconsideration of the economic recoverability of mining assets and stockpiles following the recent fall in the gold price;
Loss for the period from continuing operations of USD 173 million, compared to a profit of USD 419 million in H1 2012;
Loss per share of 5 US cents (H1 2012: Earnings per share of 13 US cents);
Operating profit before deducting impairment charges¹ of USD 313 million, compared to USD 537 million in the H1 2012;
Profit for the period from continuing operations before deducting impairment charges² of USD 255 million (H1 2012: USD 430 million);
Net cash flow from operations of USD 100 million (H1 2012: USD 467 million);
Adjusted EBITDA³ of USD 417 million (H1 2012: USD 609 million) resulting in an Adjusted EBITDA margin of 41% (H1 2012: 52%);
Total cash cost per ounce sold⁴ of USD 757 (H1 2012: USD 628);
Issuance of USD 750 million notes due 2020 with a coupon of 5.625% per annum;
Cash and cash equivalents of USD 1.2 billion (compared to USD 960 million as at 31 December 2012).

Key financial results for the six months ended 30 June 2013 and 30 June 2012, and for the year ended 31 December 2012⁵

USD’000, unless otherwise indicated	Six months ended 30 June 2013 2012⁶		% change p-o-p⁷	Year ended 31 December 2012
Gold production (k oz)	718	670	7	1,569
Gold sold (k oz)	654	686	(5)	1,571
Average realised gold price (USD per oz)	1,513	1,652	(8)	1,666
Total revenue	1,023,575	1,161,037	(12)	2,679,913
(Loss)/profit for the period from continuing operations	(173,048)	419,431	(141)	965,104
Weighted average number of ordinary shares (‘000s)⁸	3,032,150	2,868,789	6	2,950,916
(Loss)/earnings per share – basic and diluted (US cents)	(5)	13	(139)	31
Adjusted operating profit¹	312,759	537,311	(42)	1,210,527
Adjusted operating profit margin	31%	46%	-	45%
Adjusted profit/(loss) for the period from continuing operations²	255,447	429,818	(41)	977,966
Adjusted earnings per share – basic and diluted (US cents)⁹	8	14	(43)	32
Net cash flow from operations	100,122	467,156	-	991,769
Capital expenditures	699,530	308,274	127	808,886
Adjusted EBITDA³	416,890	609,391	(32)	1,303,131
Adjusted EBITDA³	416,890	609,391	(32)	1,303,131
Adjusted EBITDA margin	41%	52%	-	49%
Total cash cost per oz sold (USD per oz)⁴	757	628	21	697

Adjustments for impairment charges for the 6 months ended 30 June 2013 and 30 June 2012, and for the year ended 31 December 2012

USD thousand	Six months ended 30 June 2013 Reported Impairment Adjusted			Six months to 30 June 2012 Reported Impairment Adjusted			Year ended 31 December 2012 Reported Impairment Adjusted
Operating (Loss)/profit for the period	(156,323)	(469,082)	312,759	524,388	(12,923)	537,311	1,195,103	(15,424)	1,210,527
Finance costs	(6,890)	-	(6,890)	(20,836)	-	(20,836)	(31,573)	-	(31,573)
Income from investments, net	10,985	-	10,985	19,540	-	19,540	35,960	-	35,960
Foreign exchange gain	3,733	-	3,733	9,796	-	9,796	12,026	-	12,026
Current income tax expense	(47,469)	-	(47,469)	(102,993)	-	(102,993)	(246,193)	-	(246,193)
Deferred income tax gain (expense)	22,916	40,587	(17,671)	(10,464)	2,536	(13,000)	(219)	2,562	(2,781)
(Loss)/profit for the period from continuing operations	(173,048)	(428,495)	255,447	419,431	(10,387)	429,818	965,104	(12,862)	977,966
attributable to Shareholders of the Company	(159,103)	-	248,567	383,391	-	393,273	922,066	-	934,303
Average shares outstanding	3,032,150	-	3,032,150	2,868,789	-	2,868,789	2,950,916	-	2,950,916
(Loss)/earnings per share – basic and diluted (US Cents)	(5)	-	8	13	-	14	31	-	32

Operational highlights and development projects
Refined gold production was up by 7% to 718 thousand ounces (H1 2012: 670 thousand ounces), as a result of an exceptional performance at Blagodatnoye (+12% year-on-year) and Titimukhta (+38% year-on-year) and the continuing ramp up of Verninskoye (+80% year-on-year).

The increase in production was mainly due to:

higher than planned processing volumes and ongoing optimisation of the automated process control system at Blagodatnoye;
increase in processing volumes and upgrade of the Titimukhta plant resulting in higher recovery rates; and
higher processing volumes at Verninskoye.

Significant progress has been made on the Natalka project’s development. Assembling of the SAG and ball mills is progressing as planned and is expected to be completed in autumn 2013. Since the latest trading update on 25 July 2013, construction of the concrete foundations for the mills has been completed and the mills’ drums were placed on the foundations in August 2013. Construction of foundations for the auxiliary equipment at the mills section of the plant continues as planned. At the gravity and flotation sections of the plant, the installation of wall panels is underway and bored piles have been installed at the thickener site. The temporary pond has been filled with 1.1 mln m³ of water to ensure water supply for the mill launch during winter 2013/2014. The pier foundation has been completed at the permanent camp which is expected to be commissioned in November 2013.

With the progress achieved, Natalka remains on schedule for the commissioning of the full flowsheet in summer 2014. The Company is considering an option to start production at Natalka in winter 2013/2014 using a partial flowsheet and the already installed pilot plant.

Total cash costs
Total cash cost per ounce sold increased to USD 757 (H1 of 2012: USD 628). The increase in costs was primarily driven by:

higher labour costs;
higher prices for fuel and reagents; and
delayed sales (as of the end of the reporting period, the Company had 80 thousand ounces of refined gold in stock, with sales deliberately delayed due to the unfavourable gold price environment in June 2013).

Total cash cost per ounce sold by mine, USD/oz

	Six months ended 30 June 2013 2012		% change y-o-y
Olimpiada	720	601	20
Blagodatnoye	471	651	4
Titimukhta	894	980	(9)
Verninskoye	1,042	756	38
Alluvials	874	866	1
Kuranakh	1,138	894	27
Total cash cost per ounce sold	757	628	21

Non-cash impairment charge

Following the fall in the gold price in H1 2013 and the subsequent sustained lower price, the Company, in line with much of the industry, has reassessed the future prospectivity of its exploration and evaluation asset portfolio and has also reconsidered the economic recoverability of its mining assets. As a result, based on a long term gold price assumption of approximately USD 1,350 per ounce, the Company has recognised non-cash impairment charges of USD 469,082 thousand in H1 2013.

Capital expenditure

Capital expenditure increased by 127% year-on-year to USD 700 million (H1 2012: USD 308 million).

Business unit / item	USD mln	Description
Magadan business unit	311	Construction of processing plant, earthworks, including tailings facility, auxiliary facilities
Krasnoyarsk business unit	65	Construction of dormitories, automation of processing plants, maintenance capital
Capital construction	34	Purchase of construction equipment
Irkutsk ore business unit	32	Construction of flotation tailings facility, automation of Verninskoye plant, construction of camp
Irkutsk alluvial business unit	16	Maintenance capital
Yakutia Kuranakh business unit	11	Maintenance capital
Exploration	9	Exploration works at Nezhdaninskoye and Razdolinskaya
Differences between IFRS and management accounts	223	Construction-in-progress, construction materials accounted for at the Capital construction business unit and related mainly to Natalka and Verninskoye; other reconciling items to IFRS
Total	700⁵

Corporate update

On 28 February 2013, Polyus Gold completed the sale of its assets in Kazakhstan and Kyrgyzstan to a consortium consisting of Institute Project B.V., Financial Services B.V. and Folkstand Consortium Limited.

On 7 March 2013, Global Reporting Initiative stated that Polyus Gold’s Sustainability Report for 2012 fulfils the requirements of GRI Level A+.

On 18 March 2013, Polyus Gold International Limited was included in the FTSE Global Equity Index Series and the FTSE All World Equity Index Series.

On 10 April 2013, Mr. Vladimir Chernukhin, a Non-Executive Director nominated by Lizarazu Holdings Limited (a company associated with Mr Mutsoev), resigned from the Board.

On 29 April 2013, Polyus Gold International Limited placed an issuance of USD 750 million notes due 2020 with a coupon of 5.625% per annum. The notes have been subsequently admitted to trading on the Irish Stock Exchange and the London Stock Exchange (TDIMs: 60ZY and 60ZN).

On 31 May 2013, Mr. Robert Buchan, Chairman, resigned as a director of the Company. The Board's Nominations Committee, which is comprised solely of independent directors, is currently in the process of carrying out the search for a new independent Chairman of the Board.

On 31 May 2013, the Annual General Meeting approved the payment by the Company of a final dividend in respect of the financial year ended 31 December 2012 of USD 0.0824 per ordinary share, which represents approximately 25% of the Company’s net profits for 2012 and an increase of 101% over the dividend paid in respect of the financial year ended 31 December 2011. In addition, the Annual General Meeting approved the payment by the Company of a special dividend in respect of the financial year ended 31 December 2012 of USD 0.0232 per ordinary share, in recognition of the sale of its gold mining assets in Kazakhstan, Kyrgyzstan and Romania. The special dividend and final dividend combined represent an aggregate dividend payment of USD 0.1056 per ordinary share for 2012.

On 18 June 2013, total proven and probable reserves were updated to 83.12 million ounces of gold and total measured, indicated and inferred resources were updated to 150.14 million ounces of gold.

On 24 June 2013, Polyus Gold International Limited was included into the FTSE Gold Mines Index and the Rogers™-Van Eck Hard Assets Producers Index.

On 23 August 2013, the Company was notified of the disposal by Mr. Zelimkhan Mutsoev of an indirect beneficial ownership interest in 18.5% of the ordinary shares of the Company and of an acquisition by Mr. Amirkhan Mori of the aforementioned interest.

2013 Outlook

Gold production guidance for 2013 is reconfirmed at between 1.59 and 1.68 million ounces, excluding divested assets in Kazakhstan.

It is expected that slightly lower output at Olimpiada and lower than planned production volumes at Verninskoye will be offset by higher than planned production at Blagodatnoye and the Alluvial operations.

Conference call information
Polyus Gold will host an analyst conference call today at 2 pm London time to present and discuss the first half of 2013 financial results.

To join the conference call, please dial:

UK Free 0808 237 0033
UK International +44 (0) 20 3426 2886
USA Free 1877 841 4558
Russia Free 8108 00206 85011

A live webcast of the presentation will be available at:

https://arkadin-event.webex.com/arkadin-event/onstage/g.php?t=a&d=703857003

Event Passcode 641579

A replay of the conference call will be available from 7 pm London time on 30 August 2013, for the duration of 7 days.

International +44 (0) 20 3426 2807
UK Free 0808 237 0026

Access Number 641579#

Enquiries
Investor contact
Mikhail Seleznev, Director Investor Relations and Capital Markets
+44 (0) 203 585 35 37 ir@polyusgold.com

Media contact
Sergey Lavrinenko, Director Communications
+44 (0) 203 585 35 37 lavrinenkosn@polyusgold.com

Forward looking statements
This announcement may contain “forward-looking statements” concerning PGIL. 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 PGIL’s operations. Many of these risks and uncertainties relate to factors that are beyond PGIL’s ability to control or estimate precisely and therefore undue reliance should not be placed on such statements which speak only as at the date of this announcement. PGIL assumes no obligation in respect of, and does not intend to update, these forward-looking statements, except as required pursuant to applicable law.
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¹ Adjusted operating profit represents Operating profit (loss), adding back impairment charges, as described in the table below

² Adjusted profit/(loss) for the period from continuing operations represents profit (loss) from continuing operations, adding back impairment charges, as described in the table below

³ For the definition and calculation refer to section 2.1 of the Interim management report

⁴ For the definition and calculation refer to section 2.2 of the Interim management report

⁵ Calculation may be not precise due to rounding

⁶ The comparative information for the six months ended 30 June 2012 reflects adjustments made in connection with the early adoption of IFRIC 20 in the consolidated financial statements of the Group for the year ended 31 December 2012 and with the presentation of the effect of discontinued operations following the sale of operating subsidiaries in Kazakhstan and Kyrgyzstan

⁷ Period-on-period (“p-o-p”). Hereinafter means comparing H1 2013 with H1 2012

⁸ The weighted average number of shares changed following the sale of treasury shares on 10 May 2012, which resulted in the increase in the number of shares outstanding and therefore the average number for the year

⁹ Adjusted earnings per share represent Adjusted profit from continuing operations attributable to the shareholders of the Company divided by the weighted average number of ordinary shares