For immediate release
Polyus Gold International Limited
Financial Results for the Full Year 2013
Polyus Gold International Limited (LSE - PGIL, OTC (US) - PLZLY, “PGIL”, “Polyus Gold” or the “Company”), the largest gold producer in Russia, today releases its audited financial results for the full year 2013.
- Gold sales down by 14% to USD 2.3 billion, reflecting a 17% fall in the gold price, but partly offset by a 4% increase in gold sold (FY 2012: USD 2.6 billion)
- Total cash costs (TCC) per oz sold1 rose by just 1% to USD 707 per oz following improved cost control throughout the operations and the appreciation of the US dollar against the Russian rouble by 2%, which helped to offset cost inflation
- Following the significant fall in the gold price in 2013 an impairment of USD 472 million was recognised, primarily related to the Nezhdaninskoye (USD 248 million) and Degdekanskoye (USD 48 million) deposits at the exploration stage and the Kuranakh mine (USD 138 million)
- Adjusted operating profit2 of USD 694 million, compared to USD 1,211 million in 2012
- Adjusted EBITDA3 of USD 910 million (2012: USD 1,303 million), and Adjusted EBITDA margin of 39% (2012: 49%)
- Adjusted profit for the year from continuing operations 4decreased 42% to USD 564 million (FY 2012: USD 978 million)
- Adjusted earnings per share5 of 17 US cents (FY 2012: 32 US cents)
- Profit for the year from continuing operations decreased to USD 143 million, compared to USD 965 million in 2012
- Net debt position of USD 349 million compared with a net cash position of USD 680 million at the end of 2012.
1 Total cash costs per oz sold is total cash costs divided by the ounces of gold sold during the period. For more details refer to page 19 of the Financial review.
2Adjusted operating profit represents Operating profit, before impairment charges.
3Adjusted EBITDA is defined by the Group as profit before finance costs, income tax, income/(losses) from investments, depreciation, amortisation and finance cost, and is further adjusted for certain items, being mainly impairments. For more details refer to page 17 of the Financial review.
4Adjusted profit for the year from continuing operations represents profit from continuing operations before impairment charges.
5Adjusted earnings per share represents adjusted profit from continuing operations attributable to the shareholders of the Company divided by the weighted average number of ordinary shares.
USD’000, unless specified otherwise
Year ended 31 December
|Gold production (k oz)||1,649||1,569||5|
|Gold sold (k oz)||1,631||1,571||4|
|Average realised gold price (USD per oz)||1,385||1,666||(17)|
|Profit for the year from continuing operations||143,001||965,104||(85)|
|Weighted average number of ordinary shares (‘000s)6||3,032,150||2,950,916||3|
|Earnings per share – basic and diluted (US Cents)||4||31||(87)|
|Adjusted operating profit||693,528||1,210,527||(43)|
|Adjusted operating profit margin (%)||30||145|
|Adjusted profit for the year from continuing operations||563,791||977,966||(42)|
|Adjusted earnings per share – basic and diluted (US Cents)||17||32||(47)|
|Net cash flow from operations||422,339||991,769||(57)|
|Adjusted EBITDA margin (%)||39||49|
|Total cash cost per oz sold (USD per oz)||707||697|
|All-in-sustaining costs per oz sold (USD per oz)7||1,002||1,007||(1)|
All amounts are in USD ‘000
Year ended 31 December 2013
Year ended 31 December 2012
|Operating profit/(loss) for the year||221,871||(471,657)||693,528||1,195,103||(15,424)||1,210,527|
|Income from investments, net||21,348||-||21,348||35,960||-||35,960|
|Foreign exchange gain||4,348||-||4,348||12,026||-||12,026|
|Current income tax expense
|Deferred income tax gain/ (expense)||41,276||50,867||(9,591)||(219)||2,562||(2,781)|
|Profit/(loss) for the year from continuing operations||143,001||(420,790)||563,791||965,104||(12,862)||977,966|
|Attributable to shareholders of the Company||133,860||394,275
|Weighted average number of ordinary shares ('000s)||3,032,150||-||3,032,150||2,950,916||-||2,950,916|
|Earnings per share from continuing operations – basic and diluted (US Cents)||4||-||17||31||-||32|
6 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.
7 AISC measures costs related to sustaining production and includes TCC, SG&A expenses, sustaining CAPEX and other cash costs attributable to current sales. For more details refer to page 20 of the Financial review.
In 2013, the Company produced 1,649 thousand ounces of refined gold from continuing operations, a 5% increase compared to 1,569 thousand ounces a year ago. The growth in total production was achieved as a result of higher gold output at Verninskoye, Olimpiada and Titimukhta.
In December 2013, in light of the challenging market conditions, the Company decided to re-sequence the development of the Natalka project and delay the launch of the plant to summer 2015 from the previously announced target of summer 2014.
Although it was operationally possible to commence gold production at the Natalka mine as previously planned, the Company deems it prudent to postpone its commissioning given the recent substantial decline in gold prices. The decision to re-sequence the construction schedule will enable the Company to better balance the capital requirements of Natalka with the need to maintain a robust funding position in the uncertain macro environment.
In addition to a deferral of the project’s residual capital expenditures (“CAPEX”), the re-sequencing will allow the Company the opportunity to identify further cost and operational efficiencies, including the optimisation of capital and operating expenditure, improvements to the project design and the potential implementation of the photometric separation technology (optical sorting) as a way to pre-concentrate the ore.
A detailed plan of project improvements is expected to be finalised by the middle of 2014. The plan will benefit from the findings of an additional project assessment review initiated in early January 2014. In the meantime, construction works are continuing onsite, albeit at a slower pace than previously planned. Mining works which commenced in 2013 in accordance with the license terms also continue.
In 2013, the Company’s CAPEX amounted to USD 1.4 billion. The majority of the funds were invested in the construction of the Natalka project and the optimisation of production at the Krasnoyarsk business unit. CAPEX related to Verninskoye decreased 52% as the mine reached its designed capacity.
Year ended 31 December
|Mine under development (Natalka project)||1,023,818||305,525||235|
|Capital construction-in-progress, including||383,221||463,119||(17)|
|Capital construction BU||68,229||133,917||(49)|
|Irkutsk ore BU||53,253||111,504||(52)|
|Irkutsk alluvial BU||18,386||23,501||(22)|
|Yakutia Kuranakh BU||15,673||26,684||(41)|
|Exploration and evaluation assets||32,652||40,242||(19)|
|Capital expenditures, continuing operations||1,439,691||808,886||78|
|Discontinued operations, including||-||41,833||(100)|
|Exploration and evaluation assets||-||5,002||(100)|
|Capital expenditures, total||1,439,691||850,719||69|
Total cash costs per ounce sold
In 2013, the TCC per ounce of gold sold increased by 1%. The key driver was an increase in the cost of gold sales partly offset by the appreciation of the US dollar against the Russian rouble.
Total cash cost per ounce sold by mine, USD/oz
Year ended 31 December
|Total cash cost per ounce sold||707||697||1|
At Olimpiada, the 3% decrease in TCC per ounce of gold sold was a result of an improvement in average grade and recovery rates. At Blagodatnoye, the increase in TCC per ounce of gold sold resulted from a lower grade of ore processed partially offset by improved recovery rates. At Titimukhta, the increase in TCC per ounce of gold sold was a result of a 12% decrease in gold grade partially offset by an improvement in the recovery rate following installation of a new thickener and the expansion of the hydro-metallurgical section. At Verninskoye, the 9% increase in TCC per ounce of gold sold came as a result of a combination of an increase in consumption of various mining and processing materials amid significantly higher mining volumes, growth in the number of personnel and increased prices for goods purchased. At the alluvial operations, the 5% decrease in TCC per ounce of gold sold was due to ongoing optimisation of the mining plan and a decrease in labour costs. At Kuranakh, a 9% increase in TCC per ounce of gold sold was primarily a result of the reduced recovery rate due to an abnormal zinc content in the ore fed to the plant and an increase in cash operating costs.
All-in sustaining cash costs per ounce sold
In June 2013, the World Gold Council (WGC) published a guidance note on the all-in sustaining costs (AISC) metric for gold mining companies. It is expected that the adoption of AISC by precious metal producers may help to provide investors, governments, local communities and other stakeholders with better visibility into the true cost of producing gold.
AISC measures costs related to sustaining production 8 . We calculate it in accordance with the recommendation of the WGC including TCC, SG&A expenses, sustaining CAPEX and other cash costs attributable to current sales.
In 2013, AISC for the Company was USD 1,002 per oz sold, which is 1% lower than in 2012 (USD 1,007 per oz). The main reasons for the decrease are explained by a 2% fall in the Russian rouble against the US dollar, 61% lower stripping activity asset additions and a 12% reduction in SG&A expenses partly offset by overall inflation in the cost of sales and a 31% increase in sustaining CAPEX.__________________________
8 Non-sustaining costs are those costs incurred at new operations and costs related to ‘major projects’ at existing operations where these projects will materially increase production. Companies need to publicly disclose those operations and ‘major projects’ which are considered non-sustaining. All other costs related to existing operations are considered sustaining.
unless otherwise indicated
Year ended 31 December
|Total cash costs||1,153,266||1,095,054||5|
|SG&A less SG&A depreciation||221,309||214,157||3|
|Stripping activity asset additions||37,692||96,623||(61)|
|Sustaining capital expenditures||210,236||159,950||31|
|Unwinding of discounts on decommissioning liabilities||5,442||9,003||(40)|
|Adding back expenses excluded from TCC||2,592||4,509||(43)|
|All-in sustaining cash costs||1,633,036||1,581,375||3|
|Gold sales (K oz)||1,631||1,571||4|
|All-in sustaining cash costs per oz sold (USD per oz)||1,002||1,007||(1)|
On 27 February 2014, the Company received notice from its Chief Financial Officer, Mr. Oleg Ignatov, that he wishes to resign from his position as CFO in order to pursue other activities. As of 27 March 2014, Mr. Mikhail Stiskin, who is currently Deputy CEO for Strategy and Corporate Development, will be appointed Chief Financial Officer of Polyus Gold.
The Company’s guidance for refined gold production for 2014 is set between 1.58 and 1.65 million ounces.
The possible small decrease in total gold production is expected to be driven by our planned reduction in mining works at the highest cost alluvial deposits due to the current gold environment, and lower ore grades at Blagodatnoye and Kuranakh.
Conference call information
Polyus Gold will host an analyst conference call on 26 March at 12.00 (noon) London time to present and discuss the financial results for full year 2013.
To join the conference call, please dial:
UK toll free 0808 237 0033
UK International +44 (0) 20 3426 2845
USA toll free 1877 841 4558
Russia toll free 8108 00206 85011
A live webcast of the presentation will be available at:
Event passcode: 646785
A replay of the conference call will be available from 4 pm London time on 26 March 2014, for the duration of 7 days.
To access the replay, please dial:
UK toll free: 0808 237 0026
UK International: +44 (0) 20 3426 2807
US toll free: 18665358030
Access number: 646785#
Mikhail Seleznev, Director Investor Relations and Capital Markets
+44 (0) 203 585 35 37 email@example.com
Sergey Lavrinenko, Director Communications
+44 (0) 203 585 35 37 firstname.lastname@example.org
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.