Financial Results for the First Half of 2024

PJSC Polyus (MOEX — PLZL) (“Polyus”, the “Company”, and together with the Company subsidiaries, the “group”) has today released its consolidated financial results for the first half of 2024.

Highlights

1. Total gold sales volumes in the first half of 2024 amounted to 1,263 thousand ounces, remaining broadly flat on the first half of 2023. During the reporting period Polyus has accumulated inventories of ca. 210 thousand ounces of gold content, mainly in the form of floatation concentrate, which will be sold throughout the second half of the year and will be reflected in the group’s financials in FY2024.
2. Revenue for the reporting period amounted to $2,733 million, up 16% compared to the corresponding period of the previous year. This growth was driven by the higher average realized refined gold price compared to the first half of the previous year.
3. The group’s TCC for the first half of 2024 increased 8% year-on-year to $423 per ounce. This growth was driven by a decrease in the share of lower-cost flotation concentrate in total gold sold, lower by-product credit from sales of antimony-rich flotation concentrate at Olimpiada ($6 per ounce in 1H2024, compared to $30 per ounce in 1H2023), an increase in the MET due to higher average realized refined gold price, lower average grades in ore processed at Olimpiada, as well as consumables price inflation and wage indexation. Among positive factors, Polyus notes rouble depreciation during the reporting period and higher head grades at Blagodatnoye, Natalka and Kuranakh.
4. Adjusted EBITDA in the first half of 2024 amounted to $2,021 million, a 20% increase compared to $1,682 million in the first half of 2023, reflecting higher average gold prices during the reporting period.
5. Capital expenditures («capex») for the first half of 2024 amounted to $441 million, up 12% compared to the corresponding period of the previous year. This growth mainly reflects the higher capital expenditures at Natalka, Kuranakh and Sukhoi Log.
6. The net debt (incl. derivatives)/adjusted EBITDA ratio stood at 1.5x by the end of the first half of 2024, compared to 1.9x at the end of 2023, reflecting a lower net debt position and adjusted EBITDA growth over the last twelve months.

Outlook for 2024

In light of the company’s solid cost performance in the first half of the year, and the sale of the Alluvials business unit, Polyus has revised down its total cash cost (TCC) guidance for 2024, which is now expected to stay in the range of $425-475 per ounce, compared to the previous estimate of $450-$500 per ounce. Meanwhile, capex guidance of $1,550 — $1,700 million remains intact, as we continue to make progress on our brownfields and growth projects across the group.

Comparative financial results¹

Total Cash Costs

In the first half of 2024, the group’s TCC increased 8% to $423 per ounce compared to $393 per ounce in the first half of 2023. This growth was driven by a decrease in share of lower-cost flotation concentrate in total gold sold, lower by-product credit from sales of antimony-rich flotation concentrate at Olimpiada ($6 per ounce in 1H2024, compared to $30 per ounce in 1H2023), an increase in the MET due to higher average realized refined gold price, lower average grades in ore processed at Olimpiada, as well as consumables price inflation and wage indexation. Among positive factors, Polyus notes rouble depreciation during the reporting period and higher head grades at Blagodatnoye, Natalka and Kuranakh.

TCC performance by mine, $/oz

In the first half of 2024, TCC at Olimpiada stood at $378 per ounce, a 14% increase compared to the first half of 2023. The aforementioned negative factors were partially offset by a 1.6 ppts increase in recovery rate due to favorable mineralogy of the ore feed and rouble depreciation.

TCC at Blagodatnoye in the first half of 2024 went down 9% on the first half of 2023 and amounted to $371 per ounce, driven by an increase in head grades (2.06 g/t in 1H2024 compared to 1.61 g/t in 1H2023) and rouble depreciation.

In the first half of 2024, TCC at Natalka decreased 5% year-on-year to $514 per ounce, reflecting rouble depreciation and higher average grades in ore processed (1.42 g/t in 1H2024 compared to 1.29 g/t in 1H2023). This was partially offset by scheduled maintenance works occurring during the period, higher MET due to higher average realized refined gold price, as well as consumables price inflation and wage indexation.

TCC at Verninskoye in the first half of 2024 totalled $515 per ounce, up 10% compared to the first half of 2023, reflecting, among other factors, lower average grades in ore processed and scheduled maintenance works.

At Kuranakh, TCC in the first half of 2024 decreased 15% year-on-year to $580 per ounce due to the completion of the capacity expansion program of the Kuranakh Mill with reaching design capacity of 7.5 million tonnes per annum (Mill hourly throughput rose 27% year-on-year to 942 t/h in 1H2024). This factor along with rouble depreciation and higher head grades supported cost performance at Kuranakh.

All-in sustaining costs (AISC)

In the first half of 2024, the group’s AISC was $761 per ounce, remaining broadly flat compared to the first half of 2023 ($751 per ounce in 1H2023).

Debt management

The Company’s gross debt marginally declined to $8,966 million, compared to $9,050 million as at the end of 2023.

As at 30 June 2024, the Company’s estimated cash position rose to $2,592 million (31 December 2023: $1,711 million). The Company’s estimated net debt declined to $6,374 million (31 December 2023: $7,339 million).

The change in the net debt position mostly reflects free cash flow generated during the reporting period and the sale of a 100% stake in the Alluvials business unit. Meanwhile a redemption of Notes due 2024 was offset by the issue of 5.5-year gold bonds with a coupon rate of 3.10% per annum and 5-year local USD bonds with a coupon rate of 6.20% per annum.

Debt maturity schedule (as at 30 June 2024)¹⁰, $ million

Capex

Over the course of the first half of 2024, capital expenditures amounted to $441 million, up 12% compared to the corresponding period of the previous year. This growth mainly reflects the higher capital expenditures at Natalka, Kuranakh and Sukhoi Log.

Capex breakdown¹¹

In the first half of 2024, the total cash amount spent on the purchase of PP&E increased to $579 million, compared to $508 million in the first half of 2023.

Enquiries

Investor and Media contact

+7 (495) 641 33 77
ir@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.

¹ The comparative information for the first and the second half of 2023 reflects adjustments made in connection with the presentation of the effect of discontinued operations of Alluvials business unit.
² Gold production is comprised of 1,333.4 thousand ounces of refined gold and 139.5 thousand ounces of gold in flotation concentrate in the 2024.
³ Adjusted net profit is defined by the group as net profit / (loss) for the period adjusted for impairment loss / (reversal of impairment), unrealised (gain) / loss on derivative financial instruments, foreign exchange (gain) / loss, gain on acquisition of subsidiaries and associated deferred and current income tax related to such items.
⁴Adjusted EBITDA is defined by the group as profit for the period before income tax, depreciation and amortisation, (gain) / loss on derivative financial instruments and investments (including the effect of the disposal of a subsidiary and subsequent accounting at equity method), finance costs, interest income, foreign exchange loss / (gain), impairment loss / (reversal of impairment), (gain) / loss on property, plant and equipment disposal, expenses associated with an equity-settled share-based payment plan, expenses associated with covid-19, gain on acquisition of subsidiaries and special charitable contributions as required to ensure calculation of the Adjusted EBITDA is comparable with the prior period.
⁵ Capital expenditure figures are presented on an accrual basis.
⁶ TCC is defined by the group as the cost of gold sales, less property, plant and equipment depreciation and amortisation and change in allowance for obsolescence of inventory, expenses associated with covid-19 and adjusted by non-monetary change in inventory. TCC per ounce sold is the cost of producing an ounce of gold, which includes mining, processing and refining costs. The group calculates TCC per ounce sold as TCC divided by total ounces of gold sold for the period. The group calculates TCC and TCC per ounce sold for certain mines on the same basis, using corresponding mine-level financial information.
⁷ AISC is defined by the group as TCC plus selling, general and administrative expenses, stripping activity asset additions, sustaining capital expenditures, unwinding of discounts on decommissioning liabilities, provision for annual vacation payment, employee benefit obligations cost, and change in allowance for obsolescence of inventory less amortisation and depreciation included in selling, general and administrative expenses. AISC is an extension of TCC and incorporates costs related to sustaining production and additional costs which reflect the varying costs of producing gold over the life-cycle of a mine. The group believes AISC is helpful in understanding the economics of gold mining. AISC per ounce sold is the cost of producing and selling an ounce of gold, including mining, processing, transportation and refining costs, general costs, and the additional expenditures noted in the definition of AISC. The group calculates AISC per ounce sold as AISC divided by total ounces of gold sold for the period.
⁸ Net debt is defined as non-current borrowings plus current borrowings less cash and cash equivalents and bank deposits. Net debt also includes assets and liabilities under cross-currency and interest rate swaps at the reporting date. Net debt excludes derivative financial instrument assets/liabilities other than cross-currency and interest rate swaps, site restoration and environmental obligations, deferred tax and other non-current liabilities. Net debt should not be considered as an alternative to current and non-current borrowings, and should not necessarily be construed as a comprehensive indicator of the group’s overall liquidity.
⁹ The group calculates net debt (incl. derivatives) to Adjusted EBITDA as net debt (including derivatives) divided by Adjusted EBITDA for the last twelve months
¹⁰ The breakdown is based on actual maturities and excludes lease liabilities recognised under IFRS 16 as of 30 June 2024 in amount of $95 million.
¹¹ The capex above presents the capital construction-in-progress unit as allocated to other business units, whilst in the consolidated financial statements capital construction-in-progress is presented as a separate business unit.
¹² Reflects expenses related to exploration business unit and other unallocated CAPEX.
¹³ Including capitalised stripping costs.