PJSC Polyus (LSE, MOEX — PLZL) (Polyus, the Company, and together with the Company subsidiaries, the group) has today released its consolidated financial results for the fourth quarter and full year 2020.
- Total gold sales volumes amounted to 829 thousand ounces, up 7% compared to the third quarter of 2020. In 2020, the Company sold a total of 2,817 thousand ounces of gold, down 2% compared to the prior-year.
- Revenue for the fourth quarter of 2020 totalled $1,515 million, up 4% compared to the previous quarter. This was driven by higher sales of flotation concentrate at 141 thousand ounces, compared to 70 thousand ounces in the previous quarter. In 2020, revenue totalled $4,998 million, a 25% increase from the prior year, driven by a higher average realised refined gold price ($1,786/oz in 2020, compared to $1,403/oz in 2019).
- The group’s TCC for the fourth quarter decreased 4% to $354 per ounce, compared to $369 per ounce in the previous quarter. This improvement was attributable to a seasonal decrease in output at the structurally higher-cost alluvial operations and an increase in share of lower-cost flotation concentrate in total gold sold. In addition, the local currency depreciation also positively impacted the cost performance. In 2020, the group’s TCC decreased 1% to $362 per ounce compared to 2019. This reflects higher average grades in ore processed at Blagodatnoye and Natalka and the local currency depreciation. These factors were partially offset by higher Mineral Extraction Tax (MET) expenses, driven by higher average realised gold price, and lower average grades in ore processed at Olimpiada (3.40 grams per tonne in 2020 compared to 3.92 grams per tonne in 2019).
- Adjusted EBITDA for the fourth quarter of 2020 amounted to $1,138 million, a 3% increase compared to $1,103 million in the previous quarter, driven by higher gold sales volumes during the quarter. In 2020, the group’s adjusted EBITDA stood at $3,690 million, a 38% increase compared to the previous year, driven by higher average gold prices in 2020.
- Capital expenditures (capex) increased to $272 million, from $130 million in the previous reporting period, as the Company accelerated its capex spending programme in the fourth quarter in line with the approved 2020 investment plan. Capex for the full year of 2020 increased to $653 million from $630 million in the previous year.
- The net debt (incl. derivatives)/adjusted EBITDA ratio decreased to 0.7x compared to 1.2x at the end of 2019, reflecting a lower net debt position and adjusted EBITDA growth over the last twelve months.
The Board of Directors of the Company (the Board) has preliminarily considered dividends for the second half of 2020 that it intends to recommend for approval by the Company’s annual general shareholders’ meeting. In accordance with the Company’s Dividend Policy which targets the total dividend payout as 30% of the Company’s EBITDA for the full year, dividends for the second half of 2020 will amount to the ruble equivalent of $693 million. Based on the current number of outstanding shares, the dividend per share for the second half of 2020 is expected to be $5.09 per ordinary share. The total dividend payout for the full year of 2020 will thus correspond to $1,107 million. This amount includes $414 million paid out in form of dividend for the first half of 2020.
In 2020, the Company allocated $155 million to measures aimed at preventing the spread of the COVID-19 pandemic. Out of this amount, $50 million is included in Cost of gold sales (additional staff expenses related to extended working shifts), and $56 million is in Other expenses (COVID-19 test kits, medical services and support provided to regional hospitals). The remaining $49 million was attributable to in-progress inventory and capitalised as part of property, plant and equipment in the Statement of Financial position. The expenses associated with COVID-19 and recognised as part of Cost of gold sales were excluded from both TCC and AISC calculations. At the same time, all P&L expenses related to COVID-19 ($106 million) were excluded from the adjusted EBITDA calculation.
- Based on the mining plan and processing capabilities, we expect total gold output of ca. 2.7 million ounces of gold in 2021. Production guidance reflects a temporary reduction of head grades at Olimpiada caused by forced changes to the mining schedules, following the virus outbreak in the second quarter of 2020 and subsequent downscale of stripping works. At the same time, Polyus expects the head grades to rebound in 2022-2023 at Olimpiada as the Company gets access to the high-grade ore material. The Company continues to implement brownfield development initiatives to strengthen its operational profile.
- The Company expects TCC for 2021 to stay within the range of $425-$450 per ounce. This estimate is based on the assumptions of foreign exchange rate of 65 roubles per dollar and a gold price of $1,300 per ounce. The Company anticipates a gradual increase in TCC from 2020 levels, driven by:
- inflationary factors;
- a temporary reduction of head grades at Olimpiada as defined above;
- a decrease in the share of lower-cost flotation concentrate in total gold sold; and
- lower antimony by-product credit.
In 2021, the Company expects capex to be within the range of $1,000-$1,100 million. The capex guidance reflects:
- The recently approved Mill-5 construction project at the Blagodatnoye complex, including site preparation, foundation works, and acceleration of mining fleet procurement;
- the completion of the major part of the Sukhoi Log feasibility study, including comprehensive engineering surveys, the project team staffing and early start of infrastructure construction;
- the reconstruction of the tailings storage facility and completion of the construction of the second heap leaching pad at Kuranakh;
- a cyclical increase in spending on mining fleet maintenance; and
- growth in the exploration budget and rollover of IT capex spending from 2020.
Based on preliminary assessments, Polyus expects approximately $100 million of COVID-19 related expenses in 2021. These include salary increases paid to staff working extended shifts, procurement of medical and personal protection equipment, as all preventive measures remain in place at all sites. The expenses associated with COVID-19 and recognised as part of Cost of gold sales will be excluded from both TCC and AISC calculations as well as from the adjusted EBITDA calculation.
Pavel Grachev, Chief Executive Officer of PJSC Polyus, commented:
In 2020, Polyus posted strong results despite a challenging environment resulting from the COVID-19 pandemic. Our revenue, EBITDA and free cash flow reached all-time record highs, achieving solid double-digit increases on a year-on-year-basis.
With regard to our cost performance, our TCC remained broadly flat year-on-year at $362 per ounce, remaining below our revised guidance range of $375 — $425 per ounce.
We progress with development projects across the group’s operating assets, including the recently approved Mill-5 construction, as well as further engineering studies at Sukhoi Log, which is currently at the Feasibility Study stage.
Our key focus remains on the safety of our employees and their families, and Polyus will continue its efforts to minimise risks posed by COVID-19 at its operations.
Comparative financial results
|$ million (if not mentioned otherwise)||4Q 2020||3Q 2020||Q-o-Q||4Q 2019||Y-o-Y||2020||2019||Y-o-Y|
|Gold production (koz)2||710||771||(8%)||804||(12%)||2,766||2,841||(3%)|
|Gold sold (koz)||829||772||7%||894||(7%)||2,817||2,878||(2%)|
|Weighted-average refined gold selling price, $/oz||1,872||1,907||(2%)||1,482||26%||1,786||1,403||27%|
|Operating profit margin||62%||65%||(3) ppts||56%||6 ppts||61%||55%||6 ppts|
|Profit for the period||835||516||62%||697||20%||1,646||1,944||(15%)|
|Earnings per share — basic (US Dollar)||6.17||3.59||72%||5.25||18%||11.89||14.52||(18%)|
|Earnings per share — diluted (US Dollar)||6.15||3.58||72%||5.22||18%||11.85||14.48||(19%)|
|Adjusted net profit3||732||724||1%||550||33%||2,332||1,657||41%|
|Adjusted net profit margin||48%||50%||(2) ppts||43%||5 ppts||47%||41%||6 ppts|
|Adjusted EBITDA margin||75%||76%||(1) ppts||69%||6 ppts||74%||67%||7 ppts|
|Net cash flow from operations||895||955||(6%)||682||31%||3,046||2,174||40%|
|Total cash cost (TCC) per ounce sold ($/oz)6||354||369||(4%)||341||4%||362||365||(1%)|
All-in sustaining cash cost (AISC)
per ounce sold ($/oz)7
|Cash and cash equivalents||1,445||1,633||(12%)||1,801||(20%)||1,445||1,801||(20%)|
|Net debt (incl. derivatives)||2,464||2,299||7%||3,253||(24%)||2,464||3,253||(24%)|
|Net debt (incl. derivatives)/adjusted EBITDA (x)||0.7||0.7||0%||1.2||(42%)||0.7||1.2||(42%)|
Total Cash Costs
In the fourth quarter, the group’s TCC decreased by 4% to $354 per ounce compared to $369 per ounce in the previous quarter. This improvement was attributable to a seasonal decrease in output at the structurally higher-cost alluvial operations and an increase in share of lower-cost flotation concentrate in total gold sold. This was partially offset by scheduled maintenance works at Olimpiada, Blagodatnoye and Natalka.
In 2020, the group’s TCC decreased 1% to $362 per ounce compared to 2019. This reflects higher average grades in ore processed at Blagodatnoye and Natalka and the local currency depreciation. These factors were partially offset by higher MET expenses, driven by the increase in average realised gold price and lower average grades in ore processed at Olimpiada (3.40 grams per tonne in 2020 compared to 3.92 grams per tonne in 2019).
In the fourth quarter, TCC at Olimpiada rose to $297 per ounce, a 5% increase compared to the third quarter of 2020. This increase reflects scheduled maintenance works, including the replacement of the SAG-mill at Mill No. 3. as well as a decline in average grades in ore processed (3.34 grams per tonne in the fourth quarter compared to 3.56 grams per tonne in the third quarter). This was partially offset by a higher share of lower-cost flotation concentrate in the total gold sold during the quarter.
In 2020, TCC at Olimpiada amounted to $312 per ounce, a 6% increase compared to 2019. This was attributable to a decline in average grades in ore processed (3.40 grams per tonne in 2020 compared to 3.92 grams per tonne in 2019) and higher MET expenses. These factors were partially offset by the local currency depreciation.
At Blagodatnoye, TCC amounted to $344 per ounce, down 4% compared to the third quarter. This was driven by higher average grades in ore processed (1.91 grams per tonne in the fourth quarter compared to 1.80 grams per tonne in the third quarter) as well as an increase in recovery rate from 87.9% to 88.7% compared to the previous quarter.
In 2020, TCC at Blagodatnoye were $347 per ounce, down 13% compared to the previous year due to higher average grades in ore processed (1.82 grams per tonne in 2020 compared to 1.67 grams per tonne in 2019) and the local currency depreciation.
In the fourth quarter, TCC at Natalka increased to $342 per ounce, up 8% compared to the previous quarter, driven by higher maintenance expenses. In 2020, TCC at Natalka declined to $355 per ounce, down 10% compared to $396 per ounce in 2019, driven by a higher average grade in ore processed (1.72 grams per tonne in 2020 compared to 1.61 grams per tonne in 2019). An increase in hourly throughput to an average of 1,495 t/h, compared to an average of 1,462 t/h in 2019, also contributed to the improved performance.
In the fourth quarter, TCC at Verninskoye amounted to $325 per ounce, up 1% compared to the third quarter. In 2020, TCC at Verniskoye decreased to $327 per ounce, down 10% compared to the previous year, due to increase in hourly throughput to an average of 403 t/h compared to an average of 375 t/h in 2019.
At Kuranakh, TCC rose to $518 per ounce, up 7% compared to the third quarter, due to scheduled maintenance works and a seasonal downscaling of heap leaching operations. In 2020, TCC at Kuranakh decreased to $518 per ounce, down 1% compared to 2019, which reflects the local currency depreciation compared to the previous year. This was offset by higher MET expenses and maintenance expenses during the year.
At Alluvials, TCC increased 13% to $946 per ounce, reflecting the conclusion of the washing season. In 2020, TCC at Alluvials amounted to $847 per ounce, up 3% compared to $821 per ounce in the previous year due to a decrease in alluvial gold grade (0.46 grams per cubic metre in 2020 compared to 0.53 grams per cubic metre in 2019) and higher MET expenses.
All-in sustaining costs (AISC)
In the fourth quarter, the group’s AISC increased to $613 per ounce, up 7% reflecting higher stripping activities and sustaining capital expenditures. In 2020, the group’s AISC per ounce stood at $604 per ounce.
All-in sustaining costs by mine, $/oz
3Q 2020, 4Q 2020
In the fourth quarter of 2020, AISC at Olimpiada remained largely flat at $458 per ounce. AISC at Blagodatnoye decreased to $464 per ounce, driven by lower TCC in the reporting period. AISC at Natalka increased to $520 per ounce due to higher sustaining capital expenditures in the reporting period. AISC at Verninskoye increased to $660 per ounce, while AISC at Kuranakh increase to $836/oz, both driven by higher stripping activity and higher sustaining capital expenditures in the reporting period.
In 2020, AISC at Olimpiada increased to $515 per ounce, driven by higher sustaining capital expenditures and higher stripping expenses compared to the previous year. AISC at Blagodatnoye decreased to $478 per ounce, in line with TCC performance and due to lower stripping expenses during the period. AISC at Natalka decreased to $529 per ounce, while AISC at Verninskoye decreased to $560 per ounce, both in line with TCC performance and driven by lower sustaining capital expenditures and lower stripping expenses in the reporting year. At Kuranakh, AISC decreased to $756 per ounce, in line with TCC performance during the period. AISC at Alluvial remained almost flat at $1,141 per ounce.
In the fourth quarter, capital expenditures increased to $272 million, from $130 million in the previous period, as the Company accelerated its capex spending programme in line with the 2020 investment plan. For the full year of 2020 capital expenditures amounted to $653 million, up 4% compared to $630 million in the previous year. Adjusted for FX fluctuations, capital expenditures for the full year 2020 came closer to the upper bound of the guidance range of $700-750 million, provided at 60 roubles per dollar FX rate assumption.
At Olimpiada, capital expenditures increased to $93 million in the fourth quarter of 2020 compared to $32 million in the previous reporting period. This was driven mainly by the installation of the new SAG-mill at Mill-3 (which has already reached project capacity), and putting nine 220-tonne CAT 793D trucks into operation. In addition, Polyus has procured two Jameson Cell flotation units, which are in the process of installation at Mill No. 2. Polyus also completed the refurbishment of BIO tanks at BIO-3.
In 2020, capital expenditures at Olimpiada increased to $183 million year-on-year. In addition to the refurbishment of BIO-3 unit and commissioning of two additional reactors at BIO-4 the Company also introduced a magnetic separation of concentrate and retrofitted two BIO tanks at BIO-2 into agitation tanks. These initiatives led to an increase in flotation concentrate processing capacity.
At Blagodatnoye, capital expenditures increased to $43 million in the fourth quarter compared to $14 million in the previous reporting period. The Company upgraded its mining fleet, with the delivery of four 220-tonne CAT 793D trucks and one WK-20 excavator.
In 2020, capital expenditures at Blagodatnoye increased twofold, reaching $71 million compared to $37 million in 2019, following the acceleration of the mining fleet procurement for further pit expansion.
In the fourth quarter, capital expenditures at Natalka increased to $34 million, compared to $23 million in the previous reporting period. Polyus completed the active phase of construction of the first start-up complex of new tailings storage facility. In addition, the Company replaced four SAG and ball mill motors with upgraded sleeve bearings to improve the reliability of the equipment. Polyus replaced the screens at the SAG mill discharge to reduce the amount of idle time and improve utilisation rates. By the year end, Polyus completed the flash flotation roll-out along with a new CIL line commissioning at the Natalka Mill.
In 2020, capital expenditures at Natalka decreased to $123 million, down 21% compared to the previous year, as the Company had completed additional in-mine exploration and the active phase of mining fleet procurement in 2019.
At Verninskoye, capital expenditures increased to $25 million in the fourth quarter compared to $21 million in the previous quarter, due to the procurement of three Komatsu-HD1500 dump trucks. For the full year of 2020, capital expenditures at Verninskoye increased by 33%, compared to 2019, to $76 million, due to the start of the active phase of expanding the Mill to 3.5 mtpa.
At Kuranakh, capital expenditures in the fourth quarter of 2020 amounted $24 million, due to the scheduled replacement of the mining fleet. For the full year of 2020, capital expenditures at Kuranakh increased by 21%, compared to 2019, to $47 million, reflecting the active phase of construction activities for the second heap leaching pad and the reconstruction of the tailings storage facility. Polyus completed the construction of two out of eight total panels at the second heap leaching pad. Following the completion of the third stage of the Kuranakh mill expansion, the throughput capacity reached 6.1 mtpa on an annualised basis.
At Alluvials, capital expenditures programme amounted to $10 million and 23 million in the fourth quarter and full year 2020, respectively. It consisted of the ongoing replacement of worn-out equipment, as well as exploration activities.
In the fourth quarter, IT-related capital expenditures increased to $15 million. This includes preparation activities related to the anticipated introduction of an ERP system at Krasnoyarsk, as well as IT equipment deliveries for server hardware upgrade and IT infrastructure projects. In 2020, IT capex amounted to $35 million, down 31% compared to 2019, due to rescheduling of the implementation of ERP at
Krasnoyarsk from 2020 to 2021 and adjusted procurement of IT equipment and software.
Polyus completed a comprehensive internal review of the Sukhoi Log Pre-Feasibility Study (PFS) and provided an overview of the key highlights. The PFS has identified the preferred development approach, confirming the economic viability of Sukhoi Log, in addition to selecting key areas of the project for further in-depth analysis.
The Company completed its geotechnical drilling programme for 2020 with 3,400 meters drilled compared to 3,100 meters initially planned (1,700 meters drilled in the fourth quarter). The results of this drilling programme will be used in future studies. Polyus has also progressed with its deep-level and flank exploration drilling campaign. During the reporting period, Polyus drilled 9,300 meters ending up with 17,200 meters drilled in 2020. The Company expects to conduct additional drilling at Sukhoi Log’s flanks and deep levels in 2021.
In 2020, Polyus has also drilled 35,200 meters of in-fill drilling, compared to the 30,000 meters initially planned. This will allow the Company to better define the gold mineralisation within the future pit area, where Polyus expects to carry out mining activities during the first years of Sukhoi Log’s operations, and enable more accurate planning and sequencing of the mining works.
The Company entered into the Feasibility stage to proceed with a more accurate technical and financial analysis of the selected development option for Sukhoi Log. The results of the Bankable Feasibility Study (BFS) will serve as the basis for the Final Investment Decision on the project, which is expected by the end of 2022.
|$ million||4Q 2020||3Q 2020||Q-o-Q||2020||2019||Y-o-Y|
|Omchak electricity transmitting line13||(3)||9||N.A.||24||26||(8%)|
|Items capitalised, net||40||35||14%||129||161||(20%)|
|Change in payables for purchase of property, plant and equipment||(29)||(5)||N.A.||(6)||(22)||(73%)|
|Purchase of PP&E14||280||169||66%||800||795||1%|
In the fourth quarter, the total cash amount spent on the purchase of PP&E increased to $280 million, compared to $169 million in the previous quarter. This mainly reflects the respective increase in total capital expenditures outlined above.
In 2020, the total cash spent on the purchase of PP&E amounted to $800 million and remained broadly flat compared to $795 million in the previous year.
A conference call for investors and analysts hosted by Pavel Grachev (Chief Executive Officer) and Mikhail Stiskin (Senior Vice President, Finance and Strategy) will be held on 25 February 2021 at 11.00 (London) / 14.00 (Moscow).
To join the conference call, please dial:
Conference ID: 3052112
+44 (0)330 336 9126 (Local access) 0800 358 6377 (Toll free)
+1 929-477-0324 (Local access) 800-458-4121 (Toll free)
+7 495 213 1767 (Local access) 8 800 500 9283 (Toll free)
To access the replay, please dial:
+44 (0)20 3859 5407
8 10 800 2702 1012
Polyus is the largest gold producer in Russia and one of the top five gold miners globally with the lowest cost position. Based on its 2019 Ore Reserves and Mineral Resources, Polyus group ranks the third by attributable gold reserves among the world’s largest gold mining companies.
The Polyus group’s principal operations are located in Krasnoyarsk, Irkutsk and Magadan regions and the Republic of Sakha (Yakutia).
Investor and Media contact
Victor Drozdov, Director Investor Relations
+7 (495) 641 33 77
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 at the date of this announcement. Polyus and/or any Polyus group company assumes no obligation in respect of, and does not intend to update, these forward-looking statements, except as required pursuant to applicable law.
On the assumption of foreign exchange rate of 65 roubles per dollar.
2Gold production is comprised of 688 thousand ounces of refined gold and 22 thousand ounces of gold in flotation concentrate in the fourth quarter of 2020 and 2,568 thousand ounces of refined gold and 198 thousand ounces of gold in flotation concentrate in 2020 respectively.
3Adjusted net profit is defined by the group as net profit / (loss) for the period plus impairment loss / (reversal of impairment), unrealised (gain) / loss on derivative financial instruments, net, foreign exchange (gain) / loss, net, and associated deferred and current income taxes related to such items.
4Adjusted EBITDA is defined by the group as profit for the period before income tax, depreciation and amortisation, loss / (gain) on revaluation of derivative financial instruments, net , finance costs, net, interest income, foreign exchange loss / (gain), net, 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, loss on transfer of Omchak power grid and special charitable contributions as required to ensure calculation of the Adjusted EBITDA is comparable with the prior period.
5Capital expenditures figures are presented on an accrual basis (here presented net of the Sukhoi Log deposit license acquisition cost and net of Omchak power grid construction cost).
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.
7AISC 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 from both mine and alluvial operations, 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.
8Net 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, deferred revenue, deferred consideration for the Sukhoi Log licence 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.
9The group calculates net debt to Adjusted EBITDA as net debt divided by Adjusted EBITDA for the last twelve months.
10The capex 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.
11Reflects IT capex related to headquarter. Polyus is going to include all IT related capex across the group into the line, starting from 2021.
12Reflects expenses related to exploration business unit and construction projects.
13Including capitalised stripping costs net of capitalised interest on loans and capitalised within capital construction-in-progress. For more details see Note 11 of the consolidated financial statements.
14Presented net of the Sukhoi Log deposit license acquisition cost and payments to Rostec.