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 third quarter of 2021.
- Total gold sales volumes amounted to 776 thousand ounces, up 14% compared to the second quarter of 2021. This reflects seasonally higher production volumes at Alluvials as well as increased refined gold production volumes across almost all hard-rock deposits.
- Revenue for the third quarter of 2021 totalled $1,400 million, up 12% compared to the previous quarter. This is attributable to the aforementioned growth in gold sales volumes. At the same time, the average realised refined gold price was 2% lower compared to the second quarter of 2021.
- The group’s TCC for the third quarter increased by 9% to $427 per ounce compared to $390 per ounce in the previous quarter due to a seasonal increase in output at the structurally higher-cost alluvial operations and ongoing inflation in consumables and diesel prices. In addition, a lower by-product credit ($5 per ounce in the third quarter compared to $10 per ounce in the second quarter) and an increase in the MET rate (from 2.4% to 6%) at Verninskoye due to the conclusion of the regional investment project («RInvP») regime applicable for the deposit put additional pressure on the group’s TCC.
- The group’s TCC for the nine months of 2021 amounted to $403 per ounce. Based on current estimations, Polyus reiterates its TCC guidance of $425-$450 per ounce. Polyus continues to apply the foreign exchange rate assumption of 65 rouble per dollar for TCC guidance calculation.
- Adjusted EBITDA for the third quarter of 2021 amounted to $986 million, a 10% increase compared to $899 million in the previous quarter, driven by growth in gold sales volumes during the period.
- Capital expenditures («capex») for the period increased to $233 million, from $179 million in the previous reporting period, as the Company accelerated its capex spending programme in the third quarter.
- Capex for the nine months of 2021 amounted to $539 million. Polyus expects acceleration of the capex spending in the fourth quarter of 2021 and reiterates its capex guidance for 2021 to be within the range of $1,000-1,100 million.1
- The net debt (incl. derivatives)/adjusted EBITDA ratio decreased to 0.5x in the third quarter, compared to 0.6x in the previous quarter, reflecting a lower net debt position.
In August, the Company’s Board of Directors recommended the dividends for the first half of 2021 in the amount of 267.48 Russian roubles per ordinary share. The dividend amount is equivalent to approximately $3.69 per ordinary share or $1.84 per depositary share (with two depositary shares representing interest in one ordinary share).2 The total recommended dividend for the first half of 2021 is approximately $502 million, in line with the Company’s dividend policy. The dividend has been approved by the Company’s Extraordinary General Shareholders’ Meeting on 29 September 2021. The dividend record date was 11 October 2021.
During the third quarter of 2021, the Company allocated $14 million towards measures aimed at preventing the spread of COVID-19. Of this total amount, $7 million is included into Cost of gold sales (additional staff expenses related to extended working shifts), and $7 million is mostly related to Other expenses (COVID-19 test kits, medical services and support to regional hospitals). The expenses associated with COVID-19 and recognised as part of Cost of gold sales were excluded from both TCC and AISC calculations. All P&L expenses relating to COVID-19 were excluded from the adjusted EBITDA calculation. During the nine months of 2021, the Company allocated $74 million towards measures aimed at preventing the spread of COVID-19. Based on current assessments, Polyus reiterates its guidance of approximately $100 million of COVID-19 related expenses in 2021.
1 On the assumption of foreign exchange rate of 65 roubles per dollar.
2 Based on the currency exchange rate of the Central Bank of Russia of 72.5083 Russian roubles per 1 U.S. dollar as of 29 September 2021.
Pavel Grachev, Chief Executive Officer of PJSC Polyus, commented:
"We delivered strong financial results in the third quarter of 2021, posting double-digit growth in both revenue and EBITDA quarter-on-quarter as well as solid free cash flow on the back of a solid operational performance. The Company achieved these results despite an anticipated increase in TCC, mainly driven by the seasonally higher output at the alluvial operations and ongoing inflationary pressures.
Polyus continues to progress with its growth projects. At Mill-5 at Blagodatnoye, our key brownfield project, we signed an agreement with a major contractor and made the first advance payment. We have also finished the site preparation for an IPCC system and advanced the construction of a crushed ore stockyard at the site. At our greenfield project, Sukhoi Log, we have completed our deep-level and flank exploration drilling campaign. Development of the Bankable Feasibility Study is ongoing."
Comparative financial results
|$ million (if not mentioned otherwise)||3Q 2021||2Q 2021||Q-o-Q||3Q 2020||Y-o-Y||9M 2021||9M 2020||Y-o-Y|
|Gold production (koz)3||770||671||15%||771||(0%)||2,033||2,056||(1%)|
|Gold sold (koz)||776||679||14%||772||1%||2,024||1,988||2%|
|Weighted-average refined gold selling price, $/oz||1,787||1,815||(2%)||1,907||(6%)||1,797||1,775||2%|
|Operating profit margin||60%||60%||0 п.п.||65%||(5) п.п.||60%||61%||1 п.п.|
|Profit for the period||664||643||3%||516||29%||1,757||811||н/д|
|Earnings per share — basic (US Dollar)||4.87||4.78||2%||3.59||36%||12.97||5.67||н/д|
|Earnings per share —
diluted (US Dollar)
|Adjusted net profit4||663||582||14%||724||(8%)||1,714||1,600||7%|
|Adjusted net profit margin||47%||47%||0 п.п.||50%||(3) п.п.||47%||46%||1 п.п.|
|Adjusted EBITDA margin||70%||72%||2 п.п.||76%||(6) п.п.||71%||73%||2 п.п.|
|Net cash flow from operations||826||693||19%||955||(14%)||2,205||2,151||3%|
|Total cash cost (TCC)
per ounce sold ($/oz)7
|All-in sustaining cash cost (AISC)
per ounce sold ($/oz)8
|Cash and cash equivalents||1,675||1,532||9%||1,633||3%||1,675||1,633||3%|
|Net debt (incl. derivatives)9||1,950||2,366||(18%)||2,299||(15%)||1,950||2,299||(15%)|
|Net debt (incl. derivatives)
/adjusted EBITDA (x)10
3 Gold production is comprised of 763 thousand ounces of refined gold and 7 thousand ounces of gold in flotation concentrate in the third quarter of 2021 and 671 thousand ounces of refined gold in the second quarter of 2021.br>
4 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, net, foreign exchange (gain) / loss, net, and associated deferred and current income tax related to such items.
5 Adjusted EBITDA is defined by the group as profit for the period before income tax, depreciation and amortisation, (gain) / loss on derivative financial instruments (including the effect of the disposal of a subsidiary and subsequent accounting at equity method), 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.
6 Capital expenditure 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). For details see reconciliation on page 6.
7 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.
8 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 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.
9 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.
10 The group calculates net debt (incl. derivatives) to Adjusted EBITDA as net debt (including derivatives) divided by Adjusted EBITDA for the last twelve months.
Total Cash Costs
In the third quarter, the group’s TCC increased by 9% to $427 per ounce compared to $390 per ounce in the previous quarter, which is mainly due to a seasonal increase in output at the structurally higher-cost alluvial operations and ongoing inflation in consumables and diesel prices. In addition, there was further pressure on the group’s TCC due to a lower by-product credit ($5 per ounce in the third quarter compared to $10 per ounce in the second quarter) and an increase in the MET rate (from 2.4% to 6%) at Verninskoye due to the conclusion of the regional investment project regime applicable for the deposit.
In the third quarter, TCC at Olimpiada declined to $354 per ounce, a 5% decrease compared to the second quarter of 2021. This was primarily driven by lower maintenance expenses and a higher recovery rate in ore processed (84.6% in the third quarter compared to 83.8% in the second quarter) during the reporting period.
At Blagodatnoye, TCC amounted to $378 per ounce, up 8% compared to the second quarter, primarily due to scheduled maintenance works at the Mill.
In the third quarter, TCC at Natalka decreased to $338 per ounce, down 8% compared to the previous quarter, mainly driven by lower maintenance works occurring during the period.
TCC at Verninskoye were $350 per ounce during the third quarter, up 9% compared to the second quarter, predominantly due to an increase in the MET rate (from 2.4% to 6%) due to the conclusion of the regional investment project regime applicable for the deposit.
At Kuranakh, TCC remained flat quarter-on-quarter. A higher share of lower-cost gold produced from the heap leaching facilities in the total gold sold during the reporting period was fully offset by a lower average grade in ore processed (1.17 grams per tonne in the third quarter compared to 1.22 grams per tonne in the second quarter) at the Mill.
At Alluvials, TCC amounted to $900 per ounce, up 1% compared to the previous quarter, due to a decrease in alluvial gold grade (0.45 grams per cubic metre in the third quarter compared to 0.47 grams per cubic metre in the second quarter).
All-in sustaining costs (AISC)
In the third quarter, the group’s AISC increased to $697 per ounce, up 4% reflecting higher TCC per ounce and increase in sustaining capital expenditures during the reporting period.
In the third quarter of 2021, AISC at Olimpiada increased to $655 per ounce, driven by higher levels of stripping activity and sustaining capital expenditures during the quarter. AISC at Blagodatnoye increased to $694 per ounce, due to higher levels of stripping activity, sustaining capital expenditures and higher TCC per ounce during the quarter. AISC at Natalka decreased to $581 per ounce, due to lower levels of stripping activity and lower TCC per ounce during the quarter. AISC at Verninskoye increased to $641 per ounce, driven by higher sustaining capital expenditures, higher levels of stripping activity and increase in TCC per ounce during the quarter. AISC at Kuranakh increased to $822 per ounce, driven by higher sustaining capital expenditures. AISC at Alluvials decreased to $994 per ounce, driven by lower sustaining capital expenditures in the reporting period.
In the third quarter, capital expenditures increased to $233 million, from $179 million in the previous period, as the Company accelerated its capex spending program in line with its plan.
At Olimpiada, capital expenditures increased to $62 million in the third quarter of 2021 compared to $36 million in the previous reporting period. During the period, the Company acquired nine 220-tonne CAT 793D trucks and one drill rig for the Vostochnyi pit. In addition, Polyus completed a construction of the pit-stop for trucks maintenance on site. Polyus is progressing with initiatives to expand throughput capacity at Olimpiada, aimed at increasing capacity to 15.0 million tonnes per annum. Polyus continued to improve the efficiency of the BIO complex, including the introduction of a second magnetic separation line and ongoing calibration of the flowsheet.
At Blagodatnoye, capital expenditures increased to $61 million in the third quarter of 2021 compared to $46 million in the previous reporting period. In the third quarter, the Company signed an agreement with major contractor Esta Construction, for the Mill 5 construction project and made the first advance payment. Polyus is proceeding with groundworks and site preparation for the construction of the hydromet and comminution circuits. Polyus completed the site preparation for introducing an in-pit crushing and conveying (IPCC) system as well as advancing the construction of the crushed ore stockyard. Polyus is also progressing with expansion of the tailings storage facility. In addition, Polyus completed the repair works at the newly-built accommodation facility on site.
In the third quarter, capital expenditures at Natalka increased to $27 million, compared to $25 million in the previous reporting period. Polyus is proceeding with the construction of the second start-up complex of the main tailings storage facility, where the dams have been commissioned. The Company also installed temporary drain pump stations as a part of flood prevention measures.
At Verninskoye, capital expenditures increased to $22 million in the third quarter compared to $14 million in the previous quarter, due to scheduled maintenance works.
At Kuranakh, capital expenditure almost doubled from $13 million in the second quarter of 2021 to $25 million in the third quarter. This reflects the active phase of the second heap leaching pad construction, replacement of worn-out equipment and an overhaul of the mining fleet and process equipment. During the reporting period, Polyus commissioned the conveyor equipment and proceeded with installing two panels of the second heap leaching pad. The Company is also proceeding with the Kuranakh Mill throughput capacity expansion to 7.5 million tonnes per annum.
At Alluvials, capital expenditures decreased to $4 million in the third quarter compared to $6 million in the previous quarter. This covered the ongoing replacement of worn-out equipment and conducting exploration activities.
In the third quarter, IT-related capital expenditures decreased to $4 million, mainly reflecting rescheduling the introduction of an ERP system at Polyus Aldan and Polyus Stroi to 2023.
At Sukhoi Log, Polyus progressed with the Bankable Feasibility Study. The Company is currently proceeding with mine planning and tradeoffs as well as the general layout, infrastructure, processing plant and tailings storage facility design as part of the BFS. The Company also proceeded with comprehensive engineering studies required for the BFS and the project design documentation.
Polyus has completed its deep-level and flank exploration drilling campaign and is currently proceeding with studies. The Company has started the construction of the Vitim substation and 220 kV gridline, which are within Polyus’ scope under the agreement with the Federal Grid Company for the technical connection of Sukhoi Log to the existing power grid.
|$ million||3Q 2021||2Q 2021||Q-o-Q||9M 2021||9M 2020||Y-o-Y|
|Omchak electricity transmitting line||-||-||н/д||-||27||(100%)|
|Items capitalised12, net||70||55||27%||165||92||79%|
|Change in payables for purchase
of property, plant and equipment
|Purchase of PP&E13||298||221||35%||715||520||38%|
11 Reflects expenses related to exploration business unit and construction projects.
12 Including capitalised stripping costs. For more details see Note 12 of the condensed consolidated interim financial statements.
13 Presented net of the Sukhoi Log deposit license acquisition cost and payments to Rostec.
In the third quarter, the total cash amount spent on the purchase of PP&E increased to $298 million, compared to $221 million in the previous quarter. This mainly reflects the respective increase in total capital expenditures outlined above.
A conference call for investors and analysts hosted by Mikhail Stiskin (Senior Vice President, Finance and Strategy) will be held on 23 November 2021 at 13.00 (London) / 16.00 (Moscow).
To join the conference call, please dial:
Conference ID: 5915528
To access the replay, please dial:
USA +1 719-457-0820
Russia 810 800 2702 1012
Polyus is the world’s fourth-largest gold mining company by production volumes and the largest gold miner in terms of attributable gold ore reserves. The company has the lowest production costs among major global gold producers. Its principal operations are located in Siberia and the Russian Far East: Krasnoyarsk, Irkutsk and Magadan regions and the Republic of Sakha (Yakutia).
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.