Financial Results for the Second Half of 2023 and Full Year 2023

PJSC Polyus (MOEX — PLZL) (“Polyus”, the “Company”, and together with the Company subsidiaries, the “group”) has today released its consolidated financial results for FY 2023.

FY 2023 highlights

1. Total gold sales volumes in 2023 increased to 2,908 thousand ounces compared to 2,423 thousand ounces in 2022.This was primarily driven by higher production volumes at Olimpiada and Blagodatnoye.
2. Revenue for the full year amounted to $5,436 million ($4,257 million in 2022). This growth was driven by the aforementioned increase in production volumes and by the higher average realized refined gold price compared to the previous year.
3. The group’s TCC for 2023 decreased on a year-on-year basis to $389 per ounce. This reflects rouble depreciation, higher head grades at the Krasnoyarsk business unit and an increase in by-product credit of antimony-containing flotation concentrate ($35 per ounce in 2023 compared to $2 in 2022). Regarding negative factors, the Company notes ongoing consumables price inflation, wage indexation, an increase in electricity tariff and the anticipated decline in grades in ore processed at Natalka and Verninskoye.
4. Adjusted EBITDA in 2023 amounted to $3,889 million, compared to $2,584 million in 2022. This was supported by higher gold sales volumes and lower TCC on a per ounce basis.
5. Capital expenditures (“capex”) for the full year 2023 decreased to $1,040 million, from $1,119 million in the previous year.
6. The net debt (incl. derivatives)/adjusted EBITDA ratio increased to 1.9x at the end of 2023, compared to 0.9x at the end of 2022, reflecting a higher net debt.

2H 2023 highlights

1. Total gold sales volumes in the second half of 2023 increased to 1,647 thousand ounces, compared to 1,261 thousand ounces in the first half of 2023.This was driven by sales of previously accumulated gold, including accelerated sales of flotation concentrate, higher seasonal production at Alluvials and Kuranakh and increased gold output at Natalka.
2. Revenue for the second half of 2023 totalled $3,050 million, up 28% compared to the first half of 2023. This is attributable to the aforementioned increase in gold sales volumes.
3. The group’s TCC for the second half of 2023 decreased 5% half-on-half to $380 per ounce. This reflects rouble depreciation, an increase in by-product credit of antimony-containing flotation concentrate at Olimpiada ($39 per ounce in the second half of 2023 compared to $29 per ounce in the first half of 2023) and higher grades in ore processed at Blagodatnoye, Natalka and Kuranakh. These factors were partially offset by consumables price inflation, wage indexation, an increase in scheduled maintenance works and lower grades in ore processed at Olimpiada and Verninskoye.
4. Adjusted EBITDA for the second half of 2023 amounted to $2,202 million, compared to $1,687 million in the first half of 2023, as a result of higher gold sales volumes and lower TCC on a per ounce basis.
5. Capital expenditures (“capex”) for the second half of 2023 rose to $640 million from $400 million in first half of 2023. This increase reflects higher capital spending across nearly all business units.

OUTLOOK FOR 2024

Production guidance

Polyus anticipates gold production for the full year 2024 to be within the range of 2.7 — 2.8 million ounces. The year-on-year decline in production is expected to be mainly driven by lower grades in ore processed at Olimpiada.

TCC guidance

Polyus expects a year-on-year increase in TCC and has set a guidance range of $450-500/oz for 2024. Despite the ongoing implementation of cost-containment initiatives across the group, the Company anticipates that the following factors will negatively affect the group’s cost performance in 2024 compared to 2023:

• Change in the structure of the group’s gold output. Polyus expects a reduction in the share of lower-cost Olimpiada in the Company’s total gold production structure due to a planned decline in grades in ore mined. The latter is attributable to the sequence of mining calendars at Olimpiada. The Company is currently downscaling activities under the fourth stage of the Vostochny pit, which is expected to result in lower mining volumes of high-grade ore and completion of mining of antimony-containing material.
• A decline in the share of lower-cost flotation concentrate from Olimpiada in total gold sold and a decrease in a by-product credit on the back of completion of mining of antimony-containing ore.
• Inflationary factors in key consumables, labour and the electricity tariff.

Capex guidance

The Company has set its capital expenses guidance in the range of $1,550-1,700 million.

The anticipated year-on-year increase in capex reflects the following factors:

• Preliminary estimation of capital expenses on Sukhoi Log in 2024, which is still subject to change due to ongoing reengineering studies of the project.
• Partial capex roll-over from 2023.
• Inflationary pressure.

Dividend update

In accordance with the Russian legislation, the Board of Directors (the “Board”) of Polyus is obliged to take a decision on the dividend recommendation for the full year 2023 ahead of the Annual General Meeting of Shareholders (“AGM”). The AGM date as well as the dividend recommendation will be announced upon the Board decision over the course of the next several months in accordance with the Russian law.

In making the recommendation on dividends, the Board will take into account constantly changing economic environment, sanctions imposed on Polyus and their impact on the Company’s business.

Events after the reporting date

Gold bond issue

In January 2024, the Company completed a debut issuance of 5.5-year gold bonds at a coupon rate of 3.10% per annum. The issue size amounted to 15 billion roubles, or equivalent of approximately 2.6 tonnes of gold. The Company intends to use proceeds from the issue for refinancing of outstanding indebtedness and general corporate purposes.

Eurobonds 2024 update

In February 2024, the group repaid the principal amount and accrued interest on its 4.70% Notes due 2024 (the “Notes”) for the total consideration of $330 million.

This repayment consisted of two transfers:

• First, the group transferred the Russian rouble-denominated funds earmarked for the last coupon payment due 29 January 2024 and repayment of the principal to the holders of the Notes, whose rights are accounted within the Russian custodian infrastructure (the “Domestic Holders”).
• Furthermore, in accordance with the instructions received from the Trustee with respect to coupon and principal payment on the Notes, the Company transferred funds in the Russian roubles to the Trustee for onward payment to the holders of the Notes whose rights are accounted in foreign depositories (the “Offshore Noteholders”).

Following the completion of the aforementioned transfers by the group, which were conducted in accordance with the Notes’ documentation (modified following a successful consent solicitation process held in 2022), as well as with the applicable terms and conditions of the Notes and the Trust Deed, the group’s obligations to both domestic and non-resident holders of the Notes were completely fulfilled.

Acting in the interests of the bondholders, the Company has separately announced direct payment mechanism for the Eurobonds.

Comparative financial results

Total Cash Costs

In the second half of 2023, the group’s TCC decreased 5% to $380 per ounce compared to $400 per ounce in the first half of 2023. This reflects rouble depreciation, an increase in by-product credit of antimony-containing flotation concentrate at Olimpiada ($39 per ounce in the second half of 2023 compared to $29 per ounce in the first half of 2023) and higher grades in ore processed at Blagodatnoye, Natalka and Kuranakh. These factors were partially offset by consumables price inflation, wage indexation, an increase in scheduled maintenance works and lower grades in ore processed at Olimpiada and Verninskoye.

In 2023, the group’s TCC decreased by 25% to $389 per ounce compared to 2022. Key drivers of the group’s improved cost performance on a year-on-year basis were rouble depreciation, higher head grades at the Krasnoyarsk business unit and an increase in by-product credit of antimony in flotation concentrate ($35 per ounce in 2023 compared to $2 in 2022). Among negative factors, Polyus notes consumables price inflation, wage indexation, an increase in the electricity tariff and the anticipated decline in grades in ore processed at Natalka and Verninskoye.

TCC performance by mine, $/oz

In the second half of 2023, TCC at Olimpiada decreased to $246 per ounce, a 26% decline compared to the first half of 2023, primarily driven by rouble depreciation and higher by-product credit. In 2023, TCC at Olimpiada totalled $285 per ounce, compared to $509 per ounce in 2022, reflecting, in addition to the above-mentioned factors, higher grades in ore processed.

TCC at Blagodatnoye in the second half of 2023 amounted to $379 per ounce, a 7% decrease on the first half of 2023. The rouble depreciation and higher head grades were the key positive factors affecting cost performance at Blagodatnoye in the second half of 2023 and in the entire year. In 2023, TCC at Blagodatnoye decreased 10% year-on-year to $392 per ounce.

In the second half of 2023, TCC at Natalka decreased to $452 per ounce, down 17% compared to the first half of 2023 reflecting, among other factors, improved recovery rate due to favorable mineralogy of the ore feed. In 2023, TCC at Natalka increased to $490 per ounce, up 11% year-on-year, driven by lower head grades as well as a planned increase in the applicable MET rate (from 1.2% to 2.4%) under the regional investment project regime. This was partially offset by rouble depreciation.

TCC at Verninskoye in the second half of 2023 totalled $446 per ounce, a 5% decrease compared to the first half of 2023, with higher maintenance expenses along with wage indexation and inflationary pressures being offset by rouble depreciation. In 2023, TCC remained flat on a year-on-year basis at $456/oz. The negative impact from lower grades in ore processed, consumables price inflation and an increase in the electricity tariff was mitigated by rouble depreciation.

At Kuranakh, TCC in the second half of 2023 decreased to $553 per ounce, down 19% compared to the previous half of the year. Due to the seasonality of heap leaching activities, the share of lower-cost gold produced from the heap leaching facilities in total volumes of gold sold increased in the second half of 2023. This factor along with rouble depreciation and higher head grades supported cost performance at Kuranakh. In 2023, TCC at Kuranakh amounted to $599 per ounce, down 12% on the previous year, mainly reflecting the positive effect from FX movements. In terms of negative factors affecting cost performance at Kuranakh on an annual basis, the Company notes ongoing inflation for consumables, wage indexation and an increase in the electricity tariff.

In the second half of 2023, TCC at Alluvials amounted to $1,157 per ounce, compared to $1,248 in the first half of 2023. This decline was attributable to rouble depreciation and the seasonality of placer operations. In 2023, TCC at Alluvials totalled $1,168 per ounce, a 5% decrease on 2022, reflecting the positive effect from FX movements that fully offset higher labour and maintenance expenses.

All-in sustaining costs (AISC)

In the second half of 2023, the group’s AISC decreased to $747 per ounce, down 2% compared to the first half of 2023.

In 2023, the group’s AISC amounted to $754 per ounce, a 23% decrease year-on-year, driven by rouble depreciation, higher grades in ore processed at the Krasnoyarsk business unit, an increase in by-product credit of antimony in flotation concentrate at Olimpiada and a planned decline in stripping activities at Blagodatnoye and Natalka.

Debt management

The Company’s gross debt increased to $9,050 million at the end of 2023 compared to $3,586 million as at the end of 2022.

As at 31 December 2023, the Company’s estimated cash position rose to $1,711 million (31 December 2022: $1,317 million). The Company’s estimated net debt rose to $7,339 million (31 December 2022: $2,269 million), reflecting results of the tender offer announced on 10 July 2023.

Debt maturity schedule (as at 31 December 2023),⁹ $ million

Capex

In the second half of 2023, capital expenditures increased to $640 million, from $400 million in the first half of 2023, reflecting higher capital spending across almost all business units.

In 2023, capital expenditures decreased to $1,040 million, from $1,119 million in the previous year. Key highlights:

Capex breakdown ¹⁰

In the second half of 2023, the total cash amount spent on the purchase of PP&E increased to $681 million compared to $508 million in the first half of 2023.

In 2023, the total cash amount spent on the purchase of PP&E decreased to $1,189 million compared to $1,355 million in 2022.

¹ Gold production is comprised of 2,482.7 thousand ounces of refined gold and 419.4 thousand ounces of gold in flotation concentrate in the 2023.

² 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

³ Adjusted 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.

⁴ Capital expenditure figures are presented on an accrual basis.

⁵ 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.

⁶ 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.

⁷ 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.

⁸ The group calculates net debt (incl. derivatives) to Adjusted EBITDA as net debt (including derivatives) divided by Adjusted EBITDA for the last twelve months

⁹ The breakdown is based on actual maturities and excludes lease liabilities recognised under IFRS 16 as of 31 December 2023 in amount of $92 million.

¹⁰ 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.

¹¹ Reflects expenses related to exploration business unit and other unallocated CAPEX.

¹² Including capitalised stripping costs.

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.