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 second quarter of 2021.
Key highlights
- Total gold sales volumes amounted to 679 thousand ounces, up 19% compared to the first quarter of 2021. This was driven by higher production volumes of refined gold across all deposits, as well as the start of the washing season at Alluvials and the recommencement of heap leaching operations at Kuranakh. This also includes 9 thousand ounces of gold contained in concentrate from Olimpiada, compared to zero sales in the first quarter of 2021.
- Revenue for the second quarter of 2021 totalled $1,245 million, up 21% compared to the previous quarter. This is mainly attributable to the aforementioned growth in gold sales volumes. At the same time, the average realised refined gold price was 2% higher compared to the first quarter, at $1,815 per ounce.
- The group’s TCC for the second quarter increased by 1% to $390 per ounce compared to $386 per ounce in the previous quarter, mainly due to start of the washing season at Alluvials.
- Adjusted EBITDA for the second quarter of 2021 amounted to $899 million, a 22% increase compared to $739 million in the previous quarter, mainly driven by higher gold sales volumes during the quarter.
- Capital expenditures («capex») for the period increased to $179 million, from $127 million in the previous reporting period.
- The net debt (incl. derivatives)/adjusted EBITDA ratio stood at 0.6x compared to 0.5x at the end of previous quarter.
Dividend update
The Company’s Board of Directors has 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 $3.61 per ordinary share or $1.81 per depositary share (with two depositary shares representing interest in one ordinary share)1. The total recommended dividend for the first half of 2021 is approximately $491 million, in line with the Company’s dividend policy. The dividend is subject to approval by the Company’s Extraordinary General Shareholders’ Meeting on 29 September 2021. The dividend record date is expected to be 11 October 2021, subject to approval by the EGM.
COVID-19 update
During the second quarter of 2021, the Company allocated $25 million towards measures aimed at preventing the spread of COVID-19. Of this total amount, $9 million is included into Cost of gold sales (additional staff expenses related to extended working shifts), and $11 million is in Other expenses (COVID-19 test kits, medical services and support provided to regional hospitals). The remaining $5 million is mostly attributed to infrastructure facilities which was 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 ($20 million) were excluded from the adjusted EBITDA calculation.
Pavel Grachev, Chief Executive Officer of PJSC Polyus, commented:
Strong operational results drove a meaningful increase both in revenues and EBITDA in the second quarter of 2021.
Our TCC slightly increased to $390/oz, remaining below our guidance for 2021. We reiterate the latter at the range of $425-$450 per ounce and expect TCC to increase in the second half of 2021 on the back of ongoing inflationary pressures.
Our 2021 capex guidance of $1.0-$1.1 billion also remains intact, as we continue to make progress on our growth projects across the group. At our largest brownfield project, Mill-5 at Blagodatnoye, we have selected the primary contractor, completed groundworks and site preparation, and workers are now arriving at the site to commence construction.
At our flagship greenfield project, Sukhoi Log, we are progressing with the Feasibility Study, developing engineering studies and design documentation for the project.
Comparative financial results
| $ million (if not mentioned otherwise) | 2Q 2021 | 1Q 2021 | Q-o-Q | 2Q 2020 | Y-o-Y | 1H 2021 | 1H 2020 | Y-o-Y |
| Operating highlights | ||||||||
| Gold production (koz)2 | 671 | 592 | 13% | 690 | (3%) | 1,263 | 1,285 | (2%) |
| Gold sold (koz) | 679 | 569 | 19% | 672 | 1% | 1,248 | 1,216 | 3% |
| Realised prices | ||||||||
| Weighted-average refined gold selling price, $/oz | 1,815 | 1,788 | 2% | 1,723 | 5% | 1,803 | 1,664 | 8% |
| Financial performance | ||||||||
| Total revenue | 1,245 | 1,028 | 21% | 1,157 | 8% | 2,273 | 2,029 | 12% |
| Operating profit | 753 | 612 | 23% | 702 | 7% | 1,365 | 1,183 | 15% |
| Operating profit margin | 60% | 60% | 0 ppts | 61% | (1) ppts | 60% | 58% | 2 ppts |
| Profit for the period | 643 | 450 | 43% | 684 | (6%) | 1,093 | 295 | N.A. |
| Earnings per share — basic (US Dollar) | 4.78 | 3.33 | 44% | 5.11 | (6%) | 8.11 | 2.07 | N.A. |
| Earnings per share — diluted (US Dollar) | 4.76 | 3.32 | 43% | 5.11 | (7%) | 8.08 | 2.07 | N.A. |
| Adjusted net profit3 | 582 | 469 | 24% | 538 | 8% | 1,051 | 876 | 20% |
| Adjusted net profit margin | 47% | 46% | 1 ppts | 46% | 1 ppts | 46% | 43% | 3 ppts |
| Adjusted EBITDA4 | 899 | 739 | 22% | 860 | 5% | 1,638 | 1,449 | 13% |
| Adjusted EBITDA margin | 72% | 72% | 0 ppts | 74% | (2) ppts | 72% | 71% | 1 ppts |
| Net cash flow from operations | 693 | 686 | 1% | 652 | 6% | 1,379 | 1,196 | 15% |
| Capital expenditure5 | 179 | 127 | 41% | 127 | 41% | 306 | 251 | 22% |
| Cash costs | ||||||||
| Total cash cost (TCC) per ounce sold ($/oz)6 | 390 | 386 | 1% | 340 | 15% | 388 | 364 | 7% |
| All-in sustaining cash cost (AISC)
per ounce sold ($/oz)7 |
667 | 641 | 4% | 574 | 17% | 655 | 623 | 5% |
| Financial position | ||||||||
| Cash and cash equivalents | 1,532 | 1,800 | (15%) | 1,654 | (7%) | 1,532 | 1,654 | (7%) |
| Net debt (incl. derivatives)8 | 2,366 | 2,074 | 14% | 2,506 | (6%) | 2,366 | 2,506 | (6%) |
| Net debt (incl. derivatives)/adjusted EBITDA (x)9 | 0.6 | 0.5 | 20% | 0.8 | (25%) | 0.6 | 0.8 | (25%) |
Total Cash Costs
In the second quarter, the group’s TCC increased by 1% to $390 per ounce compared to $386 per ounce in the previous quarter, mainly due to start of the washing season at Alluvials.
In the second quarter, TCC at Olimpiada declined to $373 per ounce, a 6% decrease compared to the first quarter of 2021. This was driven by the sales of antimony-rich flotation concentrate, which resulted in by-product credit ($25 per ounce in the second quarter compared to zero in the first quarter) during the quarter. In addition, a higher recovery rate in ore processed (83.8% in the second quarter compared to 82.5% in the first quarter) also positively impacted the costs performance for the period.
At Blagodatnoye, TCC amounted to $351 per ounce, down 2% compared to the first quarter. This was driven by higher average grades in ore processed (1.80 grams per tonne in the second quarter compared to 1.65 grams per tonne in the first quarter), which was partially offset by the higher maintenance expenses during the quarter.
In the second quarter, TCC at Natalka decreased to $369 per ounce, down 2% compared to the previous quarter, driven by an increase in recovery rate to 71.8%.
In the second quarter, TCC at Verninskoye amounted to $323 per ounce, down 4% compared to the first quarter. This was driven by the increase in hourly throughput (451 t/h in the second quarter compared to 407 t/h in the first quarter), following the completion of the capacity expansion program of the Verninskoye Mill to 3.5 million tonnes per annum.
At Kuranakh, TCC rose to $563 per ounce, up 4% compared to the first quarter, due to scheduled maintenance works and higher prices for reagents in the reporting period. In addition, a decrease in average grade in ore processed at the Mill (1.22 grams per tonne in the second quarter compared to 1.25 grams per tonne in the first quarter) also negatively impacted the cost performance.
At Alluvials, TCC stood at $894 per ounce, reflecting the start of washing season.
All-in sustaining costs (AISC)
In the second quarter, the group’s AISC increased to $667 per ounce, up 4% reflecting higher sustaining capital expenditures and higher levels of stripping activities.
In the second quarter of 2021, AISC at Olimpiada increased to $467 per ounce due to higher sustaining capital expenditures in the reporting period. AISC at Blagodatnoye increased to $649 per ounce, while AISC at Natalka increased to $635 per ounce, both driven by higher sustaining capital expenditures during the quarter and higher levels of stripping activity. AISC at Verninskoye increased to $571 per ounce due to higher sustaining capital expenditures in the reporting period. AISC at Kuranakh decreased to $807 per ounce, on the back of lower sustaining capital expenditures and lower levels of stripping activity during the quarter.
Capex
In the second quarter, capital expenditures increased to $179 million, compared to $127 million in the previous quarter.
At Olimpiada, capital expenditures increased to $36 million in the second quarter of 2021, compared to $28 million in the previous quarter. In the second quarter, the Company made a license payment for the extension of the Olimpiada mine area. Polyus also upgraded its mining fleet with the delivery of three Komatsu bulldozers and a Liebherr excavator to the site. Polyus is progressing with initiatives to expand throughput capacity at Olimpiada, with the objective of reaching 15 million tonnes per annum. In addition, Polyus technical specialists introduced a Vertimill grinding unit, targeting BIO complex productivity improvement and lower losses at the CIL. Over the course of the second quarter, Polyus continued to improve the efficiency of BIO complex. This resulted in increased processing capacity and improved performance of the BIO units, following the modernization of BIO-3 unit and ongoing calibration of the flowsheet at BIO complex.
At Blagodatnoye, capital expenditures doubled from $21 million in the first quarter of 2021 to $46 million in the second quarter. During the period, the Company selected the primary contractor who will be engaged for the Mill-5 expansion project and finalised the tender process for long-lead equipment suppliers including making the first advanced payments to contractors. In addition, Polyus advanced with engineering studies on in-pit crushing and conveying (IPCC) system introduction as well as proceeded with construction of the crushed ore stockyard. The Company acquired and started using four 220-tonne CAT 793D trucks and completed groundworks and site preparation; construction workers began arriving on site in the second quarter
During the quarter, capital expenditure at Natalka increased to $25 million, compared to $20 million in the previous quarter. Polyus is continuing the active phase of construction of the second start-up complex of a new tailings storage facility, where the main components of the water recycling system have been built. The Company also finished core and RC drilling as part of the 2020-2021 grade control program.
At Verninskoye, capital expenditure was broadly flat, totaling $14 million in the second quarter compared to $15 million in the previous quarter. This reflects the completion of the capacity expansion program at the Verninskoye Mill to 3.5 million tonnes per annum in May 2021
At Kuranakh, capital expenditure in the quarter totalled $13 million. The Company made the investment decision for the expansion of Kuranakh mill to 7.5 mtpa, with the key equipment purchasing process launched. Separately, the construction of the second heap leaching pad is ongoing, with the conveyor equipment assembled and installed, and the pre-commission in process.
At Alluvials, capital expenditure amounted to $6 million in the second quarter of 2021. This covered the ongoing replacement of worn-out equipment, in addition to conducting exploration activities.
In the second quarter, capital expenditure relating to IT increased to $10 million, reflecting the integration of the ERP system in Krasnoyarsk.
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, processing plant and tailings storage facility design as part of the BFS. The Company also began comprehensive engineering studies required for the BFS and the project design documentation.
Polyus has advanced with its deep-level and flank exploration drilling campaign. During the reporting period, Polyus drilled a total of 12,000 meters, ending up with 27,000 meters drilled of a planned total of 40,000 meters for 2021.
Capex breakdown
| $ million | 2Q 2021 | 1Q 2021 | Q-o-Q | 1H 2021 | 1H 2020 | Y-o-Y |
| Olimpiada | 36 | 28 | 29% | 64 | 58 | 10% |
| Blagodatnoe | 46 | 21 | N.A. | 67 | 14 | N.A. |
| Natalka | 25 | 20 | 25% | 45 | 66 | (32%) |
| Verninskoye | 14 | 15 | (7%) | 29 | 30 | (3%) |
| Kuranakh | 13 | 12 | 8% | 25 | 15 | 67% |
| Alluvials | 6 | 4 | 50% | 10 | 9 | 11% |
| Sukhoi Log | 13 | 9 | 44% | 22 | 10 | 0% |
| IT capex | 10 | 6 | 67% | 16 | 13 | 23% |
| Other10 | 16 | 12 | 33% | 28 | 36 | (22%) |
| CAPEX | 179 | 127 | 41% | 306 | 251 | 22% |
| Omchak electricity transmitting line | - | - | N.A. | - | 18 | N.A. |
| Items capitalised11, net | 55 | 41 | 34% | 96 | 54 | 75% |
| Change in payables for purchase of property, plant and equipment | (13) | 28 | N.A. | 15 | 28 | (44%) |
| Purchase of PP&E12 | 221 | 196 | 13% | 417 | 351 | 19% |
In the second quarter, the total cash spent on the purchase of PP&E increased to $221 million, compared to $196 million in the previous quarter. This mainly reflects the respective increase in total capital expenditure, as outlined above.
Conference call
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 24 August 2021 at 14.00 (London) / 16.00 (Moscow).
To join the conference call, please dial:
Conference ID: 6765656
UK
+44 (0) 330 336 9125 (Local access)
0800 358 6377 (Toll free)
USA
+1 929-477-0324 (Local access)
800-458-4121 (Toll free)
Russia
+7 495 213 1767 (Local access)
8 800 500 9283 (Toll free)
To access the replay, please dial:
Passcode: 6765656
USA +1 719-457-0820
Russia 810 800 2702 1012
Polyus
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 demonstrates 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).
Enquiries: Investor and Media contact
Victor Drozdov, Director Communications & Investor Relations (CIR) Department
+7 (495) 641 33 77
drozdovvi@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 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.