Trading update for the first quarter of 2021

Press Release 26 April 2021

PJSC Polyus

Trading update for the first quarter of 2021

Key Highlights

· Total gold output amounted to 592 thousand ounces, compared to 710 thousand ounces in the fourth quarter of 2020. This decline was driven by a seasonal slowdown in production at Alluvials and lower refined gold volumes at Olimpiada, Blagodatnoye and Natalka. At Blagodatnoye and Natalka, a decrease in refined gold volumes mainly reflects changes in gold in inventory at the refinery.

· Volumes of ore mined amounted to 16,639 thousand tonnes, down 4% on the previous quarter, reflecting lower ore volumes mined at Olimpiada and Natalka.

· Volumes of ore processed increased 7% quarter-on-quarter to 11,126 thousand tonnes, primarily due to the higher processing volumes at Olimpiada, Blagodatnoye and Natalka.

· Recovery rate decreased to 81.6%, compared to 83.9% in the previous quarter, driven by lower recoveries at Olimpiada, Blagodatnoye and Natalka.

· Estimated gold sales amounted to $1,017 million, down 32% compared to the previous quarter, with an estimated weighted-average gold selling price of $1,788/oz (down 4% on the fourth quarter of 2020).

· As at 31 March 2021, the estimated net debt stood at $2,074 million, compared to $2,464 million as at the end of the previous quarter and $3,056 million on 31 March 2020.

Consolidated operating results

Pavel Grachev, Chief Executive Officer of PJSC Polyus, commented:

Polyus delivered solid quarterly results, with total gold output of 592 thousand ounces. The Company continues to make progress on its brownfield projects. Our throughput capacity expansion projects at Olimpiada, Verninskoye and Natalka mines are well on track.

Progress on our large-scale growth projects, Mill No. 5 and Sukhoi Log, continues in line with the schedule. At Mill No. 5, the Company is conducting groundworks and site preparation and finalizing the tender procedures. At Sukhoi Log, we are making progress with the Feasibility Study, which should be completed in 2022.

We continue to prioritize the health and safety of our people, and all of our COVID-19 protocols remain in place. Furthermore, in February we launched a COVID-19 vaccination program across all of Polyus' assets. We are progressing well with this program, and more than 50% of our employees are now confirmed to have antibodies against COVID-19.

Our production target for this year remains unchanged and stands at 2.7 million ounces of gold."

esg update

1Q Highlights

· Coronavirus: Production assets remain unaffected and operate without interruption. Thorough COVID-19 protocols remain in place. The employee vaccination program has commenced at production sites.

· LTIFR[1] at 0.27 (1Q 2020 - 0.07, FY 2020 - 0.10), with two fatalities recorded at Polyus operations.

· No major environmental incidents during the period.

Coronavirus update

· In February, Polyus launched a COVID-19 vaccination program at all of its production sites. The Company aims to make the vaccine available to all employees as well as any contractors currently working at Polyus' operations.

· Preventive measures remain in place at all operations and offices, including enhanced medical screening, social distancing, supplying employees with personal protective equipment and regular disinfection of all communal areas.

· All shift employees are tested for COVID-19 and quarantined in observation facilities prior to transfer to Polyus' sites. Employees with immunity against the virus (vaccinated or with antibodies after recovering from COVID-19) are exempt from the quarantine.

Health & Safety

· In response to the higher recorded LTIFR and two fatalities reported during the period, the Company has conducted a detailed analysis of each incident and is introducing measures to improve safety discipline at its production assets, with an increased focus on H&S risk management.

· The Company has updated its health and safety strategy for 2021-2027. In line with the updated strategy, all relevant processes are now being adjusted.

· Polyus is preparing to introduce enhanced driving safety systems and is delivering employee information campaigns to promote safe driving.

· Polyus has begun preparations for the launch of the vehicle movement management center in 2Q, focusing on the collection and analysis of driving data.

Environment and Climate

· Polyus has published its inaugural Water Report in compliance with the ICMM's Practical Guide to Consistent Water Reporting. Polyus is the first major industrial company in Russia to publish a report of this kind.

· Polyus has published its Climate Position Statement, outlining the Company's key strategic priorities in the area of climate change, including climate change mitigation, enhancing its resilience to the impacts of climate change, taking advantage of opportunities that present themselves, commitment to transparency, and cooperation as a means to tackling climate change. The Company continues to develop its Climate Strategy, which will include more detailed approaches and measures in line with the strategic priorities set out in the Climate Position Statement.

o As part of Polyus' decarbonization efforts, a major agreement for the supply of hydropower has been signed for the provision of approximately 1 billion kWh of energy to Olimpiada and Blagodatnoye in 2021. As a result, the electricity demand of these two sites, together making up Polyus' largest business unit responsible for 60% of the Company's production, will be fully powered by renewable energy.

o Polyus Group has joined the Climate Governance Initiative Russia (CGI Russia), a local partner of the World Economic Forum's Climate Governance Initiative.

Local communities

· Polyus has financed the installation of advanced new lighting equipment along one of the runways at the Severo-Yeniseysk airport (Krasnoyarsk Territory). The airport is now able to safely manage takeoffs and landings at all hours of the day and night. This will be especially important for the air medical services.

· The Company has donated new medical equipment for laboratory tests at the Nizhny Kuranakh hospital (Republic of Sakha).

· Polyus has launched the annual theatre competition for theatre companies from Polyus' regions of operations in Siberia and the Russian Far East: 'Polyus. Golden Season'.

ESG Ratings and indices

· Current ESG ratings of Polyus:

o SAM - 54

o CDP - Climate Change: C, Water Security: C

o Sustainalytics ESG Risk Rating - 27.5 (down from 29 at the end of 2020)

o MSCI ESG - A (confirmed at reassesment in 1Q)

Olimpiada 

1Q 2021 Highlights

Ø Volumes of ore processed amounted to 3,668 thousand tonnes

Ø Average grades in ore processed decreased to 3.02 g/t.

Ø Recovery rate stood at 82.5%.

Ø Total gold output was 265 thousand ounces.

Gold output

Doré gold output stood at 272 thousand ounces in the first quarter of 2021, down 3% quarter-on-quarter, driven by both lower grades in ore processed and lower recovery rates. On a year-on-year basis, both doré gold output and total gold output decreased by 16% and 4% respectively, primarily driven by lower grades in ore processed.

Mining works

Under the mine plan, Polyus decreased the volumes of ore mined to 3,290 thousand tonnes, down 12% on the previous quarter. The average grade in ore mined increased to 3.08 g/t, up from 2.94 g/t in the previous quarter, as Polyus proceeded with mining activities in a higher-grade pit area. Polyus continued to upgrade its mining fleet at Olimpiada during the reporting period, delivering two 220-tonne CAT trucks, two Komatsu bulldozers and a wheel loader to the site.

Ore processing

Volumes of ore processed totalled 3,668 thousand tonnes, up 13% compared to the previous quarter, following the replacement of SAG-mill at Mill No. 3 in the previous quarter. Polyus proceeds with throughput capacity expansion initiatives at Olimpiada, aimed at expanding it above 14.0 million tonnes per annum. At the same time, average grades in ore processed decreased to 3.02 g/t. This reflects higher processing volumes of lower grade ore stockpiles, in line with a plan.

The recovery rate declined to 82.5% reflecting lower average grades in ore processed and calibration of processing parameters of the flotation circuit, following the introduction of the Jameson Cell flotation unit at Mill No.2.

Flotation concentrate production

In the first quarter, the amount of gold contained in concentrate stood at 23 thousand ounces.

Mining works and ore processing

Blagodatnoye

1Q 2021 Highlights

Ø Volumes of ore processed increased by 9% compared to the previous quarter.

Ø Recovery rate stood at 86.2%.

Ø Doré gold output amounted to 100 thousand ounces.

Gold output

Doré gold output in the first quarter of 2021 amounted to 100 thousand ounces, down 8% compared to the previous quarter. Refined gold output amounted to 92 thousand ounces, compared to 117 thousand ounces in the previous reporting period, reflecting changes in gold in inventory at the refinery. On a year-on-year basis, both doré gold output and refined gold output declined by 11%.

Mining works

Volumes of rock moved increased by 3% to 16,949 thousand tonnes (6,085 km³) compared to the previous quarter. Volumes of ore mined increased to 4,434 thousand tonnes, compared to 4,394 thousand tonnes in the fourth quarter of 2020, while the average grades in ore mined temporarily decreased to 1.19 g/t. Under the mine plan, Polyus intensified mining activities at lower-grade areas, which will enable the Company to extract higher-grade ore from the underlying horizons of the deposit going forward.

Ore processing

Volumes of ore processed increased by 9% to 2,192 thousand tonnes as scheduled maintenance works had been carried out at Mill No. 4 in the previous quarter. Following a temporary decline in average grades in ore mined, the average grade in ore processed decreased to 1.65 g/t, from 1.91 g/t in the fourth quarter of 2020. The recovery rate decreased to 86.2%, compared to 88.7% in the fourth quarter of 2020. This decline is attributable to lower average grades in ore processed, temporary variations in the feed composition, with a higher share of arsenic and volatility in ore hardness that was addressed with addition of the new crushing equipment towards the end of the quarter.

Mill-5

Polyus is proceeding with groundworks and site preparation, while finalising the tender procedures to select the major contractor and long-lead equipment suppliers.

Mining works and ore processing

Natalka

1Q 2021 Highlights

Ø Volumes of ore processed increased 7% to the previous quarter.

Ø Grades in ore processed increased to 1.83 g/t.

Ø Doré gold output totalled 127 thousand ounces.

Gold output

Doré gold output in the first quarter of 2021 amounted to 127 thousand ounces, up 14% compared to the previous quarter. This increase was attributable to lower maintenance works during the reporting period. At the same time, refined gold output amounted to 115 thousand ounces, compared to 133 thousand ounces in the previous reporting period, reflecting changes in gold in inventory at the refinery. On a year-on-year basis, doré gold output and refined gold output increased by 19% and 21%, respectively.

Mining works

Under the mine plan, Polyus intensified stripping activities, with volumes of rock moved increasing to 18,674 thousand tonnes (7,222 km³) in the first quarter of 2021. At the same time, volumes of ore mined decreased to 5,768 thousand tonnes, a 13% decline from the fourth quarter of 2020. The average grades in ore mined rose to 1.35 g/t (1.27 g/t in the fourth quarter of 2020).

Ore processing

Volumes of ore processed increased to 2,997 thousand tonnes, up 7% on the previous quarter. This reflects the completion of scheduled maintenance works at the Natalka Mill in the fourth quarter. Following an increase in average grades in ore mined, the average grade in ore processed rose by 3% to 1.83 g/t from 1.77 g/t in the fourth quarter of 2020.

Recovery rate temporary decreased to 71.1% in the first quarter. Polyus continues to optimize processing parameters at the Natalka mill, following the installation of turbo-elevators at the SAG mill during the scheduled maintenance in the previous quarter. The adjustment of the SAG mill discharge grates and ball loading impacted the quality of grinding and led to higher losses at the gravity circuit. Flash flotation feed was switched from hydrocyclone underflow to overflow to offset the temporary variation in the grinding quality, which already contributed to recovery improvement up to 72.5% in March.

Mining works and ore processing

  Verninskoye

1Q 2021 Highlights

Ø Volumes of ore mined rose to 1,374 thousand tonnes.

Ø Recovery rate stood at 90.0%

Ø Doré output totalled 63 thousand ounces.

Gold output

Doré gold output stood at 63 thousand ounces, down 15% quarter-on-quarter. Output of refined gold amounted to 65 thousand ounces, compared to 67 thousand ounces in the fourth quarter of 2020. 

Mining works

Volumes of rock moved increased by 22% to 8,343 thousand tonnes (3,090 km³), compared to the previous quarter, in line with the mining plan.

Volumes of ore mined increased 30% compared to the previous quarter, to 1,374 thousand tonnes. The average grade in ore mined decreased to 2.33 g/t during the reporting period, from 2.42 g/t in the fourth quarter of 2020.

Ore processing

Volumes of ore processed amounted to 766 thousand tonnes, down 13% on the previous quarter, reflecting the completion of scheduled maintenance works at the Verninskoye Mill in February. 

Polyus continues further throughput capacity expansion at the Verninskoye Mill to 3.5 million tonnes per annum. The Company completed the installation of technological equipment at the extension to the main building during maintenance in February and launched the cold commissioning of a new ball mill in March. The mill's expansion project is on track to be finished in 2021, while Polyus plans to reach a target hourly throughput already in April-May 2021.

Mining works and ore processing

Kuranakh

1Q 2021 Highlights

Ø Volumes of ore processed at the Kuranakh Mill totalled 1,504 thousand tonnes.

Ø Doré gold output was 53 thousand ounces.

Gold output

Doré gold output in the first quarter of 2021 amounted to 53 thousand ounces, a 13% decline compared to the fourth quarter of 2020, driven by the seasonal suspension of activities at heap leaching facilities. On a year on year basis, doré gold output increased 2%. Refined gold output amounted to 54 thousand ounces, down 15% on the previous quarter, reflecting lower doré gold output.

Mining works

Under the mine plan, volumes of ore mined increased 20% compared to the previous quarter, to 1,773 thousand tonnes.

Ore processing

Volumes of ore processed at the Kuranakh Mill amounted to 1,504 thousand tonnes, up 1% compared to the previous quarter.

The recovery rate and average grade in ore processed at the Mill were 88.9% and 1.25 g/t, respectively, remaining unchanged from the fourth quarter of 2020. 

Heap leaching

Due to the seasonality of heap leaching operations, these will be resumed in the second quarter of 2021.

Mining works and ore processing

Alluvials

1Q 2021 Highlights

Ø Due to the seasonality of placer deposits no gold was produced at Alluvials in the first quarter of 2021.

Ø As usual, the washing season ended in November 2020 and was resumed in April 2021.

Ø Maintenance and preparation works were conducted at the deposits.

Sands washing

Sukhoi Log

1Q 2021 Highlights

Ø Polyus is proceeding with the Bankable Feasibility Study (BFS).

Bankable Feasibility Study highlights

In the first quarter of 2021, Polyus progressed with the Bankable Feasibility Study. The Company is currently proceeding with mine planning as well as general layout, process plant and tailings storage facility design as part of the BFS.

In the reporting period, the Company also started comprehensive engineering studies, including geological, geophysical and hydrometeorological surveys.

Additional drilling activity at Sukhoi Log

Polyus has also progressed with its deep-level and flank exploration drilling campaign. During the reporting period, Polyus drilled 15,000 meters of a planned total of 40,000 meters for 2021.

Other activities

In addition, the Company progressed with project design documentation of the Vitim Substation and 220 kV gridline, which are within Polyus' scope under the agreement with Federal Grid Company for the technical connection of Sukhoi Log to the existing power grid.

FINANCIAL UPDATE

Gold sales

In the first quarter of 2021, the Company sold a total of 569 thousand ounces of gold, a 31% decrease on the previous quarter. Estimated gold sales totalled approximately $1,017 million, compared to $1,503 million in the previous quarter and $861 million in the first quarter of 2020. The average realised gold price stood at $1,788/oz, down 4% on the previous quarter.

Debt management

The Company's gross debt decreased to $3,873 million, compared to $3,909 million as at the end of the fourth quarter of 2020.

As at 31 March 2021, the Company's estimated cash position increased to $1,800 million (31 December 2020: $1,445 million), while its estimated net debt position decreased, compared to the previous quarter and amounted to $2,074 million (31 December 2020: $2,464 million). This change reflects a free cash flow generation during the quarter.

The group's liabilities under cross currency and interest rate swaps related to RUB-denominated bank credit facilities and rouble bonds totalled approximately $358 million as of the end of the first quarter.

Dividend update

The Board of Directors of PJSC Polyus on 21 April 2021 recommended the dividends for the second half of 2020 in the amount of 387.15 Russian roubles per ordinary share. The dividend is subject to approval by the Company's annual general shareholders' meeting convened on 27 May 2021.

The recommended dividend amount is equivalent to approximately $5.09 per ordinary share or $2.55 per depositary share. The total recommended dividend payout for the second half of 2020 will correspond to approximately $693 million.

The total dividend payout for the full year of 2020 will correspond to approximately $1,107 million. This amount includes $414 million paid out in form of dividend for the first half of 2020.

The dividend record date recommended by the Company's Board is 7 June 2021, subject to approval by the Company's annual general shareholders' meeting.

CONFERENCE CALL INFORMATION

Polyus will host an analyst conference call on 26 April 2021 at 3 pm London time (5 pm Moscow time) to present and discuss the first quarter operating results.

To join the conference call, please dial:

Conference ID: 9072895

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: 9072895

UK

+44 (0) 207 660 0134

US

+1 719-457-0820

Russia

8 10 800 2702 1012

Enquiries: 

Investor and Media contact

Victor Drozdov, Director Communications & Investor Relations (CIR) Department

[email protected] 

Forward looking statements

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.