Trading update for the second quarter of 2021

Press Release 12 August 2021

PJSC Polyus

Trading update for the second quarter of 2021

2Q 2021 Highlights

· Total gold output amounted to 671 thousand ounces, compared to 592 thousand ounces in the first quarter of 2021. This increase 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.

· Volumes of ore mined amounted to 17,026 thousand tonnes, up 2% on the previous quarter, driven by higher ore volumes mined at Kuranakh, Verninskoye and Natalka.

· Volumes of ore processed increased 9% quarter-on-quarter to 12,169 thousand tonnes, primarily due to the start of heap leaching operations at Kuranakh and higher processing volumes at Verninskoye and Blagodatnoye.

· Recovery rate increased to 82.6%, compared to 81.6% in the previous quarter, driven by higher recoveries at Olimpiada, Blagodatnoye and Natalka.

· Estimated gold sales amounted to $1,230 million, up 21% compared to the previous quarter, with an estimated weighted-average gold selling price of $1,815/oz (up 2% on the first quarter of 2021).

· As at 30 June 2021, the estimated net debt stood at $2,366 million, compared to $2,074 million as at the end of the previous quarter and $2,506 million on 30 June 2020.

1H 2021 Highlights

· Total gold output was 1,263 thousand ounces, down 2% compared to the first half of 2020. Doré volumes totalled 1,308 thousand ounces, down 5% year-on-year.

· Volumes of ore processed increased 4% to 23,295 thousand tonnes, reflecting improved performance across all operating assets following the implementation of expansion projects.

· Recovery rate stood at 82.1%, down 1.4 ppts from the prior-year period, primarily driven by a decrease in recoveries at Olimpiada and Blagodatnoye.

· Estimated gold sales increased 12% year-on-year to $2,247 million, with an estimated weighted-average gold selling price of $1,803/oz (up 8% on the first half of 2020).

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

"Our strong operational performance over the quarter reflects both improvements on recovery side and ongoing throughput capacity expansion, as well as the start of the washing season at Alluvials and the recommencement of heap leaching operations at Kuranakh.

Our throughput capacity expansion projects yield solid results, with total volumes of ore processed increased to above 23 million tonnes in the first half of 2021, a 4% increase year-on-year. 

Polyus continues to examine new brownfield opportunities within its existing operations. We have recently announced new growth projects at Olimpiada and Kuranakh, in addition to ongoing projects at Blagodatnoye and Natalka.

Based on our operational results for the first half of 2021, we reiterate production guidance for 2021 of approximately 2.7 million ounces."

ESG update

2Q Highlights

· LTIFR[1] of 0.18 YTD (H1 2020 - 0.06, Q1 2021 - 0.27). Zero fatalities at our operations during Q2.

· Automotive Accident Rate (AARk) at 0.18 (H1 2020 - 0.16, Q1 2021 - 0.17).

· Coronavirus: production assets remain unimpacted and operate without interruption. Thorough COVID-19 protocols remain in place. Employee vaccination program has resulted in worker immunization levels of over 60%.

· Polyus has published its 2020 Sustainability Report and ESG Data Pack. The report was independently assured by the Council for Non-financial Reporting of the Russian Union of Industrialists and Entrepreneurs (RSPP). The Sustainability audit for 2020, followed by the independent assurance statement was completed at Polyus Krasnoyarsk, Polyus Verninskoye, Polyus Aldan, Shared Service Center, and headquarters.

· Zero severe environmental incidents were recorded during the reporting period.

COVID response update

· Vaccination program of employees and contractors continues at all Polyus production sites.

· 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 and contractors are tested for COVID-19 and quarantined in observation facilities prior to transfer to Polyus' sites.

· Polyus multifunctional services center received a national award for the implementation of COVID prevention measures across the Company.

Environment and Climate

· Renewables now represent 100% of Polyus' energy consumption: Polyus group has acquired I-REC green certificates to offset emissions from the remaining small share of Polyus' energy consumption not yet directly met by renewable energy sources. Earlier this year, Polyus signed a major agreement for the supply of renewable hydropower to Olimpiada and Blagodatnoye, which combined make up the Company's largest production unit.

· Polyus Logistics is now a signatory to the International Cyanide Management Code. As Polyus group's transport provider, Polyus Logistics will be able to operate in compliance with the Cyanide Code across all divisions.

· Polyus has launched a project with the Vitim natural reserve, Bodaibo district, to promote the conservation of wild ungulates.

· ICMM developed and issued a Tailings Management Good Practice Guide to help companies implement the Global Industry Standard on Tailings Management. Polyus was closely involved in the Guide's development, and took responsibility for producing a Russian version.

Health & Safety

· Verninskoye has received the interim results of its annual safety culture audit. The results demonstrated rapid progress, climbing to 3.6 points on the Bradley Curve from 3.5 points last year.

· A Group HSE risk management evaluation was completed; proposals for improvements were presented to top management and approved for implementation.

· Polyus launched a special project to train candidates to drive heavy vehicles in line with corporate safety standards and offer internship programs to drivers without prior experience.

Local communities

· Polyus financed the equipment of the "Growth Point" center in Bodaibo, Irkutsk region, an educational center specializing in digital technologies and the arts.

· Territorya. Irkutsk art festival took place in Irkutsk, bringing together local theatre companies from across Polyus' regions of presence, including theatre companies performing in indigenous languages.

· Polyus has established a new scholarship system to support geology and engineering students of the North-East State University in Magadan.

Employees

· Company-wide virtual live Q&A session took place between the group's CEO and all employees.

· Personnel engagement survey conducted among 3,200 Polyus employees.

· Operational efficiency training for line managers was carried out as part of a wider corporate educational program.

· Polyus is conducting a volunteer projects grant competition focusing on the environment, children, sports, donation, and pro-bono work.

· The annual arts competition for employees' children was launched, with a focus on the environment.

ESG Ratings and indices

· Polyus received an award from IR Magazine in the category for Best ESG materiality reporting

· Polyus' current ESG ratings:

o S&P Global CSA - 54

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

o Sustainalytics ESG Risk Rating - 26.8 (down from 27.5 at the end of Q1)

o MSCI ESG - A

Olimpiada 

2Q 2021 Highlights

Ø Average grade in ore mined rose to 3.24 g/t.

Ø Recovery rate rose to 83.8%, from 82.5% in the previous quarter.

Ø Total gold output amounted to 270 thousand ounces.

Gold output

Doré gold output stood at 280 thousand ounces, up 3% quarter-on-quarter, reflecting higher recovery rate during the reporting period. Total gold output (refined and concentrate) rose by 2% compared to the previous quarter, to 270 thousand ounces. Production of flotation concentrate was almost zero. On a year-on-year basis, doré gold output declined by 8%, while total gold production was down 12%.

Mining works

Volumes of rock moved totalled 30,764 thousand tonnes (11,368 km³), a 5% increase on the first quarter of 2021. Polyus intensified stripping activities in the Zapadny pit, while completing the mining works at the third stage of the Vostochny pit. These resulted in a 6% decrease in volumes of ore mined to 3,092 thousand tonnes. Operations in the lower areas of the Vostochny pit were focused on higher-grade zones, resulting in a 5% increase in average grades to 3.24 g/t, compared to 3.08 g/t in the previous quarter. During the second quarter of 2021, Polyus delivered three Komatsu bulldozers to the site. Polyus will focus on stripping works intensification at the fourth stage of the Vostochny pit in the second half of 2021, resulting in a substantial increase in volumes of rock moved.

Ore processing

Volumes of ore processed totalled 3,648 thousand tonnes, down 1% compared to the previous quarter due to scheduled maintenance at Mill-1 and Mill-3. Polyus is progressing with initiatives to expand throughput capacity at Olimpiada, aimed at increasing this to 15.0 million tonnes per annum. Average grades in ore processed remained flat quarter-on-quarter, at 3.03 g/t. The recovery rate rose to 83.8%, up 1.3 ppts compared to the first quarter. This was driven by improved performance of the flotation circuit at Mill-3, following upgrades to the discharge at the SAG-mill, which led to improvement of the flotation feed. 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.

Mining works and ore processing

Blagodatnoye

2Q 2021 Highlights

Ø Average grade in ore mined rose to 1.48 g/t, up 24% quarter-on-quarter.

Ø Volumes of ore processed totalled 2,283 thousand tonnes.

Ø Doré output totalled 116 thousand ounces, up 15% on the previous quarter.

Gold output

Doré gold output in the second quarter of 2021 amounted to 116 thousand ounces, up 15% compared to the previous quarter, driven by improved head grades and higher volumes of ore processed. Refined gold output amounted to 117 thousand ounces, up 27% quarter-on-quarter, reflecting changes in gold in inventory at the refinery. On a year-on-year basis, both doré gold output and refined gold output remained broadly flat.

Mining works

Volumes of rock moved increased 18% to 19,992 thousand tonnes (7,180 km³) compared to the previous quarter. This increase was mainly driven by the procurement of an additional WK-20 excavator and improved efficiency of the WK-20 excavators operating on site. In addition, Polyus delivered four 220-tonne CAT 793D trucks to the site. Polyus downscaled mining activities at the lower-grade flanks of the deposit, resulting in an increase in the average grades in ore mined to 1.48 g/t in the second quarter of 2021 (up from 1.19 g/t in the previous quarter).

Ore processing

Volumes of ore processed amounted to 2,283 thousand tonnes, up 4% compared to the previous quarter. Following an increase in average grades in ore mined, the average grade in ore processed increased to 1.80 g/t during the reporting period, from 1.65 g/t in the first quarter of 2021. The recovery rate increased to 87.0%, compared to 86.2% in the first quarter of 2021. This was attributable to higher processing grades and reflects ore hardness stabilisation via the addition of the new crushing equipment at the end of the previous quarter as well as ball loading. Polyus continues to carry out operational initiatives targeting further recovery rate improvement. The Company is now implementing ore blending adjustments and plans to conduct tests of depressant reagents in order to reduce carbon content in ore.

Mill-5

During the period, the Company selected the major contractor for the project and finalised the tender procedures for long-lead equipment suppliers. Polyus completed groundworks and site preparation, while the construction workers arriving on site. 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.

Mining works and ore processing

Natalka

2Q 2021 Highlights

Ø Volumes of ore processed amounted to 3,003 thousand tonnes.

Ø Recovery rate rose to 71.8%.

Ø Refined gold output reached 125 thousand ounces.

Gold output

Doré gold output in the second quarter of 2021 amounted to 125 thousand ounces, down 1% quarter-on-quarter, reflecting lower head grades. Refined gold output amounted to 125 thousand ounces, up 9% compared to 115 thousand ounces in the first quarter of 2021, reflecting changes in gold in inventory at the refinery. On a year-on-year basis, doré gold output and refined gold output increased by 7% and 13%, respectively.

Mining works

In the second quarter of 2021, volumes of rock moved totalled 17,583 thousand tonnes (6,825 km³), down 6% compared to the previous quarter, while volumes of ore mined rose to 5,848 thousand tonnes, up 1% from the first quarter of 2021. The average grades in ore mined stood at 1.37 g/t (1.35 g/t in the first quarter of 2021).

Ore processing

Volumes of ore processed totalled 3,003 thousand tonnes, remaining flat on the preceding quarter.

Average grade in ore processed declined to 1.76 g/t, compared to 1.83 g/t in the previous quarter.

Recovery rate rose to 71.8%, up 0.7 ppts compared to the first quarter of 2021. During the reporting period, Polyus technical team adjusted screens and the discharge grates to improve underflow at SAG mill and increased the ball loading of both the SAG and ball mills. The Company is proceeding with the selection of optimal parameters for the SAG mill discharge grates to further improve the circulation load and screening properties at the discharge of the ball mill. In addition, Polyus proceeds with calibration of processing parameters of the flash flotation circuit.

Mining works and ore processing

Verninskoye

2Q 2021 Highlights

Ø Volumes of ore mined totalled 1,614 thousand tonnes, up 17% on the previous quarter.

Ø Volumes of ore processed totalled 955 thousand tonnes, up 25% on the previous quarter.

Ø Doré output totalled 78 thousand ounces, up 24% on the previous quarter.

Gold output

Doré gold output rose to 78 thousand ounces, up 24% quarter-on-quarter. This increase was attributable to higher volumes of ore processed during the reporting period. Refined gold output amounted to 78 thousand ounces, compared to 65 thousand ounces in the previous quarter. On a year-on-year basis, doré gold output and refined gold output increased by 8% and 14%, respectively.

Mining works

Volumes of rock moved increased by 4% to 8,699 thousand tonnes (3,222 km³), compared to the previous quarter.

Volumes of ore mined increased to 1,614 thousand tonnes, up 17% from 1,374 thousand tonnes, reflecting intensified mining activities during the reporting period. This was driven by the processing capacity expansion of the Mill. Average grades decreased to 2.24 g/t (2.33 g/t in the first quarter of 2021).

Ore processing

Volumes of ore processed amounted to 955 thousand tonnes, up 25% on the previous quarter, reflecting the completion of the capacity expansion program of the Verninskoye Mill to 3.5 million tonnes per annum as well as scheduled maintenance works at the Mill, which were completed in the previous quarter. 

During the reporting period, the average grade in ore processed stood at 2.82 g/t, remaining unchanged from the previous quarter.

The recovery rate stood at 90.0% and remained flat compared to the previous quarter.

Mining works and ore processing

Kuranakh

2Q 2021 Highlights

Ø Volumes of ore processed at the Kuranakh Mill totalled 2,280 thousand tonnes.

Ø Doré gold output amounted to 59 thousand ounces, up 11% compared to the previous quarter.

Gold output

Doré gold output in the second quarter of 2021 amounted to 59 thousand ounces, up 11% compared to the first quarter of 2021, primarily due to the recommencement of the heap leaching operations. Refined gold output amounted to 56 thousand ounces, up 3% on the previous quarter.  

Mining works

Volumes of rock moved amounted to 8,153 thousand tonnes (4,525 km³), up 3% on a quarter-on-quarter basis. Volumes of ore mined increased by 17% to 2,071 thousand tonnes, compared to the first quarter of 2021. In line with the mining plan, Polyus intensified mining activities at the deposit and increased the share of lower-grade material in ore mined due to the start of the heap leaching activities. This resulted in a decrease in the average grade to 1.06 g/t (1.21 g/t in the first quarter of 2021).

Ore processing

Volumes of ore processed at the Kuranakh Mill amounted to 1,523 thousand tonnes, remaining broadly flat compared to the previous quarter.

Average grade in ore processed at the Mill amounted to 1.22 g/t, down 2% quarter-on-quarter, while the recovery rate stood at 88.8%.

Heap leaching

Leaching activities recommenced in May 2021. 757 thousand tonnes were processed at heap leaching facilities in the second quarter of 2021, with an average grade of 0.67 g/t. Doré gold output totalled 6 thousand ounces.

Mining works and ore processing

Alluvials

2Q 2021 Highlights

Ø Start of the washing season.

Ø Gold in slime production amounted to 36 thousand ounces.

Ø Refined gold output totalled 25 thousand ounces.

In the second quarter of 2021, Alluvial deposits produced 36 thousand ounces of gold in slime, down 15% on the second quarter of 2020. This decline was primarily due to lower volumes of sands washed.

Refined gold output totalled 25 thousand ounces, down 15% compared to the second quarter of 2020.

Sands washing

Sukhoi Log

2Q 2021 Highlights

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

Bankable Feasibility Study highlights

In the second quarter of 2021, 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.

In the reporting period, the Company also proceeded with comprehensive engineering studies required for the BFS and the project design documentation.

Additional drilling activity at Sukhoi Log

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. 

Other activities 

In addition, the Company has completed the project design documentation and selected the construction contractor for 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.

 FINANCIAL UPDATE

Gold sales

In the second quarter of 2021, the Company sold a total of 679 thousand ounces of gold, a 19% increase on the previous quarter. Total gold sales include 9 thousand ounces of gold contained in concentrate from Olimpiada.

Estimated gold sales in the reporting period totalled approximately $1,230 million, compared to $1,017 million in the previous quarter and $1,148 million in the second quarter of 2020.

Debt management

The Company's gross debt remained broadly flat at $3,898 million, compared to $3,874 million as at the end of the first quarter of 2021. 

As at 30 June 2021, the Company's estimated cash position decreased to $1,532 million (31 March 2021: $1,800 million), while its estimated net debt position increased, compared to the previous quarter and amounted to $2,366 million (31 March 2021: $2,074 million). Among other factors, the change in cash position reflects a dividend payout for the second half of 2020 in amount of $702 million. The group's liabilities under cross currency and interest rate swaps related to RUB-denominated bank credit facilities and rouble bonds totalled approximately $303 million as of the end of the second quarter.

In July, the Company exercised its call option and fully repaid the principal amount of RUB 15 billion of rouble bonds (USD 203 million equivalent as of the date of transaction), which corresponds to approximately USD 255 million decrease of debt including derivatives.

Dividend update

Dividends for the second half of 2020, approved at the AGM on 27 May 2021, were paid in June 2021 in the amount of $702 million. The total dividend payout for the full year of 2020 corresponded to $1,116 million.

CONFERENCE CALL INFORMATION

Polyus will host an analyst conference call on 12 August 2021 at 2 pm London time (4 pm Moscow time) to present and discuss the second quarter operating results.

To join the conference call, please dial:

Conference ID: 6121635

UK 

+44 330 336 9434 (Local access)

0800 279 7209 (Toll free)

USA

+1 646-828-8193 (Local access)

888-220-8474 (Toll free)

Russia

+7 495 646 9190 (Local access)

8 10 8002 8675011 (Toll free)

To access the replay, please dial:

Passcode: 6121635

UK

+44 207 660 0134

USA

+1 719-457-0820  

Russia

810 800 2702 1012

Enquiries: 

Investor and Media contact

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

+7 495 641 33 77

[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.