Trading update for the third quarter of 2021

Press Release 28 October 2021

PJSC Polyus

Trading update for the third quarter of 2021

3Q 2021 Highlights

· Total gold output increased by 15% quarter-on-quarter to 770 thousand ounces. This increase was driven by higher production volumes of refined gold across almost all deposits.

· Volumes of ore mined amounted to 16,827 thousand tonnes, a moderate decrease on the previous quarter. On a year-on-year basis, volumes of ore mined declined by 8%, driven by lower mining activities at Olimpiada and Verninskoye due to intensified stripping activities.

· Volumes of ore processed totalled 12,722 thousand tonnes, up 5% on the previous quarter. Year-on-year, volumes of ore processed rose by 4%, primarily due to higher processing volumes at Olimpiada, Natalka and Verninskoye.

· Recovery rate increased to 83.0%, compared to 82.6% in the previous quarter.

· Estimated gold sales amounted to $1,383 million, up 12% compared to the previous quarter, with an estimated weighted-average gold selling price of $1,787/oz, a 2% decline on the second quarter of 2021.

· As at 30 September 2021, the estimated net debt stood at $1,950 million, compared to $2,366 million as at the end of the previous quarter.

9M 2021 Highlights

· Total gold output amounted to 2,033 thousand ounces, compared to 2,056 thousand ounces in the prior-year period, representing a 1% decline year-on-year. Volumes of doré gold totalled 2,072 thousand ounces, down 3% compared to the same period in the previous year.

· Volumes of ore processed increased 4% to 36,017 thousand tonnes, reflecting the improved performance at Olimpiada, Natalka and Verninskoye mainly due to the implementation of throughput capacity expansion projects.

· Recovery rate stood at 82.4%, down 1.3 ppts from the prior-year period, primarily driven by a decline in recoveries at Olimpiada and Blagodatnoye.

· Estimated gold sales increased 5% year-on-year to $3,630 million, with an estimated weighted-average gold selling price of $1,797/oz (9M 2020: $1,755/oz).

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

We delivered solid operational results in the third quarter of 2021. Gold production stood at 770 thousand ounces, which represents a 15% increase over the preceding quarter.

Polyus continued to advance its growth projects throughout the reporting period. We have achieved growth in recovery rates at Olimpiada and Natalka, while we remain on track with the throughput capacity expansion initiatives at Olimpiada, Blagodatnoye, Natalka and Kuranakh.

At Sukhoi Log, we have completed a deep-level and flank exploration drilling campaign. We also continue to progress with the development of the Bankable Feasibility Study, the key highlights of which will be published in the second half of 2022 in line with the previously announced schedule.

I would also like to reiterate our production target for 2021, which remains unchanged at approximately 2.7 million ounces of gold. "

esg update

Q3 Highlights

· LTIFR[1] of 0.18 YTD (9M 2020 - 0.08, 6M 2021 - 0.18). Zero fatalities at our operations during Q3.

· Automotive Accident Rate (AARk) at 0.15 (9M 2020 - 0.18, 6M 2021 - 0.18).

· Coronavirus: production assets remain unimpacted and operate without interruption. Thorough COVID-19 protocols remain in place. Employee vaccination program has resulted in immunity levels of over 70% among workers.

COVID response update

· Vaccination program for employees and contractors continues at all Polyus production sites. At Olimpiada, Blagodatnoye and Verninskoye the vaccination rates are close to 90%.

· Preventive measures remain in place at all operations and offices, including enhanced medical screening, social distancing, provision of 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.

Environment and Climate

· Verninskoye operation has been certified under the International Cyanide Management Code.

· Scheduled site safety audits of tailings storage and other hydraulic facilities were carried out at Olimpiada, Blagodatnoye and Alluvials. Corporate guidelines on identifying and assessing business risks related to tailings storage facilities and other hydraulic facilities have been developed. Procurement procedures were launched for a hydraulic facility remote monitoring system software.

· Polyus won Minex ESG award by Russian Mining Forum for the Water management campaign.

Health & Safety

· Transportation safety management system audit was launched at Irkutsk branch of Polyus Logistics.

· A comprehensive HSE audit was held at Alluvials and Polyus Verninskoye.

· Polyus has published its Supplier Code of Conduct containing guidelines for its suppliers and contractors regarding key areas of sustainable development and ESG.

Local communities

· Polyus donated new medical equipment to the Russian Federal Medical and Biological Agency (FMBA) for a hospital in the Krasnoyarsk region that specializes in treating patients with infectious diseases.

· Winners of the regional theatre award, 'Polyus. Golden Season' were announced.

Employees

· 106 employees have graduated from the corporate Talent Pool development program.

· Career guidance events were held for students of 20 schools in the Krasnoyarsk Territory, as part of a pilot school project aimed at increasing the flow of applicants to study professions relevant to Polyus. 785 high school students took part in the events.

· A call center was launched for candidates applying to jobs at Polyus Krasnoyarsk, Polyus Logistics, Polyus Stroy, Polyus Project, MFC Polyus.

· A dashboard system was launched to monitor the level of operational competence of working personnel.

· Several environmental trips were organized as part of Polyus' volunteer activities.

ESG Ratings and indices

· For the second year in a row, Polyus was awarded 2nd place in ESG communications among Russian companies according to a poll by Institutional Investor.

· Polyus has been included in the top-10 of ESG Ranking of Russian companies by rating agency RAEX for the first time.

· 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

o MSCI ESG - A.

Olimpiada

 3Q 2021 Highlights

Ø Volumes of rock moved totalled 37,062 thousand tonnes, up 20% on the previous quarter.

Ø Recovery rate rose to 84.6%, up from 83.8% in the previous quarter.

Ø Total gold output amounted to 289 thousand ounces.

Gold output

Doré gold output stood at 293 thousand ounces in the third quarter of 2021, up 5% compared to the previous quarter, driven by higher processing volumes and higher recovery rate. Total gold output (refined and concentrate) rose by 7% compared to the previous quarter, to 289 thousand ounces. On a year-on-year basis, doré gold output declined by 8%, while total gold production was down 11%.

Mining works

Rock moved volumes totalled 37,062 thousand tonnes (13,713 km³), up 20% on the second quarter of 2021 as the completion of simultaneous operations within two stages of the Vostochny pit led to improved mining equipment performance. Following the completion of rich-ore mining from the bottom part of the third stage, Polyus intensified stripping activities at the fourth stage of the Vostochny pit, substantially reducing ore mining activities at Vostochny pit. At the same time, in line with a mine plan, Polyus increased mining works at the Zapadny pit, which partially offset the decline in ore mined. As a result, volumes of ore mined temporarily decreased to 1,799 thousand tonnes, down 42% from the previous quarter, while grades in ore mined decreased to 2.43 g/t.

Ore processing

Volumes of ore processed totalled 4,009 thousand tonnes, up 10% compared to the previous quarter. This increase reflects Mill No. 1 and Mill No. 3 undergoing planned maintenance in the second quarter. Average grades in ore processed remained flat quarter-on-quarter, at 3.03 g/t. The recovery rate rose further to 84.6%, up 0.8 ppts compared to the second quarter of 2021. This increase reflects the launch of the Vertimill grinding unit, which enhanced flotation concentrate properties. It was further supported by improved mineralogical characteristics of the ore feed, with the higher share of ore coming from the Zapadny pit.

During the third quarter of 2021, the Company has proceeded with a throughput capacity expansion project at Olimpiada, aimed at increasing capacity to 15.0 million tonnes per annum. Polyus continued to improve the efficiency of BIO complex, including introduction of a second magnetic separation line and ongoing calibration of the flowsheet. This resulted in improved performance of the BIO units, with daily throughput reaching record high in September.

Mining works and ore processing

Blagodatnoye

3Q 2021 Highlights

Ø Volumes of ore mined totalled 5,452 thousand tonnes up 24% on the previous quarter.

Ø Volumes of ore processed amounted to 2,194 thousand tonnes down 4% on the previous quarter.

Ø Doré gold output totalled 110 thousand ounces.

Gold output

Doré gold output in the third quarter of 2021 amounted to 110 thousand ounces, down 5% compared to the previous quarter, driven by lower volumes of ore processed. Refined gold output amounted to 108 thousand ounces, compared to 117 thousand ounces in the previous reporting period. On a year-on-year basis, refined gold output decreased by 8%.

Mining works

Volumes of rock moved increased 5% to 21,028 thousand tonnes (7,550 km³) compared to the previous quarter. In line with the sequence of mining works, volumes of ore mined increased by 24% to 5,452 thousand tonnes, compared to 4,402 thousand tonnes in the second quarter of 2021. Polyus intensified mining activities at the lower-grade area of the third stage of the pit, resulting in an decrease in the average grades in ore mined to 1.42 g/t in the third quarter of 2021 (down from 1.48 g/t in the previous quarter).

Ore processing

The average grade in ore processed amounted to 1.81 g/t during the reporting period, remaining broadly flat quarter-on-quarter. Volumes of ore processed amounted to 2,194 thousand tonnes, down 4% on the previous quarter, reflecting the scheduled maintenance works during the reporting period. Recovery rate increased to 87.2%, compared to 87.0% in the second quarter of 2021.

Mill 5

In the third quarter of 2021, the Company signed an agreement with Esta Construction, the major contractor for the Mill 5 construction project. The construction workers arrived on site during the reporting period and proceeded with preparation activities for the construction of hydromet and comminution circuits. Polyus completed the site preparation for introducing an in-pit crushing and conveying (IPCC) system as well as advanced with construction of the crushed ore stockyard. In addition, Polyus has launched a construction project for two new electrical substations and progressed with the construction of infrastructure facilities on site. 

Mining works and ore processing

Natalka

3Q 2021 Highlights

Ø Volumes of ore processed rose to 3,197 thousand tonnes, up 6% on the previous quarter.

Ø Recovery rate rose to 72.6%, up from 71.8% in the previous quarter.

Ø Refined gold output totalled 134 thousand ounces, up 7% quarter-on-quarter.

Gold output

Doré gold output in the third quarter of 2021 amounted to 130 thousand ounces, up 4% compared to the previous quarter, driven by higher processing volumes and higher recovery rate. Refined gold output amounted to 134 thousand ounces, compared to 125 thousand ounces in the previous reporting period. 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 totalled 17,547 thousand tonnes (6,801 km³), remaining flat quarter-on-quarter, while volumes of ore mined rose to 6,079 thousand tonnes, a 4% increase from the second quarter of 2021. The average grades in ore mined amounted to 1.36 g/t, remaining broadly flat compared to the previous reporting period.

Ore processing

Volumes of ore processed totalled 3,197 thousand tonnes, up 6% on the preceding quarter. This improvement reflects the reduced circulation load at the SAG mill, due to the optimisation of the discharge grates parameters and a replaced lining at the MK-60 crusher during the reporting period. In addition, this also reflects less maintenance-related downtime in the third quarter of 2021.

Average grade in ore processed stood at 1.75 g/t, remaining broadly flat quarter-on-quarter. The recovery rate rose to 72.6%, up 0.8 ppts compared to the second quarter of 2021. This reflects the calibration of processing parameters of the flash flotation circuit, including cleaner scheme optimization and upgrade of concentrators, which reduced losses at sorption circuit.

Mining works and ore processing

Verninskoye

3Q 2021 Highlights

Ø Volumes of ore mined totalled 1,070 thousand tonnes, down 34% on the previous quarter.

Ø Volumes of ore processed totalled 963 thousand tonnes. 

Ø Refined gold output totalled 83 thousand ounces, up 7% quarter-on-quarter.

Gold output

Doré gold output stood at 79 thousand ounces, up 1% quarter-on-quarter, reflecting higher volumes of ore processed. Refined gold output rose by 7% compared to the previous quarter, to 83 thousand ounces, reflecting changes in gold in inventory at the refinery. Year-on-year, doré gold output and refined gold output increased by 21%, respectively.

Mining works

Volumes of rock moved totalled 8,621 thousand tonnes (3,193 km³), remaining broadly flat on the previous quarter. In line with the mining plan, Polyus intensified stripping activities, while volumes of ore mined temporarily decreased to 1,070 thousand tonnes, down 34% from 1,614 thousand tonnes in the previous quarter. Average grades in ore mined decreased to 1.91 g/t, down 15% quarter-on-quarter.

Ore processing

Volumes of ore processed stood at 963 thousand tonnes, up 1% on the previous quarter. The recovery rate stood at 90.0% and remained flat quarter-on-quarter.

Mining works and ore processing

Kuranakh

3Q 2021 Highlights

Ø Volumes of ore processed totalled 2,359 thousand tonnes, up 3% on the previous quarter.

Ø Refined gold output increased to 65 thousand ounces, up 17% compared to the previous quarter.

Gold output

Doré gold output in the third quarter of 2021 amounted to 66 thousand ounces, a 12% increase compared to the second quarter of 2021, driven by higher volumes of ore processed at heap leaching facilities. Refined gold output amounted to 65 thousand ounces, up 17% on the previous quarter, reflecting changes in gold in inventory at the refinery. On a year-on-year basis, doré gold output and refined gold output decreased by 6% and 2%, respectively.

Mining works

Volumes of rock moved amounted to 8,048 thousand tonnes (4,472 km³), remaining broadly flat on the previous quarter. In line with the mining plan, Polyus increased volumes of ore mined to 2,427 thousand tonnes, up 17% on the previous quarter and increased the share of lower-grade material in ore mined due to the peak of the heap leaching activities. This resulted in a decrease in the average grade in ore mined to 0.96 g/t, compared to 1.06 g/t in the second quarter of 2021.

Ore processing

Volumes of ore processed at the Kuranakh Mill amounted to 1,466 thousand tonnes, down 4% on the previous quarter due to scheduled maintenance. Average grade in ore processed at the Mill amounted to 1.17 g/t, down 4% quarter-on-quarter, while the recovery rate stood at 88.4%. 

The Company proceeds with project of the Kuranakh Mill throughput capacity expansion to 7.5 million tonnes per annum.

Heap leaching

The third quarter is the peak production season for the heap leaching operations. 893 thousand tonnes were processed at heap leaching facilities in the third quarter of 2021, with an average grade of 0.67 g/t. Doré gold output amounted to 16.3 thousand ounces. During the reporting period, Polyus commissioned the conveyor equipment and proceeded with stacking of the two panels of the second heap leaching pad.

Mining works and ore processing

Alluvials

3Q 2021 Highlights

Ø Gold in slime production amounted to 87 thousand ounces.

Ø Refined gold output totalled 91 thousand ounces.

In the third quarter of 2021, alluvial deposits produced 87 thousand ounces of gold in slime, more than doubled on the second quarter of 2021.

Refined gold output totalled 91 thousand ounces, compared to 36 thousand ounces in the previous quarter.

Sands washing

Sukhoi Log

3Q 2021 Highlights

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

Bankable Feasibility Study developments

In the third 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, infrastructure, 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 completed its deep-level and flank exploration drilling campaign and is currently proceeding with studies. 

Other activities 

In addition, 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.

FINANCIAL UPDATE

Gold sales

In the third quarter of 2021, the Company sold a total of 776 thousand ounces of gold, a 14% increase on the previous quarter. Total gold sales include 11 thousand ounces of gold contained in concentrate from Olimpiada.

Estimated gold sales in the reporting period totalled approximately $1,383 million with an estimated weighted-average gold selling price of $1,787/oz, compared to $1,230 million in the previous quarter and $1,444 million in the third quarter of 2020.

Debt management

The Company's gross debt decreased to $3,625 million, compared to $3,899 million as at the end of the second quarter of 2021. In the reporting period, the Company exercised its call-option and fully repaid the principal amount of RUB 15 billion of rouble bonds ($203 million equivalent as of the date of transaction), which corresponds to $255 million decrease of debt including derivatives.

As at 30 September 2021, the Company's estimated cash position stood at $1,675 million (30 June 2021: $1,532 million) and its estimated net debt position decreased, compared to the previous quarter and amounted to $1,950 million (30 June 2021: $2,366 million). The Company's debt maturity profile remains smooth with limited debt maturities outstanding until the end of 2021.

Eurobonds

In October 2021, the Company completed a Eurobond offering ($700 million Eurobonds due to 2028 with a 3.25% coupon rate) and announced the results of the tender offer of its outstanding notes. As a result of the tender offer, Polyus bought back all of the tendered 2023 notes and most of 2024 notes and increased the final tender volume from initial target of c. $550 million to $650 million (including c. $605 million in principal amount).

Dividend update

In August, 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 $3.69 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 on 11 October 2021.

CONFERENCE CALL INFORMATION

Polyus will host an analyst conference call on 28 October 2021 at 2 pm London time (4 pm Moscow time) to present and discuss the third quarter operating results.

To join the conference call, please dial:

Conference ID: 3946990

UK

+44 (0)330 336 9434 (Local access)

0800 279 7209 (Toll free)  

USA

+1 929-477-0324 (Local access)

800-458-4121 (Toll free)

Russia

+7 495 646 9190 (Local access)

8 10 8002 8675011 (Toll free)

To access the replay, please dial:

Passcode: 3946990

UK

+44 (0) 207 660 0134 

US

+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.