Investor presentation
September 2017
Kyzyl processing plant construction
Growth and Dividends Investor presentation September 2017 Kyzyl - - PowerPoint PPT Presentation
Growth and Dividends Investor presentation September 2017 Kyzyl processing plant construction Disclaimer ward-looking statements that involve know n and unknown risks and uncertainties, many of which are beyond the Companys control and all of
September 2017
Kyzyl processing plant construction
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This presentation includes for ward-looking statements that involve know n and unknown risks and uncertainties, many of which are beyond the Company’s control and all of which are based on the directors’ beliefs and expectations about future events. These forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions, predictions and other statements, which are other than statements of historical facts. The words “believe,” “expect,” “anticipate,” “intends,” “estimate,” “forecast,” “project,” “will,” “may,” “should”, “shall”, “could”, “risk”, “aims”, “plans”, “predicts”, “continues”, “assumes”, “positioned” and similar expressions or the negative thereof identify certain of the forward-looking statements. For ward-looking statements include statements regarding: strategies, outlook and growth prospects; future plans and potential for future growth; liquidity, capital resources and capital expenditures; gro wth in demand for products; economic outlook and industry trends; developments of markets; the impact of regulatory initiatives; and the strength of competitors. The for ward-looking statements in this presentation are based upon various assumptions and predictions, many of which are based, in turn, upon further assumptions and predictions, including, without limitation, management’s examination of historical operating trends, data contained in the Company’s records and other data available from third parties. Although the Company believes that these assumptions w ere reasonable w hen made, these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond its control, and the Company may not achieve or accomplish these expectations, beliefs or projections. Many factors could cause the actual results to differ materially from those contained in predictions or for ward-looking statements of the Company, including, among others, general economic conditions, the competitive environment, risks associated with operating in Russia and Kazakhstan, rapid technological and market change in the industries in which the Company operates, as well as other risks specifically related to the Company and its operations. Past performance should not be taken as an indication or guarantee of future results, and no representation or warranty, express or implied, is made regarding future performance. Neither the Company, nor any of its agents, employees or advisors intend or have any duty or obligation to supplement, amend, update or revise any of the forward-looking statements contained in this presentation. to reflect any change in their expectations or any change in events, conditions or circumstances on w hich such statements are based Nothing in this presentation constitutes an offer, invitation, recommendation to purchase, sell or subscribe for any securities in any jurisdiction or solicitation of any offer to purchase, sell or subscribe for any securities in any jurisdiction and neither the issue of the information nor anything contained herein shall form the basis of or be relied upon in connection with, or act as any inducement to enter into, any investment activity. To the extent available, the industry, market and competitive position data contained in this presentation come from official or third party sources. Third party industry publications, studies and surveys generally state that the data contained therein have been obtained from sources believed to be reliable, but that there is no guarantee of the accuracy or completeness of such
contained therein. In addition, certain of the industry, market and competitive position data contained in this presentation come from the Company's own internal research and estimates based on the know ledge and experience of the Company's management in the market in w hich the Company operates. While the Company believes that such research and estimates are reasonable and reliable, they, and their underlying methodology and assumptions, have not been verified by any independent source for accuracy or completeness and are subject to change without notice. Accordingly, undue reliance should not be placed on any of the industry, market or competitive position data contained in this presentation. The information contained in this presentation has not been independently verified. Neither the Company, any of its affiliates, subsidiaries or subsidiary undertakings nor any of their respective advisors or representatives makes any representation or warranty, express or implied, and no reliance should be placed on the fairness, accuracy, completeness or correctness of the information or
certain tables may not be the precise sum of the figures that precede them. Neither the Company, or any of its affiliates, advisors or representatives accepts any liability w hatsoever (in negligence or otherw ise) forany loss howsoeverarising fromany information contained in the presentation.
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Notes: *As at market close 20.09.2017
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| 5 1,269 1,400 1,470 1,420 1,470 80 280 330 1,269 1,400 1,550 1,700 1,800 2016A 2017E 2018E 2019E 2020E
Kyzyl Existing
69% 77% 82% 87% 87% 2016A 2017E 2018E 2019E 2020E
Gold production, Koz of GE1
Notes: GE at 80:1 Ag oz/Au oz, 1:5 Cu mt/Au oz and 1:2 Zn mt/Au oz conv ersion ratios.
Share of gold in production1
| 6 900 1,090 1,190 1,220 1,260 952 1,168 1,312 1,267 1,269 2012 2013 2014 2015 2016
Guidance Actual
+6% +7% +10%
Annual production based on 80:1 Ag/Au ratio (Koz of GE)*
+4%
* Company historical gold equiv alent guidance recalculated using 80:1 Ag oz/Au oz conv ersion ratio.
+1%
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4.4% 3.1% 2.9% 3% 2.4% 2.3% 2.1% 2% 2.0% 1.9% 1.7% 1.7% 1.6% 1.5% 1.5% 1.5% 0.8% 0.7% 0.0% Polymetal FTSE 250 Centamin Pan American Centerra Acacia Yamana Tahoe Kinross Newmont Goldfields Barrick FTSE GM Anglogold Newcrest Agnico Eagle Eldorado Randgold New Gold
5Y Sector-leading dividend yield
27% 23% 5%
Agnico Eagle Centamin Polymetal Randgold Fresnillo Gold Newmont Newcrest Silver FTSE GM Barrick Acacia Centerra Goldfields New Gold Kinross Tahoe Anglogold Yamana Eldorado
5Y* TSR
Notes: Bloomberg data as at market close 29.08.2017 *since POLY IPO
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Average reserve grade (2P reserves), g/t GE
Source: Company data. Gold, silv er, copper prov ed and probable reserv es as of 01.01.2017 GE at 80:1 Ag oz/Au oz and 1:5 Cu mt/Au oz conv ersion ratios.
4.2 3.8 6.3 2.8 3.6 2.9 2.3 1.9 1.7 1.6 1.4 1.4 1.4 1.3 1.3 1.3 1.1 1.1 1.1 1.0 0.9 0.9 0.7
Acacia Average Underground Open-pit Randgold Gold Fields Agnico Eagle Pan American Goldcorp Eldorado Iamgold Anglogold Fresnillo Barrick Newmont Yamana Newcrest Centamin New Gold Buenaventura Tahoe Kinross Centerra
Polymetal
| 9 1,182 1,063 1,002 974 964 937 931 906 879 869 863 854 844 836 789 787 779 750 728 725 664 597
Harmony Anglogold IAMGOLD Gold Fields Kinross ACACIA Yamana Newmont Hochschild Agnico- Eagle Eldorado New Gold Tahoe Polymetal Goldcorp Newcrest Centamin Randgold Fresnillo Barrick Centerra Polyus
All-in sustaining cash costs for 12 months ending 30 June 2017, US$/oz of GE
Source: Companies’ data on co-product basis f or the 12 months ending 30 June 2017. Centamin, Centerra Gold, Tahoe: AISC reported on by -product basis Hochschild: AISC based on Ag/Au ratio of 74
US$ 1,259 oz – average LBMA gold price for the period
| 10 145 157 145 150 170 47 45 50 50 50 32 86 145 80 30 30 30 224 288 370 310 250 2015A 2016A 2017E 2018E 2019E Long-term growth projects Kyzyl and POX expansion Exploration Stay-in-business CapEx
Capital expenditures, US$M
Notes: Long-term growth projects include Prognoz, Viksha and Nezhda. Total capital expenditure in 2015-2016 includes amounts pay able at the end of the period. On a cash basis, capital expenditure was US$ 271 million in 2016 (2015: US $ 205 million).
| 11 2.2 1.1 (1.1) OCF Capex FCF (Pre- M&A) Randgold 2.5 1.1 (1.4) OCF Capex FCF (Pre- M&A) Polymetal 2.8 0.3 (2.4) OCF Capex FCF (Pre- M&A) Fresnillo
Pre-M&A free cash flow in 2012-2016, US$ bn
Notes: Company data. Free cash f low (pre-M&A)
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Total Dividends and FCF for 2012-2016, US$ bn
1.1 1.1 0.3 0.9 0.2 1.1 Polymetal Randgold Fresnillo Pre M&A FCF Dividends
Notes: Company data. Free cash f low (pre-M&A)
| 13 0.20 0.32 0.16 0.21 0.22 0.18 0.50 0.20 0.30 0.15 0.14 0.70 0.32 0.36 0.51 0.37 0.32
2012 2013 2014 2015 2016 1H 2017 Special at the discretion of the Board Regular (50% of underlying net income starting FY2017, before that - 30%)
Notes: 1) As at market close 23 August 2017 (includes interim div idend declared on 29 August 2017)
Dividends, US$ per share
> US$ 1,048 million paid out since IPO > Interim dividend for 1H 2017 increased by 55% y-o-y to US$ 0.14 per share > LTM yield of 4.7% > Average 5-year yield of 4.4%
(1) (1)
| 14 Robust liquidity profile: US$ 1.1 bn of undrawn credit facilities Current leverage at 2.19x Net Debt/ Adjusted EBITDA but is expected to decrease below 2.0x by year’s end Low cost of debt below 4% with an average maturity of >4 years Net debt of US$1.6bn*, 100% bilateral and denominated in US dollars
Notes: *As at 30.06.2017
New maturity profile, US$M
(long term loans only)
26 102 238 454 372 100 50 2018 2019 2020 2021 2022 2023 2024 46% 54% Fixed Floating Interest rate breakdown
(long term loans only)
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43% 45% 37% 39% 57% 55% 63% 61% FY 2014 FY 2015 FY 2016 FY 2017E
Revenue, %
1H 2H 45% 45% 41% 40% 55% 55% 59% 60% FY 2014 FY 2015 FY 2016 FY 2017E
Production, %
1H 2H 45% 45% 39% 55% 55% 61% FY 2014 FY 2015 FY 2016 FY 2017E
EBITDA, %
1H 2H
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FY2016 FY2017 Production, GE Koz 1,269 1,400 TCC, US$/GE oz 570 600-650 AISC, US$/GE oz 776 775-825 Capital expenditure, US$M 271 370 Free cash flow, US$M 257 Positive Regular dividend Paid Definitely Special dividend Paid Decisionin January*
Gold, US$/oz. 1,250 1,200 Silver, US$/oz. 17.3 16.0 RUR/USD rate 67 60 Brent oil, US$ 49 60
> We will deliver stronger production, lower costs and materially higher free cash flow in the 2H
*Based on FCF post regular dividends and gold price
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50x 50x 49x 46x 37x 36x 35x 35x 33x 32x 30x 30x 27x 26x 23x 17x 16x 16x 12x 12x 11x 8x 7x 7x
Agnico Eagle Yamana New Gold Kinross Hochschild Eldorado Anglogold Pan American Goldcorp Fresnillo Randgold Newcrest Newmont Gold Fields Barrick Tahoe Centamin Buenaventura Polymetal Oceana Gold Harmony Acacia Polyus Gold Centerra
2017E P/E
Source: Bloomberg data (Div idend y ield calculated in US dollars as of 25.08.2017, 2017 P/E updated as at 25.05.2017)
8.1% 4.7% 4.2% 4.2% 4.0% 4.0% 3.5% 2.0% 1.6% 1.1% 1.1% 1.1% 0.9% 0.9% 0.8% 0.8% 0.7% 0.7% 0.6% 0.6% 0.6% 0.5% 0.5% 0.4% 0.0% 0.0% Centamin Polymetal Tahoe Harmony Acacia FTSE 350 Polyus Gold Gold Fields Fresnillo Anglogold Randgold FTSE GM Newcrest Agnico Eagle Eldorado Hochschild Yamana Buenaventura Goldcorp Barrick Centerra Gold Pan American Newmont Oceana Gold Kinross New Gold
LTM Dividend yield
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> Large: 7.3 Moz of gold reserves, of which 3.1 Moz is open pit > High-grade: 7.7 g/t with 6.9 g/t in the open pit > Excellent exploration upside: 3.1 Moz of additional resources at 6.8 g/t > Technology: Flotation followed by concentrate offtake or POX processing > LOM: 22 years (first 10 years open pit) > Low capital intensity: US$375M (open pit + flotation + POX expansion) > Robust economics:*
Notes: *Based on 10% discount rate. the gold price of US$ 1,200/oz, RUB/USD exchange rate of 64 and Tenge/USD exchange rate of 300. .
| 20 Permitting Engineering Contracting Construction Open pit Processing plant External Infrastructure 100 % 100% 100 % 95 % 100% 100 % 50 % 100 % 100 % 100 % 95 % 100 % Internal Infrastructure Tailings storage 100 % 100 % 100 % 80 % 100 % 100 % 95 % 50 %
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External power supply facilities (ETL и MSDS) 100% On-site & Auezov village boiler houses 100% Maintenance shop 75% Processing plant building 100%
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> Expand the capacity of the existing POX plant by ~50% in terms of concentrate processed (now limited by the oxygen plant capacity) by debottlenecking the existing POX facility at low capital cost (US$ 55M) > Materially improve economics of the Kyzyl project by retaining ~50% of concentrate for in-house treatment at the POX by: > Increasing gold recovery from the Kyzyl concentrate to 95% > Bringing down processing and transportation costs > Strengthen Polymetal’s commercial position on the concentrate market vis-à-vis off- takers > Add development optionality for other refractory gold projects in the Company’s portfolio
| 24 Permitting Engineering Contracting Construction
Hydrometallurgical plant
Oxygen station 2 Other processing
100 % 90% 65% 50% 100% 50% 30 % 100 % 80% 65% 40% 90 % Infrastructure 100 % 55 % 85% 0 %
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Oxygen Plant No 2 30 % Cooling and neutralization area 55 % Leach tailings filtration area 30 % Dry coolers 50%
> Key additions to the equipment will comprise a 2nd oxygen plant, an autoclave discharge thickener, separate filters for thickener underflow, and upgrades for heat recovery and water treatment systems
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> Substantial resource (JORC-compliant): 11 Moz of GE at 4.8 g/t of which 2.1 Moz at 3.8 g/t is open-pit > Low capital intensity and excellent fit with Polymetal’s core capabilities: processing via flotation followed by concentrate
> Polymetal entered into binding agreement to increase its current 17.7% stake to 24.7% for $8M with a call option to buyout the remaining 75.3% based on the results of an initial JORC-compliant reserve estimate at $100/oz of attributable gold reserves. The call option premium is $12M in cash. > The call option is exercisable in 2018 with the total consideration capped at $180M of which $10M will be paid in cash and the rest in shares. > First JORC-compliant reserve statement in 2H 2017 and development decision in Q3 2018
5 000 m 1 000 m
0-5 5-25 25-50 50-70 70-100 100, ceiling Legend, AU m*g/t
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2017 2018
Exploration Geomechanical and mining method studies Preparation of JORC-compliant MR estimate Further exploration of ore zone 1 and adjacent areas to grow
into indicated
Technology Pilot plant test-work Hydrometallurgical studies (concentrate) Study of concentrate thickening and filtration Reagent mode optimization Issue of operating procedure Design Optimization of open-pit mining
processing facility
marketing
Notes: Start of construction and production is subject to positiv e dev elopment decision
Design
documentation Exploration
adjacent areas to grow open- pittable resources
potential ore zones for underground mining
resources into indicated Development
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Gram-meter (gm-m)
One of the largest open pittable PGM resources in the world
Consistent gram-meter (gm-m) down dip (Pd eq.* ore body width)
˃ 20-year mining licence granted on July 18, 2016 for a project area of 47km2 ˃ Mineral Resources: 213 Mt at 0.98 g/t of combined precious metals, total content at 6.6 Moz ˃ Processing: conventional flotation processing to produce bulk copper-PGM sulphide concentrate + off-take ˃ Average thickness: 7 m ˃ Depth of open pit: 150 m
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2016 2017 2018 2019
Q1 License documents submitted for governmental approval Q2 Received governmental approval New mining license granted Q4 Exploration program approved and being launched Q1 Geological engineering survey Q3
Q4
Q2
Q3
Notes: Start of production subject to positiv e dev elopment decision
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* Estimated by Micon in 2009
Key facts Ownership: > 5% with an option to increase stake to 50% (investment decision to be made no later than Q1 2020) > the other 50% owned by financial investor and potentially available Mineral resources: 292 Moz at 586 g/t* silver, 3% lead Additional mineral potential: 7.9 - 18.1 Mt of ore at 469 g/t silver for 119 – 273 Moz of silver contained* Mining method: Open-pit (5-8 years), followed by underground Throughput: ~1 Mtpa Production: 20 Moz of silver per annum (100%) Capex: ~$250M (100%)
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Source: Company reports, BMO Capital Markets
Silver grade, g/t 200 400 600 800 1000 200 400 600 800
Mangazeiskiy Juanicipio Prognoz Silvertip Los Gatos Webbs Terronera Fuwan Navidad La Preciosa Corani
Development projects – Ranked by Silver Grade
P+P M+I Inf. Ag grade, g/t Silver content, Moz
(BCM) (CDE) (CDE) (FRES;MAG) (POLY) (SBR) (DOWA) (Silv er Mines) (EXK) (MSV) (PAAS)
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2017
2018
estimate followed by investment decision
2019
2020
Notes: Start of production subject to positiv e dev elopment decision
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Key facts:
> Location: Magadan Region, Russia > Life of mine: 2023 > Mining: Underground > Processing: 1.8 Mtpa concentrator and 425 Ktpa Merrill Crowe plant > Reserves (JORC): 2.1 Moz GE at 4.7 g/t including 142 Moz of silver at 327 g/t > Resources (JORC): 0.6 Moz GE at 13.3 g/t including 43 Moz of silver at 886 g/t > Employees: 1,897
Operation Development Plant City
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Grade, (g/t)
Notes: GE produced at 80:1 Ag oz/Au oz; SE (silv er eq.) per oz sold based on actual realised prices (f or AISC)
1,574 1,711 1,817 1,938 967 338 400 416 435 228 1,912 2,111 2,233 2,373 1,195 FY 2013 FY 2014 FY 2015 FY 2016 1H 2017
Ore Processed, Kt
Dukat concentrator Lunnoye plant
317 344 393 369 158 FY 2013 FY 2014 FY 2015 FY 2016 1H 2017
Production (GE Koz)
6.0 5.8 6.4 5.6 4.7
13.9 10.9 7.8 8.0 10.2 FY 2013 FY 2014 FY 2015 FY 2016 1H 2017
AISC (US$/SE oz)
1,253 1,468 1,656 1,661 817 168 191 201 183 92 394 384 401 435 286 16 5 1,815 2,043 2,258 2,279 1,215 FY 2013 FY 2014 FY 2015 FY 2016 1H 2017
Ore mined, Kt
Dukat Goltsovoye Lunnoye Nachalny-2 Terem
˃ Start of production from high-grade satellite deposits ˃ Perevalnoye (ore reserves of 350 Kt, at 5.9 g/t GE) in Q4 2017 ˃ Terem (mineral resources1 of 690 Kt, at 21.9 g/t GE) in Q1 2018 ˃ Primorskoye (mineral resources of 500 Kt, at 19.6 g/t GE) in Q3 2019 ˃ Step-out exploration at deeper flanks of Dukat and Lunnoye ˃ Removal of left-behind pillars and lower-grade stopes where no minimal development is needed through application of differentiated cut-off grade
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˃ Extend LOM to 2027 while maintaining stable costs ˃ Slow down grade erosion and production decline ˃ Improve processing capacity utilization
Notes: 1) Unaudited mineral resource estimate
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Key facts:
> Location: Khabarovsk Territory, Russia > Commissioning: 2009 > Life of mine: 2031 > Mining: Open pit/Underground > Processing: 1.6 Mtpa flotation circuit followed by POX and CIL processing at Amursk Hub > Reserves (JORC): 2.0 Moz GE , 4.2 g/t > Resources (JORC): 1.7 Moz GE , 5.3 g/t > Employees: 988
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Grade, (g/t)
1,513 1,609 1,607 1,654 856 FY 2013 FY 2014 FY 2015 FY 2016 1H 2017
Ore Processed, Kt
238 227 220 244 108 FY 2013 FY 2014 FY 2015 FY 2016 1H 2017
Production (GE Koz)
5.6 4.8 5.2 5.0 4.8
1,139 901 667 684 893 FY 2013 FY 2014 FY 2015 FY 2016 1H 2017
AISC (US$/GE oz)
Notes: GE produced at 80:1 Ag oz/Au oz; GE (gold eq.) per oz sold based on actual realised prices (f or AISC)
1,338 1,566 1,583 1,866 830 49 267 161 1,338 1,566 1,632 2,133 991 FY 2013 FY 2014 FY 2015 FY 2016 1H 2017
Ore mined, Kt
Open-pit Underground Total
86.0% 93.8% 94.0% 94.0% 96.1%
Recovery (POX), %
˃ Acceleration of satellite open-pit development: ˃ Ekaterina 1 (ore reserves of 380 Kt at 3.5 g/t GE) ˃ Ekaterina 2 (ore reserves of 1,170 Kt at 2.6 g/t GE) ˃ Ekaterina 3 (ore reserves of 200 Kt at 3.5 g/t GE) ˃ Farida (mineral resources of 610 Kt at 4.0 g/t GE) ˃ Continued resource-to-reserve conversion in the underground mine ˃ Continued near-mine exploration
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Stable production and costs for the next 10-12 years
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Key facts:
> Location: Chukotka, Russia > Commissioning: 2011 > Life of mine: 2034 > Mining: Underground and open pit > Processing: 850 Ktpa flotation concentrator/CIL > Reserves (JORC): 1.4 Moz GE, 6.9 g/t > Resources (JORC): 3.2 Moz GE , 11.9 g/t > Employees: 977
Operation Development Plant Sea port / City
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48 143 138 116 9
FY 2013 FY 2014 FY 2015 FY 2016 1H 2017
Production (GE Koz)
NR 1,134 935 1,242
FY 2013 FY 2014 FY 2015 FY 2016
AISC (US$/GE oz)
667 653 628 730 538
FY 2013 FY 2014 FY 2015 FY 2016 1H 2017
Ore mined, Kt
Grade, (g/t)
488 807 683 761 428
FY 2013 FY 2014 FY 2015 FY 2016 1H 2017
Ore Processed, Kt
Notes: GE produced at 80:1 Ag oz/Au oz; GE (gold eq.) per oz sold based on actual realised prices (f or AISC)
7.1 8.7 6.7 5.3 6.5
10.0 10.5 13.8 19.5 9.6
FY 2013 FY 2014 FY 2015 FY 2016 1H 2017
Underground development, Km
˃ Debottlenecking of the CIP section to achieve design recovery levels for oxidised ore from the open pit ˃ Maintain safety, productivity and grade control underground ˃ Accelerate resource-to-reserve conversion both in the open pit and underground
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Stable production for the next 8-10 years with 2017-2019 costs lower by 25-30% vs 2016
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Key facts:
> Location: Magadan Region, Russia > Commissioning: 2010 > Life of mine: 2024 > Mining: Open pit/Underground > Processing: 850 Ktpa CIP and Merrill Crowe,1000 Ktpa HL > Reserves (JORC): 1.5 Moz GE, 3.7 g/t
> Mineral resources (JORC): 0.6 Moz GE, 10.3 g/t
> Employees: 725
Operation Development Depleted Plant City
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767 825 835 840 550 FY 2013 FY 2014 FY 2015 FY 2016 1H 2017
Ore Processed, Kt
1,322 722 732 675 901 FY 2013 FY 2014 FY 2015 FY 2016 1H 2017
AISC (US$/GE oz)
Grade, (g/t)
147 213 188 170 93 FY 2013 FY 2014 FY 2015 FY 2016 1H 2017
Production (GE Koz)
6.6 8.4 7.5 7.0 6.0
Notes: GE produced at 80:1 Ag oz/Au oz; GE (gold eq.) per oz sold based on actual realised prices (f or AISC)
2,065 2,488 1,990 2,061 272 4 172 115 2,065 2,488 1,994 2,233 387 FY 2013 FY 2014 FY 2015 FY 2016 1H 2017
Ore mined, Kt
Open-pit Underground Total
˃ Smooth roll-over from older depleted ore sources (Tsokol, Dalneye) to Birkachan, Oroch ˃ Continued resource and reserve accretion at Olcha, Sopka, Nevenrekan, Yolochka ˃ Restart of Heap Leach operation at Birkachan
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˃ Stable production and costs for the next 7-8 years ˃ Advancing LOM extension options
| 47 825 835 840 850 850 850 850 8.4 7.5 7.0 7.6 7.0 7.9 7.0 2 4 6 8 300 600 900 1200 1500 2014 2015 2016 2017E 2018E 2019E 2020E Ore processed breakdown, Kt Birkachan Sopka Tsokol Olcha Dalneye Oroch Grade GE, g/t Grade GE, g/t
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> Location: North-western Kazakhstan > Commissioning: 2007 (operated by Poymetal since 2010) > Life of mine: 2029 > Mining: Open pit > Processing: CIL (2.5 Mtpa)/ flotation (1 Mtpa) > T
> T
> Employees: 1,129
Key facts:
Operation Development Plant City
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Notes: GE produced at 80:1 Ag oz/Au oz; GE (gold eq.) per oz sold based on actual realised prices (f or AISC)
2,782 649 338 911 3,676 3,664 3,457 3,119 1,560 FY 2013 FY 2014 FY 2015 FY 2016 1H 2017
Ore Processed, Kt
Varvara and other Komar 1,088 1,049 1,092 975 1,026 FY 2013 FY 2014 FY 2015 FY 2016 1H 2017
AISC (US$/GE oz)
Grade, (g/t)
131 106 72 85 53 FY 2013 FY 2014 FY 2015 FY 2016 1H 2017
Production (GE Koz)
1.5 1.2 0.9 1.1 1.5
2,820 878 383 900 2,008 3,985 4,068 3,203 1,778 FY 2013 FY 2014 FY 2015 FY 2016 1H 2017
Ore mined by source, Kt
Varvara Komar Total
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> Full re-evaluation of ore reserves at Komar and Varvara based on additional drilling, factual costs and recoveries (Q4 2017) > Evaluation of in-pit waste storage at both Komar and Varvara with the goal to reduce operational footprint and cut costs by reducing average waste haulage distance twofold > Optimisation of the long-term mine plan for the hub as a whole with evaluation of strategic options for assets on the Russian side of the border (Tarutin, Maminskoye) > Continued active presence on the market for 3rd party ore
˃ Komar will drive a strong jump in production at Varvara in 2017 ˃ Stable production for the next 10-12 years ˃ Costs trending lower 15-20% vs 2016
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Key facts:
> Location: Khabarovsk Region, Russia > Commissioning: 2003 > Life of mine:
> Mining: Open pit/Underground > Processing: 600 Ktpa Merrill Crowe, 1000 Ktpa HL circuit at Svetloye > Reserves (JORC): 0.9 Moz GE, 3.2 g/t average grade
> Resources (JORC): 0.5 Moz GE, 5.2 g/t average grade > Employees: 1,182
Operation Development Plant Sea port
23 26 134 119 114 108 24 134 119 114 131 50 FY 2013 FY 2014 FY 2015 FY 2016 1H 2017
Production (GE Koz)
Svetloye Okhotsk Total
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Notes: GE produced at 80:1 Ag oz/Au oz; GE (gold eq.) per oz sold based on actual realised prices (f or AISC)
619 622 631 627 307 428 466 619 622 631 773 FY 2013 FY 2014 FY 2015 FY 2016 1H 2017
Ore Processed, Kt
Okhotsk Svetloye Total 1,055 1,065 909 621 752 1,040 FY 2013 FY 2014 FY 2015 FY 2016 1H 2017
AISC (US$/GE oz)
697 1,077 399 141 68 1,336 595 697 1,077 399 1,477 663 FY 2013 FY 2014 FY 2015 FY 2016 1H 2017
Ore mined, Kt
Okhotsk Svetloye
Grade, (g/t) 7.5 6.7 6.2 4.9 3.3
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> De-bottlenecking heap leach stacking capacity at Svetloye given significant expansion in ore reserves following positive grade reconciliation after in-fill drilling and positive exploration results on the flanks > Continued exploration at smaller high-grade satellite deposits potentially providing feedstock at Khakanja (Khotorchan, Kundumi, Kirankan) > Advancing Levoberezhny, particularly the heap leachable oxide cap > Evaluation of strategic options for the Khakanja plant and associated smaller deposits
˃ Stable production at very low costs at Svetloye for the next 7-8 years ˃ Flexible ore source planning for Khakanja
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Key facts:
> Location: Sverdlovsk Region, Russia > Commissioning: 2000 (HL), 2005 (CIP) > Life of mine: 2027 > Mining: Open pit > Processing: 950 Ktpa CIP circuit > Reserves (JORC): 0.9 Moz GE , 2.5 g/t > Resources (JORC): 0.8 Moz GE , 4.4 g/t > Employees: 874
Operation Development Plant City
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Notes: GE produced at 80:1 Ag oz/Au oz; GE (gold eq.) per oz sold based on actual realised prices (f or AISC)
924 915 924 1,001 498 850 747 450 319 180 1,774 1,662 1,375 1,321 678 FY 2013 FY 2014 FY 2015 FY 2016 1H 2017
Ore Processed, Kt
CIP HL 692 515 391 419 473 FY 2013 FY 2014 FY 2015 FY 2016 1H 2017
AISC (US$/GE oz)
Grade, (g/t)
154 159 141 129 58 FY 2013 FY 2014 FY 2015 FY 2016 1H 2017
Production (GE Koz)
3.6 3.7 3.4 3.6 3.5
11 11 10 10 5 FY 2013 FY 2014 FY 2015 FY 2016 1H 2017
Waste mined, Mt
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> Reserve estimate for Saum and Tamunier in 1H 2018 > Feasibility study for the joint development of Saum, North Kaluga and Tamunier with an upgrade of the existing CIP plant to include flotation circuit in Q3 2018 > Continue regional exploration and evaluation of bolt-on M&A opportunities
˃ Declining medium-term production and the cessation of mining at Voro in 2019 ˃ Stockpile processing in 2019-2027
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Key facts:
˃ Location: Kapan province, Armenia ˃ Acquired by Polymetal: April 2016 ˃ Mining: underground ˃ Processing: flotation concentration followed by offtake ˃ Life of mine: TBC in Q3 2017 ˃ Ore reserves: TBC in Q3 2017 ˃ Mineral resources (JORC):
˃ Employees: 1,085
Yerevan
2400 km 320 km
Kapan project Lichkvaz
70 km
Azerbaijan Turkey Iran Armenia
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Notes: GE produced at 80:1 Ag oz/Au oz; GE (gold eq.) per oz sold based on actual realised prices (f or AISC)
64 224 247 1H 2016 2H 2016 1H 2017
Ore Processed, Kt
1,930 1,184 1,197 1H 2016 2H 2016 1H 2017
AISC (US$/GE oz)
Grade, (g/t)
6 19 25 1H 2016 2H 2016 1H 2017
Production (GE Koz)
4.2 3.9 4.5
2 7 8 1H 2016 2H 2016 1H 2017
Underground development, Km
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> Carry on with improvement measures aimed at debottlenecking the underground mine > Undertake additional drilling to produce a JORC-compliant reserve estimate and a combined LOM for Kapan and Lichkvaz in Q3 2017 > Continue active exploration activities in the region
A capital-light regional processing hub with sizeable production of more than 100 Koz of GE per annum
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strikes and lockouts
major environmental incidents
staff turnover in 2016
0.2
LTIFR (4 fatalities in 2016)
community investments 2014-16
female qualified personnel
Member 2016/2017
cooperation agreements with communities
hours of training per person
people
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2016-2017 Sustainability highlights
> Signatory to the International Cyanide Management Code > Leaderfor Environmental management in WWF/UN rating > Completion of ESIA at Kyzyl (EBRD Environmental and Social Policy implemented) > CarbonManagementand Human Rights Policies signed > 50% reduction of extreme risks and 14% LTIFR reduction > Biodiversity conservation incorporated into corporate environmental management > Over 50 social service institutions renovated or upgraded in host communities
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Notes: Shareholder structure data as of 30 August, 2017
59% Free Float 27% ICT Group
(Alexander Nesis)
13% PPF
(Petr Kellner)
Christine Coignard Senior INED ex-MD HCF International Advisors Chair of the Remuneration Committee Jonathan Best INED ex-CFO of AngloGold Ashanti Chair of the Audit and Risk Committee Russell Skirrow INED ex-Chairman ML Metals/ Mining IB team Leonard Homeniuk INED ex-President of Centerra Gold Chair of the Safety and Sustainability Committee Jean-Pascal Duvieusart PPF Group ex-Managing Partner at McKinsey Konstantin Yanakov ICT Group Ltd ex-CFO of Polymetal Marina Gronberg Vitalbond Ltd and Vitaly Nesis Group CEO
Shares outstanding 430,112,661
1% Management & Directors
Bobby Godsell Chair Chairman of Business Leadership South Africa, ex-CEO of AngloGold Ashanti Chair of the Nomination Committee
INED Non-independent
individuals
investors
Shareholder structure Board of Directors
The majority of our Board is independent
| 64 Type of risk Recent issues in mining jurisdictions
Russia/Kazakhstan/Armenia Resource nationalism
> Tanzania – export ban on concentrate since March + possible introduction of 1% clearing fee on mineral export
with risk of nationalisation > Indonesia - Freeport McMoran divests ownership to local aluminum producer under gov’t pressure Low risk No instances of government overreach
in more than 10 years
Tax regime
> Burkina Faso – adoption of new mining code abolishes a previous 10% tax break on mining company profits (now 27.5%) > South Africa – introduction of new 1% royalty on mine turnover > Zambia – increased electricity tariffs for copper mines Stable tax regime Relatively low corporate and sector taxation levels No recent changes to royalty rates and mineral extraction tax; Corporate tax rates stable at 20% since 2009 in Russia and Kazakhstan, and since 2006 in Armenia
Environmental /regulatory/ community limitations
> Greece and some other EU countries – ban on project development for environmental reasons in many locations > Philippines – ban on open-pit mining and closure of several operating mines involved in production of nickel for environmental reasons > Colombia – project suspension by government after community anti-mining vote Low risk No material issues
Labour issues
> South Africa miners’ strikes, examples of illegal miners invades to mine sites Low risk None, unemployment rates at a low 5.3% in Russia, 4.9% in Kazakhstan and 17.4% in Armenia Labour strikes extremely rare; labour unions only traditionally influential in coal mining
Source: Publicly av ailable data
1H 2017 1H 2016 Change, % (1) FY 2016 Revenue, US$M 683 593 +15% 1583 Adjusted EBITDA, US$M 257 293
759 Adjusted EBITDA margin 38% 49%
48% Total cash cost (TCC), US$/GE oz 656 514 +28% 570 All-in sustaining cash cost (AISC), US$/GE oz 906 754 +20% 776 Net earnings/ (loss) for the period, US$M 120 165
395 Underlying net earnings, US$M 117 125
382 Underlying EPS, US$/share 0.27 0.29
0.90 Dividend declared during the period, US$/share (2) 0.18 0.13 +38% 0.37 Dividend proposed for the period, US$/share 0.14 0.09 +56% 0.37 Net operating cash flow, US$M 35 65
530 Capital expenditure, US$M 193 117 +65% 271 Free cash flow (pre M&A), US$M (3) (163) (53) +208% 257 30-June-17 31-Dec-16 Net debt, US$M 1,582 1,330 (4) +19% Net debt/Adjusted EBITDA (5) 2.19 1.75 +25%
Notes: (1) % changes can be different from zero even when absolute amounts are unchanged because of rounding. Likewise, % changes can be equal to zero when absolute amounts differ due to the same reason. (2) 1H 2017: f inal dividend for FY 2016 paid in May 2017. 1H 2016: final dividend for FY 2015 paid in May 2016. (3) Net cash generated by operating activities less capital expenditures. (4) As at 31 Dec 2016. (5) On a last 12 months basis
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| 66 754 906
AISC 1H 2016 Domestic inflation Mining tax change - Au&Ag price USD rate change Au/Ag ratio change Average grade processed Changes in sales structure Other AISC 1H 2017
AISC reconciliation, US$/oz
Source: Company data GE based on actual realised prices
˃ AISC driven mostly by the increase in TCC as a result of continued Russian Rouble strengthening which was partially offset by the robust operating performance at Varvara, Kapan and Svetloye (Okhotsk hub). ˃ We remain on track to meet the FY2017 AISC guidance of US$ 775-825/GE oz. + 37
+ 139 + 1 + 28
| 67 Labor, 24% Fuel, 20% Services, 23% Grid power, 4% Non-fuel consumables, 21% Royalty, 8% $ / RUB / Tenge RUB/ Tenge Oil $ / Au Oil / RUB / Tenge RUB / Tenge
RUB, 41% Tenge , 9% $, 20% Oil, 30%
OpEx Structure, $/oz
> A 1 RUB movement in domestic currency will have an US$8/oz effect
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RUB, 20% $, 40% Tenge, 40%
Project Capex
(Kyzyl + Amursk + LT projects)
Sustaining Capex
RUB, 50% $, 20% Tenge, 30%
> A 10% devaluation of domestic currencies will have approx. 8% effect on the sustaining capex or ~US$8/oz > A 10% devaluation of domestic currencies will have approx. 6% effect on the project capex (US$175M in 2017) or ~US$11 million
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2.1 1.5 2.0 1.4 0.9 0.9 3.0 7.3 0.9 19.9 0.6 0.6 1.7 3.2 0.5 0.8 2.9 3.1 2.5 1.9 0.7 18.6
Dukat Omolon Albazino Mayskoye Okhotsk Voro Varvara Kyzyl Kapan Nezhda Other Total
Reserves Resources
Notes: Reserv e and resource statement (JORC 2012) as at 01.01.2017 including updates f rom Dolinnoy e and Nezhda. Gold and silv er price assumptions of $1,200/oz and $16/oz respectiv ely . *Assuming a reasonable resource-to-reserv e conv ersion 1) Includes Kapan and Lichkv az mines 2) Kuty n, Veduga
GE Moz 4.7 3.7 4.2 6.9 3.2 2.5 1.6 3.9
Reserve grade, g/t
2.7 2.0 3.7 4.7 1.4 1.7 5.9 1.6 38.6 2023 2024 2031 2034 2024 2027 2029 LOM 7.7 2039 4.1 10.4 2.5 N/A N/A
* *
1 2
N/A 1.9