PETROPAVLOVSK PLC FY 2017 Results Presentation 28 March 2018 - - PowerPoint PPT Presentation

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PETROPAVLOVSK PLC FY 2017 Results Presentation 28 March 2018 - - PowerPoint PPT Presentation

PETROPAVLOVSK PLC FY 2017 Results Presentation 28 March 2018 Cautionary and Forward-looking Statements Some statements contained in this presentation or in documents referred to in it are or may be forward-looking statements, including


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PETROPAVLOVSK PLC

FY 2017 Results Presentation

28 March 2018

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  • Some statements contained in this presentation or in documents referred to in it are or may be forward-looking statements, including references

to guidance. Such statements reflect the Company’s current views with respect to future events and are subject to risks, assumptions, uncertainties and other factors beyond the Company’s control that could cause actual results to differ from those expressed in such statements. Although the Company believes that such forward-looking statements, which speak only as of the date of this presentation, are reasonable, no assurance can be given that they will prove to be correct. Therefore, you should not place undue reliance on these statements

  • There can be no assurance that the results and events contemplated by the forward-looking statements contained in this presentation will, in

fact, occur. The Company will not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events, circumstances or unanticipated events occurring after the date of this presentation, except as required by law or by any appropriate regulatory authority. Nothing in this presentation or in documents referred to in it should be considered as a profit forecast.

  • The past performance of the Company and its securities is not, and should not be relied on as, a guide to the future performance of the

Company and its securities

  • This presentation does not constitute, or form part of or contain any invitation, recommendation or offer to any person to underwrite, subscribe

for, buy, sell, otherwise acquire, exchange or dispose of any shares or securities in the Company or advise persons to do so in any jurisdiction, including, but not limited to, the Russian Federation, nor shall it, or any part of it, form the basis of or be relied on in any connection with or act as an inducement to enter into any contract or commitment therefore or engage in any other investment activity. In particular, this presentation and the information contained herein are not an offer of securities for sale in the United States. This presentation does not constitute an advertisement of any securities in the Russian Federation

  • No reliance may be placed for any purpose whatsoever on the information or opinions contained in this presentation or on its completeness and

no liability whatsoever is accepted for any loss howsoever arising from any use of this presentation or its contents or otherwise in connection therewith.

  • The development and production plans and estimates set out herein represent the current views of the Company's management. The

Company’s Board reviews the production estimates on an ongoing basis. All planning is subject, inter alia, to available funding and capital allocation decisions

  • English law and English courts will have exclusive jurisdiction over any disputes arising from or connected with this presentation

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Cautionary and Forward-looking Statements

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FY 2017 Highlights

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FY 2017 Achievements

Increased production, positive cash flows and optimised debt profile, development

  • n schedule

4 4

  • Revenues of US$587m, +9% yoy
  • EBITDA of US$197m, -2% yoy
  • Profit for the Period of US$41m, +31% yoy
  • Net cash from Operating Activities(1) of US$124m, +235% yoy

Gold sales +10% yoy at a higher price, helped to drive revenues Costs impacted by grades, recoveries, input cost inflation + stronger RUB FX Growth projects: full scale POX development, targeting Q4 2018 launch Improved debt capital terms, maturity + cost, lower YE Net Debt

  • 70% of new R&R additions are non-refractory, 16% is underground
  • Ongoing exploration: significant prospectivity remains at Albyn, Malomir, Pioneer for

additional discoveries

  • POX: construction progress currently at 80%
  • Malomir flotation: Q2 2018 commissioning
  • Underground: Pioneer + Malomir now fully operational
  • TCC: US$741/oz, +12% yoy
  • AISC: US$963/oz, +19% yoy (underground sustaining capex, stripping, central admin)

(1) Primarily due to a decrease in working capital (2) Before depletion

+6% increase(2) in Total JORC Mineral Resources to 20.9Moz

  • US$500m of guaranteed notes issued in Q4, bank loans repaid, production schedule

aligned with development plans

  • De-risking of working capital via gold sales agreement with Gazprombank (96Koz)
  • YE 2017 Net Debt down to US$585m
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FY 2017 Financials

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FY 2017 Financial Highlights

Profit for the period +31%, Net cash from operating activities +235%

Note: Operating profit includes the Group’s share of an estimated partial reversal of previous impairment losses on IRC PPE in relation to the K&S mine, amounting to 31.1% of c.US$130m Profit for the period reflects an increase in operating profit partially offset by the US$29.2m effect of deferred taxation

Units 2017 2016 Change Gold production 000oz 439.6 400.2 +10% Gold sold 000oz 439.8 399.9 +10% Group revenue US$m 587.4 540.7 +9% Average realised gold price US$/oz 1,262 1,222 +3% Total average cash costs (TCC) US$/oz 741 660 +12% All-in sustaining costs (AISC) US$/oz 963 807 +19% Operating profit US$m 111.9 77.0 +45% Underlying EBITDA US$m 196.8 200.1 (2%) Profit before tax US$m 60.5 27.0 +124% Profit for the period US$m 41.5 31.7 +31% Net cash from operating activities US$m 124.0 37.0 +235% Net Debt (as at 31 Dec) US$m (585.1) (598.6) (2%)

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US$660/oz US$741/oz US$46/oz US$37/oz US$2/oz US$81/oz US$69/oz US$15/oz US$1/oz TCC FY2016 Lower costs Mining tax concession Other taxes Change in grades / recoveries FX Deferred stripping Co-product effect TCC FY2017

Evolution of Hard Rock Cash Costs 2017 vs. 2016

TCC/oz +12% in 2017, primarily due to changes in grades / recoveries + effect of a stronger RUB, partially mitigated by lower unit costs of production

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988 789 1,004 719 807 1,367 1,029 1,278 718 963 Pokrovskiy Pioneer Malomir Albyn FY AISC

TCC and AISC Mine by Mine

Group AISC +19% yoy, due to underlying increase in TCC, sustaining capex, exploration spend, prospective stripping and central admin

+38% +30% +27%

  • 0%

+19% 2016a 2017a Change yoy

Total Cash Costs (TCC, US$/oz) All In Sustaining Cash Costs (AISC, US$/oz)

878 631 824 581 660 1,236 791 929 541 741 Pokrovskiy Pioneer Malomir Albyn FY TCC +41% +25% +13%

  • 7%

+12%

US$m Comment Sustaining exploration capex 16.1 Pioneer, Malomir, Albyn Sustaining u/ground mine capex 8.4 Pioneer, Malomir Planned tailings expansion 7.4 Pioneer, Malomir, Albyn Other sustaining capex 9.1 Across all mines

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Precious metals operating cash expenses 2017 vs. 2016

Cash expenses increased 18% to US$313m in 2017, due to a stronger RUB + inflation

  • f some RUB denominated costs, particularly energy

(2) Before movement in ore stockpiles, GIC and bullion in process of US$19.2m

Consumables + Other Materials 37%

(1) Before movement in ore stockpiles, GIC and bullion in process of US$40.5m

Consumables + Other Materials 37% Labour 21% Fuel 15% Electricity 9% Other 10% External Services 8%

FY2016 Precious Metals Operating Cash Expenses FY2017 Precious Metals Operating Cash Expenses = US$266.0m(1) = US$313.4m(2)

Note: avg. RUB:US$ FX rate FY2017 = 58.3, FY 2016 = 67.2  13% yoy change

Consumables + Other Materials 37%

Consumables + Other Materials 34% Labour 23% Fuel 14% Electricity 10% Other 7% External Services 12%

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FY2017 Development and Exploration Spend

Total FY2017 exploration + development capex = US$88.1m

11.6 6.4 3.8 Pioneer Albyn Malomir

FY2017 Exploration Spend (US$m)

US$21.9m

Comment FY2017 Development Spend (US$m)

33.2 14.6 12.7 3.6 2.2 POX Pioneer Malomir Albyn PPE Upgrade

US$66.2m

  • Overall POX development spend as at 31 Dec 2017 =

c.US$233m

  • US$33.2m was spent on POX in 2017
  • c.US$62m allocated to POX in 2018
  • c.US$6m allocated to Malomir flotation in 2018

(1) Includes US$8.1m of flotation and tailing dam related expenditure (1)

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Debt Profile

Net debt at a 5 year low, majority of existing debt long term in nature (fixed income)

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(2)

  • US$100m convertible bond issue
  • 9% coupon, paid quarterly
  • 5 year maturity (Mar 2020)
  • Exchange price: GBP£0.0826
  • US$500m guaranteed notes issue
  • 8.125%, paid semi-annually
  • 5 year maturity (Nov 2022)

Convertible Bond + Guaranteed Notes

  • US$4m in short term bank debt

Bank Debt Debt Composition

83% 17% 1% Convertible Bond Bank Debt Notes Issue

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2016 to 2017 Change in Net Debt

Net Debt down c.50% from a peak of c.US$1.2bn at end of Q1 2013, to under US$600m as at YE 2017

156.8 47.5 2.6 2.7 598.6 31.1 88.1 60.2 16.7 585.1 As at 1 Jan 2017 Net cash generated by

  • perating activities before

working capital changes Decrease in w/c Income tax paid Capital expenditure Issue of Notes (net of transaction cost) Interest accrued Bank debt refinancing Other As at 31 Dec 2017 Net cash from operating activities before w/c changes

Note: figures exclude IRC

US$m

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FY 2017 Operational Review

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Operations Overview

Strong performance across all assets, well positioned for 2018

182Koz (41%) US$541/oz 31Koz (7%) US$1,236/oz 162Koz (37%) US$791/oz 66Koz (15%) US$929/oz

Production by Mine (incl. FY 2017 TCC/oz) Operational Highlights

  • Gold production +10% at 440Koz, as per guidance
  • Strong performance from Pioneer + Albyn
  • Lower grades + recoveries vs. 2016 (Pokrovskiy, Pioneer,

Malomir), due to more refractory nature of ores mined

  • Implementation of resin treatment facility to improve
  • perational efficiencies + GIC(1)
  • Underground at Pioneer + Malomir now fully operational
  • Initial development issues resolved, no material impact on

production

  • Malomir producing at full capacity, Pioneer to ramp up in

2018

  • Pokrovskiy mine closed
  • Work under way to transform site into key component of

the POX Hub

  • POX set to unlock c.4Moz of refractory reserves
  • Construction progress at 80%, on schedule for Q4 2018

launch

  • Exploration success = R&R uplift
  • +1.2Moz of Resources added
  • 70% of additions non-refractory, 16% underground high

grade

  • New material helps de-risk / smooth production profile

during final stages of development

(1) GIC = gold in circuit

Pioneer Malomir Pokrovskiy Albyn

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Development Update

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POX Hub Overview

Strategically positioned

CHINA

Khabarovsk Zabaykalsk EAO Yakutia Pokrovskiy POX Hub Pioneer (40km from POX hub) Malomir (670km from POX hub) Pilot POX Plant Albyn

Operating Mine Underground POX Analytical Labs Hydro Plant

Lime Deposit

  • Excellent location
  • Well established infrastructure
  • 10km from Trans-Siberian Railway
  • Access to ample hydropower
  • Milling facilities and skilled workforce
  • Viable hub for processing third party ore

Blagoveschchensk

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POX Hub Path to Production

POX commissioning progressing on time / budget for Q4 2018 launch, with ramp up to commercial production throughout 2019

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Underground Mines Overview

NE Bakhmut (Pioneer) + Quartzitovoye (Malomir)

Pioneer Malomir Current JORC R&R 0.63Moz of Resources inc. 0.26Moz @ 5.46 g/t of Reserves 0.30Moz of Resources inc. 0.17Moz @ 5.13 g/t of Reserves Mine life 5 yrs + Underground development completed 2017 3,646m 3,084m Production Started 2017, 35kt @ 2.78g/t Started 2017, 74kt @ 8.03g/t Ramp up In the process of ramping up to c.200ktpa, full capacity expected in H2 2018 Mine now operating at full capacity c.200ktpa 2018 expected grade c.3.7g/t Grade to improve to 5 – 6g/t from 2019 c.6.3g/t Upside Production upside from NE Bakhmut down dip + strike extensions, Andreevskaya + Nikolaevskaya zones 2018 exploration: to add to underground R&R Exploration upside at down deep extensions of Quartzitovoye zone

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Exploration Update

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Depletion + Disposals Refractory Resources

6.8 5.2 13.0 12.8 12.1 12.0 9.3 9.3 9.3 9.6 2.1 6.0 10.1 12.3 11.7 13.8 14.0 14.4 10.4 11.2 1.4 1.9 2.4 3.8 5.1 5.9 6.6 7.2 11.2 11.7 Moz 5Moz 10Moz 15Moz 20Moz 25Moz 30Moz 35Moz 2008a 2009a 2010a 2011a 2012a 2013a 2014a 2015a 2016a 2017a

Non-Refractory Resources

Track Record Of Resource Growth

Ongoing exploration added +6% to the Group’s JORC Resources in 2017(1)

(1) 0.67Moz Au (c.8%) increase (before depletion) in Reserves and 1.17Moz Au (c.6%) increase (before depletion) in Resources

  • c.20.2Moz of JORC Resources including c.8.0Moz of Reserves
  • c.1.2Moz Au (+6%) increase in Resources across the Group’s assets, of which c.70% non-refractory (1)
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2017 Objectives 2017 Results

Pioneer

  • Discover, explore, prepare to mine

new non-refractory reserves for

  • pen pit + underground mining

Albyn

  • Expand + improve R&R base of

satellite deposits ahead of main pit depletion in 2019 Malomir

  • Exploration to support sustainable

underground operations at Quartzitovoye

2017 Exploration Objectives + Results

Exploration work yielded encouraging near + short term results

Pioneer

  • Discover + explore high grade

refractory reserves for both open pit + underground mining Albyn

  • Identify new satellites, potentially

suitable for mining in the short or mid term Pioneer

  • Nikolaevskaya: new high grade pay shoot discovered, maiden

Reserves for underground mining Albyn

  • Sukholozskiy zone: high grade exploration results
  • Ulgen: early stage exploration suggests potentially large Albyn

satellite target

Near term: boost non-refractory

  • pen pit + underground production

Near term non-refractory discoveries Mid term: add high quality refractory + non-refractory R&R Mid-term discoveries

Pioneer

  • Katrin: new non-refractory deposit explored, first JORC R&R

established, open pit production started

  • NE Bakhmut 2: further non-refractory open pit + underground R&R

discovered, open pit production to start 2018

  • Andreevskaya: new underground Reserves established, production

possible from 2019 Albyn

  • Elginskoye: Reserves increased from c.1.2 to 1.5Moz
  • Unglichikan: Resource increased from c.0.8 to c.1.1Moz

Malomir

  • New high grade pay shoot discovered
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Pioneer (2018 exploration budget US$8m)

  • Katrin / Alexandra-Shirokaya / Perspektinaya:

continue to explore non-refractory resources for open pit mining

  • Nikolaevskaya / NE Bakhmut / Andreevskaya:

continue deep drilling

  • Sosnovaya / Alkagan-Adamovskaya: early stage

“blue-sky” exploration Albyn (2018 exploration budget US$7m)

  • Exploration of underground mining targets below

Albyn pit

  • Exploration aiming on high grade resource for open

pit mining at satellite targets Malomir (2018 exploration budget US$1m)

  • Quartzitovoye: continue to support sustainable

underground mining operations New licences - exploration portfolio expansion

  • Plans to bid for 5 new exploration licenses located

near Pioneer, Malomir + Tokur projects at government auctions Pioneer

  • Katrin / NE Bakhmut 2: new open pit Reserves
  • NE Bakhmut 2 / Andreevskaya / Nikolaevskaya: new

underground Reserves

  • Sosnovaya license: promising early stage exploration

results Albyn

  • Sukholozhskiy: high grade drill intersections
  • Unglichikan / Elginskoye: expansion of Reserves

Malomir

  • New high grade pay shoot discovered

2018 Exploration Objectives

Building on 2017 exploration success

2017 Results 2018 Objectives

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Outlook

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FY 2018 Outlook

We enter 2018 in a strong position to complete the transition to a miner capable of realising the significant value of our assets

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Production Costs

  • TCC: US$700 – 750/oz, based on a RUB:US$ FX of 58:1
  • AISC: US$800 - 850/oz, helped by lower sustaining capex + lower central admin

Capex

  • US$105m: US$62m POX + US$6m Malomir flotation / tailings + US$10m underground

development + US$12m Pioneer / Albyn tailings + US$15m exploration activity

Priorities For 2018

  • 420 – 460Koz: includes open pit, underground + maiden POX Hub output

Balance Sheet Strength + Flexibility

  • Outstanding forward sales totalling 350Koz @US$1,252/oz
  • Forward gold sales agreement (96Koz) provides greater flexibility in managing w/c

2018 Guidance

  • Leverage our substantial refractory gold resource base while optimising our non-refractory resources
  • Focus on producing profitable gold oz, maximising cash generation from operating mines and enhance open pit

production, complemented by a gradual ramp up of higher grade underground operations at Pioneer + Malomir

  • The POX Hub, a top priority for management in 2018, is at the core of our growth prospects
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Appendix

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Operations Overview

Group Production Summary

Mining Units FY 2017a FY 2016a Total material moved m3 000 57,539 61,947 Ore mined t 000 17,990 10,798 Average grade g/t 0.9 1.1 Processing Units FY 2017a FY 2016a RIP Total milled t 000 16,620 16,166 Average grade g/t 0.8 0.9 Gold content Koz 448 472 Recovery rate % 80% 86% Gold recovered Koz 360 407 Heap Leach Ore stacked t 000 1,250 1,141 Average grade g/t 0.4 0.5 Gold content Koz 18 18 Recovery rate % 50% 51% Gold recovered Koz 9 9 TOTAL gold production Koz 440 400 Gold sales Koz 440 400 Costs Units FY 2017a FY 2016a TCC US$/oz 741 660 AISC US$/oz 963 807

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Albyn FY 2017 Operating Results

Our largest producing mine with a 100% non-refractory defined resource base, with a largely under explored licence area

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2016 2017

Production Processed Grades

2016 2017

Ore Mined Total Milled

2016 2017 2016 2017

2017 Performance 2018 Outlook

  • Production +4% vs. 2016
  • Consistently high plant recoveries of 90%+
  • Elginskoye + Unglichikan R&R expanded,

extending Albyn mine life

  • Production expected to be marginally higher

due to slightly higher grades

  • Drilling to take place below Albyn pit, to

model + assess underground potential

  • Continued exploration at Unglichikan +

Afanasevskoye to further expand non- refractory R&R base + subsequent mine life

5.0Mt 5.3Mt 4.7Mt 4.6Mt 1.3g/t 1.2g/t 174Koz 182Koz

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Pioneer FY 2017 Operating Results

Pioneer is one of the Group’s most prospective assets, providing near term growth from its underground non-refractory exploration + development potential

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2016 2017

Production(1) Processed Grades

2016 2017

Ore Mined Total Milled

2016 2017

2017 Performance 2018 Outlook

  • Production +21% vs. 2016
  • Underground mining commenced in June,

with 35kt @ 2.78g/t mined in 2017

  • Production levels increased despite lower

grades + recoveries, driven by successful measures to release gold in circuit

  • Underground R&R expanded from 0.36 to

0.63Moz

  • Non-refractory open pit Reserves increased

from 0.98 to 1.10Moz despite depletion

  • Pioneer production expected to be at same

level as in 2017

  • Underground will continue ramping up to full

capacity, with Pioneer expected to produce

  • re at an avg 4-5g/t towards year end
  • Currently 263Koz of underground reserves,

with significant potential to increase in the course of further exploration works planned for 2018

3.3Mt 8.5Mt 6.7Mt 6.8Mt 0.8g/t 0.7g/t 133Koz 162Koz

(1) Includes production from heap leach of 6.1Koz (2016: 5.3Koz)

2016 2017

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Malomir FY 2017 Operating Results

Preparation under way for large scale refractory mining to unlock c.6Moz of refractory R&R

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2016 2017

Production Processed Grades Ore Mined Total Milled

2016 2017 2016 2017

2017 Performance 2018 Outlook

  • Production expected to increase in 2018 due

to addition of gold from refractory ores. Non- refractory production will be as in 2017

  • Commence refractory concentrate production
  • Maintain underground mining at a steady

state output of c.200ktpa of ore

1.5Mt 2.8Mt 3.0Mt 3.4Mt 55Koz 66Koz 2016 2017 0.9g/t 0.9g/t

  • Production +20% vs. 2016, driven by +80%

increase in ore mined, +13% increase processed ore volumes

  • Underground mine development at

Quartzitovoye completed, with the mine at full production by YE

  • Stage 1 flotation plant completed, awaiting

commissioning in Q2 2018

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Pokrovskiy FY 2017 Operating Results

Having produced more than c.2.0Moz since 1999, work is well under way to convert Pokrovskiy into the POX Hub, to support the Group’s next phase of growth

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2016 2017

Production(1) Processed Grades

2016 2017

Ore Mined Total Milled

2016 2017 2016 2017

2017 Performance 2018 Outlook

  • Production as budgeted
  • RIP production to stop in Q1 2018
  • Site prepared for RIP plant decommissioning +

integration into POX

  • Production expected to be significantly below

2017 levels as existing RIP plant + site infrastructure is in the process of being integrated / converted into the POX Hub

1.0Mt 1.5Mt 1.8Mt 1.8Mt 0.7g/t 0.5g/t 38Koz 31Koz

(1) Includes production from heap leach of 2.9Koz (2016: 4.1Koz)