Polymetal International PLC (POLY)

[idpickering]

Half-yearly report for the six months ended 30 June 2021

https://www.investegate.co.uk/polymetal ... 0008EFKVE/

[idpickering]

Important notice regarding FTSE exclusion

The recent exclusion of Polymetal shares from the series of FTSE equity indices does not impact the Сompany's listing on the London Stock Exchange (LSE). Trading of POLY shares on LSE and Astana International Exchange (AIX) continues.

https://www.investegate.co.uk/polymetal ... 3004ECPTQ/

[idpickering]

Response to media speculation

The Company notes recent speculation in the media about potential change in the corporate structure of the Group. Polymetal is evaluating various options that could maximise shareholder value. Such options, among others, include potential modification of asset holding structure which would ensure distinct ownership in various jurisdictions in which the Company operates. Early stage deliberations are ongoing and accordingly, there can be no certainty as to the outcome. A further announcement will be made as and when appropriate.

https://www.investegate.co.uk/polymetal ... 0026EMQSW/

[idpickering]

Business update and impact of sanctions.

Sale of bullion/concentrate

Sales of bullion and concentrate from Kazakhstan continue as usual.
In Russia, sales of gold and silver concentrates continue normally to East Asia and Kazakhstan. Shipments have been temporarily impacted by the change of freight and logistics service providers, which is likely to result in higher costs.
Sales of gold bullion in Russia have been restored to new counterparties on terms consistent with those received earlier. Domestic demand for gold is boosted by local retail investment.
The recent Central Bank of Russia statement that the bank will buy gold from commercial banks at a fixed price of RUB 5,000/g (approx. US$ 1,800/oz at the time of the writing) is not expected to affect Group's sales price materially as gold continues to be sold at global market price, both for exports and to satisfy physical retail demand.
Liquidity & net debt

Net debt increased to US$ 1.94 billion as of 29 March (31 December 2021: US$ 1.65 billion) mainly driven by seasonal working capital increase and accelerated procurement. 94% of the total debt is denominated in US dollars.
The Group has approx. US$ 0.4 bn in cash and cash equivalents deposited with non-sanctioned financial institutions. In addition, the Company maintains US$ 0.5 billion of undrawn credit lines from non-sanctioned Russian financial institutions, while additional liquidity is expected to become available in Q2 2022 as banks gradually re-open lending.
Lending from Russian banks is available in RUB only. RUB interest rates are 23-25% on average following Central Bank's base rate increase to 20%. The Group is utilising these facilities occasionally for short-term working capital financing.

And;

Dividends

The Board and the management continue to re-evaluate the stability, liquidity and solvency of the business, including its dividend recommendation, in light of significant funding and regulatory uncertainty.
The Board also carefully monitors the MOEX trade re-opening and the developments related to National Settlement Depositary - Euroclear operations which are critical to delivering dividends to Polymetal shareholders trading through MOEX (approx. 22% of issued share capital as of 1 March). The ability to distribute dividends to all shareholders in an equitable way will be one of the factors in finalising the dividend decision.

https://www.investegate.co.uk/polymetal ... 0005EISCC/

[idpickering]

Analyst and Investor Day.

Polymetal will host its annual Analyst and Investor Day in the format of video webcast on Monday, 25 April 2022.

During the call Vitaly Nesis, Group CEO, and Maxim Nazimok, CFO, will provide an update on Polymetal's operations, projects and impact of sanctions.

The event will begin at 11:00 London time (13:00 Moscow time).

To participate in the webcast please follow the link: https://www.webcast-eqs.com/polymetal20220425.

A recording of the webcast will become available at the same link as above within 24 hours after the call.

https://www.investegate.co.uk/polymetal ... 0016EBKCI/

[idpickering]

Resignation of Auditor.

Deloitte LLP considers that the following circumstances connected with its ceasing to hold office should be brought to the notice of the members or creditors of the Company:

Following the announcement on 7 March 2022 that Deloitte's Russian and Belarus firms would separate from the global network of member firms of which Deloitte LLP is a part of, they have concluded that they will not be able to carry out an audit of the Company given that the majority of its assets and operations are in Russia.
A copy of the statement of Deloitte LLP containing above information:

has been submitted to the National Storage Mechanism and will be available shortly at https://data.fca.org.uk/#/nsm/nationalstoragemechanism;
will be distributed to each member of the Company and to each person entitled to receive notice of a general meeting of the Company as required by the Companies (Jersey) Law 1991 within 14 days.
The Board has commenced the search for the replacement of an auditor and will provide a recommendation for shareholders in due course.

https://www.investegate.co.uk/polymetal ... 0006EQGVJ/

[88V8]

This share seemed a good punt a few weeks ago, less so now.
Glad I didn't take the plunge.

Comment from yesterday's ADVFN news feed

'Berenberg downgraded Polymetal on Wednesday to 'hold' from 'buy', citing heightened uncertainty around the Russian assets and saying it has changed its valuation to be based on the NAV of the Kazakh assets alone.
The bank, which slashed its price target on the stock to 300p from 500p, said the share price has become detached from the underlying business.

"We are currently attributing no value in our NAV to the Russian assets given uncertainty about Polymetal’s ability to remit funds from assets in the country to other parts of the corporate structure," it said.
Berenberg said the company faces a number of material headwinds in terms of negotiating the sanctions that have been applied by the West on Russia and vice versa.

"There is the risk that Alexander Nesis, who holds a majority interest in ICT, the company’s 24% shareholder, will be sanctioned," it said. "The company may also need to secure debt from either domestic or Chinese lenders to replace the debt that is currently held with European banks, with higher borrowing costs. The company will face challenges importing spares, specialist equipment and skills from Western suppliers.

"Russian companies are now not allowed to remit dividends to offshore entities and so any dividend in the future will need to be funded from free cash flow from the Kazakh entities. A key decision that will need to be made is whether to split the business into its Russian and Kazakh assets, with the latter accounting for 35% of our NAV and 30% of group production."

V8

[idpickering]

Final Dividend Postponement.

Polymetal announces that the Board of Directors postpones the decision on 2021 final dividend payment.

The Board has reviewed significant changes in operating conditions that the Group has encountered in the last few weeks. As a result of this consideration the Board has concluded that it is no longer appropriate to recommend or declare the 2021 final dividend payment that was due to be put to shareholders for approval at the Annual General Meeting on 25 April 2022 and has decided to postpone the decision on the dividend payment to August 2022 (along with interim dividend decision for 1H 2022) due to

Mounting uncertainty with availability of funds due to sanctions on Russian banks and economy.
Higher working capital needs as a result of liquidity crunch and supply chain limitations.
Balance sheet constraints imposed by lower credit availability as well as significantly higher cost of funding.
The resolution in respect of the 2021 final dividend payment that was due to be put to shareholders for approval at the Annual General Meeting on 25 April 2022 will therefore be withdrawn accordingly.

"We have thoroughly re-evaluated the Board's March recommendation on dividends taking into account recent changes in macro and regulatory environment and unanimously have come to a conclusion that the payment decision should be postponed in order to sustain the stability and liquidity of the business. We will continue to monitor the operating, funding and regulatory conditions in which the business operates, hoping that stability is restored, improving visibility which would allow us to return to our cash distribution policy", said Riccardo Orcel, Chair of the Board.

https://www.investegate.co.uk/polymetal ... 0002EOXKV/

[idpickering]

Q1 2022 production results and guidance update.

HIGHLIGHTS

No fatal accidents occurred among Group workforce and contractors in Q1 2022. Lost time injury frequency rate (LTIFR) among the Group's employees stood at 0.10, a 60% decrease over Q1 2021 as there were three incidents recorded (seven in Q1 2021) resulting in minor lost-time injuries.
The Company reconfirms its FY 2022 production guidance of 1.7 Moz GE (1.2 Moz in Russia, 0.5 Moz in Kazakhstan).
Q1 gold equivalent production ("GE") decreased by 6% year-on-year (y-o-y) to 372 Koz as planned grade decline at Albazino and Svetloye more than offset first material contribution from Nezhda. Sales were lower by 50 Koz primarily due to concentrate inventory accumulation at Nezhda and Kyzyl.
Revenue for the quarter grew by 4% y-o-y to US$ 616 million underpinned by higher gold prices and on the back of large historical sales/production gap in Q1 2021.
Net debt rose to roughly US$ 2.0 billion on the back of higher working capital needs. The Company moved swiftly to increase stocks of critical consumables and spares to address supply chain issues related to sanctions. Seasonal concentrate inventory accumulation and the need to blend materials to comply with Chinese import restrictions on [expletive deleted] also played a role.
The Company revises its Total cash cost (TCC) guidance to US$ 850-950/GE oz (US$ 950-1,050/GE oz in Russia and US$ 700-800/oz in Kazakhstan) compared with the previous guidance range of US$ 850-900/GE oz. AISC guidance is revised to US$ 1,200-1,300/GE oz (US$ 1,350-1,450/GE oz in Russia and US$ 900-1,000/oz in Kazakhstan) compared with the previous guidance range of US$ 1,100-1,200/ GE oz. Cost increases predominantly relate to various impacts of economic sanctions against Russia including domestic inflation, sharp escalation of logistical costs and the need to shift to suboptimal supply sources.
POX-2 is likely to experience a 6-month slippage from the original schedule mostly due to supply chain challenges and now is expected to start production in Q2 2024. All other major projects (Kutyn, Prognoz, Urals flotation) are in the advanced stage of construction and will be continued according to the original plans.
Following a thorough project review, the Company suspended indefinitely its Pacific POX project and is currently evaluating options to re-site the facility in Kazakhstan. Commencement of Veduga construction as well as a number of other smaller scale projects have also been delayed by 12-18 months. CAPEX guidance for the full-year 2022 is therefore revised to US$ 650 million (US$ 580 million in Russia and US$ 70 million in Kazakhstan) reflecting both shrinking investment scope and inflationary pressures.
Medium-term production guidance now stands at: 1.65 Moz for 2023, 1.7 Moz for 2024, 1.7 Moz for 2025, 1.8 Moz for 2026.
The decision on 2021 final dividend was postponed until August 2022 as reported earlier.
The Company will host its virtual Analyst & Investor Day today at 11:00 London time (13:00 Moscow time). Please follow the link to join https://www.webcast-eqs.com/polymetal20220425.

https://www.investegate.co.uk/polymetal ... 0009EVJGP/

[idpickering]

Half-year report for the six month ended 30 June 2022.

“Polymetal continued to maintain operational stability in 1H 2022 despite operating in a persistently challenging external environment. Significant disruption in traditional supply chains and sales channels constrained cash flow generation and led to an increase in net debt. The management team continues to focus on ensuring long-term business viability and value creation”, said Vitaly Nesis, Group CEO, commenting on the results.

FINANCIAL HIGHLIGHTS

In 1H 2022, revenue decreased by 18%, totalling US$ 1,048 million (1H 2021: US$ 1,274 million), of which US$ 443 million (42%) was generated from operations in Kazakhstan and US$ 605 million (58%) from operations in the Russian Federation. Average realised gold and silver prices tracked market dynamics: gold price increased by 4% while silver price decreased by 14%. Gold equivalent (“GE”) production was 697 Koz, a 7% decrease year-on-year. Gold sales decreased by 23% year-on-year to 456 Koz, while silver sales increased by 9% to 8.7 Moz. Gold sales lagged production due to the bullion inventory accumulated across the Group’s mines located in the Russian Federation. This gap between sales and production is expected to start closing during Q3 as the Company ramps up export sales to various Asian markets.
Group Total Cash Costs (“TCC”)[1] for 1H 2022 were US$ 853/GE oz, at the lower end of the Group’s full-year guidance of US$ 850-950/GE oz, while being up 20% year-on-year, predominantly due to the sharp increase in domestic inflation and escalation of logistical costs, combined with the planned grades decline in ore processed at Albazino and Kyzyl. Cost performance was significantly affected by the Rouble/USD exchange rate fluctuations, with average rate of 76.2 RUB/USD versus the current level of 60 RUB/USD. Exchange rate dynamics will drive cost performance for H2 2022, as inflationary pressures in the Russian Federation cool down.
All-in Sustaining Cash Costs (“AISC”)1 amounted to US$ 1,371/GE oz, up 34% year-on-year, 6% above the upper end of the full-year guidance range of US$ 1,200-1,300/GE. The increase above TCC dynamics reflected the Group’s need to shift to suboptimal equipment supply sources, coupled with inflationary pressures and accelerated procurement of equipment and critical spare parts. Year-on-year dynamic was also impacted by capitalised stripping at the newly launched Nezhda mine, as well as accelerated stripping at Omolon (Burgali deposit) and Albazino (Kutyn development).
Adjusted EBITDA1 was US$ 426 million, a decrease of 35%, against a backdrop of higher costs and lower sales volumes. Of this, US$ 270 million (63%) was earned from operations in Kazakhstan and US$ 156 million (37%) earned from operations in the Russian Federation.The Adjusted EBITDA margin decreased by 11 percentage points to 41% (1H 2021: 52%).
Underlying net earnings[2] were US$ 203 million (1H 2021: US$ 422 million). As a result of lower EBITDA and non-cash impairment charges (the post-tax amount of US$ 564 million), the Group recorded a net loss for the period of US$ 321 million in 1H 2022, compared to a US$ 419 million profit in 1H 2021.
Capital expenditure was US$ 373 million[3], marginally lower compared with US$ 375 million in 1H 2021 but above original expectations, reflecting accelerated purchases and contractor advances for ongoing projects (most notably, POX-2), combined with inflationary and logistical pressures on the sustaining capex (US$ 178 million in 1H 2022 compared with US$ 127 million in 1H 2021). This was partially offset by the shrinking investment scope, suspension of Pacific POX project and revision of execution timeline for Veduga. The Company currently expects its FY2022 capex to be in the range of US$ 725-775 million.
Net operating cash outflow was US$ 405 million (1H 2021: US$ 358 inflow), on the back of working capital build-up of US$ 624 million. This includes positive cash flow of US$ 140 million from operations in Kazakhstan and negative cash flow of US$ 545 million from operations in the Russian Federation. The Group reported negative free cash flow1 of US$ 630 million (1H 2021: US$ 27 million).
Net debt1 increased to US$ 2,800 million during the period (31 December 2021: US$ 1,647 million), representing 2.27x of the LTM Adjusted EBITDA (1H 2021: 1.05x). The increase in net debt was driven by unsold metal inventory accumulation, accelerated purchases of equipment and spares, funding of the critically important contractors and suppliers, and upward US$ re-valuation of Rouble-denominated debt.
Polymetal continues to target its original 2022 production guidance of 1.7 Moz of gold equivalent. The key risk to production guidance is represented by COVID-related lockdowns and logistical constraints in China. On the back of the significant change in exchange rate assumptions (from 70 RUB/USD to 60 RUB/USD for the rest of the year), the Company updates its FY 2022 cost guidance range to US$ 900-1,000/GE oz and US$ 1,300-1,400/GE oz for TCC and AISC, respectively.

DIVIDENDS AND PROPOSED EXCHANGE OFFER

The Board has carefully evaluated the liquidity and solvency of the business in light of multiple external uncertainties. Taking into account significant decline in operating cash flows, challenges in establishing new sales channels and the short-term liquidity headwinds, the Board decided to permanently cancel full-year 2021 dividend. Given the continuing impact of these external uncertainties, the Board does not propose any interim 2022 dividends to allow the Group to strengthen its cash position and enhance its resilience in a highly volatile environment.

Payment of dividends in the future will also depend on the ability to unblock shares which are currently held through the National Settlement Depositary (NSD), which the Company estimates to be, in aggregate, approximately 22% of the Company’s issued share capital. Until a solution is found, the Board is not minded to propose any corporate action or dividend in which such a sizeable proportion of the Company’s shareholder base cannot participate.

Polymetal has today announced its intention to conduct an exchange offer. The exchange offer invites shareholders whose rights have been affected by the sanctions imposed on NSD, subject to fulfilling eligibility criteria, to tender such shares for exchange, in consideration for the issuance of a certificated share, on a one-for-one basis.

The exchange offer is subject to shareholder approval at a General Meeting which will be held at 10am (BST) on Wednesday 12 October 2022 at etc.venues Fenchurch Street, 8 Fenchurch Place, London.

Further details of the exchange offer can be found in the Company’s announcement in connection with the exchange offer, as well as the shareholder circular and notice of General Meeting, which has been published today.

https://www.investegate.co.uk/polymetal ... 0010EBPUJ/

Also; Offer to exchange certain shares currently affected by the EU asset freeze on NSD and Notice of General Meeting.

https://www.investegate.co.uk/polymetal ... 0110EMXAV/

Yan.