Release time	IMMEDIATE	LSE, MOEX, AIX: POLY ADR: AUCOY
Date	16 March 2023

Polymetal International plc

Preliminary results for the year ended 31 December 2022

Polymetal International plc (“Polymetal” or the “Company”) announces the Group's preliminary results for the year ended 31 December 2022.

“In 2022, the Company was subject to extraordinary and unprecedented external challenges.  Despite these adverse circumstances, Polymetal managed to maintain operational stability and achieve excellent safety performance. Nonetheless, international sanctions against Russia have had a huge impact on domestic inflation, supply chains and sales channels. As a result, costs have risen and working capital requirements ballooned with cash flow plummeting. We start 2023 from a position of relative strength and expect the resumption of free cash flows and a reduction in net debt over the course of the coming year”, said Vitaly Nesis, Group CEO, commenting on the results.

FINANCIAL HIGHLIGHTS

• In 2022, revenue decreased by 3%, totalling US$ 2,801 million (2021: US$ 2,890 million), of which US$ 933 million (33%) was generated from operations in Kazakhstan and US$ 1,868 million (67%) from operations in the Russian Federation. Average realised gold price decreased by 2% while silver price decreased by 12%, both almost tracking market dynamics. Gold equivalent (GE) production was 1,712 Koz, a 2% increase year-on-year (y-o-y). Gold sales decreased by 1% y-o-y to 1,376 Koz, while silver sales increased by 6% to 18.5 Moz. Disruption in sales channels resulted in a huge gap between production and sales in Q2-Q3 2022, but was largely eliminated in Q4 2022. The remaining gap is expected to close during the course of 1H 2023. 
• Group Total Cash Costs (TCC)[1] for 2022 were US$ 942/GE oz and within the Group’s guidance of US$ 900-1,000/GE oz, although representing an increase of 29% y-o-y, which was predominantly due to double-digit domestic inflation and the appreciation of Rouble/USD exchange rate. Escalation of logistical costs and sharp increases in the price of consumables caused by the imposition of sanctions (explosives, equipment spares, cyanide) also impacted the Group’s TCC.
• All-in Sustaining Cash Costs (AISC)1 amounted to US$ 1,344/GE oz, up 31% y-o-y, which was within the Group’s guidance of US$ 1,300-1,400/GE and also driven by the same factors as above.
• Adjusted EBITDA1 was US$ 1,017 million, 31% lower than in 2021, as costs rose and metals prices declined. US$ 478 million (47%) of Group EBITDA originated in Kazakhstan and US$ 539 million (53%) in the Russian Federation. The Adjusted EBITDA margin decreased by 15 percentage points to 36% (2021: 51%).
• Underlying net earnings[2] were US$ 440 million (2021: US$ 913 million). As a result of a lower Group EBITDA and non-cash impairment charges (a post-tax amount of US$ 653 million), the Group recorded a net loss for the period of US$ 288 million in 2022, compared to profits of US$ 904 million in 2021.
• Capital expenditure was US$ 794 million[3], up 5% compared with US$ 759 million in 2021 and 2% above the guidance range of US$ 725-775 million, reflecting accelerated purchases and contractor advances for ongoing projects (most notably, Amursk POX-2), combined with inflationary and logistical pressures on imported equipment, materials and services.
• Net operating cash inflow was US$ 206 million (2021: US$ 1,195 million), on the back of inventories build-up of US$ 473 million. This includes positive cash flow of US$ 337 million from operations in Kazakhstan and negative cash flow of US$ 131 million from operations in the Russian Federation. The Group reported negative free cash flow1 of US$ 445 million in 2022 (2021: positive US$ 418 million).
• Net debt1 increased to US$ 2,393 million during the period (31 December 2021: US$ 1,647 million), representing 2.35x of the Adjusted EBITDA (2021: 1.13x). The increase in net debt was driven by the decline in profitability, the persistently high capital intensity of the business and a very significant expansion in working capital.

DIVIDENDS

• The Board has carefully evaluated the liquidity and solvency of the business in light of multiple external uncertainties. Taking into account the Group’s leverage (2.35x Net debt/EBITDA, materially above the level of 1.5x target leverage ratio and the significant level of uncertainty regarding external factors, the Board has decided not to propose any dividend for 2022 in order to allow the Group to maintain strategic and operating flexibility in a highly volatile and uncertain external environment.

Financial highlights [4]	2022	2021		Change
Revenue, US$m	2,801	2,890		-3%
Total cash cost[5], US$ /GE oz	942	730		+29%
All-in sustaining cash cost2, US$ /GE oz	1,344	1,030		+31%
Adjusted EBITDA2, US$m	1,017	1,464		-31%
Average realised gold price[6], US$ /oz	1,764	1,792		-2%
Average realised silver price3, US$ /oz	21.9	24.8		-12%
Net (loss)/earnings, US$m	(288)	904		n/a
Underlying net earnings2, US$m	440	913		-52%
Return on assets (underlying)2, %	9%	26%		-65%
Return on equity (underlying)2, %	11%	23%		-52%
Basic (loss)/earnings per share, US$	(0.61)	1.91		n/a
Underlying EPS2, US$	0.93	1.93		-52%
Dividend declared during the period[7], US$ /share	-	1.34		-100%
Dividend proposed for the period[8], US$ /share	-	0.97		-100%
Net debt2, US$m	2,393	1,647		+45%
Net debt/Adjusted EBITDA	2.35	1.13		+109%
Net operating cash flow, US$m	206		1,195	-83%
Capital expenditure, US$m	794		759	+5%
Free cash flow before acquisitions/ disposals2, US$m	(445)		418	n/a
Free cash flow post-M&A, US$m	(473)		407	n/a

OPERATING HIGHLIGHTS

• No fatal accidents among the Group’s employees and contractors occurred in 2022. Lost time injury frequency rate (LTIFR) among the Company’s workforce for the full year decreased by 17% y-o-y to 0.10. Days lost due to work-related injuries (DIS) fell by 42% y-o-y to 877.
• The Company’s FY 2022 GE production amounted to 1,712 Koz, a y-o-y increase of 2% and in line with the original production guidance of 1.7 Moz. The first full year of operations at Nezhda and initial production at Kutyn (Albazino hub) compensated for declining grades at mature assets.
• Amursk POX-2 and other development projects progressed in line with schedules revised after the introduction of international sanctions against Russia in Q1 and Q2 2022.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”) HIGHLIGHTS

• Varvara Mine in Kazakhstan was certified for full compliance under the International Cyanide Management Code by the International Cyanide Management Institute (ICMI).
• In 2022, Polymetal continued to receive external recognition of its ESG efforts with high ratings and scores by Sustainalytics, Vigeo Eiris and ISS ESG Corporate Rating.
• In January 2023, the Group published its second green loan allocation report under the corporate green financing framework, which confirmed spending of US$ 125 million loan given by Société Générale for environmentally friendly projects at the Company’s sites. Our total green and sustainability-linked loan portfolio is now US$ 592 million, amounting to 20% of the total outstanding debt of the Group.
• Greenhouse gas emissions intensity (scopes 1 and 2) was 15% lower in 2022 compared to 2019 (Scope 1 and 2), attributed to increasing our renewable electricity consumption (30% of total), as well as energy efficiency initiatives, such as improving heat utilization systems and the implementation of solar power generation.
• In 2022, the share of water reused and recycled amounted to 91% of the total water consumption at our sites (compared to 90% in 2021). In 2022, fresh water intensity for ore processing[9] decreased by 49% (as compared to the 2019 baseline), to 138 m3/1000 t of ore processed.
• We continue to promote equal-opportunity culture through training and communications, empowering more women to take leadership roles: in 2022, the share of female participants of our Talent Pool development program increased to 35% (compared to 30% in 2021).

2023 OUTLOOK

• The Group reiterates its current production guidance of 1.7 Moz of GE for FY 2023. Production will be weighted towards 2H 2023 due to traditional seasonality at several production sites.
• Polymetal expects its costs to be in the ranges of US$ 950-1,000/GE oz for TCC and US$ 1,300-1,400/GE oz for AISC[10]. A minor y-o-y increase is mostly due to expected domestic inflation and royalty increase in Kazakhstan.
• Capital expenditures are expected to be in the range of US$ 700-750 million. Major investment projects include Amursk POX-2, Albazino power line, Voro flotation (completion expected Q2), Prognoz (completion expected Q4), and Mayskoye backfill plant.

 

PRESERVING SHAREHOLDER VALUE

• The Group continues to evaluate all available options to modify the Group’s asset-holding structure in order to maximise shareholder value.
• The Group’s preferred option is the potential re-domiciliation of the parent company, Polymetal International plc, into the Astana International Financial Centre (AIFC), a financial hub in Astana, Kazakhstan, taking into account the Group’s significant operations and presence in the region, the AIFC legal system, tax regime and the ability to execute such a re-domiciliation.
• The key objective of any re-domiciliation will be to preserve shareholder value, restore our ability to pay dividends and increase the strategic flexibility to conduct our operations, as well enabling us to pursue different strategic developments for the Russian and Kazakhstan businesses.
• No decision has been made and there can therefore be no certainty that the Company will proceed with, or ultimately complete a re-domiciliation.
• The Company has attempted to secure the services of a depository interest provider in order to continue trading on the London Stock Exchange, should the re-domiciliation proceed. However, as at the date of this announcement, the Company has not yet been able to secure such services due to the depository interest providers approached by the Company being unable or unwilling to provide such arrangements, while Euroclear, as the CREST system operator, has not confirmed the availability of this kind of services for the AIFC jurisdiction. The Company is continuing its efforts to secure such services.
• The Company confirms that any actions will be compliant with all applicable international sanctions, counter-sanctions and regulatory requirements and the Company will continue to take into consideration the  interests of its stakeholders prior to making a decision.
• Further announcements in relation to the Group’s efforts to restore shareholder value and modify the Group’s asset-holding structure will be made when appropriate.

Conference call and webcast

The Company will hold a conference call and webcast on Thursday, 16 March 2023 at 12:00 London time (15:00 Moscow time).

Please complete the registration form using the link to participate in the call. Dial-in details will be sent to you via email after registration. Participants from Russia may use the webcast link below or a dial-out option which will be provided after registration.

To participate in the webcast follow the link: https://edge.media-server.com/mmc/p/ez66tpiw.

Please find the full PDF version of the announcement at the link at the bottom of the page.

Enquiries

Investor Relations
Polymetal	ir@polymetalinternational.com
Evgeny Monakhov	+44 20 7887 1475 (UK)
Kirill Kuznetsov	+7 812 334 3666 (Russia)
	+7 717 261 0222 (Kazakhstan)

 

 

FORWARD-LOOKING STATEMENTS

 

This release may include statements that are, or may be deemed to be, “forward-looking statements”. These forward-looking statements speak only as at the date of this release. These forward-looking statements can be identified by the use of forward-looking terminology, including the words “targets”, “believes”, “expects”, “aims”, “intends”, “will”, “may”, “anticipates”, “would”, “could” or “should” or similar expressions or, in each case their negative or other variations or by discussion of strategies, plans, objectives, goals, future events or intentions. These forward-looking statements all include matters that are not historical facts. By their nature, such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the company’s control that could cause the actual results, performance or achievements of the company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the company’s present and future business strategies and the environment in which the company will operate in the future. Forward-looking statements are not guarantees of future performance. There are many factors that could cause the company’s actual results, performance or achievements to differ materially from those expressed in such forward-looking statements. The company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in the company’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based.