Annual Financial Report

RNS Number : 5513D

Polymetal International PLC

31 March 2014

 



Release time	IMMEDIATE
Date	31 March 2014

Polymetal International plc

Preliminary results for the year ended 31 December 2013

Polymetal International plc (LSE, MOEX: POLY, ADR: AUCOY) (together with its subsidiaries - "Polymetal", the "Company", or the "Group") is pleased to announce the Group's preliminary results for the year ended 31 December 2013.

FINANCIAL HIGHLIGHTS

·      Revenue in 2013 decreased by 8% to US$ 1,707 million compared to 2012 ("year-on-year") as a result of average realised gold and silver prices decreasing 19% and 28% respectively year-on-year. This unprecedented price decline was to a large extent offset by 14% growth in the volume of gold equivalent sold during the period.  

·      Group Total cash cost¹ was US$ 745/ gold equivalent ounces ("GE oz"), up 8% compared to 2012 level. Cash costs were negatively affected by an elevated level of unit costs and lower recoveries during the ramp-up at the Amursk POX facility and at the newly launched Mayskoye mine, while the mature mines demonstrated resilient cost performance. Total cash costs in the second half of the year decreased by 8% versus the first half of 2013 to US$ 721/ GE oz driven by operational improvements at the Albazino/Amursk, where cash costs decreased by 27% half-on-half to US$ 707/GE oz, and Omolon, where as a result of mine plan revision a 32% cash cost reduction to US$ 756/GE oz was achieved.

·      All-in sustaining cash costs comprised US$ 1,086/GE oz and increased slightly by 3% year-on-year, driven mostly by an increase in total cash costs during the period, which was largely offset by production growth and reduction of per ounce sustaining capital and exploration expenditure at our operating mines.

·      Adjusted EBITDA⁽¹⁾ was US$ 598 million, a decrease of 36%, driven mainly by a decline in commodity prices. Adjusted EBITDA margin was 35% compared to 50% in 2012;

·      A non-cash pre-tax impairment charge of US$ 366 million for the year resulting from the decline in gold and silver prices was recorded as at 31 December 2013, mainly due to the write-off of goodwill and mining assets at Varvara, Khakanja and low-grade ore stockpiles at Omolon. The post-tax amount recorded was US$ 315 million. The impairment calculations were performed using conservative price assumptions of US$ 1,200/oz for gold and US$ 18/oz for silver, which are meaningfully below current spot prices.

·      Underlying net earnings (adjusted for the after-tax amount of impairment charges) were US$ 117 million. As a result of lower price-driven EBITDA, non-cash foreign exchange losses and impairment charges, the Group recorded a loss for the year of US$ 198 million in 2013, compared to a US$ 428 million profit in 2012.

·      The Group's liquidity profile remained comfortable. Net debt was US$ 1,045 million and remained almost flat compared to the 2012 level of US$ 1,037 million, supported by strong free cash flow generation capacity despite challenging market conditions. Free cash flow¹ for the year was US$ 138 million, remaining flat year-on-year, of which US$ 263 million was recorded in 2H 2013 on the back of increased production, significant destockpiling, and lower operating and capital expenditure levels.

·      A final dividend of US$ 0.08 per share representing 30% of the Group's underlying net earnings for 2H 2013 is proposed by the Board in accordance with the Company's dividend policy, based on Net Debt1 / Adjusted EBITDA as at 31 December 2013 of 1.75 (31 December 2012: 1.1).

 OPERATING HIGHLIGHTS

·      Polymetal exceeded its original annual production guidance and produced 1.28 Moz of gold equivalent in 2013, up 21% year-on-year. This achievement was driven by the successful ramp-up at Amursk POX and Mayskoye and strong operational delivery at the Dukat hub. During the year, the Amursk POX plant successfully ramped up to design throughput and recovery (averaging 93% in Q4), an important strategic milestone for the Company which now possesses a unique competitive advantage in the Former Soviet Union ("FSU").

·      The Company re-iterates its production guidance of 1.3 Moz of gold equivalent for 2014 and 1.35 Moz for 2015. In 2014, Polymetal expects total cash costs of US$ 700-750/ "GE oz, all-in sustaining cash costs of US$ 975-1025/ GE oz, and capital expenditure of US$ 250 million (including exploration and capitalised stripping).

·      In 2013, Polymetal's Ore Reserves decreased by 12% to 13.3 Moz of "GE, while Mineral Resources (additional to Ore Reserves) declined by 11%. The declines were driven mostly by more stringent economic evaluation with the same prices of $1300/oz gold and $22.5/oz silver used to estimate both Reserves and Resources. Material additions to Ore Reserves during 2014 are expected at Svetloye (Q2), Albazino (Q4), and Kutyn (Q4), with further likely additions at near-mine properties at Omolon and Voro.

 "I am pleased to report robust cost performance and cash flow generation in a year which was so challenging in terms of market conditions", said Vitaly Nesis, CEO of Polymetal, commenting on the results. "This resilient performance, combined with our strong balance sheet position, allows us to progress on further growth opportunities while generating meaningful cash returns to our shareholders".

(1) The definition and calculation of non-IFRS measures used in this report, including Adjusted EBITDA, Total cash costs, All-in sustaining cash costs, Underlying net earnings, Net debt, Free cash flow and the related ratios, is explained in the "Financial Review" section below.

Financial highlights	2013	2012	Change, %(1)
Revenue, US$m	1,707	1,854	-8%
Total cash cost, US$/GE oz	745	690	+8%
All-in cash cost, US$/GE oz	1,086	1,059	+3%
Adjusted EBITDA, US$m	598	932	-36%
Adjusted EBITDA margin, %	35%	50%	-15%
Average realised gold price, US$/ oz	1,326	1,640	-19%
Average LBMA gold price, US$/ oz	1,410	1,668	-16%
Average realised silver price, US$/ oz	21.6	30.0	-28%
Average LBMA silver price, US$/ oz	23.8	31.1	-24%
(Loss)/profit for the year, US$m	(198)	428	NM
Underlying net earnings, US$m	117	431	-73%
Basic EPS, US$/share	(0.51)	1.10	NM
Underlying EPS, US$/share	0.30	1.13	-73%
Dividend declared during the period, US$/share(2)	0.32	0.70	-54%
Net debt, US$m	1,045	1,037	+1%
Net debt/Adjusted EBITDA	1.75	1.11	+57%
Net operating cash flow, US$m	462	541	-15%
Capital expenditure, US$m	319	397	-20%
Free cash flow, US$m	138	138	0%
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. This note applies to all tables in this release (2) FY 2013: final dividend for FY 2012 declared in April 2013 and interim dividend proposed for the 1H 2013 declared in August 2013. FY 2012: final dividend for FY 2011 declared in April 2012 and special dividend for FY 2012 declared in December 2012. The full financial results statement is attached. http://www.rns-pdf.londonstockexchange.com/rns/5513D_-2014-3-31.pdf

PRESENTATION AND WEBCAST

Polymetal will hold a conference call and webcast on Monday, March 31, 2014 at 9:30 am London time (12:30 pm Moscow time).

To participate in the call, please dial:

8 10 8002 4902044 (toll-free from Russia), or

0808 109 0700 (toll-free from the UK), or

1 866 966 5335 (toll-free from the US), or

[phone] (from outside the UK, the US and Russia), or follow the link:

http://webcast.instinctif.tv/p/795-1028-14115/en

Please be prepared to introduce yourself to the moderator or register.

Webcast replay will be available on Polymetal's website (www.polymetalinternational.com) and at http://webcast.instinctif.tv/p/795-1028-14115/en. A recording of the call will be available immediately after the call at [phone] (from within the UK), 1 866 583 1035 (from within the US) and 8 10 8002 4832044 (from within Russia), access code 7594381, from 3:30 pm Moscow time Monday, March 31, till 3:30 pm Moscow time Monday, April 7, 2014.

Enquiries

Media		Investor Relations
Instinctif Partners Leonid Fink Tony Friend	[phone]	Polymetal Maxim Nazimok Evgenia Onuschenko Elena Revenko	[e-mail] [phone] (Russia) [phone] (UK)
Joint Corporate Brokers
Morgan Stanley Bill Hutchings Sam McLennan	[phone]	RBC Europe Limited Stephen Foss Jonny Hardy	[phone]

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.

 

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