Polus · RUS:PLZL
Polus — Polyus — Investor Presentation (February 2018)
60 slides from Polus's investor presentation, February 2018
Slide 1: Corporate Presentation February 2018
CORPORATE PRESENTATION February 2018
Slide 2: 1. Overview
1. OVERVIEW Ss POLYUS
Slide 3: Unique Exposure to Russian & Gold Public Markets
OVERVIEW Unique Exposure to Russian & Gold Public Markets 71 moz gold P&P Reserves (one of the largest globally) 193 moz gold MI&I Resources (one of the largest globally) Leading reserves and resources base Average life of mine: above 30 years 100% open pit operations Moving from ca. 2.16
Slide 4: Leading Gold Producer Globally
OVERVIEW Leading Gold Producer Globally 7th largest gold producer (FY 2017), moz The largest gold reserves base (last reported), moz 5.3 5.3 71 69 65 62 3.8 50 48 2.7 41 2.6 2.3 31 2.2 2.2 26 1.7 1.4 23 * Newmont Newmont Barrick Newcrest Fields Harmony Sibanye Barrick Polyus Agnico Eagle Goldcorp An
Slide 5: Large-scale Assets Spread Across Siberia and the Far East
OVERVIEW Large-scale Assets Spread Across Siberia and the Far East MAGADAN CLUSTER KRASNOYARSK 6 CLUSTER YAKUTIA 2 CLUSTER 1 7 8 5 Polyus gold output in 3 4 2017: IRKUTSK 2,160 koz Natalka CLUSTER Kuranakh 0.2% Alluvials 8% 7% 5 6 Olimpiada 3 54% Verninskoye PRODUCTION DEVELOPMENT EXPLORATION 10% 4
Slide 6: Developing largest gold mines in the world
OVERVIEW Developing largest gold mines in the world Largest gold assets by output in 2016, koz Largest gold assets by resources in 2016, moz Muruntau (Uzbekistan) 1,961 Pebble (USA) 108 Newmont Nevada Operations… 1,631 Olympic Dam (Australia) 107 1 Polyus Krasnoyarsk cluster (Russia) 1,447 Grasberg
Slide 7: Leading Position on the Cost Curve and Strong Financial Performance
OVERVIEW Leading Position on the Cost Curve and Strong Financial Performance First decile on the global TCC and AISC curves (2017) moz 2017 average gold price = $1,257/oz 1,250 1,000 750 Polyus AISC @ $621/oz 500 Polyus TCC @ $364/oz 250 0 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% One of the most
Slide 8: Leading Position on the Cost Curve and Strong Financial Performance
OVERVIEW Leading Position on the Cost Curve and Strong Financial Performance Reserves split (2016) moz 80 60 40 20 0 Barrick Polyus Newmont Newcrest Goldcorp AngloGold Gold Fields Sibanye Kinross Agnico Eagle Polymetal Open pit Underground Average grade in reserves (2016) 3.42 2.8 2.5 2.01 2.3 Назва
Slide 9: Recent Corporate Developments & Performance Snapshot
OVERVIEW Recent Corporate Developments & Performance Snapshot In November 2017, MSCI included the Company’s local shares in MSCI Russia and MSCI EM indices In December 2017, Polyus announced that it has poured the first doré gold at Natalka In January 2018, Polyus released FY2017 Trading Update: T
Slide 10: 2. Corporate Governance
2. CORPORATE GOVERNANCE Ss POLYUS
Slide 11: Shareholder structure and equity instrument performance
CORPORATE GOVERNANCE Shareholder structure and equity instrument performance Shareholder structure of PJSC Polyus Key highlights SPO completed in June 2017 Treasury shares The total size of the offering was $858 mln or 9.7% of the (1.22%) share capital on a fully diluted basis Free float The p
Slide 12: Experienced world-class board
CORPORATE GOVERNANCE Experienced world-class board BoD Structure 4 independent Directors 4 BoD Committees Chairman of BoD Audit Edward Dowling (Chairman) Served at BoD of PGIL INDEPENDENT DIRECTORS Kent Potter (Chairman) (INED) Ex-CEO & current Chairman at BoD of Alacer Gold Edward Dowling
Slide 13: Prudent dividend policy
CORPORATE GOVERNANCE Prudent dividend policy Dividend policy (amended in January 2018) FY 2017 and FY 2018 dividend: 30% of EBITDA but not less than $550 million Post FY 2018: 30% of EBITDA Provision for dividend policy to be utilised: Net Debt/EBITDA < 2.5x If Net Debt/EBITDA > 2.5x, BoD wi
Slide 14: 3. Operational Performance
3. OPERATIONAL PERFORMANCE Ss POLYUS
Slide 15: Polyus Key Operational Advantages
OPERATIONAL PERFORMANCE Polyus Key Operational Advantages Polyus key assets (Krasnoyarsk cluster and Natalka) Large scale open pit operations with a high grade are among top-15 globally by reserves and production Compact layout of assets provide transportation Compact assets operated on a fly-in
Slide 16: Health & Safety
OPERATIONAL PERFORMANCE Health & Safety Member of the ICMM1 since 2015. The first company from Eastern Europe out of 23 mining and metals companies and 34 regional and commodities associations Safety remains a top priority for Polyus, which is committed to be a zero-fatality company LTIFR2 dynam
Slide 17: Strong operational results
OPERATIONAL PERFORMANCE Strong operational results In 2013-2017 total gold output increased 31% to 2,160 koz. Average recoveries improved by 4.1 ppts Sustained production increases achieved at key assets: Olimpiada, Blagodatnoye, Verninskoye, Kuranakh First doré gold poured at the Natalka Mill
Slide 18: Improving recovery rates & productivity
OPERATIONAL PERFORMANCE Improving recovery rates & productivity Olimpiada Blagodatnoye 739 753 800 667 695 1,017 645 110 .0 1,1 00 964 700 1,0 00 939 110 .0 600 518 488 100 .0 853 855 455 479 900 100 .0 500 421 90. 0 800 90. 0 400 80. 0 700 88.2 88.0 87.9 88.0 87.8 80. 0 300 80.1 81.0 80.7 600 200 7
Slide 19: Operational Optimization Initiatives
OPERATIONAL PERFORMANCE Operational Optimization Initiatives Equipment modernization and retrofitting Improvement of equipment availability (increasing throughput capacities and recoveries) (minimizing downtime/increasing production run time) Verninskoye: new Blagodatnoye: Verninskoye: Olimp
Slide 20: Total Optimisation Program Overview
OPERATIONAL PERFORMANCE Total Optimisation Program Overview Initiatives implemented Achieved EBITDA effect, $ mln 150 283 138 190 94 88 2015 2016 2017 2015 2016 2017 TOP objectives: Investments < RUB 35 mln per initiative Payback period of < 2 years Focused on: equipment productivity, recovery
Slide 21: Further production growth expected
Operational performance Further production growth expected Gold production dynamics and guidance, FY 2013-2019, koz1 Initial 300 0 guidance Initial guidance for FY18 Initial guidance revised revised in January 2018 surpassed 280 0 6% upward in October 2,800 260 0 by 3% 2,425 240 0 Guidance Guidance
Slide 22: Balanced pipeline of projects to facilitate production growth
OPERATIONAL PERFORMANCE Balanced pipeline of projects to facilitate production growth Annual production target of 2.8 million ounces of gold expected to be achieved in 2019 The projects contributing to Company’s production target achievement include 7 brownfield projects and 1 greenfield project (
Slide 23: Projects to facilitate production expansion
OPERATIONAL PERFORMANCE Projects to facilitate production expansion Annual production target of 2.8 million ounces of gold expected to be achieved in 2019 Most of the projects are to be launched in 2017-2018. 6 projects, including Natalka, are planned to be commissioned during this period 2016 201
Slide 24: Power Projects
OPERATIONAL PERFORMANCE Power Projects Access to reliable and low-cost source of electricity via grid lines Razdolinskaya – Taiga (RT) grid Ust-Omchug – Omchak (UO) grid Capex: $103 mln Capex: RUB 9.9 bln ($152 mln)1 Financing: FGC UES to buy out in 2017 Financing: state subsidy Construction timelin
Slide 25: Polyus Potential Brownfield Projects – Source of Additional Expansion
OPERATIONAL PERFORMANCE Polyus Potential Brownfield Projects – Source of Additional Expansion The brownfield projects in feasibility study stage (not included into the guidance) represent a potential upside Antimony ingot produced at Polyus Processing the high-grade Olimpiada ore with high 1. Proc
Slide 26: Natalka: Project Overview
OPERATIONAL PERFORMANCE Natalka: Project Overview Asset overview Location One of the largest gold deposits in Russia and globally in terms of gold reserves Life of mine: c.31 years Active construction works on site commenced in 2012, open-pit mining commenced in 1Q 2013 In 2017, capital expe
Slide 27: Natalka: History of Development – Project Review 2013-2016
OPERATIONAL PERFORMANCE Natalka: History of Development – Project Review 2013-2016 Helicopter view Background Actions Result Gold grade wasn’t Block model review Reserve estimate (Dec 2015) confirmed At the end of 2013 the Measured, indicated and Mining in 2013 didn’t Group initiated review of i
Slide 28: Natalka: Current Status
OPERATIONAL PERFORMANCE Natalka: Current Status Updated plant flowsheet (3 stage gravity concentration) Gravity Separation I Intensive Cyanidation 18 units Electrowinning Conc. PLS Crushing and Cake Ore stockpile Grinding Gravity Separation II 15 units Hydrocyclone Filtration + Smelting Dore Conc. G
Slide 29: Natalka: Next Steps
OPERATIONAL PERFORMANCE Natalka: Next Steps Supporting Infrastructure Ust-Omchug / Omchak grid Accommodation camp being expanded Tailings facility to be expanded The Grid is supposed to link Ust-Srednekanskaya HPP Timeline: 2018 with Natalka, enabling expansion of power supply Grid length:
Slide 30: Sukhoi Log: Overview
OPERATIONAL PERFORMANCE Sukhoi Log: Overview Key Highlights Location Chertovo Koryto One of the largest undeveloped gold deposits globally with 58 moz of gold JORC Greenfield project owned by Polyus resources @ 2.0 g/t Distance to Sukhoi Log: 100 km Reserves: 3.1 moz Total consideration pai
Slide 31: Sukhoi Log: Positioning vs Peers
OPERATIONAL PERFORMANCE Sukhoi Log: Positioning vs Peers World’s largest greenfield assets World’s largest operating by JORC gold MI&I Resources, moz1 mines by JORC gold MI&I Resources, moz1 Pebble Olympic Dam 107.7 107.1 (NDM) (BHP Billiton) KSM Grasberg 83.6 (Freeport McMoRan) 99.8 (Seabridge Gold
Slide 32: Sukhoi Log: Tier 1 Asset
OPERATIONAL PERFORMANCE Sukhoi Log: Tier 1 Asset Tier 1 asset1 with world class resource base Broad knowledge of the asset Extensive exploration performed with 324 km drilled over One of the largest gold deposits in the world with 1961-1999 JORC resources of 58 moz @ 2.0 g/t 9 studies performe
Slide 33: Sukhoi Log: Overview of Joint Venture
GREENFIELD PORTFOLIO DEVELOPMENTS Sukhoi Log: Overview of Joint Venture The Sukhoi Log joint venture (“SL Gold”) partner of Polyus is LLC RT Business Development (“RTRB”), which is a subsidiary of Russian state-owned Rostec Corporation (“Rostec”) Both in December 2016 and July 2017 Polyus entere
Slide 34: Sukhoi Log: Drilling campaign & scoping study in progress
GREENFIELD PORTFOLIO DEVELOPMENTS Sukhoi Log: Drilling campaign & scoping study in progress 1. Geology Detailed plan for exploration completed November 2017, the Group started a 180,000 meter drilling campaign, scheduled to last 2 years: 14.7 ths m already drilled as at mid-February 2018 201
Slide 35: Chertovo Koryto: Overview
GREENFIELD PORTFOLIO DEVELOPMENTS Chertovo Koryto: Overview Asset overview Location Chertovo Koryto deposit (“ChK”) is located in a remote area of N Irkutsk Region approximately 200 km northeast of Bodaybo Deposit lies in an area of high relief where several gold rich placer Russian Chertovo Fed
Slide 36: 4. Financial Performance
4. FINANCIAL PERFORMANCE Ss POLYUS
Slide 37: Key Financial Figures
FINANCIAL PERFORMANCE Key Financial Figures Key Financial Highlights TCC dynamics: 2016 vs 2017, $/oz 2013 2014 2015 2016 2017 Y-o-Y (6%) TCC decreased 6% Gold sales, koz 1,631 1,691 1,768 1,915 2,158 13% y-o-y despite local 389 364 currency USD/RUB exchange rate 32 39 61 67 58 (13%) appreciation 13
Slide 38: Total Cash Costs and All In Sustaining Costs
FINANCIAL PERFORMANCE Total Cash Costs and All In Sustaining Costs TCC & AISC among top 10 global majors (9M 2017) 954 975 980 986 856 915 824 730 761 606 799 696 744 571 573 573 677 669 546 380 Polyus Barrick Newcrest Agnico Eagle Goldcorp Newmont Sibanye Kinross Goldfields AngloGold TCC, $/oz AISC
Slide 39: Investment Program
FINANCIAL PERFORMANCE Investment Program Historical and forecasted capital expenditures ($ mln) Capex breakdown ($ mln) Capex structure by currency $ mln 2017 2016 Y-o-Y RUB- Natalka 378 213 77% linked Olimpiada 177 80 121% 60% Blagodatnoye 49 20 145% USD- 1,432 linked Verninskoye 39 24 63% 40% Allu
Slide 40: Debt and Cash Overview
FINANCIAL PERFORMANCE Debt and Cash Overview Key Highlights Debt breakdown as of 31-Dec-17 As of the end of 2017, the Group’s gross debt amounted to $4,281 mln, down 14% compared to By source $4,981 mln as at 31 December 2016 $1.25 bln Bank loans (17%) Sberbank loan (2023) As of the end of 2017,
Slide 41: Proactive Debt Management
PROJECTS UPDATE FINANCIAL PERFORMANCE Natalka: Production Proactive Debt Management Profile Overview & DCM activities February 2017: $800 mln 5.25% 6-year Eurobond offering Convertible Bond due 2021 January 2018 Transaction highlights: $250 mln 1.0% 3-year convertible bond offering Priced:
Slide 42: Net Debt & Cash Evolution
FINANCIAL PERFORMANCE Net Debt & Cash Evolution Net Debt & Cash evolution 2.1x 2.0x 1.9x 1.9x 1.8x 3,241 3,128 3,151 3,084 3,077 1,740 1,487 1,477 1,121 1,204 31-Dec-16 31-Mar-17 30-Jun-17 30-Sep-17 31-Dec-17 Net Debt, $ mln Cash position, $ mln Net Debt/adj. EBITDA, x Comments By the end of 2017,
Slide 43: 5. Appendix
5. APPENDIX Ss POLYUS
Slide 44: Strategic Price Protection Programme (SPPP) overview
APPENDIX Strategic Price Protection Programme (SPPP) overview The SPPP comprises of a series of zero cost Asian barrier collar agreements to purchase put options and to sell call options with “knock- out” and “knock-in” barriers Primary part Secondary part Callable amount, 285 420 775 440 380 25 0
Slide 45: TOP Examples
APPENDIX TOP Examples Increase in payload capacity of САТ785С Purchase of mobile canteens at the Wet Sag Mill #10 reconfiguration mining trucks at the Vostochny pit Vostochny pit Replacement of an intermediate shaft with Prior to the initiative, there was a 10-16 Prior to the initiative, the t
Slide 46: Kuranakh: Turnaround Example
APPENDIX Kuranakh: Turnaround Example Kuranakh in FY13 MINING IMPROVEMENTS Kuranakh in FY17 Optimisation of ore transportation The highest-cost, underperforming An average cost producer with a Logistic improvements asset within the portfolio without prospect to increase gold output a clear strat
Slide 47: Increase in Bio Oxidation (BIO) Efficiency
APPENDIX Increase in Bio Oxidation (BIO) Efficiency BIO throughput capacity, ore tonnes per day 1,251 BIO-3 BIO-2 BIO-1 1,089 1,127 1,133 1,017 1,053 1,058 939 979 185 863 860 892 895 904 908 193 205 797 827 179 167 166 749 180 156 672 621 95 107 107 128 137 134 183 120 106 607 505 529 548 423 477 5
Slide 48: Blagodatnoye: Intensive Approach
APPENDIX Blagodatnoye: Intensive Approach During the last 6 years, the Mill has been operating above its design capacity of 6.0 mtpa Prior to 2014, capex-intensive expansion of the Blagodatnoye processing capacities to 9 mtpa via constructing an additional production line (Mill No. 5) was considered
Slide 49: Brownfield Development Projects (1 of 2)
APPENDIX Brownfield Development Projects (1 of 2) 1 Reconfiguration of Mill No. 1 2 Blagodatnoye Mill expansion to 8.0 mtpa Increase ore processing capacity at the Blagodatnoye mill to Reconfiguration of the Mill-1 to process high-grade Olimpiada Initiative Initiative 8 mtpa via existing operations
Slide 50: Brownfield Development Projects (2 of 2)
APPENDIX Brownfield Development Projects (2 of 2) 5 BIO expansion at Mills No. 1,2,3 Initiative An additional BIO circuit at Mills No. 2,3 complex will provide an option to process excessive flotation concentrate The existing BIO capacities are not sufficient to process the whole amount of flotation
Slide 51: Description of Mine-to-Mill and Flash Flotation developments
APPENDIX Description of Mine-to-Mill and Flash Flotation developments Mine-to-Mill Flash Flotation Mine-to-Mill (optimisation) is a holistic approach to the Flash flotation is the unit operation designed to reduce overgrinding optimisation of mining and processing operations. It involves by remo
Slide 52: Cost Cutting Initiatives
APPENDIX Cost Cutting Initiatives Outsourcing of non-core Optimization of consumables Insourcing of core functions procurement functions PREVIOUSLY Consumables (e.g. diesel oil and ammonia Non-core support services (cleaning, Transportation of material nitrate) procured on spot basis, which is
Slide 53: Government Relations
APPENDIX Government Relations Sukhoi Log In February 2017, a company held by Polyus and Rostec JV (then 51% and 49% shares) 1, SL Gold, acquired the license for Sukhoi Log, the largest gold deposit in Russia and one of the largest deposits globally with 58 moz JORC resources The license was acqu
Slide 54: JORC Ore Reserves and Mineral Resources Estimates as at 31 December 2016
APPENDIX JORC Ore Reserves and Mineral Resources Estimates as at 31 December 2016 Ore Reserves MI&I Mineral Resources Deposit Proved & Probable Total Tonnes Grade Gold Tonnes Grade Gold (mt) (g/t) (moz) (mt) (g/t) (moz) Operating Olimpiada 316 3.0 30 474 3.0 46 Blagodatnoye 223 1.4 10 420 1. 4 19 Ti
Slide 55: Sukhoi Log: Satellite Map & Resource Block Model 2017
APPENDIX Sukhoi Log: Satellite Map & Resource Block Model 2017 Carbonaceous shales with inclusions and individual crystals of Pyrite Thin layers of gold along fractures in the quartz vein Source: Company data This image is illustrative only, and is subject to changes in market conditions and enginee
Slide 56: Gold Mining Tax Regime Benchmarking
APPENDIX Gold Mining Tax Regime Benchmarking Corporate income tax 34.0% 35.0% 30.0% 30.0% 31.0% 25.0% 28.0% 20.0% 24.0% 20.0% 1 15.0% Russia Kazakhstan Chile Indonesia South Africa Australia Mexico Canada Brazil Ghana Mineral extraction tax 16.0% 14.0% 8.0% 6.0% 5.0% 3.8% 5.0% 5.0% 2.5% 1.0% 5.0% 4
Slide 57: Gold Market Update: Supply and Demand Highlights
APPENDIX Gold Market Update: Supply and Demand Highlights Global gold supply and demand, t 1,639 1,296 1,130 1,328 1,130 1,574 1,690 1,235 4,735 4,687 4,454 4,362 4,215 4,269 4,216 4,072 2,917 3,076 3,155 3,233 3,263 3,269 2,745 2,846 2010 2011 2012 2013 2014 2015 2016 2017 Mine production Recycled
Slide 58: Gold Market Update: Consumer Demand
APPENDIX Gold Market Update: Consumer Demand Jewellery demand, t Jewellery demand in selected countries, t 182 190 2,683 200 179 176 175 2,481 165 159 146 153 180 2,389 148 2,129 2,136 160 141 138 1,126 2,054 140 126 1,046 973 935 926 120 94 99 919 100 85 80 939 807 753 599 630 647 60 40 595 617 627
Slide 59: Investment Demand
APPENDIX Investment Demand Gold official reserve holdings, February 2018 Changes in CB reserve holdings y-o-y, t 33,791 Gold reserves, Gold’s share of change 609 Holder 437 tonnes total reserves 2005-17 714 US 8,133 24% 0% 173 177 31,436 366 475 Germany 3,374 10% -1% 524 334 IMF 2,814 8% -13% (603)
Slide 60: Disclaimer
DISCLAIMER The information contained herein has been prepared using information available to PJSC Polyus at the time of preparation of the presentation. External or other factors may have impacted on the business of Polyus and the content of this presentation, since its preparation. In addition all