Slide 1: Corporate Presentation May 2017
CORPORATE PRESENTATION May 2017
Slide 2: 1. Overview
1. OVERVIEW Ss POLYUS
Slide 3: Executive summary
Overview Executive summary First Level listing on MOEX obtained in April 2016 with the Company intending to raise its free float The Company is #8 globally by gold output and #4 globally by gold reserves1 One of the lowest cost producers globally2 The management team fully revamped in 2014 with the
Slide 4: Leading gold producer globally
Overview Leading gold producer globally #8 globally by production (2016, moz) #4 globally by P&P reserves (last reported, moz) 5.5 5.1 86 68 65 64 3.6 2.9 50 46 2.7 2.5 41 2.1 2.0 31 1.7 1.5 29 23 Barrick Polyus Kinross Sibanye Goldcorp AngloGold Newcrest Gold Fields Newmont Harmony Barrick Goldcorp
Slide 5: Operating in a gold-rich region
Overview Operating in a gold-rich region Russia is #3 globally by production (2016, moz) 14.9 Polyus #1 in Russia 1.97 moz in 2016 approximately 22% of the Russian production 9.2 8.8 7.3 5.3 5.3 5.2 4.1 3.5 3.1 3.1 2.8 China Australia Russia United States Peru South Africa Canada Mexico Indone
Slide 6: Strong portfolio of producing assets
Overview Strong portfolio of producing assets 13 MAGADAN CLUSTER 7 KRASNOYARSK CLUSTER 13 YAKUTIA 3 2 PRODUCTION 1 CLUSTER FY16 gold production by mine 9 8 11 6 1. Olimpiada 10 2. Blagodatnoye KuranakhNatalka 4 5 3. Titimukhta 8% 0.3% IRKUTSK 12 4. Alluvials Alluvials 5. Verninskoye 9% 6 7 CLUSTER 6
Slide 7: 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 20161, moz Muruntau (Uzbekistan) 1,897 Pebble (US) 104.2 2 Polyus Kransoyarsk cluster* (Russia) 1,447 Olympic Dam (Australia) 103.6 Pueblo Viejo (DRC) 1,129 Grasberg (In
Slide 8: Highest EBITDA margin among peers
Overview Highest EBITDA margin among peers EBITDA margin of Russian m&m companies, % EBITDA margin of global peers, % Polyus 62 +4 ppts Polyus 62 +4 ppts 58 58 56 Alrosa 53 +3 ppts Newcrest* 38 46 +8 ppts Polymetal 48 46 +2 ppts Gold Fields 45 39 +6 ppts Norilsk 47 50 -3 ppts 45 Barrick 35 +10 ppts
Slide 9: Extensive open-pit high-grade resource base
Overview Extensive open-pit high-grade resource base Reserves split and average grade in reserves, g/t (last reported) 100 % 4.5 90% 4 80% 3.5 70% 2.8 3 2.3 2.2 Average grade excl. Polyus = 1.6 g/t 60% 2.5 50% 2.5 2 40% 1.3 1.3 1.2 30% 1.1 1.1 1.5 20% 0.7 0.6 1 0.5 10% 0% 0 1 Gold Fields Polymetal A
Slide 10: Strategy targets
Overview Strategy targets Maintain and expand extensive reserve and resources base Pursue capital-efficient growth opportunities Focus on the CIS as a gold-rich home region Sustainable organic high-quality growth with high IRRs Well positioned to capitalize on future opportunities in the Dev
Slide 11: The latest achievements
Overview The latest achievements SL Gold officially obtained the Sukhoi Log license on 21 February 2017 On 10 April 2017, following completion of the merger of Polyus’ 100% direct subsidiary LLC Polyus-Invest into Polyus, 63,082,318 treasury shares of the Company were cancelled New dividend policy a
Slide 12: 2. Corporate Governance
2. CORPORATE GOVERNANCE Ss POLYUS
Slide 13: Corporate development
Corporate governance Corporate development Polyus corporate structure changes From 2012 until 2015, Polyus Gold International Limited (PGIL) was a premium LSE listed company In December 2015, Wandle Holdings (the vehicle of the largest shareholder of PGIL) and its 100% subsidiary Sacturino Limit
Slide 14: New corporate structure
Corporate governance New corporate structure Polyus Gold corporate structure Polyus Gold corporate structure Polyus current corporate (prior to reverse takeover via KazakhGold in July 2011) (prior to 17 November 2015) structure Principal holding company Polyus Gold International Limited Issuer of
Slide 15: Establishment of new Board of Directors
Corporate governance Establishment of new Board of Directors NEW BOD COMPRISES OF 9 MEMBERS 3 INDEPENDENT DIRECTORS 4 BOD COMMITTEES Edward Dowling Chairman of BoD Audit Committee INDEPENDENT (Chairman of BoD) Served at BoD of PGIL Kent Potter (Chairman) (INED) DIRECTORS Ex-CEO & current Cha
Slide 16: Reporting standards: unchanged or improved
Corporate governance Reporting standards: unchanged or improved Annual Report Annual Report Published semiannually Published quarterly starting 3Q 2016 Financial Statements under IFRS standards, Financial Statements under IFRS standards, including MD&A including MD&A Published quarterly Published qu
Slide 17: Buyback and evolution of PJSC Polyus shareholder structure
Corporate governance Buyback and evolution of PJSC Polyus shareholder structure Shareholder structure of PJSC Polyus before Pre treasury shares cancellation structure Current shareholder structure of PJSC Polyus the buyback (prior to 11-Mar-16) (from 30-Sep-16 to 10-Apr-17) (following the cancelatio
Slide 18: New dividend policy
Corporate governance New dividend policy New dividend policy adopted in October’16 Payout ratio: 30% of adjusted EBITDA if Net Debt/Adjusted EBITDA < 2.5x Semi-annual dividend payments If Net Debt/Adjusted EBITDA > 2.5x, BoD will exercise discretion on dividends First dividend is expected to
Slide 19: 3. Operational Performance
3. OPERATIONAL PERFORMANCE Ss POLYUS
Slide 20: 2016 operational achievements
Operational performance 2016 operational achievements Continued operational improvements drove 2016 gold output 12% up y-o-y to 1,968 koz Initial FY16 guidance announced at 1,760-1,800 koz in January 2016. An updated guidance range for FY16 announced at 1,870-1,900 koz in October 2016. Initial guida
Slide 21: Health & safety
Operational performance Health & safety Highlights LTIFR at selected companies (2016) In 2015, Polyus becomes the first company from Eastern Europe and the CIS to be a member of the ICMM1 Uralkali 0.08 Average LTIFR Polyus, together with DuPont, implemented the Health & Safety Rangold 0.09 (ex.
Slide 22: Operational improvements since 2013
Operational performance Operational improvements since 2013 Total gold output increased 19% in 2016 vs. 2013 to 1,968 koz Sustained production increases achieved at key assets: Olimpiada, Blagodatnoye, Verninskoye, Kuranakh Within 3 years the Company increased its average recoveries by 4.6 ppt
Slide 23: Improving operational performance at Polyus' key assets
Operational performance Improving operational performance at Polyus’ key assets Recovery rate (%) and productivity per hour (t/h) Recovery rate (%) and productivity per hour (t/h) at Olimpiada at Blagodatnoye Worn out SAG mill to be replaced at Mill No. 2 Mill No. 4 operates above its design capacit
Slide 24: Total Optimisation Program overview
Operational performance Total Optimisation Program overview TOP objectives TOP initiatives Aimed to introduce quick-win measures that do not Equipment productivity improvement require significant investments: Application of new reagents Measures with proven economic effect Recovery rate incr
Slide 25: Kuranakh: turnaround example
Operational performance Kuranakh: turnaround example Kuranakh in FY13 MINING IMPROVEMENTS Kuranakh in FY16 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 outpu
Slide 26: Increase in Bio Oxidation (BIO) efficiency
Operational performance 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 52
Slide 27: Strong growth profile
Operational performance Strong growth profile Gold production dynamics and guidance, FY 2008-2020, koz1 Initial guidance revised > 2,700 Guidance 6% upward in October Guidance surpassed 2016; Initial guidance surpassed by 6% surpassed by 11% 2,125 by 5% 1,968 1,900 1,710 1,763 1,800 2,075 1,569 1,65
Slide 28: Projects to facilitate production expansion
Operational performance Projects to facilitate production expansion Mid-term annual production target of > 2.7 million ounces of gold expected to be achieved by 2020 The projects contributing to Company’s production target achievement include 7 brownfield projects (see p. 29-30) and 1 greenfield p
Slide 29: Krasnoyarsk Business Unit (KBU) development
Operational performance Krasnoyarsk Business Unit (KBU) development 1 Reconfiguration of Mill No. 1 2 BIO expansion at Mills No. 1,2,3 An additional BIO circuit at Mills No. 2,3 complex will provide Reconfiguration of the Mill-1 to process high-grade Olimpiada Initiative Initiative an option to proc
Slide 30: Key initiatives at Verninskoye and Kuranakh
Operational performance Key initiatives at Verninskoye and Kuranakh 5 Verninskoye Mill expansion to 3.0 mtpa Initiative Verninskoye Mill throughput capacity expansion to 3.0 mtpa via existing operations debottlenecking Background Possibility of expanding the mill’s capacity above the current 2.2 mtp
Slide 31: Blagodatnoye: intensive approach
Operational performance 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)
Slide 32: Construction of power supply infrastructure
Operational performance Construction of power supply infrastructure Razdolinskaya-Tayga grid Peleduy-Mamakan grid Ust-Omchug - Omchak grid Project potential and goals Project potential and goals Project potential and goals Increase in gold production at the Solving the regional power shortage
Slide 33: Natalka: Project overview
Operational performance Natalka: Project overview Asset overview Location Natalka deposit, located in Magadan region, is one of the largest gold deposits in Russia and globally in terms of gold Reserves Natalka project execution put on hold in December 2013, revisited, redesigned and slated for
Slide 34: Natalka: Mining side revision
Operational performance Natalka: Mining side revision Rationale In Q1 2013 active full-scale mining was launched, showing a substantial deviation in gold content from the mineral resource block model Results of the review Micromine developed a new block model, which demonstrated high consistency w
Slide 35: Natalka: Processing flowsheet optimization
Operational performance Natalka: Processing flowsheet optimization Rationale The results of the pilot plant program and laboratory testing of the core samples variability provided the evidence that Natalka ore is highly responsive to gravity technology treatment. Results of the review As a result
Slide 36: Natalka: Project review
Operational performance Natalka: Project review Comparison 2012 design 2015 design JORC P&P reserves 31.6 moz @ 1.6 g/t 16.2 moz at 1.6 g/t Peak Mill Production rate, mtpa 10.0/20.0/40.0 11.1 Processing Scheme Gravitation-Flotation 3 stage gravitation only Following the update of the reserve estim
Slide 37: Chertovo Koryto: overview
Operational performance Chertovo Koryto: overview Asset overview Location Chertovo Koryto deposit is located in a remote area of Irkutsk N Region approximately 200 km northeast of Bodaybo Deposit lies in an area of high relief where several gold rich placer deposits have been mined, some mineral
Slide 38: Sukhoi Log: overview
Operational performance Sukhoi Log: overview Asset overview Location Sukhoi Log is one of the world’s largest undeveloped deposits and the biggest Chertovo Koryto Greenfield project owned by Russian gold greenfield project Polyus During the exploration period (from 1961 to 1999) 323,900 m of d
Slide 39: Sukhoi Log: Strategic Rationale for the Acquisition
Operational performance Sukhoi Log: Strategic Rationale for the Acquisition Advanced exploration status Well-studied processing flowsheet Verninskoye deposit operated by Polyus belongs to the same geological structure as Sukhoi Log and has Extensive exploration program and metallurgical tests si
Slide 40: Sukhoi Log: Positioning vs. peers
Operational performance Sukhoi Log: Positioning vs. peers World’s largest greenfield assets World’s largest operating by P&P Reserves, moz1 mines by Reserves, moz1 Sukhoi Sukhoi 2 LogLog 2 Sukhoi LogSukhoi Log 62.8 62.8 KSM Grasberg KSM 38.7 Grasberg (Freeport McMoRan) 56.9 (Seabridge Gold) Donlin M
Slide 41: Sukhoi Log: Exploration history
Operational performance Sukhoi Log: Exploration history 1959 – Sukhoi Log deposit was discovered as a result of prospecting and evaluation works conducted within Bodaybo expedition at Sukhoi Log 1963 ore field (V. Buryak, N. Popov and others) 1967 – An exploration program aimed at developing the
Slide 42: Sukhoi Log: advanced status of exploration works
Operational performance Sukhoi Log: advanced status of exploration works Extensive exploration program conducted from 1961 till 1999 Period Work phase Drilling scope 1961 – 1971 Early exploration stage ca. 11,400 1971 – 1977 Detailed exploration program ca. 238,100 Exploration program focused on the
Slide 43: Sukhoi Log: Overview of Joint Venture
Operational performance Sukhoi Log: Overview of Joint Venture The Sukhoi Log joint venture partner of Polyus is LLC RT Business Development (“RTRB”), which is a subsidiary of Russian state-owned Rostec Corporation (“Rostec”) Polyus and Rostec ownership Additional stake Rostec PJSC Polyus Polyus
Slide 44: 4. Financial Performance
4. FINANCIAL PERFORMANCE Ss POLYUS
Slide 45: Financial highlights
Financial performance Financial highlights Key highlights 1Q17 1Q16 change, % FY16 Gold production, koz 450 384 17% 1,968 Average realised refined gold price excl. SPPP1, $/oz 1,217 1,186 3% 1,250 Average realised refined gold price incl. SPPP, $/oz 1,258 1,260 (0%) 1,287 Total cash cost (TCC), $/oz
Slide 46: TCC benchmarking
Financial performance TCC benchmarking Polyus’ evolution on the global TCC curves in FY13 - FY16 US$/oz FY13 FY14 FY15 FY16 1,200 1,000 Polyus in 2013 – 707 US$/oz 800 600 Polyus in 2014 – 585 US$/oz 400 Polyus in 2015 – 424 US$/oz 200 Polyus in 2016 – 389 US$/oz Cumulative production, % 0 0% 20% 40
Slide 47: AISC benchmarking
Financial performance AISC benchmarking Global AISC curve in FY14-FY16 US$/oz 1,600 FY14 FY15 FY16 1,400 1,200 1,000 Polyus in 2014 – 819 US$/oz 800 600 Polyus in 2015 – 596 US$/oz 400 Polyus in 2016 – 572 US$/oz Cumulative production, % 200 0% 20% 40% 60% 80% 100% Highlights The lowest AISC among T
Slide 48: EBITDA margin and cost performance
Financial performance EBITDA margin and cost performance EBITDA margin, TCC and AISC breakdown by mine, 1Q 2017 TCC ($/oz) AISC ($/oz) EBITDA margin 800 80% 76% 700 743 70% 59% 58% 600 60% 610 585 51% 564 500 50% 518 400 40% 393 389 300 30% 306 200 20% 100 10% 0 0% Olimpiada Blagodatnoye Verninskoye
Slide 49: Debt maturity profile as of the end of 1Q 2017
Financial performance Debt maturity profile as of the end of 1Q 2017 Polyus has very comfortable debt maturity profile and proactively manages upcoming redemptions As of the end of 1Q 2017, the debt portfolio is represented by $1.25 bln Sberbank loan (2023), Eurobonds (2020, 2022 & 2023) in the
Slide 50: Debt structure evolution
Financial performance Debt structure evolution As of 30 September 2016 As of 31 March 2017 $2.5 bln • In the 4Q 2016, proceeds from the issue of $500 mln Notes due 2022 $1.25 bln Sberbank loan (2023) Bank loans Bank loans were spent on repayment short- Sberbank loan (2023) Debt breakdown (50%) (23%)
Slide 51: Net debt position
Financial performance Net debt position By the end of 1Q17, the Group’s net debt stood at $3,128 mln, down 3% from $3,241 mln as of 31 December 2016 The net debt/adjusted EBITDA ratio as of 31 March 2017 decreased to 2.0x, compared to 2.1x as of the end of 2016, due to both the decrease in net d
Slide 52: 5. Appendix
5. APPENDIX Ss POLYUS
Slide 53: 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 54: 1Q 2017 operational highlights
Appendix 1Q 2017 operational highlights Total gold output increased 17% y-o-y to 450 koz driven by higher production volumes at Olimpiada, Blagodatnoye and Kuranakh In 1Q17, volumes of ore processed increased 4% y-o-y to 6.6 mt as a result of the throughput capacity expansion at Olimpiada, Blago
Slide 55: Capex profile driven by development projects
Appendix Сapex profile driven by development projects Capex breakdown, $ mln $ mln 1Q17 1Q16 change, % Natalka 76 37 105% Olimpiada 14 6 133% Blagodatnoye 3 7 (57%) Verninskoye 5 2 150% Alluvials 7 3 133% Kuranakh 8 9 (11%) Exploration 1 1 - Other (including power projects) 14 31 (55%) Total 128 96
Slide 56: Addition of new reserves at existing mines – Alluvials case study
Appendix Addition of new reserves at existing mines – Alluvials case study Reserves and Resources replacement Licenses acquired in 2011-2016 Alluvials are actively increasing its reserve base by: Acquisition year Licenses acquired Reserves acquired, koz Exploration at currently operating mines:
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 1,335 1,574 1,690 1,235 4,735 4,687 4,454 4,215 4,269 4,216 4,309 2,917 3,076 3,155 3,233 3,236 2,745 2,846 2010 2011 2012 2013 2014 2015 2016 Mine production Recycled gold & Net producer hed
Slide 58: Gold market update: consumer demand
Appendix Gold market update: consumer demand Jewellery demand, t Jewellery demand in selected countries, t In 2016 India and China jewellery 350 demand decreased by 19% y-o-y 2,683 2,481 2,389 300 2,129 2,042 1,126 250 1,046 973 935 200 899 150 939 807 753 599 629 216 214 181 176 188 179 182 164 100
Slide 59: Investment Demand
Appendix Investment Demand Gold official reserve holdings, April 2017 Changes in CB reserve holdings y-o-y, t Gold reserves, Gold’s share of change 585 33,329 Holder 714 tonnes total reserves 2005-16 US 8,134 24% 0% 177 Germany 3,378 10% -1% 475 173 IMF 2,814 8% -13% 31,436 366 Italy 2,452 7% 0% 334
Slide 60: Supportive Policy Backdrop
Appendix Supportive Policy Backdrop Limited upside for bond yields as a result of a global growth momentum weakness 5.0% Swiss Germany Japan Netherlands 4.0% 3.0% 2.0% 31,436 1.0% 0.0% -1.0% Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Apr-13 Apr-16 Apr-09 Apr-10 Apr-11 Apr-12 Jan-13 Apr-
Slide 61: 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