Polus · RUS:PLZL
Polus — Polyus — Investor Presentation (February 2017)
59 slides from Polus's investor presentation, February 2017
Slide 1: Corporate Presentation
CORPORATE PRESENTATION February 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 #9 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 #9 globally by production (2015, moz) #4 globally by P&P reserves (2015, moz) 6.1 92 5.0 74 69 4.0 64 3.5 52 2.6 46 41 2.5 2.2 2.0 33 1.8 1.7 31 21 Barrick Agnico Kinross Polyus Anglogold Goldcorp Navoi MMC Newcrest Newmont Goldfields Newmont Newcrest Sibanye
Slide 5: Operating in a gold-rich region
Overview Operating in a gold-rich region Russia is #3 globally by production (2015, moz) 14.8 #1 in Russia Polyus 1.76 moz in 2015 approximately 19% of the Russian production 8.8 8.6 6.9 5.5 5.4 5.1 4.3 3.6 3.1 3.0 2.7 2.0 2.0 1.9 China Australia Russia United Peru South Canada Mexico Indonesi
Slide 6: Strong portfolio of producing assets
Overview Strong portfolio of producing assets 14 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 2015, koz Largest gold assets by resources in 2015, moz Muruntau (Uzbekistan) 1,961 Pebble (US) 107.7 Grasberg (Indonesia) 1,360 Grasberg (Indonesia) 104.8 1 Polyus Krasnoyarsk cluster (Russia) 1,289 Olympic Dam (Au
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 64 +6 ppts Polyus 64 +6 ppts 58 58 Alrosa 60 +7 ppts 48 53 Gold Fields +8 ppts 40 Polymetal 50 46 +4 ppts Newcrest 42 0 ppts 42 Norilsk 47 55 -8 ppts 40 Agnico Eagle +1 ppts 3
Slide 9: Extensive open-pit high-grade resource base
Overview Extensive open-pit high-grade resource base Reserves split and average grade in reserves as of 2015, g/t 100 % 4.5 90% 4 80% 2.9 3.5 70% 3.6 2.4 3 60% 2.2 Average grade excl. Polyus = 1.6 g/t 2.5 50% 1.4 2 40% 1.3 30% 1.1 1.1 1.1 1.5 0.7 0.6 1 20% 0.5 10% 0% 0 Polymetal Gold Fields Agnico E
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 The highest bid submitted at the auction for the Sukhoi Log license in January 2017 for the total amount of RUB 9.4 bln New dividend policy adopted in October 2016 stipulating payout at 30% of adjusted EBITDA Total gold output of 1,968 koz in 2016, up 12% y-o-y. Init
Slide 12: 2. Corporate Governance
2. CORPORATE GOVERNANCE Ss POLYUS
Slide 13: Corporate development
Corporate governance Corporate development Polyus corporate structure changes Since 2012, Polyus Gold International Limited (PGIL) was a premium LSE listed company In November 2015, Wandle Holdings (the vehicle of the largest shareholder of PGIL) consolidated 100% of PGIL through the buyouts F
Slide 14: New corporate structure
Corporate governance New corporate structure Polyus Gold previous corporate structure Polyus current corporate structure (prior to 17 November 2015) Principal holding company Polyus Gold International Limited Issuer of the eurobonds Polyus Gold International Limited BoD with Independent (PGIL)
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 Current shareholder structure of PJSC Polyus Pro-forma shareholder structure of PJSC the buyback (prior to 11 March 2016) (post 30 September 2016) Polyus (following the cancela
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 (2015) In 2015, Polyus becomes the first company from Eastern Europe Polyus 0.08 Average LTIFR and the CIS to become a member of the ICMM1 Polyus, together with DuPont, implemented the Health & Safety Uralkali 0.11 (e
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 2.8 ppt
Slide 23: 2H 2016 operational highlights
Operational performance 2H 2016 operational highlights Stripping ratio dropped 83% y-o-y to 3.3 t/t as large stripping works for a pit cutback at Olimpiada were completed in 1Q 2016 Olimpiada Processed ore volumes increased to 6.1 mnt on the back of the reconfiguration of Mill No. 1 (see p. 29)
Slide 24: 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 25: Total Operational Efficiency Program overview
Operational performance Total Operational Efficiency Program overview TOE objectives TOE 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
Slide 26: Kuranakh: turnaround example
Operational performance Kuranakh: turnaround example Kuranakh in FY13 MINING IMPROVEMENTS Kuranakh in 9M16 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 27: Strong growth profile
Operational performance Strong growth profile Gold production dynamics and guidance, FY 2008-2020, koz1 Initial guidance > 2,700 revised 6% upward in October 2016; Guidance Guidance Initial guidance surpassed surpassed surpassed by 11% 2,125 by 5% by 6% 1,968 1,900 2,075 1,760 1,763 1,800 1,652 1,69
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 BIOX expansion at Mills No. 1,2,3 An additional BIOX circuit at Mills No. 2,3 complex will provide Reconfiguration of the Mill-1 to process high-grade Olimpiada Initiative Initiative an option to pr
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 Auction process overview Location Sukhoi Log license auction announced by the Russian Government (Decree Chertovo Koryto 30-Nov-16 of the Government of the Russian Federation No. 2550-r dated 30 Greenfield project owned by November 2016) Polyus Distan
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 (2015), moz1 Sukhoi Sukhoi 2 LogLog 2 Sukhoi LogSukhoi Log 62.8 62.8 KSM Grasberg KSM 38.8 Grasberg (Freeport McMoRan) 58.8 (Seabridge Gold) D
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 Item 3Q16 3Q15 change y-o-y 9M16 9M15 change y-o-y FY15 Gold production, koz 555 514 8% 1,395 1,298 7% 1,763 Average realized refined gold price excl. SPPP, $/oz 1,335 1,138 17% 1,265 1,177 7% 1,155 Average realised refined gold price incl. SPPP, $/oz 1,344
Slide 46: TCC benchmarking
Financial performance TCC benchmarking Polyus’ evolution on the global TCC curves in FY13 - FY15 1,200 1,200 1,200 US$/oz FY15 FY14 FY13 1,000 1,000 1,000 800 800 800 600 600 600 Polyus in 2014 – 585 US$/oz Polyus in 2013 – 707 US$/oz 400 400 400 Polyus in 2015 – 424 US$/oz Cumulative production, %
Slide 47: AISC benchmarking
Financial performance AISC benchmarking Global AISC curve in FY14-FY15 1,400 US$/oz FY15 FY14 1,200 1,000 Polyus in 2014 – 819 US$/oz 800 600 400 Polyus in 2015 – 596 US$/oz Cumulative production, % 200 0% 10% 20% 30% 40% 40% 50% 50% 60% 60% 70% 70% 80% 80% 90% 90% 100% 100% Highlights The lowest AI
Slide 48: EBITDA margin and cost performance
Financial performance EBITDA margin and cost performance EBITDA margin, TCC and AISC breakdown by mine, 9M16 TCC ($/oz) AISC ($/oz) EBITDA margin (%) 800 73% 735 724 70% 700 64% 64% 62% 600 591 60% 57% 512 522 495 500 465 50% 420 412 47% 407 399 400 40% 300 286 30% 200 20% 100 0 10% 1 Olimpiada Blag
Slide 49: Debt maturity profile as of the end of 4Q 2016
Financial performance Debt maturity profile as of the end of 4Q 2016 Polyus has very comfortable debt maturity profile and proactively manages upcoming redemptions. As of the end of 2016, the debt portfolio is represented by $2.5 bln Sberbank loan (2023), Eurobonds (2020 & 2022), local rouble bo
Slide 50: Debt structure evolution
Financial performance Debt structure evolution As of 30 September 2016 As of 31 December 2016 $2.5 bln • On 20 October 2016, Sberbank loan (2023) PGIL priced an issuance $2.5 bln Bank loans Bank loans Debt breakdown (50%) of USD 500 million notes Sberbank loan (2023) (30%) (20%) due 28 March 2022 wi
Slide 51: Net debt position
Financial performance Net debt position Historically, Polyus had low leverage (Net Debt / EBITDA below 0.5x). In 1H 2016 it increased to 2.5x1 due to the share buyback partly financed with debt Strong underlying performance accompanied by favorable market conditions during the 2H 2016 resulted i
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: Capex profile driven by development projects
Appendix Сapex profile driven by development projects Capex breakdown, $ mln 3Q 3Q 9M 9M $ mln y-o-y chng y-o-y chng 2016 2015 2016 2015 Natalka 47 37 27% 129 75 72% Olimpiada 17 8 113% 50 18 178% Blagodatnoye 5 − N.A. 14 4 250% Verninskoye 8 1 N.M. 14 9 56% Alluvials 5 2 150% 16 5 220% Titimukhta −
Slide 55: 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 4,215.1 4,269 4,216 4,309 2,917 3,076 3,155 3,233 3,236 2,745 2,846 0 2010 2011 2012 2013 2014 2015 2016 Mine production Recycled gold & Net producer
Slide 56: 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 2,042 367 395 1,126 250 364 346 1,046 973 290 293 935 264 240 200 899 150 939 807 753 599 629 216
Slide 57: Gold market update: investment demand
Appendix Gold market update: investment demand Gold official reserve holdings, February 2017 Changes in CB reserve holdings y-o-y, t Gold reserves, Gold’s share of change 515 33,259 Holder tonnes total reserves 2005-16 714 US 8,133 24% 0% 177 Germany 3,378 10% -1% 475 173 IMF 2,814 8% -13% 31,436 36
Slide 58: Gold market update: supportive policy backdrop
Appendix Gold market update: supportive policy backdrop Limited upside for bond yields as a result of a global growth momentum weakness 5.0 4.0 3.0 2.0 31,436 1.0 - (1.0) Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Swiss Germany Japan Netherlands Gold vs. inflation-indexed US rate
Slide 59: 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