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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Polymetal International Plc | LSE:POLY | London | Ordinary Share | JE00B6T5S470 | ORD NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 215.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMPOLY TIDMTTM
RNS Number : 0141C
Polymetal International PLC
25 April 2012
Release time IMMEDIATE Date 25 April 2012
Polymetal International plc
Full Year 2011 Financial results
Polymetal International plc (LSE: POLY) (together with its subsidiaries, including JSC "Polymetal" - "Polymetal", the "Company", or the "Group") is pleased to announce the Group's financial results for the year ended 31 December 2011.
HIGHLIGHTS
-- Revenue was up 43% to US$ 1,326 million, driven by 13% increase in gold equivalent ounces sold and a 26% increase in the average realised gold price;
-- Adjusted EBITDA of US$ 624 million, up 47% and exceeding revenue growth; adjusted EBITDA margin was up 110 bps to 47% despite ramp-up of new mines and operational challenges in the beginning of the year;
-- Total cash cost of US$ 701/AuEq oz, up 26% compared to 2010 as a result of Russia's domestic inflation of 6.1%, Rouble strengthening against the US dollar by 3.4%, and relatively high cost levels at Omolon and Albazino mines which have just commenced commercial production and are still in ramp up mode;
-- Total cash cost of mature operations (ex. Omolon and Albazino) was US$ 642/ AuEq oz, up 19% compared to 2010;
-- Diluted EPS up 12% to US$ 0.74 per share as net earnings increased by 21% to US$290 million;
-- Adjusted diluted EPS up 30% to US$ 0.89 per share as adjusted net earnings (excluding share based compensation) increased by 41% to US$ 347 million;
-- Inaugural dividend of US$ 0.20 per share proposed in accordance with the new dividend policy;
-- Strong liquidity and funding profile: Net debt / adjusted EBITDA reduced to 1.41, with 65% of borrowings being long-term;
-- The Company is on track to deliver 1 Moz gold equivalent production in 2012, with all related investments completed or nearing completion by the end of 2011.
Hot Features
Premium
2011 2010 Change, %(1)
------- ------- -------------
operating highlights (2)
Stripping, Kt 80,683 63,283 +27%
Underground development, m 35,150 23,577 +49%
Ore mined, Kt 11,002 7,474 +47%
Open-pit 9,636 6,509 +48%
Underground development 1,366 965 +42%
Average grade in ore mined (gold equivalent,
g/t) 3.8 4.4 -15%
Ore processed, Kt 8,821 7,845 +12%
Average grade in ore processed (gold
equivalent, g/t) 3.8 3.8 -1%
Production
Gold, Koz 443 444 0%
Silver, Moz 19.9 17.3 +15%
Copper, Kt 6.9 4.0 +73%
Gold equivalent, Koz (3) 810 753 +8%
Sales
Gold, Koz 448 440 +2%
Silver, Moz 17.0 18.0 -5%
Copper, Kt 6.4 4.0 +59%
Gold equivalent, Koz 4 851 750 +13%
Average headcount 8,051 6,912 +16%
Financial highlights
Revenue, US$m 1,326 925 +43%
Adjusted EBITDA(5) , US$m 624 425 +47%
Total cash cost, US$/AuEq oz 701 555 +26%
Adjusted EBITDA margin, % 47.0% 45.9% +110 bps
Net income(6) 290 239 +21%
Diluted EPS, US$/share 0.74 0.66 +12%
Adjusted net income, US$m 347 247 +41%
Adjusted diluted EPS, US$/share 0.89 0.68 +30%
Net debt, US$m 879 785 +12%
Net debt/Adjusted EBITDA 1.41 1.85 -24%
Operating cash flow before changes in
working capital, US$m 462 333 +39%
Operating cash flow, US$m 212 215 -1%
------------------------------------------------ ------- ------- -------------
Notes:
(1) % changes can be different from zero even when absolute amounts are
unchanged because of rounding. Likewise, % changes can be equal to zero
when absolute amounts differ due to the same reason. This note applies
to all the tables in this release
(2) Unaudited
(3) Based on 1:60 Ag/Au and 5:1 Cu/Au conversion ratios
(4) Based on actual realised prices
(5) The calculation of Adjusted EBITDA is explained below
(6) Net income represents profit for the financial year
"2011 was a very successful year for the Company. We believe that a combination of robust operating performance, with a good momentum achieved in the second half of the year, favorable market conditions and meaningful progress across all key investment projects, has delivered strong financial results in 2011 and superior positioning for value creation in the coming years", said Vitaly Nesis, CEO of Polymetal, commenting on the results.
"Polymetal's inaugural dividend payment demonstrates our commitment to delivering this value to our shareholders. We expect a strong financial year in 2012 on the back of meaningful production growth to 1 Moz, and robust cashflow generation as investments made in prior years are starting to pay off."
Precious metals market summary
2011 witnessed another period of strong price growth both for gold and silver, with gold reaching its all-time high in the beginning of September at US$ 1900/oz, and silver demonstrating even stronger growth, going up to as much as US$ 48.4/oz in April, with the gold/silver ratio standing at 32, a record low. Both gold and silver were rising on the back of continuing debt crisis in peripheral EU countries and US budget deficit problems, which, together with continued quantitative easing policy by the Federal Reserve System, raised doubts both about euro and dollar long-term strength as a reserve currency. Gold and silver therefore were viewed as "safe havens" by many institutions and private investors, while silver price highs were purportedly also driven by speculative dealing, to which the less liquid silver market is more sensitive.
By the end of the year, there was a moderate price decline to US$ 1564/oz for gold and US$ 27.8/oz for silver. As a result, the average 2011 gold price was US$ 1,572/oz, up 28%, and the silver price was US$ 35.3/oz, up 75% compared to 2010. The gold/silver ratio during 2011 dropped to 45 Ag/Au compared to 61 Au/Ag in the prior year.
Looking ahead to 2012, the Company believes that the gold price will stay above US$ 1,500/oz, as the key fundamental factors affecting the price are still in place for this year and are supporting the investment demand for gold. For silver, the Company expects a more modest price performance, with an average level slightly above US$ 30/oz.
Revenue
2011 2010 Change, %
------ ------ ----------
Sales volumes
Gold Koz 448 440 +2%
Silver Moz 17.0 18.0 -5%
Copper kt 6.363 3.991 +59%
Gold equivalent sold(1) Koz 851 750 +13%
------------------------- ----- ------ ------ ----------
(1) Based on actual realised prices
Sales by metal
(US$ mln unless otherwise
stated) 2011 2010 Change, % Volume variance, US$ mln Price variance, US$ mln
------ ------ ---------- ------------------------- ------------------------
Gold 697 542 +29% +10 +145
Average realised price US$/oz 1,556 1,232 +26%
Share of revenues % 53% 59%
Silver 580 353 +64% -18 +245
Average realised price US$/oz 34.0 19.6 +73%
Share of revenues % 44% 38%
Copper 46 29 +58%
Share of revenues % 3% 3%
Total metal sales 1,323 924 +43%
------------------------------------- ------ ------ ---------- ------------------------- ------------------------
Other revenue 3 1 +121%
Total revenue 1,326 925 +43%
===================================== ====== ====== ========== ========================= ========================
In 2011, revenue grew by 43% to US$ 1,326 million, driven mostly by significant increases in the gold and silver prices. Gold sales volume was up by 2%, in line with production dynamics. Silver sales volumes were down 5% despite 15% production growth, as the Group started to sell most of its silver produced at the Dukat plant (the major silver producing segment) in the form of silver concentrate to a third party off-taker in Kazakhstan. This has led to a one-off increase in finished goods inventories representing concentrate in transit or awaiting treatment at third-party refineries.
The average realised price for gold was US$ 1,556/oz, up 26% compared to 2010 and in line with market price of US$ 1,572/oz. The average realised silver price stood at US$ 34.0/oz, up 73% compared to 2010 which again closely reflects the market price levels and movements.
The share of gold in total revenue reduced from 59% in 2010 to 53% in 2011, while the share of silver grew from 38% to 44% on the back of the significant change in the gold/silver price ratio in the market.
Revenue by segment
(US$ mln) 2011 2010 Change, %
------ ----- ----------
Dukat 532 345 +54%
Voro 280 214 +31%
Khakanja 214 215 -1%
Varvara 182 125 +45%
Omolon 73 25 +192%
Albazino 45 - n/a
Other - 1 n/a
Total revenue 1,326 925 +43%
==================== ====== ===== ==========
Dukat continues to be the largest revenue contributor for the Group, with 40% of metal sales revenues coming from that segment. Voro and Varvara contributed 21% and 14% to the revenues respectively, broadly unchanged from 2010, while the share of Khakanja declined in 2011 from 23% to 16% as a result of a 25% decrease in gold equivalent produced driven by a lower grade profile. Albazino generated its first sales of gold concentrate to a Chinese third party off-taker in 2011 amounting to 3% of total revenues, and will become a meaningful revenue generating operation in 2012.
Cost of sales
Cost of sales
(US$ mln) 2011 2010 Change, %
----- ----- ----------
On-mine costs 320 174 +84%
Consumables and spare parts 111 67 +66%
Services 120 61 +99%
Labour 83 44 +90%
Taxes, other than income tax 2 0 n/a
Other expenses 4 3 +35%
Smelting costs 255 174 +47%
Consumables and spare parts 117 80 +46%
Services 88 57 +54%
Labour 47 34 +39%
Taxes, other than income tax 0 0 n/a
Other expenses 2 2 +8%
Purchase of ore from third parties 17 11 +50%
Mining tax 97 57 +69%
Total cash operating costs 688 416 +66%
------------------------------------------------ ----- ----- ----------
Depreciation and depletion of operating assets 140 76 +85%
Rehabilitation expenses 4 3 +25%
Total costs of production 832 494 +68%
------------------------------------------------ ----- ----- ----------
Increase in metal inventories -215 -53 +305%
Write-down to net realisable value 6 15 -59%
Total change in metal inventories -209 -38 +453%
------------------------------------------------ ----- ----- ----------
Cost of other sales 3 2 +87%
Total cost of sales 626 458 +37%
================================================ ===== ===== ==========
2011, 2011, 2010, 2010,
Cash operating cost structure US$ mln % of total US$ mln % of total
--------- ------------ --------- ------------
Consumables and spare parts 228 33% 147 35%
Services 208 30% 118 28%
Labour 130 19% 78 19%
Other expenses 8 1% 5 1%
Purchase of ore from third parties 17 2% 11 3%
Mining tax 97 14% 57 14%
------------
Total cash operating costs 688 100% 416 100%
==================================== ========= ============ ========= ============
Total cost of sales grew by 37% in 2011 to US$ 626 million, mainly on the back of volume-based growth both in ore mined (by 47%) and ore processed (by 12%). The key cost drivers were the domestic inflation in Russia (6.1% CPI growth in 2011), and appreciation of the rouble against the dollar (3.4% increase in average rate from 2010 to 2011). The increased operating assets base, which now fully includes Omolon and Albazino, both currently higher cost assets, contributed 21% of the 37% increase, while inflationary factors and production growth at other mines made up another 16%.
Diesel fuel price inflation in particular is an important factor affecting the Company's cost base and driving cost increases, especially for remote mines generating power using diesel gensets, and in-house and third party transportation costs. Depending on the region, the price of diesel fuel increased by 20-50% in 2011.
The total cost of labour within cash operating costs increased by 68% in 2011 to a total of US$ 130 million, as a result of general labour cost inflation, and also as a result of growth in the average number of employees directly involved in production by 46% as a result of production commencing at Albazino and a full year of commercial production at Omolon (including the Sopka mine). The cost of labour at those operations was mostly included in inventory costs in 2010. Another important factor was the increase in social tax rates in Russia from 26% to 34%.
The cost of consumables and spare parts and the cost of services grew by 55% and 77% respectively, mainly affected by mining and processing volume increases (47% and 12%, respectively), and further inflated by increased diesel and electricity prices, as well as increases in US dollar costs for other consumables in line with general CPI levels. Specific cost increases throughout the year were related to a shift of mining and, to some extent, processing volumes mix towards more complex and expensive mines and locations. In particular, significant increases are attributable to increased ore and concentrate haulage costs at Dukat, Omolon and Khakanja, as well as concentrate shipping costs and general transportation costs at Albazino.
Mining tax represents a consistent 14% share of total cost of sales and has increased by 69% in 2011 on the back of soaring metal prices, as well as an increased amount of total metal contained in ore mined in 2011.
Depreciation and depletion expenses nearly doubled in 2011 and amounted to US$ 140 mln as the Group put into production new mining and processing assets and completed several capex projects, including expansion of the Omsukchan factory at Dukat, the start-up of a new mine at Goltsovoye and a trial mine at Avlayakan, the launch of commercial production at Albazino, and the inclusion of a full year of mining and production at Omolon. The biggest increases are attributable to three mines where mining volumes significantly exceeded ore processed at relevant processing plants: ore mined at Sopka and not processed at Kubaka (Omolon hub), Albazino ore and concentrate prepared for further processing, and ore at the Avlayakan trial mine. At all locations mentioned, depreciation charges (mainly represented by depletion of mineral rights) were mostly included in metal inventories at the year-end.
In 2011 a net metal inventory increase of US$ 215 million was recorded as the Group has been building concentrate stockpiles at Albazino (awaiting further processing at Amursk POX in 2012), and Dukat (concentrate in transit and in third-party refineries), both largely representing one-off factors. The Group has also been building ore stockpiles at Sopka (awaiting transportation by winter road at the beginning of 2012), Mayskoe and Avlayakan.
General, administrative and selling expenses
(US$ mln) 2011 2010 Change, %
----- ----- ----------
Labour 72 43 +69%
Services 24 21 +18%
Share based compensation 57 8 +623%
Depreciation 4 2 +106%
Other 12 9 +34%
Total 170 82 +107%
========================== ===== ===== ==========
General, administrative and selling expenses grew from US$ 82 million to US$ 170 million, with the bulk of the increase arising from increase in non-cash share-based compensation costs. Labour costs grew by 69% as a result of the start of production and/or mining at Omolon, Albazino and Mayskoe, whilst previously general and administrative costs of those operations were capitalised.
Other expenses
(US$ mln) 2011 2010 Change, %
------ ----- ----------
Taxes, other than income tax 11.3 14.5 -22%
Listing expenses 9.5 - n/a
Exploration expenses 30.2 8.1 +273%
Omolon plant pre-commissioning expenses - 7.2 -100%
Social payments 8.7 6.5 +34%
Housing and communal services 6.4 4.3 +49%
Loss on disposal of property, plant and equipment 6.2 6.3 -1%
Bad debt allowance (1.2) 2.3 -150%
Other expenses 7.3 6.4 +13%
Total 78.3 55.5 +41%
=================================================== ====== ===== ==========
Other expenses grew by 41% to US$ 78.3 million. The increase was mostly comprised of listing expenses (a US$ 9.5 million one-off item, representing transaction costs of the Company's listing on the London Stock Exchange, excluding costs related to new capital issued), and an increase in exploration expenses (US$ 22.1 million) related to assets where no probable or proved reserves were established. Other components demonstrated a moderate increase on the back of increased production, asset base and general cost inflation.
TOTAL Cash cost BY MINE
Cash costs per gold equivalent ounce Cash cost per AuEq ounce, US$/oz Gold equivalent sold, Koz(1)
2011 2010 Change, % 2011 2010 Change, %
---------- --------- --------------- --------- -------- ------------
Dukat (AgEq) 14.0 9.9 +41% 15,546 17,608 -12%
Voro 553 423 +31% 176 174 +1%
Khakanja 672 478 +41% 138 175 -21%
Varvara 747 626 +19% 120 101 +19%
Total - mature operations 642 540 +19% 774 731 +6%
Omolon 1,481 1,162 +27% 46 19 +146%
Albazino 1,018 - n/a 31 - n/a
Total - new operations 1,294 1,162 +11% 77 19 +314%
Total 701 555 +26% 851 750 +13%
====================================== ========== ========= =============== ========= ======== ============
(1) Based on average realised prices
Cash costs per tonne milled
Cash cost per tonne milled, US$/t Ore processed, Kt
2011 2010 Change, % 2011 2010 Change, %
---------- --------- --------------- --------- -------- ------------
Dukat 138 109 +27% 1,733 1,533 +13%
Voro 48 40 +19% 1,803 1,931 -7%
Khakanja 173 113 +53% 617 622 -1%
Varvara 30 25 +20% 3,473 3,076 +13%
Total - mature operations 70 55 +29% 7,627 7,163 +6%
Omolon 185 48 +285% 574 682 -16%
Albazino 88 - n/a 620 - n/a
Total - new operations 134 48 +180% 1,194 682 +75%
Total 79 54 +46% 8,821 7,845 +12%
====================================== ========== ========= =============== ========= ======== ============
The Company believes it has demonstrated a good ability to control costs in the face of both global and local inflationary pressures which the mining industry is facing. Total cash costs per gold equivalent ounce sold were US$ 701/AuEq oz, up 26% compared to 2010. The cash cost dynamics was significantly influenced by Omolon and Albazino, the former operating under design capacity during 2011, and the latter going through the ramp-up stage and reaching design volumes and recoveries in the last quarter of the year. As a result, both operations have demonstrated cash costs which are higher than at our mature mines, but the Group is confident that their 2012 performance will be in line with the Group's average. Excluding these two operations, total cash cost was US$ 642/AuEq oz, or up just 19% compared to 2010. The key factors contributing to the growth in cash costs were Russian domestic inflation (6.1%) and appreciation of the US dollar against the rouble (3.4%) in 2011.
Cash cost by mine:
-- At Dukat, the cash cost per silver equivalent ounce sold grew by 42% to US$ 14.0/AgEq oz due to an increased share of underground mining (Goltsovoye) and increased ore and concentrate haulage costs, as well as significantly higher mining tax on the back of rapid growth in the average silver price by 73% year-on-year. General inflation and increased diesel fuel prices also contributed to the growth. However, in the second half of 2011, cash cost per silver equivalent dropped to US$ 13.4/AgEq oz as the both grades and recoveries improved, and silver prices slightly retreated from April highs.
-- At Voro, the cash cost per gold equivalent ounce sold in 2011 was US$ 553/AuEq oz, the lowest among our assets. Cash cost of gold equivalent ounce increased by 31% in 2011 on the back of a decrease in average grade in ore mined from 5.2 g/t to 3.6 g/t and a resulting production volume decline, combined with increased metal prices driving up mining tax, as well as general inflationary factors.
-- Khakanja's cash cost per gold equivalent ounce sold was US$ 672/AuEq oz, up 41% compared to 2010. The growth in cost was driven mainly by the grade decline after processing of high grade ore from Yurievskoe had been completed and the grades declined at the main Khakanja mine, coupled by Avlayakan ore transportation costs and diesel fuel price growth.
-- Varvara has demonstrated the least cost inflation among our assets, with cash cost per gold equivalent ounce growing by 19% in 2011 to US$ 747/ AuEq oz. The growth was mainly driven by increased use of third party ore and metal prices pushing the mining taxes up. On the positive side, cost inflation has been limited due to average grade improvement and 13% growth in total ore processed at the mine, with a 28% increase in gold equivalent production achieved in 2011.
-- At Omolon, cash costs were US$ 1,481/AuEq oz sold, significantly above the Company's and industry average as the Group has been unable to reach this year's production volume targets. From a spike of US$ 1,833/AuEq oz in first half of the year, the Group achieved a notable improvement to US$ 1,303/ AuEq oz in the second half, on the back of significant increased grade in Birkachan ore processed (from 1.9 g/t in 1H 2011 to 3.1 g/t in 2H 2011) and improved recoveries. The Group expects a radical improvement in the cost profile of the Kubaka plant in 2012 as it will be able to process high grade ore from the Sopka mine as originally planned and achieve more than a three-fold increase in gold equivalent production volume.
-- At Albazino, the cash cost was US$ 1,018/ AuEq oz, a high level driven by the ramp-up of both the mine and processing plant during 2011. By the end of the year the processing plant has reached both its designed volume and recoveries, so the Group is quite positive about the 2012 cost outlook.
Cash costs by mine, 2H vs 1H:
Cash costs per gold equivalent ounce Cash cost per ounce, US$/oz Gold equivalent sold, Koz(1)
2H 2011 1H 2011 Change, % 2H 2011 1H 2011 Change, %
----------- ---------- ------------- --------- --------- -----------
Dukat (AgEq) 13.4 15.2 -12% 182 159 +14%
Voro 598 530 +13% 102 74 +38%
Khakanja 717 617 +16% 68 69 -2%
Varvara 749 730 +3% 62 60 +4%
Total - mature operations 658 623 +6% 414 362 +14%
Omolon 1,303 1,833 -29% 31 15 +105%
Albazino 993 - n/a 32 - n/a
Total - new operations 1,147 1,833 -37% 63 15 +320%
Total 721 671 +7% 477 377 +26%
====================================== =========== ========== ============= ========= ========= ===========
(1) Based on average realised prices
Cash costs per tonne milled
Cash cost per tonne milled, US$/t Ore processed, Kt
2H 2011 1H 2011 Change, % 2H 2011 1H 2011 Change, %
----------- ---------- ------------- --------- --------- -----------
Dukat 133 144 -7% 915 818 +12%
Voro 49 47 +3% 968 838 +16%
Khakanja 214 131 +63% 305 312 -2%
Varvara 31 28 +12% 1,786 1,687 +6%
Total - mature operations 73 67 +9% 3,975 3,654 +9%
Omolon 256 115 +122% 275 299 -8%
Albazino 86 - n/a 620 - n/a
Total - new operations 140 115 +21% 895 299 +199%
Total 85 71 +20% 4,870 3,953 +23%
====================================== =========== ========== ============= ========= ========= ===========
In the second half of 2011, cash cost inflation was much more moderate as compared to the first half of the year and was largely driven by a 13% increase in the average realised gold price pushing mining taxes up, and continuing increase in throughput volumes at most of our operations, but also gaining from depreciation of the rouble against the US dollar and lower Russia domestic inflation (down by 1.1%). As a result, excluding Albazino and Omolon (now in ramp-up mode), cash cost per gold equivalent ounce grew by only 6% and the total cash cost per tonne milled increased by 9%. All-in, total cash costs per gold equivalent ounce increased by 7% to US$ 721/AuEq oz, while total cash costs per tonne milled grew by 20% to US$ 85/t.
Cash cost by mine:
-- At Dukat, cash cost per silver equivalent ounce sold decreased by 12% to US$ 13.4/AgEq oz as a result of significant improvement in both gold and silver recoveries in the second half of the year which was achieved after the recent refurbishment of the plant. The cash cost per tonne also improved by 7% half-on-half from US$ 144/t to US$ 133/t on the back of a 12% increase in throughput at the Omsukchan plant providing some economies of scale.
-- At Voro, despite a 13% growth to US$ 598/AuEq oz on the back of significantly increasing volumes of oxidized ore mined and stacked as well as higher stripping volumes in the second half of the year as compared to the first half, cash cost per gold equivalent ounce remained the lowest among our assets. Cash cost per tonne milled grew only 3% to US$ 49/t and are below Company's average.
-- Khakanja's cash cost per gold equivalent ounce sold was US$ 717/AuEq oz, above company average. The 16% increase in costs compared to 1H 2011 was driven mainly by the grade decline after processing of high grade ore from Yurievskoe had been completed and the grades declined at the main Khakanja mine, coupled by Avlayakan ore transportation costs. These factors also contributed to the higher cash cost per tonne milled of US$ 214/t oz in the second half of the year.
-- Varvara has demonstrated very moderate cost inflation, with cash cost per gold equivalent ounce increased by 3% half-on-half to US$ 749/oz. Cash cost per tonne milled were the lowest in the Company's portfolio and accounted for USD 31/t in the second half of 2011.
-- At Omolon, from a high of US$ 1,833/AuEq oz in first half of the year, the Group has achieved a notable improvement to US$ 1,303 / GE oz the second half, on the back of significant increased grade in Birkachan ore processed (from 1.9 g/t in 1H 2011 to 3.1 g/t in 2H 2011) and improved recoveries.
-- At Albazino, the cash cost was US$ 993/AuEq oz (based on the average US$/RUR exchange rate in 2H 2011), a high level driven by the ramp-up of both the mine and processing plant during 2011. By the end of the year the processing plant has reached its designed volume, so the cash costs per tonne of US$ 86/t close to Company's average.
Adjusted EBITDA and EBITDA margin
Reconciliation of Adjusted EBITDA
(US$ mln) 2011 2010 Change, %
------ ------ ----------
Net income 290 239 +21%
Finance cost (net) 25 21 +18%
Income tax expense 119 67 +76%
Depreciation and depletion 97 70 +37%
EBITDA 530 398 +33%
------------------------------------------------------ ------ ------ ----------
Share based compensation 57 8 +623%
Exchange gains/losses 14 0 n/a
Listing expenses 10 - n/a
Change in fair value of contingent liability 7 4 +89%
Rehabilitation costs 4 3 +25%
Write-down of inventory 6 15 -59%
Change in fair value of derivatives 2 1 +104%
Gain on disposal of subsidiary/bargain purchase gain (5) (4) +38%
Adjusted EBITDA 624 425 +47%
====================================================== ====== ====== ==========
Adjusted EBITDA margin 47.0% 45.9% +110 bps
------------------------------------------------------ ------ ------ ----------
Adjusted EBITDA by segment
(US$ mln) 2011 2010 Change, %
----- ----- ----------
Dukat 282 154 +83%
Voro 175 131 +33%
Khakanja 113 120 -6%
Varvara 91 55 +66%
Omolon 5 (8) -159%
Amursk hub (including Albazino and Mayskoe) (6) (14) -60%
Corporate and other and intersegment operations (36) (12) +191%
Total 624 425 +47%
================================================= ===== ===== ==========
In 2011, adjusted EBITDA grew by 47% to US$ 624 million, slightly ahead of revenue growth. This year the Group fully benefited from increased metal prices, production growth, and our ability to keep costs under control in a challenging environment. The adjusted EBITDA margin grew slightly by 1.1% to 47.0%. Dukat and Voro contributed most to the adjusted EBITDA growth. Adjusted EBITDA at Dukat grew by 83% to US$ 282 million on the back of soaring silver prices and a 17% increase in silver production volumes, while at Voro the Group benefited from the lowest cost base among its assets, pushing adjusted EBITDA up by 33% despite some production volume decline. At Albazino (excluding Amursk and Mayskoe, both assets under construction), in 2011 the Group has already achieved a positive adjusted EBITDA contribution of US$ 4.5 million.
Other income statement items
Foreign exchange losses increased significantly from US$ 0.3 million in 2010 to US$ 13.6 million in 2011, mainly stemming from the appreciation of the Group's mostly US dollar denominated borrowings against the Russian rouble as the US dollar appreciated against the rouble by 5.6% year-on-year. The Company does not use any hedging instruments on foreign exchange, other than a natural hedge arising from the fact that the majority of the Group's revenue is denominated or calculated in US dollars.
A US$ 6.8 million non-cash loss was recorded in 2011, arising from changes in the fair value of contingent consideration liabilities. The change mainly arises from an increase in metal prices, as the Group is obliged to pay a perpetual 2% of revenues from deposits acquired as part of the acquisition of Kubaka in 2008. In September 2011, the Group fully settled deferred liabilities in relation to the acquisition of Varvara by paying US$ 5.5 million consideration to the previous owner.
Net INCOME, earnings per share and dividends
Pre-tax earnings in 2011 were US$ 409 million, up 33% compared to 2010, reflecting strong revenue growth and controlled cost dynamics. The Group's effective tax rate in 2011 was 29%, up from 22% in 2010, as a result of an increase in various non-deductible expense items or expenses incurred in jurisdictions outside Russia. The biggest single non-deductible expense item was share-based compensation (a non-cash item, US$ 57 million in 2011 compared to US$ 8 million in 2010). Other significant non-deductible expenses included contingent consideration, and charitable and social expenses.
As a result, net income grew by 21% to US$ 290 million. Basic earnings per share were US$ 0.79, or 18% higher than 2010 (the average number of shares in issue in 2011 was 2% higher as a result of the IPO). Diluted earnings per share were US$ 0.74, up 12% compared to 2010 and further influenced by an increase in the dilutive effect of shares potentially issuable by the Company under the terms of its Long-term Employee Incentive Programme.
From 2011, the Company has implemented a new dividend policy. For 2011, the Directors propose to pay a dividend of US$ 0.20 per share, and from 2012 the Company intends to pay a dividend of 20% of net earnings provided that net debt to adjusted EBITDA ratio is below 1.75.
Capital expenditure
(US$ mln) 2011 2010 Change, %
----- ----- ----------
Amursk/Albazino 133 179 -26%
Mayskoe 85 51 +66%
Omolon 68 43 +59%
Dukat 55 26 +112%
Khakanja 20 7 +172%
Voro 13 12 +8%
Varvara 15 22 -33%
Corporate 13 31 -58%
Exploration 66 59 +12%
Capitalised interest 12 14 -11%
Total capital expenditure(1) 480 444 +8%
=============================== ===== ===== ==========
(1) Total capital expenditure including amounts payable at the end of the period
In 2011, total capital expenditure was US$ 480 million, up 8% compared to 2010 as the Group was completing a number of major projects during the year. The Company expects that in 2012 it will see a considerable decrease in investment as most of the construction projects on the existing assets have been completed or are nearing completion.
The major capital expenditure items in 2011 were:
-- US$ 133 million has been invested in completion of construction at Amursk POX and Albazino concentrator, with all major construction works completed at both sites in 2011. The concentrator already is up and running and the Amursk POX is completing the commissioning stage;
-- US$ 85 million was spent on construction of processing plant and underground mine at Mayskoye, where the Group is targeting completion in Q4 2012;
-- US$ 68 million was invested in the Omolon operations, including installation of a Merrill Crowe section and completion of refurbishment at the Kubaka plant (completed in December 2011) and expansion of the mining fleet at Sopka and Birkachan;
-- Capital expenditure at Dukat was US$ 55 million, representing mainly completion of refurbishment of the Omsukchan concentrator (gravity circuit installed) and expansion of underground operations and fleet at Dukat and Goltsovoye mines;
-- Other operating mines incurred less significant capital expenditures in 2011, mainly representing routine maintenance investment and upgrades to mining fleet;
-- We have continued to actively invest in greenfield and brownfield exploration. Capital expenditure on exploration was US$ 66 million, up 12% compared to 2010;
-- Total capital expenditure in 2011 includes US$ 12 million of capitalised interest (2010: US$ 14 million).
Cash flows
(US$ mln) 2011 2010 Change, %
------ ------ ----------
Operating cash flows before changes in working capital 462 333 +39%
Changes in working capital (250) (118) +113%
Total operating cash flows 212 215 -1%
---------------------------------------------------------------------- ------ ------ ----------
Investing cash flows (472) (410) +15%
---------------------------------------------------------------------- ------ ------ ----------
Financing cash flows
Net changes in gross debt 191 178 +8%
Proceeds from IPO 763 - n/a
Other (47) - n/a
Total financing cash flows 907 178 +410%
---------------------------------------------------------------------- ------ ------ ----------
Net decrease/increase in cash and cash equivalents 647 (17) n/a
---------------------------------------------------------------------- ------ ------ ----------
Cash and cash equivalents at the beginning of the year 11 28 -61%
Effect of foreign exchange rate changes on cash and cash equivalents 1 (0) -373%
Cash and cash equivalents at the end of the year 659 11 n/a
---------------------------------------------------------------------- ------ ------ ----------
Cash flows in 2011 were strong, supported by metal prices and the inflow of funds from the IPO. Cash and cash equivalents increased from US$ 11 million in 2010 to US$ 659 million as at 31 December 2011 as a result of the following:
-- Operating cash flows before changes in working capital were US$ 462 million, up 39% from 2010 and supported by growth in adjusted EBITDA;
-- Changes in working capital were negative at US$ 250 million (2010: US$ 118 million) mainly as a result of increase in metal inventories at Omolon (ore mined at Sopka for further processing in 2012 at the Kubaka plant) and Albazino (concentrate produced for further processing at the Amursk POX in 2012) and, to a lesser extent, at other mines where the amounts of ore mined exceeded processing capacity in 2011 and stockpiles of saleable concentrate have built up;
-- Investing cash flows were up 15% driven by progress at major capital expenditure projects in 2011;
-- Financing cash flows were US$ 907 million, mainly represented by the IPO proceeds of US$ 763 million and US$ 191 million net increase in debt.
Liquidity and funding
Net debt 2011 2010 Change, %
------ ----- ----------
Short-term debt and current portion of long-term debt 348 91 +285%
MTO obligation 535 - n/a
Finance lease liabilities - 5 -100%
Long-term debt 655 595 +10%
Derivatives - 105 -100%
Gross debt 1,538 796 +93%
------------------------------------------------------- ------ ----- ----------
Less: cash and cash equivalents 659 11 n/a
Net debt 879 785 +12%
======================================================= ====== ===== ==========
Net debt / adjusted EBITDA 1.41 1.85 -23.8%
------------------------------------------------------- ------ ----- ----------
The Group is keen to maintain a safe liquidity and funding profile, underpinned by strong operating cash flows and robust short-term and long-term liquidity management policies.
The Group's net debt stood at US$ 879 million as of 31 December 2011, representing a Net debt / adjusted EBITDA ratio of 1.41 as a result of receipt of IPO proceeds received in November 2011, and recognition of the MTO obligation.
The Group continues to focus on building a healthy debt profile, which is comfortable both from the liquidity and cost standpoints. The majority of our borrowings (65%) were long-term as at 31 December 2011, while the average cost of debt remained at a low 3.2% in 2011 (2010: 3.1%), supported by low base interest rates and our ability to negotiate competitive premiums on the back of the improved financial position of the Company and our excellent credit history.
Key 2012 financial targets
The Company is positively looking into 2012. It will be a year when we will be benefiting from the following factors:
-- Achievable production targets of 1 Moz of gold equivalent, representing a 24% increase over the 2011 level;
-- Completion of a major capital investment cycle in 2011, with significantly less capital expenditure planned for 2012;
-- Completion of the ramp-up of new operations at Omolon and Albazino allowing the Group to achieve robust cost performance.
The Company therefore expects a strong financial year, both in terms of earnings and free cash flow. The Company will continue to implement a rigid liquidity policy, further pushing the debt level down in order to maintain net debt/adjusted EBITDA below 2011 levels and to be able to generate the anticipated dividend flow to our shareholders.
presentation, webcast and conference call details
Polymetal will hold the Company's full year results presentation on Wednesday, April 25, 2012 at 9:00am London time (12:00 pm Moscow time; 4:00 am New York time) at Citypoint, 1 Ropemaker Street, London, EC2Y 9AW. The presentation will be supported by a conference call and webcast.
To participate in the call, please dial:
0808 109 0700 (toll-free from the UK)
+44 20 3003 2666 (from outside the UK), password: Polymetal International
To access the webcast, please follow the link:
http://webcast.irsquared.net/p/795-1028-11145/en
Recording of the call will be available at +44 (0) 20 8196 1998, replay pin 1923259810, from Wednesday, April 25, till Wednesday, May 2, 2012.
Enquiries
Media Investor Relations ----------------- ----------------- ------------------------------------- College Hill Polymetal Leonid Fink Pavel Danilin Tony Friend +44 20 7457 2020 Maxim Nazimok +7 812 313 5964 ----------------- ----------------- ------------------ ----------------- Joint Corporate Brokers ------------------------------------ ------------------------------------- Morgan Stanley Canaccord Genuity Edward Knight John Prior Sandip Patodia +44 20 7425 8000 Roger Lambert +44 20 7523 8350 ----------------- ----------------- ------------------ -----------------
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
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EASLSASFAEEF
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