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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 | 00:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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Polymetal International plc Preliminary results for the year ended 31 December 2023 Polymetal International plc (“Polymetal”, the “Company” or the Group) announces the Group's preliminary results for the year ended 31 December 2023. “In 2023, Polymetal managed to stay profitable and reduce leverage despite persistent geopolitical headwinds. Robust production and stable cost performance coupled with favorable commodity price dynamics drove improvement in financial results. In 2024, after the sale of the Russian assets is completed, the Company will pursue long-term growth while ensuring long-term free cash flow potential of the existing assets in Kazakhstan”, said Vitaly Nesis, Group CEO of Polymetal International plc, commenting on the results. FINANCIAL HIGHLIGHTS
DIVIDENDS AND DISPOSAL
Notes: (1) Totals may not correspond to the sum of the separate figures due to rounding. % changes can be different from zero even when absolute amounts are unchanged because of rounding. Likewise, % changes can be equal to zero when absolute amounts differ due to the same reason. This note applies to all tables in this release. (2) Defined in the “Alternative performance measures” section below.
OPERATING HIGHLIGHTS
Notes: (1) Based on 80:1 Au/Ag conversion ratio and excluding base metals. Discrepancies in calculations are due to rounding. Mayskoye production reporting approach was amended to record production as soon as the ownership title for gold is transferred to a buyer at the mine site’s concentrate storage facility. Previous periods were restated accordingly. (2) Company employees only are taken into account. (3) The average number of personnel was revised versus the number reported in January 2024 to include average headcount of all assets in Russia that were deconsolidated during the reporting year and were not part of Group as at 31 December 2023, for the period they were part of the Group. ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”) HIGHLIGHTS
2024 OUTLOOK FOR KAZAKHSTAN BUSINESS
Conference call and webcast The Company will hold a webcast on Friday, 15 March 2024, at 16:00 Astana time (11:00 London time). To participate in the webcast, please register using the following link: https://streamstudio.world-television.com/1451-2739-39231/en Webcast details will be sent to you via email after registration. Enquiries
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.
Table of contents
SINED’s statement......................................................................7 Group CEO statement...................................................................9 Operating review ......................................................................11 Financial review .......................................................................18 Principal risks and uncertainties ..........................................................30 Going concern ........................................................................31 Directors’ responsibility statement .........................................................32 Financial statements ....................................................................33 Alternative Performance Measures ........................................................64
SINED’s statement
It has been gratifying to see the Company’s financial and operating performance stabilise during 2023 against the continuing and tightening backdrop of a continued Russia-Ukraine conflict and new sanctions (including the designation of the Russian business of the Company by the US in May 2023) and counter-sanctions. The Board believed that under these circumstances fully divesting the Russian assets and pursuing growth in Kazakhstan and other Central Asian countries would greatly increase the Company’s ability to generate value for shareholders. And, already in 2024, the long-anticipated restructuring of the business was completed, and we are positively looking into the future.
Re-domiciliation to Kazakhstan Back in 2022, given the rapid deterioration of the business environment caused by the Russian invasion of Ukraine, the Board set up a Special Committee, comprised of Independent Non-Executive Directors, to review the options open to the Company, which would enable it to preserve business continuity and restore shareholder value. Its first recommendation was that Polymetal International should switch its domicile from Jersey to Kazakhstan. It had been the first foreign company listed on the Astana Stock Exchange (AIX) in 2019 and, following re-domiciliation in August 2023, Polymetal has been able to switch from LSE to AIX as its primary listing. This decision was not taken lightly since, as a consequence, its premium listing on the London Stock Exchange was cancelled. However, this was felt to be necessary in order to mitigate the impact of Russian counter-sanctions being imposed against entities incorporated in unfriendly jurisdictions (including Jersey), as well the prospect of further reprisals. Both would place significant restrictions on the Company and expose it to unmanageable risk. Choosing the Astana International Finance Centre (AIFC) as the jurisdiction for our re-domiciliation was also prudent given AIFC’s own adoption of English common law and adherence to best practice. We too will continue to uphold the standards that we have set ourselves over the last 25 years in corporate governance, health and safety, and approach to environmental matters.
The divestment of Russian assets However, a further strategic pivot was required following the US Department of State designation of JSC Polymetal and its subsidiaries in Russia. The Special Committee was once again deployed to develop an appropriate response in the light of these new sanctions. In the first instance, the Group’s Russian subsidiaries were ring-fenced, with management of all Russian operations delegated to the executives of JSC Polymetal, and management of Polymetal International resigning from their positions in the Russian entities. At the same time, all service agreements between the Company and its non-Russian subsidiaries, and JSC Polymetal and its subsidiaries, were terminated and all payments from the Company and its non-designated subsidiaries under other inter-Group agreements with JSC Polymetal and its subsidiaries were discontinued. The Special Committee, after a thorough review, also recommended the divestment of the Group’s Russian assets as the most viable option for mitigating the legal, financial and operational risks that emerged as a result of designation, and also the optimal path towards re-establishing shareholder value. It became the Company’s way to restore the access to international financial markets, enable the resumption of dividend payments and eliminate the discounts being applied by international capital markets to businesses associated with Russia. With this divestment completed in March 2024, Polymetal’s Board and management team will now be able to concentrate on expanding its asset base within Kazakhstan and also looking to other countries in Central Asia, which present a number of interesting options for further growth.
Dividend decision Both the re-domiciliation and divestment of the Russian business, along with related de-leveraging, have improved the balance sheet of the Company considerably. However, it will need to invest in excess of $1 billion over the medium term in projects in Kazakhstan, most notably the new Ertis POX, and M&A activities in order to achieve its ambitious long-term growth plans. As yet, the Company has not restored its access to major sources of debt funding and, in the light of this, the Board considers that it would not be prudent to pay dividends for the full year 2023. This will allow the Group to maintain both strategic and operating flexibility. The Board will further consider the dividend, as described in Dividends and disposal section above.
Change of a major shareholder I want to express my gratitude to all our shareholders and investors for the continued support that they have shown us over the years. We also welcome our new significant shareholder Maaden International Investment, representing the government of Sultanate of Oman. We are pleased that the shareholders have confirmed their full support of Polymetal’s strategy and the actions undertaken to secure the future of this business to date as well the intention to further develop the asset base in Kazakhstan and the wider region.
Brighter future Now that the Company has significantly de-risked its operations and finances, and established stable operations in Kazakhstan, the favourable macroeconomic conditions will allow it to generate sufficient cash flows to fund growth and repay debt. With divestment now complete, we also expect better stock trading conditions for Western shareholders as infrastructure providers gradually remove the limitations previously placed on Polymetal’s shares. The Board is also set on maintaining high standards of corporate governance and ESG in the new environment, which will ensure the creation of further sustainable value.
Senior Independent Non-Executive Director Evgueni Konovalenko Group CEO Statement
We started 2023 facing many of the frustrations of the previous year: namely, the ongoing Russia/Ukraine war with the resulting upheavals of sanctions and counter-sanctions, and disruptions in supply chains and financing options. With this in mind, from the outset, we planned to pursue re-domiciliation to a “friendly” jurisdiction with a view to also engineer a subsequent split of the business in order to restore shareholder value. However, due to geopolitical interventions beyond our control, this reorganisation did not go as we had originally planned.
Key corporate events in 2023 For a number of reasons, we quickly identified Astana International Financial Centre (AIFC) as the optimal re-domiciliation jurisdiction: because of its basis on English common law, our long-standing presence and listing in Kazakhstan, and its neutral position from the point of western and Russian counter-sanctions. For Astana International Exchange (AIX) to become our primary exchange, however, we also had to accept the hard reality that this would necessitate discontinuing our 12-year premium listing on the London Stock Exchange. And, this in turn, would entail management resolving a separate, complicated set of infrastructural issues in order to enable trading for all categories of shareholder post re-domiciliation. As we progressed our plans for re-domiciliation to AIFC, the Group was hit by the designation of its Russian business, JSC Polymetal, by the US Department of State, which made any plans to spin off the Russian operation totally impracticable. As a consequence and in response to the US designation, the Board formed a Special Committee to develop appropriate measures with regards to sanctions compliance and to oversee the full divestment of the Russian business – JSC Polymetal and its subsidiaries. Since then, we have made substantial progress in redefining Polymetal’s status for the long term. In August 2023 the Company successfully completed re-domiciliation to AIFC and resumed trading on AIX as a Kazakh issuer. This also kicked off the process of searching for potential buyers for the Russian business and culminated in the announcement of its disposal at a total effective valuation of US$ 3.7 billion on 19 February 2024. The deal successfully closed on 7 March 2024. Seen from a purely financial perspective, due to the inevitable Russian discount, the transaction has not generated a great deal of value for Polymetal. Nevertheless, in removing numerous operational, financial, legal and sanctions risks, I truly believe that it is in the best interest of all our shareholders since it enables the Company to open a new chapter in its corporate history. Polymetal is now well-positioned to implement a new strategy and restore its track record of creating sustained shareholder value.
Production and performance In 2023, the Company avoided major operational business disruption and successfully met its original production guidance. The Company’s gold equivalent production demonstrated solid results, despite the difficult environment experienced by the Russian part of the business and some repercussions from the designation of JSC Polymetal for the Company on the Kazakhstan side. In spite of persistent geopolitical headwinds, Polymetal retained its profitability and reduced its leverage. An improvement in financial results was driven by robust production and stable cost performance coupled with favourable commodity price dynamics, with revenue increasing by 8% year-on-year to US$ 3 billion. We also reported an impressive 43% increase in EBITDA at US$ 1.5 billion, thanks to both growth in ounces sold through release of working capital and in the devaluation of the local currency in Russia. Total cash costs (TCC) were 8% lower and all-in sustaining costs (AISC) were 5% lower than in 2022. Both were below the announced guidance range of US$ 950-1,000/GE oz and US$ 1,300-1,400/GE oz, respectively, attributing to the substantial positive impact of Rouble devaluation on local-currency costs. Net debt was largely stable year-on-year at US$ 2.38 billion (US$ 0.17 billion in Kazakhstan and US$ 2.21 billion in Russia) however it decreased in relative terms from 2.35 ND/EBITDA in 2022 to 1.64 in 2023.
Safety remains our top priority We remain committed to ensuring a safe working environment for all our employees and contractors. Significantly, for the fourth consecutive year, there were no fatal accidents during 2023 among Polymetal’s workforce and nor, for the second year running, among our contractors. I am also pleased to report that none of the ten lost-time accidents (in Russia) resulted in permanent disability or serious damage to health. Employees’ lost-time injury frequency rate (LTIFR) decreased by 30% year-on-year and is a testament to our investment in promoting a zero-harm safety culture. Our new POX development project in Kazakhstan Our major development focus now is on Kazakhstan’s first large-scale full-cycle pressure oxidation (POX) plant for refractory ore processing: the Ertis POX project. This will be a new, state-of-the-art facility in the Pavlodar region and will ensure that Kyzyl (and potentially other Kazakh assets) will no longer have to rely on the temporary POX processing arrangement made with Amursk POX in Russia. We have already identified the site and signed contracts for this and the critical processing equipment. We plan to start construction early next year with completion due by 2028. We are partnering once again with international engineering consultancy, Hatch, who are tasked with both basic and detailed engineering for the project. We are also proceeding with the permitting process. Capitalising on our experience in developing POX sites in Russia, we believe that this project will involve fewer construction risks. Compared with the Russian Far East, the logistics in Kazakhstan are much better as is the cost of materials and labour.
Our next steps With the sale of Russian assets completed in Q1 2024, the Company is now able to pursue its future growth plans while, at the same time, ensuring the long-term free cash flow potential of the existing assets in Kazakhstan. We expect stable operational results in Kazakhstan in 2024 and, following a positive investment decision from the Board, expected in H2 2024, will accelerate the construction schedule for the Ertis POX. Our priorities during the year will be centered on safety, cost control and operational improvement. Alongside this, we also plan to make tangible progress in terms of securing new growth opportunities for the business. Together, these will ensure that we deliver substantial financial returns for our shareholders over the coming years. We could not have achieved the continued operation of the business over the last year without the loyal support of our employees and I would like to formally thank them on behalf of the whole senior management team. Their skills, expertise and commitment are vital to Polymetal’s future.
Group Chief Executive Officer Vitaly Nesis Operating review Robust production In 2023, operations continued undisrupted despite the difficulties caused by the imposition of US sanctions against JSC Polymetal and its subsidiaries. The Company’s gold equivalent (GE) production for the year was stable at 1,714 Koz, comprising 486 Koz in Kazakhstan and 1,228 Koz in Russia, and in line with the original production guidance of 1.7 Moz. Kazakhstan’s GE production declined by 10%, mostly driven by a planned grade decline and lower share of high-grade third-party feed at the flotation circuit at Varvara. Russian GE production grew by 4% to 1,228 Koz, in line with the original production plan. Gold production for the full year was up 3% to 1,492 Koz, while silver output decreased by 15% to 17.7 Moz. Gold sales of 1,400 Koz increased marginally year-on-year, while silver sales decreased by 10% to 16.6 Moz. The gap between production and sales is considered a temporary one: significant tightening of concentrate exports regulations in Russia led to material accumulation in seaports for concentrates in transit. Management is working to resolve this issue in 2024. Kyzyl continues as the largest individual contributor to the Group’s overall output: full-year gold production came in at 316 Koz. Varvara GE output decreased by 20% to 169 Koz, driven by a decrease in Komar ore grade at the leaching circuit and a lower share of high-grade third-party feed at the flotation circuit. In total, Kazakh operations delivered 486 GE Koz, which accounts for 28% of the Group’s production. The Company has successfully secured a land plot for the Ertis POX project in the Special Economic Zone near Pavlodar. Evaluation of the site conditions and logistics planning have begun in preparation for delivery of the autoclave. Additionally, the Company has once again selected Hatch for basic and detailed engineering, as well as procurement support. Hatch has an exceptional track record of working with Polymetal on several other projects. Base engineering is already in-progress, enabling accelerated commencement of construction. The investment decision is expected to be made by the Board in the second half of 2024, with the start-up by the end of 2028. Reserves and resources In 2023, Group Ore Reserves increased by 2% year-on-year to 28.0 Moz of GE, while the average grade in Ore Reserves decreased by 5% year-on-year and stood at 3.5 g/t of GE. Ore Reserves in Kazakhstan increased by 3% year-on-year to 11.6 Moz of GE on the back of the revised estimate for underground mining at Kyzyl and positive exploration results (an increase by 249 Koz). The average grade in Ore Reserves in Kazakhstan was 3.2 g/t of GE, a 2% decrease year-on-year driven by a 4% grade decline at Varvara, which was partially offset by positive grade revaluation at Kyzyl. Share of Ore Reserves for open-pit mining in Kazakhstan decreased by 4% compared to the previous year and stood at 45% on the back of underground reserves extension at Kyzyl. Group’s Mineral Resources (additional to Ore Reserves) grew by 3% year-on-year to 26.7 Moz of GE. The average GE grade in Mineral Resources was down 7% year-on-year to 4.2 g/t. Mineral Resources in Kazakhstan increased by 26%, while the average GE grade increased by 8% to 2.9 g/t, mainly driven by the MR grade appreciation at Kyzyl by 13%, from 4.1 to 4.6 g/t of GE. Ore Reserves reconciliation, GE Moz
In 2023, exploration activities in Kazakhstan were carried out at 11 licensed and contract areas. In total, 59.4 km of drilling was completed, a 12% decrease year-on-year. Ore Reserves and Mineral Resources summary[10] [11]
Ore Reserves and Mineral Resources as at 1 January 2024[12]
Health and safety There were no fatal accidents in 2023. However, lost-time incidents still took place among Polymetal’s workforce and contractors. Most were the result of slipping or tripping while walking or being jammed by a rotating mechanism. In 2023, 10 lost-time incidents were recorded among employees and 4 – among contractors. LTIFR for 2023 decreased to 0.07 for employees (0.10 in 2022) and to 0.08 for contractors (0.21 in 2022). Days lost due to work-related injuries for the full year increased by 32% y-o-y to 1,156 (2022: 877). While the majority of the incidents that took place during the year were classified as minor (8 minor and 2 severe injuries were reported), Polymetal still took responsive measures for each by updating risk maps for relevant facilities, providing additional instructions to employees and encouraging contractors to carry out an investigation if the accident involved a contractor’s worker.
Employees Our average headcount in 2023 decreased slightly by 0.3% y-o-y to 14,647 employees, with approximately half working on a fly-in/fly-out basis at remote sites. Our voluntary turnover rate significantly decreased to 4.7% in 2023, compared to 8.4% in 2022. The voluntary staff turnover for assets in Russia was 5.6% while in Kazakhstan it comprised 1.4%. We continue to observe higher labour market competition and increased demand for mining experts, that is why we offer employees competitive salaries and a range of opportunities for professional development, such as succession planning, mentorship and a Talent Pool programme. In 2023, our Talent Pool consisted of 456 employees prepared to take up leadership positions in the future, 78 of which gained promotion during the year. The share of women in Polymetal’s workforce remained stable at 21% in 2023. We continue to promote a culture of equal opportunity through training and communications. In order to eliminate workplace bias, empower diverse teams and attract and retain people with different background, we have adopted a Diversity and Inclusion Programme, which includes training and engagement activities, diversity metrics and targets, collaboration with educational institutions and ongoing internal communication. Among other actions, this led to an increase in the proportion of women in leadership positions by 1% to 23% in 2023. Besides managing gender diversity issues, we aim to eliminate discrimination based on age or disability. For example, we have created an interactive online course on inclusion practices. This course provides an informed understanding of disability, highlighting the potential risks of bias at work and has also been incorporated into the induction programme for new employees.
Climate and Energy Accepting the need to take urgent action to mitigate human-made impacts on climate, we are committed to reducing our own impact and developing an approach to potential carbon neutrality. Our strategy is focused on those projects that comprehensively reduce our GHG emissions and also the net adverse impact on water resources and biodiversity. In 2023, we adhered to our climate targets of reducing our direct and energy-related emissions, and we are gradually adapting our Climate Action Plan to the new circumstances and potential changes in Group structure. In our Climate Strategy, we give unconditional priority to real decarbonisation projects and state that offsetting is reserved only for hard-to-abate or residual emissions. Our 2023 direct emissions (Scope 1) decreased by 4% compared to 2022 mainly due to the implementation of energy efficiency measures, while our indirect energy-related emissions (Scope 2) increased due to legislative changes in the energy market of Kazakhstan and the resulting lack of opportunity to purchase green electricity from the grid. Further efforts within the Kazakhstan segment are therefore focused on commissioning in-house solar power plants with a total capacity of up to 40 MW at Varvara and Kyzyl. We have continued to reforest territories equal to those that had been disturbed by our activities. In 2023, we planted 430 thousand saplings on almost 200 hectares of land in regions where we operate. In addition, as part of our commitment to actively fostering a favourable environment for all stakeholders in our operating regions and taking initial steps towards implementing a Net Positive Impact approach, we are undertaking a voluntary pilot project to plant a new forest not far from Varvara site in Kazakhstan.
Environment Our Environmental Management System (EMS) is the cornerstone of our approach. All production sites in Kazakhstan and most of them in Russia are certified to the ISO 14001 global standard. Our EMS is supported by specific systems for cyanide and tailings management, as well as internal and external auditing. The monitoring of both water quantity and quality is a key focus within our EMS. Given the predicted physical impacts of climate change on our operations, vigilance in monitoring water risks is crucial for our assets in Kazakhstan. We strive to continually enhance our water efficiency by employing metering and auditing practices for water consumption, coupled with the meticulous management of the quality of wastewater. The majority of the water we use in ore processing is circulated in closed water cycles. Overall, 93% of our on-site water consumption is via a closed cycle of treated waste water (compared to 91% in 2022). We remain committed to our ambitious goal of reducing fresh water usage for processing per unit of production by 55% by 2030, compared with the 2019[13]. In 2023, we decreased our fresh water intensity for ore processing by 53%, compared with 2019, to 125 m³/1,000 t (2022: 49%). We operate seven TSFs and four dry stacking facilities in Kazakhstan and Russia, and are carrying out technical closure works at two TSFs. Wherever possible, we have implemented dry cake stacking in order to eliminate affecting both ground and surface water, as well as the surrounding area, and we currently store 70% in dams and 30% as dry cake.
Communities We aim to maintain open dialogue with neighboring communities, ensuring transparent feedback mechanisms in all regions where we operate. In 2023, we responded to all of the 780 enquiries received from locals, surveyed 1,174 community representatives and held 90 stakeholder engagement events. The outcomes of such engagement inform our social investment programmes. Polymetal’s social investments amounted to US$ 17.6 million in 2023 (including US$ 7.3 million in Kazakhstan) and were targeted to projects in education, local infrastructure, sports, culture and Indigenous Minorities of the North support (compared to US$ 23 million in 2022). No cases of human rights violations connected to Polymetal’s employees or contractors were reported in 2023.
2024 outlook for Kazakhstan business Safety remains a top priority for Polymetal. We will continue to focus on further improvements in health and safety metrics and maintaining zero fatalities across our operations and among on-site contractors conducting business on behalf of the Group. In 2024, we expect stable operational results in Kazakhstan as well as a positive investment decision on the Ertis POX. The Company expects its Kazakhstan assets to deliver stable production at approximately 475 Koz of GE. We will continue running a number of development projects at existing operations, aimed at either extending the life-of-mine or reducing costs despite the planned depletion of higher-grade ore sources. At Kyzyl, the Company intends to push the throughput further to the 2.6 Mtpa level by the second half of 2024. We are in the process of reducing our reliance on diesel power, and with it our environmental impact, through renewable energy projects. This includes upgrading dump trucks from diesel fuel to gas at Kyzyl and progressing the 40 MWh solar power plant and gas power plant for Varvara and Kyzyl located at Varvara’s operating site. At the same time, we will focus on advancing our long-term project pipeline. At Ertis POX, we plan to undertake engineering work, order technological equipment and prepare the construction site. The investment decision is expected to be made by the Board in the second half of 2024, with the start-up in 2028. Polymetal will aim to pursue growth opportunities in Kazakhstan and selected Central Asian countries. We are looking for precious and base metal assets where we can apply our deep competencies in engineering, development and operations. Financial reviewmarket summary Precious metals Despite multiyear-high interest rates and bond yields, markets remained disturbed by looming recessionary fears and the ongoing global geopolitical conflicts, which made investors lean towards safe-haven assets such as gold. In H1 2023, along with the peaking interest rates, gold price reached the lowest boundary of US$ 1,811/oz before beating 2022 all-time high and reaching US$ 2,078/oz in H2 2023 on the back of elevated geopolitical and security risks, and indications of rate cuts in 2024. The average LBMA gold price in 2023 was US$ 1,943/oz, an increase of 8% compared to the prior year. In 2023, gold demand remained strong at 4,448 tonnes, only 5% below the very exceptional 2022, when the world saw post pandemic re-opening and the escalation of the military conflict between Russia and Ukraine. Gold accumulation momentum in the recent years continued into 2023 – over 1,037 tonnes were added to central banks’ reserves, with China purchasing the most, while Kazakhstan being the one the biggest sellers. Despite an elevated gold price, jewelry demand proved to be strong and maintained on par with 2022 at 2,093 tonnes. The removal of COVID restrictions in 2022 paved the way for 2023 jewelry demand hike in China – the world’s largest jewelry consumer. China’s annual jewelry consumption increased by 10% y-o-y to 630 tonnes, which was partially offset by India’s price sensitivity and as a result volume of gold jewelry purchases. Third consecutive annual gold ETF outflow along with the weakening demand for bars and coins pulled overall investment demand to 945 tonnes – a 15% y-o-y drop (2022: 1,113 tonnes). In 2023, global soaring inflation, record-high bond yields and waves of liquidity issues within the banking sector attracted investors to a strong US dollar and risk-free government bonds away from the gold investments. Consequences of the COVID relief stimulus payments by governments has not spared the technology market. Notwithstanding advances in the artificial intelligence, major chip manufacturers experienced downturn, which was reflected in the gold demand. Tech demand for gold dropped by 4% y-o-y to 298 tonnes for the first time sinking below 300 tonnes mark. Having started the year by largely tracking gold dynamics, the silver price reached annual low of US$ 20.1/oz in March. It did not then, however, see the same dramatic upturn as gold. Investors preferred to stick to the more superior safe-haven gold. Even though silver briefly rallied to US$ 26.0/oz in April on the back of the geopolitical tension and economic uncertainty, it failed to maintain the momentum and averaged at US$ 23.3/oz for the year, up 7% (2022: US$ 21.8/oz). Foreign exchange The Group’s revenue and over 72% of borrowings are denoted in US Dollars and Renminbi, while the majority of the Group’s operational costs are denoted in Russian Rouble and Kazakh Tenge. As a result, changes in exchange rates affected the Company’s financial results and performance. The Russian Rouble demonstrated significant devaluation relative to 2022. Continuous geopolitical escalation, capital outflows and a US$ 169.4 billion decrease in exports, as a result of deteriorating oil prices pulled the Rouble rate to a high level of 101 RUB/US$ in August of 2023. Towards the year-end, the Rouble somewhat improved to 89.7 RUB/USD on the back of the emergency 350bps rate hike by the Central Bank of Russia and re-introduction of capital control measures, including variable export duties and mandatory sales of foreign currency revenues. The average annual Rouble rate was 85.3 RUB/US$ (2022: 68.6 RUB/US$). Although, consistent geopolitical tension within the CIS region, global strengthening of the USD as well as a weakening average oil price of US$ 82 per barrel (2022: US$ 101 per barrel) posed significant pressures, the Kazakhstani tenge remained steady at 456 KZT/US$ (2022: 461 KZT/US$) throughout 2023. This has been driven by increased oil exports, and significant sales of foreign currency and gold reserves by the National Bank of Kazakhstan.
Revenue
In 2023, revenue grew by 8% y-o-y driven by the growth of gold and silver average realised prices. Gold sales increased marginally by 2% y-o-y. Silver sales decreased by 10% due to significant tightening of concentrate exports regulations in Russia, which led to material accumulation in sea ports of concentrates from Russian assets. The Group’s average realised gold price was US$ 1,929/oz in 2023, up 9% from US$ 1,764/oz in 2022, slightly below the average market price of US$ 1,943/oz. The Group’s average realised silver price was US$ 22.8/oz, higher by 4% y-o-y, but 3% below the average market price of US$ 23.4/oz since two-thirds of annual sales were skewed towards the first half of 2023 with weaker average prices. The share of gold sales as a percentage of total revenue increased from 85% in 2022 to 87% in 2023, driven by a corresponding shift in production and sales volume by metal.
The decrease in sales volumes during the period had a negative impact on revenues at all operating mines in Kazakhstan, which was partially offset by higher commodity prices. Difficulties with inventory conversion into sales were particularly pronounced with concentrates going through Russian Far Eastern ports, including Kyzyl concentrate being sold to China. Management will continue to work to resolve this issue during the first half of 2024, particularly focusing on Kyzyl. At Varvara, sales volumes broadly followed production volumes, which decreased as a result of planned grade decline. COST OF SALES
The total cost of sales decreased by 14% in 2023 to US$ 1,459 million, reflecting the positive impact of the Russian Rouble depreciating by 24%. The devaluation impact from Russian operations offset domestic inflation (9% y-o-y in Kazakhstan and 7% y-o-y in Russia) and increase in mining tax. The cost of services and of consumables and spare parts were down 15% and 7% y-o-y, caused mostly by a weaker Rouble compared with 2022. The cost of labour within cash operating costs was US$ 257 million, a 10% decrease over 2022, mainly stemming from local currency devaluations, which outweighed the annual salary increases (tracking domestic CPI inflation). Mining tax increased by 20% y-o-y to US$ 163 million, mainly driven by an increase in average realised prices, as well as gold mining tax rates in Kazakhstan increasing from 5% to 7.5%. The increase in purchases of third-party metal inventories by 84% was mostly driven by larger volumes of high-grade third-party ore processed at the Varvara flotation circuit. Depreciation and depletion was US$ 280 million, down 14% y-o-y, largely driven by the positive effect of a weaker Rouble. US$ 26 million of depreciation cost are included within the total increase in metal inventories (2022: US$ 52 million). In 2023, a net metal inventory increase of US$ 276 million (2022: US$ 216 million) was recorded. The increase was mainly represented by concentrate build-up at Russian assets, due to the tightening of concentrate exports regulations in Russia. The Company expects the bulk of this increase to be reversed during the course of 2024, particularly at Kyzyl. The Group recognised a US$ 6 million reversal (2022: US$ 65 million write-down) to the net realisable value of heap leach ore at Russian mines (see Note 17 of the condensed consolidated financial statements). General, administrative and selling expenses
General, administrative and selling expenses (“SGA”) decreased by 12% y-o-y from US$ 311 million in 2022 to US$ 274 million in 2023, mainly reflecting a decrease in staff costs in US Dollar terms driven by devaluation of the Rouble. Other operating expenses
Other operating expenses decreased to US$ 117 million in 2023 (2022: US$ 142 million) mainly due to the reduction in exploration costs and a scheduled decrease in social payments in accordance with existing partnership agreements. TOTAL Cash costs In 2023, total cash costs per gold equivalent ounce sold were US$ 861/GE oz, down 8% y-o-y. The depreciation of the Russian Rouble against the US Dollar outweighed inflationary pressures and planned grade decline. The table below summarises major factors that have affected the Group’s TCC and AISC dynamics y-o-y:
Total cash cost by segment/operation, US$/GE oz
Kazakhstan
Russia
Analysis of 2H 2023 versus 1H 2023 performance: Total cash costs per GE oz
In 2H 2023, TCC were 16% lower compared to 1H 2023 at US$ 797/GE oz, driven by the increase in sales volumes combined with local currency depreciation. Kazakhstan
Russia
ALL-IN SUSTAINING AND all-in cash costs All-in sustaining cash costs amounted to US$ 1,276/GE oz, down 5% y-o-y, broadly in line with TCC dynamics, reflecting the decrease in capitalised stripping on the back of completed stripping campaigns at Dukat. AISC by operations were as follows: All-in sustaining cash costs by segment/operation, US$/GE oz
AISC at all operating mines generally followed TCC dynamics. In Kazakhstan, AISC increased by 18% to US$ 1,263/oz, which was mostly driven by the decrease in sales volume, resulting in the spread of sizeable sustaining capital expenditure (including investments in new tailing storage facilities at Varvara) over a limited amount of ounces sold. In Russia, AISC decreased by 13% to US$ 1,281/oz, on the back of sales increase, coupled with lower stripping volumes after completion of large stripping campaigns in 2023.
Adjusted EBITDA[20] and EBITDA margin (US$m)
Adjusted EBITDA by segment/operation (US$m)
In 2023, Adjusted EBITDA increased by 43% y-o-y to US$ 1,458 million, with an Adjusted EBITDA margin of 48% (2022: 36%), driven by the cost dynamics described above combined with a 9% increase in the gold average realised price. Other income statement items Polymetal recorded a net foreign exchange loss in 2023 of US$ 174 million compared with an exchange loss of US$ 32 million in 2022, mostly attributable to the revaluation of the US Dollar-denominated borrowings of Russian operating companies, the functional currency of which is the Russian Rouble. This was partially offset by a foreign exchange loss on intercompany loans with different functional currencies in lending and borrowing subsidiaries. The Group does not use any hedging instruments for managing foreign exchange risk, other than a natural hedge arising from the fact that the majority of the Group’s revenue is denominated or calculated in US Dollars. In 2023 the Group recognised an impairment charge of US$ 165 million in respect to Amursk POX due to continued use of Amursk POX processing facility to treat Kyzyl refractory concentrate on the terms of a new tolling agreement, as entailed by provisions of JSC Polymetal divestment. See Note 14 to the condensed consolidated financial statements. Income tax expense for 2023 was US$ 315 million compared to US$ 44 million benefit in 2022. For details refer to Note 13 of the condensed consolidated financial statements. Net earnings, earnings per share and dividends The Group recorded a net profit of US$ 528 million in 2023, compared to loss of US$ 288 million in 2022 which was largely driven by impairment charges. In September 2023, the Group effectively disposed of 50.1% stake in Amikan and recognised a gain on disposal of US$ 113 million. See Note 3 to the condensed consolidated financial statements. The underlying net earnings attributable to shareholders of the parent company were US$ 615 million, compared with US$ 440 million in 2022: Reconciliation of underlying net earnings[22] (US$m)
Basic profit per share was US$ 1.11 compared to US$ 0.61 loss per share in 2022. Underlying basic EPS[23] was US$ 1.30, compared with US$ 0.93 in 2022.
Capital expenditurE[24]
In 2023, total capital expenditure was US$ 679 million[25], down 14% y-o-y, and 3% below the lower end of the guidance range of US$ 700-750 million, because of the substantial positive impact of the Russian Rouble devaluation on local-currency costs. Capital expenditure excluding capitalised stripping costs was US$ 614 million in 2023 (2022: US$ 679 million). The major capital expenditure items in 2023 were as follows: Development projects
Stay-in-business capex at operating assets
Exploration and stripping
Cash flows
Total operating cash flows in 2023 strengthened y-o-y. Operating cash flows before changes in working capital grew by 58% y-o-y to US$ 1,074 million, as a result of an increase in adjusted EBITDA. Net operating cash flows were US$ 575 million, compared with US$ 206 million in 2022, affected by an increase in working capital of US$ 499 million (2022: US$ 473 million). Total cash and cash equivalents increased by 33% compared with 2022 and comprised US$ 842 million, with the following items affecting the cash position of the Group:
balance sheet, Liquidity and funding
The Group’s net debt decreased to US$ 2,383 million as of 31 December 2023, representing a Net debt/Adjusted EBITDA ratio of 1.64x, significantly below the 2022 leverage ratio of 2.35x. The proportion of long-term borrowings of total borrowings was 69% as at 31 December 2023 (83% as at 31 December 2022). As at 31 December 2023, the Group had US$ 1.4 billion (31 December 2022: US$ 0.35 billion) of available undrawn facilities, from a wide range of lenders, which allows the Group to maintain its operational flexibility in the current environment. Gross debt increased by 7% to $3,225 million, of which 73% is denominated in hard currency. Kazakhstan represents 16% of the total debt outstanding, while Russia represents the remaining 84% of the debt. The average cost of debt increased to 8.3% in 2023 (2022: 5.08%). In Kazakhstan, average interest rates remained low at 3.95%, while for Russian subsidiaries it reached 9.1% as re-financing was available mostly in Roubles or in Renminbi at elevated interest rates. 77% of available cash balances of US$ 842 million is denominated in hard currency. The Group is confident in its ability to repay its existing borrowings as they fall due.
INVENTORies Inventory levels increased by US$ 104 million to US$ 1,294 million for 2023. US$ 274 million of inventory balance relates to Kazakhstan, and US$ 1,020 million of inventory comes from Russia. This increase of US$ 95 million for the second half of 2023 relates mostly to accumulation in sea ports of concentrates from Russian assets.
Payable metals in inventory accumulated at 31 December 2023 were as follows:
2024 OUTLOOK FOR KAZAKHSTAN BUSINESS
There are a number of potential risks and uncertainties which could have a material impact on the Group’s performance and could cause actual results to differ materially from expected and historical results. The principal risks and uncertainties facing the Group are categorised as follows:
A detailed explanation of these risks and uncertainties can be found on pages 100 to 109 of the 2022 annual report which is available at www.polymetalinternational.com. The directors consider that these principal risks and uncertainties have not changed materially since the publication of the annual report for the year ended 31 December 2022 and continue to apply to the Group for the 2023 financial year. Further updates will be presented in the full annual financial report for 2023. Going concernIn assessing its going concern status, the Group has taken into account principal risks and uncertainties, financial position, sources of cash generation, anticipated future trading performance, borrowings and other available credit facilities, and forecasted compliance with covenants on those borrowings, and capital expenditure commitments and plans. In the going concern assessment, the Group also considered the implications of sanctions imposed by U.S. Department of State on JSC Polymetal, the Company’s subsidiary in the Russian Federation. In February 2024, the Group entered into contracts for the divestment of its Russian business through a sale of 100% JSC Polymetal’s shares to a third party, JSC Mangazeya Plus, as described in Note 24. On 16 February 2024, US Department of the Treasury’s Office of Foreign Asset Control (“OFAC”) confirmed to the Company that it would not impose sanctions on non-US persons, including Polymetal International Plc, for participating in or facilitating such a transaction. The Group determined that these implications did not have any material effect on the Group’s liquidity position and its ability to finance its obligations. On 7 March 2024 the transaction was approved by the Shareholders General Meeting and, following receipt of required regulatory approvals, the transaction was completed on the same day. To assess the resilience of the Group’s going concern assessment in light of the macroeconomic volatility, management performed the stress downside scenario that is considered plausible over the next 12 months from the date of approval of the 2023 condensed consolidated financial statements. As such, this does not represent the Group’s ‘best estimate’ forecast, but was considered in the Group’s assessment of going concern, reflecting the current evolving circumstances and the most significant and plausible changes in macro assumptions identified at the date of performing of the going concern assessment. The Group has already taken precautionary measures to manage liquidity and provide flexibility for the future. In addition, it was assumed that the Group has adapted its sales routes and supply chain and the net cash flows generated will be available for use within the Group. Under the stress scenario, the Group’s income and profits are affected by simultaneous decrease of gold prices by 5% and local currency appreciation by 10%, as well as 10% overrun of development capital expenditure. At the reporting date, the Group holds US$ 329 million of cash and US$ 100 million of undrawn credit facilities (excluding assets sold in March 2024), which when combined with the forecast net cash flows under the stress scenario above, is considered to be adequate to meet the Group’s financial obligations as they fall due over the next 12 months. No borrowing covenant requirements are expected to be breached in the stress scenario. The Group expects to settle obligations as they fall due but also has mitigating actions available such as reducing production volumes and variable mining costs where possible, reducing and deferring non-essential and non-committed capital expenditure. The Board is therefore satisfied that the Group’s forecasts and projections, including the stress scenario above, demonstrate that the Group has adequate resources to continue in operational existence for at least 12 months from the date of approval of the 2023 condensed consolidated financial statements and that it is appropriate to adopt the going concern basis in preparing the condensed consolidated financial statements for the year ended 31 December 2023. Directors’ responsibility statementDirectors are responsible for the preparation of the condensed consolidated financial statements that present the financial position of Polymetal International Plc (the “Company”) and its subsidiaries (the “Group”) as of 31 December 2023, and the results of its operations, cash flows and changes in equity for the year then ended based on the recognition, derecognition, measurement and classification principles of International Financial Reporting Standards (“IFRS”).
In preparing the condensed consolidated financial statements, directors are responsible for:
Directors also are responsible for:
Condensed consolidated financial statements of the Group for the year ended 31 December 2023 were approved by Board of Directors on 14 March 2024.
By order of Board of Directors:
Evgueni Konovalenko Senior Independent Non-Executive Director
Vitaly Nesis Group Chief Executive Officer 14 March 2024
Polymetal International plc
Condensed Consolidated income Statement
Polymetal International plc
condensed Consolidated Statement of Comprehensive Income
condensed Consolidated Statement of Financial Position
condensed Consolidated Statement of Cash Flows
Polymetal International plc
condensed Consolidated Statement of Changes in Equity
1. General
Corporate information Polymetal Group is a leading gold and silver mining group, operating in Kazakhstan and Russia. Polymetal International plc (the “Company”) is the ultimate parent entity of Polymetal Group. The Company was incorporated on 29 July 2010 as a public limited company under Companies (Jersey) Law. On 8 August 2023, the Group completed the re-domiciliation of the Company from Jersey to the Astana International Financial Centre ("AIFC"), Republic of Kazakhstan. The Company is listed on the AIX, which has become the Company’s primary stock exchange, while its listing on London stock exchange was cancelled on 28 August 2023. The Company also maintains a secondary listing on Moscow Exchange (MOEX). On 19 May 2023, JSC Polymetal, the holding company for the Group’s assets located in the Russian Federation, and its subsidiaries were designated by the U.S. Department of State pursuant to Executive Order 14024 for operating in the metals and mining sector of the Russian economy. Following the designation the Board of Directors of the Company (the “Board”) set up a special committee of independent non-executive directors to ensure full and comprehensive compliance with U.S. sanctions. The Company and its non-Russian subsidiaries are not subject to blocking sanctions. In the light of these developments, and in the interests of preserving shareholder value, the Board and the Special Committee undertook a strategic process to review all possible options in respect of JSC Polymetal and its subsidiaries (JSC Polymental Group) divestment in order to restore value for Polymetal shareholders and de-risk its ongoing operations. Based on circumstances existing as of 31 December 2023, the Group has determined that JSC Polymetal and its subsidiaries did not meet the definition of the disposal group in accordance IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. In February 2024, the Group entered into contracts for the divestment of its Russian business through a sale of 100% JSC Polymetal’s shares to a third party, JSC Mangazeya Plus, as described in Note 24. On 16 February 2024, US Department of the Treasury’s Office of Foreign Asset Control (“OFAC”) confirmed to the Company that it would not impose sanctions on non-US persons, including Polymetal International Plc, for participating in or facilitating such a transaction. On 7 March 2024, following receipt of required regulatory and shareholder approvals, the transaction was completed. Going concern In assessing its going concern status, the Group has taken into account principal risks and uncertainties, financial position, sources of cash generation, anticipated future trading performance, borrowings and other available credit facilities, and forecasted compliance with covenants on those borrowings, and capital expenditure commitments and plans. In the going concern assessment, the Group also considered the implications of sanctions imposed by U.S. Department of State on JSC Polymetal, the Company’s subsidiary in the Russian Federation, and the imminent sale of Russian business in March 2024, as described above. The Group determined that these implications did not have any material effect on the Group’s liquidity position and its ability to finance its obligations. On 7 March 2024 the transaction was approved by the Shareholders General Meeting and, following receipt of required regulatory approvals, the transaction was completed on the same day. To assess the resilience of the Group’s going concern assessment in light of the macroeconomic volatility, management performed the stress downside scenario that is considered plausible over the next 12 months from the date of approval of the 2023 condensed consolidated financial statements. As such, this does not represent the Group’s ‘best estimate’ forecast, but was considered in the Group’s assessment of going concern, reflecting the current evolving circumstances and the most significant and plausible changes in macro assumptions identified at the date of performing of the going concern assessment. The Group has already taken precautionary measures to manage liquidity and provide flexibility for the future. In addition, it was assumed that the Group has adapted its sales routes and supply chain and the net cash flows generated will be available for use within the Group. Under the stress scenario, the Group’s income and profits are affected by simultaneous decrease of gold prices by 5% and local currency appreciation by 10%, as well as 10% overrun of development сapital expenditure. At the reporting date, the Group holds US$ 329 million of cash and US$ 100 million of undrawn credit facilities (excluding assets sold in March 2024), which when combined with the forecast net cash flows under the stress scenario above, is considered to be adequate to meet the Group’s financial obligations as they fall due over the next 12 months. No borrowing covenant requirements are expected to be breached in the stress scenario. The Group expects to settle obligations as they fall due but also has mitigating actions available such as reducing production volumes and variable mining costs where possible, reducing and deferring non-essential and non-committed capital expenditure. The Board is therefore satisfied that the Group’s forecasts and projections, including the stress scenario above, demonstrate that the Group has adequate resources to continue in operational existence for at least 12 months from the date of approval of the 2023 condensed consolidated financial statements and that it is appropriate to adopt the going concern basis in preparing the condensed consolidated financial statements for the year ended 31 December 2023. Basis of presentationThe Group’s annual condensed consolidated financial statements for the year ended 31 December 2023 are prepared in accordance with the recognition, derecognition, measurement and classification principles of International Financial Reporting Standards (IFRS). The financial statements have been prepared on the historical cost basis, except for certain financial instruments which are measured at fair value as of end of the reporting period and share-based payments which are recognised at fair value as of the measurement date. The accounting policies and methods of computation applied are consistent with those adopted and disclosed in the Group’s annual report for the year ended 31 December 2022 on pages 177 to 187, except as described below. During the year ended 31 December 2023 management has reviewed the segmental presentation of financial information it requires to assess performance and allocate resources, As a result the presentation of segmental information was re-assessed, including comparative information as described in Note 4. The Group determined that starting from August 2023, following the re-domiciliation of the Company from Jersey to AIFC in Kazakhstan and due to the accumulation over time of those factors which are the main determinants of functional currency, there had been a change in facts and circumstances surrounding the operations of the Company, indicating that the functional currency of the Company and some of its intermediate holding companies had changed from the US Dollar to the KZT. In accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates, this change has been accounted for prospectively from 1 August 2023. New standards adopted by the Group
The Group has determined that these standards and interpretations do not have a material impact on its condensed consolidated financial statements or are not applicable to the Group. New accounting standards issued but not yet effective The following amendments to the accounting standards were in issue but not yet effective as of date of approval of these condensed consolidated financial statements:
Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures regarding supplier finance arrangements, effective for annual period beginning on or after 1 January 2024 with earlier application permitted;
The Group has determined that these standards and interpretations are unlikely to have a material impact on its condensed consolidated financial statements or are not applicable to the Group. 2. Critical accounting judgements and key sources of estimation uncertainty In the course of preparing the condensed consolidated financial statements, management necessarily makes judgements and estimates that can have a significant impact on those financial statements. The determination of estimates requires judgements which are based on historical experience, current and expected economic conditions, and all other available information. Estimates and underlying assumptions are reviewed on an ongoing basis, with revisions recognised in the period in which the estimates are revised and in the future periods affected. The judgements involving a higher degree of estimation or complexity are set out below. Critical accounting judgementsThe following are the critical accounting judgements (apart from judgements involving estimation which are dealt with separately below), made during the year that had the most significant effect on the amounts recognised in the condensed consolidated financial statements. Re-assessment and impairment of Amursk POX CGUImpairment charges are assessed at the CGU level. Significant management judgement is applied in determining the Group’s CGUs, particularly when assets relate to integrated operations, and where changes in CGU determinations could impact the impairment recognised. It was previously determined that Amursk POX represented a shared corporate asset in accordance with IAS 36 Impairment of assets. During the year ended 31 December 2023, the Group has determined that due to the changes in the mode of assets utilisation that generate a revenue stream for Amursk POX, it became a separate CGU. Such changes included continued use of Amursk POX processing facility to treat Kyzyl refractory concentrate on the terms of tolling agreement, as entailed by provisions of JSC Polymetal divestment (Notes 1, 24) and the offtake arrangement over Veduga concentrate, described below. This judgement was applied to the impairment review as of 31 December 2023, resulting in impairment charge of US$ 165 million (Note 14). Indicators of Impairment and reversal of impairment The Group considers both external and internal sources of information in assessing whether there are any indications that CGUs are impaired. The external sources of information the Group considers include changes in the market, economic and legal environment in which the Group operates, that are usually not within its control, and are expected to affect the recoverable amount of CGUs. Internal sources of information include the manner in which mining properties, plant and equipment are being used or are expected to be used; and indicators of the economic performance of the assets, historical exploration and operating results. The primary external factors considered are changes in spot and forecast metal prices, market rates of returns that form discount rates, and changes in laws and regulations. The primary internal factors considered are the Group’s current mine performance against expectations, changes in mineral reserves and resources, life of mine plans and exploration results. Assets (other than goodwill) that have been previously impaired should be assessed for indicators of both impairment and impairment reversal. Such assets are generally carried on the balance sheet at a value close to their recoverable amount at the last assessment. Therefore in principle any change to operational or macroeconomic parameters could result in further impairment or impairment reversal if an indicator is identified. During year ended 31 December 2023 the Group determined that due to updated operational plans and futher advancement of the project, impairment loss previously recognised for Veduga was fully reversed as detailed in Note 14. As a result the reversal of impairment loss of US$ 68 million was recorded. Other significant operating assets that the Group has previously impaired include Nezhda-Prognoz and Kutyn CGU. These assets had a combined carrying value of US$ 751 million as at 31 December 2023. Despite the external indicators such as commodities’ prices and foreign exchange rates showed favorable changes, there is no significant positive change in these CGUs’ expected economic performance, and therefore no indicators of the reversal of previously recognised impairment loss were identified. Veduga (Amikan GRK LLC) Joint VentureIn September 2023, the Group disposed of the stake in Amikan LLC (holder of Veduga deposit license), which resulted in loss control of over subsidiary, as described in Note 3. The Group retained interest of 49.9% in Amikan and entered into a number of corporate arrangements with the new shareholder regarding project financing, governance and operations. When the Group enters into an arrangement where it has the power to participate in the financial and operating policy decisions of an investee or into arrangements with other parties for the joint ownership of particular assets or developments, it must assess whether the arrangements constitute significant influence, control, joint operations or a joint venture based on the rights and obligations of the parties to the arrangements. Based on the governance structure of the investee, it was determined that the arrangement requires the unanimous consent of the parties sharing control. The preliminary offtake arrangement to purchase the output by Amursk POX, entailed by the shareholders agreement, does not indicate that the parties have rights to the substantially all economic benefits of the assets and, therefore, in effect do not have the obligation for liabilities, as pricing mechanism relates only to the market metal price and related adjustments is in line with the market practice, with no additional financing arrangements. Therefore it was concluded that the joint arrangement provides the parties with rights to the net assets of the arrangement and, therefore, the retained investment represents a joint venture. The retained investment was initially recognised at fair value as of date of transaction, as described in Note 3. Accounting for acquisitionsTo determine the appropriate accounting approach to be followed for an acquisition transaction, the Group applies judgement to assess whether the acquisition is of a business, and therefore within scope of IFRS 3 Business Combinations, or is of a group of assets that do not constitute a business and is therefore outside scope of IFRS 3. In making this determination, management evaluates the inputs, processes and outputs of the asset or entity acquired. Judgement is used to determine whether an integrated set of activities and assets is capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs or other economic benefits directly to investors or other owners, members or participants. The acquisitions of subsidiaries during reporting year have been assessed as asset acquisitions (Note 3). Recoverability of exploration and evaluation assetsExploration and evaluation assets include mineral rights and exploration and evaluation costs, including geophysical, topographical, geological and similar types of costs. Exploration and evaluation costs are capitalised if management concludes that future economic benefits are likely to be realised and determines that economically viable extraction operation can be established as a result of exploration activities and internal assessment of mineral resources. According to IFRS 6 Exploration for and evaluation of mineral resources, the potential indicators of impairment include: management’s plans to discontinue the exploration activities, lack of further substantial exploration expenditure planned, expiry of exploration licences in the period or in the nearest future, or existence of other data indicating the expenditure capitalised is not recoverable. At the end of each reporting period, management assesses whether such indicators exist for the exploration and evaluation assets capitalised, which requires significant judgement. During the year ended 31 December 2023 the Group recognised impairment loss related to the individual exploration and evaluation assets of US$ 29 million as detailed in Note 14. Use of estimatesThe preparation of financial statements requires the Group to make estimates and assumptions that affect the amounts of the assets and liabilities recognised, amounts of revenue and expenses reported, and contingent liabilities disclosed, as of the reporting date. The determination of estimates is based on current and expected economic conditions, as well as historical data and statistical and mathematical methods as appropriate. Key sources of estimation uncertaintyKey sources of estimation uncertainty reflect those sources of estimation uncertainty which may have a possible material impact of resulting in a material adjustment to the carrying amount of assets and liabilities within the next financial year. They include: cash flow projections for impairment testing and impairment reversal, valuation of contingent consideration assets and liabilities and calculation of net realisable value of stockpiles and work-in progress, mineral reserves and resources assessment and life of mine plans, useful lives of production and other assets, environmental provision and recoverability of deferred tax assets. DCF models are developed for the purposes of impairment testing, valuation of contingent consideration assets and liabilities, calculation of net realisable value of metal inventories and assessment of the recoverability of deferred tax assets. Expected future cash flows used in DCF models are inherently uncertain and could change over time. They are affected by a number of factors including ore reserves, together with economic factors such as commodity prices, exchange rates, discount rates and estimates of production costs and future capital expenditure.
Sensitivity analysis The impairment charge of US$ 165 million for Amursk POX property, plant and equipment was recognised during the year ended 31 December 2023 (Note 14). The recoverable amount was estimated based on a value in use calculation. The impairment assessment is inherently sensitive to plausible changes in certain economic and operational key input assumptions within the next financial year, which could increase or reduce the CGU’s recoverable value estimate. Management performed an analysis as to whether a reasonably possible adverse change to any of the key assumptions would lead to further impairment. The table below summarises the outcomes of the following isolated scenarios and respective additional impairment that would be recognised.
Each of the sensitivities above has been determined by assuming that the relevant key assumption moves in isolation, and without regard to potential mine plan changes and other management decisions which would be taken to respond to adverse changes in existing management projections. The sensitivities of contingent consideration liabilities measured at FVTPL of US$ 44 million at 31 December 2023 (31 December 2022: US$ 36 million) and inventories held at net realisable value of US$ 80 million at 31 December 2023 (31 December 2022: US$ 95 million) to a reasonably possible change in key assumptions described above are not considered material due to materiality of the respective balances. Recoverability of deferred tax assetsDeferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. This review takes into account the factors such as estimated future production, projected commodity prices, operating costs, future capital expenditure, as described above. If actual results differ from these estimates or if these estimates must be adjusted in future periods, the financial position, results of operations and cash flows may be negatively affected. Deferred tax assets arising from tax losses carried forward, as well as applicable tax legislation, are described in Note 13. Climate changeWe have assessed and set out the Group’s climate risks and opportunities as part of our commitment to climate disclosure within the Strategic Report. Mitigation and adaptation measures that may be required in the future to combat the physical and transition risks of climate change could also have potential implications for the Group’s financial statements. This would be the case where assets and liabilities are measured based on an estimate of future cash flows. In preparing the Group’s financial statements, climate-related strategic decisions have impacted the following:
We have adopted both mitigation and adaptation measures within our climate management system. We focus on renewable energy, carbon-intensive fuel replacement and innovative technologies to both mitigate climate change impacts and to reduce our carbon footprint. The adaptation measures we use are based on climate models, which inform the design, construction, operation and closure of our mining assets. Significant judgements and key estimates made by the Group may be impacted in the future by changes to our climate change strategy or in global commitments to decarbonisation. This could, in turn, result in material changes to the financial results and the carrying values of certain assets and liabilities in future reporting periods. As at the reporting date, the Group believes that there is no material impact on balance sheet carrying values of assets or liabilities. 3. ACQUisitions and disposals Veduga (Amikan GRK LLC)In September 2023, the Group has agreed to cancel its historic call and put options and a shareholder agreement over 40.6% share in GRK Amikan LLC (“Amikan”) with the previous joint venture (JV) partner (refer to the transaction disclosure in the condensed consolidated financial statements for the year ended 31 December 2020). This allowed the Group to form a new joint venture over Amikan. The 40.6% stake was acquired from the previous JV partner by a new third party. Subsequently, JSC Polymetal disposed of its 9.5% stake in Amikan to the same third party for a сash consideration of US$ 21 million. As a result, the Group now owns 49.9% interest of Amikan. Simultaneously, JSC Polymetal entered into number of corporate arrangements with the new shareholder regarding Amikan project financing, governance and operations. In 2020 at the inception of options the Group determined that the call option over 40.6% stake represents a derivative containing potential voting right, that provided the Group access to the returns associated with related ownership interest, and thus in accordance with IFRS 10 Consolidated financial statements the Group accounted for the options over 40.6% interest as is they were already exercised and consolidated 100% interest in Amikan with the option exercise price recognised as a deferred consideration payable. At the disposal date, the fair value of deferred consideration payable amounted to US$ 88 million, which was recognised as a part of the consideration received on disposal. As a result of this transaction the Group has effectively disposed of 50.1% interest of the investee. The retained interest of 49.9% was valued at the fair value of US$ 110 million at the date when control was lost in accordance with IFRS 10 requirements. The fair value was determined based on consideration received from third party for 9.5% stake, which was supported by life-of-mine model. Based on the governance structure of the investee, policy-making processes and the board of directors composition, it was determined that all key decisions require the unanimous consent of the parties sharing control and provides the parties of the joint arrangement with rights to its net assets, therefore, the investment was classified as a joint venture. Subsequently, the investment is accounted for using the equity method. The summary of transaction is presented below.
Other individually insignificant acquisitions of exploration assets during the year ended 31 December 2023 of US$ 52 million in total, related to consolidation of certain former joint ventures, including the Baksy project project in Kazakhstan (Note 16), and the acquisition a number of exploration interests in Russia. All transactions represented asset acquisitions in accordance with IFRS 3 Business Combinations, as the acquired companies did not have any substantive processes required to create outputs. The summary of net assets acquired is presented below:
4. Segment Information The Group’s operating segments are aligned to those businesses that are evaluated regularly by the chief operating decision maker (the CODM) in deciding how to allocated resources and in assessing performance. Operating segments with similar economic characteristics are aggregated into reportable segments. In May 2023, following the designation of JSC Polymetal by the U.S. Department of State pursuant to Executive Order 14024, the governance and management structure of the Group was changed. As a part of ring-fencing the Group’s Russian subsidiaries to ensure sanctions compliance the management of the Russian operations has been delegated to the executives of JSC Polymetal, while the Company’s Board and management focused on the operations of the Group’s assets located in Kazakhstan, as well as separation of the Group’s assets by jurisdiction, as described in Note 1. As a result of these changes management of the Company has re-assessed presentation of financial information by segments it requires to assess performance and allocate resources. It was concluded that jurisdiction-based reporting format is more meaningful from a management and forecasting perspective, as well as better aligned to the new management structure, internal reporting and processes. The comparative information was presented in line with the current year format. Therefore the Group has identified two reportable segments in 2023:
The measure which management and the CODM use to evaluate the performance of the Group is a segment Adjusted EBITDA, which is an Alternative Performance Measure (APM). The accounting policies of the reportable segments are consistent with those of the Group’s accounting policies under IFRS. Revenue and cost of sales of the production entities are reported net of any intersegmental revenue and cost of sales, related to the intercompany sales of ore and concentrates. Business segment current assets and liabilities, other than current inventory, are not reviewed by the CODM and therefore are not disclosed in these condensed consolidated financial statements. Additionally, net debt is included in performance measures, reviewed by CODM. The segment adjusted EBITDA reconciles to the profit before income tax as follows:
4. Segment information (continued)
5. Revenue
Included in revenues for the year ended 31 December 2023 are those arisen from the sales to the Group’s largest customers, whose contribution to the Group’s revenue presented 10% or more of the total revenue. In 2023 revenues from such customers amounted to US$ 547 million, US$ 357 million and US$ 292 million (2022: US$ 754 million, US$ 446 million, US$ 452 million and US$ 233). Geographical analysis of revenue by destination is presented below:
Presented below is an analysis per revenue streams:
6. Cost of Sales
7. On-mine costs
8. Smelting costs
9. Depletion and depreciation of operating assets
Depreciation of operating assets excludes depreciation relating to non-operating assets (included in general, administrative and selling expenses) and depreciation related to assets employed in development projects where the charge is capitalised. 10. General, administrative and selling expenses
11. Other OPerating expenses, NET
For the operations held in the Special Economic Zone of the Russian Far East, Omolon Gold Mining Company LLC and Magadan Silver JSC are entitled to the decreased statutory income tax rate of 17%, as well as decreased mining tax rate (paying 60% of standard mining tax rates). In return for obtaining this tax relief the members of the regional free Economic Zone are obliged to invest 50% of their tax savings each year in the Special Economic Zone Development Programme, amounting to US$ 15 million in 2023 (2022: US$ 14 million). Operating cash flows spent on exploration activities amounted to US$ 34 million (2022: US$ 61 million). 12. Finance expenses
During the year ended 31 December 2023 interest expense on borrowings excluded borrowing costs capitalised in the cost of qualifying assets of US$ 49 million (2022: US$ 35 million). These amounts were calculated based on the Group’s general borrowing pool and by applying an effective interest rate of 5.57% (2022: 4.53%) to weighted average balance of expenditure associated with qualifying assets. 13. Income TaxIncome tax expense for the years ended 31 December 2023 and 2022 recognised in the condensed consolidated income statement was as follows:
A reconciliation between the reported amounts of income tax expense attributable to income before income tax is as follows:
The actual tax expense differs from the amount which would have been determined by applying the statutory rate of 20% for the Russian Federation and Kazakhstan to profit before income tax as a result of the application of relevant jurisdictional tax regulations, which disallow certain deductions which are included in the determination of accounting profit. The Group has a number of tax concessions, therefore the tax rate varies for each separate entity from 0% to 20%. Tax exposures related to the income tax In 2023 and 2022 no individual material exposures were identified as probable and therefore provided for. Management has identified a total exposure in respect of contingent liabilities (Note 19) (covering taxes and related interest and penalties) of approximately US$ 38 million being uncertain tax positions (31 December 2022: US$ 122 million) which relate to income tax. This is connected largely to the more assertive position of the Russian tax authorities in their interpretation of tax legislation in several recent court cases for other taxpayers. Fiscal periods remain open to review by the tax authorities in respect of taxes for the three and five calendar years preceding the year of tax review for Russia and Kazakhstan respectively. In case of Regional Investment Project in Russian Federation fiscal period remains open to review for five years as well. While the Group believes it has provided adequately for all tax liabilities based on its understanding of the tax legislation, the above facts may create additional financial risks for the Group. Management does not anticipate a significant risk of material changes in estimates in these matters in the next financial year. Deferred taxation Deferred taxation is attributable to the temporary differences that exist between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. The following are the major deferred tax assets and liabilities recognised by the Group and movements thereon during the reporting period.
Deferred tax assets and liabilities are offset where the Group has a legally enforceable right to do so. The following analysis shows deferred tax balances presented for financial reporting purposes:
The Group believes that recoverability of the recognised deferred tax asset (DTA) of US$ 119 million at 31 December 2023 (2022: US$ 189 million), which is related to the tax losses carried forward, is more likely than not based upon expectations of future taxable income in the Russian Federation. It was concluded that there is sufficient evidence to overcome the recent history of losses based on forecasts of sufficient taxable income in the carry-forward period. In accordance with Russian Federation tax law regarding loss carryforwards, they are limited to 50% of taxable profit in tax years through to 2026. Starting from 2027, the limitation will expire and it will be possible to fully utilise loss carryforwards against the corporate tax base in a given year. Losses incurred from 2007 can be carried forward for an indefinite period until fully utilised. The Group’s estimate of future taxable income is based on established proven and probable reserves which can be economically developed. The related detailed mine plans and forecasts provide sufficient supporting evidence that the Group will generate taxable earnings to be able to fully realise its net DTA even under various stressed scenarios. The amount of the DTA considered realisable, however, could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced due to delays in production start dates, decreases in ore reserve estimates, increases in environmental obligations, or reductions in precious metal prices. No deferred tax asset has been recognised in respect of US$ 31 million (2022: US$ 95 million) of losses as it was not considered probable that there will be future taxable profits against which these losses can be utilised. In 2023 the Group paid withholding income tax of US$ 10 million (2022: US$ 7 million) related to intercompany dividends, which were remitted during the year. As of 31 December 2023 the Group recognised deferred tax liability of US$ 152 million (31 December 2022: nil) in respect of the undistributed retained earnings of certain of the Group subsidiaries, which are expected to be remitted from these subsidiaries in foreseeable future (judged to be one year). No deferred tax liabilities for taxes that would be payable on the unremitted earnings of the Group subsidiaries is recognised where the Group determines that the undistributed profit of its subsidiaries will not be distributed in a foreseeable future (judged to be one year). The temporary differences associated with investments in subsidiaries, for which deferred tax liabilities have not been recognised, amounted to US$ 2.3 billion (2022: US$ 4.1 billion). 14. IMPAIRMENT of non-current assets, net During year ended 31 December 2023 due to the updated operational plans and further advancement of the Veduga project (Amikan GRK LLC), the Group carried out an impairment review of the property, plant and equipment, related to this CGU. As a result of this review an impairment loss of US$ 68 million previously recognised for Veduga CGU was fully reversed. An impairment charge of US$ 165 million in respect to Amursk POX is mainly attributable to the classification of Amursk POX as a separate CGU due to changes in the mode of assets utilisation (Note 2). Additionally, as a result of review of recoverability of exploration and evaluation assets, the Group recognised an impairment loss of US$ 29 million. Total net impairment loss of US$ 126 million recognised comprised the following:
Amikan, Amursk POX and Viksha related to Russia reporting segment, Bolshevik was included in Kazakhstan reporting segment (Note 4). The recoverable amount of the relevant cash-generating units is determined based on a value in use calculation. The impairment testing procedure, related assumptions and sensitivities are described in detail in Note 2 “Use of estimates” section above. 15. Property, Plant And Equipment
Mining, exploration and development assets at 31 December 2023 included mineral rights with a net book value of US$ 621 million (31 December 2022: US$ 713 million) and capitalised stripping costs with a net book value of US$ 262 million (31 December 2022: US$ 277 million). Mineral rights of the Group comprise assets acquired upon acquisition of subsidiaries. Disposed and written off assets included fully depreciated items of US$ 21 million (year ended 31 December 2022: US$ 153 million and US$ 121 million, respectively). No property, plant and equipment was pledged as collateral at 31 December 2023 and at 31 December 2022. 16. Investments in Associates and Joint ventures
Movement during the reporting periods was as follows:
Summarised financial position of the investments
17. Inventories
Write-downs of metal inventories to net realisable value The Group recognised the following write-downs and reversals to net realisable value of its metal inventories:
The key assumptions used as of 31 December 2023 in determining net realisable value of inventories (including the commodity price assumptions for long-term stockpiles) are described in Note 2 “Use of estimates” section. For short-term metal inventories, applicable quoted forward prices as of 31 December 2023 were used: gold and silver prices of US$ 2,128 per ounce (2022: US$ 1,874) and US$ 24.8 per ounce (2022: US$ 24.6), respectively. During the year ended 31 December 2023 the Group recognised a write-down of consumables and spare parts of US$ 2 million (year ended 31 December 2022: reversal of US$ 1 million). The amount of inventories held at net realisable value at 31 December 2023 amounted to US$ 81 million (31 December 2022: US$ 95 million). 18. Borrowings
Bank loans The Group has a number of borrowing arrangements with various lenders. These borrowings consist of unsecured and secured loans and credit facilities as detailed above. Movements in borrowings are presented in Note 23. The Group complied with its debt covenants throughout 2023 and 2022. The table below summarises maturities of borrowings:
19. Commitments and Contingencies Commitments Capital commitments The Group’s contractual capital expenditure commitments as of 31 December 2023 amounted to US$ 171 million (2022: US$ 279 million). Nezhda power line The Group’s lease commitments, representing variable lease payments related to the Nezhda grid power line and substation, were estimated at US$ 24 million (undiscounted), which will be expensed as incurred (2022: US$ 36 million). Contingent liabilities TaxationRussian and Kazakhstan tax, currency and customs legislation is subject to varying interpretations, and changes, which can occur frequently. Management’s interpretation of such legislation as applied to the transaction and activity of the companies of the Group may be challenged by the relevant regional and federal authorities and as a result, significant additional taxes, penalties and interest may be assessed. Fiscal periods remain open to review by the tax authorities in respect of taxes for three and five calendar years preceding the year of review for Russia and Kazakhstan respectively. Under certain circumstances reviews may cover longer periods. Management has identified a total exposure (covering taxes and related interest and penalties) of US$ 41 million in respect of contingent liabilities (2022: US$ 125 million), mainly related to income tax as described in Note 13. 20. Financial instruments Major categories of financial instruments
The Group’s principal financial liabilities comprise borrowings, derivatives, trade and other payables. The Group has various financial assets such as accounts receivable, loans advanced and cash and cash equivalents. Trade and other payables exclude employee benefits and social security. Interest expense, calculated using effective interest method, arising on financial liabilities at amortised costs is disclosed in Note 23. The main risks arising from the Group’s financial instruments are foreign currency and commodity price risk, interest rate, credit and liquidity risks. At the end of the reporting period, there were no significant concentrations of credit risk for receivables at FVTPL. The carrying amount reflected above represents the Group's maximum exposure to credit risk for such receivables. Presented below is a summary of the Group’s accounts receivable with embedded derivative recorded on the condensed consolidated statement of financial position at fair value. As of 31 December 2023, accounts receivable with embedded derivatives recognised at fair value amounted to US$ 135 million (31 December 2022: US$ 54 million) and represented receivables from provisional metal concentrate sales. In 2023 gains recognised on revaluation of these instruments amounted to US$ 4 million (2022: US$ 17 million) and was recorded within revenue. Fair value of financial instrumentsThe following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable as follows: Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). At 31 December 2023 and 31 December 2022, the Group held the following financial instruments:
During the reporting year, there were no transfers between Level 1 and Level 2. The Group recognised the following gains and loss from revaluation of its Level 3 financial instruments:
The carrying values of cash and cash equivalents, trade and other receivables, trade and other payables and short-term debt recorded at amortised cost approximate to their fair values because of the short maturities of these instruments. Long-term loans to related parties (Note 22) are discounted at rates obtained from active capital markets. The estimated fair value of the Group’s debt, calculated using the market interest rate available to the Group as of 31 December 2023, was US$ 2,699 million (2022: US$ 2,615 million), and the carrying value as of 31 December 2023 was US$ 3,225 million (2022: US$ 3,026 million) (see Note 18). As of 31 December 2023 the Group held several interest rate swap contracts, recognised within non-current accounts receivables and other financial instruments in the amount of US$ 8 million (31 December 2022: US$ 16 million). All interest rate swap contracts to pay fixed and receive floating interest payments are designated as cash flow hedges to reduce the Group’s cash flow exposure resulting from variable interest rates on borrowings. As the critical terms of the interest rate swap contracts and their corresponding hedged items are the same, the Group performs a qualitative assessment of effectiveness and it is expected that the value of the interest rate swap contracts and the value of the corresponding hedged items will systematically change in opposite direction in response to movements in the underlying interest rates. As of 31 December 2023 and 31 December 2022 it was determined that there is no hedge ineffectiveness identified and therefore change of fair value was recognised within other comprehensive income. Receivables from provisional copper, gold and silver concentrate salesThe fair value of receivables arising from copper, gold and silver concentrate sales contracts that contain provisional pricing mechanisms is determined using the appropriate quoted forward price from the exchange that is the principal active market for the particular metal. As such, these receivables are classified within Level 2 of the fair value hierarchy. Valuation methodologies used in the measurement of fair value for Level 3 financial assets and financial liabilitiesThe main level 3 inputs used by the Group in measuring the fair value of contingent consideration assets and liabilities, represented by various royalties and net smelter returns (NSR), are derived and evaluated as follows:
The key assumptions used in the Monte-Carlo calculations are set out below:
Management consider that a reasonably possible change in a valuation assumption would not have a material impact on the condensed consolidated financial statements for contingent considerations receivables and payable. 21. Stated capital accountThe movements in the Stated capital account in the year were as follows:
As a part of the re-domiciliation described in Note 1, in order to comply with the AIFC companies rules, the Company's shares were converted from 512,697,077 ordinary shares of no par value to 512,697,077 ordinary shares of US$ 0.03 each in the share capital of the Company. As result the Company recognised Share capital of US$ 14 million and Share premium of US$ 2,436 million, calculated as difference between Share capital and Stated capital account, previously recorded. On 22 September 2022, the Board announced its intention to conduct an exchange offer. The exchange offer invited shareholders whose rights have been affected by the sanctions imposed on NSD, subject to fulfilling eligibility criteria, to tender such shares for exchange in consideration for the issuance of a certificated share, on a one-for-one basis. The first exchange offer which was completed on 11 October 2023. 2,543,840 shares were repurchased during year ended 31 December 2023 (31 December 2022: 39,070,838 shares). The exchange of shares did not give rise to any cash settlement and hence does not give rise to any financial liability. The shares were exchanged at par, on a one-for-one basis and does not affect the Company’s net asset and resources position or capital structure. As of 31 December 2023 total number of voting rights in the Company amounted to 473,645,141 ordinary shares of nominal value US$ 0.03 each (31 December 2022: 473,626,239 ordinary shares with no par value), each carrying one vote, and additionally the Company held 41,514,678 shares in treasury and such shares did not enjoy any voting or economic rights (31 December 2022: 39,070,838 shares). Weighted average number of shares: Diluted earnings per shareBoth basic and diluted earnings per share were calculated by dividing profit for the year attributable to equity holders of the parent by the weighted average number of outstanding common shares before/after dilution respectively. The calculation of the weighted average number of outstanding common shares after dilution is as follows:
There were no adjustments required to earnings for the purposes of calculating the diluted earnings per share during the year ended 31 December 2023 (year ended 31 December 2022: nil). There are no dilutive potential ordinary shares with respect to earnings per share from continuing operations as these are out of money as of the reporting date (2022: no dilutive potential ordinary shares). 22. Related PartiesRelated parties are considered to include shareholders, affiliates, associates, joint ventures and entities under common ownership and control with the Group and members of key management personnel. During the period ended 31 December 2023 transactions with the related parties, represented by equity method investments, included miscellaneous purchases of US$ 4 million (year ended 31 December 2022: US$ 0.7 million) and various sales of US$ 0.5 million (year ended 31 December 2022: US$ 0.5 million). Outstanding balances as of 31 December 2023 were represented by accounts receivable of US$ 1.2 million (31 December 2022: US$ 1.2 million) from equity method investments and long-term loans advanced to the joint venture amounting to US$ 64 million (Note 16). The loans bear 0% interest date up to the start of production with maturity of 5 years. Loans provided to equity method investments, classified as loans forming part of net investment in joint ventures, are presented in Note 16. The remuneration of directors and other members of key management personnel during the periods was as follows:
23. Supplementary cash flow information
There were no significant non-cash transactions during the years ended 31 December 2023 and 31 December 2022, other than in respect of exchange of the ordinary shares (Note 21). Cash outflows related to capitalised exploration amounted to US$ 11 million for the year ended 31 December 2023 (2022: US$ 15 million). During the year ended 31 December 2023, the capital expenditure related to the new projects, which increase the Group’s operating capacity amounts to US$ 237 million (2022: US$ 208 million). Cash and cash equivalents
At 31 December 2023 cash balances included US$ 513 million of cash and cash equivalents (31 December 2022: US$ 118 million) held in Russia, that are subject to certain legal and sanctions restrictions and are therefore not available for general use of the Company (but fully available for use by Russian subsidiaries). The Group determined that these restrictions would not have any material effect on the Group’s liquidity position and its ability to finance its obligations. Bank deposits as of 31 December 2023 were mainly presented by the US Dollar and CNY deposits, bearing an average interest rate of 2.98% and 4.04% per annum, respectively (2022: US Dollar deposits, bearing an average interest rate of 3.9% per annum). Changes in liabilities arising from financing activitiesThe table below details changes in the Group's liabilities arising from financing activities, including both cash and non-cash changes. Liabilities from financing activities are those for which cash flow were, or future cash flows will be, classified in the Group's condensed consolidated cash flow statements as cash flows from financing activities.
24. Subsequent Events Оn 18 February 2024 the Group entered into contracts for the divestment of its Russian business through a sale of 100% JSC Polymetal’s shares to a third party, JSC Mangazeya Plus (the Purchaser). On 7 March 2024, following the receipt of required regulatory and shareholder approvals, the transaction was completed. The transaction entailed US$ 50 million cash consideration which was paid to the Company at completion. Prior to completion, an aggregate dividend of US$ 1,429 million (before tax) was paid by JSC Polymetal to the Company, of which US$ 278 million will be retained by the Company for its general corporate purposes and US$ 1,151 million were used to repay, and fully discharge, the intra-group debt and related interest owed to JSC Polymetal. Combined net cash proceeds from the Purchaser and through dividends retained by the Company, after tax of US$ 28 million, amounted to US$ 300 million. Major classes of assets and liabilities of JSC Polymetal Group, net of dividends payable and intercompany loans receivable, that were settled in March 2024 before the actual disposal date and which will not be part of assets and liabilities of the divested subsidiaries, are presented below. Cash and cash equivalents balance as of 31 December 2023 was adjusted for the net outflow accordingly, including dividends tax effect.
The rationale for the transaction is associated with the significant political and financial risks that the pre-divestment structure poses to the Group, as well as the difficulty and related uncertainty of executing any alternative transaction. Therefore management believes that the transaction terms do not represent an indicator of further impairment of any CGU within the JSC Polymetal Group. The impairment review conducted as of 31 December 2023 is described in Note 2. 25. SUPPLEMENTARY FINANCIAL INFORMATION ON DIVESTMENT (UNAUDITED)The financial information below is to illustrate the financial effect of the divestment, so each caption of the consolidated statement of financial position and consolidated income statement was adjusted to exclude the amounts of JSC Polymetal Group. In contrast with the statement of financial position presented on the face of these consolidated financial statements intra-group balances with JSC Polymetal Group are not eliminated, instead they are treated as balances with a related party. Unrealised profits or losses are excluded from the inventory balances and accumulated profits of Polymetal International plc. Additionally, the table below presents post-disposal Polymetal International plc pro forma financial information, which illustrates the impact of the sale transaction on the net assets of the Polymetal International plc as of 31 December 2023 as if it had taken place at that date and the results of operations of the Polymetal International plc as if the transaction had taken place at 1 January 2023.
Alternative Performance Measures Introduction The financial performance reported by the Group contains certain Alternative Performance Measures (APMs), disclosed to complement measures that are defined or specified under International Financial Reporting Standards (IFRS). APMs should be considered in addition to, and not as a substitute for, measures of financial performance, financial position or cash flows reported in accordance with IFRS. The Group believes that these measures, together with measures determined in accordance with IFRS, provide the readers with valuable information and an improved understanding of the underlying performance of the business. APMs are not uniformly defined by all companies, including those within the Group’s industry. Therefore, the APMs used by the Group may not be comparable to similar measures and disclosures made by other companies. Purpose APMs used by the Group represent financial KPIs for clarifying the financial performance of the Group and measuring it against strategic objectives, given the following background:
APMs and justification for their use
[1] The financial performance reported by the Group contains certain Alternative Performance Measures (APMs) disclosed to complement measures that are defined or specified under International Financial Reporting Standards (IFRS). For more information on the APMs used by the Group, including justification for their use, please refer to the “Alternative performance measures” section below. [2] Adjusted for the after-tax amount of impairment charges, write-downs of metal inventory, foreign exchange gains/losses and other change in fair value of contingent consideration. [3] Profit for the year [4] On a cash basis, representing cash outflow on purchases of property, plant and equipment in the consolidated statement of cash flows. [5] Totals may not correspond to the sum of the separate figures due to rounding. % changes can be different from zero even when absolute amounts are unchanged because of rounding. Likewise, % changes can be equal to zero when absolute amounts differ due to the same reason. This note applies to all tables in this release. [6] Defined in the “Alternative performance measures” section below. [7] Allocation factors for corporate costs were revised in 2023, previous periods were restated accordingly. [8] In accordance with IFRS, revenue is presented net of treatment charges which are subtracted in calculating the amount to be invoiced. Average realised prices are calculated as revenue divided by gold and silver volumes sold, without effect of treatment charges deductions from revenue. [9] Based on 500 KZT/USD and 13% inflation in Kazakhstan. [10] Ore Reserves and Mineral Resources from continuing operations. Base metal are not included in GE calculation as they are insignificant. Ore Reserves of rare earths metals are given separately and not included in GE calculation. [11] Mineral Resources are additional to Ore Reserves. Mineral Resources of platinum group metals and rare earth metals are given separately and are not included in the calculation of GE. Discrepancies in calculations are due to rounding. [12] Mineral Resources and Ore Reserves in accordance with the JORC Code (2012). Mineral Resources are additional to Ore Reserves. Detailed tables for Mineral Resources and Ore Reserves with a breakdown by deposits and metals are given below. Ore Reserves of rare earths metals are given separately and not included in GE calculation. Mineral Resources of platinum group metals and rare earth metals are given separately and are not included in the calculation of the gold equivalent. Discrepancies in calculations are due to rounding. [13] Our water target includes only water used for technological purposes such as ore processing at plants and dust suppression in mines. [14] Water use for processing does not include water used for non-technological purposes. [15] Based on actual realised prices. [16] Without the effect of deductions for treatment charges from revenue. [17] Commission sales of third-party materials [18] Allocation factors for corporate costs were revised in 2023, previous periods were restated accordingly. [19] Prior year restated: income tax on cash basis is considered more relevant for cash costs calculation instead of income tax on accruals basis. [20] Adjusted EBITDA is a key measure of the Group's operating performance and cash generation capacity (excluding impact of financing, depreciation and tax) and a key industry benchmark allowing peer comparison. Adjusted EBITDA also excludes the impact of certain accounting adjustments (mainly non-cash items) that can mask underlying changes in core operating performance. The Group defines Adjusted EBITDA (a non-IFRS measure) as profit for the period adjusted for depreciation and amortisation, write-downs and reversals of inventory to net realisable value, impairment/reversal of previously recognised impairment of non-current assets, share-based compensation expenses, gains and losses on disposal or revaluation of investments in subsidiaries, joint ventures and associates, rehabilitation expenses, bad debt allowance, foreign exchange gains or losses, changes in fair value of contingent consideration, finance income, finance costs, income tax expense and other tax exposures accrued within other operating expenses. Adjusted EBITDA margin is Adjusted EBITDA divided by revenue. [21] Net of finance income. [22] Underlying net earnings represent net profit for the year excluding the impact of key items that can mask underlying changes in core performance, such as after-tax amount of impairment charges, write-downs of metal inventory, foreign exchange gains/losses and other change in fair value of contingent consideration. [23] Underlying basic EPS are calculated based on underlying net earnings. [24] On a cash basis. [25] On accrual basis, capital expenditure was US$ 756 million in 2023 (2022: US$ 883 million). [26] Based on 500 KZT/$ and 13% inflation in Kazakhstan. [27] Adjustment of US$ 5 million in post-disposal proforma represents the estimated costs of the disposal [28] Loss from discontinued operation was calculated as cash consideration receivable of U$ 50 million less the carrying amount of the net assets of the Polymetal Russia Group as of 31 December 2023 net of dividends payable (including applicable taxation) and intercompany loans receivable (Note 32). [29] The functional currency of the Polymetal Russia Group is the Russian rouble, which is different from the Polymetal International plc functional currency (US dollar to 1 January 2015 and Kazakh tenge from 1 August 2023). The exchange differences arising on translation of the assets, liabilities and income statements of the Polymetal Russia Group were recorded in other comprehensive income and accumulated in the separate component of equity. On disposal of the Polymetal Russia Group the cumulative amount of the exchange differences relating to Polymetal Russia operations is to be recycled to the Polymetal International plc’s income statement.
[30] Excluding lease liabilities and royalty payments. File: Polymetal International plc: Preliminary results for the year ended 31 December 2023
15/03/2024 Dissemination of a Financial Press Release, transmitted by EQS News. |
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