Polymetal International : - Half-yearly report for the six months ended 30 June 2021

We are pleased to report our strong financial performance on the back of favourable commodity prices and steady operational delivery during the first half of the year', said Vitaly Nesis, Group CEO of Polymetal, commenting on the results.

'We expect stronger production, stable cash costs within the original guidance and significant free cash flow generation for the second half and remain focused on progressing our development projects on schedule'.

FINANCIAL HIGHLIGHTS

Revenue in 1H 2021 increased by 12% to US$ 1,274 million compared to 1H 2020 ('year-on-year') driven by higher metal prices. Average realised gold and silver prices tracked market dynamics and increased by 8% and 59%, respectively. Gold equivalent ('GE') production was 714 Koz, a marginal decrease of 1% year-on-year. Gold sales remained stable year-on-year at 595 Koz but lagged production by 40 Koz mainly due to concentrate in transit build-up at Kyzyl. Silver sales were down 19% to 8.0 Moz, due to a lag between silver concentrate production and sales, which is expected to close in 2H 2021.

Group Total Cash Costs ('TCC')1 were US$ 712/GE oz for 1H 2021, within the Company's guidance of US$ 700-750/GE oz, and up 12% year-on-year due to above-CPI inflation in the mining industry and full-period impact of COVID-related costs, as well as planned decline in grades processed at Kyzyl and Albazino.

All-in Sustaining Cash Costs ('AISC')1 amounted to US$ 1,019/GE oz, up 16% year-on-year, reflecting investments at Omolon (power complex, filtration building and mining fleet renewals) and Kyzyl (mining fleet), as well as accelerated stripping at Voro (Pescherny and Saum deposits) and Omolon (Burgali deposit). AISC are expected to decline in the second half of the year on the back of seasonally higher production and sales to meet the full year guidance of US$ 925-975/GE oz.

Adjusted EBITDA1 was US$ 660 million, an increase of 8% year-on-year, driven by higher commodity prices against the backdrop of stable production. The Adjusted EBITDA margin decreased to 52% (1H 2020: 54%).

Net earnings2 were US$ 419 million (1H 2020: US$ 376 million), with basic EPS of US$ 0.89 per share (1H 2020: US$ 0.80 per share), reflecting the increase in operating profit. Underlying net earnings1 increased by 15% to US$ 422 million (1H 2020: US$ 368 million).

Capital expenditure was US$ 375 million3, up 55% compared to US$ 242 million in 1H 2020, reflecting the construction at POX-2, Nezhda and Kutyn, combined with stripping at Veduga4, Voro and Omolon. Capital expenditure levels were also affected by inflationary pressures and COVID-related costs.

Given the continuing macroeconomic pressures, materials and wage inflation, as well as scope changes approved by the Board, including costs of the feasibility study for POX-3 and acceleration of Veduga and Prognoz projects, Polymetal revises its FY 2021 capex guidance to US$ 675-725 million (previously US$ 560 million). The guidance for 2022-2025 will be updated during the Company's capital markets day in November 2021.

An interim dividend of US$ 0.45 per share (1H 2020: US$ 0.40 per share) representing 50% of the Group's underlying net earnings for 1H 2021 has been approved by the Board in accordance with the dividend policy. A final dividend for 2020 of US$ 0.89 per share (total of US$ 421 million) was paid in May 2021.

Net debt1 increased to US$ 1,827 million during the period (31 December 2020: US$ 1,351 million), representing 1.05x of the last twelve months Adjusted EBITDA, significantly and favourably below the Group's target leverage ratio of 1.5x. The increase in net debt was mainly driven by accelerated capital expenditures combined with seasonal working capital build-up.

Operating cash flow increased by 22% year-on-year to US$ 358 million, however free cash flow ('FCF')3 represented a US$ 27 million outflow, compared to a US$ 54 million inflow a year earlier, driven by higher capital expenditure. As usual, FCF is expected to be stronger in the second half of the year due to seasonally higher production and working capital release.

Polymetal is on track to meet its 2021 production guidance of 1.5 Moz of gold equivalent. The company maintains its 2021 guidance range of US$ 700-750/GE oz and US$ 925-975/GE oz for TCC and AISC, respectively. This guidance remains contingent on the RUB/USD and KZT/USD exchange rates which have a significant effect on the Group's local currency denominated operating costs.

COVID-19 IMPACT ON THE GROUP's PERFORMANCE TO DATE

As of the date of this press release, there are 64 active cases of COVID-19 among Polymetal's workforce.

In July 2021, the Kubaka processing plant site (Omolon hub) suffered a significant COVID-19 outbreak. Management responded quickly to isolate the infected individuals and evacuated those who had symptoms or exhibited potentially risky pre-conditions with no impact on production. As of the date of this press release, there are 41 active cases of COVID-19, mostly among construction and drilling contractors.

Other operations and projects continue undisrupted. All precautionary measures, including extensive testing and observatory periods, are maintained at all sites.

Voluntary vaccinations continue at the Group's sites and offices, with 30% of employees having received at least one vaccination across different mine sites.

About Polymetal

Polymetal International plc (together with its subsidiaries - 'Polymetal', the 'Company', or the 'Group') is a top-10 global gold producer and top-5 global silver producer with assets in Russia and Kazakhstan. The Company combines strong growth with a robust dividend yield.

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