Resilient Responsible Sustainable
ANNUAL REVIEW 2021
Strategic report
Sustainability reviewCorporate GovernanceFinancial statementsAdditional information
We remain resilient, responsible and sustainable
ROBUST OPERATIONAL PROGRESS
Polyus produced 2.7 moz of doré gold in 2021. Refined gold output also stood at 2.7 moz. This was down 2% year-on-year and in line with the initial production target. As per the Company's market guidance, the decline was mainly driven by temporary lower head grades at Olimpiada. This was partially offset by increased output at Verninskoye and Natalka; the result of throughput capacity expansion initiatives.
Good progress was made with our growth projects in 2021. At Olimpiada, ore processed volumes reached 15 mtpa. This was driven by the SAG mill replacement at Mill 3 in late 2020, as well as various initiatives introduced during the year to improve the performance of the BIO complex.
At Natalka, the target throughput of 1,550 tph, or 12.5 mtpa was achieved, thanks to a combination of debottlenecking initiatives. These included the replacement of sleeve bearings on four electrical motors in the SAG and ball mills in late 2020, installation of turbo elevators and adjustment of screens and discharge grates at the SAG mill in 2021. During the year, Natalka was also the second-largest asset in terms of output, producing 513 koz of gold, reflecting higher ore processed volumes and growth in head grade to 1.77 g/t.
We completed the program to expand capacity at Verninskoye ahead of the original schedule. Volumes of ore processed for the year reached 3.6 mln tonnes, up 10% on 2020.
At Kuranakh, a new project was launched to expand the mill capacity to 7.5 mtpa, starting construction and contracting most of key long-lead process equipment.
Our largest brownfield project: the construction of Mill 5 at Blagodatnoye, continued to make good progress. In 2021, Company signed a procurement agreement for technological equipment for the construction of the Mill and in-pit crushing and conveying (IPCC) system. The general contractor continued to arrange hydromet and comminution foundations and progressed with the construction of infrastructure facilities. Key vendors for long-lead equipment were also selected.
At Sukhoi Log, our flagship greenfield project, preparatory work proceeded on schedule. The open-pit geotechnical parameters were finalized and the main process equipment specifications for the mill were outlined. Deep-level and flank exploration drilling was also completed. The Company commenced construction of the mill's power supply infrastructure and instrumental surveys of bridges and roads between Taksimo and Sukhoi Log were also completed.
ONGOING FINANCIAL STABILITY
Polyus achieved all its operational and financial targets in 2021. Revenue for the full year was almost $5 bln, down 1% from 2020. This decline was driven by lower gold sales volumes following an anticipated reduction in output in 2021.
Total cash costs were $405 per ounce, (2020: $362 per ounce) and below the lower limit of our guidance range of $425-$450 per ounce. This reflects several factors, including inflation in consumables, lower head grades at Krasnoyarsk and an increase in the MET rate applied to Verninskoye and Natalka in line with the regional investment project regime schedule. These factors were partially offset by performance at Olimpiada, Veninskoye and Natalka, where record highs were achieved in terms of hourly throughput rates.
Considerable effort was made to withstand price escalations. We took several steps to mitigate the negative impact on costs, including fixed-price contracts, long-term formula-based contracts and procurement of some key consumables in advance.
EBITDA for 2021 was slightly above $3.5 bln; a 5% decrease compared to 2020, due to lower gold sales volumes and higher total cash costs on a per ounce basis.
2021 capital expenditure was lower than our guidance range of $1.0 - $1.1 bln at $928 mln (2020: $653 mln). The year-on-year increase reflects higher spending across all deposits, except Natalka. The bulk of the capex program related to the Company's Krasnoyarsk assets, and Blagodatnoye in particular, to progress the Mill 5 project.
Net debt stood at approximately $2.2 bln at the end of 2021 a decrease of 11% year-on-year.
The net debt to EBITDA ratio stood at 0.6x (2020: 0.7x). Free cash flow was approximately $1.6 bln (2020: $2.0 bln).
TOWARDS A SUSTAINABLE FUTURE
2021 saw Polyus switch fully to renewable electricity. Direct energy supply contracts were signed for most of the Company's electricity needs, with the remainder covered through purchase of I-REC certificates. During the year, we began developing Polyus' climate strategy. This will be published in 2022 and will outline our long-term approach to decarbonization - as well as our plans to manage climate change-related risks.
The share of recycled water in the Company's production processes is currently around 93%. In 2021, Polyus became the first major Russian company to issue a Water Report, which discloses data on the Company's use of water resources.
In December, Polyus - along with other companies that acknowledge the importance of strong ESG practices - signed an agreement to create the National ESG Alliance. This inter-sectoral platform will stimulate dialogue and joint action on sustainable development across business, society and the state.
During the year, independent rating agencies MSCI, S&P Global and Sustainalytics confirmed or upgraded Polyus' ESG ratings. This speaks to their recognition of how the Company manages risks, supply chains, and water resources, as well as the comprehensive nature of its information disclosure and occupational health and industrial safety indicators.
In the current unpredictable circumstances, we are working hard to ensure stable supplies of materials and equipment for production. Polyus remains a reliable, attractive employer, committed to environmental and social responsibility, and to fulfilling its obligations to its employees, regions of operation and partners.
COVID-19
Our extensive testing, vaccination and boosting program - combined with the use of PPE and sanitization - ensured that the pandemic had no further impact on the continuity of operations in 2021. Herd immunity to COVID-19 across Polyus stood at 89% at the end of the year.
At some assets, such as Olimpiada and Blagodatnoye, this was close to 100%.
Strategic | Sustainability | Corporate | Financial | Additional |
report | review | Governance | statements | information |
Overview
STRATEGIC REPORT
03 Polyus at a glance
04 Our investment case
09 Climate change management
10 Business model
11 Stakeholder engagement
12 Key performance indicators
13 Risk management
20 Operational review
29 Financial review
SUSTAINABILITY REVIEW
40 Our approach to sustainability
44 Ethics and human rights
46 Human capital
48 Health and Safety
50 Environmental stewardship
52 Energy and climate change
54 Local communities
CORPORATE GOVERNANCE
56 The Board
58 Composition of the Board
59 Senior Management
60 Anti-corruption efforts
60 Board Committees
FINANCIAL STATEMENTS
65 Independent auditor's report
67 Consolidated statement of profit or loss
67 Consolidated statement of comprehensive income
68 Consolidated statement of financial position
69 Consolidated statement of changes in equity
70 Consolidated statement of cash flows
71 Notes to the consolidated financial statements
ADDITIONAL INFORMATION
92 Statement of the Board of Directors on Complience
111 Report on payments to governments
111 Cautionary statement
111 Contacts
OUR PURPOSE
We are committed to unlocking the potential of our high-quality operating assets and greenfield projects. We will accomplish this by evolving into the most efficient, responsible and advanced business at the forefront of the industry.
OUR KEY FIGURES
Climate change management
Page 9
Our investment case
Page 4
Business model
Page 10
At a glance
Polyus large-scale production assets are spread across Eastern Siberia and the Russian Far East, with principal operations in Krasnoyarsk Territory, Irkutsk and Magadan Regions and the Republic of Sakha (Yakutia).
WHERE WE OPERATE
Our large-scale production assets are spread across Russia's richest gold mining provinces in Eastern Siberia and the Far East. Our principal operations are located in Krasnoyarsk Territory, the Irkutsk, Magadan, and Amur Regions, and the Republic of Sakha (Yakutia).
OUR VALUES
Polyus' values are the guiding work principles for all our employees, and motivate our
Company to achieve high level of performance.
Our key values comprise:Efficiency CooperationSustainability Safety
OLIMPIADA
• Location: Krasnoyarsk Territory
• 41% of total output
• 43% of adjusted EBITDA
• $369/oz TCC
• 3,381 employees
• 15mt per annum processing capacity
Page 21
BLAGODATNOYE
• Location: Krasnoyarsk Territory
• 16% of total output
• 16% of adjusted EBITDA
• $367/oz TCC
• 1,571 employees
• 9.0mt per annum processing capacity
Page 22
VERNINSKOYE
• Location: Irkutsk Region
• 11% of total output
• 11% of adjusted EBITDA
• $358/oz TCC
• 1,188 employees
• 3.6mt per annum processing capacity
Page 22
KURANAKH
• Location:
Republic of Sakha (Yakutia)
• 9% of total output
• 8% of adjusted EBITDA
• $569/oz TCC
• 1,744 employees
• 7.8mt per annum processing capacity
Page 23
NATALKA
• Location: Magadan Region
• 19% of total output
• 19% of adjusted EBITDA
• $368/oz TCC
• 1,836 employees
• 12.4mt per annum processing capacity
Page 21
SUKHOI LOG
• Location: Irkutsk Region
• Exploration and verification drilling completed
• Feasibility study ongoing
• 115 employees
Page 24
Strategic | Sustainability | Corporate | Financial | Additional |
report | review | Governance | statements | information |
Our investment case
Strong culture, committed people
We aim to deliver value for all our stakeholders.
Every one of our people has a part to play in fulfilling that objective; our employees are the key drivers of our success.
Turning ideas into action
Great ideas can improve processes and workplaces - and every employee can make a difference at Polyus through our proposal system. Each year we hold a centralized tender to solicit ideas, which can be submitted either on paper or electronically. The most popular themes involve suggestions for improvements to working conditions, productivity and safety.
Number of KAYZEN1/A32 proposals accepted (2021)
Kayzen practice is an instrument of the production system of Polyus that enables every employee to make improvement proposals in any sphere of business. In 2021, to make submission easier, we created the "Polyus of Ideas" portal - and received proposals from 4,142 employees. The portal contains a database of initiatives implemented through the system, so that employees can learn from the experience of other business units and replicate their colleagues' ideas.
In the last six years, Polyus has implemented more than 36,000 suggestions.
PerformanceImproving work conditionsQualityEcologyExpensesSafety
1 Kayzen - fast-implemented continuous small proposals for improvement of the performance and elimination of losses.
2
A3 - similar to Kayzen proposals that have a quantifiable economic effect.
In the last six years, Polyus has implemented more than 36,000 suggestions
Our culture is established right at the top - and our board comprises a potent blend of experience, knowledge, independence and insight. It works with a constructive, collaborative way that influences the rest of the business.
We work hard to support and develop all our people, aiming to provide them with rewarding careers and a safe environment wherever they work in the Company. We have a particular focus on growing our talent pipeline, promoting from within and increasing the diversity of our workforce.
Team
Industry position and asset quality
Growth prospects
Sustainable development
Operational excellence and technological advancement
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Polyus Gold International Limited published this content on 29 April 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 April 2022 16:17:03 UTC.