Omolon Amursk POX Hub Khakanja Hub Khakanja Standalone Exploration Projects Exploration Standalone
Total Page:16
File Type:pdf, Size:1020Kb
Annual Report 2013 www.polymetalinternational.com Robust strategy RESILIENT PERFORMANCE Strategic report Introduction Polymetal International plc International Polymetal 2013 Report Annual > STRONG PROGRESS We have achieved the objectives that we set ourselves at the time of our London listing in 2011, and are now FOCUSED strongly positioned for the next stage of our development. AND RESILIENT report Strategic Our aim is to become the leading > STraTEGIC REPORT > GOVERNANCE 2 At a glance 74 Board of Directors precious metals mining group in Russia 4 Where we operate 75 Senior management 6 Performance highlights 76 Corporate Governance and the CIS, delivering sustainable value 8 Development focus 81 Audit and Risk Committee report 10 Operational focus 86 Directors’ report to all our stakeholders. 12 Financial focus 88 Remuneration report 14 Chairman’s statement 16 Chief Executive’s review Despite significant market volatility during 18 Business model > FINANCIAL STATEMENTS 19 Strategy update the year we remain strongly committed 22 Operating review 102 Directors’ responsibility statement 22 Overview 103 Independent auditor’s report to our strategy and business model, and 27 Dukat hub 106 Consolidated income statement 30 Omolon hub 106 Consolidated statement to our principles of capital discipline and 33 Amursk POX hub of comprehensive income 36 Albazino 107 Consolidated balance sheet 38 Mayskoye 108 Consolidated statement of cash flows the development of high-quality assets. 40 Khakanja hub 109 Consolidated statement of changes 42 Voro in equity 44 Varvara 110 Notes to the consolidated Combined with our focus on high standards 46 Standalone exploration projects financial statements 48 Sustainability of corporate governance and responsibility, 56 Financial review > 70 Risks and risk management APPENDICES we believe that this approach will enable 152 Reserves and resources 159 Glossary us to build on our strong track record and 162 Shareholder information continue to deliver above-average returns. 1 Strategic report Polymetal at a glance Polymetal International plc International Polymetal 2013 Report Annual ResILIent > ProDUCTIon > KEY FINANCIAL FIGUres > Asset portfoLIO (as at 31 December 2013) perforMANCE Production structure GE 1,707 598 54 10,650 1 2 Koz Sales revenue (US$ million) Adjusted EBITDA – Licences Total licence area (km ) 1, 2 8 2 Gold equivalent 2012: US$1,854 million total (US$ million) What sets us apart 2012: 1,063 Koz 2012: US$932 million Strong capital discipline As demonstrated in 2013, we are able to react dynamically 6 to the changing market environment. This has allowed Mining operations us to maintain free cash flow generation and sustain +21% 745 13 8 report Strategic a significant dividend stream to our shareholders. Increase of gold equivalent Total cash cost Free cash flow production over 2012 (US$/GE oz)2 (US$ million) ■ Gold 63% 3 High-quality assets 2012: US$690/GE oz 2012: US$138 million > ReserVES AND ResoURCES Our high reserve grade supports relatively low cost profile ■ Silver 35% and lower capital spending per ounce, which taken together ■ Copper 2% drive better returns on invested capital and resilience to price shocks. 1 The Company defines adjusted EBITDA (a non-IFRS measure) as profit for the period adjusted for depreciation expenses, rehabilitation expenses, write-downs of inventory Moz Moz to net realisable value, share-based compensation, listing expenses, additional mining 13.3 16.7 How we’ve delivered tax, penalties and accrued interest, income on disposal of subsidiaries, bargain purchase Ore reserves (GE oz) Mineral resources (GE oz) gains, foreign exchange gains/(losses), changes in fair value of derivatives, changes We beat our original production guidance for the second in fair value of contingent considerations, finance income, finance costs, and income consecutive year and delivered 1.28 Moz (2012: 1.06 Moz) tax expenses. Adjusted EBITDA margin is adjusted EBITDA divided by revenue. See Note 5 to the financial statements. of gold equivalent in 2013, up 21% year-on-year and 7% 2 Total cash costs comprise cost of sales of the operating assets (adjusted for depreciation above original expectations. This robust achievement expenses, rehabilitation expenses and write-downs of inventory to net realisable value) and general, administrative and selling expenses of the operating assets. Gold equivalent was driven by the successful ramp-up of our key growth 3.7 g/t 3.7g/t sales volume is calculated based on average realised metal prices in the relevant period. projects, Amursk POX and Mayskoye, and exceptional Total cash cost per gold equivalent ounce sold is calculated as total cash costs divided Average reserve grade Average resource grade by total gold equivalent unit ounces sold. (GE g/t) (GE g/t) operational delivery at the Dukat hub. 3 Mineral resources and ore reserves are estimated in accordance with the JORC Code (2012). Mineral resources are additional to ore reserves. Our achievements > 2011 > 2012 > 2013 Record production volume Strong operational performance Mayskoye mine started Polymetal achieved an all-time record Metal sales for the full year exceeded and ramped up > the FUTUre production volume with production for both gold and silver. The Mayskoye plant was started up in April We are fully on track to meet Polymetal produced and achieved design capacity by Q4. This production guidance for 2014 810 Koz marked the completion of a major investment of 1.3 Moz total gold equivalent, cycle to bring the second generation of assets increasing to 1.35 Moz in 2015. of gold equivalent. This strong performance 1,0 6 3 K o z into production, and the first 48 Koz of gold was bolstered by: of total gold equivalent, up 31% compared to were sold to off-takers. In 2014, we expect total cash costs • de-bottlenecking of the Omsukchan 2011 and exceeding original guidance by 6%. A Doré bar at Voro of US$700-750/gold equivalent concentrator (Dukat hub); New dividend policy in action (‘GE’) oz, all-in sustaining cash costs • the expansion of the Kubaka plant; and Resource base increased A total of US$0.82 per share was paid of US$975-1025/GE oz, and capital There was a dramatic increase in the resource in dividends in 2013, resulting in an industry- • mining and processing commencing expenditure of US$250 million base at Albazino. Successful exploration Production guidance exceeded leading dividend yield. The increased dividend at Albazino. (including exploration and has also identified potential new growth Polymetal exceeded its original annual Amursk POX plant payments were underpinned by commitment capitalised stripping). assets at Kutyn and Svetloye. As a result, production guidance for the second to capital discipline and strong free cash Premium listing on the LSE total gold equivalent resources grew by 35%. consecutive year and produced flow generation. Polymetal was admitted to the London Stock Exchange in November and included First operating POX plant in the Increased dividend pay-out De-stockpiling on track in FTSE 100 listing. Former Soviet Union launched Polymetal’s inaugural dividend payment, 1,282 Koz Progress made with scheduled stockpile 1.4 Moz The first operating pressure oxidation plant in respect of 2011, was made in June 2012. of gold equivalent, up 21% year-on-year. reductions and with total gold equivalent total gold equivalent in 2016 (POX) in Russia’s gold industry, Polymetal’s A new dividend policy was adopted, sales exceeding production. De-stockpiling Amursk POX was started up and produced raising the payout ratio to 30% and Amursk POX ramp-up was driven mainly by the Dukat hub its first gold in April 2012. introducing an annual consideration successfully completed and Albazino. of special dividends in order to ensure The Amursk POX plant delivered a full value is delivered to shareholders. quarter at design throughput and recovery Net debt decreased (averaging 93% in Q4). This is an important Positive cash flows resulted in a stable net strategic milestone for Polymetal, which debt at US$1,045 million, driven by continued now possesses a unique competitive strong operating cash flow and decreased 2/3 Listing on the London Stock Exchange advantage in the FSU. capital spending. Strategic report Where we operate Polymetal International plc International Polymetal 2013 Report Annual HIgh-QUALITY > MAYSKOYE > OMOLON HUB Bringing our newest mine Delivering the full up to speed potential of the processing hub concept 850 Assets Mayskoye concentrator Ktpa 850 Kubaka CIP and Ktpa Merrill-Crowe plant Mayskoye 1.3 Birkachan HL plant Mtpa We have a growing portfolio Birkachan, Sopka, Tsokol, Dalneye of high-quality assets, supported > DUKAT HUB by a robust exploration programme. Oroch, Prognoz Further growth at Russia’s largest silver mine report Strategic Pyatinakh, Burgali, 1.6 Dukat concentrator Adygaya Mtpa Map key 400 Lunnoye CIL plant Ktpa Hub Dukat, Goltsovoye, > Voro Lunnoye, Arylakh Operating mines Sustaining high performance Olcha and margins Development projects 900 HL Magadan + Krasin, Zvezdny, Ktpa Kamenisty Seaport 900 CIP Ktpa Standalone mining operations Voro Latvia Lithuania Key exploration projects South Voro, Volchansky Head office Belarus + City/town + Russia > AMUrsK POX HUB St. Petersburg > KhAKANJA HUB Unparalleled competitive Ukraine Developing new and cost- Moscow + Ekaterinburg advantage in the region efficient ore sources Khabarovsk + 500 Amursk POX plant 600 Merrill-Crowe plant tpd processing concentrate Ktpa from Albazino Khakanja, Avlayakan,