Information Document
Total Page:16
File Type:pdf, Size:1020Kb
DISCLAIMER IMPORTANT NOTICE: NOT FOR PUBLICATION, DISTRIBUTION OR RELEASE, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES, CANADA, AUSTRALIA, JAPAN, SOUTH AFRICA OR TO ANY PERSON IN ANY OF THOSE JURISDICTIONS OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION IMPORTANT: You must read the following disclaimer before continuing. The following applies to the attached document following this page, and you are therefore advised to read this carefully before reading, accessing or making any other use of the attached document. In accessing this document, you agree to be bound by the following terms and conditions, including any modifications to them any time you receive any information from us as a result of such access. NOTHING IN THIS DOCUMENT CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN ANY JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE SECURITIES REFERRED TO HEREIN HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE SECURITIES ACT, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTION AND THE SECURITIES MAY NOT BE OFFERED, PLEDGED, SOLD OR OTHERWISE TRANSFERRED, EXCEPT (1) WITHIN THE UNITED STATES TO A PERSON THAT THE HOLDER AND ANY PERSON ACTING ON ITS BEHALF REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” WITHIN THE MEANING OF RULE 144A IN RELIANCE ON THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A OR (2) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR 904 OF REGULATION S UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. You are reminded that this document has been delivered to you on the basis that you are a person into whose possession this document may be lawfully delivered in accordance with the laws of the jurisdiction in which you are located and you may not, nor are you authorised to, deliver this document to any other person. No representation or warranty, express or implied, is made or given by or on behalf of the Company (as defined below) or any of its subsidiary undertakings, or any of such person’s directors, officers or employees, or any other person, as to the accuracy, completeness or fairness of the information or opinions contained in this document and, save as expressly set out below, no responsibility or liability is assumed for any such information or opinions. Information Document This document is an Information Document and comprises information in relation to Public Joint Stock Company Polyus (the “Company”) and its subsidiaries. This Information Document does not, and is not intended to, constitute an offer in the Russian Federation or anywhere else and does not constitute an advertisement of any securities in the Russian Federation or in any other jurisdiction. It or any information contained herein does not contain or constitute an offer, or an invitation to make offers, sell, purchase, exchange or transfer any securities or financial instruments in the Russian Federation or any other jurisdiction or to the benefit of any Russian person or any person in the Russian Federation or any other person. Distribution of this document does not constitute a placement and/or public circulation of foreign securities or other financial instruments in the Russian Federation or anywhere else. Any non-Russian securities referred to herein have not been and will not be admitted to placement and/or public circulation in the Russian Federation and may not be offered to any person in the Russian Federation except as permitted by Russian law. The appendix to this document comprises a part of this document. The Company is responsible for the information given in this Information Document. The Company declares that, having taken all reasonable care to ensure that such is the case, the information contained in this Information Document is, to the best of its knowledge, in accordance with the facts and contains no omission likely to affect its import. INFORMATION DOCUMENT DATED: 5 June 2017. PART I: BUSINESS Overview of the Group The group comprising the Company and its consolidated subsidiaries (the “Group”) is the largest gold mining group in the Russian Federation (“Russia”) by both production and reserves, according to Metals Focus’ Quarterly Gold Mine Cost Service report dated 24 February 2017. The Group is also the eighth largest gold company globally in terms of production, based on the Metals Focus Quarterly Gold Mine Cost Service report and publicly available reports, and is the second largest gold company globally in terms of attributable gold reserves (excluding Sukhoi Log), based on the latest reserves and resources statements of other gold mining companies. Since 2007, the Group’s gold production has increased at a compound annual growth rate (“CAGR”) of 6 per cent to 1,968 thousand ounces in 2016, principally as a result of expanding Olimpiada; launching production at the Blagodatnoye, Titimukhta and Verninskoye deposits; and introducing targeted optimization and debottlenecking projects at each of its mines. The Group is committed to the Russian market and operates a portfolio of four core producing open pit mines with a major near-term greenfield development project. Its principal assets are located in the Krasnoyarsk, Irkutsk, Magadan and Republic of Sakha (Yakutia) regions of Russia. The Group’s mineral base as classified and reported according to the JORC Code includes 71 million ounces of Proved and Probable Ore Reserves and 193 million ounces of Measured, Indicated and Inferred Mineral Resources (including 58 million ounces of Inferred Mineral Resources for Sukhoi Log on a 100 per cent basis) as at 31 December 2016. Based on attributable 2016 production volumes and attributable Proved and Probable Ore Reserves, the Group has an average mine life of approximately 37 years. In 2016, the Group had total gold sales of US$2,429 million, total revenue of US$2,458 million and profit for the year of US$1,445 million, and, as at 31 December 2016, total assets of US$5,666 million and a total equity deficit of US$414 million. The Group’s Adjusted Earnings before Interest, Taxes, Depreciation and Amortisation (“Adjusted EBITDA”) was US$1,536 million in 2016. The Group is well-positioned to maintain its position as one of the lowest-cost producers globally with total cash cost per gold ounce sold (“TCC/oz”) of US$389/oz and average all-in sustaining cost per gold ounce sold (“AISC/oz”) of US$572/oz in 2016, placing the Group in the first decile of the 2016 global cost curves according to Metals Focus’ Quarterly Gold Mine Cost Service report. According to Bloomberg Intelligence, the Group is also one of the most profitable gold producers globally, with an Adjusted EBITDA margin of 62 per cent in 2016. Going forward, the Group is aiming to increase production from approximately 2.0 million ounces in 2016 to approximately 2.1 million ounces in 2017, approximately 2.35-2.4 million ounces in 2018 and 2.8 million ounces by 2019 (which would make the Group the fourth largest gold company globally in terms of production, based on production volumes for the largest gold producers as estimated by Wood Mackenzie), while keeping TCC below US$400/oz. This anticipated increase is expected from the planned commissioning of the Natalka project, which is currently under construction, at the end of 2017, and further anticipated production increases at existing operational assets identified in the Strategic Asset Review Program carried out in 2014 and 2015 with respect to the development of low- risk, low-cost brownfield projects. Approximately 420-470 thousand ounces per annum (average over the life of mine) of targeted incremental gold production from 2018 onwards is expected from the anticipated commissioning of Natalka at the end of 2017, while further gold production growth is expected from brownfield expansion projects at the Group’s core assets, including reconfiguration of Olimpiada’s Mill No. 1 to process higher-grade ore from the Olimpiada deposit; productivity increase at the Blagodatnoye, Verninskoye and Kuranakh mills; introduction of heap leaching at Blagodatnoye and Kuranakh; and other optimization initiatives. The Group participated in the auction announced by the Russian government on 2 December 2016 (Decree of the Government of the Russian Federation No. 2550-r dated 30 November 2016) for the Sukhoi Log deposit, one of the 30 largest gold mineral Page | 1 deposits globally in terms of reserves according to Metals Focus’ Gold Focus 2016 report, with total reserves estimated by Russian state authorities of 62.8 million ounces with an average grade of 2.1 g/t (53.3 million ounces, with 2.0 g/t for open pit mining and 9.5 million ounces having a grade of 2.8 g/t for underground mining), classified according to the Russian Standards set by the Russian State Commission for Reserves (Gosu darstvennayaKomissiapoZapasam) (the “GKZ”) based on publicly available information, including data derived from Decree of the Government of the Russian Federation No. 2550-r dated 30 November 2016. The auction was held on 26 January 2017 and the RUB 9,406,435,500 bid of LLC SL Gold (“SL Gold”), the Company’s indirect subsidiary established to participate in the auction, was highest. On 21 February 2017, further to the Governmental decree No. 269-r dated 15 February 2017 confirming the results of the auction, the Russian Federal Agency for Subsoil Use (“Rosnedra”) issued a license for the development of the Sukhoi Log deposit to SL Gold. The acquisition is expected to be a significant contributor to the Group’s long-term development strategy.