Polymetal International plc

Good day and welcome to the PolyMetal FY 2021 results conference call. This call is not for media. If you are a media representative, please disconnect now. At this time, I'd like to turn the conference over to Vitaly Nesist. Please go ahead, sir.

Ladies and gentlemen, welcome to the conference call on PolyMetal International results for year 2021. For the obvious reasons, we will be concentrating not so much on the historical results, but on the present situation. We are all at power metal shocked and appalled by the war going on in Ukraine. The related economic and political developments are likely to require a lot of management efforts to maintain company performance. However, despite a wide range of uncertainties we will be working under in 2022 and maybe longer, it is our current intention to operate as normally as possible in order to preserve shareholder value, but also to address the needs and concerns of other stakeholders, including our employees and communities where we operate. Today's call will be structured differently compared with the traditional results calls. I will first brief you on the current situation that Palmetto finds itself in. Then I will go through the briefly financial highlights for 2021 and current outlook, and we will conclude with Q&A. Today, two language lines for questions will be available, both English, which will come first, and then Russian. In terms of the current situation, again, I would like to stress an unprecedented for the team level of uncertainty. However, presently, all of the operations are continuing normally. operating activities are continuing and the project execution is also ongoing. In terms of the financial and liquidity situation, the Central Bank of Russia has announced on Sunday that it will resume the domestic purchases of gold and silver bullion and We believe we have sufficient channels of sales from our Russian operations to ensure that we are both liquid and solid. In terms of the direct sanctions impact, so far we don't see any direct sanctions. sanctions impact. We believe that the sanctioned counterparties that we have dealt with can be discontinued and replaced, if needed, by non-sanctioned entities. In terms of the supply chain, we currently don't see any threat to operations as We so far haven't seen any sector-specific trade sanctions, and we also already for several years have backup plans to replace the imported consumables by domestic or Chinese consumables in case the sanctions will be expanded and will include the goods that are necessary for the continuation of our activities. Currently, the largest challenge that we expect to face in the coming months is the logistical challenge related to significant disruption of container ship service to and from Russia. The management is very busy evaluating different options. I would like to stress that This situation is not expected to have any impact on the current performance, given pretty significant stock levels, which we have accumulated during the COVID pandemic, but also because we have backup plans in terms of consumables and critical equipment. Now, let me conclude with the 2022 outlook. Again, the devastating war in Ukraine is likely, is certain to require significant management efforts to maintain our performance. We will do our best to serve the interests of all of our stakeholders while maintaining company values. The group reiterates the current production guidance of 1.7 million ounces of gold equivalent for the current year. Traditionally, production will be weighted towards second half due to seasonality at several operations. We do not expect that the scope of operational activities will change materially in the light of recent developments. We also don't expect that the current capital project advancement will change materially. I refer to the projects which are more than 20% completed. Still, the management is in the process of project review. Now, for the projects not completed by more than 20%, and the results of this review will be provided within four weeks of this call. Also, I'm forced to suspend both CAPEX and OPEX guidance for 2022, CAPEX mostly because of the potential changes to the new projects, and TCC and AIC guidance mostly due to the unpredictable path that the exchange rates and domestic inflation will take in 2022. Having reiterated production guidance and suspended cost guidance, I'm pleased to say that we maintain our commitment to adhere to the previously announced carbon footprint reduction trajectory, which calls for the reduction by 30% by 2030, and we continue to plan to release our long-term GAG reduction goals by the end of the year. And in terms of the outlook, last but not least, we currently plan to pay a regular annual dividend. And this will come for approval at the AGM at the end of April to be paid by the end of May. However, citing again the aforementioned uncertainties, the management and the board reserve the right to exercise judgment and discretion and to postpone or partially postpone or cancel the dividend if the political and sanctions situation changes significantly. So much for 2022 outlook. In terms of 2021 highlights, just several bullet points. The year was successful in terms of our production and project advancement results. We did our production guidance we advanced our projects on schedule despite very significant COVID related challenges. Total cash costs and all the sustaining costs were up significantly year on year by 15 and 18% respectively. And that was the combination of factors reflecting mostly high inflationary pressures, particularly in the capex. And then net earnings declined by approximately 15%, but still stood at about $900 million, mostly reflecting the higher costs that I talked about. CapEx was probably the biggest disappointment because we had to revise our capital guidance, CapEx guidance for the year a couple of times, mostly due to the significant and somewhat unforeseen pressures affecting global supply chains as an indirect consequence of the COVID pandemic. We also continue to invest in pre-stripping at the range of our projects, which, as we see now, will be extremely helpful in terms of weathering potential uncertainties and instability in the operating environment. Net debt increased through the year, and we paid $635 million of dividends, a record amount in the company's history. I would like to stress that the group generated very significant free cash flow in 2021, and although the net debt increased, that mostly represented a significant pace of capital investment in future production, which should maintain the company at our growth path going forward. I would also like to stress that we are ahead of our plan in terms of greenhouse gas emissions intensity reduction. we reduced it by 9% compared to 2019, mostly thanks to energy efficiency initiatives and the implementation of local and grid renewable energy sources. In terms of safety, last but not least, we are on the one hand satisfied that We didn't have any fatalities among company employees in 2021, although we regret to report that one of our contractors lost his life at war operation. We intend to continue to position ESG criteria front and center in terms of priorities and drivers for management compensation. in 2022. With this, I conclude my introduction. Please refer to the presentation available on the webcast, and you can ask questions both relating to my speech and to the presentation.

Thanks. Ladies and gentlemen, If you'd like to ask a question, you can do so by pressing star one on your telephones. That's star one if you would like to ask a question. We will now take our first question from Christian Agarwal from Citi. Please go ahead, the line is open.