PETROPAVLOVSK PLC FY 2017 Results Presentation 28 March 2018

Transcription

1 PETROPAVLOVSK PLC FY 2017 Results Presentation 28 March 2018

2 Cautionary and Forward-looking Statements Some statements contained in this presentation or in documents referred to in it are or may be forward-looking statements, including references to guidance. Such statements reflect the Company s current views with respect to future events and are subject to risks, assumptions, uncertainties and other factors beyond the Company s control that could cause actual results to differ from those expressed in such statements. Although the Company believes that such forward-looking statements, which speak only as of the date of this presentation, are reasonable, no assurance can be given that they will prove to be correct. Therefore, you should not place undue reliance on these statements There can be no assurance that the results and events contemplated by the forward-looking statements contained in this presentation will, in fact, occur. The Company will not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events, circumstances or unanticipated events occurring after the date of this presentation, except as required by law or by any appropriate regulatory authority. Nothing in this presentation or in documents referred to in it should be considered as a profit forecast. The past performance of the Company and its securities is not, and should not be relied on as, a guide to the future performance of the Company and its securities This presentation does not constitute, or form part of or contain any invitation, recommendation or offer to any person to underwrite, subscribe for, buy, sell, otherwise acquire, exchange or dispose of any shares or securities in the Company or advise persons to do so in any jurisdiction, including, but not limited to, the Russian Federation, nor shall it, or any part of it, form the basis of or be relied on in any connection with or act as an inducement to enter into any contract or commitment therefore or engage in any other investment activity. In particular, this presentation and the information contained herein are not an offer of securities for sale in the United States. This presentation does not constitute an advertisement of any securities in the Russian Federation No reliance may be placed for any purpose whatsoever on the information or opinions contained in this presentation or on its completeness and no liability whatsoever is accepted for any loss howsoever arising from any use of this presentation or its contents or otherwise in connection therewith. The development and production plans and estimates set out herein represent the current views of the Company's management. The Company s Board reviews the production estimates on an ongoing basis. All planning is subject, inter alia, to available funding and capital allocation decisions English law and English courts will have exclusive jurisdiction over any disputes arising from or connected with this presentation 2

3 FY 2017 Highlights

4 FY 2017 Achievements Increased production, positive cash flows and optimised debt profile, development on schedule Gold sales +10% yoy at a higher price, helped to drive revenues Revenues of US$587m, +9% yoy EBITDA of US$197m, -2% yoy Profit for the Period of US$41m, +31% yoy Net cash from Operating Activities (1) of US$124m, +235% yoy Costs impacted by grades, recoveries, input cost inflation + stronger RUB FX Growth projects: full scale POX development, targeting Q launch Improved debt capital terms, maturity + cost, lower YE Net Debt +6% increase (2) in Total JORC Mineral Resources to 20.9Moz TCC: US$741/oz, +12% yoy AISC: US$963/oz, +19% yoy (underground sustaining capex, stripping, central admin) POX: construction progress currently at 80% Malomir flotation: Q commissioning Underground: Pioneer + Malomir now fully operational US$500m of guaranteed notes issued in Q4, bank loans repaid, production schedule aligned with development plans De-risking of working capital via gold sales agreement with Gazprombank (96Koz) YE 2017 Net Debt down to US$585m 70% of new R&R additions are non-refractory, 16% is underground Ongoing exploration: significant prospectivity remains at Albyn, Malomir, Pioneer for additional discoveries 4 (1) Primarily due to a decrease in working capital (2) Before depletion

5 FY 2017 Financials

6 FY 2017 Financial Highlights Profit for the period +31%, Net cash from operating activities +235% Units Change Gold production 000oz % Gold sold 000oz % Group revenue US$m % Average realised gold price US$/oz 1,262 1,222 +3% Total average cash costs (TCC) US$/oz % All-in sustaining costs (AISC) US$/oz % Operating profit US$m % Underlying EBITDA US$m (2%) Profit before tax US$m % Profit for the period US$m % Net cash from operating activities US$m % Net Debt (as at 31 Dec) US$m (585.1) (598.6) (2%) 6 Note: Operating profit includes the Group s share of an estimated partial reversal of previous impairment losses on IRC PPE in relation to the K&S mine, amounting to 31.1% of c.us$130m Profit for the period reflects an increase in operating profit partially offset by the US$29.2m effect of deferred taxation

7 7 Evolution of Hard Rock Cash Costs 2017 vs TCC/oz +12% in 2017, primarily due to changes in grades / recoveries + effect of a stronger RUB, partially mitigated by lower unit costs of production US$15/oz US$1/oz US$69/oz US$46/oz US$37/oz US$2/oz US$81/oz US$660/oz US$741/oz TCC FY2016 Lower costs Mining tax concession Other taxes Change in grades / recoveries FX Deferred stripping Co-product effect TCC FY2017

8 TCC and AISC Mine by Mine Group AISC +19% yoy, due to underlying increase in TCC, sustaining capex, exploration spend, prospective stripping and central admin Total Cash Costs (TCC, US$/oz) All In Sustaining Cash Costs (AISC, US$/oz) US$m Comment Sustaining exploration capex 16.1 Pioneer, Malomir, Albyn Sustaining u/ground mine capex 8.4 Pioneer, Malomir Planned tailings expansion 7.4 Pioneer, Malomir, Albyn Other sustaining capex 9.1 Across all mines 1,236 1,367 1, ,029 1, % +25% +13% -7% +12% +38% +30% +27% -0% +19% Pokrovskiy Pioneer Malomir Albyn FY TCC Pokrovskiy Pioneer Malomir Albyn FY AISC a 2017a Change yoy

9 Precious metals operating cash expenses 2017 vs Cash expenses increased 18% to US$313m in 2017, due to a stronger RUB + inflation of some RUB denominated costs, particularly energy FY2016 Precious Metals Operating Cash Expenses (1) Before movement in ore stockpiles, GIC and bullion in process of US$40.5m FY2017 Precious Metals Operating Cash Expenses (2) Before movement in ore stockpiles, GIC and bullion in process of US$19.2m Consumables + Consumables Other + Other Materials Materials 37% 37% Labour 21% Fuel 15% Other 10% Consumables + Consumables Other + Other Materials Materials 34% 37% Labour 23% Fuel 14% Other 7% External Services 8% Electricity 9% External Services 12% Electricity 10% = US$266.0m (1) = US$313.4m (2) 9 Note: avg. RUB:US$ FX rate FY2017 = 58.3, FY 2016 = % yoy change

10 10 FY2017 Development and Exploration Spend Total FY2017 exploration + development capex = US$88.1m FY2017 Development Spend (US$m) Comment US$66.2m Overall POX development spend as at 31 Dec 2017 = 12.7 (1) c.us$233m US$33.2m was spent on POX in 2017 c.us$62m allocated to POX in 2018 c.us$6m allocated to Malomir flotation in POX Pioneer Malomir Albyn PPE Upgrade (1) Includes US$8.1m of flotation and tailing dam related expenditure FY2017 Exploration Spend (US$m) US$21.9m Pioneer Albyn Malomir

11 Debt Profile Net debt at a 5 year low, majority of existing debt long term in nature (fixed income) Convertible Bond + Guaranteed Notes US$100m convertible bond issue - 9% coupon, paid quarterly - 5 year maturity (Mar 2020) Bank Debt US$4m in short term bank debt - Exchange price: GBP (2) US$500m guaranteed notes issue %, paid semi-annually - 5 year maturity (Nov 2022) Debt Composition Notes Issue 83% Convertible Bond 17% Bank Debt 1% 11

12 2016 to 2017 Change in Net Debt Net Debt down c.50% from a peak of c.us$1.2bn at end of Q1 2013, to under US$600m as at YE 2017 US$m As at 1 Jan 2017 Net cash from generated operating by operating activities activities before before w/c working capital changes Decrease in w/c Income tax paid Capital expenditure Issue of Notes (net of transaction cost) Interest accrued Bank debt refinancing Other As at 31 Dec Note: figures exclude IRC

13 FY 2017 Operational Review

14 Operations Overview Strong performance across all assets, well positioned for Production by Mine (incl. FY 2017 TCC/oz) 162Koz (37%) US$791/oz 31Koz (7%) US$1,236/oz (1) GIC = gold in circuit Pioneer Pokrovskiy 66Koz (15%) US$929/oz Albyn 182Koz (41%) US$541/oz Malomir Operational Highlights Gold production +10% at 440Koz, as per guidance - Strong performance from Pioneer + Albyn - Lower grades + recoveries vs (Pokrovskiy, Pioneer, Malomir), due to more refractory nature of ores mined - Implementation of resin treatment facility to improve operational efficiencies + GIC (1) Underground at Pioneer + Malomir now fully operational - Initial development issues resolved, no material impact on production - Malomir producing at full capacity, Pioneer to ramp up in 2018 Pokrovskiy mine closed - Work under way to transform site into key component of the POX Hub POX set to unlock c.4moz of refractory reserves - Construction progress at 80%, on schedule for Q launch Exploration success = R&R uplift Moz of Resources added - 70% of additions non-refractory, 16% underground high grade - New material helps de-risk / smooth production profile during final stages of development

15 Development Update

16 POX Hub Overview Strategically positioned Excellent location Well established infrastructure 10km from Trans-Siberian Railway Access to ample hydropower Milling facilities and skilled workforce Viable hub for processing third party ore Yakutia Malomir (670km from POX hub) Khabarovsk Pokrovskiy POX Hub Pioneer (40km from POX hub) Albyn Lime Deposit Zabaykalsk 16 Operating Mine Underground POX Analytical Labs Hydro Plant CHINA Blagoveschchensk Pilot POX Plant EAO

17 17 POX Hub Path to Production POX commissioning progressing on time / budget for Q launch, with ramp up to commercial production throughout 2019

18 Underground Mines Overview NE Bakhmut (Pioneer) + Quartzitovoye (Malomir) Current JORC R&R Pioneer 0.63Moz of Resources inc g/t of Reserves Malomir 0.30Moz of Resources inc g/t of Reserves Mine life 5 yrs + Underground development completed ,646m 3,084m Production Started 2017, 2.78g/t Started 2017, 8.03g/t Ramp up In the process of ramping up to c.200ktpa, full capacity expected in H Mine now operating at full capacity c.200ktpa 2018 expected grade Upside c.3.7g/t Grade to improve to 5 6g/t from 2019 Production upside from NE Bakhmut down dip + strike extensions, Andreevskaya + Nikolaevskaya zones 2018 exploration: to add to underground R&R c.6.3g/t Exploration upside at down deep extensions of Quartzitovoye zone 18

19 Exploration Update

20 Track Record Of Resource Growth Ongoing exploration added +6% to the Group s JORC Resources in 2017 (1) c.20.2moz of JORC Resources including c.8.0moz of Reserves c.1.2moz Au (+6%) increase in Resources across the Group s assets, of which c.70% non-refractory (1) 35Moz 30Moz 25Moz Moz 15Moz 10Moz 5Moz Moz a 2009a 2010a 2011a 2012a 2013a 2014a 2015a 2016a 2017a Refractory Resources Non-Refractory Resources Depletion + Disposals 20 (1) 0.67Moz Au (c.8%) increase (before depletion) in Reserves and 1.17Moz Au (c.6%) increase (before depletion) in Resources

21 2017 Exploration Objectives + Results Exploration work yielded encouraging near + short term results Objectives 2017 Results Near term: boost non-refractory open pit + underground production Near term non-refractory discoveries Pioneer Discover, explore, prepare to mine new non-refractory reserves for open pit + underground mining Albyn Expand + improve R&R base of satellite deposits ahead of main pit depletion in 2019 Malomir Exploration to support sustainable underground operations at Quartzitovoye Mid term: add high quality refractory + non-refractory R&R Pioneer Discover + explore high grade refractory reserves for both open pit + underground mining Albyn Identify new satellites, potentially suitable for mining in the short or mid term Pioneer Katrin: new non-refractory deposit explored, first JORC R&R established, open pit production started NE Bakhmut 2: further non-refractory open pit + underground R&R discovered, open pit production to start 2018 Andreevskaya: new underground Reserves established, production possible from 2019 Albyn Elginskoye: Reserves increased from c.1.2 to 1.5Moz Unglichikan: Resource increased from c.0.8 to c.1.1moz Malomir New high grade pay shoot discovered Mid-term discoveries Pioneer Nikolaevskaya: new high grade pay shoot discovered, maiden Reserves for underground mining Albyn Sukholozskiy zone: high grade exploration results Ulgen: early stage exploration suggests potentially large Albyn satellite target

22 Exploration Objectives Building on 2017 exploration success Pioneer Katrin / NE Bakhmut 2: new open pit Reserves NE Bakhmut 2 / Andreevskaya / Nikolaevskaya: new underground Reserves Sosnovaya license: promising early stage exploration Albyn results Sukholozhskiy: high grade drill intersections Unglichikan / Elginskoye: expansion of Reserves Malomir New high grade pay shoot discovered 2017 Results 2018 Objectives Pioneer (2018 exploration budget US$8m) Katrin / Alexandra-Shirokaya / Perspektinaya: continue to explore non-refractory resources for open pit mining Nikolaevskaya / NE Bakhmut / Andreevskaya: continue deep drilling Sosnovaya / Alkagan-Adamovskaya: early stage blue-sky exploration Albyn (2018 exploration budget US$7m) Exploration of underground mining targets below Albyn pit Exploration aiming on high grade resource for open pit mining at satellite targets Malomir (2018 exploration budget US$1m) Quartzitovoye: continue to support sustainable underground mining operations New licences - exploration portfolio expansion Plans to bid for 5 new exploration licenses located near Pioneer, Malomir + Tokur projects at government auctions

23 Outlook

24 FY 2018 Outlook We enter 2018 in a strong position to complete the transition to a miner capable of realising the significant value of our assets Priorities For 2018 Leverage our substantial refractory gold resource base while optimising our non-refractory resources Focus on producing profitable gold oz, maximising cash generation from operating mines and enhance open pit production, complemented by a gradual ramp up of higher grade underground operations at Pioneer + Malomir The POX Hub, a top priority for management in 2018, is at the core of our growth prospects 2018 Guidance Production Koz: includes open pit, underground + maiden POX Hub output Costs Capex TCC: US$ /oz, based on a RUB:US$ FX of 58:1 AISC: US$ /oz, helped by lower sustaining capex + lower central admin US$105m: US$62m POX + US$6m Malomir flotation / tailings + US$10m underground development + US$12m Pioneer / Albyn tailings + US$15m exploration activity 24 Balance Sheet Strength + Flexibility Outstanding forward sales totalling Forward gold sales agreement (96Koz) provides greater flexibility in managing w/c

25 25 Appendix

26 Operations Overview Group Production Summary 26 Mining Units FY 2017a FY 2016a Total material moved m ,539 61,947 Ore mined t ,990 10,798 Average grade g/t Processing Units FY 2017a FY 2016a RIP Total milled t ,620 16,166 Average grade g/t Gold content Koz Recovery rate % 80% 86% Gold recovered Koz Heap Leach Ore stacked t 000 1,250 1,141 Average grade g/t Gold content Koz Recovery rate % 50% 51% Gold recovered Koz 9 9 TOTAL gold production Koz Gold sales Koz Costs Units FY 2017a FY 2016a TCC US$/oz AISC US$/oz

27 Albyn FY 2017 Operating Results Our largest producing mine with a 100% non-refractory defined resource base, with a largely under explored licence area 5.0Mt Ore Mined 5.3Mt Total Milled 4.7Mt 4.6Mt 2017 Performance Production +4% vs Consistently high plant recoveries of 90%+ Elginskoye + Unglichikan R&R expanded, extending Albyn mine life Processed Grades 1.3g/t 1.2g/t Production 182Koz 174Koz 2018 Outlook Production expected to be marginally higher due to slightly higher grades Drilling to take place below Albyn pit, to model + assess underground potential Continued exploration at Unglichikan + Afanasevskoye to further expand nonrefractory R&R base + subsequent mine life 27

28 Pioneer FY 2017 Operating Results Pioneer is one of the Group s most prospective assets, providing near term growth from its underground non-refractory exploration + development potential 3.3Mt Ore Mined Processed Grades 0.8g/t 8.5Mt 0.7g/t Total Milled 6.7Mt 6.8Mt Production (1) 133Koz 162Koz 2017 Performance Production +21% vs Underground mining commenced in June, with 2.78g/t mined in 2017 Production levels increased despite lower grades + recoveries, driven by successful measures to release gold in circuit Underground R&R expanded from 0.36 to 0.63Moz Non-refractory open pit Reserves increased from 0.98 to 1.10Moz despite depletion 2018 Outlook Pioneer production expected to be at same level as in 2017 Underground will continue ramping up to full capacity, with Pioneer expected to produce ore at an avg 4-5g/t towards year end Currently 263Koz of underground reserves, with significant potential to increase in the course of further exploration works planned for (1) Includes production from heap leach of 6.1Koz (2016: 5.3Koz)

29 Malomir FY 2017 Operating Results Preparation under way for large scale refractory mining to unlock c.6moz of refractory R&R Ore Mined 1.5Mt 2.8Mt Total Milled 3.0Mt 3.4Mt 2017 Performance Production +20% vs. 2016, driven by +80% increase in ore mined, +13% increase processed ore volumes Underground mine development at Quartzitovoye completed, with the mine at full production by YE Stage 1 flotation plant completed, awaiting commissioning in Q Processed Grades 0.9g/t 0.9g/t Production 55Koz 66Koz 2018 Outlook Production expected to increase in 2018 due to addition of gold from refractory ores. Nonrefractory production will be as in 2017 Commence refractory concentrate production Maintain underground mining at a steady state output of c.200ktpa of ore 29

30 Pokrovskiy FY 2017 Operating Results Having produced more than c.2.0moz since 1999, work is well under way to convert Pokrovskiy into the POX Hub, to support the Group s next phase of growth 1.0Mt Ore Mined 1.5Mt Total Milled 1.8Mt 1.8Mt 2017 Performance Production as budgeted RIP production to stop in Q Site prepared for RIP plant decommissioning + integration into POX Processed Grades 0.7g/t 0.5g/t Production (1) 38Koz 31Koz 2018 Outlook Production expected to be significantly below 2017 levels as existing RIP plant + site infrastructure is in the process of being integrated / converted into the POX Hub 30 (1) Includes production from heap leach of 2.9Koz (2016: 4.1Koz)