For immediate release 7 October 2016
Polyus Gold International Limited
PJSC Polyus Dividend Policy and Corporate Update
Polyus Gold International Limited ("PGIL) notes that on 7 October 2016 PJSC Polyus ("Polyus" or the "Company") announced a change in the Company's Dividend Policy and a Corporate Update.
New Dividend Policy
The Board of Directors (the "Board") of Polyus has approved the Company's dividend policy, pursuant to which the Company will pay dividends on a semi-annual basis in an amount of 30% of the EBITDA of PJSC Polyus for the respective reporting period. Payment will be calculated on the basis of the consolidated financial statements of the Company in accordance with IFRS requirements, provided that the net debt/adjusted EBITDA (last 12 months) ratio based on the consolidated financial statements of PJSC Polyus is lower than 2.5х.
Should the Company's net debt/adjusted EBITDA (for the last 12 months) ratio increase to higher than 2.5x, the Board will exercise discretion on dividends, considering the Company's financial position, free cash flow, outlook and macro environment.
The Board may consider the possibility of payment of special dividends, subject to the Company's liquidity position, capex requirements, FCFs and leverage.
The new dividend policy intends to provide key stakeholders with the visibility on the dividend distributions and aims to balance the appropriate cash returns to equity holders with the requirement of maintaining a balanced and sound financial position.
The Board anticipates considering a recommendation for a first dividend in accordance with the new dividend policy in the first half of 2017 based on the 2H 2016 results.
Net debt update
Strong underlying performance accompanied by favorable market conditions during the 3Q16 resulted in robust FCF generation and enabled the reduction in the Company's net debt by $228 million (as per Management Estimates under IFRS) - the net debt position stood at $3,241 million as of the end of September 2016 as compared to $3,469 million as of the end of 1H 2016.
Likewise, PGIL's estimated net debt position amounted to $2,941 million as of the end of September 2016 (30 June 2016: $3,171 million).
2016 Guidance Upgrade
Following a strong delivery at Olimpiada, Blagodatnoye, Verninskoye and Kuranakh the Company upgrades its production guidance for 2016 and now expects its total gold production in 2016 to be in the range of 1.87-1.90 million ounces. This exceeds the upper bound of the initially announced guidance range of 1.76-1.80 million ounces. The Company reported total gold produced of 1.763 million ounces for 2015.
Polyus announces a mid-term annual production target of at least 2.7 million ounces of gold to be achieved by 2020. The Company expects its existing portfolio of advanced development projects to allow for this production expansion.
The projects contributing to Company's production target achievement include 7 brownfield and 1 greenfield projects.
Polyus' brownfield projects are expected to include:
· Krasnoyarsk Business Unit:
o Reconfiguration of the Mill-1 in order to treat higher-grade ore from Olimpiada combined with the Mill-1 throughput capacity expansion from 2.4 to 3 million tonnes per annum;
o BIOX capacity expansion at the Olimpiada Mill-2/3 to enable the processing of the increased volume of flotation concentrate following both the reconfiguration of the Mill-1 and implemented debottlenecking initiatives at the Mill-2/3;
o An introduction of the heap leaching at the Blagodatnoye to process stockpiled and in situ low-grade ore;
o De-bottlenecking and upgrading of the Blagodatnoye mill, sustainably increasing the throughput from 6 to 8 million tonnes per annum.
o Verninskoye Mill throughput capacity expansion from 2.2 to 3.0 million tonnes per annum.
o An introduction of the heap leaching at the Kuranakh to process over 50 million tonnes of the low-grade stockpiled ore;
o Kuranakh Mill throughput capacity expansion from 3.8 to 5.0 million tonnes per annum.
The construction works at Natalka, the Company's main greenfield project, substantially accelerated in 2016. The construction of the primary crushing and main conveyor complex, including a 1 km underground tunnel, has been completed. Crushed ore storage and reclaim facility is progressing well. Equipment for the grinding circuit has been installed and construction of power facilities (110 kV power line, main substation) and auxiliary infrastructure (a boiler house) are ongoing. The Company expects to take delivery of the remainder of the main beneficiation equipment such as gravity concentrators, screening equipment, main conveyors, main slurry pumps and the Carbon In Leach (CIL) equipment by the end of 2016 or in early 2017 and will work on finalizing its installation. The construction works are expected to peak during the 1H 2017. Commencement of the early pre-commissioning activities is currently planned for the second quarter of 2017. The Company anticipates commissioning of the Natalka project by the end of 2017.
Taking into account the abovementioned projects the Company expects its production levels to increase in 2017, allowing it to produce more than 2 million ounces, thus marking another year of production growth.
The Company will continue evaluating additional production growth opportunities including the expansion of its existing operating mines and its development strategy with respect to its portfolio of greenfield projects.
Forward looking statements
This announcement may contain "forward-looking statements" concerning PGIL. Generally, the words "will", "may", "should", "could", "would", "can", "continue", "opportunity", "believes", "expects", "intends", "anticipates", "estimates" or similar expressions identify forward-looking statements. The forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Forward-looking statements include statements relating to future capital expenditures and business and management strategies and the expansion and growth of PGIL's operations. Many of these risks and uncertainties relate to factors that are beyond PGIL's ability to control or estimate precisely and therefore undue reliance should not be placed on such statements which speak only as at the date of this announcement. PGIL assumes no obligation in respect of, and does not intend to update, these forward-looking statements, except as required pursuant to applicable law.
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