TIDMPOG
RNS Number : 3552K
Petropavlovsk PLC
01 September 2021
01 September 2021
Petropavlovsk PLC
Interim Results for the Period Ended 30 June 2021
Petropavlovsk PLC ("Petropavlovsk", or the "Company" and,
together with its subsidiaries, the "Group") today issues its
Interim Results for the period from 1 January 2021 to 30 June 2021
("H1 2021" or the "Period").
Denis Alexandrov, Chief Executive Officer, said:
"Petropavlovsk's financial performance in the first-half
reflects the transitional period we are navigating as we shift to
processing more refractory ore to supply our state-of-the-art POX
plant with more of our own-mined reserves. In the first half of the
year, own-mine production continued the downward trend that started
in 2020, however we are now observing that trend reversing and
expect higher production in the second half, supported by the
recent launch of the Pioneer flotation plant. We therefore maintain
our production guidance for the full year.
First-half revenue and EBITDA tracked the reduction in output
and while costs did rise due, in part, to lower volumes, I am
pleased to report that total cash costs for own-mined ore for the
period were in the lower half of our guidance range. Furthermore,
we generated cash flow from operations before changes in working
capital of US$113.7 million in H1 2021, along with a net profit of
US$ 48.9 million compared to a loss in the same period last
year.
Looking ahead, with the Pioneer flotation plant set to unlock
the potential of the mine's refractory reserves in the second half
of the year, we will see the POX hub operating at closer to full
capacity as the year progresses. We also continue to progress the
Malomir expansion, which will further increase our capacity to
produce refractory ore concentrate for the POX plant when completed
in Q3 2022.
At Albyn, we continue to see the harder, more challenging ore
from Elginskoye that now feeds the plant limits the throughput and
recoveries we can achieve. Furthermore, based on our experience
mining the deposit, we expect exploration drilling being conducted
at Elginskoye this year to confirm the deposit contains more
refractory ore than previously estimated. In light of this, we are
currently studying options for adding flotation capacity to the
Albyn hub, which would provide an additional source of concentrate
for the POX hub.
We are currently in the final stage of the operational review my
team and I began earlier in the year - the drafting of a new
strategy and development plan for the Company that will help us
realise the value of assets like Albyn and Elginskoye, support
future production, and deliver improved returns to shareholders. I
look forward to presenting this plan to stakeholders at our
upcoming Capital Markets Day this autumn.
Financial Highlights
H1 2021 H1 2020 % Change
----------------------------------- -------- -------- -------- ---------
Total gold produced koz 195.0 320.6 (39%)
Own gold production koz 158.3 213.7 (26%)
3rd-party concentrate production koz 36.7 106.9 (66%)
Total gold sold koz 187.1 312.4 (40%)
Average realised gold price US$/oz 1,795 1,640 9%
Total cash costs (own gold)
([1]) US$/oz 906 800 13%
All-in sustaining costs US$/oz 1,404 1,220 15%
----------------------------------- -------- -------- -------- ---------
Group revenue US$m 351.9 522.7 (33%)
Underlying EBITDA US$m 114.3 192.6 (41%)
Operating profit (a) US$m 48.3 144.3 (67%)
Profit/(loss) for the period US$m 48.9 (22.0) -
Capital expenditure US$m 47.3 59.6 (21%)
Cash generated from operations
before working capital changes US$m 113.7 183.3 (38%)
Cash generated from operations US$m 57.1 172.8 (67%)
Net debt US$m (535.6) (538.0) -
(a) Since the 2020 annual report operating profit is presented
from the perspective of group operations excluding the results of
the associate, IRC. This is more representative of how the business
is viewed following the classification of IRC as held for sale and
this change in classification also been applied to the comparative
period.
-- Gold sales were 187.1 koz in H1 2021, down 40% from 312.4 koz
sold in H1 2020, which is consistent with the decrease in total
gold production during the Period
-- Average realised gold price [2] increased 9% to US$1,795/oz,
with zero impact from the Company's hedging programme
-- Group revenue was US$351.9m, or 33% lower year-on-year, as
the impact of lower sales was partially offset by higher gold
prices and increased revenue from service divisions
-- Underlying EBITDA* was US$114.3m, or 41% lower, in line with
the reduction in sale volumes, as higher gold prices were offset by
an increase in total cash costs during the period
-- Profit for the period was US$48.9m or US$0.01 per share,
compared to a loss of US$22m in the prior year, including some
non-cash items
-- Total cash costs (TCC) for gold produced from own ore in H1
2021 were US$906/oz (13% higher year-on-year), well within the
Company's 2021 cost guidance range, with the increase influenced
mainly by lower grades and recoveries at the mines as well as some
Rouble-denominated cost inflation and higher mining taxes where
certain tax incentives expired
-- All-in sustaining costs (AISC) were 15% higher year-on-year
at US$1,404/oz, reflecting the increase in TCC, higher
administrative costs, and the decrease in physical ounces sold in
H1 2021, partially offset by a decrease in capitalized stripping at
Malomir and Pioneer
-- Capital expenditure* for the period was US$47.3m (21% lower
vs US$59.6 in H1 2020) reflecting the deferral of some expenses to
the second half of the year
Balance Sheet and Liquidity
-- Cash (unaudited) as of 30 June 2021 was US$36.5m (31 March
2021: US$7.5m, 31 December 2020: US$35.4m) including US$2.1m in
transit (see note 15 to the Financial Statements)
-- Debt principal outstanding as of 30 June 2021 was US$573m (31
March 2021: US$538m, 31 December 2020: US$538m) with the increase
due to use of the Gazprombank ("GPB") revolving credit facility for
day-to-day working capital requirements
-- Interest-bearing gold prepays stood at US$37.1m as at 30 June
2021 (US$53.3m as at 31 March 2021, US$63.8m as at 31 December
2020), a net decrease of US$16.2m over the course of Q2 2021 and
US$26.7m since the beginning of the year. The Company plans to
fully settle the gold prepays by year-end
-- To replace the gold prepays and support day-to-day liquidity
needs, the Group secured a c.US$54m (RUB 4 billion) increase in the
limit of its revolving credit facilities ("RCF") with GPB, from
c.US$68m (RUB 5 billion) to a total of c.US$122m (RUB 9 billion),
along with a maturity extension from May 2022 to June 2026. At
interest rates of 2.8 - 4.5%, the RCF is significantly lower cost
than existing borrowings. The Company intends to further increase
the credit limit under the RCF going forward to support
liquidity
-- On 10 August 2021, the Company's wholly-owned subsidiary
Petropavlovsk 2016 (the "Issuer") announced the final tender
results of an offer to purchase for cash up to US$200m of the
aggregate principal amount of its 8.125% guaranteed notes maturing
2022 (the "US$500m Notes"). The Issuer accepted for purchase an
aggregate principal amount of validly tendered US$500m Notes
totalling US$135,731,000.
-- On 28 July 2021, the Group secured a US$200m term loan (30
June 2023 maturity), which was used for the buy-back of
US$135,731,000 of the US$500m Notes in accordance with the tender
offer. The term loan interest rate is significantly lower than the
8.125% coupon on the US$500 Notes
Operational Highlights
-- H1 2021 gold production totalled 195.0koz, a decrease of 39%
versus 320.6koz in H1 2020
-- Own mined gold production amounted to 158.3koz in H1 2021 (H1
2020: 213.7koz), with the 26% year-on-year decrease being primarily
due to the switch to processing ore from the Elginskoye deposit at
Albyn and preparations for the launch of the Pioneer flotation
plant, which entailed a shift to mining refractory ore for
stockpiling and a planned temporary shutdown of the processing
plant in April
-- 3rd-party concentrate gold production decreased by 66% to
36.7koz in H1 2021 (H1 2020: 106.9koz) due to expected lower
volumes of concentrate available for purchase and lower grades in
the concentrates supplied
Gold production (koz)
----------------------------------- -------- --------
Asset H1 2021 H1 2020
----------------------------------- -------- --------
Pioneer 46.0 60.3
Malomir 70.1 81.6
Albyn 42.3 71.8
3rd-party concentrate (POX Hub) 36.7 106.9
Total Group 195.0 320.6
----------------------------------- -------- --------
Note: Numbers may not add up due to rounding effect
Pokrovskiy Pressure Oxidation (POX) Hub
-- A total of 123kt of refractory gold concentrate was processed
through the POX Hub in H1 2021, including 76kt from Malomir with an
average grade of 28.5g/t and 38kt of 3rd-party concentrate with an
average grade of 30.7g/t
-- The new flotation plant at Pioneer supplied 8kt of
concentrate at an average grade of 21.9g/t to the POX Hub in May
and June, with 5.5koz of gold recovered for the Period (95%
recovery rate)
2021 Guidance
-- The Company affirms its 2021 full-year production guidance of
430 - 470koz of gold, comprising own gold production of 370 -
390koz and gold production from 3rd-party concentrate of 60 -
80koz
-- Total cash costs for own gold production for the year are
also expected to be within the Company's guidance range of US$870 -
970 per ounce
-- Capital expenditure for the year is expected to be up to
US$140m, consisting of sustaining and development capex of US$120m
and exploration spend of c.US$20m
Responsible Business
-- Zero fatal accidents have occurred at Petropavlovsk's
operations this year to date, neither among the Group's employees
nor its contractors
-- An increase in the number of reported incidents and,
consequently, LTIFR during the period is partially attributable to
an improved reporting methodology implemented this year. The
severity of reported injuries has decreased during the period, and
we have seen a positive trend in the monthly reduction of injuries
since the beginning of the year. The availability and in-depth
analysis of robust data are the first steps towards improving
health and safety reporting, in alignment with international best
practices
-- A strengthened health and safety leadership team, led since
April by Head of Health & Safety Roman Dertinov, has resulted
in the drafting of a new and improved set of Fundamental Safety
Rules, which have been approved by the Board of Directors and are
now being rolled out across the Group to promote safer working
practices
-- The Group is also implementing several new long-term injury
prevention projects, including initiatives specifically aimed at
addressing falls from height and electrical safety
-- Zero environmental incidents were reported in H1 2021
Metric Units H1 2021 H1 2020
------------------------- ------------------- -------- --------
LTIFR Per 1m hrs worked 1.75 1.23
Environmental incidents Number 0 0
------------------------- ------------------- -------- --------
Note: Environmental incidents defined as moderate or serious
-- Due to recent severe flooding in the Amur region, the Company
is carrying out daily environmental monitoring of local rivers and
streams. No material environmental pollution has been
identified
-- Attention is drawn to the update on principal risks and
uncertainties presented later in this release
COVID-19 Update
-- No material COVID-19 outbreaks have occurred at our sites
this year to date, and the Company continues to implement strict
quarantine and safety measures across its operations
-- In Q2 2021, the Company launched an on-site vaccination
programme at each of its mines, accompanied by a supporting
informational campaign via corporate and social media and other
communications channels
-- As of 23 August 2021, 47.3% of employees at the Group's
operating subsidiaries have been fully vaccinated (2 doses) and an
additional 32.4% have exhibited Covid antibodies
-- At the time of reporting, the Group's supply chains remain
fully functional
Development and Exploration Update
Progress on Development Projects
-- On 31 May 2021, the Company launched the Pioneer flotation
plant, with the capacity to process 3.6Mtpa of ore, thereby
doubling the Group's total processing capacity for refractory gold
ore from its own mines to 7.2Mtpa (including the existing Malomir
plant)
-- The Pioneer flotation plant is expected to produce up to 60kt
of flotation concentrate this year, and up to 100kt in 2022,
reducing the Company's reliance on 3rd-party concentrate to feed
the Pokrovskiy POX plant
-- The construction of a third line at the Malomir flotation
plant progressed throughout H1 2021 and will add an additional
1.8Mtpa of flotation capacity upon completion in Q3 2022, bringing
the total combined Group capacity to 9.0Mtpa
Exploration
-- Pioneer - A review of reserves is underway using updated
parameters that better reflect prevailing gold prices. As a result,
notable increases are expected in reserves of gold contained in
refractory and non-refractory ore for both open pit and underground
mining (excluding mining activities)
-- Malomir - Work in H1 2021 focused on the evaluation of
high-grade ores in underground workings along the eastern flank of
the Quartzitovoye deposit. Scattered older wells drilled in the
area have exhibited grades of up to 20.2-28.4 g/t per 2.1-3.8 m
-- Osipkan - Exploration work on the northern, un-delineated
section of the deposit, suitable for heap leaching, is being
accelerated. Alongside poorer ores with grades of 0.7-1.3 g/t,
drilling on the targeted area has revealed ore sections with
visible gold and grades of up to 67.05 g/t per 1.7 m
-- Tokur - Exploration work at the site has been temporarily
suspended
-- Albyn - Geologists are currently reviewing the potential for
underground mining of an estimated 30 tonnes of un-delineated ore
resources at depth below the depleted Albyn open pit
-- Elginskoye - Exploration drilling on the deposit planned for
this year is nearing completion. The programme was designed to
better delineate the deposit and new technological mapping of the
drilled-out area has been completed. Metallurgical studies have
found the ore responds well to processing by gravity-flotation
-- Unglichikanskoye - Technological studies of samples for
processing via gravity-flotation are nearing completion
Corporate Events
-- On 12 July 2021, the Board of Directors appointed Mr. Evgeny
Potapov as a non-executive director. Mr. Potapov was nominated by
Uzhuralzoloto Group of Companies ("UGC"), the Company's largest
shareholder, pursuant to the relationship agreement in place
between the Company and UGC. Mr Potapov replaced Mr. Maxim Kharin,
who resigned from the Board
IRC Update
-- Petropavlovsk is a major shareholder in IRC (31.1%), a
Hong-Kong-listed producer and developer of industrial commodities.
On 27 August 2021, IRC released its interim results for the six
months ended 30 June 2021. The results are available to view on the
IRC website at http://www.ircgroup.com.hk
-- Petropavlovsk continues to act as guarantor in relation to
the obligations of IRC Limited's subsidiary K&S under two loan
facility agreements with Gazprombank. IRC continues to pay down the
debt in line with the repayment schedule. In addition, K&S made
an early repayment of US$20m to GPB in July and US$30m in August.
Therefore, the outstanding loan principal amount as of the end of
August 2021 amounted to c.US$143.5m.
Webcast and Conference Call
The Company's CEO Denis Alexandrov and CFO Danila Kotlyarov will
host a webcast followed by a Q&A session to present the
Company's financial results today at 09:00 BST / 11.00 MSK. The
webcast can be accessed via the following link:
https://webcasting.brrmedia.co.uk/broadcast/6115521dc97de6636c2d913d
Alternatively, phone users can listen to the webcast and
participate in the Q&A session via the following dial-in
numbers:
+44 (0)330 336
United Kingdom 9105
Russia +7 495 213 1767
When prompted, please use the following confirmation code:
8000181
About Petropavlovsk
Petropavlovsk PLC (LSE: POG. MOEX: POGR) is a major integrated
Russian gold producer with JORC Resources of 19.50Moz Au which
include Reserves of 7.16Moz Au. Following its IPO on the
Alternative Investment Market (AIM) in 2002, Petropavlovsk was
promoted to the London Stock Exchange in 2009, where today it is a
Premium Listed company and a constituent of the FTSE 250, FTSE 350
and FTSE All Share indices. The Company's shares also trade on the
Moscow Exchange and are a constituent of the RTS Index and MOEX
Index.
The Company's key operating mines (Pioneer, Malomir and Albyn)
and its Pokrovskiy Pressure Oxidation (POX) Hub are located in the
Amur Region in the Russian Far East. Petropavlovsk has produced a
total of c.8.5Moz of gold since operations began in 1994 and has a
strong track record of mine development, expansion, and asset
optimisation.
Petropavlovsk is one of the region's largest employers and one
of the largest contributors to the sustainable development of the
local economy.
For more information
Please visit www.petropavlovskplc.com or contact:
Petropavlovsk PLC +44 (0) 20 7201 8900
John Mann / Max Zaltsman TeamIR@petropavlovskplc.com
Hudson Sandler +44 (0) 20 7796 4133
Charlie Jack / Katerina Parker / Elfie Kent Petropavlovsk@hudsonsandler.com
Cautionary note on forward-looking statements
This release may include statements that are, or may be deemed
to be, "forward-looking statements". These forward-looking
statements can be identified by the use of forward-looking
terminology, including the terms "believes", "estimates", "plans",
"projects", "anticipates", "expects", "intends", "may", "will" or
"should" or, in each case, their negative or other variations or
comparable terminology, or by discussions of strategy, plans,
objectives, goals, future events or intentions. These forward
looking statements include all matters that are not historical
facts. They appear in a number of places throughout this release
and include, but are not limited to, statements regarding the
Group's intentions, beliefs or current expectations concerning,
among other things, the future price of gold, the Group's results
of operations, financial position, liquidity, prospects, growth,
estimation of mineral reserves and resources and strategies, and
exchange rates and the expectations of the industry. By their
nature, forward-looking statements involve risk and uncertainty
because they relate to future events and circumstances [outside the
control of the Group. Forward-looking statements are not guarantees
of future performance and the development of the markets and the
industry in which the Group operates may differ materially from
those described in, or suggested by, any forward- looking
statements contained in this release. In addition, even if the
development of the markets and the industry in which the Group
operates are consistent with the forward looking statements
contained in this release, those developments may not be
indicative of developments in subsequent periods. A number of
factors could cause results and/or developments to differ
materially from those expressed or implied by the forward-looking
statements including, without limitation, general economic and
business conditions, demand, supply and prices for gold and other
long-term commodity price assumptions (and their effect on the
timing and feasibility of future projects and developments), trends
in the gold mining industry and conditions of the international
gold markets, competition, actions and activities of governmental
authorities (including changes in laws, regulations or taxation),
currency fluctuations (including as between the US Dollar and
Rouble), the Group's ability to recover its reserves or develop new
reserves, changes in its business strategy, any litigation, and
political and economic uncertainty. Except as required by
applicable law, rule or regulation (including the Listing and
Disclosure Guidance and Transparency Rules), the Group does not
undertake any obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. Past performance cannot be relied on as
a guide to future performance. The content of websites referred to
in this announcement does not form part of this announcement.
Financial Review
Note: Figures may not add up due to rounding
Financial Highlights
H1 2021 H1 2020
-------------------------------------- ------------- -------- -----------
Gold sold '000oz 187.1 312.4
Group revenue US$ million 351.9 522.7
Average realised gold price .. US$/oz 1,795 1,640
Average LBMA gold price afternoon
fixing US$/oz 1,806 1,645
Total Cash Costs .. (a) US$/oz 1,020 9 8 3
Total Cash Costs from own materials
(a) US$/oz 906 800
Total Cash Costs from third parties
concentrate (a) US$/oz 1,639 1,380
All-in Sustaining Costs .. (b) US$/oz 1,404 1,2 20
All-in Costs .. (b) US$/oz 1,514 1,3 25
Underlying EBITDA .. US$ million 114.3 19 2 . 6
Operating profit ( () US$ million 48.3 144.3
Profit before tax US$ million 69.1 16.5
Profit/(loss) for the period US$ million 48 . 9 (2 2 . 0 )
Profit/(loss) for the period
attributable to equity shareholders
of Petropavlovsk PLC US$ million 44.5 (23 . 9)
Basic profit/(loss) per share US$ 0.01 (0.01)
Cash generated from operations
before working capital changes US$ million 113.7 183.3
Net cash from operating activities US$ million 25.2 112. 1
-------------------------------------- ------------- -------- -----------
(a) Calculation of Total Cash Costs u ("TCC") is set out in the section Hard rock mines below.
(b) All-in Sustaining Costs u ("AISC") and All-in Costs u
("AIC") are calculated in accordance with guidelines for reporting
All-in Sustaining Costs u and All-in Costs u published by the World
Gold Council. Calculation is set out in the section All-in
Sustaining Costs u and All-in Costs u below.
(c) Since the 2020 annual report operating profit is presented
from the perspective of group operations excluding the results of
the associate, IRC. This is more representative of how the business
is viewed following the classification of IRC as held for sale and
this change in classification also been applied to the comparative
period.
30 June 2021 31 December
US$ million 2020 US$ million
--------------------------- ------------ -----------------
Cash and cash equivalents 36.5 35.4
Notes ( (d) () (502.6) (502.0)
Convertible bonds (e) (34.5) (34.0)
Bank loans (f) (35.0) -
---------------------------- ------------ -----------------
Net Debt .. (535.6) (500.6)
---------------------------- ------------ -----------------
(d) US$500 million Guaranteed Notes due on 14 November 2022 at amortised cost.
(e) US$125 million convertible bonds due on 03 July 2024 at amortised cost.
(f) Outstanding principal amount of revolving credit facility with Gazprombank.
Revenue
H1 2021 H1 2020
US$ million US$ million
------------------------------ ----------- -----------
Revenue from hard rock mines 335.8 512.3
Revenue from other operations 16.2 10.4
------------------------------- ----------- -----------
351 . 9 522.7
------------------------------ ----------- -----------
Group revenue during the period was US$351.9 million, 33% lower
than the US$522.7 million achieved in H1 2020.
Revenue from hard rock mines during the period was US$335.8
million, 34% lower than the US$512.3 million achieved in H1 2020.
Gold remains the key commodity produced and sold by the group,
comprising 95% of total revenue generated in H1 2021. The physical
volume of gold sold from hard rock mines decreased by 40% from
312,354 oz in H1 2020 to 187,064 oz in H1 2021, incl. 26% decrease
of own gold production primarily due to the switch to processing
ore from the Elginskoye deposit at Albyn and preparations for the
launch of the Pioneer flotation plant, which entailed a shift to
mining refractory ore for stockpiling and a planned temporary
shutdown of the processing plant in April and 66% decrease in
3rd-party gold production to 36.7koz in H1 2021 (H1 2020: 106.9koz)
due to expected lower volumes of concentrate available for purchase
and lower grades in the concentrates supplied. The average realised
gold price .. .. increased by 9% from US$1,640/oz in H1 2020 to
US$1,795/oz in H1 2021. The average realised gold price .. was not
affected by hedge arrangements in H1 2021 and H1 2020. There were
no sales of silver in H1 2021 and H1 2020.
Revenue generated as a result of third-party work by the group's
in-house service companies was US$16.2 million in H1 2021, a US$5.8
million increase compared to US$10.4 million in H1 2020. This
revenue is substantially attributable to sales generated by the
group's engineering and research institute, Irgiredmet, primarily
through engineering services and the procurement of materials,
consumables and equipment for third parties, which comprised
US$14.9 million in H1 2021 compared to US$9.0 million in H1
2020.
Cash flow hedge arrangements
In March 2020 the group has entered into a number of gold option
and currency option contracts, in both cases structured as zero
cost collars where the company purchased a put option and sold a
call option, in order to increase certainty in respect of a
proportion of its operating cash flows.
Zero cost collars for the underlying aggregate of US$42 million
(US$7 million per month) with a RUB:USD exercise price of RUB75.00
for put options and a RUB:USD exercise price in the range of
between RUB90.65 and RUB100.00 for call options matured during H1
2021 and resulted in US$0.6 million net cash settlement received by
the group. Zero cost collars for the underlying aggregate of US$42
million (US$7 million per month until December 2021) with a RUB:USD
exercise price of RUB75.00 for put options and a RUB:USD exercise
price in the range between RUB90.65 and RUB100.00 for call options
were outstanding as at 30 June 2021.
Zero cost collars for the underlying aggregate of 21,000 oz of
gold (3,500 oz of gold per month) with an exercise price of
US$1,600/oz for put options and US$1,832/oz for call options
matured during H1 2021 and resulted in US$(0.3) million net cash
settlement paid by the group. Zero cost collars for the underlying
aggregate of 21,000 oz of gold (3,500 oz of gold per month until
December 2021) with an exercise price of US$1,600/oz for put
options and US$1,832/oz for call options were outstanding as at 30
June 2021.
The aforementioned contracts did not qualify for hedge
accounting under IFRS 9. Accordingly, there was no adjustment to
the average realized gold price in H1 2021 and H1 2020 for the
effect of net settlement under these arrangements.
Corresponding fair values for gold and currency option contracts
are disclosed in note 16 to the group's consolidated interim
financial statements for the six months ended 30 June 2021.
Underlying aggregate Put option Call option
amount exercise price exercise
price
-----------------------------
Option contract matured in H1
2021:
21,000 oz (3,500
oz of gold per
Gold option contracts month) US$1,600/oz US$1,832/oz
US$42 million RUB90.65
(US$7 million -
Currency option contacts per month) RUB75.00 RUB100.00
----------------------------- --------------------- --------------- -----------
Option contracts outstanding
as at 30 June 2021:
220212021:
21,000 oz (3,500
oz of gold per
month until December
Gold option contracts 2021) US$1,600/oz US$1,832/oz
US$42 million
(US$7 million RUB90.65
per month until -
Currency option contracts December 2021) RUB75.00 RUB100.00
----------------------------- --------------------- --------------- -----------
Underlying EBITDA
H1 2021 H1 2020
US$ million US$ million
----------------------------------------------- ------------ --------------------
Profit/(loss) for the period 48 . 9 (22.0 )
Add/(less):
Net (impairment reversals)/impairment losses
on financial instruments (1.1) 1.3
Investment and other finance income (3.3) (4.0)
Interest expense 24.3 33.4
Net other finance (gains)/losses (a) (4.7) 98. 9
Foreign exchange losses / (gains) 0.7 (2 6 .7)
Taxation 20.3 3 8 . 5
Depreciation 63.0 64. 7
Write-down of inventory to net realisable
value 0.1 -
Impairment of gold in circuit 0.7 -
Reversal of write-down to adjust the carrying
value of net assets of disposal group to
fair value less costs to sell (34.9) -
Share of results of associates (b) 0.3 8.6
Underlying EBITDA .. .. 114.3 19 2 . 6
----------------------------------------------- ------------ --------------------
(a) Including US$32.0 million fair value gain from
re-measurement of the conversion option of the convertible
bonds
(H1 2020:US$(122.2) million fair value loss from re-measurement
of the conversion option of the convertible bond) and US$ (31.6)
million fair value loss on the agreement for the sale of stake in
IRC.
(b) Group's share of interest expense, investment income, other
finance gains and losses, foreign exchange gains/losses, taxation,
depreciation and impairment/reversal of impairment recognised by an
associate and impairment/reversal of impairment recognised against
investment in the associate.
Underlying EBITDA .. as contributed by business segments is set
out below.
H1 20 2 H1 20 20
1
US$ million US$ million
------------------------------ ------------ ------------
Pioneer 34 . 4 59. 3
Malomir 67 . 9 7 0 . 9
Albyn 42 . 7 75. 0
------------------------------ ------------ ------------
Total Hard rock mines 145 . 0 20 5 . 1
( 32 . 2
Corporate and other ) (23.0)
Underlying EBITDA by segment 1 12 . 8 182.2
------------------------------ ------------ ------------
IRC 1.5 10.5
------------------------------ ------------ ------------
Underlying EBITDA .. 114.3 19 2 . 6
------------------------------ ------------ ------------
Hard rock mines
During this period, hard rock mines generated Underlying EBITDA
.. of US$145.0 million compared to US$205.1 million Underlying
EBITDA .. in H1 2020.
Total Cash Costs .. for hard rock mines increased from US$ 983
/oz in H1 20 20 to US$ 1,020 /oz in H1 202 1 .
The increase in Total Cash Costs from own material from US$ 800
/oz in H1 20 20 to US$ 906 /oz in H1 202 1 primarily reflects the
effect of lower grades and recoveries of non-refractory ore
processed at Albyn plant as the result of switching to processing
of ore from the Elginskoye deposit as the main source of
non-refractory ore starting from 2021 which replaced the depleted
Albyn pit, as well as the impact of the Pioneer flotation plant
launching to produce refractory concentrate for further processing
at the POX Hub, lower grades of refractory ore processed at
Malomir, lower recoveries of non-refractory ore processed at
Pioneer , the impact of inflation of certain Rouble denominated
costs, and the effect of mining tax rates as set out below. This
effect was partially mitigated by the effect of higher grades of
non-refractory ore processed at Pioneer and Malomir, and the effect
of higher recoveries of refractory ore processed at Malomir, as
well as by the effect of Rouble depreciation.
Total Cash Costs from 3rd parties concentrate increased from
US$1,380/oz in H1 2020 to US$1,639/oz in H1 2021. Total Cash Costs
from 3rd parties concentrate are directly dependent on gold price
which has increased in H1 2021 .
The decrease in physical ounces sold from 312 , 354 oz in H1 20
20 to 187,064 oz in H1 2021 resulted in US$(82.3) million decrease
in the Underlying EBITDA .. . The increase in TCC .. contributed to
a further US$(6.8) million decrease in the Underlying EBITDA .. .
This effect was partly offset by the increase in the average
realised gold price .. from US$1, 640 /oz in H1 20 20 to US$ 1,795
/oz in H1 202 1 with US$ 29 .0 million effect on Underlying EBITDA
.. .
The key components of the operating cash expenses are wages,
electricity, diesel, chemical reagents and consumables, as set out
in the table below. The key cost drivers affecting the operating
cash expenses are production volumes of ore mined and processed,
grades of ore processed, recovery rates, cost inflation and
fluctuations in the Rouble to US Dollar exchange rate.
The Rouble depreciated against the US Dollar by 7 % in H1 2021
compared to H1 2020, with the average exchange rate for the period
of 74.31 Roubles per US Dollar in H1 2021 compared to 69.42 Roubles
per US Dollar in H1 2020, somewhat mitigating the effect of Rouble
denominated costs inflation.
Refinery and transportation costs are variable costs dependent
on production volume. Mining tax is also a variable cost dependent
on production volume and the gold price realised. The Russian
statutory mining tax rate is 6%. Under the Russian Federal Law
144-FZ dated 23 May 2016 that introduced certain amendments to the
Russian Tax Code, taxpayers who are participants in Regional
Investment Projects ("RIP") have the right to apply the reduced
mining tax rate provided certain conditions are met. JSC Pokrovskiy
Rudnik and LLC Malomirskiy Rudnik applied full mining tax rate in
H1 2021 and H1 2020, LLC Albynskiy Rudnik applied 1.2% mining tax
rate in H1 2020 and full mining tax rate in H1 2021, resulting in
US$18.4 million mining tax expense in H1 2021 compared to US$ 15 .
2 million mining tax expense in H1 20 20 .
H1 2021 H1 2020
------------------
US$ million % US$ million %
-------------------------------------- ------------ ---- ------------ ----
Staff costs (a) 46.7 22 40.8 15
Materials 44.4 21 40.8 15
Flotation concentrate purchased 49.2 23 130.2 47
Fuel 16.2 8 17.5 6
Electricity 15.9 7 17.7 6
Other external services 25.7 12 18.1 6
Other operating expenses 14.2 7 1 2 .9 5
212.4 100 278.1 100
-------------------------------------- ------------ ---- ------------ ----
Movement in ore stockpiles, gold
in circuit, bullion in process,
limestone and flotation concentrate
attributable to gold production (44.2) 9.3
--------------------------------------- ------------ ---- ------------ ----
Total operating cash expenses 168.2 287.4
--------------------------------------- ------------ ---- ------------ ----
( a ) Including staff redundancies costs US$0.3 million in H1
2021 due to enhancing operational governance and improving
management structure.
H1 202
Hard rock mines 1 H1 2020
Pioneer Malomir Albyn Total Total
US$ US$ US$ US$ US$
million million million million million
Revenue
Gold 134.7 125.4 75.7 335.8 512.3
Including:
353 .
Gold from own material 82.5 125.4 75.7 283.5 6
Gold from 3rd parties concentrate 52.3 - - 52.3 158.8
Silver - - - - -
134.7 125.4 75.7 335.8 512.3
Expenses
28 7 .
Operating cash expenses 93.7 47.1 27.4 168.2 4
Refinery and transportation 0.1 0.1 0.0 0.3 0.5
Other taxes 1.0 1.9 0.9 3.9 4.1
Mining tax 5.4 8.3 4.6 18.4 15.2
Depreciation 22.7 27.3 11.5 61.5 63.5
Write-down of inventory
to net realisable value - - 0.0 0.0 -
Impairment/(r eversal of
impairment) of ore stockpiles
and gold in circuit - 0.7 - 0.7 (0.1)
3 70
Operating expenses 123.0 85.4 44.5 253.0 . 7
Result of precious metals 14 1
operations 11.7 39.9 31.2 82.8 . 7
Add/(less):
Depreciation 22.7 27.3 11.5 61.5 63.5
Write-down of inventory
to net realisable value - - 0.0 0.0 -
Impairment/(r eversal of
impairment) of ore stockpiles
and gold in circuit - 0.7 - 0.7 (0.1)
20 5
Segment EBITDA 34.4 67.9 42.7 145.0 . 1
Physical volume of gold
sold, oz 74,932 69,895 42,238 187,064 312,354
Including:
G old sold from own material,
oz 45,859 69,895 42,238 157,992 213,436
G old sold from 3rd parties
concentrate, oz 29,073 - - 29,073 98,919
Cash costs
28 7
Operating cash expenses 93.7 47.1 27.4 168.2 . 4
Refinery and transportation 0.1 0.1 0.0 0.3 0.5
Other taxes 1.0 1.9 0.9 3.9 4.1
Mining tax 5.4 8.3 4.6 18.4 15.2
30 7
Operating cash costs 100.3 57.5 33.0 190.8 . 2
Deduct: co-product revenue - - - - -
30 7
Total ash osts .. 100.3 57.5 33.0 190.8 . 2
Including:
Total Cash Costs from own
material 52.6 57.5 33.0 143.1 170.7
Total Cash Costs from 3rd 1 36 .
parties concentrate 47 . 7 - - 47. 7 5
TCC .. , US$/oz 1,339 8 2 2 781 1,020 98 3
TCC from own material, US$/oz 1,148 822 781 906 800
TCC from 3rd parties concentrate,
US$/oz 1,639 - - 1,639 1,380
All-in Sustaining Costs and All-in Costs
AISC .. increased from US$1,220/oz in H1 2020 to US$1,404/oz in
H1 2021. The increase in AISC .. reflects increase in TCC ..
explained above as well as higher central administration expenses
and the decrease in physical ounces sold in H1 2021 with an
aggregate of sustaining capital and exploration expenditures and
sustaining lease remaining at approximately the same level as in H1
2020. This effect was partly offset by the decrease in capitalized
stripping expenditure during the period at Malomir and Pioneer.
AIC .. increased from US$1,325/oz in H1 2020 to US$1,514/oz in
H1 2021, primarily reflecting the increase in AISC .. explained
above. The start of operations at the Elginskoye deposit resulted
in the decrease of capital expenditure with Elginskoye project
being considered as sustaining in 2021. This effect was mainly
offset by the decrease in physical ounces sold in H1 2021 with an
aggregate of non-sustaining capital expenditures related to Pioneer
flotation plant, 3rd flotation line at Malomir, capitalized
stripping expenditure in respect of refractory ore at Pioneer and
non-sustaining exploration expenditures remaining at approximately
the same level as in H1 2020.
c
Hard rock mines H1 2021 H1 2020
-----------------------------------------------------
Pioneer Malomir Albyn Total Total
US$ US$ US$ US$ US$
million million million million million
----------------------- ---------------- ----------------- ---------------- -------------------- --------------
Physical volume of gold
sold, oz 74,932 69,895 42,238 187,064 312,354
---------------- ----------------- ---------------- --------------------
30 7 .
Total Cash Costs .. 100.3 57.5 33.0 190.8 2
TCC .. , US$/oz 1,339 822 781 1,020 98 3
----------------------- ---------------- ----------------- ---------------- -------------------- --------------
Impairment/(r eversal
of
impairment) of ore
stockpiles
and gold in circuit - 0.7 - 0.7 (0.1)
Write-down of inventory
to net realisable
value - - 0.0 0.0 -
Adjusted operating 30 7 .
costs 100.3 58.2 33.0 191.5 1
Central administration
expenses (a) 11.8 11.1 6.7 29.6 20 . 7
Capitalised stripping 5.4 5.1 - 10.5 23.7
Close-down and site
restoration 0.8 0.6 0.3 1.6 0.7
Sustaining exploration
expenditure 0.1 - 2.9 3.0 0.5
Sustaining capital
expenditure 6.9 7. 2 11.7 2 5 . 8 26 . 2
Sustaining lease 0.3 0.2 0.2 0.7 2.1
----------------------- ---------------- ----------------- ---------------- -------------------- --------------
All-in Sustaining Costs 26 2 . 3 81 .
.. 125.7 82. 4 54.7 7 0
----------------------- ---------------- ----------------- ---------------- -------------------- --------------
All-in Sustaining Costs
.. , US$/oz 1,677 1,1 79 1,29 4 1,40 4 1,2 20
----------------------- ---------------- ----------------- ---------------- -------------------- --------------
Exploration expenditure - 1.5 - 1.5 4.6
Capital expenditure 11.4 5. 7 - 1 7 . 1 28 . 2
Capitalised stripping 2.1 - - 2.1 -
4 13 .
All-in Costs .. 139.1 89.5 54.7 283.3 8
----------------------- ---------------- ----------------- ---------------- -------------------- --------------
All-in Costs .. ,
US$/oz 1,856 1,281 1,29 4 1,514 1,3 25
----------------------- ---------------- ----------------- ---------------- -------------------- --------------
(a) Including staff redundancies costs US$0.8 million in H1 2021
due to enhancing operational governance and improving management
structure.
Corporate and other
Corporate and other operations contributed US$(32.2) million to
Underlying EBITDA .. in H1 2021 compared to US$(23.0) million in H1
2020. Corporate and other operations primarily include central
administration function, result of in-house service companies and
the group's share of results of its associate IRC.
The group has corporate offices in London, Moscow and
Blagoveschensk, which together represent the central administration
function. Central administration expenses increased by US$8.9
million from US$20.7 million in H1 2020 to US$29.6 million in H1
2021, including staff redundancies costs US$0.8 million in H1 2021
due to enhancing operational governance and improving management
structure.
Results of associate
The group's share of profit generated by IRC is US$1.2 million
in H1 2021 (H1 2020: US$1.8 million). Following re-classification
of 29.9% interest in IRC as assets held for sale, the group
recognised a US$34.9 million reversal of write-down to adjust the
carrying value of net assets of disposal group to fair value less
costs to sell in H1 2021. IRC contributed US$1.5 million to the
group's Underlying EBITDA (u) in H1 2021 (H1 2020: US$10.5
million).
Impairment review
Impairment of mining assets
As at 30 June 2021 and 30 June 2020, the group undertook a
review of impairment indicators of the tangible assets attributable
to its gold mining projects and supporting in-house service
companies. Detailed calculations of recoverable amounts, which are
value-in-use calculations based on discounted cash flows, were
prepared which concluded no impairment was required as at 30 June
2021 and 30 June 2020.
Impairment of exploration and evaluation assets
As at 30 June 2021 and 30 June 2020, the group performed a
review of its exploration and evaluation assets and concluded no
impairment was required.
Exploration and evaluation assets in the statement of financial
position primarily relate to the areas adjacent to the existing
mines.
Financial income and expenses
Investment and other finance income
H1 2021 H1 2020
US$ million US$ million
------------------------- ----------- -----------
Interest income (a) 0.2 0.6
Guarantee fee income (b) 3.1 3.4
-------------------------- ----------- -----------
3.3 4.0
------------------------- ----------- -----------
(a) Interest income on bank deposits.
(b) Guarantee fee income under Gazprombank Guarantee
arrangements, as set out in section "Corporate activities" below
.
Interest expense
H1 202 1 H1 2020
US$ million US$ million
--------------------- ----------- -----------
Interest expense 25.4 34.0
Interest capitalised (1.6) (1.0)
Other 0.4 0.4
---------------------- ----------- -----------
24.3 33.4
--------------------- ----------- -----------
Interest expense for the period comprised of US$20.9 million of
effective interest on the Notes, US$2.0 million of effective
interest on the Convertible Bonds, US$2.1 million of interest on
prepayments on gold sale agreements, US$0.3 million of interest on
finance lease and US$0.1 million of interest on bank loans (H1
2020: US$21.0 million of effective interest on the Notes, US$6.5
million of effective interest on the Convertible Bonds, US$6.3
million of interest on prepayments on gold sale agreements and
US$0.3 million interest on finance lease).
As the group continued with construction of Pioneer flotation
plant, 3rd flotation line at Malomir, these projects met
eligibility criteria for borrowing costs capitalization under IAS
23 "Borrowing Costs" with US$1.6 million of interest expense
capitalized within property, plant and equipment (H1 2020: US$1.0
million of interest expense was capitalized within property, plant
and equipment in relation to flotation line at Pioneer).
Net other finance gains/(losses)
Net other finance gains for the period totaled US$4.7 million
compared to US$(98.9) million of net other finance losses in H1
2020. Key elements of other finance gains and losses this period
include:
- US$ 32.0 million fair value non-cash gain from re-measurement
of the conversion option of the convertible bonds, reflecting the
increase in the underlying share price of the Company;
- US$3.9 million net fair value gain on gold and currency option contracts;
- US$0.4 million gains on other items;
- US$(31.6) million fair value non-cash loss on the agreement for the sale of stake in IRC.
Net impairment reversals/ (impairment losses) on financial
instruments
In H1 2021, the group recognised a US$0.6 million decrease in
the provision for expected credit losses under Gazprombank
guarantee arrangements (H1 2020: US$1.3 million of provision for
expected credit losses).
Taxation
H1 2021 H1 2020
US$ million US$ million
----------- ----------- -----------
Tax charge 20 . 3 38.5
------------ ----------- -----------
The group is subject to corporation tax under the UK, Russia and
Cyprus tax legislation. The statutory tax rate for H1 2021 was 19%
in the UK and 20% in Russia.
The tax charge for the period primarily related to the group's
gold mining operations and is represented by a current tax charge
of US$17.3 million (H1 2020: US$25.1 million) and a deferred tax
charge, which is a non-cash item, of US$3.0 million (H1 2020:
US$13.4 million). Included in the deferred tax charge in H1 2021 is
a US$3.2 million credit (H1 2020: US$23.7 million charge) from the
effect of foreign exchange which primarily arises because the tax
base for a significant portion of the future taxable deductions in
relation to the group's property, plant and equipment are
denominated in Russian Roubles, whilst the future depreciation
charges associated with these assets will be based on their US
Dollar carrying value.
The effective tax rate was also affected by expenses that are
not taxable/deductible for tax purposes which primarily relate to
fair value gains/losses on re-measurement of the conversion option
of the Convertible Bonds and reversal of write-down/write-down of
investment in IRC to fair value less costs to sell, effect of tax
losses for which no deferred income tax asset was recognized which
primarily related to interest expense incurred in the UK and
Russian withholding tax on intercompany dividends.
During the period, the group made corporation tax payments in
aggregate of US$21.2 million in Russia (H1 2020: corporation tax
payments in aggregate of US$28.5 million in Russia).
Earnings per share
H1 2021 H1 2020
------------------------------------------- ----------------- -------------
Profit/(loss) for the period attributable
to equity holders of Petropavlovsk PLC US$44.5 million US$(23. 9 )
million
Weighted average number of Ordinary Shares 3,957,270,254 3,310,369,237
Basic profit/(loss) per ordinary share US$0.01 US$(0.01)
------------------------------------------- ----------------- -------------
Basic profit per share for H1 2021 was US$0.01 compared to
US$(0.01) basic loss per share for H1 2020.
The total number of Ordinary Shares in issue as at 30 June 2021
was 3,957,270,254 (30 June 2020: 3,312,825,822).
Financial position and cash flows
30 June 2021 31 December
2020
US$ million US$ million
--------------------------- ------------ -----------
Cash and cash equivalents 36.5 35.4
Notes (a) (502.6) (502.0)
Convertible bonds (b) (34.5) (34.0)
Bank loans (c) (35.0) -
Net Debt .. (535.6) (500.6)
--------------------------- ------------ -----------
( a) US$500 million Guaranteed Notes due on 14 November 2022 at
amortised cost.
(b) US$125 million convertible bonds due on 03 July 2024 at amortised
cost.
(c) Outstanding principal amount of revolving credit facility with
Gazprombank.
H1 2021 H1 2020
US$ million US$ million
---------------------------------------------- ----------- -----------
Net cash from operating activities 25.2 112.1
Net cash used in investing activities
( (d) () (59.3) (82.7)
Net cash from/(used in) financing activities 34.9 (2.0)
---------------------------------------------- ----------- -----------
(d) Including US$47.3 million Capital Expenditure (u) (H1 2020: US$59.6 million).
Key movements in cash and Net Debt (u)
Net Debt
Cash Debt (u)
US$ million US$ million US$ million
------------------------------------------- ----------- ----------- -----------
As at 1 January 2021 35.4 (536.0) (500.6)
Net cash generated by operating activities
before working capital changes 113.7
Changes in working capital (56.6)
Corporation tax paid (21.2)
Capital Expenditure (u) (47.3)
Capitalized stripping (12.6)
Proceeds from borrowings 35.0 (35.0)
Interest accrued (23.1)
Interest paid (24.5) (e) 22.0
Guarantee fee received 13.8
Interest received 0.2
Other 0.6
------------------------------------------- ----------- ----------- -----------
As at 30 June 2021 36.5 (572.1) (535.6)
------------------------------------------- ----------- ----------- -----------
(e) Including US$2.1 million interest paid in relation to
advance payments from Gazprombank.
Capital Expenditure ..
The group invested an aggregate of US$47.3 million in H1 2021
compared to US$59.6 million in H1 2020. The key areas of focus in
this period were on Pioneer and Malomir flotation and development
to support the mining at Elginskoye. The group capitalised US$1.6
million of interest expense incurred in relation to the group's
debt into the cost of the Pioneer flotation and Malomir 3rd line
flotation (H1 2020: US$1.0 million of interest expense incurred in
relation to the group's debt into the cost of the Pioneer
flotation).
Exploration Development Total
expenditure and other Capital Expenditure
capital expenditure ..
US$ million US$ million US$ million
-------------------------------- ------------ -------------------- --------------------------
POX - 1 . 5 1 . 5
Pioneer (a), (b) 0. 1 16 . 7 16 . 8
Malomir (c), (d), (e) 0.8 11 . 3 12 .0
Albyn (f) 2 . 9 1 0 . 8 1 3 . 7
Other 0.7 - 0.7
Corporate and in-house services - 2 . 6 2 . 6
4 . 4 42 . 9 47 . 3
-------------------------------- ------------ -------------------- --------------------------
(a) Including US$2.0 million of development expenditure in
relation to Pioneer Underground project to be sustaining capital
expenditure for the purposes of calculating AISC and AIC .
(b) Including US$11.4 million development expenditure in
relation to the Pioneer Flotation project (US$10.7 million of
expenditure in relation to flotation and US$0.7 million of
expenditure in relation to hydrotechnical storage facilities) to be
non-sustaining capital expenditure for the purposes of calculating
the AISC and AIC .
(c) Including US$0.6 million of development expenditure in
relation to Malomir Underground project to be sustaining capital
expenditure for the purposes of calculating AISC and AIC .
(d) Including US$2.3 million of development expenditure in
relation to Malomir 1st and 2nd lines Flotation (US$2.3 million of
expenditure in relation to hydrotechnical storage facilities) to be
sustaining capital expenditure for the purposes of calculating AISC
and AIC .
(e) Including US$5.7 million of development expenditure in
relation to Malomir 3rd line Flotation to be non-sustaining capital
expenditure for the purposes of calculating AISC and AIC .
(f) Including US$2.6 million of exploration expenditure in
relation to Elginskoye project, US$0.6 million of development
expenditure in relation to road between Elginskoye and Albyn
processing facilities and US$6.0 million of development expenditure
in relation to hydrotechnical storage facilities for Elginskoye
project to be sustaining capital expenditure for the purposes of
calculating AISC and AIC .
Foreign currency exchange differences
The group's principal subsidiaries have a US Dollar functional
currency. Foreign exchange differences arise on the translation of
monetary assets and liabilities denominated in foreign currencies,
which for the principal subsidiaries of the group are the Russian
Rouble and GB Pounds Sterling.
The following exchange rates to the US Dollar have been applied
to translate monetary assets and liabilities denominated in foreign
currencies.
30 June 2021 31 December 2020
------------------------- ------------ ----------------
GB Pounds Sterling (GBP:
US$) 0.72 0.73
Russian Rouble (RUB:
US$) 72.37 73.88
-------------------------- ------------ ----------------
The Rouble recovered by 2% against the US Dollar during H1 2021,
from RUB73.88: US$1 as at 31 December 2020 to RUB72.37: US$1 as at
30 June 2021. The average period-on-period depreciation of Rouble
against the US Dollar was approximately 7%, with the average
exchange rate for H1 2021 being RUB74.31: US$1 compared to RUB69.42
: US$1 for H1 2020.The Group recognised foreign exchange losses of
US$0.7 million in H1 2021 (H1 2020: US$26.7 million gains) arising
primarily on Rouble denominated net monetary liabilities (including
advance payments received from Gazprombank and Sberbank under gold
sales agreements).
Corporate activit ies
Guarantee over IRC's external borrowings
The group historically entered into an arrangement to provide a
guarantee over its associate's, IRC, external borrowings, the ICBC
Facility ('ICBC Guarantee'). Under the terms of the arrangement the
group was entitled to receive an annual fee equal to 1.75% of the
outstanding amount.
In March 2019, IRC refinanced the ICBC Facility through entering
into a US$240 million new facility with Gazprombank ('Gazprombank
Facility'). The facility was fully drawn down during the year ended
31 December 2019. The outstanding loan principal was US$194 million
as at 30 June 2021. A new guarantee was issued by the group over
part of the Gazprombank Facility ('Gazprombank Guarantee'), the
guarantee mechanism is implemented through a series of five
guarantees that fluctuate in value through the eight-year life of
the loan, with the possibility of the initial US$160 million
principal amounts guaranteed reducing to US$40 million within two
to three years, subject to certain conditions being met. For the
final two years of the Gazprombank Facility, the guaranteed amounts
will increase to US$120 million to cover the final principal and
interest repayments. If certain springing recourse events
transpire, including default on a scheduled payment, then full
outstanding loan balance is accelerated and subject to the
guarantee. Under the Gazprombank Guarantee arrangements, the
guarantee fee receivable is determined at each reporting date on an
independently determined fair value basis, which for the six months
ended 30 June 2021, 30 June 2020 and year ended 31 December 2020
was calculated at the annual rate of 3.07% by reference to the
average outstanding principal balance under Gazprombank Facility.
The guarantee fee charged for the six months ended 30 June 2021 was
US$3.1 million, with corresponding value of US$3.4 million after
reversal of provision for expected credit losses (30 June 2020:
US$3.4 million, with corresponding value of US$3.2 million after
provision for expected credit losses; 31 December 2020: US$6.7
million, with corresponding value of US$6.3 million after provision
for expected credit losses).
The following assets and liabilities have been recognised in
relation to the ICBC Guarantee and Gazprombank Guarantee as at 30
June 2021 and 31 December 2020:
31 December
30 June 2021 2020
US$ million US$ million
-------------------------------------------- ------------- ------------
Other receivables - ICBC Guarantee - 0.0
Other receivables - Gazprombank Guarantee 1.5 11.9
Financial guarantee contract - Gazprombank
Guarantee (a) (7.7) (8.2)
-------------------------------------------- ------------- ------------
(a) Classified as <<held for sale>> and presented
separately in the statement of financial position as at 30 June
2021 and 31 December 2020.
P otential disposal of interest in IRC
During the period , the group has continued to explore disposal
options for the interest in IRC and further engaged with several
parties to dispose of the equity holding and release the group's
obligation to guarantee IRC's external debt under the Gazprombank
Facility (note 2 1 ). Following negotiations with several
interested parties the directors resolved to approve th e potential
disposal of 29.9% investment in IRC. In the opinion of the
directors it is highly probable this disposal to be completed
within 12 months after the reporting date and accordingly, 29.9%
investment in IRC together with the financial guarantee contract
were considered to be a disposal group held-for sale under IFRS 5
"Non-current Assets Held for
Sale and Discontinued Operations" as at 3 0 June 202 1 .
T ender offer to purchase up to US$200 million maximum tender
amount of outstanding US$500 million 8.125 per cent Guaranteed
Notes
On 13th July 2021 the Company announced that its wholly-owned
subsidiary, Petropavlovsk 2016 Limited announced the launch of its
offer to purchase for cash up to US$200 million aggregate principal
amount of its 8.125 per cent Guaranteed Notes due 2022.
Tender offer is financed via Gazprombank loan facility with a
total limit of US$200 million, that was consequently entered in
July 2021 with an interest rate significantly lower than the Notes.
Gazprombank loan repayment schedule is US$66 million in December
2022, US$66 million in March 2023 and remaining balance in June
2023.
On 10 August 2021, Petropavlovsk 2016 Limited announced the
final tender results-- US$135,731,000 aggregate principal amount of
the Notes were validly tendered.
Going concern
Please refer to the note 2 to the group's consolidated financial
statements for the six months ended 30 June 2021.
2021 Outlook
Production outlook is on track to meet the full year target of
430 - 470koz of gold in 2021. The group expects own metal TCC in
2021 to be in the range of US$870 - US$970/oz, excluding
third-party concentrate as the pricing of concentrate depends on
highly volatile gold price.
Principal Risks and Uncertainties
The Group is exposed to a variety of risks and uncertainties
which could significantly affect its business and financial
results. A detailed review of the key risks facing the Group is set
out in the Principal Risks section on pages 68 to 75 of the 2020
Annual Report, which is available on the Group's website,
http://www.petropavlovskplc.com. This also includes a description
of the potential impact of such risks on the Group together with
measures in place to manage or mitigate against each specific risk
where this is within the Group's control.
The nature of the principal risks and uncertainties facing the
Group for the remainder of the current financial year remains
substantially unchanged. An update on these risks and events in H1
2021 relevant to them, including any new or emerging factors within
the context of existing risks, is set out below.
There may be additional risks unknown to the Group and other
risks, currently believed to be immaterial, which could turn out to
be material. These risks, whether they materialize, individually or
simultaneously, could significantly affect the Group's business and
financial results. The Group will continue to monitor internal and
external areas of uncertainty and threat closely as well as remain
vigilant on internal controls and incorporate any further
developments as part of the full-year assessment of principal risks
and uncertainties. Without limiting the generality of the
foregoing, an extensive independent environmental review to be
conducted in H2 2021 could potentially uncover additional risks
that the Group will need to address.
Below is indication of events relevant to our principal risks
that have occurred during the first six months of 2021:
Operational risks
-- 3rd-party concentrate gold production decreased in H1 2021
due to lower volumes and grades of concentrate available for
purchase;
-- The Pioneer flotation plant was commissioned in May 2021,
with an expected capacity of 60kt of concentrate in 2021 and 100kt
in 2022.
-- Anomalous torrential rains led to flooding in some parts of
Amur region causing some logistical issues and interruption to
production, all of which were minor in effect.
-- Inflation in Russia in June 2021 reached 6.5% per annum,
affecting some of the Company's supplies, none of which was
critical.
The Company has also identified the risk of lowering production
performance due to processing new types of ore as an emerging
operational risk for the business. In H1 2021, the Company began
processing ore from Elginskoye. The ore mined at Elginskoye is of a
lower grade than that previously mined from the Albyn deposit, and,
as a result recovery rates and mill grinding capacity may be
reduced, resulting in operational under-performance and higher
cost. As announced in April 2021, exploration and metallurgical
surveys are underway at Elginskoye to complete full-scale mapping
of the deposit and may result in updates to the Company's
production plans. The Company continues to expect to meet its
production forecasts for 2021.
Financial risks
-- The Company completed the partial buy-back of its U.S.$500m
8.125% guaranteed notes due in 2022, purchasing c.US$136m of the
outstanding U.S.$500m Notes using the proceeds of a term loan
facility with Gazprombank which matures some six months later than
and bears interest at a lower rate than that payable in respect of
the U.S.$500m Notes.
-- The property insurance previously maintained by the Company
in respect of its facilities expired in the first half of 2021 and
was not automatically renewed due to concerns that the insurance
had not been procured at market rates. The Company is in the course
of tendering for the provision of property and other insurances and
expects this process to be completed and the real assets insured in
September 2021. In the interim, there remains a risk that, in the
event that an event occurs at one of the facilities the costs of
which might have been expected to be recoverable from its insurers,
such costs will be borne by the Company without recourse to
insurance. All insurances mandated by law in Russia are in
place.
Country and regional risks
-- In June 2021, KPMG LLP published its interim report pursuant
to 'Resolution 19' identifying several potential issues with
transactions involving the Company with an estimated value of
US$157 million. These issues include transactions with potentially
undisclosed related parties and likely conflicts of interest.
Sustainability risks
-- The Company published its 2020 sustainability report in July
2021, highlighting key sustainability initiatives across the
business.
-- No fatal accidents and zero environmental incidents were
reported in H1 2021. The Group has strengthened its health and
safety and environmental teams through the employment of new field
specialists aiming to bring best practice and expertise.
-- No material COVID-19 outbreaks took place at the Company's
operations in H1 2021. As of 30 June 2021, 28% of employees at the
Group's operating subsidiaries have been fully vaccinated (47.3% at
23 August 2021). Nonetheless, the risk posed by the Covid-19
pandemic remains high.
The Company continues to monitor its principal risks.
Director's Responsibilities Statement
We confirm that to the best of our knowledge:
-- The condensed set of consolidated interim financial
statements has been prepared in accordance with UK-adopted IAS34
"Interim Financial Reporting" as required by DTR4.2.4R
-- The interim management report includes a fair review of the
information required by DTR4.2.7R (indication of important events
during the first six months and their impact on the condensed set
of financial statements and a description of principal risks and
uncertainties for the remaining six months of the financial year);
and
-- The interim management report includes a fair review of the
information required on related party transactions as required by
DTR4.2.8R
By order of the Board,
Denis Alexandrov Danila Kotlyarov
Chief Executive Officer Chief Financial Officer
31 August 2021
Independent Review Report to Petropavlovsk PLC
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed Petropavlovsk plc's condensed consolidated
interim financial statements (the "interim financial statements")
in the Interim financial report of Petropavlovsk plc for the 6
month period ended 30 June 2021 (the "period").
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the condensed consolidated balance sheet as at 30 June 2021;
-- the condensed consolidated statement of profit and loss and condensed consolidated
-- statement of comprehensive income for the period then ended;
-- the condensed consolidated statement of cash flows for the period then ended;
-- the condensed consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the Interim
financial report of Petropavlovsk plc have been prepared in
accordance with UK adopted International Accounting Standard 34,
'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The Interim financial report, including the interim financial
statements, is the responsibility of, and has been approved by the
directors. The directors are responsible for preparing the Interim
financial report in accordance with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the Interim financial report based on our
review. This report, including the conclusion, has been prepared
for and only for the company for the purpose of complying with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Interim
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
MHA MacIntyre Hudson
Chartered Accountants
London
31 August 2021
Condensed Consolidated Interim Financial Statements and
Notes to the Condensed Consolidated Interim Financial
Statements
PETROPAVLOVSK PLC
Condensed Consolidated Statement of Profit or Loss
Six months ended 30 June 2021
Six months Six months Year ended
ended ended
31 December
30 June 2021 30 June 2020 2020
(unaudited) (unaudited)
note US$'000 US$'000 US$'000
-------------------------------------------- ---- ------------- ------------- ------------
Group revenue 5 351 ,945 522,731 988,534
(30 3 , 652
Operating expenses 6 ) (378,440) (840,494)
- Operating profit 4 8 , 293 144,291 148,040
- Share of results of associate 12 1,216 1,845 52,681
- Reversal of write-down/(write-down)
to adjust the carrying value
of net assets of disposal group
to fair value less costs to sell 12 34,874 - (55,798)
Net impairment reversals / (impairment
losses) on financial instruments 7 1,056 (1,274) 1,000
Investment and other finance
income 7 3,266 3,962 7,754
Interest expense 7 (24,252) (33,383) (58,533)
Net other finance gains/(losses) 7 4,683 (98,893) (67,957)
-------------------------------------------- ---- ------------- ------------- ------------
Profit before taxation 69,136 1 6 , 548 27,187
Taxation 8 (20,257) (38,542) (76,069)
-------------------------------------------- ---- ------------- ------------- ------------
Profit/(loss) for the period 48,879 (21,994) (48,882)
-------------------------------------------- ---- ------------- ------------- ------------
Attributable to:
Equity shareholders of Petropavlovsk
PLC 44,543 (23 , 934) (45,633)
Non-controlling interests 4 ,336 1,940 (3,249)
-------------------------------------------- ---- ------------- ------------- ------------
Earnings per share
US$0.01 US$ ( 0.01 US$(0.01)
Basic profit/(loss) per share 9 )
US$0.01 US$ ( 0.01 US$(0.01)
Diluted profit/(loss) per share 9 )
-------------------------------------------- ---- ------------- ------------- ------------
PETROPAVLOVSK PLC
Condensed Consolidated Statement of Comprehensive Income
Six months ended 30 June 2021
Six months Six months Year ended
ended ended 31 December
30 June 2021 30 June 2020 2020
(unaudited) (unaudited)
US$'000 US$'000 US$'000
---------------------------------------------------- -------------- -------------- -------------
Profit/(loss) for the period 48,879 (21,994) (48,882)
----------------------------------------------------- -------------- -------------- -------------
- Items that may be reclassified subsequently
to profit or loss:
---------------------------------------------------- -------------- -------------- -------------
Exchange differences:
Exchange differences on translating foreign
operations 400 (2,261) (3,029)
Share of other comprehensive (loss)/
profit of associate (75) 42 5 902
325 (1,836) (2,127)
---------------------------------------------------- -------------- -------------- -------------
Total comprehensive profit / (loss) for
the period 49,204 (23,830) (51,009)
----------------------------------------------------- -------------- -------------- -------------
Attributable to:
Equity shareholders of Petropavlovsk PLC 44,868 (25,770) (47,760)
Non-controlling interest s 4,336 1,940 (3,249)
----------------------------------------------------- -------------- -------------- -------------
49,204 (23,830) (51,009)
---------------------------------------------------- -------------- -------------- -------------
PETROPAVLOVSK PLC
Condensed Consolidated Statement of Financial Position
At 30 June 2021
30 June 2021 30 June 2020 31 December
2020
(unaudited) (unaudited)
note US$'000 US$'000 US$'000
------------------------------------- ----------------- ------------- ------------- ------------
- Assets
Non-current assets
Exploration and evaluation assets 10 14,320 57,751 45,182
Property, plant and equipment 11 1,231,671 1,219,716 1,204,550
Investments in associate 12 5,077 5 0 , 950 3,936
Inventories 13 89,663 64,556 86,186
Trade and other receivables 1 4 354 578 481
Derivative financial instruments 16 - 2,730 -
Other non-current assets 892 763 893
1,341,977 1,397, 0 44 1,341,228
------------------------------------- ----------------- ------------- ------------- ------------
Current assets
Inventories 1 3 230,895 221,554 196,668
Trade and other receivables 1 4 69,485 86,827 98,551
Current tax assets 18,150 10,535 13,312
Derivative financial instruments 16 1,397 37,647 3,320
Cash and cash equivalents 1 5 36,536 73,458 35,404
------------------------------------- ----------------- ------------- ------------- ------------
356,463 430,021 347,255
------------------------------------- ----------------- ------------- ------------- ------------
Assets of disposal group classified
as held for sale 12 77,403 - 42,529
------------------------------------- ----------------- ------------- ------------- ------------
433 ,866 430,021 389,784
------------------------------------- ----------------- ------------- ------------- ------------
Total assets 1,775,843 1,827,065 1,731,012
------------------------------------- ----------------- ------------- ------------- ------------
Liabilities
Current liabilities
(15 6 ,
Trade and other payables 1 7 127 ) (229,648) (191,139)
Current tax liabilities (433) (2,138) (144)
Borrowings 1 8 (35,000) - -
Derivative financial instruments 1 6 (32,200) (3,168) (6,072)
Provision for close down and
restoration costs (34) - (34)
Lease liabilities (1,428) (2,473) (1,895)
(225,222) (237,427) (199,284)
------------------------------------- ----------------- ------------- ------------- ------------
Liabilities of disposal group
associated with assets classified
as held for sale 12 (7,663) - (8,232)
------------------------------------- ----------------- ------------- ------------- ------------
(232,885) (237,427) (207,516)
------------------------------------- ----------------- ------------- ------------- ------------
Net current assets 200,981 192,594 182,268
------------------------------------- ----------------- ------------- ------------- ------------
Non-current liabilities
Borrowings 1 8 (537,094) (611 , 436) (536,020)
Derivative financial instruments 1 6 (57,095) (171,939) (89,088)
Deferred tax liabilities (143,034) (126,045) (140,034)
Provision for close down and
restoration costs (70,948) (36,616) (70,515)
Financial guarantee contract 2 1 - (10,199) -
Trade and other payables 17 (10,583) (19,473) (13,950)
Lease liabilities (3,044) (2,144) (2,248)
------------------------------------- ----------------- ------------- ------------- ------------
(821,798) (977,852) (851,855)
------------------------------------- ----------------- ------------- ------------- ------------
Total liabilities ( 1,054,683) (1,215,279) (1,059,371)
------------------------------------- ----------------- ------------- ------------- ------------
Net assets 721,160 611,786 671,641
------------------------------------- ----------------- ------------- ------------- ------------
Equity
Share capital 1 9 57,464 49,035 57,464
Share premium 596,713 518,142 596,713
Share based payments reserve 349 - 34
Translation reserves (18,507) (18,139) (18,907)
Retained earnings 73,598 50,352 29,130
------------------------------------- ----------------- ------------- ------------- ------------
Equity attributable to the
shareholders of Petropavlovsk
PLC 709,617 599,390 664,434
------------------------------------- ----------------- ------------- ------------- ------------
Non-controlling interests 11,543 12,396 7,207
------------------------------------- ----------------- ------------- ------------- ------------
Total equity 721,160 611,786 671,641
------------------------------------- ----------------- ------------- ------------- ------------
These condensed consolidated financial statements for
Petropavlovsk PLC, registered number 4343841, were approved by the
Directors on 30 August 2021 and signed on their behalf by
Denis Alexandrov Danila Kotlyarov
Chief Executive Officer Chief Financial Officer
PETROPAVLOVSK PLC
Condensed Consolidated Statement of Changes in Equity
Six months ended 30 June 2021
Total attributable to equity holders of Petropavlovsk
PLC
Share
based Retained
Share Share payments Hedging Translation earnings/ Non-controlling Total
capital premium reserve reserve reserve (losses) Total interests equity
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
--------------- -------- -------- --------- -------- ------------ ---------- --------- ---------------- ---------
Balance
at 1 January ( 15,878
2020 49,003 518,142 199 - ) 73,605 625,071 10, 456 635,527
---------------- -------- -------- --------- -------- ------------ ---------- --------- ---------------- ---------
Total
comprehensive
(loss)/profit - - - - (2,261) (23,509) (25,770) 1,940 (23,830)
---------------- -------- -------- --------- -------- ------------ ---------- --------- ---------------- ---------
Profit/(loss)
for
the period - - - - - (23,934) (23,934) 1,940 (21,994)
Other
comprehensive
(loss)/profit - - - - (2,261) 425 (1,836) - (1,836)
---------------- -------- -------- --------- -------- ------------ ---------- --------- ---------------- ---------
Deferred share
awards 32 - (199) - - 256 89 - 89
Balance
at 30 June
2020
(unaudited) 49,035 518,142 - - (18,139) 50,352 599,390 12,396 611,786
---------------- -------- -------- --------- -------- ------------ ---------- --------- ---------------- ---------
Total
comprehensive
loss - - - - (768) (21,222) (21,990) (5,189) (27,179)
---------------- -------- -------- --------- -------- ------------ ---------- --------- ---------------- ---------
Loss for the
period - - - - - (21,699) (21,699) (5,189) (26,888)
Other
comprehensive
(loss)/profit - - - - (768) 477 (291) - (291)
---------------- -------- -------- --------- -------- ------------ ---------- --------- ---------------- ---------
Conversion of
convertible
bonds 8,429 78,571 - - - - 87,000 - 87,000
Deferred share
awards - - 34 - - - 34 - 34
Balance
at 31 December
2020 57,464 596,713 34 - (18,907) 29,130 664,434 7,207 671,641
---------------- -------- -------- --------- -------- ------------ ---------- --------- ---------------- ---------
Total
comprehensive
profit - - - - 400 44,468 44,868 4,336 49,204
---------------- -------- -------- --------- -------- ------------ ---------- --------- ---------------- ---------
Profit for the
period - - - - - 44,543 44,543 4,336 48,879
Other
comprehensive
profit/(loss) - - - - 400 (75) 325 - 325
---------------- -------- -------- --------- -------- ------------ ---------- --------- ---------------- ---------
Deferred share
awards - - 315 - - - 315 - 315
---------------- -------- -------- --------- -------- ------------ ---------- --------- ---------------- ---------
Balance
at 30 June 20
2
1 (unaudited) 57,464 596,713 349 - (18,507) 73,598 709,617 11,543 721,160
---------------- -------- -------- --------- -------- ------------ ---------- --------- ---------------- ---------
PETROPAVLOVSK PLC
Condensed Consolidated Statement of Cash Flows
Six months ended 30 June 20 2 1
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2020
20 21 2020
(unaudited) (unaudited)
note US$'000 US$'000 US$'000
--------------------------------------------- ------------------ ------------- ------------- --------------
- Cash flows from operating activities
17 2 ,7
Cash generated from operations 20 57,134 58 265,860
(32, 149
Interest paid (24,453) ) (58,086)
Guarantee fee received 21 13,810 - 5,000
(28,5 13
Income tax paid (21,247) ) (56,472)
--------------------------------------------- ------------------ ------------- ------------- --------------
Net cash from operating activities 25,244 112 , 096 156,302
--------------------------------------------- ------------------ ------------- ------------- --------------
Cash flows from investing activities
Purchase of property, plant and
equipment 20 (58,413) (78,618) (151,503)
Expenditure on exploration and
evaluation assets 10 (1,490) (4,648) (8,829)
Proceeds from disposal of property,
plant and equipment 373 57 194
Interest received 215 558 1,065
Net cash used in investing activities (59,315) (82,651) (159,073)
--------------------------------------------- ------------------ ------------- ------------- --------------
Cash flows from financing activities
Exercise of gold options 16 (284) - (1,525)
Exercise of currency options 16 648 677 1,389
Exercise of other options 16 - (999) (999)
Proceeds from borrowings 18 35,000 - -
Principal elements of lease payments (447) (1,655) (3,493)
Bond solicitation expenses - - (1,705)
Net cash from/(used in) financing ( 1 , 977
activities 34,917 ) (6,333)
--------------------------------------------- ------------------ ------------- ------------- --------------
Net increase/(decrease) in cash
and cash equivalents in the period 846 27 , 4 68 (9,104)
Effect of exchange rates on cash
and cash equivalents 286 (2,163) (3,645)
Cash and cash equivalents at
beginning of period 1 5 35,404 48,153 48,153
Cash and cash equivalents at
end of period 1 5 36,536 73,458 35,404
--------------------------------------------- ------------------ ------------- ------------- --------------
PETROPAVLOVSK PLC
Notes to the condensed consolidated interim financial
statements
Six months ended 30 June 2021
- 1. General information
Petropavlovsk PLC (the 'Company') is a company incorporated and
registered in England and Wales. The address of the registered
office is 11 Grosvenor Place, London SW1X 7HH.
These condensed consolidated interim financial statements are
for the six months ended 30 June 202 1 . The interim financial
statements are unaudited.
These condensed interim financial statements do not constitute
statutory accounts within the meaning of section 434 of the
Companies Act 2006. Statutory accounts for the year ended 31
December 2020 were approved by the board of directors on 16 May
2021 and delivered to the Registrar of Companies. The report of the
auditors on those accounts was unqualified, did not contain an
emphasis of matter paragraph and did not contain any statement
under section 498 of the Companies Act 2006.
- 2. Basis of preparation and presentation
The interim condensed consolidated financial statements of the
Company and its subsidiaries (the "group") for the six-month
reporting period ended 30 June 2021 have been prepared in
accordance with the UK-adopted International Accounting Standard 34
'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority. The interim condensed consolidated financial
statements do not include all of the information and disclosures
required in the annual financial statements and should be read in
conjunction with the Group's annual financial statements for the
year ended 31 December 2020.
The condensed consolidated set of financial statements has been
prepared using accounting policies consistent with those set out in
the annual financial statements for the year ended 31 December
2020, which had been prepared in accordance with both
"International Accounting Standards in conformity with the
requirements of the Companies Act 2006" and "International
Financial Reporting Standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union".
Going concern
The group monitors and manages its liquidity risk on an ongoing
basis to ensure that it has access to sufficient funds to meet its
obligations. Cash forecasts are prepared regularly based on a
number of inputs including, but not limited to, forecast commodity
prices and the impact of hedging arrangements, the group's mining
plan, forecast expenditure and debt repayment schedules.
Sensitivities are run for different scenarios including, but not
limited to, changes in commodity prices, cost inflation, different
production rates from the group's producing assets and the timing
of expenditure on development projects. This is done to identify
risks to liquidity and enable management to develop appropriate and
timely mitigation strategies. The group meets its capital
requirements through a combination of sources including cash
generated from operations, advances received from customers under
prepayment arrangements and external debt.
The group performed an assessment of the forecast cash flows for
the period of at least 12 months from the date of approval of the
2021 Half-Year Report and Accounts. As at 30 June 2021, the group
had sufficient liquidity. The group is also satisfied that it has
sufficient headroom under a base case scenario for the period till
end of 2022. The group has also performed projections under a
layered stressed case that is based on:
_ A gold price, which is approximately 10% lower than the upper
quartile of the average of the market consensus forecasts;
_ Processing of 3rd-party concentrate through POX facilities is
approximately 10% lower than projected and oxide gold production
from underground operations at Pioneer and Malomir approximately
10% lower than projected;
_ Delayed commissioning of the Malomir third flotation line beyond 2022; and
_ Russian Rouble : US Dollar exchange rate that is approximately
10% stronger than the average of the market consensus
forecasts.
In selecting these scenarios, the directors have also considered
the potential impacts of COVID-19 . On the basis of the limited
impact of Covid-19 on the Company's and IRC's operations in 2020
and comprehensive measures for 2021, management currently doesn't
anticipate Covid-19 to be a material risk and hence doesn't stress
the Going Concern model for its impact.
This layered stressed case indicates that mitigating actions
will be required to be taken in order to ensure sufficient
liquidity for the relevant period till end of 2022.
The mitigated downside case includes the following mitigating
actions:
-- Reduction of group central administrative expenses by US$6
million in 2022. This estimated reduction has been applied in 2021
budget in the second half of 2021. We assume that a similar saving
can be achieved in 2022;
-- Postponing capital expenditures from September 2021 beyond
the going concern period. This includes exploration, maintenance
and third flotation lines at both Malomyr and Pioneer. Since the
launch of the third Malomir flotation line in the RWC scenario is
moved beyond the going concern period, reduction of the relevant
capital expenditures does not affect production capacity within the
going concern period;
-- Postponing mining works planned as deferred stripping in
2022. These do not affect gold production in the going concern
period;
-- Borrowings of up to US$25 million using a revolving credit
line with a limit of c.US$116 million.
Having taken into account the aforementioned factors, and after
making enquiries and considering the uncertainties described above,
the directors have a reasonable expectation that the group will
have adequate resources to continue in operational existence for
the foreseeable future, being at least the next 12 months from the
date of approval of the 2021 Half-year Report and Accounts.
Accordingly, they continue to adopt the going concern basis of
accounting in preparing these consolidated financial
statements.
A doption of new and revised standards and interpretations
During the period the group adopted all standards, amendments
and interpretations that were effective for annual periods
beginning on or after 1 January 2021 (such standards, amendments
and interpretations were disclosed in note 2 to the group's
consolidated financial statements for the year ended 31 December
2020). These standards, amendments, and interpretations have not
had a significant impact on the presentation or disclosure in
group's condensed consolidated financial statements for the interim
period ended 30 June 2021. No other changes have been made to the
group's accounting policies in the period ended 30 June 2021.
Additional disclosures with respect to the annual period
requirements will be included in the Group's consolidated financial
statements for the year ending 31 December 2021.
Areas of judgement in applying accounting policies and key
sources of estimation uncertainty
When preparing the consolidated financial statements, management
necessarily makes judgements and estimates that can have a
significant impact on the financial statements. Areas of judgement
in applying accounting policies and key sources of estimation
uncertainty are consistent with those set out in the annual
financial statements for the year ended 31 December 2020 .
- 3. Foreign currency translation
The following exchange rates to the US dollar have been applied
to translate balances and transactions in foreign currencies:
Average Average
As at six months six months Average
30 June ended As at ended As at year ended
20 2 30 June 30 June 30 June 31 December 31 December
1 20 21 2020 2020 2020 2020
GB Pounds Sterling (GBP:
US$) 0.72 0.72 0.81 0.79 0.73 0.78
Russian Rouble (RUB:
US$) 72.37 74.31 69.95 69.42 73.88 72.18
- 4. Segment information
The group's reportable segments under IFRS 8, which are aligned
with its operating locations, were determined to be Pioneer,
Malomir and Albyn hard rock gold mines which are engaged in gold
and silver production as well as field exploration and mine
development. POX Hub facilities are allocated between Pioneer,
Malomir and Albyn reportable segments based on the expected use by
each segment.
Corporate and Other segment amalgamates corporate
administration, in-house geological exploration and construction
and engineering expertise, engineering and scientific operations
and other supporting in-house functions as well as various gold
projects and other activities that do not meet the reportable
segment criteria.
Reportable segments are based on the internal reports provided
to the Chief Operating Decision Maker ('CODM') to evaluate segment
performance, decide how to allocate resources and make other
operating decisions and reflect the way the group's businesses are
managed and reported.
The financial performance of the segments is principally
evaluated with reference to operating profit less foreign exchange
impacts.
Six months ended 30 June 20 2 1 Corporate
Pioneer Malomir Albyn and other Consolidated
US$'000 US$'000 US$'000 US$'000 US$'000
------------------------------------------- ---------- ---------- --------- ----------- ---------------
Revenue
Gold 134,742 125,360 75,681 - 335,783
Silver - - - - -
Other external revenue - - - 16,162 16,162
Inter segment revenue 18,185 199 20 60,464 78,868
Intra group eliminations (18,185) (199) (20) (60,464) (78,868)
------------------------------------------- ---------- ---------- --------- ----------- ---------------
Total group revenue from external
customers 134,742 125,360 75,681 16,162 351,945
------------------------------------------- ---------- ---------- --------- ----------- ---------------
Operating expenses and income
Operating cash costs (100,303) (57,458) (33,002) (18,778) (209,541)
Depreciation (22,694) (27,279) (11,495) (1,513) (62,981)
(2 9 (2 9
, 579 , 579
Central administration expenses - - - ) )
Write-down of inventory to net realisable
value - - (31) (114) (145)
I mpairment of gold in circuit - (700) - - (700)
(85,437 (44,52
Total operating expenses ( (a) () (122,997) ) 8 ) (49,984) (302,946)
------------------------------------------- ---------- ---------- --------- ----------- ---------------
11,74
Segment result 5 39,923 31,153 (33,822) 48,999
------------------------------------------- ---------- ---------- --------- ----------- ---------------
(70 6
Foreign exchange losses )
------------------------------------------- ---------- ---------- --------- ----------- ---------------
4 8 ,
Operating profit 293
Share of results of associate 1,216
Reversal of write-down to adjust the
carrying value of net assets of disposal
group to fair value less costs to
sell 34,874
Net impairment reversals on financial
instruments 1,056
Investment and other finance income 3,266
Interest expense (24,252)
Net other finance gains 4,683
Taxation (20,257)
------------------------------------------- ---------- ---------- --------- ----------- ---------------
Profit for the period 48, 879
------------------------------------------- ---------- ---------- --------- ----------- ---------------
32
6 14 602 7 , 151,8
Segment assets , 805 , 269 199 20 1,696,093
Unallocated cash 2,347
Consolidated total assets 1,698,440
------------------------------------------- ---------- ---------- --------- ----------- ---------------
(a) Operating expenses excluding foreign exchange losses (note 6).
Six months ended 30 Corporate
June 2020 Pioneer Malomir Albyn and other Consolidated
US$'000 US$'000 US$'000 US$'000 US$'000
---------------------- ------------------- ----------------- ---------------- -------------- --------------------
Revenue
Gold 258,378 136,404 117,553 - 512,335
Silver - - - - -
Other external
revenue - - - 10,396 10,396
Inter segment revenue 17,169 179 6,633 71,166 95,147
Intra group
eliminations (17,169) (179) (6,633) (71,166) (95,147)
---------------------- ------------------- ----------------- ---------------- -------------- --------------------
Total group revenue
from external
customers 258,378 136,404 117,553 10,396 522,731
---------------------- ------------------- ----------------- ---------------- -------------- --------------------
Operating expenses
and income
(19 9 (42, (1 2 (3 19
, 104 (65, 560 , 679 , 872
Operating cash costs ) 529 ) ) ) )
(22,9 (1,12 (64,6
Depreciation 87 ) (23,941) (16,607) 5 ) 60 )
Central
administration ( 20 ( 20 ,
expenses - - - , 6 71) 6 71)
Reversal of
impairment of ore
stockpiles - 15 - - 15
Reversal of
impairment of gold
in
circuit - 38 - - 38
(22 2 (5 9 (3 4 (40 5
Total operating , 091 (89, , 16 , 475 , 150
expenses ( (b) () ) 417 ) 7) ) )
---------------------- ------------------- ----------------- ---------------- -------------- --------------------
4 6 , 58,
Segment result 36, 287 987 38 6 (24,079) 117,581
---------------------- ------------------- ----------------- ---------------- -------------- --------------------
Foreign exchange 2 6 ,
gains 710
---------------------- ------------------- ----------------- ---------------- -------------- --------------------
Operating profit 144,291
Share of results of
associate 1 , 845
Net impairment losses
on financial
instruments (1,274)
Investment and other
finance income 3,962
(33,3
Interest expense 83 )
( 98
Net other finance , 893
losses )
(3 8
, 542
Taxation )
---------------------- ------------------- ----------------- ---------------- -------------- --------------------
(2 1 ,
Loss for the period 994 )
---------------------- ------------------- ----------------- ---------------- -------------- --------------------
622, 665, 2 19
Segment assets 174 757 313,567 , 735 1,821,233
Unallocated cash 5,832
Consolidated total 1,82 7
assets , 065
---------------------- ------------------- ----------------- ---------------- -------------- --------------------
(b) Operating expenses excluding foreign exchange gains (note 6).
2020 Pioneer Malomir Albyn Corporate Consolidated
and other
US$'000 US$'000 US$'000 US$'000 US$'000
----------------------------------- ---- ---------- ---------- ---------- ----------- -------------
Revenue
Gold 486,207 247,921 221,244 - 955,372
Silver 338 100 196 - 634
Other external revenue - - - 32,528 32,528
Inter segment revenue 32,694 380 23,104 143,425 199,603
( 23,104
Intra group eliminations (32,694) ( 380 ) ) (143,425) (199,603)
------------------------------------ --- ---------- ---------- ---------- ----------- -------------
Total group revenue from external
customers 486,545 248,021 221,440 32,528 988,534
------------------------------------ --- ---------- ---------- ---------- ----------- -------------
Operating expenses and income
Operating cash costs (366,677) (106,959) (92,307) (35,497) (601,440)
Depreciation (49,824) (53,771) (27,969) (2,515) (134,079)
Central administration expenses - - - (61,371) (61,371)
I impairment of mining assets - - (58,806) - (58,806)
Impairment of exploration
and evaluation assets - - (16,112) - (16,112)
Impairment of gold in circuit (77) - - - (77)
Impairment of bullion in process (41) - - - (41)
Write-down of inventory to
net realisable value - - - (1,215) (1,215)
Total operating expenses (c) (416,619) (160,730) (195,194) (100,598) (873,141)
------------------------------------ --- ---------- ---------- ---------- ----------- -------------
Segment result 69,926 87,291 26,246 (68,070) 115,393
------------------------------------ --- ---------- ---------- ---------- ----------- -------------
Foreign exchange gains 32,647
------------------------------------ --- ---------- ---------- ---------- ----------- -------------
Operating profit 148,040
Share of results of associate 52,681
Write-down to adjust the carrying
value of net assets of disposal
group to fair value less costs
to sell (55,798)
Net impairment reversals on
financial instruments 1,000
Investment and other finance
income 7,754
Interest expense (58,533)
Net other finance losses (67,957)
Taxation (76,069)
------------------------------------ --- ---------- ---------- ---------- ----------- -------------
Loss for the year (48,882)
Segment assets 619,004 603,684 312,678 149,698 1,685,064
Unallocated cash 3,419
Consolidated total assets 1,688,483
------------------------------------ --- ---------- ---------- ---------- ----------- -------------
(c) Operating expenses excluding foreign exchange gains (note 6).
5. Group revenue
Six months Six months Year ended
ended ended 31 December
30 June 2021 30 June 2020 2020
US$'000 US$'000 US$'000
----------------------------------------- -------------- -------------- --------------
Sales of goods:
Gold 335,783 512,335 955,372
Silver - - 634
Other goods 9,837 3,976 19,664
Rendering of services:
Engineering and construction contracts 5,087 5,036 10,390
Other services 880 1,042 1,897
Rental income 358 342 577
351,945 522,731 988,534
----------------------------------------- -------------- -------------- --------------
Timing of revenue recognition:
At a point in time 345,620 516,311 975,670
Over time 6,325 6,420 12,864
----------------------------------------- --------------
351,945 522,731 988,534
6. Operating expenses and income
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2020 2020
202 1 US$'000 US$'000
US$'000
------------------------------------------- ----------- -------------- --------------
Net operating expenses (a) 272,522 38 4 , 532 735,519
I mpairment of mining assets and
in-house service (a) - - 58,806
Impairment of exploration and evaluation
assets(a) - - 16,112
Write-down of inventory to net realisable
value 145 - 1,215
R eversal of impairment of ore stockpiles
(a) - (15) -
Impairment/(reversal of impairment)
of gold in circuit 700 (38) 77
Impairment of bullion in process - - 41
Central administration expenses
(a) 29,579 20 , 6 71 61,371
(26, 710
Foreign exchange losses / (gains) 706 ) (32,647)
30 3 , 652 37 8 , 440 840,494
------------------------------------------- ----------- -------------- --------------
(a) As set out below.
Net operating expenses
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2020 2020
202 1 US$'000 US$'000
US$'000
Depreciation 62,981 64,660 134,079
Staff costs 51,179 45,178 88,492
Materials 45,428 42,277 88,623
Flotation concentrate purchased 49,175 130,175 201,647
Fuel 16,360 17,652 29,565
External services 26,698 18,941 43,095
Mining tax charge 18,351 15,238 33,796
Electricity 15,927 17,779 33,880
Smelting and transportation costs 276 466 777
Movement in ore stockpiles, work
in progress , bullion in process
, limestone and flotation concentrate
attributable to gold production (44,211) 9,297 29,962
Taxes other than income 3,975 4,238 7,962
Insurance 684 2,225 3,641
Rental fee 1,187 1,6 09 2,861
( R eversal of provision)/provision
for impairment of trade and other
receivables (230) (27) 650
Bank charges 853 553 1,088
Repair and maintenance 1,801 2,860 5,061
Security services 1,979 2,265 4,424
Travel expenses 731 606 1,284
Goods for resale 7,856 2,673 11,068
Other operating expenses 11, 522 5,867 13,564
272,52 2 38 4 , 532 735,519
Central administration expenses
Six months Six months Year ended
ended ended 31 December
30 June 2021 30 June 2020 2020
US$'000 US$'000 US$'000
Staff costs 15,2 17 13,217 29,926
Professional fees 10,211 3 , 6 62 20,615
Insurance 649 415 739
Rental fee 240 193 416
Business travel expenses 415 369 541
Office costs 402 383 830
Other 2 , 445 2,432 8,304
2 9 , 579 20 , 6 71 61,371
--------------------------
Impairment charges
Impairment of mining assets
The group undertook a review of impairment indicators of the
tangible assets attributable to its gold mining projects and
supporting in-house service companies. Detailed calculations of
recoverable amounts, which are value-in-use calculations based on
discounted cash flows, were prepared which concluded no impairment
was required as at 30 June 2021 and 30 June 2020.
As at 31 December 2020, the group recognised a pre-tax
impairment of an aggregate of US$74.9 million (being a post-tax
impairment of an aggregate of US$59.9 million) to the extent that
recoverable amounts no longer supported the relevant carrying
values of assets that were part of Albyn CGU on the statement of
financial position as at 31 December 2020. A pre-tax impairment of
US$58.8 million (US$47.0 million post-tax) has been recorded
against the associated assets within property, plant and equipment
and a pre-tax impairment of US$16.1 million (US$12.9 million
post-tax) has been recorded against the associated exploration and
evaluation assets.
Impairment of exploration and evaluation assets
The group performed a review of its exploration and evaluation
assets and concluded no impairment was required as at 30 June 2021
and 30 June 2020. As at 31 December 2020, no impairment except for
in relation to exploration and evaluation assets that were part of
Albyn CGU was required.
As at 30 June 2021, 30 June 2020 and 31 December 2020,
exploration and evaluation assets in the statement of financial
position primarily related to the areas adjacent to the existing
mines (note 10).
The key assumptions which formed the basis of forecasting future
cash flows and the value in use calculation are set out below:
Year ended Year ended
3 0 June 31 December
202 1 2020
Long-term real gold price (a) US$1,464/oz US$1,575/oz
Discount rate (b) 7.1% 6.4%
RUB : US$ exchange rate (c) RUB74.6 : RUB73.6 :
US$1 US$1
(a) Being upper 75% range of the analyst forecasts based on
Consensus Economics, published in June 2021 and January 2021. Based
on experience of analyst forecasts being on a conservative side, it
is management's view that the upper 75% range is a more accurate
basis on which to base the forecasting of forecasting future cash
flows for value-in-use calculations.
(b) Being the post-tax real weighted average cost of capital, an
equivalent to a nominal pre-tax discount rate of 9.4% (2020: 8.7%),
applied to cash flows prepared on a consistent post-tax real
basis.
(c) Based on Consensus Economics, published in June 2021 (2020: in January 2021).
Impairment of ore stockpiles
The group assessed the recoverability of the carrying value of
ore stockpiles and recorded reversals of impairment/ impairment
charges as set out below:
Six months ended 30 Six months ended 30 Year ended 31 December
June 2021 June 2020 2020
Pre-tax Post-tax Pre-tax Post-tax Pre-tax Post-tax
Impairment impairment Impairment impairment Impairment impairment
charge charge/ charge charge/ charge charge/
/ (reversal (reversal / (reversal (reversal / (reversal (reversal
of of of of of of
impairment) Taxation impairment) impairment) Taxation impairment) impairment) Taxation impairment)
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Pioneer - - - - - - - - -
Malomir - - - (15) 3 (12) - - -
Albyn - - - - - - - - -
- - - (15) 3 (12) - - -
- 7. Financial income and expenses and impairment of financial instruments
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2020
2021 2020 US$'000
US$'000 US$'000
--------------
Net impairment reversals/(impairment losses)
on financial instruments
Reversal of impairment of financial assets 487 2 309
Financial guarantee contract 569 (1,276) 691
--------------
1,056 (1,274) 1,000
Investment and other finance income
Interest income 211 574 1,100
Guarantee fee income ( (a) () 3 ,055 3,388 6,654
3,266 3,962 7,754
Interest expense
Notes (20,935) (20,986) (42,238)
Convertible bonds (2,019) (6,455) (9,231)
Bank loans (124) - -
Prepayment on gold sale agreements (2,063) (6,295) (9,938)
Lease liabilities (283) (2 81 ) (485)
(3 4 ,
(25,424) 017 ) (61,892)
Interest capitalised 1,605 1,019 4,134
Unwinding of discount on environmental obligation (433) (385) (775)
(33,3 83
(24,252) ) (58,533)
Net other finance gains/(losses)
Fair value gain/(loss) on the conversion 31,9 9
option (b) 3 (122,248) (45,775)
Loss on Bonds conversion (c) - - (9,536)
Fair value gain on the guarantee receivable
(d) - 226 571
Fair value gain /(loss) on the call option
over non-controlling interests (e) - 20, 558 (11,022)
Fair value loss on other derivative financial
instruments - (733) (733)
Fair value gain /(loss) on listed equity
investments 127 (59) (92)
Gain on lease modification 249 224 224
Fair value gain /(loss) on gold option contracts
(f) 4,799 (4,544) (7,021)
Fair value (loss) /gain on currency option
contracts (f) (902) 7,683 4,132
F air value loss on the agreement for the
sale of stake in IRC (g) (31,583) - -
Bond solicitation expenses - - (1,705)
( 98 ,8
4,683 93 ) (67,957)
(a) Guarantee fee income under Gazprombank Guarantee arrangements (note 21).
(b) Result of re-measurement of the conversion option to fair value (notes 16 and 18).
(c) Result of Bonds being converted and settled in shares at
their nominal value and the carrying value of Convertible
Bonds.
(d) Result of re-measurement of receivable from IRC under ICBC
Guarantee arrangements to fair value (note 21).
(e) Result of re-measurement of the TEMI option to fair value (notes 16 and 21).
(f) Result of measurement of gold and currency option contracts (note 16).
(g) Results of measurement of value the derivative associated
with a transaction undertaken by the Company on 16 March 2020 with
Stocken Board AG in connection with the sale of a stake in IRC.
- 8. Taxation
Six months Six months Year ended
ended ended 31 December
30 June 2021 30 June 2020 2020
US$'000 US$'000 US$'000
Current tax
Russian current tax 17,261 25,100 48,652
17,261 25,100 48,652
Deferred tax
Origination of temporary differences
(a) 2,996 13,442 27,417
Total tax charge (b) 20,257 38,542 76,069
(a) Including effect of foreign exchange movements in respect of
deductible temporary differences of US$(3.2) million (six months
ended 30 June 2020: US$23.7 million, year ended 31 December 2020:
US$33.1 million) which primarily arises as the tax base for a
significant portion of the future taxable deductions in relation to
the group's property, plant and equipment are denominated in
Russian Rouble whilst the future depreciation charges associated
with these assets will be based on their US Dollar carrying value
and reflects the movements in the Russian Rouble to the US Dollar
exchange rate.
(b) Including effect of expenses that are not taxable/deductible
for tax purposes which primarily relate to fair value gain/loss on
re-measurement of the conversion option of the Convertible Bonds
(note 7), effect of tax losses for which no deferred income tax
asset was recognised which primarily relate to interest expense
incurred in the UK (note 7) and Russian withholding tax on
intercompany dividends.
Tax laws, regulations and court practice applicable to the group
are complex and subject to frequent change, varying interpretations
and inconsistent and selective enforcement. There are a number of
practical uncertainties associated with the application of relevant
tax legislation and there is a risk of tax authorities making
arbitrary judgements of business activities. If a particular
treatment, based on management's judgement of the group's business
activities, was to be challenged by the tax authorities, the group
may be subject to tax claims and exposures. Management has
calculated a total exposure (including taxes and respective
interest and penalties) estimated to be US$7.5 million (six months
ended 30 June 2020: US$6.7 million and 2020: US$7.5 million) of
contingent liabilities, including US$0.2 million (30 June 2020: US$
1.1 million and 31 December 2020: US$0.2 million) in respect of
income tax and US$7.4 million (30 June 2020: US$5.6 million and 31
December 2020: US$7.3 million) in respect of other taxes.
- 9. Earnings per share
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2020 2020
202 1
US$'000 US$'000 US$'000
Profit/ (loss) for the period attributable (2 3 , 934
to equity holders of Petropavlovsk PLC 44,543 ) (45,633)
Interest expense on convertible bonds 2,019 - (a) - (a)
Profit/ (loss) used to determine diluted (2 3 , 934
earnings per share 46,562 ) (45,633)
No of shares No of shares No of shares
Weighted average number of Ordinary Shares 3,957,270,254 3,310,369,237 3,564,250,949
Adjustments for dilutive potential Ordinary
Shares 281,481,494 - (a) - (a)
Weighted average number of Ordinary Shares
for diluted earnings per share 4,238,751,748 3,310,369,237 3,564,250,949
US$ US$ US$
Basic profit/ (loss) per share 0 . 01 (0.01) (0.01)
Diluted profit/ (loss) per share 0 . 01 (0.01) (0.01)
(a) Convertible bonds which could potentially dilute basic
profit/(loss) per ordinary share in the future are not included in
the calculation of diluted profit/(loss) per share because they
were anti-dilutive for the six months ended 30 June 2020 and the
year ended 31 December 2020.
- 10. Exploration and evaluation assets
Flanks Flanks
of Pioneer of Other Total
Albyn
US$'000 US$'000 US$'000 US$'000
At 1 January 2021 7,544 32,347 5,291 45,182
1,48
Additions 1,48 5 5
Transfer to mining assets
( (a) () - (32,347) - (32,347)
At 30 June 2021 7,544 - 6,77 6 14,320
(a) Amount capitalised in respect of Elginskoye.
- 11. Property, plant and equipment
Mining Non-mining Capital
assets assets construction
(d) (d) in progress Total
US$'000 US$'000 US$'000 US$'000
Cost
At 1 January 2021 2,613,218 183,475 98,577 2,895,270
Additions ( (a) () 27,585 9,246 28,963 65,794
Interest capitalised - - 1,605 1,605
Transfers from exploration and 48,4 48,4
evaluation assets ( (note 10) () 59 - - 59
Transfers from capital construction
in progress ( (b) () 91,446 320 (91,766) -
Disposals ( (c) () (31,906) (16,622) - (48,528)
Reallocation and other transfers 114 (114) - -
Foreign exchange differences - 48 7 7 49 4
2,748,91 176,7
At 30 June 2021 ( (f) () 6 92 37,386 2,963,094
Accumulated depreciation and impairment
At 1 January 2021 1,560,511 130,209 - 1,690,720
Charge for the year ( (e) () 61,521 2,268 - 63,789
Disposals (30,633) (8,962) - (39,595)
Transfers from exploration and
evaluation assets ( (note 10) () 16,112 - - 16,112
Reallocation and other transfers (1,302) 1,302 - -
Foreign exchange differences - 397 - 397
At 30 June 2021 ( (f) () 1,606,209 125,214 - 1,731,423
Net book value
At 1 January 2021 ( (g) () 1,052,707 53,266 98,577 1,204,550
1,142,7 51,57
At 30 June 2021 ( (g) () 07 8 37,386 1,231,671
(a) Including US$13.4 million additions of stripping cost.
(b) Being costs primarily associated with the Flotation Pioneer and Elginskoye projects.
(c) Including US$29.0 million of fully depreciated fleet that is
not suitable for future use due to wear and tear, US$7.0 million
disposals of lease modification, US$6.0 million disposals of mining
fleet due to derecognition of the replaced part.
(d) Mining and Non-mining assets include right-of-use assets.
(e) Including US$17.7 million depreciation charge of capitalized stripping cost.
(f) Including US$479.5 million of fully depreciated property,
plant and equipment (31 December 2020: US$498.0 million).
(g) Including US$52.1 million net book value of capitalized
stripping cost (31 December 2020: US$56.4 million).
- 12. Investment in associate and disposal group held for sale
31 December
30 June 2021 30 June 2020 2020
US$'000 US$'000 US$'000
IRC Limited ('IRC') (a) 5,077 50,950 3,936
5,077 50,950 3,936
(a) 1.2% interest in IRC, with 29.9% interest in IRC
re-classified as assets held for sale as set out below (30 June
2020: 31.1%, 31 December 2020: 1.2% with 29.9% interest in IRC
re-classified as assets held for sale).
Summarised financial information for IRC and its subsidiaries is
set out below.
IRC IRC IRC
30 June 2021 30 June 2020 31 December
2020
US$'000 US$'000 US$'000
Non-current assets
Exploration and evaluation assets 20,303 20,035 20,165
Property, plant and equipment 56 6 , 866 512,652 573,041
Other non-current assets 13,836 14,840 14,481
60 1 ,0
05 547,527 607,687
Current assets
Cash and cash equivalents 67,01 9 4,980 20,371
Other current assets 9 3 , 810 52,065 53,063
16 0 , 829 57,045 73,434
Current liabilities
Borrowings (a) (19,476) (19,869) (20,082)
(77,8 84 (82,78 1
Other current liabilities ) ) (77,898)
(97,3 60 (102,6 50
) ) (97,980)
Non-current liabilities
(172,8 43
Borrowings (a) ) (191,981) (181,998)
(17, 416
Other non-current liabilities ) (24,181) (18,857)
(190,25
9 ) (216,162) (200,855)
Net assets 47 4 , 215 285,76 0 382,286
(a) On 18 December 2018, IRC entered into two facility
agreements for a loan in aggregate of US$240 million (the
"Gazprombank Facility"). The Gazprombank Facility will mature in
2026 and consists of two tranches. The principal under the first
tranche amounts to US$160 million with interest being charged at
the London Inter-bank Offer Rate ("LIBOR") + 5.7% per annum and is
repayable in equal quarterly payments during the term of the
Gazprombank Facility, the final payment in December 2026. The
principal under the second tranche amounts to US$80 million with
interest being charged at LIBOR + 7.7% per annum and is repayable
in full at the end of the term, in December 2026. Interest charged
on the drawn down amounts under the two tranches is payable in
equal quarterly payments during the term of the Gazprombank
Facility. As at 30 June 2021, 30 June 2020 and 31 December 2020,
the entire facility amount of US$240 million has been fully drawn
down.
(b) The Gazprombank Facility is secured by (i) IRC's property,
plant and equipment with net book value of US$52 million, (ii) 100%
equity share of Kapucius Services Limited in LLC KS GOK and (iii) a
guarantee from the Company. Please refer to the note 21 for the
details on the guarantee arrangements. The Gazprombank Facility is
also subject to certain financial covenants and requirements.
IRC IRC IRC
Six months
ended Six months Year ended
30 June 20 ended 31 December
21 30 June 2020 2020
US$'000 US$'000 US$'000
Revenue 217,170 106,173 224,591
Net operating expenses (108,374) (86,489) (97,366)
including
Depreciation (11,904) (13,465) (28,818)
Impairment losses under expected credit
loss model (2,054) (5,176) (7,115)
Reversal of impairment of mining assets - - 75,832
Foreign exchange (losses)/gains (585) 4,69 0 6,934
Investment income 15 26 44
Interest expense (10,847) (13,338) (25,157)
Taxation 266 (440) (1,602)
Profit for the period 98,230 5,932 100,510
Other comprehensive (loss)/profit (6,352) 1,368 2,902
Total comprehensive profit 91,878 7,300 103,412
Group's share % 1.2% 31.1% 31.1%
Group's share in profit for the period 1,216 1,845 31,257
Reversal of impairment of investment
in associate - - 21,424
Share of results of associate 1,216 1,845 52,681
Impairment of investment in associate
As at 30 June 20 21 , the group identified no impairment
indicators or indicators of impairment reversal in relation to its
investment in IRC (30 June 2020: no impairment indicators and 31
December 2020: detailed calculations of recoverable amounts, which
are value-in-use calculations based on discounted cash flows, were
prepared which concluded a US$21.4 million reversal impairment was
required and recorded accordingly).
Following negotiations with several interested parties the
directors resolved to approve the potential disposal of 29.9%
investment in IRC (note 3.1). This disposal is expected to be
completed within 12 months after the reporting date and accordingly
investment in IRC has been classified as "held for sale" and
presented separately in the statement of financial position as at
31 December 2020.
The following assets and liabilities re-classified as held for
sale are set out below .
30 June 31 December 2020
2021
Fair value Carrying Fair value
less costs amount less costs
to sell(a) to sell(a)
US$'000 US$'000 US$'000
-----------
Investment in associate (b) 77,403 98,327 42,529
Total assets of disposal group classified
as held for sale 77,403 98,327 42,529
Financial guarantee contract (7,663) (8,232) (8,232)
Total liabilities of disposal group associated
with assets classified as held for sale (7,663) (8,232) (8,232)
Net assets of disposal group classified
as held for sale 69,740 90,095 34,297
Reversal of write-down/(write-down) to
adjust the carrying value of net assets
of disposal group to fair value less costs
to sell 34,874 (55,798)
(a) Based on market share price of HK$0.27 per IRC share as at
30 June 2021 (31 December 2020: HK$0.14), less estimated
transaction costs, and fair value of Gazprombank Guarantee of
US$nill (31 December 2020: US$nil).
A decrease/ increase of 10% in IRC's share price would result in
US$7.3 million additional write-down/ reversal of write-down
adjustment (31 December 2020: US$3.8 million).
(b) 29.9% interest in IRC Limited (31 December 2020: 29.9%)
- 13. Inventories
30 June 30 June 31 December
20 2 1 2020 2020
US$'000 US$'000 US$'000
------------
Current
Construction materials 8,300 9,652 9,060
Stores and spares 89,012 81,956 84,309
Ore in stockpiles 56,288 59,945 29,901
Gold in circuit (a) 28,160 10,055 26,567
Bullion in process (a) 21,179 17,936 9,284
Flotation concentrate 13,782 33,068 32,801
Other 14,174 8,942 4,746
-------- ------------
230,895 221,554 196,668
-------- ------------
Non-current
Ore in stockpiles (b) 77,621 64,556 75,605
Other (c) 12,042 - 10,581
89,663 64,556 86,186
------------
(a) As at 30 June 2021, there were no bullion in process (30
June 2020: US$nil, 31 December 2020: US$0.2 million) carried at net
realisable value and there were US$0.6 million of gold in circuit
(30 June 2020: US$nil, 31 December 2020: US$3.4 million) carried at
net realisable value (note 6).
(b) Ore in stockpiles that is not planned to be processed within
twelve months after the reporting period.
(c) As at 30 June 2021 there were US$12 million goods for resale
at Irgiredmet planned to be realised more than one year after the
reporting period (30 June 2020: US$nil, 31 December 2020: US$10.6
million).
- 14. Trade and other receivables
30 June 30 June 31 December
20 2 1 2020 2020
US$'000 US$'000 US$'000
------------
Current
VAT recoverable 31,051 3 3 , 756 37,959
Advances to suppliers 1 3 , 617 13, 329 17,800
Prepayments for property, plant and
equipment 3 , 168 5 , 411 5,753
Trade receivables 7,085 5,467 8,547
Contract assets 1,472 1,211 827
Guarantee fee receivable (a) 1,482 13,041 11,926
Other debtors 11,610 14,61 2 15,739
------------
8 6 , 82
69,485 7 98,551
------------
Non-current
Other 354 578 481
------------
354 578 481
(a) Please refer to 12 and 21 for the details of ICBC and Gazprombank guarantee arrangements.
The Directors consider that the carrying amount of trade and
other receivables approximates their fair value.
- 15. Cash and cash equivalents
30 June 30 June 31 December
20 2 1 2020 2020
US$'000 US$'000 US$'000
Cash at bank and in hand 15,947 20,540 7,862
Short-term bank deposits 18,489 52,918 27,542
Cash in transit 2 , 100 - -
36,536 73,458 35,404
- 16. Derivative financial instruments
30 June 20 2 1 30 June 2020 31 December 2020
Assets Liabilities Assets Liabilities Assets Liabilities
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Current
Gold option contracts (a), (c) 192 ( 604) 1, 11 9 ( 2 , 936 ) 172 (5,668)
Currency option contract s ( (b) ), (c) 1,205 ( 13) 4,948 (232) 3,148 (404)
Call option over non-controlling interests - - 31,580 - - -
Financial liability on agreement for the
sale of stake in IRC (d) - (31,583) - - - -
1,397 (32,200) 37,647 (3,168) 3,320 (6,072)
Non-current
Gold option contracts (a), (c) - - 72 (2,799) - -
Currency option contract s ( (b) ), (c) - - 2,658 (579) - -
Conversion option (e), (f) - ( 57,095) (168,561) - (89,088)
- ( 57,095) 2,730 (171,939) - (89,088)
(a) Gold option contracts with an exercise price of US$1,600/oz
for purchased put options and US$1,832/oz for issued call options
for an aggregate of 21,000 ounces of gold maturing over a period
until December 2021.
(b) Currency option contracts with an exercise price of RUB75.00
for purchased put options and in the range between RUB90.65 and
RUB100.00 for issued call options for an aggregate of US$42 million
maturing over a period until December 2021.
(c) Measured at fair value and considered as Level 2 of the fair
value hierarchy which valuation incorporates the following
inputs:
- Historic gold price / RUB: USD exchange rates volatility;
- Exercise price;
- Time to maturity; and
- Risk free rate.
(d) The derivative associated with a transaction undertaken by
the Company on 16 March 2020 with Stocken Board AG in connection
with the sale of a stake in IRC measured at fair value and
considered as level 3 of the fair value hierarchy and includes the
following inputs :
- IRC share price;
- Historic volatility of IRC share price;
- Time to maturity;
- Implied sale price;
- Occurrence of certain events specified in the contract;
and
- Discount for lack of marketability of the contract.
(e) Note 18.
(f) Measured at fair value and considered as Level 3 of the fair
value hierarchy which valuation incorporates the following
inputs:
- The group's credit risk and implied credit spreads (Level
3);
- Historic share price volatility;
- The conversion price;
- Time to maturity; and
- Risk free rate.
- 17. Trade and other payables
30 June 30 June 31 December
2021 2020 2020
US$'000 US$'000 US$'000
Current
Trade payables (a) 33,904 64,217 48,604
Payables for property, plant and equipment 5,441 3,865 9,244
Contract liabilities - advances from
customers under gold sales agreements
(b) 37,134 101,547 63,787
Other contract liabilities (c) 17,213 14,743 7,371
Accruals and other payables 62,435 45,276 62,133
156,127 229,648 191,139
Non-current
Contract liabilities - advances from
customers under gold sales agreements
(b) - 19,473 -
Other contract liabilities (c) 10,363 - 13,288
Accruals and other payables 220 - 662
10,583 19,473 13,950
(a) The trade payables as at 30 June 2021 include US$9.2 million
payable for flotation concentrate purchased
(30 June 2020 : US$28.5 million, 31 December 2020: US$23.1 million).
(b) Include US$37.1 million (30 June 2020 : US$121.0 million, 31
December 2020: US$63.8 million) Russian Rouble denominated advance
payments received from Gazprombank under gold sales agreements.
Advance payments are to be settled against physical delivery of
gold produced by the group in regular intervals over the period of
up to twelve months from the reporting date based on the sales
price prevailing at delivery that is determined with reference to
LBMA fixing. Contractual interest charged on the advances received
as at 30 June 2021 is in the range 8.0 - 8.32% and is payable
monthly (30 June 2020 : in the range of 8.0 - 8.9% for Russian
Rouble denominated advances payable monthly, 31 December 2020: in
the range of 8.0 - 8.32% for Russian Rouble denominated advances
payable monthly). The table below sets out reconciliation of
opening and closing balances, including revenue recognised in the
period (note 5) that was included in the contract liability balance
at the beginning of the period.
Six months Six months Year ended
ended ended 30 31 December
30 June June 2020 2020
2021
US$'000 US$'000 US$'000
At the beginning of the period 63,787 187,433 187,433
New contract liabilities - 45,414 71,222
Revenue recognised in the period that
was included in the contract liability
balance at the beginning of the period (27,334) (93,161) (163,043)
Revenue recognised in the period against
new contract liabilities - - (7,107)
Interest accrued (note 7) 2,063 6,295 9,938
Interest paid (note 7) (2,063) (6,295) (9,938)
Foreign exchange difference 681 (18,666) (24,718)
At the end of the period 37,134 121,020 63,787
(c) Being primarily advances received under re-sale contracts in
connection with services performed by the group's subsidiary,
Irgiredmet, in its activity to procure materials such as reagents,
consumables and equipment for third parties.
The Directors consider that the carrying amount of trade and
other payables approximates their fair value.
-
-
-
- 18. Borrowings
30 June 30 June 31 December
2021 2020 2020
US$'000 US$'000 US$'000
Borrowings at amortised cost
Notes (a) 502,613 501,051 501,990
Convertible Bonds (b) 34,481 110,385 34,030
Bank loans (c) 35,000 - -
572,094 611,436 536,020
Amount due for settlement within 12 months 35,000 - -
Amount due for settlement after 12 months 537,094 611,436 536,020
572,094 611,436 536,020
(a) US$500 million Guaranteed Notes due for repayment on 14
November 2022 (the "Notes"), measured at amortised cost. The Notes
were issued by the group's wholly owned subsidiary Petropavlovsk
2016 Limited and are guaranteed by the Company and its subsidiaries
JSC Pokrovskiy Rudnik, LLC Albynskiy Rudnik and LLC Malomirskiy
Rudnik. The Notes have been admitted to the official list of the
Irish Stock Exchange and to trading on the Global Exchange Market
of the Irish Stock Exchange on 14 November 2017. The Notes carry a
coupon of 8.125% payable semi-annually in arrears. The interest
charged was calculated by applying an effective interest rate of
8.35%.
(b) Debt component of the US$125 million Convertible Bonds due
on 03 July 2024 measured at amortised cost and not revalued. As at
30 June 2021, the outstanding principal amount of the Convertible
Bonds was US$38 million (30 June 2020: US$125 million, 31 December
2020: US$38 million). The bonds were issued by the Group's wholly
owned subsidiary Petropavlovsk 2010 Limited (the "Issuer") on 03
July 2019 and are guaranteed by the Company. The bonds carry a
coupon of 8.25% per annum, payable quarterly in arrears. The bonds
are, subject to certain conditions, convertible into fully paid
ordinary shares of the Company with an initial exchange price of
US$0.1350 subject to customary adjustment provisions. The interest
charged was calculated by applying an effective interest rate of
12.08%.
During the year ended 31 December 2020, the Company has received
Conversion Notices in respect of the exercise of conversion rights
under the US$125 million Convertible Bonds. The principal amount of
the Convertible Bonds in respect of which the Conversion Notices
have been served amounted to an aggregate of US$87 million, which,
at a fixed exchange price of US$0.1350 per ordinary share, resulted
in the issue and allotment of an aggregate of 644,444,432 new
ordinary shares.
The conversion option of the convertible bonds represents the
fair value of the embedded option for the bondholders to convert
into the equity of the Company (the "Conversion Right"). As the
Company can elect to pay the cash value in lieu of delivering the
Ordinary Shares following the exercise of the Conversion Right the
conversion option is a derivative liability. Accordingly, the
conversion option is measured at fair value and is presented
separately within derivative financial liabilities (note 16) which
the fair value loss is included in the net other finance (losses)/
gains (note 7).
As at 30 June 2021, the fair value of debt component of the
convertible bonds, considered as Level 3 of the fair value
hierarchy, amounted to US$ 39.0 million (30 June 2020: US$124.7
million, 31 December 2020: US$36.8 million), with the carrying
value of US$34.5 million (30 June 2020: US$110.4 million, 31
December 2020: US$34.0 million). Valuation incorporates the
following inputs: the group's credit risk and implied credit
spreads, time to maturity and risk free rate.
As at 30 June 2021, the fair value of the convertible bonds,
considered as Level 1 of the fair value hierarchy and calculated by
applying the market traded price to the convertible bonds
outstanding, amounted to US$96.1 million (30 June 2020: US$293.3
million, 31 December 2020: US$125.9 million).
(c) In April 2021, the group signed RUB5 billion (an equivalent
of approximately US$67 million) revolving credit facility with
Gazprombank valid until May 2022. As at 30 June 2021, the
outstanding principal amount were US$35 million, US$10 million,
bearing 3.7% interest and repayable until April 2022, US$7 million,
bearing 2.9% interest and repayable until October 2021 and US$18
million, bearing 2.8% interest and repayable until December
2021.
- 19. Share capital
30 June 2021 30 June 2020 31 December 2020
No of shares US$'000 No of shares US$'000 No of shares US$'000
Allotted, called up
and fully paid
At the beginning of
the period 3,957,270,254 57,464 3,310,210,281 49,003 3,310,210,281 49,003
Issued during the period - - 2,615,541 32 647,059,973 8,461
At the end of the period 3,957,270,254 57,464 3,312,825,822 49,035 3,957,270,254 57,464
- 20. Notes to the cash flow statement
Reconciliation of profit before tax to operating cash flow
Six months Six months Year ended
ended 30 ended 30 31 December
June 2021 June 2020 2020
US$'000 US$'000 US$'000
Profit before tax 69,136 16,548 27,187
Adjustments for:
Share of results of associate (1,216) (1,845) (52,681)
Net (impairment reversals)/ impairment
losses on financial instruments (1,056) 1,274 (1,000)
Investment and other finance income (3,266) (3,962) (7,754)
Interest expense 24,252 33,383 58,533
Net other finance (gains)/losses (4,683) 98,893 67,957
Share based payments 315 89 123
Depreciation 62,981 64,660 134,079
Impairment/(reversal of impairment) of
mining assets and in-house service - - 58,806
Impairment of exploration and evaluation
assets - - 16,112
Write-down of inventory to net realisable
value 145 - 1,215
Reversal of impairment of ore stockpiles - (15) -
Effect of processing previously impaired
stockpiles - (502) (517)
Impairment/(reversal of impairment) of
gold in circuit 700 (38) 77
Effect of processing previously impaired
gold in circuit (77) (206) (244)
Impairment of bullion in process - - 41
(Reversal of provision)/provision for
impairment of trade and other receivables (896) (21) 1,339
Loss on disposals of property, plant and
equipment 1,272 663 1,451
( Reversal of write-down ) /write-down
to adjust the carrying value of net assets
of disposal group to fair value less costs
to sell (34,874) - 55,798
Foreign exchange losses/(gains) 70 6 (26,710) (32,647)
Other non-cash items 263 999 645
Changes in working capital:
Decrease /(i ncrease ) in trade and other
receivables 17,515 13,045 (5,149)
(Increase)/decrease in inventories (37,554) 82,129 85,512
Decrease in trade and other payables (36,529) (105,626) (143,023)
Net cash generated from operations 57,134 172,758 265,860
Reconciliation of cash flows used to purchase property, plant
and equipment
Six months Six months Year ended
ended 30 ended 30 31 December
June 2021 June 2020 2020
US$'000 US$'000 US$'000
Additions to property, plant and equipment 65,794 83,121 163,368
Non-cash additions to property, plant
and equipment:
Transfer from materials 370 50 2,120
Capitalised depreciation (808) (430) (3,818)
Right-of-use assets additions (7,953) (1,735) (3,410)
57,403 81,006 158,260
Associated cash flows:
Purchase of property, plant and equipment 58, 413 78,618 151,503
De crease in prepayments for property,
plant and equipment 2 , 585 3,804 3,480
(Decrease)/increase in payables for property, ( 3 , 803
plant and equipment ) (1,945) 3,434
Cash movements presented in other cash
flow lines:
Changes in working capital 208 529 (157)
57,403 81,006 158,260
Non-cash transactions
There were no significant non-cash transactions during the six
months ended 30 June 2021 and 30 June 2020. An equivalent of US$0.1
million of VAT recoverable was offset against profit tax during the
year ended 31 December 2020 and US$1 million of provision of profit
tax relating to Albyn, was accrued as at 31 December 2020.
- 21. Related parties
Related parties the g roup entered into transactions with during
the reporting period
The Petropavlovsk Foundation for Social Investment (the
'Petropavlovsk Foundation') is considered to be a related party due
to the participation of the key management of the group in the
board of directors of the Petropavlovsk Foundation.
IRC Limited and its subsidiaries are associates to the group and
hence are related parties since 7 August 2015.
The Uzhuralzoloto Group of Companies that holds over 20% of the
Company's shares is substantial shareholder and hence is related
party.
Transactions with related parties the group entered into during
the six months ended 30 June 2021, 30 June 2020 and the year ended
31 December 2020 are set out below.
Trading Transactions
Related party transactions the group entered into that relate to
the day-to-day operation of the business are set out below.
Sales to related parties Purchases from related
parties
Six Six months
months ended
Six months ended Year Six months 30 June
ended 30 ended ended 2020 Year ended
30 June June 31 December 30 June US$'000 31 December
2021 2020 2020 2021 2020
US$'000 US$'000 US$'000 US$'000 US$'000
Close family members of key
management personnel - - - - 195 256
IRC Limited and its subsidiaries - 58 85 56 58 111
- 58 85 56 253 367
During the six months ended 30 June 2021, the group made US$nil
million charitable donations to the Petropavlovsk Foundation (six
months ended 30 June 2020: US$0.2 million ; year ended 31 December
2020: US$0.3 million).
The outstanding balances with related parties at 30 June 2021,
30 June 2020 and 31 December 2020 are set out below.
Amounts owed by related Amounts owed to related
parties parties
30 June 30 June 31 December 30 June 30 June 31 December
2021 2020 2020 2021 2020 2020
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Substantial shareholders - - - 27 - -
IRC Limited and its subsidiaries 2,034 3,622 3,604 1,122 1,166 1,100
2,034 3,622 3,604 1,149 1,166 1,100
Financing transactions
Guarantee over IRC's external borrowings
The group historically entered into an arrangement to provide a
guarantee over its associate's, IRC, external borrowings, the ICBC
Facility ('ICBC Guarantee'). As at 30 June 2021, there was no
outstanding contractual guarantee fee (30 June 2020 : outstanding
contractual guarantee fee of US$ 5.0 million with corresponding
fair value after provision for credit losses of US$4.7 million ; 31
December 20 20 : outstanding contractual guarantee fee of US$0.01
million with corresponding fair value after provision for credit
losses of US$0.01 million).
In March 2019, IRC has refinanced the ICBC Facility through
entering into a US$240 million new facility with Gazprombank
('Gazprombank Facility'). The facility was fully drawn down during
the year ended 31 December 2019.
A new guarantee was issued by the group over part of the
Gazprombank Facility ('Gazprombank Guarantee'), the guarantee
mechanism is implemented through a series of five guarantees that
fluctuate in value through the eight-year life of the loan, with
the possibility of the initial US$160 million principal amounts
guaranteed reducing to US$40 million within two to three years,
subject to certain conditions being met. For the final two years of
the Gazprombank Facility, the guaranteed amounts will increase to
US$120 million to cover the final principal and interest
repayments. If certain springing recourse events transpire,
including default on a scheduled payment, then full outstanding
loan balance is accelerated and subject to the guarantee. The
outstanding loan principal was US$ 194 million as at 30 June 2021
(30 June 2020 : US$214 million ; 31 December 2020: US$204 million).
Under the Gazprombank Guarantee arrangements, the guarantee fee
receivable is determined at each reporting date on an independently
determined fair value basis, which for the six months ended 30 June
2021 was at the annual rate of 3.07% by reference to the average
outstanding principal balance under Gazprombank Facility (six
months ended 30 June 2020: 3.07%; year ended 31 December 2020:
3.07%). The guarantee fee charged for the six months ended 30 June
202 1 was US$ 3.1 million, with corresponding value of US$3.4
million after reversal of provision for expected credit losses (30
June 2020: US$3.4 million, with corresponding value of US$3.2
million after provision for expected credit losses ; 31 December
2020: US$6.7 million, with corresponding value of US$6.3 million
after provision for expected credit losses). As at 3 0 June 2021
the remaining outstanding contractual guarantee fee was US$1.5
million, with corresponding value of US$1.5 million after provision
for expected credit losses (3 0 June 2020: US$9.0 million, with
corresponding value of US$8.4 million after provision for expected
credit losses ; 31 December 2020: US$12.3 million, with
corresponding value of US$11.9 million after provision for expected
credit losses).
The following assets and liabilities have been recognised in
relation to the ICBC Guarantee and Gazprombank Guarantee as at 30
June 2021, 30 June 2020 and 31 December 2020:
30 June 30 June 31 December
2021 2020 2020
US$'000 US$'000 US$'000
Other receivables - ICBC Guarantee
(a) - 4,662 7
Other receivables - Gazprombank Guarantee
(b) 1,482 8,380 11,919
Financial guarantee contract - Gazprombank
Guarantee (c), (d) 7,663 10,199 8,232
a) The fair value of the receivable, comprising billed fee
receivable, less provision for credit losses. Considered Level 3 of
the fair value hierarchy which valuation incorporates the following
inputs:
- Assessment of the credit standing of IRC and implied credit
spread;
- Share price and share price volatility of IRC as at 30 June
2021, 30 June 2020 and 31 December 2020.
b) Amounts of guarantee fee that are expected to be received
from IRC and calculated by applying annual rate of 3.07% for six
month ended 30 June 2021 and 2020 and year ended 31 December 2020
by reference to the average outstanding principal balance under
Gazprombank Facility for the relevant period, less provision for
ECL.
c) Measured in accordance with ECL model: the amount of the loss
allowance equals to 12-month ECL as it has been concluded that the
credit risk on the financial guarantee contract has not increased
significantly since initial recognition.
d) Classified as "held for sale" and presented separately in the
statement of financial position as at 30 June 2021 and 31 December
2020.
The results from relevant re-measurements of the aforementioned
assets and liabilities were recognised within Other finance gains
and losses and impairments of financial instruments (note 7).
Other financing transactions
In March 2018, the group entered into a loan agreement with Dr.
Pavel Maslovskiy. The loan principal outstanding amounted to an
equivalent of US$0.2 million, with corresponding value of US$0.2
million after provision for expected credit losses, as at 30 June
2020 and US$0.1 million, with corresponding value of US$nil after
provision for expected credit losses, as at 31 December 2020. The
loan together with accrued interest was fully repaid as at 30 June
2021. Interest charged during the six months ended 30 June 2021
comprised an equivalent of US$0.01 million (six month ended 30 June
2020: US$0.01 million, year ended 31 December 2020 : US$0.01
million). At 10 August 2020, Dr. Pavel Maslovskiy ceased to be a
related party.
In April 2019, the g roup entered into a loan agreement with Dr.
Alya Samokhvalova. The loan principal outstanding amounted to an
equivalent of US$0.4 million, with corresponding value of US$0.4
million after provision for expected credit losses, as at 30 June
2020 and US$0.3 million, with corresponding value of US$nil after
provision for expected credit losses, as at 31 December 2020. The
loan together with accrued interest was fully repaid as at 30 June
2021. Interest charged during the six month ended 30 June 2021
comprised an equivalent of US$0.01 million (six month ended 30 June
2020: US$0.01 million, year ended 31 December 2020 : US$0.03
million). At 12 October 2020, Dr. Alya Samokhvalova ceased to be a
related party.
Key management compensation
Key management personnel, comprising a group of 10 individuals
during the period (six months ended 30 June 2020: 1 7 and year
ended 31 December 2020: 11 ), including Executive and Non-Executive
Directors of the Company and members of senior management, are
those having authority and responsibility for planning, directing
and controlling the activities of the group.
Six months Six months Year ended
ended ended 31 December
30 June 2021 30 June 2020 2020
US$'000 US$'000 US$'000
Wages and salaries 4 ,049 2,255 4,228
Pension costs 30 38 47
Share-based compensation 315 91 33
4,394 2,384 4,308
- 22. Analysis of Net Debt ..
At 1 January Net cash Exchange Non-cash At 30 June
2021 movement movement changes 2021
US$'000 US$'000 US$'000 US$'000 US$'000
Cash and cash equivalents 35,404 846 286 - 36,536
(12,996) (23,078)
Borrowings (536,020) ( (a) () - ( (b) () (572,094)
Net Debt (u) (500,616) (12,150) 286 (23,078) (535,558)
Lease liabilities (4,143) 713 (370) (672) (4,472)
Conversion option (c) (89,088) - - 31,993 (57,095)
(593,847) (11,437) (84) 8,243 (597,125)
a) Being US$22.0 million interest paid on borrowings, which is
presented as operating cash flows in the Statement of cash flows
and US$35.0 million proceeds from borrowings.
b) Being principally accrued interest expense which is presented
as operating cash flows in the Statement of cash flows when paid
(note 7).
c) Notes 16, 18.
At 1 January Net cash Exchange Non-cash At 30 June
2020 movement movement changes 2020
US$'000 US$'000 US$'000 US$'000 US$'000
(2,1 63
Cash and cash equivalents 48,153 27,4 68 ) - 73,458
25,468 (27,441)
Borrowings (609,463) (d) - ( (e) () (611,436)
(2,1 63
Net Debt (u) (561,310) 52,9 36 ) (27,441) (537,978)
( 4 , 617
Lease liabilities (13,178) 2 , 053 769 5 , 739 )
Conversion option (f) (46,313) - - (122,248) (168,561)
(1, 394 (14 3 , (7 11 ,
(620,801) 54, 989 ) 9 5 0 ) 156 )
(a) Being US$25.5 million interest paid on borrowings, which is
presented as operating cash flows in the Statement of cash
flows.
(b) Being principally accrued interest expense which is
presented as operating cash flows in the Statement of cash flows
when paid (note 7).
(c) Notes 16, 18.
At 1 January Net cash Exchange Non-cash At 31 December
2020 movement movement changes 2020
US$'000 US$'000 US$'000 US$'000 US$'000
Cash and cash equivalents 48,153 (9,104) (3,645) - 35,404
Borrowings (609,463) 47,447(g) - 25,996(h) (536,020)
Net Debt (u) (561,310) 38,343 (3,645) 25,996 (500,616)
Lease liabilities (13,178) 4,153 1,022 3,860 (4,143)
Conversion option (i) (46,313) - - (42,775) (89,088)
(620,801) 42,496 (2,623) (12,919) (593,847)
(d) Being US$47.4 million interest paid on borrowings, which is
presented as operating cash flows in the Statement of cash
flows.
(e) Being principally accrued interest expense which is
presented as operating cash flows in the Statement of cash flows
when paid (note 7) and US$77.5 million of Bonds conversion into
share.
(f) Notes 16, 18.
- 23. Commitments and contingencies
-
- Capital commitments
At 30 June 2021, the group had entered into contractual
commitments in relation to the acquisition of property, plant and
equipment amounting to US$ 21.4 million (30 June 2020:
US$9.7million, 31 December 2020: US$3.5 million) including US$ 15.6
million in relation to Malomir Flotation project (30 June 2020:
US$1.2 million, 31 December 2020: US$ 0 . 9 million) and US$ 4.5
million in relation to Pioneer Flotation project (30 June 2020:
US$5.8 million, 31 December 2020: US$2.0 million).
- Contingencies
On 24 June 2021, the Company announced that KPMG LLP had
published an Interim Reporting regarding its forensic investigation
into certain transactions undertaken by the Company and its
subsidiaries, and IRC Ltd and its subsidiaries, in the three years
to August 2020.
The Interim Report has identified a number of potential issues
with transactions involving the Company with an estimated value of
US$157 million. These issues include potentially undisclosed
related parties and likely conflicts of interest. KPMG intends to
focus on these transactions, amongst a number of other potential
issues, during its ongoing investigation. As KPMG's work is
ongoing, KPMG and the Company are not able to draw or disclose firm
conclusions at this stage.
The group may be exposed to the risk of civil, criminal or
regulatory actions and liabilities (including fines and penalties)
may accrue to the group if it becomes apparent that transactions
have been entered into with related parties of the Group without
proper processes having been followed, including proper approvals
obtained and/or disclosures made.
At the current time the existence, timing and quantum of
potential future liability (if any) including fines, penalties,
damages or other consequences arising from any such transactions or
failures to obtain all proper approvals or make proper disclosures
cannot be determined or measured. As a consequence, no associated
liabilities have been recognised in relation to these matters in
the consolidated statement of financial position as at 30 June 2021
and 31 December 2020.
- 24. Subsequent events
On 13th July 2021 the Company announced that its wholly-owned
subsidiary, Petropavlovsk 2016 Limited announced the launch of its
offer to purchase for cash up to US$200 million aggregate principal
amount of its 8.125 per cent Guaranteed Notes due 2022. Tender
offer is financed via Gazprombank loan facility with a total limit
of US$200 million, that was consequently entered in July 2021 with
an interest rate significantly lower than the Notes. Gazprombank
loan repayment schedule is US$66 million in December 202 2 , US$66
million in March 2023 and remaining balance in June 2023.
On 10 August 2021 Petropavlovsk 2016 Limited announced the final
tender results, US$135,731,000 aggregate principal amount of the
Notes were validly tendered.
The Use and Application of Alternative Performance Measures
(APMs)
Throughout this Half Year Report, when discussing the group's
financial performance, reference is made to APMs.
Each of the APMs is defined and calculated by the group and as
such they are non-IFRS measures because they may include or exclude
certain items that an IFRS measure ordinarily would or would not
take into account. APMs should not be regarded as an alternative or
substitute for the equivalent measures calculated and presented in
accordance with IFRS but instead should be seen as additional
information provided to investors to enable the comparison of
information between different reporting periods of the group.
Although the APMs used by the group may be calculated in a
different manner and defined differently by other peers in the
precious metals mining sector (despite being similar in title),
they are nonetheless relevant and commonly used measures for the
industry in which Petropavlovsk operates. These and similar
measures are used widely by certain investors, analysts and other
interested parties as supplemental measures of financial
performance.
Some of the APMs form part of the group's Key Performance
Indicators (KPIs), which are used to monitor progress and
performance against strategic objectives and to benchmark the
performance of the business each year.
A discussion of the relevance of each APM as well as a
description of how they are calculated is set out below, with
reconciliation to IFRS equivalents from the consolidated IFRS
financial statements (Consolidated Statement of Profit or Loss
(SPL), Consolidated Statement of Financial Position (SFP),
Consolidated Statement of Cash Flows (SCF) and the notes to the
consolidated IFRS financial statements).
Total Cash Costs (TCC)
Definition
The total cash cost per ounce is the cost of producing and
selling an ounce of gold from the group's three hard-rock
operations and processing and selling an ounce of gold by treatment
of third party sourced refractory concentrate at the POX Hub.
Calculation
TCC are calculated by the group as operating cash costs less
co-product revenue. TCC per oz are calculated as total cash costs
divided by the ounces of gold sold. TCC per oz are presented on a
segment basis .
Operating cash costs are defined by the group as operating cash
expenses plus refinery and transportation costs, other taxes and
mining tax. This also equates to the group's segment result as
reported under IFRS plus each segment's loss/gain on disposal of
subsidiaries, impairment of ore stockpiles, gold in circuit,
bullion in process and flotation concentrate, impairment of
exploration and evaluation assets, impairment of mining assets,
write-down of inventory to net realizable value, central
administration expenses, depreciation minus each segment's revenue
from external customers , bullion in process and flotation
concentrate, reversal of impairment of mining assets and in-house
service. Operating cash costs are presented on a segment basis.
Operating cash expenses are defined by the group as the total of
staff costs, materials, fuel, electricity, other external services,
other operating expenses, and the movement in ore stockpiles, work
in progress, bullion in process and flotation concentrate
attributable to gold production. The main cost drivers affecting
operating cash expenses are stripping ratios, production volumes of
ore mined / processed, recovery rates, cost inflation and
fluctuations in the ruble to US dollar exchange rate.
Other companies may calculate this measure differently.
Relevance
The group closely monitors its current and projected costs to
track and benchmark the ongoing efficiency and effectiveness of its
operations. This monitoring includes analysing fluctuations in the
components that operating cash costs and cost per tonne mined and
processed to identify where and how efficiencies may be made.
Reconciliation
The tables below provide a reconciliation between operating
expenses and total cash costs to calculate the cash cost per ounce
sold for relevant periods.
H1 20 2 1 Corporate
Ref Pioneer Malomir Albyn and other Total
US$'000 US$'000 US$'000 US$'000 US$'000
---------- --------- ------------- --------------------------
Operating expenses SPL 303,652
Deduct:
Foreign exchange note (70 6
losses 6 )
note
Depreciation 6 (62,981)
Write-down of inventory
to net realisable note
value 6 (145)
Impairment of gold note
in circuit 6 (700)
Central administration note
expenses 6 ( 2 9,579)
note 18,77 209,54
Operating cash costs 4 100,303 57,458 33,002 8 1
Deduct:
Corporate and other note (18,77 (18,77
segment 4 8 ) 8 )
Deduct: silver revenue note - - - -
4 -
190,76
Total Cash Costs 100,303 57,458 33,002 - 3
187,06
Total ounces sold oz 74,932 69,895 42,238 4
Total Cash Cost per
ounce sold US$/oz 1,339 8 2 2 781 1,020
H1 20 20 Corporate
Ref Pioneer Malomir Albyn and other Total
US$'000 US$'000 US$'000 US$'000 US$'000
----------- ---------- -------------- ------------------------
37 8 ,
Operating expenses SPL 440
Deduct:
Foreign exchange note 2 6 ,
gains 6 710
note (64,6
Depreciation 6 60 )
Reversal of impairment note
of ore stockpiles 6 15
Reversal of impairment note
of gold in circuit 6 38
Central administration note ( 20 ,
expenses 6 6 71)
----------- ---------- -------------- ------------------------
note 42, 56 1 2 , 3 19 ,
Operating cash costs 4 19 9 , 104 65, 529 0 679 872
Deduct:
Corporate and other note (1 2 , (1 2 ,
segment 4 679 ) 679 )
Deduct: silver revenue note - - - -
4 -
----------- ---------- -------------- ------------------------
42, 56
Total Cash Costs 19 9 , 104 65, 529 0 - 307 , 193
----------- ---------- -------------- ------------------------
1 5 8 ,8
Total ounces sold oz 44 81 , 726 7 1 , 785 312 , 354
Total Cash Cost per
ounce sold US$/oz 1, 253 802 593 983
FY20 20 Corporate
Ref Pioneer Malomir Albyn and other Total
US$'000 US$'000 US$'000 US$'000 US$'000
---------- -------- ----------- -----------
Operating expenses SPL 840,494
Deduct:
Foreign exchange note
gains 6 32,647
note
Depreciation 6 (134,079)
Impairment of mining note
assets 6 (58,806)
Impairment of exploration note
and evaluation assets 6 (16,112)
Write-down of inventory
to net realisable note
value 6 (1,215)
Impairment of gold note
in circuit 6 (77)
Impairment of bullion note
in process 6 (41)
Central administration note
expenses 6 (61,371)
---------- -------- ----------- -----------
note
Operating cash costs 4 366,677 106,959 92,307 35,497 601,440
Deduct:
Corporate and other note
segment 4 (35,497) (35,497)
note
Deduct: silver revenue 4 (338) (100) (196) - (634)
---------- -------- ----------- -----------
Total Cash Costs 366,339 106,859 92,111 - 565,309
---------- -------- ----------- -----------
Total ounces sold oz 279,364 140,436 126,658 - 546,458
Total Cash Cost per
ounce sold US$/oz 1,311 761 727 - 1,034
All-in Sustaining Costs (AISC)
Definition
AISC includes both operating and capital costs required to
sustain gold production on an ongoing basis, over and above the
direct mining and selling costs shown by TCC.
Calculation
AISC are calculated by the group as TCC plus/(minus)
impairment/(reversal of impairment) of ore stockpiles, gold in
circuit, bullion in process and flotation concentrate, central
administration expenses, plus sustaining capitalized stripping,
close-down and site restoration, sustaining capital and exploration
expenditure and payments under sustaining leases. This is then
divided by the ounces of gold sold. AISC are presented on a segment
basis.
AISC are calculated in accordance with guidelines for reporting
AISC as published by the World Gold Council in June 2013. Other
companies may calculate this measure differently.
Relevance
AISC allows for a better understanding of the true cost of
producing gold once key components such as central admin costs and
the cost of sustaining capital and exploration expenditure are
taken into account. Management uses this measure to monitor the
performance of our assets and their ability to generate positive
cash flows.
Reconciliation
The tables below provide a reconciliation between total cash
costs and all-in sustaining costs to calculate all-in sustaining
cost per ounce sold for relevant periods.
H1 20 2 1 Corporate
Ref Pioneer Malomir Albyn and other Total
US$'000 US$'000 US$'000 US$'000 US$'000
--------------- ------------- ---------------
190,76
Total Cash Costs 100,303 57,458 33,002 - 3
Impairment of gold note
in circuit 6 - 700 - - 700
Write-down of
inventory
to net realisable note
value 6 - - 31 - 31
Central
administration note 1 1,
expenses 6 849 1 1 , 051 6 , 679 - 29 , 579
Capitalised stripping 5,375 5,138 - - 10 , 513
Close-down and site
restoration 792 601 250 - 1, 6 43
Sustaining exploration
expenditure 71 - 2,891 - 2,962
Sustaining capital 6,94
expenditure 8 7 , 225 11 , 663 - 25 , 836
Sustaining lease 318 204 155 - 677
All-in Sustaining 125,
Costs 656 82 , 377 54 , 671 - 262 , 704
187,06
Total ounces sold oz 74,932 69,895 42,238 4
All-in Sustaining
Costs per ounce 1,67
sold US$/oz 7 1,1 79 1,294 - 1, 404
H1 20 20 Corporate
Ref Pioneer Malomir Albyn and other Total
US$'000 US$'000 US$'000 US$'000 US$'000
---------------- ------------- ----------------
19 9 30 7 ,
Total Cash Costs , 104 65, 529 42, 560 - 193
Add:
Reversal of
impairment note
of ore stockpiles 6 - (15) - - (15)
Reversal of
impairment note
of gold in circuit 6 - (38) - - (38)
Central
administration note 10 , 20 , 6
expense 6 512 5 , 409 4, 750 - 71
Capitalised stripping 12,995 10,713 - - 23,708
Close-down and site
restoration 629 - 57 - 686
Sustaining exploration
expenditure 362 - 158 - 520
Sustaining capital 10,6 4
expenditure 12, 393 5 3 , 174 - 26 , 212
Sustaining lease 149 1,047 857 - 2,053
All-in Sustaining 236, 3 80 ,
Costs 144 9 3 , 290 51 , 556 - 990
---------------- ----------------
Total ounces sold oz 158,844 81,726 71,785 - 312,354
All-in Sustaining
Costs per ounce
sold US$/oz 1,4 87 1,1 41 718 - 1,2 20
FY2020 Corporate
Ref Pioneer Malomir Albyn and other Total
US$'000 US$'000 US$'000 US$'000 US$'000
---------- ---------- -----------
Total Cash Costs 366,339 106,859 92,111 - 565,309
Add:
Impairment of gold note
in circuit 6 77 - - - 77
Impairment of bullion note
in process 6 41 - - - 41
Central administration note
expenses 6 31,374 15,772 14,225 - 61,371
Capitalised stripping 11,227 22,593 - - 33,820
Close-down and site
restoration 1,264 465 114 - 1,843
Sustaining exploration
expenditure 539 - 391 930
Sustaining capital
expenditure 25,143 18,094 6,004 - 49,241
Sustaining lease 384 2,116 1,653 - 4,153
All-in Sustaining
Costs 436,388 165,899 114,498 - 716,785
---------- -----------
Total ounces sold oz 279,364 140,436 126,658 - 546,458
All-in Sustaining
Costs per ounce sold US$/oz 1,562 1,181 904 - 1,312
All-in Costs (AIC)
Definition
AIC comprises of AISC as well as capital expenditure for major
growth projects or enhancement capital for significant improvements
at existing operations.
Calculation
AIC are calculated by the group as AISC plus non-sustaining
capitalized stripping (when the resulting ore production phase is
more than five years), non-sustaining exploration and capital
expenditures, (reversal of impairment)/impairment of refractory ore
stockpiles and payments under non-sustaining leases. This is then
divided by the ounces of gold sold. AIC are presented on a segment
basis .
AIC is calculated in accordance with guidelines for reporting
AIC as published by the World Gold Council in June 2013. Other
companies may calculate this measure differently.
Relevance
AIC reflect the costs of producing gold over the life-cycle of a
mine .
Reconciliation
The tables below provide a reconciliation between all-in
sustaining costs and all-in costs to calculate all-in cost per
ounce sold for relevant periods.
H1 2021 Corporate
Ref Pioneer Malomir Albyn and other Total
US$'000 US$'000 US$'000 US$'000 US$'000
--------------- ------------- --------------- -----------------------
All-in Sustaining 125, 262 ,
Costs 656 82 , 377 54 , 671 - 704
Add:
Capitalised stripping 2,050 - - - 2,050
Exploration expenditure - 1, 480 - - 1, 480
1 1 ,
Capital expenditure 374 5,688 - - 17 , 062
All-in Costs 139,080 89,545 54 , 671 - 283,296
187,06
Total ounces sold oz 74,932 69,895 42,238 4
All-in Costs per 1,85
ounce sold US$/oz 6 1,2 81 1,29 4 - 1,5 14
H1 2020 Corporate
Ref Pioneer Malomir Albyn and other Total
US$'000 US$'000 US$'000 US$'000 US$'000
---------------- ---------------- ---------------- ------------------------
All-in Sustaining 236, 3 80 ,
Costs 144 9 3 , 290 51 , 556 - 990
Add:
Exploration expenditure - 1,289 3,359 - 4,648
Capital expenditure 16,075 - 12,103 - 28 , 178
25 2 6 7 , 4 13 ,
All-in Costs , 219 9 4 , 579 018 - 816
---------------- ---------------- ------------------------
Total ounces
sold oz 158,844 81,726 71,785 - 312,354
All-in Costs
per
ounce sold US$/oz 1,5 88 1,1 57 9 34 - 1,3 25
2020 Corporate
Ref Pioneer Malomir Albyn and other Total
US$'000 US$'000 US$'000 US$'000 US$'000
---------- -------- ----------- --------
All-in Sustaining
Costs 436,388 165,899 114,498 - 716,785
Add:
Capitalised stripping 8,717 - - - 8,717
Exploration expenditure - 3,109 5,707 - 8,816
Capital expenditure 23,133 3,507 32,168 - 58,808
All-in Costs 468,238 172,515 152,373 - 793,126
---------- -------- --------
Total ounces sold oz 279,364 140,436 126,658 - 546,458
All-in Costs per
ounce sold US$/oz 1,676 1,228 1,203 - 1,451
Average Realised Gold Sales Price
Definition
The average realized gold sales price is the mean price at which
the group sold its gold production output throughout the reporting
period, including the realized effect of cash flow hedge contracts
during the period.
Calculation
The average realized gold sales price is calculated by dividing
total revenue received from gold sales (including the realized
effect of any hedging contracts) by the total quantity of gold sold
during the period. Other companies may calculate this measure
differently.
Relevance
As gold is the key commodity produced and sold by the group, the
average realized gold sales price is a key driver behind the
group's revenues and profitability.
Reconciliation
The average realized gold price has been calculated as set out
in the table below.
Ref H1 2021 H1 2020 FY2020
-------- ---------- --------
note
Gold revenue 4 US$'000 335,783 512 ,3 35 955,372
Gold sold ounces 187,064 312 , 354 5 46,458
Average realized gold
price US$/oz 1,795 1,640 1,748
Capital Expenditure (CAPEX)
Definition
CAPEX is the investment required by the group to explore and
develop its gold assets and keep current plants and other equipment
at its gold mines in good working order.
Calculation
CAPEX represents cash flows used in investing activities, namely
Purchases of property, plant and equipment and Expenditure of
exploration and evaluation assets.
Relevance
Capital expenditure is necessary in order not only to maintain
but also to develop and grow the business. Capex requirements need
to be balanced in line with the group's strategy and provide an
optimal allocation of the group's funds.
Reconciliation
The table below provides a reconciliation between capital
expenditure and cash flows used in investing activities.
Ref H1 2021 H1 2020 FY2020
US$'000 US$'000 US$'000
--------- --------- ----------
Purchase of property,
plant and equipment SCF 58,413 7 8, 618 1 51,503
Expenditure on exploration
and evaluation assets SCF 1,490 4, 648 8,829
Less:
( 42 ,
Capitalised stripping (12,563) (23,708) 537 )
1 17 ,
Total Capital Expenditure 47,340 59 , 55 8 795
Net Debt
Definition
Net Debt shows how indebted a company is after total debt and
any cash (or its equivalent) are netted off against each other.
Calculation
Net Debt is calculated as the sum of current borrowings and
non-current borrowings less cash and cash e quivalents. Other
companies may calculate this measure differently.
Relevance
Management considers Net Debt a key measure of the Company's
leverage and its ability to repay debt as well showing what
progress is being made in strengthening the statement of financial
position. The measure is also widely used by various
stakeholders.
Reconciliation
The table below provides calculation of net debt at relevant
reporting dates.
Ref 30 June 2021 31 December
US$'000 2020
US$'000
----- ------------- ------------
Cash and cash equivalents SFP 36,536 35,404
( 572,094
Borrowings SFP ) (536,020)
-----
(53 5 ,
Net debt 558 ) (500,616)
Underlying EBITDA
Definition
EBITDA is a common measure used to assess profitability without
the impact of different financing methods, tax, asset depreciation
and amortisation of intangibles and items of an exceptional /
non-recurring nature, or those that could make comparison of
results from prior periods less meaningful.
Calculation
Underlying EBITDA is calculated as profit/(loss) for the period
before financial income, financial expenses, foreign exchange gains
and losses, fair value changes, taxation, depreciation, impairment
charges/reversal of impairment. Other companies may calculate this
measure differently.
Relevance
Underlying EBITDA is an indicator of the group's ability to
generate operating cash flows, which are the source of funding for
the group's working capital requirements, capital expenditure and
debt service obligations. The measure is also widely used by
various stakeholders.
Reconciliation
The tables below provide reconciliations between net profit and
Underlying EBITDA as well as reconciliation between operating
profit and Underlying EBITDA for relevant periods.
Ref H1 2021 H1 2020 FY2020
US$'000 US$'000 US$'000
----------- -----------
(21, 994
Profit/(loss) for the period SPL 48,879 ) (48,882)
Add/(less):
Net (impairment reversals)/impairment
losses on financial instruments SPL (1,056) 1,274 (1,000)
Investment and other finance income SPL (3,266) (3,962) (7,754)
Interest expense SPL 24,252 33,3 83 58,533
(4,683
Net other finance (gains)/losses SPL ) 98 ,8 93 67,957
(2 6 ,7
Foreign exchange losses/(gains) note 6 706 10 ) (32,647)
Taxation SPL 20,257 3 8 , 542 76,069
6 4 ,66
Depreciation note 6 62,981 0 134,079
Impairment of mining assets and
in-house service note 6 - - 58,806
Impairment of exploration and evaluation
assets note 6 - - 16,112
Write-down of inventory to net
realizable value note 6 145 - 1,215
Reversal of impairment of ore stockpiles note 6 - (15) -
Impairment/(reversal of impairment)
of gold in circuit note 6 700 (38) 77
Impairment of bullion in process note 6 - - 41
(Reversal of write-down)/write-down
to adjust the carrying value of
net assets of disposal group to
fair value less costs to sell note 12 (34,874) - 55,798
Share of results of associate (a) note 1 2 281 8 , 615 (27,680)
19 2 ,
Underlying EBITDA 114,322 648 350,724
----------- -----------
Corporate Consolidated
Pioneer Malomir Albyn and other
H1 2021
Ref US$'000 US$'000 US$'000 US$'000 US$'000
----------- ---------------
Operating profit SPL 4 8 , 293
Foreign exchange
losses note 6 706
( 33 , 4 8 , 99
Segment result note 4 11,745 39,923 31 , 153 82 2) 9
Add/ (less):
1 1 ,
Depreciation notes 4,6 22,694 27,279 495 1, 513 62,981
Write-down of
inventory
to net realizable
value notes 4,6 - - 31 114 145
Impairment of gold
in circuit notes 4,6 - 700 - - 700
Underlying EBITDA (3 2 , 11 2 ,
by segment 34,439 67 , 902 42,679 19 5) 82 5
Share of results
of associate note 12 1,216
Share of results
of associate (a) note 12 281
11 4 ,
Underlying EBITDA 32 2
Corporate Consolidated
Pioneer Malomir Albyn and other
H1 2020
Ref US$'000 US$'000 US$'000 US$'000 US$'000
Operating 14 4 ,
profit SPL 291
Foreign
exchange (2 6 ,
gains note 6 710 )
36, (2 4 , 1 17 ,
Segment result note 4 287 4 6 , 987 58, 386 079 ) 581
Add/ (less):
22,9
Depreciation notes 4,6 87 23,941 16,607 1,12 5 64,6 60
Reversal of
impairment
of ore
stockpiles notes 4,6 - (15) - - (15)
Reversal of
impairment
of gold in
circuit notes 4,6 - (38) - - (38)
Underlying EBITDA 59, 7 4 , (22,95 18 2 ,18
by segment 274 7 0 , 875 993 4 ) 8
Share of
results
of associate note 12 1,845
Share of
results
of associate
(a) note 12 8,615
19 2 ,
Underlying EBITDA 648
(a) Group's share of interest expense, investment income, other finance
gains and losses, foreign exchange gains and losses, taxation, depreciation
and impairment/reversal of impairment recognized by an associate and
impairment/reversal of impairment recognized against investment in
the associate.
Corporate Consolidated
FY2020 Pioneer Malomir Albyn and other
Ref US$'000 US$'000 US$'000 US$'000 US$'000
----------
Operating
profit SPL 148,040
Foreign
exchange
gains note 6 (32,647)
Segment result note 4 69,926 87,291 26,246 (68, 0 70) 115,393
Add/ (less):
Depreciation notes 4,6 49,824 53,771 27,969 2,515 134,079
Impairment of
mining
assets notes 4,6 - - 58,806 - 58,806
Impairment of
exploration
and evaluation
assets notes 4,6 - - 16,112 - 16,112
Impairment of
bullion
in process notes 4,6 41 - - - 41
Impairment of
gold
in circuit notes 4,6 77 - - - 77
Write-down of
inventory
to net
realizable
value notes 4,6 - - - 1,215 1,215
----------
Underlying EBITDA
by segment 119,868 141,062 129,133 (64,340) 325,723
----------
Share in
results
of associates note 12 52,681
Share in
results
of associates
(a) note 12 (27,680)
Underlying EBITDA 350,724
(a) Group's share of interest expense, investment income, other
finance gains and losses, foreign exchange gains and losses,
taxation, depreciation and impairment/reversal of impairment
recognized by an associate and impairment/reversal of impairment
recognized against investment in the associate.
See "The Use and Application of Alternative Performance Measures
(APMs)" section for further information on our APMs
.. Throughout this document, when discussing the group's
financial performance, reference is made to a number of financial
measures, known as Alternative Performance Measures (APMs), which
are not defined or calculated in accordance with IFRS. Go to "The
Use and Application of Alternative Performance Measures (APMs)"
section for further information on our APMs.
.. Throughout this document, when discussing the group's
financial performance, reference is made to a number of financial
measures, known as Alternative Performance Measures (APMs), which
are not defined or calculated in accordance with IFRS. Go to "The
Use and Application of Alternative Performance Measures (APMs)"
section for further information on our APMs.
.. Throughout this document, when discussing the group's
financial performance, reference is made to a number of financial
measures, known as Alternative Performance Measures (APMs), which
are not defined or calculated in accordance with IFRS. Go to "The
Use and Application of Alternative Performance Measures (APMs)"
section for further information on our APMs.
.. Throughout this document, when discussing the group's
financial performance, reference is made to a number of financial
measures, known as Alternative Performance Measures (APMs), which
are not defined or calculated in accordance with IFRS. Go to "The
Use and Application of Alternative Performance Measures (APMs)"
section for further information on our APMs.
.. Throughout this document, when discussing the group's
financial performance, reference is made to a number of financial
measures, known as Alternative Performance Measures (APMs), which
are not defined or calculated in accordance with IFRS. Go to "The
Use and Application of Alternative Performance Measures (APMs)"
section for further information on our APMs.
.. Throughout this document, when discussing the group's
financial performance, reference is made to a number of financial
measures, known as Alternative Performance Measures (APMs), which
are not defined or calculated in accordance with IFRS. Go to "The
Use and Application of Alternative Performance Measures (APMs)"
section for further information on our APMs.
.. Throughout this document, when discussing the group's
financial performance, reference is made to a number of financial
measures, known as Alternative Performance Measures (APM), which
are not defined or calculated in accordance with IFRS. Go to "The
Use and Application of Alternative Performance Measures (APMs)"
section for further information on our APMs.
.. Throughout this document, when discussing the group's
financial performance, reference is made to a number of financial
measures, known as Alternative Performance Measures (APM), which
are not defined or calculated in accordance with IFRS. Go to "The
Use and Application of Alternative Performance Measures (APMs)"
section for further information on our APMs.
.. Net debt is an Alternative Performance Measure (APM), which
is not defined or calculated in accordance with IFRS. Go to "The
Use and Application of Alternative performance Measures (APMs)"
section for further information about our APMs.
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IR DKDBQPBKKCCK
(END) Dow Jones Newswires
September 01, 2021 02:00 ET (06:00 GMT)
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