1
PJSC Polyus
Management Report
31 December 2021
1 March 2022
2
Contents
CAUTIONARY
STATEMENT ..............................................................................................................................................................3
RESPONSIBILITY
STATEMENT .........................................................................................................................................................4
THE
FOURTH
QUARTER
AND
FULL
YEAR
2021
KEY
METRICS
OVERVIEW ..........................................................................5
S
TATEMENT OF PROFIT OR LOSS REVIEW
11
S
TATEMENT OF FINANCIAL POSITION REVIEW
19
S
TATEMENT OF CASH FLOWS REVIEW
21
GOING
CONCERN ...................................................................................................................................................................... 25
RISKS
AND
UNCERTAINTIES .................................................................................................................................................... 25
INDEPENDENT
AUDITOR’S
REPORT ....................................................................................................................................... 27
CONSOLIDATED
FINANCIAL
STATEMENTS
FOR
THE
YEAR
ENDED
31
DECEMBER
2021 ............................................. 32
CONSOLIDATED
STATEMENT
OF
PROFIT
OR
LOSS
FOR
THE
YEAR
ENDED
31
DECEMBER
2021................................. 33
CONSOLIDATED
STATEMENT
OF
COMPREHENSIVE
INCOME
FOR
THE
YEAR
ENDED
31
DECEMBER
2021.............. 34
CONSOLIDATED
STATEMENT
OF
FINANCIAL
POSITION
AT
31
DECEMBER
2021 .......................................................... 35
CONSOLIDATED
STATEMENT
OF
CHANGES
IN
EQUITY
FOR
THE
YEAR
ENDED
31
DECEMBER
2021......................... 36
CONSOLIDATED
STATEMENT
OF
CASH
FLOWS
FOR
THE
YEAR
ENDED
31
DECEMBER
2021...................................... 37
NOTES
TO
THE
CONSOLIDATED
FINANCIAL
STATEMENTS
FOR
THE
YEAR
ENDED
31
DECEMBER
2021 ................... 38
Management Report for the fourth quarter and full year 2021
3
Cautionary statement
1 March 2022 – PJSC Polyus (the “Company” or “Polyus”) issues this Annual Management Report
(“AMR”) to summarise recent operational activities and to provide trading guidance in respect of
the consolidated financial statements for the full year ended 31 December 2021.
This AMR has been prepared solely to provide additional information to stakeholders to assess
the Company’s and its subsidiaries’ (the “group”) strategies and the potential for those strategies
to succeed. The AMR should not be relied on by any other party or for any other purpose.
The AMR contains certain forward-looking statements. These statements are made by the
Directors in good faith based on the information available to them up to the time of their approval
of this report but such statements should be treated with caution due to the inherent
uncertainties, in cluding both economic and business risk factors, underlying any such forward-
looking information.
This AMR has been prepared for the group as a whole and therefore gives greater emphasis to
those matters which are significant to Polyus and its subsidiaries undertakings when viewed as a
whole.
4
Responsibility statement
Management of PJSC “Polyus” are responsible for the preparation of the consolidated financial
statements that present fairly the financial position of PJSC “Polyus” and its subsidiaries (the
“group”) as of
31 December
equity for the year then ended, in compliance with International Financial Reporting Standards
(“IFRS”).
In preparing the consolidated financial statements, Management is responsible for:
●
properly selecting and applying accounting policies;
●
presenting information, including accounting policies, in a manner that provides relevant,
reliable, comparable and understandable information;
●
compliance with the requirements of IFRS and providing additional disclosures when
compliance with the specific requirements of IFRS are insufficient to enable users to
understand the impact of particular transactions, other events and conditions on the
group’s consolidated financial position and financial performance; and
●
making an assessment of the group’s ability to continue as a going concern.
Management is also responsible for:
●
designing, implementing and maintaining an effective and sound system of internal
controls, throughout the group;
●
maintaining adequate accounting records that are sufficient to show and explain the
group’s transactions and disclose with reasonable accuracy at any time the consolidated
financial position of the group, and which enable them to ensure that the consolidated
financial statements of the group comply with IFRS;
●
maintaining statutory accounting records in compliance with legislation and accounting
standards in the jurisdictions in which the group operates;
●
taking such steps as are reasonably available to them to safeguard the assets of the group;
and
●
preventing and detecting fraud and other irregularities.
The consolidated financial statements of the group for the year ended 31 December 2021 were
approved by Directors on 1 March 2022.
By order of the Board of Directors,
Chief Executive Officer
Pavel Grachev
Management Report for the fourth quarter and full year 2021
5
Management Discussion and Analysis
The fourth quarter and full year 2021 key metrics overview
$ million
(if not mentioned otherwise)
4Q
2021
3Q
2021
Q-o-Q
4Q
2020
Y-o-Y
Y-o-Y
Operating highlights
Gold production (koz)
1
684
770
(11%)
710
(4%)
2,717
2,766
(2%)
Gold sold (koz)
712
776
(8%)
829
(14%)
2,736
2,817
(3%)
Realised prices
Weighted -average refined gold selling
price, $/oz
1,802
1,787
1%
1,872
(4%)
1,798
1,786
1%
Financial performance
Total revenue
1,293
1,400
(8%)
1,515
(15%)
4,966
4,998
(1%)
Operating profit
751
843
(11%)
935
(20%)
2,959
3,066
(3%)
Operating profit margin
58%
60%
62%
60%
61%
Profit for the period
521
664
(22%)
835
(38%)
2,278
1,646
38%
Earnings per share - basic (US Dollar)
3.85
4.87
(21%)
6.17
(38%)
16.82
11.89
41%
Earnings per share - diluted (US Dollar)
3.83
4.85
(21%)
6.15
(38%)
16.77
11.85
42%
Adjusted net profit
2
573
663
(14%)
732
(22%)
2,287
2,332
(2%)
Adjusted net profit margin
44%
47%
48%
46%
47%
Adjusted EBITDA
3
894
986
(9%)
1,138
(21%)
3,518
3,690
(5%)
Adjusted EBITDA margin
69%
70%
75%
71%
74%
Net cash flow from operations
731
826
(12%)
895
(18%)
2,936
3,046
(4%)
Capital expenditure
4
389
233
67%
272
43%
928
653
42%
Cash costs
Total cash cost (TCC) per ounce sold
($/oz)
5
412
427
(4%)
354
16%
405
362
12%
All-in sustaining cash cost (AISC)
per ounce sold ($/oz)
6
837
697
20%
613
37%
715
604
18%
Financial position
Cash and cash equivalents
1,343
1,675
(20%)
1,445
(7%)
1,343
1,445
(7%)
Net debt (incl. derivatives)
7
2,197
1,950
13%
2,464
(11%)
2,197
2,464
(11%)
Net debt (incl. derivatives)/adjusted
EBITDA (x)
8
20%
(14%)
(14%)
1
Gold production is comprised of 684 thousand ounces of refined gold in the fourth quarter of 2021 and 2,687 thousand ounces of refined gold and 30 thousand ounces of gold in flotation
concentrate in 2021 respectively.
2
instruments, foreign exchange (gain) / loss and associated deferred and current income tax related to such items.
3
disposal of a subsidiary and subsequent accounting at equity method), finance costs, interest income, foreign exchange loss / (gain), impairment loss / (reversal of impairment), (gain) / loss on
property, plant and equipment disposal, expenses associated with an equity-settled share-based payment plan, expenses associated with covid-19, loss on transfer of Omchak power grid and
special charitable contributions as required to ensure calculation of the Adjusted EBITDA is comparable with the prior period.
4
details see reconciliation on page 24.
5
associated with covid-19 and adjusted by non-monetary change in inventory. TCC per ounce sold is the cost of producing an ounce of gold, which includes mining, processing and refining costs.
The group calculates TCC per ounce sold as TCC divided by total ounces of gold sold for the period. The group calculates TCC and TCC per ounce sold for certain mines on the same basis, using
corresponding mine-level financial information.
6
decommissioning liabilities, provision for annual vacation payment, employee benefit obligations cost, and change in allowance for obsolescence of inventory less amortisation and depreciation
included in selling, general and administrative expenses. AISC is an extension of TCC and incorporates costs related to sustaining production and additional costs which reflect the varying costs
of producing gold over the life-cycle of a mine. The group believes AISC is helpful in understanding the economics of gold mining. AISC per ounce sold is the cost of producing and selling an
ounce of gold, including mining, processing, transportation and refining costs, general costs from both mine and alluvial operations, and the additional expenditures noted in the definition of
AISC. The group calculates AISC per ounce sold as AISC divided by total ounces of gold sold for the period.
7
and interest rate swaps at the reporting date. Net debt excludes derivative financial instrument assets/liabilities other than cross-currency and interest rate swaps, site restoration and
environmental obligations, deferred tax and other non-current liabilities. Net debt should not be considered as an alternative to current and non-current borrowings, and should not necessarily
be construed as a comprehensive indicator of the group's overall liquidity.
8
6
Key highlights for the fourth quarter and full year 2021
1.
Total gold sales volumes in the fourth quarter of 2021 amounted to 712 thousand ounces, down 8%
compared to the third quarter due to seasonally lower production volumes at Alluvials and Kuranakh
and lower production volumes at Verninskoye as a result of scheduled maintenance works. The
Company sold a total of 2,736 thousand ounces of gold in the full year of 2021, down 3% compared
to the prior year. This was primarily driven by lower production volumes at both Olimpiada and
Blagodatnoye.
2.
Revenue for the fourth quarter of 2021 totalled $1,293 million, down 8% compared to the previous
quarter, while revenue for the full year amounted to $4,966 million, a 1% decrease year-on-year. This
was driven by the aforementioned decline in production volumes.
3.
In the fourth quarter, the group’s TCC decreased by 4% to $412 per ounce compared to $427 per
ounce in the previous quarter. This improvement was attributable to a seasonal decrease in output
at the structurally higher-cost alluvial operations and higher sales volumes of antimony-rich flotation
concentrate. The latter resulted in higher by-product credit ($13 per ounce in the fourth quarter of
2021 compared to $5 per ounce in the third quarter of 2021). In 2021, the group’s TCC increased by
12% to $405 per ounce compared to 2020. This reflects lower average grades in ore processed at
Olimpiada and Blagodatnoye, ongoing inflation in consumables and an increase in the MET rate
applied to Verninskoye and Natalka in line with the regional investment project (“RInvP”) regime for
the deposit s. These factors were partially offset by improved hourly-throughput performance at
Olimpiada, Ve rninskoye and Natalka.
4.
Adjusted for FX and gold price fluctuations, the group’s TCC for the full year 2021 came below the
lower bound of the guidance range of $425-450 per ounce, which was based on the assumptions of
FX rate of 65 roubles per dollar and a gold price of $1,300 per ounce. This was driven by improved
operational performance at Olimpiada and Verninskoye, proactive purchasing and procurement
management initiatives and partial services and maintenances rollover from the fourth quarter of
2021 to the first quarter of 2022.
5.
In the fourth quarter of 2021, the group’s adjusted EBITDA amounted to $894 million, a 9% decrease
compared to $986 million in the previous quarter, reflecting lower gold sales volumes during the
quarter. In 2021, the group’s adjusted EBITDA stood at $3,518 million, a 5% decrease compared to
the previous year, as a result of lower gold sales volumes and higher TCC on a per ounce basis.
6.
Net profit for the fourth quarter amounted to $521 million, compared to $664 million in the third
quarter. Net profit for the full year of 2021 increased to $2,278 million , compared to $1,646 million
in 2020. This increase reflected the negative impact of non-cash items on profit before tax in 2020.
Polyus recognised a gain on derivative financial instruments of $33 million and a foreign exchange
loss of $39 million in 2021.
7.
Adjusted net profit amounted to $573 million in the fourth quarter, down 14% compared to the third
quarter of 2021. For the full year of 2021, adjusted net profit amounted to $2,287 million, down 2%
year-on-year, reflecting lower operating profit.
8.
Net cash generated from operations was $731 million in the fourth quarter, compared to $826 million
in the previous quarter. In 2021, net cash generated from operations decreased to $2,936 million,
compared to $3,046 million in 2020.
9.
Capital expenditures (“capex”) for the fourth quarter increased to $389 million, from $233 million in
the previous quarter, as the Company accelerated its capex spending programme as planned. Capex
Management Report for the fourth quarter and full year 2021
7
for the full year of 2021 increased to $928 million from $653 million in the previous year. This increase
reflects higher capital expenditures across all deposits, except Natalka.
10.
Adjusted for FX fluctuations, capital expenditures for the full year 2021 came closer to the lower
bound of the guidance range of $1,000-1,100 million, which was based on a FX rate assumptions of
65 roubles per dollar.
11.
Cash and cash equivalents as at 31 December 2021 decreased to $1,343 million (30 September 2021:
$1,675 million), while the net debt position, including liabilities under cross-currency and interest rate
swaps increased to $2,197 million (30 September 2021: $1,950 million). The group’s net liabilities
under cross-currency and interest rate swaps related to bank credit facilities and rouble bonds
totalled approximately $268 million as of the end of the fourth quarter (30 September 2021: net
liabilities of $249 million).
12.
The net debt (incl. derivatives)/adjusted EBITDA ratio decreased to 0.6x compared to 0.7x at the end
of 2020, reflecting a lower net debt position.
13.
The Board of Directors of the Company (the «Board») has preliminarily considered dividends for the
second half of 2021 that it intends to recommend for approval by the Company’s annual general
shareholders’ meeting. In accordance with the Company’s Dividend Policy which suggests the total
dividend payout as 30% of the Company’s EBITDA for the full year, dividends for the second half of
2021 will amount to the ruble equivalent of $548 million. Based on the current number of outstanding
shares recommended dividen d per share for the second half of 2021 is expected to be $4.03 per
ordinary share. The total dividend payout for the full year of 2021 will correspond to $1,055 million.
This amount includes $507 million paid out in form of dividend for the first half of 2021.
14.
In 2021, the Company allocated $94 million to measures aimed at preventing the spread of COVID-
19. Out of this total amount, $78 million is included in Cost of gold sales (additional staff expenses
related to extended working shifts) and Other expenses (COVID -19 test kits, medical services and
support provided to regional hospitals) in amounts of $36 million and $42 million, respectively. The
remaining $16 million was attributable to in-progress inventory and capitalised as part of property,
plant and equipment in the Statement of Financial position. The expenses associated with COVID-19
and recognised as part of Cost of gold sales were excluded from both TCC and AISC calculations. At
the same time, all P&L expenses related to COVID -19, in the amount of $78 million , were excluded
from the adjusted EBITDA calculation.
8
OUTLOOK
Production guidance
●
Based on the mining plan and processing capabilities, we reiterate total gold output of ca. 2.8 million
ounces of gold in 2022. Production guidance reflects an improvement in head grades at Olimpiada as
the Company gets access to the high -grade ore material. The Company is continuing to implement
brownfield development initiatives to strengthen its operational profile.
TCC guidance
●
The Company reiterates its 2022 TCC guidance and expects it to reside within the range of $425-$450
per ounce. This estimate is based on the assumption of a foreign exchange rate of 65 roubles per
dollar and a gold price of $1,300 per ounce. The Company anticipates a gradual increase in TCC from
2021 levels, mainly driven by inflationary factors in key consumables and labour.
Capex guidance
●
The Company reiterates its 2022 capex guidance range of $1,100-1,200
9
reflects:
o
ongoing construction of Mill 5 at the Blagodatnoye complex;
o
the completion of the Bankable Feasibility Study and commencement of internal
infrastructure construction at Sukhoi Log;
o
Kuranakh mill expansion to 7.5 million tonne per annum and reconstruction of the tailings
storage facility ;
o
mining fleet procurement for the Natalka mine;
o
an increase in the exploration budget and mining fleet replacement at Alluvials as well as
a rollover of IT capex spending from 2021.
COVID-19 expenses
●
Based on preliminary assessments, Polyus expects approximately $100 million of COVID-19 related
expenses in 2022. These include salary increases for staff working extended shifts, procurement of
medical and personal protection equipment, as all preventive measures remain in place at all sites.
The expenses associated with COVID-19 and recognised as part of Cost of gold sales will be excluded
from both TCC and AISC calculations as well as from the adjusted EBITDA calculation.
Review of external factors
9
On the assumption of foreign exchange rate of 65 roubles per dollar.
Management Report for the fourth quarter and full year 2021
9
1,650
1,700
1,750
1,800
1,850
1,900
1,950
01-Jan
03-Feb
08-Mar
10-Apr
13-May
15-Jun
18-Jul
20-Aug
22-Sep
25-Oct
27-Nov
30-Dec
The group’s results are significantly affected by movements in the price of gold and currency exchange rates
(principally the RUB/USD rate).
Gold price dynamics
The market price of gold is a significant factor that influences the group’s profitability and operating cash
flow generation. In the fourth quarter of 2021, the average London Bullion Market Association (LBMA) gold
price was $1,795 per ounce, compared to $1,790 per ounce in the previous quarter and $1,874 per ounce
in the fourth quarter of 2020. In 2021, the average LBMA gold price was $1,798 per ounce, 2% above the
2020 average of $1,770 per ounce.
LBMA gold price dynamics in 2021 $/oz
Source: London Bullion Market Association
Rouble exchange rate dynamics
The group's revenue from gold sales is linked to the US dollar (USD), whereas most of the group’s operating
expenses are denominated in Russian roubles (RUB). The strengthening of the RUB against the USD can
negatively impact the group’s margins by increasing the USD value of its RUB-denominated costs, while a
weaker RUB positively affects its margins as it reduces the USD value of the group’s RUB-denominated costs.
In the fourth quarter of 2021, the average RUB/USD exchange rate amounted to 72.61, compared to 73.47
in the previous quarter and 76.21 in the fourth quarter of 2020. In 2021, the average USD/RUB exchange
rate was 73.65, compared to 72.14 in 2020.
Min $
1,684
/oz
Average $
1,798
/oz
Max $
1,943
/oz
10
69.00
70.00
71.00
72.00
73.00
74.00
75.00
76.00
77.00
78.00
01-Jan
03-Feb
08-Mar
10-Apr
13-May
15-Jun
18-Jul
20-Aug
22-Sep
25-Oct
27-Nov
30-Dec
Max 77.77
Min 69.55
RUB/USD dynamics, 2021
Source: The Central Bank of the Russian Federation
Inflationary trends
All of the group’s operations are located in Russia. The rouble-based annualised Russian Consumer Price
Index (CPI), calculated by the Federal State Statistics Service, was at 8.4% as of the end of the fourth quarter
of 2021, compared to 7.4% as of the end of the previous quarter and 4.9% as of the end of the fourth quarter
of 2020.
Average 73.65
Management Report for the fourth quarter and full year 2021
11
Financial review of the fourth quarter and full year 2021
Statement of profit or loss review
REVENUE ANALYSIS
4Q
2021
3Q
2021
Q-o-Q
2021
2020
Y-o-Y
Gold sales (koz)
712
776
(8%)
2,736
2,817
(3%)
Weighted-average refined gold selling price, $/oz
1,802
1,787
1%
1,798
1,786
1%
Average afternoon gold LBMA price fixing ($/oz)
1795
1,790
0%
1,798
1,770
2%
Premium of \ (Discount to) average selling price
over average LBMA price fixing ($/oz)
7
(3)
N.A.
-
16
(100%)
Gold sales ($ million)
1,274
1,383
(8%)
4,904
4,956
(1%)
Other sales ($ million)
19
17
12%
62
42
48%
Total revenue ($ million)
1,293
1,400
(8%)
4,966
4,998
(1%)
In the fourth quarter, the group’s revenue from gold sales amounted to $1,274 million, an 8% decrease
compared to the previous quarter. Gold sales totalled 712 thousand ounces, down 8% compared to the
previous quarter, driven by seasonally lower production volumes at Alluv ials and Kuranakh and lower
production volumes at Verninskoye due to scheduled maintenance.
For the full year of 2021, the group’s revenue from gold sales amounted to $4,904 million , a 1% decrease
year-on-year. Gold sales totalled 2,736 thousand ounce, a 3% decrease from the previous year. This was
driven by a lower production volumes at Olimpiada and Blagodatnoye, while the average realised refined
gold price was 1% higher compared to 2020.
Revenue breakdown by business unit, 4Q 2021 vs. 3Q 2021
Assets
4Q 2021 ($ million)
3Q 2021 ($ million)
Gold
sales
Other
sales
Total
sales
Gold
sales
Other
sales
Total
sales
Olimpiada
562
1
563
520
1
521
Blagodatnoye
201
-
201
194
-
194
Natalka
233
-
233
240
1
241
Verninskoye
120
-
120
149
-
149
Kuranakh
113
1
114
117
-
117
Alluvials
45
2
47
163
2
165
Other
-
15
15
-
13
13
Total
1,274
19
1,293
1,383
17
1,400
Revenue breakdown by business unit, 2021 vs. 2020
Assets
Gold
sales
Other
sales
Total
sales
Gold
sales
Other
sales
Total
sales
Olimpiada
2,018
4
2,022
2,155
11
2,166
Blagodatnoye
772
-
772
810
-
810
Natalka
905
2
907
814
6
820
Verninskoye
527
-
527
484
3
487
Kuranakh
428
3
431
426
4
430
Alluvials
254
6
260
267
6
273
Other
-
47
47
-
12
12
Total
4,904
62
4,966
4,956
42
4,998
12
293
109
134
83
66
91
318
112
129
66
62
25
Olimpiada
Blagodatnoye
Natalka
Verninskoye
Kuranakh
Alluvials
Gold sold by mine, koz
3Q 2021
4Q 2021
1,251
455
455
274
239
143
1,132
430
503
292
238
141
Olimpiada
Blagodatnoye
Natalka
Verninskoye
Kuranakh
Alluvials
2020
2021
CASH COSTS ANALYSIS
In the fourth quarter, the group’s cost of gold sales decreased by 10% compared to the previous quarter, to
$384 million, while cash operating costs decreased by 2%, to $335 million.
In 2021, the group’s cost of gold sales increased 6% compared to the prior year, to $1,468 million. Cash
operating costs amounted to $1,239 million, remaining broadly flat on the previous year.
Cost of gold sales breakdown
$ million
4Q 2021
3Q 2021
Q-o-Q
Y-o-Y
Cash operating costs
10
335
343
(2%)
1,239
1,230
1%
Depreciation and amortisation (D&A) of
operating assets
103
95
8%
385
406
(5%)
Total cost of production
438
438
0%
1,624
1,636
(1%)
Increase in stockpiles, gold-in -process and
refined gold inventories
(54)
(10)
N.A.
(156)
(247)
(37%)
Cost of gold sales
384
428
(10%)
1,468
1,389
6%
Cash operating costs - breakdown by item
$ million
4Q 2021
3Q 2021
Q-o-Q
Y-o-Y
Consumables and spares
86
84
2%
304
304
0%
Employee compensation
85
86
(1%)
330
331
0%
Mineral Extraction Tax (“MET”)
64
70
(9%)
245
238
3%
Fuel
33
32
3%
116
120
(3%)
Power
18
15
20%
63
61
3%
Other
10
49
56
(13%)
181
176
3%
Total
335
343
(2%)
1,239
1,230
1%
In the fourth quarter of 2021, consumables and spares expenses rose by 2% compared to the previous
quarter. The positive impact of the seasonal downscale of activities at Alluvials was offset by the increase in
maintenance expenses. For the full year of 2021, consumables and spares expenses remained flat compared
to the previous reporting period. The ongoing inflation across all inputs, including milling balls, ammonium
10
mining services and other costs, including Refining, logistics and costs on explosives. Other costs also include $9 million and $36 million of COVID-19 expenses related to employee
compensation in the fourth quarter of 2021 and for the full year of 2021, respectively. The expenses associated with COVID-19 and recognised as part of Cost of gold sales were excluded from
both TCC and AISC calculations.
Management Report for the fourth quarter and full year 2021
13
nitrate, xanthogenate and copper sulfate was fully offset by set of operational improvements at Olimpiada
and Verninskoye, as well as purchasing and procurement management initiatives. The latter include long-
term contracts with fixed or linked to benchmarks prices, ahead-of-schedule procurement of key
consumables and spares and pro-active negotiations with key suppliers to improve the pricing-terms.
Employee compensation expenses (excluding additional expenses related to Covid -19) decreased by 1%
compared to the previous quarter. This reflects the seasonal downscale of activities at the Alluvials
operations. In 2021, employee compensation expenses remained flat compared to the prior year. Total
employee compensation in rouble terms increased, following annual salary indexation.
Power costs increased by 20% quarter-on-quarter due to the increase in power tariffs. For the full year of
2021, the group’s power costs increased by 3% compared to the prior year , due to the higher energy
consumption and increase in power tariffs across almost all deposits.
The group’s MET expenses decreased by 9% compared to the previous quarter. This reflects lower
production volumes of gold dore during the period. In 2021, MET expenses increased by 3%, which mainly
reflects an increase in the MET rate applied to Verninskoye and Natalka, in line with the regional investment
project (“RInvP”) regime for the deposits .
In the fourth quarter, fuel costs increased by 3% compared to the previous quarter. In 2021, fuel costs
decreased by 3%, primarily due to intensification of stripping activities across almost all deposits, resulting
in a higher portion of capitalized diesel expenses.
Cash operating costs - breakdown by key business units
11
,
4Q 2021 vs. 3Q 2021
Olimpiada
Blagodatnoye
Natalka
Verninskoye
Kuranakh
Alluvials
$ million
4Q
2021
3Q
2021
4Q
2021
3Q
2021
4Q
2021
3Q
2021
4Q
2021
3Q
2021
4Q
2021
3Q
2021
4Q
2021
3Q
2021
Consumables
and spares
37
30
13
14
16
13
9
8
9
7
3
11
Employee
compensation
14
17
13
7
13
11
6
5
10
10
7
24
MET
33
32
12
12
3
3
8
7
7
7
2
9
Fuel
10
4
6
5
9
8
2
1
5
4
2
9
Power
7
6
2
2
7
6
1
2
3
2
1
3
Other
31
14
8
11
15
10
9
8
7
4
25
12
Total
132
103
54
51
63
51
35
31
41
34
40
68
Cash operating costs - breakdown by key business units,
2021 vs. 2020
Olimpiada
Blagodatnoye
Natalka
Verninskoye
Kuranakh
Alluvials
$ million
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
Consumables
and spares
127
125
45
46
54
58
28
27
29
28
19
17
Employee
compensation
72
71
32
41
49
54
25
35
41
39
42
37
MET
123
137
48
53
12
-
21
6
26
26
15
16
Fuel
25
22
19
21
31
33
6
8
16
15
14
14
Power
25
22
7
7
24
22
5
4
9
9
5
6
Other
80
66
41
39
57
60
34
36
18
13
42
37
Total
452
443
192
207
227
227
119
116
139
130
137
127
11
14
354
378
338
350
563
900
360
377
389
429
608
1,196
Olimpiada
Blagodatnoye
Natalka
Verninskoye
Kuranakh
Alluvials
TCC performance by mine, $/oz
3Q 2021
4Q 2021
312
347
355
327
518
847
369
367
368
358
569
950
Olimpiada
Blagodatnoye
Natalka
Verninskoye
Kuranakh
Alluvials
2020
2021
TOTAL CASH COSTS
TCC calculation
$ million
4Q 2021
3Q 2021
Q-o-Q
Y-o-Y
Cost of gold sales before by-product
393
432
(9%)
1,488
1,413
5%
Antimony by-product credit
(9)
(4)
N.A.
(20)
(24)
(17%)
Cost of gold sales
384
428
(10%)
1,468
1,389
6%
depreciation and amortisation
(103)
(95)
8%
(385)
(406)
(5%)
expenses related to COVID -19 in cost of gold
sales
(9)
(7)
29%
(36)
(50)
(28%)
effect of depreciation, amortisation, accrual and
provisions in inventory change
22
6
N.A.
63
87
(28%)
TCC
294
332
(11%)
1,110
1,020
9%
Gold sold (koz)
712
776
(8%)
2,736
2,817
(3%)
TCC per ounce sold ($/oz)
412
427
(4%)
405
362
12%
In the fourth quarter, the group’s TCC decreased by 4% to $412 per ounce compared to $427 per ounce in
the previous quarter. This improvement was attributable to a seasonal decrease in output at the structurally
higher-cost alluvial operations and higher sales volumes of antimony-rich flotation concentrate. The latter
resulted in higher by-product credit ($13 per ounce in the fourth quarter of 2021 compared to $5 per ounce
in the third quarter of 2021). This was partially offset by scheduled maintenance works at Olimpiada, Natalka
and Verninskoye .
In 2021, the group’s TCC increased by 12% to $405 per ounce compared to 2020. This reflects lower average
grades in ore processed at Olimpiada and Blagodatnoye, ongoing inflation in consumables and increase in
the MET rate applied to Verninskoye and Natalka in line with the regional investment project (“RInvP”)
regime for the deposit s. These factors were partially offset by an improved hourly-throughput performance
at Olimpiada, Verninskoye and Natalka.
In the fourth quarter, TCC at Olimpiada rose to $360 per ounce, a 2% increase compared to the third quarter
of 2021. This increase reflects scheduled maintenance works, as well as a decline in average grades in
ore
processed (2.93 grams per tonne in the fourth quarter compared to 3.03 grams per tonne in the third
quarter). This was partially offset by higher sales volumes of antimony-rich flotation concentrate, resulting
in by-product credit of $28 per ounce in the fourth quarter compared to $14 per ounce in the third quarter.
In 2021, TCC at Olimpiada amounted to $369 per ounce, up 18% compared to 2020. This was attributable
to a decline in average grades in ore processed (3.00 grams per tonne in 2021 compared to 3.40 grams per
tonne in 2020), a decrease in the share of lower -cost flotation concentrate in total gold sold and inflation
across key consumables.
Management Report for the fourth quarter and full year 2021
15
At Blagodatnoye, TCC amounted to $377 per ounce, remaining flat on the previous quarter. In 2021, TCC at
Blagodatnoye were $367 per ounce, up 6% compared to the previous year, due to inflation across key
consumables and higher maintenance expenses, in addition to lower average grades in ore processed (1.
75
grams per tonne in 2021 compared to 1.82 grams per tonne in 2020).
In the fourth quarter, TCC at Natalka increased to $389 per ounce, up 15% compared to the previous quarter,
driven by higher maintenance expenses . In 2021, TCC at Natalka increased to $368 per ounce, up 4%
compared to $355 per ounce in 2020, driven by an increase in the MET rate (from 0% to 1.2%) applied to
Natalka. This was partially offset by the higher average grades in ore processed (1.77 grams per tonne in
2021 compared to 1.72 grams per tonne in 2020).
In the fourth quarter, TCC at Verninskoye amounted to $429 per ounce, up 23% compared to the third
quarter due to higher maintenance expenses. In 2021, TCC at Verniskoye increased to $358 per ounce, up
9% compared to the previous year, driven by increase in the MET rate (from 2.4% to 6%) applied to
Verninskoye due to the conclusion of the regional investment project (“ RInvP”) regime for the deposit. In
addition, lower average grades in ore processed (2.82 grams per tonne in 2021 compared to 2.91 grams per
tonne in 2020) negatively impacted the cost performance.
At Kuranakh, TCC rose to $608 per ounce, up 8% compared to the third quarter, due to scheduled
maintenance works and a seasonal downscaling of heap leaching operations. In 2021, TCC at Kuranakh rose
to $569 per ounce, up 10% compared to 2020, which reflects the inflation across key consumables and lower
average grades in ore processed .
At Alluvials, TCC increased 33% to $1,196 per ounce, reflecting end of the washing season. In 2021, TCC at
Alluvials amounted to $950 per ounce, up 12% compared to $847 per ounce in the previous year due to
ongoing inflation in consumables and diesel prices.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
In the fourth quarter, the group’s selling, general, and administrative (SG&A) expenses amounted to $107
million . In 2021, the group’s SG&A expenses amounted to $334 million, remaining broadly flat on the
previous year, as an increase in headcount was fully offset by lower long-term incentive plan (“LTIP”) related
expenses.
SG&A breakdown by item
$ million
4Q 2021
3Q 2021
Q-o-Q
Y-o-Y
Salaries
72
48
50%
232
236
(2%)
Distribution expenses related to gold-bearing
products
3
1
N.A.
5
18
(72%)
Taxes other than mining and income taxes
4
5
(20%)
18
19
(5%)
Professional services
9
5
80%
19
15
27%
Depreciation and amortisation
6
6
0%
25
23
9%
Other
13
9
44%
35
25
40%
Total
107
74
45%
334
336
(1%)
ALL-IN SUSTAINING COSTS (AISC)
In the fourth quarter, the group’s AISC increased to $837 per ounce, up 20% reflecting higher sustaining
capital expenditures. In 2021, the group’s AISC per ounce stood at $715 per ounce, driven by higher stripping
expenses and higher sustaining capital expenditures.
16
655
694
581
641
822
994
564
681
672
810
983
1,959
0
500
1,000
1,500
2,000
2,500
Olimpiada
Blagodatnoye
Natalka
Verninskoye
Kuranakh
Alluvials
3Q 2021
4Q 2021
515
478
529
560
756
1,141
618
658
626
644
865
1,277
0
200
400
600
800
1,000
1,200
1,400
Olimpiada
Blagodatnoye
Natalka
Verninskoye
Kuranakh
Alluvials
2020
2021
All-in sustaining costs calculation
$ million
4Q 2021
3Q 2021
Q-o-Q
Y-o-Y
Total TCC
294
332
(11%)
1,110
1,020
9%
selling, general and administrative expenses
107
74
45%
334
336
(1%)
amortisation and depreciation related to SG&A
(6)
(6)
0%
(25)
(23)
9%
stripping activity asset additions
12
64
67
(4%)
232
143
62%
sustaining capital expenditure
13
138
73
89%
303
218
39%
unwinding of discounts on decommissioning
liabilities
1
1
0%
4
4
0%
adding back expenses excluded from cost of
gold sales
change in allowance for obsolescence of
inventory
(1)
-
N.A.
(2)
4
N.A.
Total all-in sustaining costs
597
541
10%
1,956
1,702
15%
Gold sold (koz)
712
776
(8%)
2,736
2,817
(3%)
All-in-sustaining cost ($/oz)
837
697
20%
715
604
18%
In the fourth quarter of 2021, AISC at Olimpiada decreased to $564 per ounce driven by lower stripping
activity during the period. AISC at Blagodatnoye amounted to $681 per ounce. AISC at Natalka increased to
$672 per ounce due to higher sustaining capital expenditures and higher TCC per ounce in the reporting
period. AISC at Verninskoye increased to $810 per ounce, while AISC at Kuranakh increased to $983/oz, both
driven by higher sustaining capital expenditures, higher stripping activity and higher TCC per ounce in the
reporting period.
In 2021, AISC at Olimpiada increased to $618 per ounce, driven by higher TCC per ounce and higher stripping
expenses compared to the previous year. AISC at Blagodatnoye increased to $658 per ounce due to higher
stripping expenses and higher sustaining capital expenditures during the period. AISC at Natalka increased
to $626 per ounce, while AISC at Verninskoye increased to $644 per ounce, both in line with the TCC
performance and driven by higher stripping expenses and higher sustaining capital expenditures in the
reporting year. At Kuranakh, AISC increased to $865 per ounce, in line with the TCC performance and due
to higher sustaining capital expenditures during the period. AISC at Alluvial increased to $1,277 per ounce.
All-in sustaining costs by mine, $/oz
12
million in 2020); and COVID-19 related expenses of $3 million in the fourth quarter of 2021 and $1 million in the third quarter of 2021 ($10 million in 2021 and $9 million in 2020).
13
facilities, and does not include capital expenditures for major growth projects or enhancement capital for significant infrastructure improvements at existing operations.
Management Report for the fourth quarter and full year 2021
17
3,690
31
3,518
121
71
(11)
EBITDA 2020
Gold price
Volume
TCC
Other
EBITDA 2021
ADJUSTED EBITDA
In the fourth quarter of 2021, the group’s adjusted EBITDA amounted to $894 million, a 9% decrease
compared to $986 million in the previous quarter, driven by lower gold sales volumes. In 2021, the group’s
adjusted EBITDA stood at $3,518 million, a 5% decrease compared to the previous year. This was driven by
lower production volumes in 2021 and higher TCC on a per ounce basis.
$ million
4Q 2021
3Q 2021
Q-o-Q
Y-o-Y
Profit before income tax
642
803
(20%)
2,758
2,062
34%
Expenses related to COVID-19
18
16
13%
78
106
(26%)
Loss on transfer of Omchak power grid
-
-
N.A.
-
45
(100%)
Depreciation and amortisation
90
96
(6%)
358
349
3%
Loss / (gain) on revaluation of derivative financial
instruments, net
29
(5)
N.A.
(33)
544
N.A.
Finance costs, net
62
45
38%
209
232
(10%)
Equity-settled share -based payment plans
15
7
N.A.
44
77
(43%)
Foreign exchange loss, net
22
4
N.A.
39
250
(84%)
Interest inco me
(4)
(4)
0%
(14)
(22)
(36%)
Impairment
11
-
N.A.
16
10
60%
Special charitable contributions
5
23
(78%)
51
35
46%
Loss on property, plant and equipment disposal
4
1
N.A.
12
2
N.A.
Adjusted EBITDA
894
986
(9%)
3,518
3,690
(5%)
Total revenue
1,293
1,400
(8%)
4,966
4,998
(1%)
Adjusted EBITDA margin (%)
69%
70%
71%
74%
Adjusted EBITDA calculation
Adjusted EBITDA bridge, $ million
Adjusted EBITDA breakdown by business unit, $ million
$ million
4Q 2021
3Q 2021
Q-o-Q
Y-o-Y
Olimpiada
433
383
13%
1,496
1,665
(10%)
Blagodatnoye
155
141
10%
577
620
(7%)
Natalka
180
180
0%
669
594
13%
Verninskoye
90
111
(19%)
397
370
7%
Kuranakh
70
73
(4%)
264
279
(5%)
Alluvials
9
76
(88%)
99
129
(23%)
Other
14
(43)
22
N.A.
16
33
(52%)
Total
894
986
(9%)
3,518
3,690
(5%)
14
segments
18
3,909
3,874
3,898
3,625
3,540
4.7%
4.7%
4.7%
4.7%
4.3%
3.00%
3.50%
4.00%
4.50%
5.00%
0
1,000
2,000
3,000
4,000
5,000
6,000
Total debt (incl. derivatives), $ million
Weighted average interest rate
FINANCE COST ANALYSIS
$ million
4Q 2021
3Q 2021
Q-o-Q
Y-o-Y
Interest on borrowings
51
48
6%
195
229
(15%)
Interest on lease liabilities
2
1
100%
5
4
25%
Bank commission and write-off of unamortised
debt cost due to early extinguishment
2
-
N.A.
2
12
(83%)
Unwinding of discounts
1
2
(50%)
6
10
(40%)
Loss on an early redemption of financial
liabilities
38
-
N.A.
38
5
N.A.
Gain on debt modification
(23)
-
N.A.
(23)
-
N.A.
Gain on exchange of interest payments under
cross currency swap and interest rate swap
(9)
(6)
50%
(14)
(28)
(50%)
Total finance cost expensed
62
45
38%
209
232
(10%)
The group’s total finance costs amounted to $62 million, compared to $45 million in the third quarter. In
2021, the group’s total finance costs were $209 million , down 10% compared to the previous year. Interest
on borrowings decreased 15% to $195 million. This reflects the decline in gross debt in 2021.
Weighted average interest rate dynamics
15
Foreign exchange loss and derivatives
The group’s foreign exchange loss was $22 million in the fourth quarter, compared to a $4 million loss in the
third quarter, which reflects the revaluation of USD-denominated bank deposits, USD-denominated
accounts receivables and USD-denominated liabilities as at 31 December 2021 due to FX rate fluctuation. In
2021, the group’s foreign exchange loss was $39 million, compared to a $250 million loss in the previous
year, which reflects the revaluation of USD-denominated bank deposits, USD-denominated accounts
receivables and USD-denominated liabilities as at 31 December 2021 due to FX rate fluctuation.
Valuation of derivative financial instruments as at 31 December 2021 and for the full year then ended
$ million
Asset
Liability
Fair value recorded
in the statement of
financial position
Profit & loss
(expenses)/ income
Cross -currency swaps
23
(291)
(268)
30
Interest rate swaps
-
-
-
3
Total
23
(291)
(268)
33
In 2021, the group’s revaluation gain on cross currency and interest rate swaps amounted to $33 million,
which mainly reflects the local currency depreciation in 2021.
15
Management Report for the fourth quarter and full year 2021
19
Cross-currency and interest rate swaps
16
In the fourth quarter of 2021, the overall positive effect from cross-currency and interest rate swaps on
finance cost amounted to $9 million. In 2021, the overall positive effect from cross-currency and interest
rate swaps on finance cost amounted to $14 million . This was presented within note 9 of the consolidated
financial statement as a gain on the exchange of interest payments under interest rate and cross currency
swaps.
PROFIT BEFORE TAX & INCOME TAXES
In the fourth quarter of 2021, the group recognised profit before tax of $642 million. For the full year of
2021, profit before tax increased to $2,758 million primarily driven by lower impact of non-cash items.
Income tax amounted to $480 million, resulting in an effective income tax rate of 17%.
NET PROFIT
In the fourth quarter of 2021, net profit totalled $521 million, compared to net profit of $664 million in the
third quarter.
Net profit for the full year of 2021 increased to $2,278 million compared to $1,646 million in 2020. This was
driven by the negative impact of non-cash items on profit before tax in 2020. Polyus recognised a gain of
$33 million on revaluation of derivative financial instruments and a foreign exchange loss of $39 million in
2021. Adjusted for these items, the group’s adjusted net profit for 2021 amounted to $2,287 million, a 2%
decrease from the prior year.
Adjusted net profit calculation
$ million
4Q 2021
3Q 2021
Q-o-Q
Y-o-Y
Net profit for the period
521
664
(22%)
2,278
1,646
38%
impairment
11
-
N.A.
16
10
60%
loss / (gain) on derivative financial instruments,
net
29
(5)
N.A.
(33)
544
N.A.
foreign exchange loss, net
22
4
N.A.
39
250
(84%)
effect of deferred and current tax on items
above
(10)
-
N.A.
(13)
(118)
(89%)
Adjusted net profit
573
663
(14%)
2,287
2,332
(2%)
Total revenue
1,293
1,400
(8%)
4,966
4,998
(1%)
Adjusted net profit margin
44%
47%
46%
47%
Statement of financial position review
DEBT
The Company’s gross debt decreased to $3,540 million, compared to $3,625 million as at the end of the
third quarter of 2021. During the reporting period, the Company repaid $150 million of bank loans, while
the average interest rate decreased to 4.3% compared to 4.7% in the third quarter due to proactive debt
management initiatives.
As at 31 December 2021, the Company’s cash position decreased to $1,343 million (30 September 2021:
$1,675 million), while its net debt position increased, compared to the previous quarter and amounted to
$2,197 million (30 September 2021: $1,950 million). Among other factors, the change in cash position
reflects a dividend payout for the first half of 2021 in amount of $507 million.
16
20
500
341
1,909
44
700
2022
2023
2024
2025
2026
2027
2028
As of 31 December 2021, the group had a lease liability in the amount of $84 million, which is discussed
further within note 14 of the consolidated financial statements.
Eurobonds
In October 2021, the Company completed a Eurobond offering ($700 million Eurobonds due to 2028 with
a 3.25% coupon rate) and announced the results of the tender offer of its outstanding notes. As a result of
the tender offer, Polyus bought back all of the tendered 2023 notes and most of 2024 notes and increased
the final tender volume from initial target of c. $550 million to $650 million (including c. $605 million in
principal amount).
Buyback programme
On the 31st of January 2022, Polyus launched an open-market buyback with maximum amount of $200
million, but not more than 1.4% of share capital, to be executed over the course of the next 6 months. As
of 25th of February, the Company has not bought back any shares from an open-market.
Debt breakdown by type
$ million
31 December 2021
30 September 2021
31 December 2020
Eurobonds
1,829
1,736
1,734
RUB bonds
328
319
556
Finance lease
84
80
70
Bank loans
1,299
1,490
1,549
Total
3,540
3,625
3,909
The group’s debt portfolio remains dominated by USD-denominated instruments.
Debt
breakdown by currency
31 December 2021
30 September 2021
31 December 2020
$ million
$ million
% of total
$ million
% of total
RUB
1,389
39%
1,438
40%
1,614
41%
USD
2,151
61%
2,187
60%
2,295
59%
Total
3,540
100%
3,625
100%
3,909
100%
Debt maturity schedule (as at 31 December 2021)
17
, $ million
CASH AND CASH EQUIVALENTS AND BANK DEPOSITS
As at 31 December 2021, the group’s cash and cash equivalents and bank deposits totalled 1,343 million,
down 20% compared to the end of the third quarter of 2021. The group’s cash position is primarily held in
USD-denominated instruments. Existing cash balances cover all principal debt repayments up to 2023.
17
(the remaining $3 million of the total amount of lease liabilities of $84 million presented in the Note 19 and included in the bridge)..
Management Report for the fourth quarter and full year 2021
21
2,464
2,074
2,366
1,950
2,197
0.7
0.5
0.6
0.5
0.6
1,500
1,700
1,900
2,100
2,300
2,500
2,700
Net Debt (incl. derivatives), $ million
Net Debt (incl. derivatives)/Adj. EBITDA
1,445
2,936
(1,138)
(1,893)
(7)
1,343
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Cash & CE
31-Dec-20
Operating CF
Investing CF
Financing CF
Effect of foreign
exchange rate
changes
Cash & CE
31-Dec-21
Cash flow bridge, $ million
Cash, cash equivalents, and bank deposits breakdown by currency
$ million
31 December 2021
30 September 2021
31 December 2020
RUB
134
131
152
USD
1,209
1,544
1,293
Total
1,343
1,675
1,445
NET DEBT
At the end of the fourth quarter of 2021, the group’s net debt amounted to $2,197 million, up 13% from
$1,950 million at the end of the third quarter of 2021.
Net debt calculation
$ million
31 December 2021
30 September 2021
31 December 2020
Non-current borrowings
3,032
3,119
3,642
+ Current borrowings
508
506
267
- Cash and cash equivalents
(1,343)
(1,675)
(1,445)
Net debt
2,197
1,950
2,464
The net debt/adjusted EBITDA ratio increased to 0.6x compared to the end of the third quarter of 2021,
reflecting a decrease in the net debt.
Net debt and net debt/adjusted EBITDA (last 12 months)
18
Statement of cash flows review
18
Net debt to Adjusted EBITDA ratio is calculated as net debt as of the end of the relevant period divided by Adjusted EBITDA for the relevant
period. For the purpose of the net debt to Adjusted EBITDA ratio as of 31 December 2021, Adjusted EBITDA is calculated as the twelve months
ended on 31 December 2021. For the purpose of the net debt to Adjusted EBITDA ratio as of 30 September 2021, Adjusted EBITDA is calculated
as the trailing twelve months ended on 30 September 2021 (being Adjusted EBITDA for 2020 less Adjusted EBITDA for the nine months ended 30
September 2020 plus Adjusted EBITDA for the nine months ended 30 September 2021). For the purpose of the net debt to Adjusted EBITDA
ratio as of 30 June 2021, Adjusted EBITDA is calculated as the trailing twelve months ended on 30 June 2021 (being Adjusted EBITDA for 2020
less Adjusted EBITDA for the six months ended 30 June 2020 plus Adjusted EBITDA for the six months ended 30 June 2021). For the purpose of
the net debt to Adjusted EBITDA ratio as of 31 March 2021, Adjusted EBITDA is calculated as the trailing twelve months ended on 31 March 2021
(being Adjusted EBITDA for 2020 less Adjusted EBITDA for the three months ended 31 March 2020 plus Adjusted EBITDA for the three months
ended 31 March 2021). For the purpose of the net debt to Adjusted EBITDA ratio as of 31 December 2020, Adjusted EBITDA is calculated as the
twelve months ended on 31 December 2020.
22
In 2021, cash flow from operations decreased to $2,936 million, down 4% compared to $3,046 million in
2020
.
Cash outflow on investing activities increased to $1,138 million, up 24% compared to $918 million in the
previous year due to higher capex across almost all deposits . Net financing cash outflow totalled $1,893
million , reflecting the repayment of $1,011 million borrowings, $1,236 million of dividend payments for the
second half of 2020 and the first half of 2021.
OPERATING CASH FLOW
In the fourth quarter, the group generated operational cash inflow of $731 million, which was negatively
impacted by a working capital outflow of $24 million. This figure reflects an accumulation of ore stockpiles
inventory at Natalka and Blagodatnoye and an increase in trade receivables related to sales of flotation
concentrate.
For the full year of 2021, the group generated operational cash inflow of $2,936 million, which was
negatively impacted by a working capital outflow of $31 million. The latter was driven by an accumulation
of ore stockpiles at Natalka and Blagodatnoye.
INVESTING CASH FLOW
In the fourth quarter, capital expenditures increased to $389 million, from $233 million in the previous period,
as the Company accelerated its capex spending programme in line with a plan. For the full year of 2021 capital
expenditures amounted to $928 million, up 42% compared to $653 million in the previous year. Adjusted for
FX fluctuations, capital expenditures for the full year 2021 came closer to the lower bound of the guidance
range of $1,000-1,100 million, which was based on a FX rate assumption of 65 roubles per dollar.
At Olimpiada, capital expenditures increased to $71 million in the fourth quarter of 2021 compared to $62
million in the previous reporting period. In 2021, capital expenditures at Olimpiada increased to $197 million
year-on-year. Polyus proceeded with a number of initiatives aimed at stabilising the processing parameters
at 15.0 million tonnes per annum. Alongside the increase in throughput, Polyus has improved the efficiency
of the BIO complex, as a result of the modernization of the BIO-2 and BIO-3 units and the ongoing calibration
of the flowsheet at the BIO complex. In addition, the Company continued to upgrade its mining fleet and
completed the construction of the first stage of the pit-stop for truck maintenance on site.
At Blagodatnoye, capital expenditures increased to $110 million in the fourth quarter of 2021 compared to
$61 million in the previous quarter. In 2021, capital expenditures at Blagodatnoye increased to $238 million
compared to $71 million in 2020 reflecting the launch of the Mill 5 project.
Esta Construction, the major contractor for the Mill 5 construction project, proceeded with the foundation
works of the hydromet and comminution circuits during the period, as well as the construction of
infrastructure facilities on site. In addition, the contracting procedures for key processing equipment have
almost been finalised with most of the key manufacturers selected and long-lead equipment contracted.
For example, the Company signed a procurement agreement with FLSmidth for technological equipment for
the construction of the Mill and in-pit crushing and conveying (IPCC) system. In addition , the Company
continued to upgrade its mining fleet.
In the fourth quarter, capital expenditures at Natalka increased to $38 million, compared to $27 million in
the previous reporting period. Polyus installed drainage pumping stations and the pipeline infrastructure for
the main tailings storage facility. In 2021, capital expenditures at Natalka decreased to $110 million, down
11% year -on-year, as the Company completed the construction of the main tailings storage facilities (the
second start-up complex) as well as the flash flotation roll-out at the Natalka mill during 2020.
Management Report for the fourth quarter and full year 2021
23
At Verninskoye, capital expenditures increased to $28 million in the fourth quarter compared to $22 million
in the previous quarter, reflecting prepayments for mining equipment and construction activities under the
2022 investment program. For the full year of 2021, capital expenditures at Verninskoye increased by 4%,
compared to 2020, amounting to $79 million, due to an increase in scheduled maintenance works. In 2021,
volumes of ore processed reached 3.6 million tonnes, up 10% compared to the previous year, exceeding the
target capacity of 3.5 million tonnes per annum of the Verninskoye mill expansion project, which was
completed in the first half of 2021.
At Kuranakh, capital expenditures in the fourth quarter of 2021 increased to $44 million due to the
scheduled replacement of the mining fleet and the start of construction and procurement as part of the
project to expand Kuranakh mill’s processing capacity to 7.5 million tonnes per annum.
For the full year of 2021, capital expenditures at Kuranakh increased twofold, compared to 2020, to $94
million, reflecting the active phase of construction activities for the second heap leaching pad, the
reconstruction of tailings storage facilities and the scheduled replacement of the mining fleet . Polyus
completed the construction of eight panels at the second heap leaching pad and commissioned the conveyor
equipment . The Company is progressing with the project to expand throughput capacity at the Kuranakh
mill to 7.5 million tonnes per annum. Construction began, with contracts signed for most of long-lead key
technological equipment and progress made on the detailed design documentation.
At Alluvials, capital expenditures amounted to $13 million and $27 million in the fourth quarter of 2021 and
full year 2021, respectively. This reflected the ongoing replacement of worn -out equipment, as well as
exploration activities.
In the fourth quarter, IT-related capital expenditures increased to $31 million. This includes preparation for
the anticipated introduction of an ERP system at Natalka, Kuranakh, Polyus Stroi, Polyus Project and HQ, as
well as IT equipment deliveries for server hardware upgrade. In 2021, IT capex amounted to $51 million, up
46% compared to 2020, due to the implementation of the ERP system and the procurement of IT equipment
and software.
At Sukhoi Log, Polyus is proceeding with the Bankable Feasibility Study (BFS). The Company finalised open
pit geotechnical parameters, defined the parameters of the main technological equipment of the processing
plant, and is currently in the final stages of mine planning as well as the general layout, infrastructure,
processing plant and tailings storage facility design as part of the BFS. During the reporting period, the
Company also progressed with comprehensive engineering studies required for the BFS and the project
design documentation.
Polyus has completed its deep -level and flank exploration drilling campaign at Sukhoi Log and is currently
proceeding with studies. In the reporting period, the Company completed engineering studies and started
detailed design and construction of the Vitim substation and 220 kV gridline . The infrastructure is within
Polyus’ project scope according to the agreement with the Federal Grid Company for the technical
connection of Sukhoi Log to the existing power grid.
In addition, Polyus has launched the project design documentation stage for warehousing storage capacity
expansion at Taksimo Yard. Project design documentation is expected to be completed in 2022.
24
Capex breakdown
19
$ million
4Q 2021
3Q 2021
Q-o-Q
Y-o-Y
Olimpiada
71
62
15%
197
183
8%
Blagodatnoe
110
61
80%
238
71
N.A.
Natalka
38
27
41%
110
123
(11%)
Verninskoye
28
22
27%
79
76
4%
Alluvials
13
4
N.A.
27
23
17%
Kuranakh
44
25
76%
94
47
100%
Sukhoi Log
31
16
94%
69
29
N.A.
IT capex
31
4
N.A.
51
35
46%
Other
20
23
12
92%
63
66
(5%)
CAPEX
389
233
67%
928
653
42%
Omchak electricity transmitting line
-
-
N.A.
-
24
(100%)
Items capitalised
21
, net
62
70
(11%)
227
129
76%
Change in working capital for purchase of
property, plant and equipment
(36)
(5)
N.A.
(25)
(6)
N.A.
Purchase of PP&E
22
415
298
39%
1,130
800
41%
In the fourth quarter, the total cash amount spent on the purchase of PP&E increased to $415 million,
compared to $298 million in the previous quarter. This mainly reflects the respective increase in total capital
expenditures outlined above.
In 2021, the total cash spent on the purchase of PP&E increased to $1,130 milli on, compared to $800 million
in the previous year.
FINANCING CASH FLOW
In the fourth quarter, net financing cash outflow amounted to $649 million compared to $381 million of
cash outflow in the prior period, primarily due to a dividend payout of $507 million for the first half of 2021.
For the full year of 2021, net financing cash outflow totalled $1,893 million compared to $2,436 million in
the previous year. Polyus completed the repayment of approximately $1,011 million of credit facilities and
paid out a total of $1,236 million in dividends for the second half of 2020 and the first half of 2021 combined.
19
presented as a separate business unit
20
21
22
Management Report for the fourth quarter and full year 2021
25
Going concern
The financial position of the group, its cash flows, liquidity position, and borrowing facilities are set out in
this MD&A on pages 19 to 23. As of 31 December 2021 the group held $1,343 million in cash and cash
equivalents and bank deposits and had a net debt of $2,197 million, with $1,276 million of undrawn but
committed credit facilities, subject to covenant compliance. Details on borrowings and credit facilities are
disclosed in note 19 to the consolidated financial statements. In assessing its going-concern status, the
Directors have considered the uncertainties affecting future cash flows and have taken into account its
financial position, anticipated future trading performance, borrowings, and other available credit facilities,
as well as its forecast compliance with the covenants on those borrowings and its capital expenditure
commitments and plans. In the event of certain reasonably possible adverse pricing and forex scenarios and
the risks and uncertainties below, management has within its control the option of deferring uncommitted
capital expenditure, or managing the dividend payment profile to maintain the group’s funding position.
Having examined all the scenarios, the Directors concluded that no covenants will be breached in any of
these adverse pricing scenarios for at least the next 12 months from the date of signing the consolidated
financial statements. Accordingly, the Board is satisfied that the group’s forecasts and projections, having
taken into account reasonably possible changes in trading performance, show that the group has adequate
resources to continue in operational existence for at least the next 12 months from the date of signing the
consolidated financial statements.
Risks and uncertainties
The group’s activities are associated with a variety of risks that could affect its operational and financial
results and, consequently, shareholder returns. Successful risk management requires, among other things,
identifying and assessing potential threats and developing measures to mitigate them.
The group’s financial results depend largely on gold prices. The gold market follows cyclical patterns and is
sensitive to general macroeconomic trends. The group constantly monitors the gold market, implements
cost optimisation measures and reviews its investment program.
Starting from March 2014, a number of sanction packages have been imposed by the United States (“US”)
and the European Union (“EU”) on certain Russian officials, businessmen and companies. The impact of
further economic developments on future operations and financial position of the group is at this stage
difficult to determine.
The Directors do not believe that the principal risks and uncertainties have changed since the publication
of the annual report for the year ended 31 December 2020. Detailed explanation of the risks summarized
below, together with the group’s risk mitigation plans, can be found on pages 17 to 20 of the 2020 Annual
Report, which is available at
https://polyus.com/en/media/press-releases/pjsc-polyus-2020-annual-review/
The health and safety of our employees remains the group’s utmost focus. The group continues to monitor
the COVID-19 threat level and assess the potential health risks for its employees, with all monitoring systems
in place. For additional comments on operating environment, see note 23 of the consolidated financial
statements.
The group’s activities expose it to a variety of financial risks, which are summarised below. The group uses
derivative financial instruments to reduce exposure to foreign exchange and interest rate movements. The
Board of Directors is responsible for overseeing the group’s risk management framework.
26
Foreign exchange risk
As stated on page 9, the group’s revenue is linked to the USD, as the gold price is quoted in this currency.
Thus the group’s strategy is to have mostly USD-denominated debt and to keep its cash and deposits in USD.
As of 31 December 2021, 90% of the cash and cash equivalents and bank deposits of the group were in USD
– see page 21 of this MD&A for a detailed description. As part of this strategy, the group entered into a
number of cross-currency swaps with leading Russian banks economically to hedge interest payments and
the exchange of the principal amounts (see page 18).
Interest rate risk
The group is not materially exposed to interest rate risk, as only 1% of the group’s debt portfolio is made up
of USD floating rate borrowings.
Inflation risk
As stated on page 10, the group’s earnings are exposed to inflationary trends in Russia, and inflation
negatively impacts the group’s earnings, increasing future operating costs. To mitigate rouble inflation risk,
the group estimates possible inflation levels and incorporates them into its cost planning; it has
implemented cost reduction initiatives at its operations, and its treasury team is responsible for ensuring
that the majority of cash and cash equivalents are held in USD.
27
INDEPENDENT AUDITOR’S REPORT
To the Shareholders and Board of Directors of Public Joint Stock Company “Polyus”
Opinion
We have audited the consolidated financial statements of Public Joint Stock Company
“Polyus” and its subsidiaries (the “group”), which comprise the consolidated statement of
financial position as of 31 December 2021 and the consolidated statement of profit or loss,
consolidated statement of comprehensive income, consolidated statement of changes in
equity and consolidated statement of cash flows for the year then ended, and notes to the
consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all
material respects, the consolidated financial position of the group as of 31 December 2021
and its consolidated financial performance and its consolidated cash flows for the year
then ended in accordance with International Financial Reporting Standards (“IFRSs”).
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (“ISAs”).
Our responsibilities under those standards are further described in the Auditor’s
Responsibilities for the Audit of the Consolidated Financial Statements section of our
report. We are independent of the group in accordance with the Auditor’s Independence
Rules and the Auditor’s Professional Ethics Code, that are relevant to our audit of the
financial statements in the Russian Federation together with the ethical requirements of the
International Ethics Standards Board for Accountants’ Code of Ethics for Professional
Accountants (the “IESBA Code”), and we have fulfilled our other ethical responsibilities in
accordance with these requirements and the IESBA Code. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most
significance in our audit of the consolidated financial statements of the current period.
These matters were addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
28
Why the matter was determined to be
a key audit matter
How the matter was addressed
in the audit
Recoverability of long-term ore stockpiles
(Notes 3.12, 4.2.3 and 15)
Long-term ore stockpiles are material to
the group’s consolidated financial statements
and represent a significant portion of the
group’s inventories and total assets. As stated
in the Note 15 to the consolidated financial
statements, as at 31 December 2021
the long-term ore stockpile balance was
USD 617 million (2020: USD 505 million).
In accordance with the group’s accounting
policy, ore stockpiles are valued at the lower
of average production costs per unit of ore
mined and net realisable value.
Determination of net realisable value of long-
term ore stockpiles depends on management
estimates of expected timing of processing,
gold content, future gold prices, exchange
rates and processing costs as well as selection
of appropriate discount rate.
We consider this area to be a key audit
matter due to its materiality and high level of
professional judgement involved in assessing
the reasonableness of management
assumptions used to determine the carrying
value of this balance.
We obtained understanding of the group’s
internal processes and relevant controls
relating to the measurement of ore stockpiles
and the assessment of net realisable value.
We have performed substantive analytical
procedures on production cost of ore
stockpiles and observed stock counts of ore
stockpiles.
Assessed the overall methodology applied to
determine the cost of inventory and
compared the method used to industry
practice.
We have tested the model prepared by
management to determine the net realisable
value of ore stockpiles to assess whether
costs exceed the net realisable value and a
write-down should be recorded. To assess
management’s assumptions we have:
●
Reviewed approved life of mine plans
and held discussions with operational
and finance management to understand
future plans to process ore stockpiles ;
●
Challenged management’s assumptions
about forecast prices, exchange rates,
and macroeconomic parameters
included in the calculation of the
discount rate, comparing them with
long-term analyst estimates;
●
Challenged the reasonableness of
management’s forecasts of future
processing costs and technical recovery
assumptions by comparing them to
current and historical operational results.
Tested completeness and assessed the
presentation of information in the financial
statements in respect of accounting policy
and estimation uncertainty related to
valuation of inventory.
Valuation of Stripping activity asset (Notes
3.8, 4.2.1 and 13)
As stated in the Note 13 of the consolidated
financial statements, stripping activity asset
was USD 847 million as at 31 December 2021
(2020: USD 625 millio n).
As described in Note 4.2.1, capitalised
stripping costs and their depreciation are
We have performed the following procedures
with respect to valuation of stripping activity
asset:
●
Confirmed that management’s choice of
the method of mining cost allocation to
stripping activity asset defined in the
group’s accounting policy is in line with
requirements of IFRIC 20 and industry
practice;
29
Why the matter was determined to be
a key audit matter
How the matter was addressed
in the audit
determined based on proportion of
expected waste to ore extracted in line with
the group’s life of mine plans. The life of
mine plans preparation process requires
complex geological judgements and analysis
to interpret the data. Life of mine plans are
prepared with reference to production
stages, which form the basis for
management’s judgement relating to
identification of separate components of the
ore body for the purpose of subsequent
depreciation of capitalised stripping costs
under IFRIC 20
Stripping Costs in the
Production Phase of a Surface Mine
.
IFRIC 20 also allows alternative cost
allocation methods, which may result in
differing proportion of capitalised vs
expensed stripping costs.
We consider this area to be a key audit
matter due to significance of the stripping
activity asset balance and high level of
professional judgement involved in assessing
the reasonableness of management’s
determination of the relevant accounting
policies.
●
Verified the accuracy of management’s
calculations of stripping activity costs
capitalised on the group’s balance sheet
as of 31 December 2021 and the related
depreciation charge for the year by re-
performing them for selected mines. We
have also traced the key inputs used in
production reports, that reflect actual
production for the reporting period;
●
Challenged key assumptions used in
calculation of stripping activity asset as
of 31 December 2021 by comparing
them to life of mine plans, actual results
as well as reserve estimates reflected in
Joint Ore Reserves Committee reports;
●
Confirmed that components of the ore
bodies to which stripping activity was
attributable were appropriately
identified based on life of mine plans for
each mine in accordance with the key
principles of IFRIC 20;
●
Tested completeness and assessed the
presentation of information in financial
statements with respect to stripping
activity assets in the consolidated
financial statements.
Other Information
Directors are responsible for the other information. The other information comprises
the information included in the Annual report, but does not include the consolidated
financial statements and our auditor’s report thereon. The Annual report is expected to be
made available to us after the date of this auditor's report.
Our opinion on the consolidated financial statements does not cover the other information
and we will not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is
to read the other information identified above when it becomes available and, in doing so,
consider whether the other information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the audit, or otherwise appears to be
materially misstated.
When we read the Annual report, if we conclude that there is a material misstatement
therein, we are required to communicate the matter to those charged with governance.
30
Responsibilities of Directors and Those Charged with Governance for the Consolidated
Financial Statements
Directors are responsible for the preparation and fair presentation of the consolidated
financial statements in accordance with IFRSs, and for such internal control as Directors
determine is necessary to enable the preparation of consolidated financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, Directors are responsible for assessing
the group’s ability to continue as a going concern, disclosing, as applicable, matters related
to going concern and using the going concern basis of accounting unless Directors either
intend to liquidate the group or to cease operations, or has no realistic alternative
but to do so.
Those charged with governance are responsible for overseeing the group’s financial
reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated
financial statements as a whole are free from material misstatement, whether due to fraud
or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit conducted in accordance
with ISAs will always detect a material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on
the basis of these consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and
maintain professional skepticism throughout the audit. We also:
●
Identify and assess the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error, design and perform audit procedures
responsive to those risks, and obtain audit evidence that is sufficient and appropriate
to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
●
Obtain an understanding of internal control relevant to the audit in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the group’s internal control.
●
Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by Directors.
●
Conclude on the appropriateness of Directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may cast significant doubt on
the group’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the
related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future events or conditions
may cause the group to cease to continue as a going concern.
31
●
Evaluate the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial
statements represent the underlying transactions and events in a manner that
achieves fair presentation.
We communicate with those charged with governance regarding, among other matters,
the planned scope and timing of the audit and significant audit findings, including
any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied
with relevant ethical requirements regarding independence, and to communicate with
them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine
those matters that were of most significance in the audit of the consolidated financial
statements of the current period, and are therefore the key audit matters. We describe
these matters in our auditor’s report unless law or regulation precludes public disclosure
about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so
would reasonably be expected to outweigh the public interest benefits of such
communication.
Igor Tokarev
(ORNZ № 21906100732),
Engagement partner,
Acting based on the power of attorney issued by the General Director on 16.02.2022
authorizing to sign off the audit report on behalf of AO “Deloitte & Touche CIS”
(ORNZ № 12006020384)
1 March 2022
Consolidated financial statements
for the year ended 31 December 2021
33
PJSC “POLYUS”
CONSOLIDATED STATEME NT OF PROFIT OR LOSS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
Year ended
31 December
Notes
2021
2020
Gold sales
Other sales
Total revenue
Cost of gold sales
(1,468 )
(1,389 )
Cost of other sales
(53 )
(34 )
Gross profit
Selling, general and administrative expenses
(334 )
(336 )
Other expenses
(152 )
(173 )
Operating profit
Finance costs
(209 )
(232 )
Interest income
Gain / (loss) on revaluation of derivative financial instruments
(544 )
Foreign exchange loss
(39 )
(250 )
Profit before income tax
Income tax expense
(480 )
(416 )
Profit for the year
Profit for the year attributable to:
Shareholders of the Company
Non-controlling interests
Weighted average number of ordinary shares ’000
- for basic earnings per share
- for diluted earnings per share
Earnings per share (US Dollar per share)
- basic
- diluted
34
PJSC “POLYUS”
CONSOLIDATED STATEME NT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
Year ended
31 December
2021
2020
Profit for the year
Other comprehensive loss for the year
Items that may be subsequently reclassified to profit or loss:
Effect of translation to presentation currency
(19 )
(321 )
Items that will not be subsequently reclassified to profit or loss
Increase in other reserves
Other comprehensive loss for the year
(17 )
(321 )
Total comprehensive income for the year
Total comprehensive income for the year attributable to:
Shareholders of the Company
Non-controlling interests
35
PJSC “POLYUS”
CONSOLIDATED STATEME NT OF FINANCIAL POSITION
AT 31 DECEMBER 2021
(in millions of US Dollars)
Notes
31 Dec.
2021
31 Dec.
2020
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Inventories
Deferred tax assets
Derivative financial instruments and investments
Other receivables and non-current assets
Current assets
Inventories
Deferred expenditure
Advances paid to suppliers and prepaid expenses
Trade and other receivables
Taxes receivable
Income tax prepaid
Cash and cash equivalents
Total assets
Equity and liabilities
Capital and reserves
Share capital
Additional paid-in capital
Treasury shares
(226 )
(288 )
Translation reserve
(3,064 )
(3,044 )
Other revaluation reserve
Retained earnings
Equity attributable to shareholders of the Company
Non-controlling interests
Non-current liabilities
Borrowings
Derivative financial instruments
Deferred tax liabilities
Site restoration, decommissioning and environmental obligations
Other non-current liabilities
Current liabilities
Borrowings
Derivative financial instruments
Trade and other payables
Taxes other than income tax payable
Income tax payable
Total liabilities
Total equity and liabilities
36
PJSC “POLYUS”
CONSOLIDATED STATEME NT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
Equity attributable to shareholders of the Company
Notes
Number of
outstanding
shares ’000
Share
capital
Additional
paid-in
capital
Treasury
shares
Other
reserves
Translation
reserve
Retained
earnings
Total
Non-
controlling
interests
Total
Balance at 31 December 2019
(103 )
(2,727 )
Profit for the year
Other comprehensive loss
(302 )
(302 )
(19 )
(321 )
Total comprehensive income / (loss)
(302 )
Equity-settled share-based compensation (LTIP), net of tax
Shares awarded under LTIP
(13 )
(5 )
(24 )
(6 )
(6 )
Execution of conversion option by bondholders
(3 )
Issue of treasury shares to a subsidiary
(436 )
Settlement of share loan
(429 )
(7 )
Purchase of additional ownership in SL Gold
(6 )
Increase of ownership in subsidiaries
(13 )
(12 )
(24 )
(36 )
Share buyback
(1,361 )
(287 )
(14 )
(301 )
(301 )
Dividends declared to shareholders of the Company
(860 )
(860 )
(860 )
Dividends declared to shareholders of non-controlling interests
(11 )
(11 )
Other
(8 )
(2 )
(7 )
(9 )
(9 )
Balance at 31 December 2020
(288 )
(3,044 )
Balance at 1 January 2021
(288 )
(3,044 )
Profit for the year
Other comprehensive income / (loss)
(20 )
(18 )
(17 )
Total comprehensive income / (loss)
(20 )
Equity-settled share-based compensation (LTIP), net of tax
Shares awarded under LTIP
(34 )
(39 )
Share buyback
(62 )
(14 )
Dividends declared to shareholders of the Company
(1,209 )
(1,209 )
(1,209 )
Dividends declared to shareholders of non-controlling interests
(37 )
(37 )
Decrease of non-controlling interests due to change in the net
assets of the subsidiary
(38 )
Other
Balance at 31 December 2021
(226 )
(3,064 )
37
PJSC “POLYUS”
CONSOLIDATED STATEME NT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
Year ended
31 December
Notes
2021
2020
Operating activities
Profit before income tax
Adjustments for:
Finance costs
Interest income
(14 )
(22 )
(Gain) / loss on revaluation of derivative financial instruments
(33 )
Depreciation and amortisation
Foreign exchange loss
Other
Movements in working capital
Inventories
(96 )
(122 )
Deferred expenditure
(4 )
Trade and other receivables
Advances paid to suppliers and prepaid expenses
(23 )
(11 )
Taxes receivable
(21 )
(29 )
Trade and other payables and accrued expenses
Taxes payable
(16 )
Cash flows from operations
Income tax paid
(401 )
(415 )
Net cash generated by operating activities
Investing activities
23
Purchase of property, plant and equipment (excluding purchase of additional ownership in LLC SL Gold
and construction of the Omchak high-voltage power grid) and intangible assets
(1,130 )
(776 )
Purchase of additional ownership in LLC SL Gold
(156 )
Payments for the Omchak high voltage power grid
(24 )
Refund of unutilised part of government grant
(14 )
Interest received
Loans issued
(24 )
(1 )
Proceeds from disposal of electricity transmission grids
Net cash utilised in investing activities
(1,138 )
(918 )
Financing activities
1
Proceeds from borrowings
Repayment of borrowings
(1,011 )
(1,144 )
Interest paid
(198 )
(237 )
Commissions paid on borrowings
(5 )
(4 )
Payments of lease liability
(16 )
(15 )
Net proceeds on exchange of interest payments under cross currency swaps
Net payment on exchange of interest payments under interest rate swaps
(3 )
(2 )
Payments on expiration of cross-currency swaps
(47 )
Payments on termination of interest rate swaps
(6 )
Payments for close out of revenue stabilizer programme
(32 )
Increase of own ership in subsidiaries
(24 )
(12 )
Payment for share buyback
(32 )
(268 )
Dividends paid to shareholders of the Company
(1,236 )
(844 )
Dividends paid to shareholders of non-controlling interests
(32 )
(11 )
Other
(9 )
Net cash utilised in financing activities
(1,893 )
(2,436 )
Net decrease in cash and cash equivalents
(95 )
(308 )
Cash and cash equivalents at the beginning of the year
Effect of foreign exchange rate changes on cash and cash equivalents
(7 )
(48 )
Cash and cash equivalents at the end of the year
23
Significant non-cash transactions relating to investing (right-of-use assets recognition and LTIP payments in treasury shares) and financing activities
(lease liabilities recognition) are disclosed in the notes 14 and 18 to these consolidated financial statements.
PJSC “POLYUS”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
38
1. GENERAL
.
The principal activities of the Company and its controlled entities (the “group”) are the
. The mining and processing facilities of the group are located in the
Krasnoyarsk, Irkutsk, Magadan regions and the Sakha Republic of the
. The
group also performs research and exploration works. Further details regarding the nature of the
business of the significant subsidiaries of the group are presented in note 26.
The shares of the Company are “level one” listed on the Moscow Exchange. Global depository
shares (“GDSs”) each representing interest in ½ of an ordinary share in the Company are traded on
the main market for listed securities of the London Stock Exchange plc (“LSE”). The controlling
shareholder of the Company is
Jersey. The most senior parent of the Company is Wandle Holdings Limited, а company registered
in Cyprus. As of 31 December 2021 and 2020, the ultimate controlling party of the Company was
.
2. BASIS OF PREPARATION AND PRESENTATION
2.1. Going concern
In assessing the appropriateness of the going concern assumption, the Directors have taken account
of the group’s financial position, expected future trading performance, its borrowings, available credit
facilities and its capital expenditure commitments, expectations of the future gold price, currency
exchange rates and other risks facing the group. After making appropriate enquiries, the Directors
consider that the group has adequate resources to continue in operational existence for at least
the next 12 months from the date of signing these consolidated financial statements and that it is
appropriate to adopt the going concern basis in preparing these consolidated financial statements.
2.2. Compliance with the International Financial Reporting Standards
The consolidated financial statements have been prepared in accordance with IFRS as issued by
the International Accounting Standards Board (“IASB”). IFRS include the standards and
interpretations approved by the IASB including IFRS, International Accounting Standards (“IAS”) and
interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”).
2.3. Basis of presentation
The entities of the group maintain their accounting records in accordance with the laws, accounting
and reporting regulations of the jurisdiction in which they are incorporated and registered. The accounting
principles and financial reporting procedures in these jurisdictions may differ substantially from those
generally accepted under IFRS. Accordingly, such financial information has been adjusted to ensure
that the consolidated financial statements are presented in accordance with IFRS.
The consolidated financial statements of the group are prepared on the historical cost basis, except for
derivative financial instruments and certain trade receivables, which are accounted for at fair value, as
explained in the accounting policies below.
2.4. IFRS standards and amendments first time applied in 2021
The following is a list of new or amended IFRS standards and interpretations that have been applied
by the group in these consolidated financial statements:
PJSC “POLYUS”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
39
Title
Subject
Effective for annual
periods beginning
on or after
Effect
on the consolidated
financial statements
Interest Rate Benchmark Reform
phase 2 (Amendments to
IFRS
9,
IAS 39,
IFRS
7,
IFRS
4 and
IFRS
16)
Replacement of LIBOR with alternative
Risk-free Rates
1 January 2021
No effect, see below
Amendment to IFRS 16
Extension of the availability of the
practical expedient for COVID-19-
related rent concessions
1 April 2021
No effect
Interest Rate Benchmark Reform phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and
IFRS 16)
The amendments issued in 2019 (phase 1) require disclosure of the effect of the replacement of an
old interest rate benchmark with an alternative benchmark rate as a result of the Interest Rate
Benchmark Reform. In 2021, the group closed out all financial instruments linked to LIBOR, thus the
amendments do not have any material effect on the consolidated financial statements.
2.5. IFRS standards and amendments to be applied after 2021
The following standards and interpretations, which have not been applied in these consolidated
financial statements, were in issue but not yet effective:
Title
Subject
Effective for annual
periods beginning
on or after
Expected effect
on the consolidated
financial statements
Amendment
IFRS
3
Updates of references to or from
the Conceptual Frameworks to
the
IFRS
standards
1 January 2022
No effect
Amendment IAS 16
Proceeds before Intended Use
1 January 2022
Under review
Amendment
IFRS
1
Subsidiary as a first-time adopter
1 January 2022
No effect
Amendment IAS 41
Taxation in fair value measurements
1 January 2022
No effect
Amendment IAS 37
Onerous Contracts—Cost of Fulfilling
a Contract
1 January 2022
No effect
Amendment
IFRS
9
Fees in the ‘10 per cent’ test for
derecognition of financial liabilities
1 January 2022
No effect
IFRS
17
Insurance contracts
1 January 2023
No effect
Amendments to
IFRS
17
Insurance contracts
1 January 2023
No effect
Amendment IAS 1
Classification of Liabilities as Current or
Non-Current
1 January 2023
No effect
Amendment IAS 8
New definition of the accounting
estimates
1 January 2023
No effect
Amendment IAS 12
Deferred Tax related to Assets and
Liabilities arising from a Single
Transaction
1 January 2023
No effect
Amendment IAS 1
Disclosure of accounting policy
1 January 2023
No effect
PJSC “POLYUS”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
40
3. SIGNIFICANT ACCOUNTING POLICIES
3.1. Basis of consolidation
Subsidiaries
The consolidated financial statements of the group incorporate the financial statements of
the Company and all its subsidiaries, from the date that control effectively commenced until the date
that control effectively ceased. Control is achieved where the Company has the power over
the investee, exposure or rights to variable returns from its involvement with the investee and the
ability to use its power to affect its returns. The Company reassesses whether or not it controls
an investee if facts and circumstances indicate that there are changes to one or more of the three
elements of control defined above. Subsidiaries are included in the consolidated financial results of
the Company from the effective date of acquisition up to the effective date of loss of control.
For non-wholly owned, controlled subsidiaries, the net assets attributable to outside equity
shareholders are presented as non-controlling interests in the equity section of the consolidated
statement of financial position. The non-controlling interest may initially be measured either at fair
value or at the non-controlling interest’s proportionate share of the fair value of the subsidiary’s
identifiable net assets. The choice of measurement basis is made on an acquisition -by-acquisition
basis.
All intra-group balances, transactions and any unrealised profits or losses arising from intra-group
transactions are eliminated on consolidation.
Functional currency
The functional currency of the Company and all the subsidiaries of the group is the Russian Rouble
(“RUB”).
3.2. Presentation currency
The group presents its consolidated financial statements in the US Dollar (“USD”), as management
believes it is a more convenient presentation currency for international users of the consolidated
financial statements of the group as it is a common presentation currency in the mining industry.
The translation of the financial statements of the group entities from their functional currencies to
the presentation currency is performed as follows:
●
●
revenue and significant transactions that are translated at rates on the date of such
transactions;
●
Translation reserve
such entities this
Translation reserve
loss); and
●
reporting period presented are translated at exchange rates at the respective dates. All cash
flows are translated at the monthly average exchange rates, except for significant transactions
that are translated at rates on the date of such transactions.
As of 31 December 2021, year-end RUB/ US Dollar exchange rate used in the preparation of
the consolidated financial statements was 74.29 (31 December 2020: 73.88).
3.3. Foreign currencies
Transactions not denominated in RUB (functional currency of the Company and all the subsidiaries
of the group) are recorded at the exchange rate prevailing on the date of the transactions. All
monetary assets and liabilities not denominated in RUB are translated at the exchange rates
prevailing at the reporting date. Non-monetary items carried at historical cost are translated
at the exchange rate prevailing on the date of the transaction.
PJSC “POLYUS”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
41
3.4. Revenue
The group entity recognises revenue when or as a performance obligation is satisfied, i.e. when
control of the goods or services underlying the particular performance obligation is transferred to the
customer.
Refined gold sales
The group recognises revenue from refined gold sales upon physical shipment of gold from the
refinery plant to customers, which are major Russian banks. Gold price is based on prevailing spot
market metal prices. Cash payments are received in advance or within several days after sale.
Gold-antimony and gold flotation concentrates sales
The group has a number of sales contracts for gold flotation concentrates, which contain provisional
pricing terms depending on quantity and price. Revenue from sales of gold flotation concentrates is
recognised upon shipments from the railroad stations, seaports or group’s warehouses depending on
the date of passing the title as per contracts with customers.
Revenue from sales of gold within gold flotation concentrates is recognised in
Gold in flotation
concentrate
sales
within
Gold sales
. The sale proceeds from sale of antimony contained in the gold-
antimony flotation concentrate is treated as by-product sales and recognised as a decrease to
cost
of gold sales
.
Final cash payments are received within several months after the shipment.
The adjustment to the quantity of gold in gold flotation concentrates delivered is treated as a variable
consideration, thus completely recognised in
Gold in flotation concentrate sales
within
Gold sales
.
The adjustment to the gold price depends on gold market prices, therefore represents a sales
contract with an embedded derivative. The embedded derivative relates to the trade receivables and
fails the “solely payments of principal and interest” test under IFRS 9, thus such trade receivables
are recognised and measured at fair value through profit or loss (FVTPL). The revaluation result is
presented within
Other expenses
.
Other revenue
Other revenue comprises mainly sales of electricity and materials and supplies. Revenue from sales
is recognised when a contract exists, delivery has taken place, a quantifiable price has been
established or can be determined and the receivables are likely to be recovered. Delivery takes
place when the risks and benefits associated with ownership are transferred to the buyer.
3.5. Income tax
The income tax expense or benefit for the period consists of two components: current and deferred.
Income tax expense is recognised in the consolidated statement of profit or loss except to the extent
it relates to a business combination or items recognised directly in the consolidated statement of
changes in equity (the group does not have any significant amounts of income tax recognised
directly in the consolidated statement of changes in equity).
Current tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from
or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those
that are enacted or substantively enacted at the reporting date in the countries where the group
operates and generates taxable income.
Management periodically evaluates positions taken in the tax returns with respect to situations in
which applicable tax regulations are subject to interpretation and establishes provisions where
appropriate.
PJSC “POLYUS”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
42
Deferred tax
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in
the financial statements of the separate legal entities and the corresponding tax bases used in
the computation of taxable profit and are accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax
assets are generally recognised for all deductible temporary differences to the extent that it is
probable that taxable profits will be available against which those deductible temporary differences
can be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in
the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that
have been enacted or substantively enacted by the reporting date. The measurement of deferred tax
liabilities and assets reflects the tax consequences that would follow from the manner in which
the group expects, at the reporting date, to recover or settle the carrying amount of its assets and
liabilities.
Deferred tax assets and liabilities are not recognised for taxable temporary differences associated
with investments in subsidiaries because the group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to
the extent that it is no longer probable that sufficient taxable profits will be available to allow all or
part of the asset to be recovered.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set-off current
tax assets against current tax liabilities and when they relate to income taxes levied by the same
taxation authority and the group intends to settle its current tax assets and liabilities on a net basis.
3.6. Dividends
Dividends and related taxation thereon are recognised as a liability in the period in which they have
been declared and become legally payable.
Retained earnings legally distributable by the Company are based on the amounts available for
distribution in accordance with the applicable legislation and as reflected in the statutory financial
statements of the individual subsidiaries of the group. These amounts may differ significantly from
the amounts calculated on the basis of IFRS.
3.7. Intangible assets
Intangible assets are carried at cost less accumulated amortisation and impairment losses.
Intangible assets with a finite useful life are amortised on a straight-line basis over the estimated
economic useful life of the asset. The amortisation of such intangible assets is included in
Cost of
sales
Selling, general and administrative
operating activities or not. Intangible assets with an infinite useful life are not amortised.
The remaining useful lives of the group’s intangible assets are from 1 to 15 years.
The group applies IAS 36
Impairment of Assets
and accounts for any identified impairment loss when incurred.
PJSC “POLYUS”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
43
3.8. Property, plant and equipment
Fixed assets
Fixed assets are recorded at cost less accumulated depreciation. Fixed assets include th e cost of
acquiring and developing mining properties, pre-production expenditure and mine infrastructure,
processing plant, mineral rights and mining and exploration licences and the present value of future
mine closure, rehabilitation and decommissioning costs.
Fixed assets are amortised on a straight-line basis over the estimated economic useful life of
the asset, or the remaining life-of-mine in accordance with the mine operating plans (MOPs),
whichever is shorter.
Depreciation is charged from the date a new mine reaches commercial production quantities and is
included in the
Cost of sales
,
Selling, general and administrative expenses
or
assets
accordingly. The estimated remaining useful lives of the group’s significant mines and
processing facilities based on the MOPs are as follows:
Olimpiada
13 years
Blagodatnoye
16 years
Verninskoye
16 years
Kuranakh
16 years
Natalka
21 years
Stripping activity asset
The group incurs stripping costs during the production phases of its surface mining operations.
The group identifies separate components towards which the stripping costs are incurred for the ore
bodies in each of its mines. An identifiable component is a specific volume of the ore body that is
made more accessible by the stripping activity. For the purposes of identification of separate
components the group uses MOPs. Each discrete stage of mining identified in a MOP is considered
as a unit of account. If the MOP identifies several discrete stages which are scheduled to be mined
consecutively (one after the another) or located in the different parts of the mine, these stages are
identified as components.
The group uses an allocation basis that compares volume of waste extracted with expected volume,
for a given volume of ore production in the period for the identified component of the ore body to
determine if stripping costs are to be allocated to stripping activity asset or the cost of inventory.
The stripping activity asset is initially measured at cost, which is the accumulation of costs directly
incurred to perform the stripping activity that improves access to the identified component of the ore
body, plus an allocation of directly attributable overhead costs.
After initial recognition the stripping activity asset is carried at cost less depreciation using unit-of
production method based on ore extracted and any impairment losses.
Capital construction in progress
Assets under construction at operating mines are accounted for as capital construction in progress.
When the capital construction in progress is completed and in a condition necessary to be capable of
operating in the manner intended by management, the objects are reclassified to fixed assets.
Capital construction in progress is not depreciated.
Exploration and evaluation assets
Exploration and evaluation expenditure is capitalised when the exploration and evaluation activities
have not reached a stage that permits a reasonable assessment of the existence of commercially
recoverable gold resources. When the technical feasibility and commercial viability of extracting
a gold resource are demonstrable and a decision has been made to develop the mine, capitalised
exploration and evaluation assets are reclassified to
Mine under development or Fixed assets
.
PJSC “POLYUS”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
44
3.9. Impairment of property, plant and equipment
Property, plant and equipment items
are largely independent of cash flows of other assets, which is generally at the individual mine level.
An impairment review of
property, plant and equipment items
an indication that those assets have suffered an impairment loss. There were no such indicators
during 2021 and 2020.
Exploration and evaluation assets are assessed for impairment when facts and circumstances
suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable
amount. The following facts and circumstances, among others, indicate that exploration and
evaluation assets must be tested for impairment:
●
or will expire in the near future, and is not expected to be renewed;
●
the specific area is neither budgeted nor planned;
●
the discovery of commercially viable quantities of gold resources and the decision was made to
discontinue such activities in the specific area; and
●
occur, the carrying amount of the exploration and evaluation asset is unlikely to be recovered
in full from successful development or by sale.
3.10. Leases
The group assesses all contracts whether they contain leases and recognises a right-of-use asset
and a corresponding lease liability with respect to all lease arrangements in which it is the lessee
except for short-term leases and leases of low value assets.
The lease liability is initially measured at the present value of the lease payments discounted by
using the rate implicit in the lease or incremental borrowing rate.
The lease liability is subsequently measured at amortised cost using the effective interest method
and presented within
Borrowings
The group excludes the following lease agreements from the measurement of lease liabilities and
accounts lease payments associated with those leases as an expense:
●
●
The right-of-use assets comprise the initial measurement of the corresponding lease liability, any
lease payments made at or before the commencement date less any incentives received, any initial
direct costs incurred and an estimate of decommissioning costs. The right-of-use assets are
subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated on a straight-line basis over the shorter period of lease term and
useful life of the underlying asset. The depreciation starts at the commencement date of the lease.
The right-of-use assets are presented within
Property, Plant and Equipment
statement of financial position.
The group applies IAS 36
Impairment of Assets
and accounts for any identified impairment loss when incurred.
3.11. Financial instruments
Financial assets and financial liabilities are initially recognised at fair value when the group becomes
a party to the contractual provisions of the instruments.
The group subsequently measures its financial instruments as follows:
PJSC “POLYUS”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
45
●
value change presented within note 10;
●
FVTPL), loans receivable, trade and other payables – at amortised cost using the effective
interest method.
The group neither applies hedge accounting nor has any financial instruments measured at fair value
through other comprehensive income.
Trade receivables for gold flotation concentrates
Accounting of trade receivables for gold flotation concentrates is disclosed in 3.4
Revenue
.
Derivatives
The group enters into a variety of derivative financial instruments to manage its exposure to interest
rate, foreign exchange rate risk and risk of volatility in the gold price.
Derivatives are carried at fair value through profit or loss. Changes in the fair value of the derivative
financial instruments are recognised within
Gain / (loss) on revaluation of derivative financial
instruments
of the consolidated statement of profit or loss. Gain or loss on the exchange of interest
payments under cross-currency and interest rate swaps are recognised within
Finance costs
.
Borrowings
Borrowings (consisting of bonds issued, bank loans and lease liabilities) are initially recognised at
fair value adjusted for directly attributable transaction costs and are subsequently accounted at
amortised cost using the effective interest method.
Amortisation under the effective interest method (interest expense) and gains or losses on de-
recognition or debt modification are recognised as profit or loss in the consolidated statement of
income within
Finance costs
.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances, cash deposits and highly liquid investments
which are:
●
changes in value; or
●
Impairment of financial assets
Cash and cash equivalents and non-current receivables that are determined to have a low credit risk
at the reporting date and for which credit risk has not increased significantly since initial recognition,
are measured based on 12-month expected credit loss (ECL).
Lifetime ECL’s that result from all possible default events are recognised in respect of other financial
assets measured at amortised cost.
The expected credit losses on these financial assets are estimated at each reporting date based
on the group’s historical credit loss experience, adjusted for factors that are specific to the debtors,
general economic conditions and an assessment of both the current as well as the forecast direction
of conditions at the reporting date, including time value of money where appropriate.
Fair value
PJSC “POLYUS”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
46
Accounting standards require that the fair value of financial instruments reflects their credit quality,
and also changes in credit quality where there is evidence that this has occurred. The credit risk
associated with the group’s derivative financial instruments is reflected in its derivative valuations.
This credit factor is adjusted over time to reflect the reducing tenor of the instrument and is updated
where the credit risk associated with the derivative has clearly changed based on market
transactions and prices.
3.12. Inventories
Refined gold, ore stockpiles and gold-in-process
Stockpiles are valued at the lower of the average production costs per unit of ore mined and net
realisable value. Gold-in-process, refined gold and gold in flotation concentrate are valued at the
lower of the average production costs per recoverable gold and net realisable value. Costs are
assigned to individual items of inventory on a weighted average cost basis.
Net realisable value of long-term stockpiles is estimated in real terms by calculating the selling price
less all costs still to be incurred in converting the relevant inventory to saleable product, and
delivering it to the customer, subject to an applicable discount factor. The selling price is estimated
using long-term consensus gold price forecasts, multiplied by long-term consensus exchange-rate
forecasts, gold content determined under group’s production reports and recovery coefficients
expected for a given ore type. Costs still to be incurred in converting the stockpile to refined gold are
determined based on historical processing costs. Timing for discounting is determined based on
management plans to process each type of ore or the life of the mine.
Materials and supplies
Materials and supplies consist of consumable materials and are stated at the lower of cost or net
realisable value. Costs of materials and supplies are determined on a weighted average cost basis.
Antimony in gold -antimony flotation concentrate and silver
Antimony in gold-antimony flotation concentrate and silver are by-products of the group’s gold
production, which are valued at their net realisable value.
3.13. Deferred expenditure
Deferred expenditure relates to the preparation for the seasonal alluvial mining activities comprised
of excavation costs, general production and specific production overhead costs and releases in the
statement of profit or loss when the gold is extracted during the mining season.
3.14. Share -based payments
Equity-settled share-based payments to employees and others providing similar services are
measured at the fair value of the equity instruments at the grant date and subsequently expensed on
a straight-line basis over the vesting period, with a corresponding increase in equity. At the end of
each reporting period, the group revises its estimate of the number of equity instruments expected to
vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such
that the cumulative expense reflects the revised estimate, with a corresponding adjustment to
the equity.
4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
Preparation of the consolidated financial statements in accordance with IFRS requires the group’s
management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements,
and the reported amounts of revenues and expenses during the reporting period. The determination
of estimates requires judgements which are based on historical experience, current and expected
economic conditions, and all other available information. Actual results could differ from those
estimates.
PJSC “POLYUS”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
47
4.1. Critical judgements in applying accounting policies
No critical judgements have been applied when selecting the appropriate accounting policies.
4.2. Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and other key sources of estimation
uncertainty at the end of the reporting period that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year:
●
●
●
●
●
◾
4.2.1. Mine operating plans
The group estimates ore, stripping volumes and grades for MOPs based on the data consistent with
Joint Ore Reserves Committee Code (JORC) principles, where applicable, and considering national
regulations. The MOPs are prepared based on geological, technical and economic factors, including
quantities, grades, production techniques, recovery rates, production costs, transport costs,
commodity prices and exchange rates. This process requires complex and difficult geological
judgements and analysis to interpret the data. The MOPs are usually updated annually to account for
the newly obtained information including, but not limited to, resource definition drilling.
MOPs are the best estimates of the group about the expected volume and timing of extraction and
processing of the reserves and resources from the group’s mines. MOPs are used for the planning
and actual extraction of ore from the mines and affect the following amounts in the financial
statements:
●
production or straight-line basis (if life-of-mine is shorter than the useful economic life of the
asset);
●
inventory, depending on proportion of ore and waste as per MOPs and actual performance in
the reporting period;
●
●
related tax benefits and is impacted by the expected results of mine operation and their timing.
◾
4.2.2. Recoverability of exploration and evaluation assets
Management’s judgement is involved in the determination of whether the expenditures which are
capitalised as exploration and evaluation assets may be recouped by future exploitation or sale or
should be impaired. Determining this, management estimates the possibility of finding recoverable
ore reserves related to a particular area of interest. However, these estimates are subject to significant
uncertainties. The group is involved in exploration and evaluation activities and some of its licensed
properties contain gold resources. Management assumes that all licences will be renewed. Many of
the factors, assumptions and variables involved in estimating resources are beyond the group’s
control and may prove to be incorrect over time. Subsequent changes in gold resources estimates
could impact the carrying value of exploration and evaluation assets.
PJSC “POLYUS”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
48
◾
4.2.3. Impairment of long-lived assets
The group reviews the carrying amounts of its long-lived assets to determine whether there is any
indication that those assets are impaired. In making the assessment for impairment indicators, assets
that do not generate independent cash flows are allocated to an appropriate cash-generating unit.
Management necessarily applies its judgement in allocating assets that do not generate independent
cash flows to appropriate cash-generating units and also in estimating the timing and value of
underlying cash flows within the value-in-use calculation. The value-in-use calculations for operating
mines are based on the best available reserve estimates at the time of the analysis such as JORC.
Factors which could impact the underlying cash flows include:
●
●
●
●
Subsequent changes to the cash -generating unit allocation or to the timing of cash flows could impact
the carrying value of the respective assets.
◾
4.2.4. Net realisable value of long -term stockpiles
The measurement of long-term stockpiles includes the determination of its net realisable value,
which involves significant estimates of future gold prices, Russian Rouble exchange rates, gold
recoveries, future energy, material and other processing costs, timing of refined gold sales and
processing and determination of discount rates.
Judgment also exists in estimating the number of contained ounces in ore stockpiles. These
amounts are measured by estimating the number of gold ounces added (based on assay data) and
removed (based on processing data) from the stockpile. Although the quantities of recoverable gold
placed on the stockpiles are reconciled to the quantities of gold actually recovered (metallurgical
balancing), the nature of the process inherently limits the ability to precisely monitor recoverability
levels.
The group assesses net realisable value of low-grade ore at the end of each reporting period. As at
31 December 2021, of all low-grade ore balances owned the group, the net realisable value of low-
grade ore at Natalka was the most sensitive to changes in the key assumptions used in the
assessment, including processing schedule and macroeconomic assumptions, such as the long-term
gold price and a RUB/USD exchange rate.
◾
4.2.5. Interpretation of tax legislation
The group is subject to income taxes in a number of jurisdictions. Significant judgement is required in
determining the group’s provision for income taxes due to the complexity of legislation. There are
many transactions and calculations for which the ultimate tax determination is uncertain. The group
recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes
will be due. Where the final tax outcome of these matters is different from the amounts that were
initially recorded, such differences may impact the income tax and deferred tax provisions in the period
in which such determination is made.
5. SEGMENT INFORMATION
For management purposes the group is organised by separate business segments identified
by a combination of operating activities and geographical area bases with separate financial
information available and reported regularly to the chief operating decision maker (“CODM”), being
the Budget Committee and the Investment Committee.
The following is a description of operations of the group’s identified reportable segments:
PJSC “POLYUS”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
49
Business
unit
Russian
Federation region
Mine / deposit
Description of operations at the specified mine /
deposit
Olimpiada
Krasnoyarsk region
Olimpiada
mining (including initial processing) and sale of gold, as
well as research, exploration and development work
Blagodatnoye
Krasnoyarsk region
Blagodatnoye
mining (including initial processing) and sale of gold, as
well as research, exploration and development work
Natalka
Magadan region
Natalka
mining (including initial processing) and sale of gold, as
well as research, exploration and development work
Verninskoye
Irkutsk region
Verninskoye
mining (including initial processing) and sale of gold, as
well as research, exploration and development work
Kuranakh
Sakha Republic
Kuranakh
mining (including initial processing) and sale of gold, as
well as research, exploration and development work
Alluvials
Irkutsk region
Alluvials
mining (including initial processing) and sale of gold
Sukhoi Log
Irkutsk region
Sukhoi Log
exploration and evaluation works
Exploration
Krasnoyarsk,
Irkutsk, Amur and
other regions
Not applicable
exploration and evaluation work in several regions of the
Russian Federation other than those performed by other
business units
The group does not allocate segment results of companies that perform management, investing
activities and certain other functions. Neither standalone results nor the aggregated results of these
companies are significant enough to be disclosed as operating segments because quantitative
thresholds are not met. Aggregated results of these companies are presented as
Unallocated
.
The reportable gold production segments derive their revenue primarily from gold sales. The CODM
performs an analysis of the operating results based on these separate business units and evaluates
the reporting segment’s results, for purposes of resource allocation, based on the measurements of:
gold sales; ounces of gold sold, in thousands; adjusted earnings before interest, tax, depreciation
and amortisation and other items (Adjusted EBITDA); total cash cost (TCC); total cash cost per
ounce of gold sold (TCC per ounce); and capital expenditures. Business segment assets and
liabilities are not reviewed by the CODM and therefore are not disclosed in these consolidated
financial statements.
The reporting segment’s results for the year ended 31 December were as follows:
Gold sales
Ounces of
gold sold in
thousands
24
Adjusted
EBITDA
TCC
2
TCC
per ounce
(US dollar)
2
Capital
expenditures
Business units
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
Olimpiada
2,018
2,155
1,132
1,250
1,496
1,665
417
389
369
312
197
183
Blagodatnoye
772
810
430
456
577
620
160
158
367
347
238
71
Natalka
905
814
503
455
669
594
185
162
368
355
110
123
Verninskoye
527
484
292
274
397
370
105
89
358
327
79
76
Kuranakh
428
426
238
239
264
279
136
124
569
518
94
47
Alluvials
254
267
141
143
99
129
134
121
950
847
27
23
Exploration
-
-
-
-
-
-
-
-
-
-
12
12
Sukhoi Log
-
-
-
-
1
-
-
-
-
-
69
29
Unallocated
-
-
-
-
15
33
(27)
(23)
-
-
102
89
¤
¤
Total
4,904
4,956
2,736
2,817
3,518
3,690
1,110
1,020
405
362
928
653
24
Unaudited
PJSC “POLYUS”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
50
Adjusted EBITDA reconciles to the IFRS reported figures on a consolidated basis as follows:
Year ended
31 December
2021
2020
Profit for the year
2,278
1,646
Income tax expense
480
416
Finance costs (note 9)
209
232
Interest income
(14)
(22)
Depreciation and amortisation
358
349
Foreign exchange loss
39
250
(Gain) / loss on revaluation of derivative financial instruments
(33)
544
Equity-settled share-based plans (LTIP) (note 18)
44
77
Expenses related to COVID-19
(note 23)
78
106
Special charitable contributions
51
35
Impairment of property, plant and equipment
16
10
Loss on disposal of property, plant and equipment and intangible assets
12
2
Loss on transfer of Omchak high voltage power grid
(note 8)
-
45
Adjusted EBITDA
3,518
3,690
The measurement of TCC per ounce of gold sold reconciles to the IFRS reported figures
on
a
consolidated basis as follows:
Year ended
31 December
2021
2020
Cost of gold sales before by-product sales
1,488
1,413
Antimony by-product sales
(20)
(24)
Cost of gold sales
(note 6)
1,468
1,389
Adjusted for:
Depreciation and amortisation (note 6)
(385)
(406)
Effect of depreciation, amortisation, accrual and provisions in inventory change
63
87
Expenses related to COVID-19 in cost of gold sales
(36)
(50)
TCC
2
1,110
1,020
Ounces of gold sold, in thousands
2
2,736
2,817
TCC per ounce of gold sold, USD per ounce
25
405
362
Gold sales
Year ended
31 December
2021
2020
Refined gold
4,832
4,586
Gold in flotation concentrate
72
370
Total gold sales
4,904
4,956
Geographical segments of gold sales:
Russian Federation
4,832
4,618
Outside of Russian Federation
72
338
Total gold sales
4,904
4,956
Gold sales reported above represent revenue generated from external customers. There were no
inter-segment gold sales during the years ended 31 December 2021 and 2020.
Reconciliation of capital expenditures to the property plant and equipment additions (note 13)
is presented below:
25
Unaudited
PJSC “POLYUS”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
51
Year ended
31 December
2021
2020
Capital expenditures
928
653
Stripping activity assets additions (note 13)
313
203
Construction of the Omchak high-voltage power grid
-
24
Less: intangible and other non-current assets additions
(44)
(43)
Property plant and equipment additions (note 13)
1,197
837
6. COST OF GOLD SALES
Year ended
31 December
2021
2020
Depreciation and amortisation
385
406
Employee compensation
366
381
Consumables and spares
304
304
Mineral extraction tax
245
238
Fuel
116
120
Power
63
61
Other
145
126
Total cost of production
1,624
1,636
Increase in stockpiles, gold-in-process and refined gold inventories
(156)
(247)
Total
1,468
1,389
7. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Year ended
31 December
2021
2020
Employee compensation
232
236
Depreciation and amortisation
25
23
Professional services
19
15
Taxes other than mineral extraction tax and income taxes
18
19
Distribution expenses related to gold flotation concentrate
5
18
Other
35
25
Total
334
336
8. OTHER EXPENSES
Year ended
31 December
2021
2020
Special charitable contributions
51
35
Expenses related to COVID-19 (note 23)
42
56
Impairment of property, plant and equipment
16
10
Loss on disposal of property, plant and equipment and intangible assets
Loss on transfe r of Omchak high voltage power grid
-
45
Other
31
25
Total
152
173
PJSC “POLYUS”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
52
9. FINANCE COSTS
Year ended
31 December
2021
2020
Interest on borrowings
195
229
Interest on lease liabilities
5
4
Gain on exchange of interest payments under cross currency swaps
(17)
(30)
Loss on exchange of interest payments under interest rate swaps
3
2
Unwinding of discounts
6
10
Bank commission and write -off of unamortised debt cost due to early extinguishment
2
12
Loss on early redemption of debt and deferred consideration
38
5
Gain on debt modification
(23)
-
Total
209
232
10. GAIN / (LOSS) ON REVALUATION OF DERIVATIVE FINANCIAL INSTRUMENTS
Year ended
2021
2020
Revaluation gain / (loss) on cross currency swaps
30
(403)
Revaluation gain / (loss) on interest rate swaps
3
(7)
Revaluation loss on revenue stabiliser
-
(29)
Revaluation loss on conversion option
-
(105)
Total
33
(544)
11. INCOME TAX EXPENSE AND DEFERRED TAX ASSETS AND LIABILITIES
Income tax expense was as follows:
Year ended 31 December
2021
2020
Current tax expense
Deferred tax expense / (income)
Total income tax expense
The corporate income tax rate in the Russian Federation is 20% (17% regional and 3% federal).
The taxpayers in Russia have a right to apply reduced rates of mineral extraction tax (MET) and
income tax if they implement a regional investment projects in certain regions and meet certain
criteria (thereafter "RInvP").
The Tax Code provides for a right of each specified region of the Russian Federation to reduce
the regional component of the income tax rate to as low as zero percent.
JSC Polyus Krasnoyarsk RInvP (Blagodatnoye business unit)
JSC Polyus Krasnoyarsk is undertaking an investment project to increase mining and processing
facilities of the Blagodatnoye mine (Mill-5 project). According to the Directive of the Government of the
Krasnoyarsk region JSC Polyus Krasnoyarsk was included in the register of the participants of RInvP
starting from 2021. As a result, the subsidiary has been granted a right to apply reduced corporate
income tax rates in relation to the Mill-5 project income and reducing MET coefficients in relation to
minerals extracted under the Mill-5 project.
Considering the expected start of production under the Mill-5 project, JSC Polyus Krasnoyarsk expects
to apply the following reduced tax rates:
PJSC “POLYUS”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
53
●
●
The amount of tax savings should not exceed the amount of investments in Mill-5 project.
JSC Polyus Verninskoye RInvP (Verninskoye business unit)
JSC Polyus Verninskoye, a 100% subsidiary of JSC Polyus Krasnoyarsk operating in the Irkutsk
region of the Russian Federation, had a right to apply the following RInvP rates:
●
●
In July 2021, the amount of MET savings exceeded the amount of investments in RInvP, therefore,
starting from August 2021, JSC Polyus Verninskoye does not benefit from the reduced MET, and a
reduced income tax rate is not applied as well from January 2021.
JSC Polyus Magadan RInvP (Natalka business unit)
JSC Polyus Magadan, a 100% subsidiary of JSC Polyus Krasnoyarsk operating in the Magadan
region of the Russian Federation, applies the following RInvP rates:
●
●
thereafter.
The amount of tax savings should not exceed the amount of investments in regional investment
project.
A reconciliation of Russian Federation statutory income tax, the location of the group’s major
production entities and operations, to the income tax expense recorded in the consolidated
statement of profit or loss is as follows:
Year ended 31 December
2021
2020
Profit before income tax
Income tax at statutory rate applicable to principal entities (20%)
Effect of the RinvP due to different tax rates (JSC Polyus Magadan and JSC Polyus Verninskoye)
Unrecognised temporary differences on revaluation of derivative financial instruments
Tax effect of non-deductible expenses and other permanent differences
Income tax expense
The movement in the group’s deferred taxation position was as follows (tax assets are presented as
negative amounts, tax liabilities – as positive):
Year ended 31 December
2021
2020
Net deferred tax liability at the beginning of the year
150
174
Recognised in the consolidated statement of profit or loss
78
(1)
Effect of translation to presentation currency
(1)
(23)
Net deferred tax liability at the end of the year
227
150
Deferred taxation is attributable to tax losses carried-forward and the temporary differences that exist
between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts
used for tax purposes and was as follows:
PJSC “POLYUS”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
54
31 December 2020
Recognised
in profit or
loss
Effect of
translation
to
presentation
currency
31 December 2021
Property, plant and equipment
365
69
(2)
432
Inventory
110
29
-
139
Borrowings
(9)
-
-
(9)
Deferred expenditure
3
-
1
4
Tax losses carried-forward
(248)
(10)
-
(258)
Trade and other payables
(23)
(5)
-
(28)
Intangible assets
2
(1)
-
1
Derivatives
(50)
(2)
1
(51)
Other
-
(2)
(1)
(3)
Net deferred tax liability
150
78
(1)
227
Certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred
tax balances (after offset) as they are presented in the consolidated statement of financial position:
31 December
2021
2020
Deferred tax assets
(106)
(109)
Deferred tax liabilities
333
259
Net deferred tax liability
227
150
Unrecognised deferred tax asset
31 December
2021
2020
Unrecognised deferred tax assets resulting from losses on derivative financial instruments
186
195
Unrecognised deferred tax assets resulted from impairments
5
5
Unrecognised deferred tax assets in respect of tax losses carried forward available
for offset against future taxable profit
6
6
Total
197
206
Unrecognised deferred tax liability
31 December
2021
2020
Taxable temporary difference associated with investments in subsidiaries
80
85
Deferred tax liability for the taxable temporary difference associated with investments in subsidiaries
is not recognised because the group is able to control the timing of the reversal of the temporary
difference and it is probable that the temporary difference will not reverse in the foreseeable future.
The group does not recognise deferred tax assets for some of its tax losses if it is more likely than not
that the future taxable profits will not be available to offset them in certain group entities.
PJSC “POLYUS”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
55
12. INTANGIBLE ASSETS
Internally-
generated
software
Purchased
software
Internally-
generated
other
Total
Cost
Accumulated amortisation and impairment
Net book value at 1 January 2020
Additions
Reclassification
Amortisation charge
Effect of translation to presentation currency
Cost
Accumulated amortisation and impairment
Net book value at 31 December 2020
Additions
Reclassification
Amortisation charge
Disposals
Effect of translation to presentation currency
Cost
Accumulated amortisation and impairment
Net book value at 31 December 2021
13. PROPERTY, PLANT AND EQUIPMENT
Fixed
assets
Stripping
activity
assets
Capital
construction
in progress
Exploration
and
evaluation
assets
Total
Cost
Accumulated depreciation and impairment
Net book value at 1 January 2020
Additions
Transfers
Disposals
Omchak high-voltage power grid disposal
(132)
-
(1)
-
(133)
Depreciation charge
Impairment
Effect of translation to presentation currency
Other
Cost
Accumulated depreciation and impairment
Net book value at 31 December 2020
Additions
Transfers
Disposals
Depreciation charge
Impairment
Effect of translation to presentation currency
Other
Cost
Accumulated depreciation and impairment
Net book value at 31 December 2021
PJSC “POLYUS”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
56
Carrying value of rights-of-use assets included in fixed assets is disclosed in note 14.
The carrying values of mineral rights included in fixed assets and exploration and evaluation assets
were as follows:
31 Dec.
2021
31 Dec.
2020
Mineral rights presented within fixed assets
54
57
Mineral rights presented within exploration and evaluation assets
347
346
Total
401
403
The carrying values of exploration and evaluation assets were as follows:
31 Dec.
2021
31 Dec.
2020
Sukhoi Log
469
409
Olimpiada
43
27
Chertovo Koryto
32
31
Razdolinskoye
30
29
Burgakhchan area
23
17
Panimba
16
17
Bamsky
15
15
Kuranakh
11
4
Blagodatnoye
9
6
Natalka
8
7
Other
9
3
Total
665
565
Depreciation and amortisation charges are allocated as follows:
Year ended
31 December
2021
2020
Depreciation in change in inventory
60
91
Capitalised within property, plant and equipment
88
72
Less: amortisation of intangible and other non-current assets
(12)
(15)
Total depreciation capitalised as part of other assets
136
148
Depreciation and amortisation within cost of production (note 6)
385
406
Less: depreciation in change in inventory
(60)
(91)
Selling, general and administrative expenses (note 7)
25
23
Cost of other sales
8
11
Total depreciation in profit or loss
358
349
Total depreciation of property, plant and equipment
494
497
14. LEASES
The most significant leases of the group are office leases. Movements of the right-of-use assets
presented within
Property, Plant and Equipment
follows:
PJSC “POLYUS”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
57
Related party
transactions
Non-related party
transactions
Total
2021
2020
2021
2020
2021
2020
Carrying value as of the beginning of the year
46
58
19
22
65
80
Changes in right-of-use assets due to lease indexation,
modification and recognition of new contracts
2
2
21
6
23
8
Depreciation charge
(4)
(4)
(6)
(6)
(10)
(10)
Effect of translation to presentation currency
-
(10)
1
(3)
1
(13)
Carrying value as of the end of the year
44
46
35
19
79
65
Movements of the lease liabilities presented within
Borrowings
December were as follows:
Related party
transactions
Non-related party
transactions
Total
2021
2020
2021
2020
2021
2020
Carrying value as of the beginning of the year
51
53
19
27
70
80
Changes in lease liabilities due to lease indexation,
modification and recognition of new contracts
2
2
22
(2)
24
-
Foreign exchange loss
1
10
(1)
5
-
15
Interest on lease liabilities
4
3
1
1
5
4
Payments of lease liability
(6)
(7)
(10)
(8)
(16)
(15)
Effect of translation to presentation currency
(1)
(10)
2
(4)
1
(14)
Carrying value as of the end of the year
51
51
33
19
84
70
15. INVENTORIES
31 Dec.
2021
31 Dec.
2020
Stockpiles
617
505
Gold-in-process
16
14
Inventories expected to be used after 12 months
633
519
Stockpiles
182
150
Gold-in-process
113
101
Antimony in gold-antimony flotation concentrate and silver
1
4
Refined gold and gold in flotation concentrate
-
4
Materials and supplies
362
365
Less: obsolescence provision for materials and supplies
(25)
(29)
Inventories expected to be used in the next 12 months
633
595
Total
1,266
1,114
The carrying value of long-term stockpiles was as follows:
31 Dec.
2021
31 Dec.
2020
Natalka
230
179
Blagodatnoye
145
93
Verninskoye
105
98
Olimpiada
48
51
Titimukhta
41
42
Kuranakh
32
29
Other long-term ore
16
13
Total long-term stockpiles
617
505
As of 31 December 2021 and 2020, there were no stockpiles measured at net realisable value.
PJSC “POLYUS”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
58
16. RECEIVABLES
31 Dec.
2021
31 Dec.
2020
Trade receivables for gold-bearing products
18
115
Other receivables
42
32
Less: allowance for other receivables
(18)
(14)
Total trade and other receivables
42
133
Reimbursable value added tax
146
118
Other prepaid taxes
1
2
Total taxes receivable
147
120
17. CASH AND CASH EQUIVALENTS
31 Dec.
2021
31 Dec.
2020
Current USD bank accounts
799
1,115
Current RUB bank accounts
20
69
Bank deposits denominated in USD
410
178
Bank deposits denominated in RUB
114
83
Total
1,343
1,445
Bank deposits within cash and cash equivalents include deposits with original maturity less than
three months or repayable on demand without loss on principal and accrued interest denominated in
RUB and USD and accrue interest at the following rates:
Interest rates:
- Bank deposits denominated in USD
0.7-1.0%
0.5-0.9%
- Bank deposits denominated in RUB
7.3-9.0%
4.0-4.7%
18. SHARE CAPITAL AND RESERVES
Authorised share capital of the Company as of 31 December 2021 comprised issued and fully paid
136,069 thousand ordinary shares at par value of RUB 1 each, of which 1,064 thousand was
included within treasury shares.
Equity-settled share-based compensation (long-term incentive plan)
PJSC Polyus grants long-term incentive awards according to which the members of management of
the group are entitled to a conditional award in the form of PJSC Polyus’ ordinary shares, which vest
upon achievement of financial and non-financial performance targets on expiry of performance
periods. Expenses arising from the LTIP are recognised in the consolidated statement of profit or
loss within
Selling, general and administrative expenses.
Share buyback
During the first quarter of 2021, the group completed a share buyback started in December 2020 by
acquiring 62 thousand of the Company’s ordinary shares from its shareholders. As of 31 December
2020, a liability in the amount of USD 14 million was recognised in respect of shares to be delivered.
Dividends
The declared dividends for the year ended 31 December 2021 were as follows:
PJSC “POLYUS”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
59
Declaration by
Shareholders of
the Company date
Per share,
RUB
Total
26
Total on
treasury shares
In respect of the second half of financial year 2020
27 May 2021
387.15
717
6
in respect of the first half of financial year 2021
29 September 2021
267.48
502
4
Total dividends declared
1,219
10
During the year ended 31 December 2021, total amount of dividends paid in cash to the
shareholders was USD 1,236 million (at the CBR currency exchange rate at the date of payment).
During the year ended 31 December 2021, dividends to non-controlling interests in the amount of
USD 37 million were declared. This resulted in a decrease of the share of the subsidiary’s net assets
that remained attributable to the non-controlling interests in the amount of USD 38 million.
Weighted average number of ordinary shares
The weighted average number of ordinary shares used in the calculation of basic and diluted earnings
per share (“EPS”) is as follows (in thousands of shares):
Year ended
2021
2020
Weighted average number of ordinary shares in issue – basic EPS
134,927
134,360
Dilutive effect of potentially issuable shares under LTIP
446
534
Weighted average number of ordinary shares in issue – diluted EPS
135,373
134,894
Profit after tax attributable to the shareholders of the Company for basic and diluted EPS
calculation (million USD)
2,270
1,600
Basic EPS (US Dollar per share)
16.82
Diluted EPS (US Dollar per share)
16.77
26
dividends on treasury shares owned by the subsidiary of the Company.
PJSC “POLYUS”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
60
19. BORROWINGS, DERIVATIVE FINANCIAL INSTRUMENTS AND INVESTMENTS
As of 31 December 2021, borrowings and derivatives were as follows:
Borrowings terms
at 31 December 2021
Effective terms on
economically hedged
borrowings
at 31 December 2021
Borrowings
balances
Currency
Interest
rate
Nominal
rate %
Currency
Interest
rate
Nominal
rate %
31 Dec.
2021
31 Dec.
2020
Eurobonds due in 2022
USD
Fixed
4.699%
-
-
-
482
481
Eurobonds due in 2023
USD
Fixed
5.250%
-
-
-
329
785
Eurobonds due in 2024
USD
Fixed
4.7%
-
-
-
322
468
Eurobonds due in 2028
USD
Fixed
3.25%
-
-
-
696
-
Notes due in 2029 with noteholders’ early
repayment option in 2024
RUB
Fixed
7.4%
USD
Fixed
3.23%
269
270
Credit facilities with financial institutions
RUB
Fixed
8.0%
USD
Fixed
4.96%
847
-
Credit facilities with financial institutions
RUB
Fixed
8.75%
USD
Fixed
5.04%
108
-
Credit facilities with financial institutions
RUB
Variable
MosPrime +
0.27%
USD
Fixed
2.8%
110
110
Credit facilities with financial institutions
RUB
Variable
Central bank
rate + 2.3%
-
-
-
25
40
Lease liabilities
USD / RUB
Fixed
6.0%
-
-
-
84
70
Credit facilities with financial institutions
RUB
Variable
MosPrime
+0.2% / -
0.45%
-
-
-
-
978
Credit facilities with financial institutions
USD
Variable
USD LIBOR
+ 1.65%
-
-
-
-
149
Notes due in 2025 with noteholders’ early
repayment option in 2021
RUB
Fixed
12.1%
-
-
-
-
203
Sub-total
3,272
3,554
Less: current portion of long-term
borrowings due within 12 months
(507)
(225)
Long-term borrowings
2,765
3,329
Effective terms on economically hedged borrowings are presented encompassing the effect of cross
currency swaps, detailed description and nominal amounts of which are presented in this note below.
Notes due in 2025 (Rusbonds) with noteholders’ early repayment option in 2021
In July 2021, the group exercised its call-option and repaid in advance of maturity USD 203 million of
Rusbonds (RUB 15,000 million translated at exchange rate at the date of transaction). In connection
with this on expiration of cross currency swaps the group exchanged principal amounts paying
USD 255 million and receiving RUB 15,300 million. Net cash outflow related to payments on
expiration of cross-currency swaps amounted to USD 47 million.
Eurobonds with fixed interest rate due in 2028
In October 2021, the group issued USD 700 million notes with coupon rate 3.25% and maturity date
in October 2028. Proceeds from this issuance were partly used to perform partial buy-back of 2023
and 2024 notes in amount of USD 458 million and USD 148 million respectively.
Credit facilities with financial institutions nominated in USD with variable interest rates
In October 2021, the group repaid in advance of maturity credit facilities nominated in USD with a
variable interest rate in the amount of USD 150 million.
PJSC “POLYUS”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
61
Credit facilities with financial institutions nominated in RUB
In October 2021, the group switched variable rates in several credit facilities with financial institutions
nominated in RUB to fixed rates which was treated as non-substantial debt modification and resulted
in USD 23 million gain reflected in line
Gain on debt modification
within
Finance costs
Derivative financial instruments and investments
As of 31 December 2021, derivative financial instruments and investments were as follows:
31 December 2021
31 December 2020
Non-Current
Current
Total
Non-Current
Current
Total
Cross currency swaps
23
-
23
17
-
17
Loans receivable
24
-
-
-
Total derivative financial assets
and investments
47
-
47
17
-
17
Cross currency swaps
290
1
291
321
42
363
Interest rate swaps
-
-
-
9
-
9
Total derivative financial liabilities
290
1
291
330
42
372
Cross currency swaps
During the year ended 31 December 2021, following the switch from variable to fixed rates of several
credit facilities with financial institutions nominated in RUB, the group amended previous cross
currency contracts to economically hedge interest payments and principal amounts nominated in
RUB and changed the rates in respective cross-currency swaps. The following terms were in place
as of 31 December 2021:
Nominal
Interest payments
Expiration
date
Group pays
(USD million)
Group receives
(
RUB
million)
Frequency
Group pays
(in USD)
Group receives
(in
RUB)
March 2024
125
8,225
quarterly
5.04%
8.75%
April 2024
965
64,801
quarterly
4.96%
8,1%
October 2024
310
20,000
semi-annually
3.23%
7.4%
March 2025
125
8,169
quarterly
2.8%
MosPrime 3m + 0.27%
Interest rate swaps
During the year ended 31 December 2021, following the repayment of the credit facilities nominated
in USD with a variable interest rate the group terminated in advance of maturity the respective
interest rate swaps. Net cash outflow related to payments on termination of interest rate swaps
amounted to USD 6 million. As of 31 December 2021, the group had no interest rate swaps in place.
Unused credit facilities
As of 31 December 2021, the group has unused credit facilities in the total amount of USD 1,276
million (31 December 2020: USD 1,243 million).
Pledge
As of 31 December 2021 and 2020, all shares of JSC TaigaEnergoStroy belonging to the group were
pledged to secure a credit line.
Other matters
There were a number of financial covenants under several loan agreements in effect as of 31
December 2021 according to which the respective subsidiaries of the Company and the Company
itself are limited in their level of leverage and other financial and non-financial parameters.
PJSC “POLYUS”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
62
The group tests covenants quarterly and was in compliance with the covenants as of 31 December
2021.
Reconciliation of liabilities arising from financing activities
Borrowings
Lease
Dividends payable
Derivatives
2021
2020
2021
2020
2021
2020
2021
2020
Carrying value as of the beginning
of the year
3,484
5,006
70
80
2
2
355
38
Net cash flows
(316)
(1,032)
(16)
(15)
(1,268)
(855)
(39)
(4)
Non-cash changes, including:
Dividends accrued
-
-
-
-
1,246
869
-
-
Loss on early redemption of debt
38
-
-
-
-
-
-
-
Redemption of convertible bonds
-
(200)
-
-
-
-
-
(163)
Foreign exchange (gain) / loss
8
492
-
15
-
-
-
-
Debt modification
(23)
-
24
-
-
-
-
-
Commissions on borrowings and
amortisation at effective interest rate
9
21
5
4
-
-
-
-
Gain on exchange of interest
payments under cross currency and
interest rate swaps
-
-
-
-
-
-
(14)
(28)
(Gain) / loss on revaluation of
derivative financial instruments
-
-
-
-
-
-
(33)
544
Effect of currency translation
(12)
(803)
1
(14)
27
(14)
(1)
(32)
Carrying value as of the end of the
year
3,188
3,484
84
70
7
2
268
355
20. PAYABLES
31 Dec.
2021
31 Dec.
2020
Capital expenditures payables
109
89
Employee compensation payable
106
94
Trade payables
65
49
Interest payable
46
57
Accrued annual leave
31
33
Other accounts payable and accrued expenses
34
77
Total trade and other payables
391
399
Social taxes
29
24
Value added tax
24
33
Mineral extraction tax
17
24
Property tax
4
5
Other taxes
20
15
Total taxes other than income tax payable
94
101
21. RELATED PARTIES
There were no transactions with related parties throughout the year ended 31 December 2021,
except for those presented within note 14 and compensation of the key management personnel as
detailed below.
PJSC “POLYUS”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
63
Key management personnel
27
Year ended
2021
2020
Short-term compensation to key management personnel accrued
20
18
Equity-settled share-based compensation (LTIP)
35
63
Total
55
81
22. COMMITMENTS
The Land in the Russian Federation on which the group’s production facilities are located is owned
by the state. The group leases this land through lease agreements, which expire in various years
through to 2065. Future lease payments due under lease agreements excluded from IFRS 16 scope
(note 14) were as follows:
31 Dec.
2021
31 Dec.
2020
Due within one year
10
8
From one to five years
33
24
Thereafter
56
49
Total
99
81
The group’s contracted capital expenditure commitments are as follows:
31 Dec.
2021
31 Dec.
2020
Projects in Krasnoyarsk
337
97
Project Natalka
145
73
Project Sukhoi Log
49
-
Other capital commitments
50
26
Total
581
196
23. OPERATING ENVIRONMENT - IMPACT OF COVID-19 PANDEMIC
Starting from early 2020 a new coronavirus disease (COVID-19) has begun rapidly spreading all
over the world resulting in announcement of the pandemic status by the World Health Organization
in March 2020. Responses put in place by many countries to contain the spread of COVID-19 are
resulting in significant operational disruption for many companies and have significant impact on
global financial markets. Therefore, the group may face the increasingly broad effects of COVID-19
as a result of its negative impact on the global economy and major financial markets. The
significance of the effect of COVID-19 on the group’s business largely depends on the duration and
the incidence of the pandemic effects on the world and Russian economy.
Costs directly attributable to dealing with the COVID-19 pandemic comprise additional compensation
paid to employees, donations to regional administrations, hospitals and other institutions as well as
additional health and safety expenses. The group’s direct and incremental costs related to COVID-19
were included in the following captions of the consolidated financial statements:
27
During the year ended 31 December 2021, following the analysis of involvement of each individual member of the key management personnel in the
decision making process within the group, it was concluded that certain members were to be excluded from the list. Amounts for the year ended
31 December 2020 were updated, respectively.
PJSC “POLYUS”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
64
Year ended
31 December
2021
2020
Cost of gold sales (Employee compensation)
36
50
Other expenses
42
56
Total expenses related to COVID-19 recognised in profit or loss
78
106
Increase in stockpiles, gold-in-process and refined gold inventories
-
23
Property plant and equipment additions (infrastructure facilities and stripping activity asset)
16
26
Total costs related to COVID-19
94
155
24. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash and cash equivalents, current trade and other receivables and accounts
payable approximate their fair value given the short-term nature of these instruments. Non-current
other receivables are discounted at discount rates derived from observable market input data. Trade
receivables for gold-bearing products are carried at fair value through profit or loss (Level 2 of the fair
value hierarchy in accordance with IFRS 13).
The fair value of cross-currency swaps is determined using a discounted cash flow valuation technique
and is based on inputs (spot currency exchange rates, USD and RUB interest rates), which are
observable in the market and are classified as Level 2 of the fair value hierarchy in accordance with
IFRS 13.
The fair value of derivative financial instruments includes an adjustment for credit risk in accordance
with IFRS 13. The adjustment is calculated based on the expected exposure. For positive expected
exposures, credit risk is based on the observed credit default swap spreads for each particular
counterparty or, if they are unavailable, for equivalent peers of the counterparty. For negative expected
exposures, the credit risk is based on the observed credit default swap spread of the group’s peer.
Borrowings and deferred consideration are carried at amortised cost. The fair value of the group’s
borrowings excluding lease liabilities is estimated as follows:
31 December 2021
31 December 2020
Carrying amount
Fair value
Carrying amount
Fair value
Eurobonds (Level 1)
1,829
1,847
1,734
1,852
Borrowings (Level 2)
1,090
1,111
1,277
1,278
Rusbonds (Level 1)
269
262
473
497
Total
3,188
3,220
3,484
3,627
The fair value of all of the group’s borrowings except for the Eurobonds and Rusbonds is within Level 2
of the fair value hierarchy in accordance with IFRS 13. The fair value of the Eurobonds and Rusbonds
is within Level 1 of the fair value hierarchy in accordance with IFRS 13, because the Eurobonds and
Rusbonds are publicly traded in an active market. The fair value of borrowings and bonds is
determined using a discounted cash flow valuation technique with reference to observable market
inputs: spot currency exchange rates, forward USD and RUB interest rates, the company’s own credit
risk and quoted price of the convertible bonds.
25. FINANCIAL INSTRUMENTS RISK MANAGEMENT ACTIVITIES
Capital risk management
The primary objective of managing the group’s capital is to ensure that there is sufficient capital
available to support the funding requirements of the group, including capital expenditure, in a way
that optimises the cost of capital, maximi ses shareholders’ returns and ensures that the group
remains in a sound financial position.
PJSC “POLYUS”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
65
The group manages and adjusts the capital structure as opportunities arise in the market place, as
and when borrowings mature, or as and when funding is required. This may take the form of raising
equity, market or bank debt or hybrids thereof. The level of dividends is monitored by the Board of
Directors of the group in accordance with the Dividend policy of the group.
In the capital management process the group utilizes various financial metrics including the ratio of
group Net Indebtedness to Adjusted EBITDA (“group Leverage Ratio”). The group recognizes that
group Leverage Ratio should not exceed 3.5 times as per the Terms and Conditions of the Notes
(Eurobonds). As of 31 December 2021 the group Leverage ratio was 0.6 times (31 December 2020:
0.7 times).
“Group Net Indebtedness” is defined in the Terms and Conditions of the Notes (Eurobonds) as all
consolidated Indebtedness less cash and cash equivalents, as shown on the Consolidated Financial
Statements of the group. Indebtedness is defined as the sum of any moneys borrowed, any principal
amount raised by acceptance under any acceptance credit facility, any principal amount raised
pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any
similar instrument, any principal amount raised under any other transaction having the economic or
commercial effect of a borrowing and the amount of any liability in respect of the guarantee or
indemnity.
There were no changes in the group’s approach to capital management during the year.
Major categories of financial instruments
The group’s principal financial liabilities comprise borrowings, derivative financial instruments and
account payables. The main purpose of these financial instruments is to finance the group’s
operations. The group has various financial assets such as cash and cash equivalents, trade and
other receivables, derivative financial instruments and loans receivable.
31 Dec.
2021
31 Dec.
2020
Financial assets measured at fair value through profit or loss (FVPL)
Derivative financial instruments (Level 2)
23
17
Trade receivables (Level 2)
18
115
Financial assets measured at amortised cost
Trade and other receivables
45
43
Loans receivable
24
-
Cash and cash equivalents
1,343
1,445
Total financial assets
1,453
1,620
Financial liabilities measured at fair value through profit or loss (FVPL)
Derivative financial instruments (Level 2)
291
372
Financial liabilities measured at amortised cost
Borrowings
3,272
3,554
Accounts payable
370
378
Total financial liabilities
3,933
4,304
The fair value of the group’s financial instruments and levels of fair value hierarchy are disclosed in
note 24. The main risks arising from the group’s financial instruments are gold price, interest rate,
foreign currency exchange rates, credit and liquidity risks.
Gold price risk
The group is exposed to changes in the gold price due to its significant volatility.
If the gold price was 10% higher / lower during the year ended 31 December 2021
profit for the year
would have increased / decreased by USD 406 million / USD 406 million, respectively (2020: USD
385 million / USD 385 million).
Interest rate risk
Interest expenses on borrowings issued at variable interest rates are for the most part effectively
converted into fixed-rate interest payments using cross-currency swaps (note 19); the group is not
materially exposed to interest rate risk.
PJSC “POLYUS”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
66
Foreign currency exchange rate risk
Currency risk is the risk that the financial results of the group will be adversely affected by changes
in exchange rates to which the group is exposed. The group undertakes certain transactions
denominated in foreign currencies. Prices for gold are quoted in USD based on international quoted
market prices. The majority of the group’s expenditure are denominated in RUB, accordingly,
operating profits are adversely impacted by appreciation of the RUB against the USD. In assessing
this risk, management takes into consideration changes in the gold price.
The carrying amounts of monetary assets and liabilities denominated in foreign currencies other than
the functional currencies of the individual group entities were as follows:
31 Dec.
2021
31 Dec.
2020
Assets
USD
1,261
1,421
EURO (presented in USD at closing exchange rate)
-
3
Total
1,261
1,424
Liabilities
USD
2,255
2,402
EURO (presented in USD at closing exchange rate)
9
4
Total
2,264
2,406
Currency risk is monitored regularly by performing a sensitivity analysis of foreign currency positions
in order to verify that potential effects are within planned parameters.
RUB denominated borrowings are for the most part effectively converted into USD borrowings using
cross-currency swaps (note 19). The following details the group’s sensitivity to changes in exchange
rates by 25% which is the sensitivity rate used by the group for internal analysis. The analysis was
applied to monetary items at the reporting dates denominated in their respective currencies. If the
USD to RUB exchange rate had increased by 25% for the year ended 31 December 2021, as of
the end of respective year the group would have incurred a loss of USD 627 million (2020: USD 604
million).
Credit risk
Credit risk is the risk that a customer may default or not meet its obligations to the group on a timely
basis, leading to financial losses to the group. Credit risk arises from cash, cash equivalents and
deposits kept with banks, derivative agreements, loans issued, advances paid and other receivables.
In order to mitigate credit risk, the group conducts its business with creditworthy and reliable
counterparties, and minimises advance payments, actively uses guarantees, letters of credit and
other instruments for trade finance to decrease risks of non-payment. The group employs
a methodology for in-house financial analysis of banks and non-banking counterparties, which is
used during new agreements with counterparties.
The group’s credit risk profile is regularly monitored by management in order to avoid undesirable
increases in risk, to limit concentration of credit and to ensure compliance with the above mentioned
policies and procedures. Deposits, current bank accounts and derivative financial instruments are held
with major Russian and international banks, with reasonable and appropriate diversification, which
decreases concentration risk by spreading the credit risk exposure across several top rated banks.
Published credit ratings of banks (or their parent companies) in which the group held cash and cash
equivalents are presented as follows:
31 Dec.
2021
31 Dec.
2020
Investment grade rating
1,227
1,206
Non-investment grade rating
116
239
Total
cash and cash equivalents
1,343
1,445
PJSC “POLYUS”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
67
Investment grade rating is classified as Aaa to Baa3 for Moody’s Investors Service, and as AAA to
BBB- for Fitch Ratings and Standard & Poor’s. As of 31 December 2021, 44% and 36% of cash and
cash equivalents were held in two banks with investment grade ratings (31 December 2020: 69% in
one bank with investment grade rating).
Although the group sells more than 90% of the total gold sales to several major customers, the group is
not economically dependent on these customers because of the high level of liquidity in the gold
commodity market. A substantial portion of gold sales are made to banks on advance payment or
immediate payment terms, therefore the credit risk related to trade receivables is minimal.
As of 31 December 2021, trade receivables for gold bearing products sales were USD 18 million (31
December 2020: USD 115 million).
Gold sales to the group’s major customers are presented as follows:
Year ended 31 December
2021
2020
Otkritie Bank
2,369
2,889
Sovkombank
1,941
1,262
VTB Bank
297
283
Other
297
522
Total
4,904
4,956
Liquidity risk
Liquidity risk is the risk that the group will not be able to settle all liabilities as they are due. The group’s
liquidity position is carefully monitored and managed. The group manages liquidity risk by maintaining
detailed budgeting and cash forecasting processes and matching the maturity profiles of financial
assets and liabilities to help ensure that it has adequate cash available to meet its payment
obligations.
For assessing own credit risk, a proxy credit default swaps for the industry is used since Polyus does
not have quoted credit default swaps. The group’s cash management procedures include medium-
term forecasting (a budget approved each financial year and updated on a quarterly basis) and
short-term forecasting (monthly cash-flow budgets are established for each business unit and
a review of each entity’s daily cash position is performed using a two-week rolling basis).
Presented below is the maturity profile of the group’s financial liabilities as of 31 December 2021
based on undiscounted contractual cash payments, including interest payments and derivatives:
Borrowings and derivatives
Accounts
Principal
Interest
payable
Leasing
Total
Due in the first year
498
131
370
15
1,014
Due in the second year
341
116
-
12
469
Due in the third year
1,816
71
-
11
1,898
Due in the fourth year
31
23
-
11
65
Due in the fifth year
-
23
-
11
34
Due in the period between sixth
to eleventh years
700
44
-
51
795
Total
3,386
408
370
111
4,275
Presented below is the maturity profile of the group’s financial liabilities as of 31 December 2020
based on undiscounted contractual payments, including interest payments and derivatives:
PJSC “POLYUS”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
68
Borrowings and derivatives
Accounts
Principal
Interest
payable
Leasing
Total
Due in the first year
265
176
378
12
831
Due in the second year
497
151
-
12
660
Due in the third year
911
116
-
9
1,036
Due in the fourth year
2,001
51
-
9
2,061
Due in the fifth year
31
-
-
8
39
Due in the period between sixth
to eight years
-
-
-
35
35
Total
3,705
494
378
85
4,662
The maturity of the derivative financial instruments is presented within note 19.
26. INVESTMENTS IN SIGNIFICANT SUBSIDIARIES
The basis of distribution of accumulated retained earnings for companies operating in the Russian
Federation is defined by legislation as the current year net profit of the company, as calculated in
accordance with Russian accounting standards. However, the legislation and other statutory laws and
regulations dealing with profit distribution are open to legal interpretation and accordingly management
believes at present it would not be appropriate to disclose an amount for distributable profits and
reserves in these consolidated financial statements.
Information about significant subsidiaries of the group
Effective % held
at
28
Subsidiaries
Nature of business
31 Dec.
2021
31 Dec.
2020
Incorporated in Russian Federation
JSC Polyus Krasnoyarsk
Mining (including initial processing) and
sale of gold
100
100
JSC Polyus Aldan
Mining (including initial processing) and
sale of gold
100
100
JSC Polyus Verninskoye
Mining (including initial processing) and
sale of gold
100
100
JSC GMC Lenzoloto
Mining (including initial processing) and
sale of gold
100
100
JSC Polyus Magadan
Mining (including initial processing) and
sale of gold
100
100
LLC Polyus Stroy
Construction
100
100
LLC Polyus Sukhoi Log (renamed,
previously LLC SL Gold)
Exploration and evaluation of
the Sukhoi Log deposit
100
100
27. EVENTS AFTER THE REPORTING DATE
There were no events subsequent to the reporting date that would adjust amounts of assets,
liabilities, income or expenses or that should be disclosed in these consolidated financial statements,
except for the following:
●
the Donetsk People’s Republic and the Lugansk People’s Republic. On 24 February 2022, a
decision to carry out a special military operation in Ukraine was announced. Subsequent to these
events, the US, UK, EU and other countries announced an extension of sanctions on certain
Russian officials, businessmen, companies and governmental bodies, including the Central Bank
of Russia. In response, the Russian Government has announced a series of measures including
an increase in the Central Bank key refinancing rate (up to 20%) and certain foreign currency
exchange and transfer restrictions. These developments may result in reduced access of the
Russian businesses to international capital and export markets, weakening of the Russian
Rouble, decline in financial markets and other negative economic consequences.
28
PJSC “POLYUS”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(in millions of US Dollars)
69
At the date these financial statements are authorized for issuance the above sanctions have not
directly negatively affected the group's operations. However, there is a high level of uncertainty
regarding the impact of these events and possible subsequent changes in the economic situation
on future operations and financial position of the group. The group is monitoring the geopolitical
situation and we will keep the market appraised of any developments that may impact
operations.