Polymetal International plc: Preliminary results for the year ended 31 December 2023
EQS Newswire / 15/03/2024 / 08:45 MSK
Polymetal International plc
Preliminary results for the year ended 31 December 2023
Polymetal International plc (“Polymetal”, the “Company” or the Group) announces the Group's preliminary results for the year ended 31 December 2023.
“In 2023, Polymetal managed to stay profitable and reduce leverage despite persistent geopolitical headwinds. Robust production and stable cost performance coupled with favorable commodity price dynamics drove improvement in financial results. In 2024, after the sale of the Russian assets is completed, the Company will pursue long-term growth while ensuring long-term free cash flow potential of the existing assets in Kazakhstan”, said Vitaly Nesis, Group CEO of Polymetal International plc, commenting on the results.
FINANCIAL HIGHLIGHTS
· In 2023, revenue increased by 8% year-on-year (y-o-y), totalling US$ 3,025 million (2022: US$ 2,801 million), of which US$ 893 million (30%) was generated from operations in Kazakhstan and US$ 2,132 million (70%) from operations in the Russian Federation. Average realised gold price increased by 9% while silver price increased by 4%, both closely tracking market dynamics. Gold equivalent (GE) production was stable at 1,714 Koz y-o-y. Gold sales increased by 2% y-o-y to 1,400 Koz, while silver sales decreased by 10% to 16.6 Moz. Significant tightening of concentrate exports regulations in Russia led to material accumulation of concentrates in sea ports.
· Group Total Cash Costs (TCC)[1] for 2023 were US$ 861/GE oz, down 9% y-o-y, and 9% below the lower end of the Group’s guidance of US$ 950-1,000/GE oz. This was predominantly on the back of a weaker Rouble which outweighed inflationary pressures. In Kazakhstan, TCC were US$ 903/GE oz, up by 24% y-o-y, on the back of a planned grade decline combined with a 14% decrease in sales volumes and inflationary headwinds. Across the Group’s Russian mines, TCC were at US$ 845/GE oz, down by 19% y-o-y, mainly on the back of Rouble depreciation.
· All-in Sustaining Cash Costs (AISC)1 amounted to US$ 1,276/GE oz, down 5% y-o-y, 2% below the lower end of the Group’s guidance of US$ 1,300-1,400/GE and driven by the same factors. In Kazakhstan, AISC increased by 18% to US$ 1,263/GE oz, mostly driven by a decrease in sales volume. In Russia, AISC decreased by 13% to US$ 1,281/oz, on the back of a sales increase coupled with lower stripping volumes after completion of large stripping campaigns in 2023.
· Adjusted EBITDA1 was US$ 1,458 million, 43% higher than in 2022, on the back of higher commodity prices and lower cash costs. Of this, US$ 439 million (30%) was earned from operations in Kazakhstan and US$ 1,019 million (70%) earned from operations in the Russian Federation. The Adjusted EBITDA margin increased by 12 percentage points to 48% (2022: 36%).
· Underlying net earnings[2] increased by 40%, totalling US$ 615 million (2022: US$ 440 million), with a basic EPS of US$ 1.11 per share. Reflecting the increase in operating profit, the Group recorded a net profit[3] of US$ 528 million in 2023, compared to a net loss of US$ 288 million due to one-off impairment charges in 2022.
· Capital expenditure was US$ 679 million[4], down 14% compared with US$ 794 million in 2022 and 3% below the lower end of the guidance range of US$ 700-750 million, as a result of the substantial positive impact of Russian Rouble devaluation on local-currency costs.
· Net operating cash inflow was US$ 575 million (2022: US$ 206 million). The Group reported negative free cash flow1 of US$ 128 million in 2023, which is still a significant improvement over the 2022 negative free cash flow of US$ 445 million.
· Net debt2 was largely stable at US$ 2,383 million (US$ 174 million in Kazakhstan and US$ 2,209 million in Russia), compared with US$ 2,393 million as at 31 December 2022 (US$ 277 million in Kazakhstan and US$ 2,117 million in Russia). This represents 1.64x of Adjusted EBITDA and is significantly below the 2022 leverage ratio of 2.35x.
DIVIDENDS AND DISPOSAL
· On 19 February 2024, the Group announced its intention to sell 100% of JSC Polymetal and its subsidiaries to JSC Mangazeya Plus for an effective total consideration of approximately US$ 3.69 billion, valuing JSC Polymetal and its subsidiaries at 5.3x EV/EBITDA based on Adjusted EBITDA of JSC Polymetal and its subsidiaries for the 12 months ended 30 June 2023 (US$ 694 million) and at 3.6x based on an full year 2023 Adjusted EBITDA of JSC Polymetal and its subsidiaries (approximately US$ 1.0 billion). On 7 March, 2024 the transaction was approved by the Shareholders General Meeting and, following receipt of required regulatory approvals, was completed on the same day.
· Following the disposal, the Group’s net cash position of approx. US$ 130 million.
· No dividend will be proposed for the full year 2023. Following the recent completion of the divestment of the Russian business, the Board will actively reconsider the dividend policy and intend to share an update in May this year.
Financial highlights [5]
2023
2022
Change
Revenue, US$m
Kazakhstan
893
933
-4%
Russia
2,132
1,868
+14%
Total
3,025
2,801
+8%
Total cash cost[6], US$ /GE oz
Kazakhstan
903
728
+24%
Russia
845
1,046
-19%
Total
861
942
-9%
All-in sustaining cash cost2, US$ /GE oz
Kazakhstan
1,263
1,0673
+18%
Russia
1,281
1,4803
-13%
Total
1,276
1,344
-5%
Adjusted EBITDA2, US$m
Kazakhstan
439
516[7]
-15%
Russia
1,019
5013
+103%
Total
1,458
1,017
+43%
Average realised gold price[8], US$ /oz
1,929
1,764
+9%
Average realised silver price4, US$ /oz
22.8
21.9
+4%
Net earnings/(loss), US$m
528
(288)
n/a
Underlying net earnings2, US$m
615
440
+40%
Return on assets (underlying)2, %
17%
9%
+8%
Return on equity (underlying)2, %
15%
11%
+4%
Basic earnings/(loss) per share, US$
1.11
(0.61)
n/a
Underlying EPS2, US$
1.30
0.93
+44%
Net debt2, US$m
Kazakhstan
174
277
-37%
Russia
2,209
2,117
+4%
Total
2,383
2,393
-0%
Net debt/Adjusted EBITDA
Kazakhstan
0.39
0.54
-27%
Russia
2.17
4.23
-49%
Total
1.63
2.35
-31%
Capital expenditure, US$m
Kazakhstan
145
101
+43%
Russia
534
693
-23%
Total
679
794
-14%
Net operating cash flow, US$m
575
206
+179%
Free cash flow2, US$m
(128)
(445)
+71%
Free cash flow post-M&A2, US$m
(131)
(473)
+72%
Notes:
(1) Totals may not correspond to the sum of the separate figures due to rounding. % changes can be different from zero even when absolute amounts are unchanged because of rounding. Likewise, % changes can be equal to zero when absolute amounts differ due to the same reason. This note applies to all tables in this release.
(2) Defined in the “Alternative performance measures” section below.
OPERATING HIGHLIGHTS
· No fatal accidents among the Group’s employees and contractors occurred in 2023 as well as no lost time injuries were recorded in Kazakhstan. Lost time injury frequency rate (LTIFR) among the Company’s workforce for the full year decreased by 30% y-o-y to 0.07. Two serious and eight minor lost-time accidents were recorded in 2023, all in Russia. Days lost due to work-related injuries (DIS) increased by 32% y-o-y to 1,156, also relates to Russia.
· The Company’s 2023 GE production was stable at 1,714 Koz, including 486 Koz in Kazakhstan and 1,228 Koz in Russia, and in line with the original production guidance of 1.7 Moz.
· The Company has successfully secured a land plot for the Ertis POX project in the Pavlodar Special Economic Zone in Kazakhstan.
2023
2022
Change
PRODUCTION (Koz of GE) 1
1,714
1,720
-0%
Kazakhstan
486
541
-10%
Kyzyl
316
330
-4%
Varvara
169
211
-20%
Russia
1,228
1,178
+4%
SAFETY
LTIFR2 (Employees)
0.07
0.10
-30%
Kazakhstan
n/a
Russia
0.09
0.12
-25%
DIS2
1,156
877
+32%
Kazakhstan
n/a
Russia
1,156
877
+32%
Fatalities
Employees
n/a
Contractors
n/a
Average headcount
14,647
14,694
-0.3%
Kazakhstan
3,202
3,219
-0.5%
Russia
11,4453
11,475
-0.3%
Notes:
(1) Based on 80:1 Au/Ag conversion ratio and excluding base metals. Discrepancies in calculations are due to rounding. Mayskoye production reporting approach was amended to record production as soon as the ownership title for gold is transferred to a buyer at the mine site’s concentrate storage facility. Previous periods were restated accordingly.
(2) Company employees only are taken into account.
(3) The average number of personnel was revised versus the number reported in January 2024 to include average headcount of all assets in Russia that were deconsolidated during the reporting year and were not part of Group as at 31 December 2023, for the period they were part of the Group.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”) HIGHLIGHTS
· Our 2023 group-wide direct and indirect energy-related emissions (Scope 1 and Scope 2) increased by 5% compared to 2022. In Kazakhstan our Scope 1 and Scope 2 emissions increased by 10% compared to 2022 mainly due to the legislative changes in the energy market and the resulting inability to purchase green electricity from the grid. We are currently focusing our efforts on the Kazakhstan segment and on designing our own solar power plants with a total capacity of up to 40 MW at Varvara and Kyzyl to minimize our dependence on grid electricity.
· We continue to reforest territories equal to those that had been disturbed by our activities. In 2023, we planted 430 thousand saplings on almost 200 hectares of land in Russia and were implementing a voluntary pilot project to plant a new forest not far from Varvara site in Kazakhstan.
· In 2023, we decreased our fresh water intensity for ore processing by 53%, compared with 2019, to 125 m³/1,000 t (2022: 49%). In Kazakhstan, we have also continued to decrease our fresh water intensity as the majority of the water we use in ore processing at our cites in Kazakhstan is circulated in closed water cycles. Overall, 90% of our on-site water consumption in Kazakhstan is via a closed cycle of treated waste.
· Polymetal’s social investments amounted to US$ 17.6 million in 2023, including US$ 7.3 million in Kazakhstan, and were targeted to projects in education, local infrastructure, sports and culture.
2024 OUTLOOK FOR KAZAKHSTAN BUSINESS
· The Company expects its Kazakhstan assets to deliver stable production at 475 Koz of GE.
· Costs are estimated in the ranges of US$ 900-1,000/GE oz for TCC and US$ 1,250-1,350/GE oz for AISC[9]. A y-o-y increase is expected mostly due to sharp increases in power and railway tariffs in Kazakhstan.
· Capital expenditures are expected to be approximately US$ 225 million including US$ 60 million for Ertis POX.
Conference call and webcast
The Company will hold a webcast on Friday, 15 March 2024, at 16:00 Astana time (11:00 London time).
To participate in the webcast, please register using the following link:
https://streamstudio.world-television.com/1451-2739-39231/en
Webcast details will be sent to you via email after registration.
Enquiries
Investor Relations
Media
Evgeny Monakhov
+44 20 7887 1475 (UK)
Kirill Kuznetsov
Alikhan Bissengali
+7 7172 47 66 55 (Kazakhstan)
ir@polymetalinternational.com
Yerkin Uderbay
+7 7172 47 66 55 (Kazakhstan)
media@polymetal.kz
FORWARD-LOOKING STATEMENTS
This release may include statements that are, or may be deemed to be, “forward-looking statements”. These forward-looking statements speak only as at the date of this release. These forward-looking statements can be identified by the use of forward-looking terminology, including the words “targets”, “believes”, “expects”, “aims”, “intends”, “will”, “may”, “anticipates”, “would”, “could” or “should” or similar expressions or, in each case their negative or other variations or by discussion of strategies, plans, objectives, goals, future events or intentions. These forward-looking statements all include matters that are not historical facts. By their nature, such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the company’s control that could cause the actual results, performance or achievements of the company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the company’s present and future business strategies and the environment in which the company will operate in the future. Forward-looking statements are not guarantees of future performance. There are many factors that could cause the company’s actual results, performance or achievements to differ materially from those expressed in such forward-looking statements. The company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in the company’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based.
** Table of contents **
SINED’s statement......................................................................7
Group CEO statement...................................................................9
Operating review ......................................................................11
Financial review .......................................................................18
Principal risks and uncertainties ..........................................................30
Going concern ........................................................................31
Directors’ responsibility statement .........................................................32
Financial statements ....................................................................33
Alternative Performance Measures ........................................................64
** SINED’s statement **
It has been gratifying to see the Company’s financial and operating performance stabilise during 2023 against the continuing and tightening backdrop of a continued Russia-Ukraine conflict and new sanctions (including the designation of the Russian business of the Company by the US in May 2023) and counter-sanctions. The Board believed that under these circumstances fully divesting the Russian assets and pursuing growth in Kazakhstan and other Central Asian countries would greatly increase the Company’s ability to generate value for shareholders. And, already in 2024, the long-anticipated restructuring of the business was completed, and we are positively looking into the future.
Re-domiciliation to Kazakhstan
Back in 2022, given the rapid deterioration of the business environment caused by the Russian invasion of Ukraine, the Board set up a Special Committee, comprised of Independent Non-Executive Directors, to review the options open to the Company, which would enable it to preserve business continuity and restore shareholder value. Its first recommendation was that Polymetal International should switch its domicile from Jersey to Kazakhstan. It had been the first foreign company listed on the Astana Stock Exchange (AIX) in 2019 and, following re-domiciliation in August 2023, Polymetal has been able to switch from LSE to AIX as its primary listing.
This decision was not taken lightly since, as a consequence, its premium listing on the London Stock Exchange was cancelled. However, this was felt to be necessary in order to mitigate the impact of Russian counter-sanctions being imposed against entities incorporated in unfriendly jurisdictions (including Jersey), as well the prospect of further reprisals. Both would place significant restrictions on the Company and expose it to unmanageable risk.
Choosing the Astana International Finance Centre (AIFC) as the jurisdiction for our re-domiciliation was also prudent given AIFC’s own adoption of English common law and adherence to best practice. We too will continue to uphold the standards that we have set ourselves over the last 25 years in corporate governance, health and safety, and approach to environmental matters.
The divestment of Russian assets
However, a further strategic pivot was required following the US Department of State designation of JSC Polymetal and its subsidiaries in Russia. The Special Committee was once again deployed to develop an appropriate response in the light of these new sanctions. In the first instance, the Group’s Russian subsidiaries were ring-fenced, with management of all Russian operations delegated to the executives of JSC Polymetal, and management of Polymetal International resigning from their positions in the Russian entities. At the same time, all service agreements between the Company and its non-Russian subsidiaries, and JSC Polymetal and its subsidiaries, were terminated and all payments from the Company and its non-designated subsidiaries under other inter-Group agreements with JSC Polymetal and its subsidiaries were discontinued.
The Special Committee, after a thorough review, also recommended the divestment of the Group’s Russian assets as the most viable option for mitigating the legal, financial and operational risks that emerged as a result of designation, and also the optimal path towards re-establishing shareholder value. It became the Company’s way to restore the access to international financial markets, enable the resumption of dividend payments and eliminate the discounts being applied by international capital markets to businesses associated with Russia. With this divestment completed in March 2024, Polymetal’s Board and management team will now be able to concentrate on expanding its asset base within Kazakhstan and also looking to other countries in Central Asia, which present a number of interesting options for further growth.
Dividend decision
Both the re-domiciliation and divestment of the Russian business, along with related de-leveraging, have improved the balance sheet of the Company considerably. However, it will need to invest in excess of $1 billion over the medium term in projects in Kazakhstan, most notably the new Ertis POX, and M&A activities in order to achieve its ambitious long-term growth plans.
As yet, the Company has not restored its access to major sources of debt funding and, in the light of this, the Board considers that it would not be prudent to pay dividends for the full year 2023. This will allow the Group to maintain both strategic and operating flexibility. The Board will further consider the dividend, as described in Dividends and disposal section above.
Change of a major shareholder
I want to express my gratitude to all our shareholders and investors for the continued support that they have shown us over the years. We also welcome our new significant shareholder Maaden International Investment, representing the government of Sultanate of Oman.
We are pleased that the shareholders have confirmed their full support of Polymetal’s strategy and the actions undertaken to secure the future of this business to date as well the intention to further develop the asset base in Kazakhstan and the wider region.
Brighter future
Now that the Company has significantly de-risked its operations and finances, and established stable operations in Kazakhstan, the favourable macroeconomic conditions will allow it to generate sufficient cash flows to fund growth and repay debt. With divestment now complete, we also expect better stock trading conditions for Western shareholders as infrastructure providers gradually remove the limitations previously placed on Polymetal’s shares. The Board is also set on maintaining high standards of corporate governance and ESG in the new environment, which will ensure the creation of further sustainable value.
Senior Independent Non-Executive Director
Evgueni Konovalenko
** Group CEO Statement **
We started 2023 facing many of the frustrations of the previous year: namely, the ongoing Russia/Ukraine war with the resulting upheavals of sanctions and counter-sanctions, and disruptions in supply chains and financing options. With this in mind, from the outset, we planned to pursue re-domiciliation to a “friendly” jurisdiction with a view to also engineer a subsequent split of the business in order to restore shareholder value. However, due to geopolitical interventions beyond our control, this reorganisation did not go as we had originally planned.
Key corporate events in 2023
For a number of reasons, we quickly identified Astana International Financial Centre (AIFC) as the optimal re-domiciliation jurisdiction: because of its basis on English common law, our long-standing presence and listing in Kazakhstan, and its neutral position from the point of western and Russian counter-sanctions. For Astana International Exchange (AIX) to become our primary exchange, however, we also had to accept the hard reality that this would necessitate discontinuing our 12-year premium listing on the London Stock Exchange. And, this in turn, would entail management resolving a separate, complicated set of infrastructural issues in order to enable trading for all categories of shareholder post re-domiciliation.
As we progressed our plans for re-domiciliation to AIFC, the Group was hit by the designation of its Russian business, JSC Polymetal, by the US Department of State, which made any plans to spin off the Russian operation totally impracticable. As a consequence and in response to the US designation, the Board formed a Special Committee to develop appropriate measures with regards to sanctions compliance and to oversee the full divestment of the Russian business – JSC Polymetal and its subsidiaries.
Since then, we have made substantial progress in redefining Polymetal’s status for the long term. In August 2023 the Company successfully completed re-domiciliation to AIFC and resumed trading on AIX as a Kazakh issuer. This also kicked off the process of searching for potential buyers for the Russian business and culminated in the announcement of its disposal at a total effective valuation of US$ 3.7 billion on 19 February 2024. The deal successfully closed on 7 March 2024.
Seen from a purely financial perspective, due to the inevitable Russian discount, the transaction has not generated a great deal of value for Polymetal. Nevertheless, in removing numerous operational, financial, legal and sanctions risks, I truly believe that it is in the best interest of all our shareholders since it enables the Company to open a new chapter in its corporate history. Polymetal is now well-positioned to implement a new strategy and restore its track record of creating sustained shareholder value.
Production and performance
In 2023, the Company avoided major operational business disruption and successfully met its original production guidance. The Company’s gold equivalent production demonstrated solid results, despite the difficult environment experienced by the Russian part of the business and some repercussions from the designation of JSC Polymetal for the Company on the Kazakhstan side.
In spite of persistent geopolitical headwinds, Polymetal retained its profitability and reduced its leverage. An improvement in financial results was driven by robust production and stable cost performance coupled with favourable commodity price dynamics, with revenue increasing by 8% year-on-year to US$ 3 billion. We also reported an impressive 43% increase in EBITDA at US$ 1.5 billion, thanks to both growth in ounces sold through release of working capital and in the devaluation of the local currency in Russia.
Total cash costs (TCC) were 8% lower and all-in sustaining costs (AISC) were 5% lower than in 2022. Both were below the announced guidance range of US$ 950-1,000/GE oz and US$ 1,300-1,400/GE oz, respectively, attributing to the substantial positive impact of Rouble devaluation on local-currency costs. Net debt was largely stable year-on-year at US$ 2.38 billion (US$ 0.17 billion in Kazakhstan and US$ 2.21 billion in Russia) however it decreased in relative terms from 2.35 ND/EBITDA in 2022 to 1.64 in 2023.
Safety remains our top priority
We remain committed to ensuring a safe working environment for all our employees and contractors. Significantly, for the fourth consecutive year, there were no fatal accidents during 2023 among Polymetal’s workforce and nor, for the second year running, among our contractors. I am also pleased to report that none of the ten lost-time accidents (in Russia) resulted in permanent disability or serious damage to health. Employees’ lost-time injury frequency rate (LTIFR) decreased by 30% year-on-year and is a testament to our investment in promoting a zero-harm safety culture.
Our new POX development project in Kazakhstan
Our major development focus now is on Kazakhstan’s first large-scale full-cycle pressure oxidation (POX) plant for refractory ore processing: the Ertis POX project. This will be a new, state-of-the-art facility in the Pavlodar region and will ensure that Kyzyl (and potentially other Kazakh assets) will no longer have to rely on the temporary POX processing arrangement made with Amursk POX in Russia.
We have already identified the site and signed contracts for this and the critical processing equipment. We plan to start construction early next year with completion due by 2028. We are partnering once again with international engineering consultancy, Hatch, who are tasked with both basic and detailed engineering for the project. We are also proceeding with the permitting process. Capitalising on our experience in developing POX sites in Russia, we believe that this project will involve fewer construction risks. Compared with the Russian Far East, the logistics in Kazakhstan are much better as is the cost of materials and labour.
Our next steps
With the sale of Russian assets completed in Q1 2024, the Company is now able to pursue its future growth plans while, at the same time, ensuring the long-term free cash flow potential of the existing assets in Kazakhstan. We expect stable operational results in Kazakhstan in 2024 and, following a positive investment decision from the Board, expected in H2 2024, will accelerate the construction schedule for the Ertis POX.
Our priorities during the year will be centered on safety, cost control and operational improvement. Alongside this, we also plan to make tangible progress in terms of securing new growth opportunities for the business. Together, these will ensure that we deliver substantial financial returns for our shareholders over the coming years.
We could not have achieved the continued operation of the business over the last year without the loyal support of our employees and I would like to formally thank them on behalf of the whole senior management team. Their skills, expertise and commitment are vital to Polymetal’s future.
Group Chief Executive Officer
Vitaly Nesis
** Operating review **
Robust production
In 2023, operations continued undisrupted despite the difficulties caused by the imposition of US sanctions against JSC Polymetal and its subsidiaries. The Company’s gold equivalent (GE) production for the year was stable at 1,714 Koz, comprising 486 Koz in Kazakhstan and 1,228 Koz in Russia, and in line with the original production guidance of 1.7 Moz. Kazakhstan’s GE production declined by 10%, mostly driven by a planned grade decline and lower share of high-grade third-party feed at the flotation circuit at Varvara. Russian GE production grew by 4% to 1,228 Koz, in line with the original production plan.
Gold production for the full year was up 3% to 1,492 Koz, while silver output decreased by 15% to 17.7 Moz. Gold sales of 1,400 Koz increased marginally year-on-year, while silver sales decreased by 10% to 16.6 Moz. The gap between production and sales is considered a temporary one: significant tightening of concentrate exports regulations in Russia led to material accumulation in seaports for concentrates in transit. Management is working to resolve this issue in 2024.
Kyzyl continues as the largest individual contributor to the Group’s overall output: full-year gold production came in at 316 Koz. Varvara GE output decreased by 20% to 169 Koz, driven by a decrease in Komar ore grade at the leaching circuit and a lower share of high-grade third-party feed at the flotation circuit. In total, Kazakh operations delivered 486 GE Koz, which accounts for 28% of the Group’s production.
The Company has successfully secured a land plot for the Ertis POX project in the Special Economic Zone near Pavlodar. Evaluation of the site conditions and logistics planning have begun in preparation for delivery of the autoclave. Additionally, the Company has once again selected Hatch for basic and detailed engineering, as well as procurement support. Hatch has an exceptional track record of working with Polymetal on several other projects. Base engineering is already in-progress, enabling accelerated commencement of construction. The investment decision is expected to be made by the Board in the second half of 2024, with the start-up by the end of 2028.
Reserves and resources
In 2023, Group Ore Reserves increased by 2% year-on-year to 28.0 Moz of GE, while the average grade in Ore Reserves decreased by 5% year-on-year and stood at 3.5 g/t of GE.
Ore Reserves in Kazakhstan increased by 3% year-on-year to 11.6 Moz of GE on the back of the revised estimate for underground mining at Kyzyl and positive exploration results (an increase by 249 Koz). The average grade in Ore Reserves in Kazakhstan was 3.2 g/t of GE, a 2% decrease year-on-year driven by a 4% grade decline at Varvara, which was partially offset by positive grade revaluation at Kyzyl.
Share of Ore Reserves for open-pit mining in Kazakhstan decreased by 4% compared to the previous year and stood at 45% on the back of underground reserves extension at Kyzyl.
Group’s Mineral Resources (additional to Ore Reserves) grew by 3% year-on-year to 26.7 Moz of GE. The average GE grade in Mineral Resources was down 7% year-on-year to 4.2 g/t. Mineral Resources in Kazakhstan increased by 26%, while the average GE grade increased by 8% to 2.9 g/t, mainly driven by the MR grade appreciation at Kyzyl by 13%, from 4.1 to 4.6 g/t of GE.
Ore Reserves reconciliation, GE Moz
Ore Reserves, as at 1 January 2023
Depletion
Revaluation
Initial Ore Reserves estimate
Change in ownership
Ore Reserves, as at 1 January 2024
Kazakhstan
11.3
-0.5
+0.9
-
-
11.6
Russia
16.0
-1.6
+1.7
+0.5
-0.2
16.4
Total Group
27.3
-2.1
+2.5
+0.5
-0.2
28.0
In 2023, exploration activities in Kazakhstan were carried out at 11 licensed and contract areas. In total, 59.4 km of drilling was completed, a 12% decrease year-on-year.
Ore Reserves and Mineral Resources summary[10] [11]
1 Jan 2024
1 Jan 2023
Change
Ore Reserves (Proved+Probable), GE Moz
28.0
27.3
+2%
Gold, Moz
25.4
24.7
+3%
Silver, Moz
210.0
211.3
-1%
Average reserve grade, g/t
3.5
3.6
-5%
Mineral Resources
(Measured+Indicated+Inferred), GE Moz
26.7
25.8
+3%
Gold, Moz
24.1
23.1
+4%
Silver, Moz
209.2
212.9
-2%
Average resource grade, g/t
4.2
4.5
-8%
Ore Reserves and Mineral Resources as at 1 January 2024[12]
Tonnage
Mt
Grade GE
g/t
Content
GE, Moz
Ore Reserves
Proved (Kazakhstan)
28.9
1.7
1.6
Proved (Russia)
45.5
3.2
4.7
Probable (Kazakhstan)
82.4
3.8
10.0
Probable (Russia)
95.4
3.8
11.6
Proved+Probable (Kazakhstan)
111.3
3.2
11.6
Proved+Probable (Russia)
140.9
3.6
16.4
Proved+Probable
252.2
3.5
28.0
Mineral Resources
Measured (Kazakhstan)
6.5
0.9
0.2
Measured (Russia)
22.7
4.0
2.9
Indicated (Kazakhstan)
17.8
2.5
1.4
Indicated (Russia)
41.9
4.0
5.4
Measured+Indicated (Kazakhstan)
24.4
2.1
1.6
Measured+Indicated (Russia)
64.6
4.0
8.3
Measured+Indicated
88.9
3.5
9.9
Inferred (Kazakhstan)
19.3
3.9
2.4
Inferred (Russia)
89.9
5.0
14.3
Measured+Indicated+Inferred (Kazakhstan)
43.7
2.9
4.0
Measured+Indicated+Inferred (Russia)
154.4
4.6
22.6
Measured+Indicated+Inferred
198.1
4.2
26.7
Health and safety
There were no fatal accidents in 2023. However, lost-time incidents still took place among Polymetal’s workforce and contractors. Most were the result of slipping or tripping while walking or being jammed by a rotating mechanism. In 2023, 10 lost-time incidents were recorded among employees and 4 – among contractors. LTIFR for 2023 decreased to 0.07 for employees (0.10 in 2022) and to 0.08 for contractors (0.21 in 2022). Days lost due to work-related injuries for the full year increased by 32% y-o-y to 1,156 (2022: 877).
While the majority of the incidents that took place during the year were classified as minor (8 minor and 2 severe injuries were reported), Polymetal still took responsive measures for each by updating risk maps for relevant facilities, providing additional instructions to employees and encouraging contractors to carry out an investigation if the accident involved a contractor’s worker.
2023
2022
Change
Injuries
Kazakhstan
n/a
Russia
10
13
-23%
Total
10
13
-23%
including
Fatalities
Kazakhstan
n/a
Russia
n/a
Total
n/a
Severe injuries
Kazakhstan
n/a
Russia
2
+100%
Total
2
+100%
LTIFR (per 200,000 hours worked)
Kazakhstan
n/a
Russia
0.09
0.12
-25%
Total
0.07
0.10
-30%
Days off work following accidents
Kazakhstan
n/a
Russia
1,156
877
+32%
Total
1,156
877
+32%
CONTRACTORS
Injuries
Kazakhstan
n/a
Russia
4
12
-67%
Total
4
12
-67%
including
Fatalities
Kazakhstan
n/a
Russia
n/a
Total
n/a
Severe injuries
Kazakhstan
n/a
Russia
n/a
Total
n/a
LTIFR (per 200,000 hours worked)
Kazakhstan
n/a
Russia
0.12
0.31
-61%
Total
0.08
0.21
-62%
Employees
Our average headcount in 2023 decreased slightly by 0.3% y-o-y to 14,647 employees, with approximately half working on a fly-in/fly-out basis at remote sites. Our voluntary turnover rate significantly decreased to 4.7% in 2023, compared to 8.4% in 2022. The voluntary staff turnover for assets in Russia was 5.6% while in Kazakhstan it comprised 1.4%.
We continue to observe higher labour market competition and increased demand for mining experts, that is why we offer employees competitive salaries and a range of opportunities for professional development, such as succession planning, mentorship and a Talent Pool programme. In 2023, our Talent Pool consisted of 456 employees prepared to take up leadership positions in the future, 78 of which gained promotion during the year.
The share of women in Polymetal’s workforce remained stable at 21% in 2023. We continue to promote a culture of equal opportunity through training and communications. In order to eliminate workplace bias, empower diverse teams and attract and retain people with different background, we have adopted a Diversity and Inclusion Programme, which includes training and engagement activities, diversity metrics and targets, collaboration with educational institutions and ongoing internal communication. Among other actions, this led to an increase in the proportion of women in leadership positions by 1% to 23% in 2023. Besides managing gender diversity issues, we aim to eliminate discrimination based on age or disability. For example, we have created an interactive online course on inclusion practices. This course provides an informed understanding of disability, highlighting the potential risks of bias at work and has also been incorporated into the induction programme for new employees.
2023
2022
Change
Average headcount
Kazakhstan
3,202
3,219
-0.5%
Russia
11,445
11,475
-0.3%
Total
14,647
14,694
-0.3%
Share of female employees
Kazakhstan
20%
20%
0%
Russia
22%
22%
0%
Total
21%
21%
0%
Share of female managers
Kazakhstan
21%
22%
-5%
Russia
23%
22%
5%
Total
23%
22%
5%
Voluntary turnover
Kazakhstan
1.4%
4.6%
-70%
Russia
5.6%
9.4%
-40%
Total
4.7%
8.4%
-44%
including
For female employees
Kazakhstan
2.5%
2.9%
-14%
Russia
5.1%
8.2%
-38%
Total
4.6%
7.1%
-35%
For male employees
Kazakhstan
1.1%
5.1%
-78%
Russia
5.8%
9.8%
-41%
Total
4.7%
8.7%
-46%
Climate and Energy
Accepting the need to take urgent action to mitigate human-made impacts on climate, we are committed to reducing our own impact and developing an approach to potential carbon neutrality. Our strategy is focused on those projects that comprehensively reduce our GHG emissions and also the net adverse impact on water resources and biodiversity.
In 2023, we adhered to our climate targets of reducing our direct and energy-related emissions, and we are gradually adapting our Climate Action Plan to the new circumstances and potential changes in Group structure. In our Climate Strategy, we give unconditional priority to real decarbonisation projects and state that offsetting is reserved only for hard-to-abate or residual emissions.
Our 2023 direct emissions (Scope 1) decreased by 4% compared to 2022 mainly due to the implementation of energy efficiency measures, while our indirect energy-related emissions (Scope 2) increased due to legislative changes in the energy market of Kazakhstan and the resulting lack of opportunity to purchase green electricity from the grid. Further efforts within the Kazakhstan segment are therefore focused on commissioning in-house solar power plants with a total capacity of up to 40 MW at Varvara and Kyzyl.
We have continued to reforest territories equal to those that had been disturbed by our activities. In 2023, we planted 430 thousand saplings on almost 200 hectares of land in regions where we operate. In addition, as part of our commitment to actively fostering a favourable environment for all stakeholders in our operating regions and taking initial steps towards implementing a Net Positive Impact approach, we are undertaking a voluntary pilot project to plant a new forest not far from Varvara site in Kazakhstan.
2023
2022
Change
ENERGY
Total energy consumed (GJ)
Kazakhstan
3,542,140
3,471,719
2.0%
Russia
7,205,597
7,285,162
-1.1%
Total
10,747,737
10,756,881
-0.1%
Energy intensity (GJ per Koz of GE produced)
Kazakhstan
7,296
6,417
+14%
Russia
5,867
6,179
-5%
Total
6,271
6,254
+0.3%
GREENHOUSE GAS (GHG) EMISSIONS
Scope 1 GHG emissions (CO2 eq. Kt)
Kazakhstan
208
201
+3%
Russia
516
550
-6%
Total
724
751
-4%
Scope 2 GHG emissions (market based, CO2 eq. Kt)
Kazakhstan
252
216
+17%
Russia
111
115
-3%
Total
363
331
+10%
Scope 1 + Scope 2 (CO2 eq. Kt)
Kazakhstan
460
417
+10%
Russia
627
665
-6%
Total
1,087
1,082
+0.5%
GHG intensity of Scope 1 and Scope 2 emissions
(kg of CO2e per oz of GE)
Kazakhstan
947
771
+23%
Russia
511
564
-4%
Total
634
629
+4%
Environment
Our Environmental Management System (EMS) is the cornerstone of our approach. All production sites in Kazakhstan and most of them in Russia are certified to the ISO 14001 global standard. Our EMS is supported by specific systems for cyanide and tailings management, as well as internal and external auditing.
The monitoring of both water quantity and quality is a key focus within our EMS. Given the predicted physical impacts of climate change on our operations, vigilance in monitoring water risks is crucial for our assets in Kazakhstan. We strive to continually enhance our water efficiency by employing metering and auditing practices for water consumption, coupled with the meticulous management of the quality of wastewater. The majority of the water we use in ore processing is circulated in closed water cycles. Overall, 93% of our on-site water consumption is via a closed cycle of treated waste water (compared to 91% in 2022). We remain committed to our ambitious goal of reducing fresh water usage for processing per unit of production by 55% by 2030, compared with the 2019[13]. In 2023, we decreased our fresh water intensity for ore processing by 53%, compared with 2019, to 125 m³/1,000 t (2022: 49%).
We operate seven TSFs and four dry stacking facilities in Kazakhstan and Russia, and are carrying out technical closure works at two TSFs. Wherever possible, we have implemented dry cake stacking in order to eliminate affecting both ground and surface water, as well as the surrounding area, and we currently store 70% in dams and 30% as dry cake.
2023
2022
Change
WATER
Fresh water withdrawn (th. m3)
Kazakhstan
1,273
1,290
-1%
Russia
2,010
2,054
-2%
Total
3,283
3,344
-2%
Water reused and recycled (th. m3)
Kazakhstan
11,569
11,089
+4%
Russia
34,329
23,353
+47%
Total
45,898
34,442
+33%
Total water used (th. m3)
Kazakhstan
12,842
12,378
+4%
Russia
36,338
25,408
+43%
Total
49,181
37,786
+30%
Share of water recycled and reused
Kazakhstan
90%
90%
+1%
Russia
94%
92%
+3%
Total
93%
91%
+2%
Fresh water use for processing intensity
(m3/ Kt of processed ore)[14]
Kazakhstan
178
188
-5%
Russia
99
112
-12%
Total
125
138
-9%
WASTE
Share of waste recycled (including overburden)
Kazakhstan
8%
10%
-20%
Russia
33%
42%
-21%
Total
17%
23%
-26%
Share of dry stacking in tailings disposal
Kazakhstan
-
-
n/a
Russia
30%
28%
+7%
Total
30%
28%
+7%
Communities
We aim to maintain open dialogue with neighboring communities, ensuring transparent feedback mechanisms in all regions where we operate. In 2023, we responded to all of the 780 enquiries received from locals, surveyed 1,174 community representatives and held 90 stakeholder engagement events. The outcomes of such engagement inform our social investment programmes. Polymetal’s social investments amounted to US$ 17.6 million in 2023 (including US$ 7.3 million in Kazakhstan) and were targeted to projects in education, local infrastructure, sports, culture and Indigenous Minorities of the North support (compared to US$ 23 million in 2022). No cases of human rights violations connected to Polymetal’s employees or contractors were reported in 2023.
2023
2022
Change
Total community investment (US$ million)
Kazakhstan
7.3
8.8
-17%
Russia
10.3
14.4
-28%
Total
17.6
23.2
-24%
Enquiries from communities received and responded to
Kazakhstan
335
223
+50%
Russia
445
616
-28%
Total
780
839
-7%
Stakeholder meetings and events
Kazakhstan
21
22
-5%
Russia
69
58
+19%
Total
90
80
+13%
Number of respondents to community polls
Kazakhstan
79
100
-21%
Russia
1,095
1100
-0.5%
Total
1,174
1,200
-2%
2024 outlook for Kazakhstan business
Safety remains a top priority for Polymetal. We will continue to focus on further improvements in health and safety metrics and maintaining zero fatalities across our operations and among on-site contractors conducting business on behalf of the Group.
In 2024, we expect stable operational results in Kazakhstan as well as a positive investment decision on the Ertis POX. The Company expects its Kazakhstan assets to deliver stable production at approximately 475 Koz of GE.
We will continue running a number of development projects at existing operations, aimed at either extending the life-of-mine or reducing costs despite the planned depletion of higher-grade ore sources. At Kyzyl, the Company intends to push the throughput further to the 2.6 Mtpa level by the second half of 2024. We are in the process of reducing our reliance on diesel power, and with it our environmental impact, through renewable energy projects. This includes upgrading dump trucks from diesel fuel to gas at Kyzyl and progressing the 40 MWh solar power plant and gas power plant for Varvara and Kyzyl located at Varvara’s operating site.
At the same time, we will focus on advancing our long-term project pipeline. At Ertis POX, we plan to undertake engineering work, order technological equipment and prepare the construction site. The investment decision is expected to be made by the Board in the second half of 2024, with the start-up in 2028.
Polymetal will aim to pursue growth opportunities in Kazakhstan and selected Central Asian countries. We are looking for precious and base metal assets where we can apply our deep competencies in engineering, development and operations.
** Financial review **
market summary
Precious metals
Despite multiyear-high interest rates and bond yields, markets remained disturbed by looming recessionary fears and the ongoing global geopolitical conflicts, which made investors lean towards safe-haven assets such as gold. In H1 2023, along with the peaking interest rates, gold price reached the lowest boundary of US$ 1,811/oz before beating 2022 all-time high and reaching US$ 2,078/oz in H2 2023 on the back of elevated geopolitical and security risks, and indications of rate cuts in 2024. The average LBMA gold price in 2023 was US$ 1,943/oz, an increase of 8% compared to the prior year.
In 2023, gold demand remained strong at 4,448 tonnes, only 5% below the very exceptional 2022, when the world saw post pandemic re-opening and the escalation of the military conflict between Russia and Ukraine. Gold accumulation momentum in the recent years continued into 2023 – over 1,037 tonnes were added to central banks’ reserves, with China purchasing the most, while Kazakhstan being the one the biggest sellers.
Despite an elevated gold price, jewelry demand proved to be strong and maintained on par with 2022 at 2,093 tonnes. The removal of COVID restrictions in 2022 paved the way for 2023 jewelry demand hike in China – the world’s largest jewelry consumer. China’s annual jewelry consumption increased by 10% y-o-y to 630 tonnes, which was partially offset by India’s price sensitivity and as a result volume of gold jewelry purchases.
Third consecutive annual gold ETF outflow along with the weakening demand for bars and coins pulled overall investment demand to 945 tonnes – a 15% y-o-y drop (2022: 1,113 tonnes). In 2023, global soaring inflation, record-high bond yields and waves of liquidity issues within the banking sector attracted investors to a strong US dollar and risk-free government bonds away from the gold investments.
Consequences of the COVID relief stimulus payments by governments has not spared the technology market. Notwithstanding advances in the artificial intelligence, major chip manufacturers experienced downturn, which was reflected in the gold demand. Tech demand for gold dropped by 4% y-o-y to 298 tonnes for the first time sinking below 300 tonnes mark.
Having started the year by largely tracking gold dynamics, the silver price reached annual low of US$ 20.1/oz in March. It did not then, however, see the same dramatic upturn as gold. Investors preferred to stick to the more superior safe-haven gold. Even though silver briefly rallied to US$ 26.0/oz in April on the back of the geopolitical tension and economic uncertainty, it failed to maintain the momentum and averaged at US$ 23.3/oz for the year, up 7% (2022: US$ 21.8/oz).
Foreign exchange
The Group’s revenue and over 72% of borrowings are denoted in US Dollars and Renminbi, while the majority of the Group’s operational costs are denoted in Russian Rouble and Kazakh Tenge. As a result, changes in exchange rates affected the Company’s financial results and performance.
The Russian Rouble demonstrated significant devaluation relative to 2022. Continuous geopolitical escalation, capital outflows and a US$ 169.4 billion decrease in exports, as a result of deteriorating oil prices pulled the Rouble rate to a high level of 101 RUB/US$ in August of 2023. Towards the year-end, the Rouble somewhat improved to 89.7 RUB/USD on the back of the emergency 350bps rate hike by the Central Bank of Russia and re-introduction of capital control measures, including variable export duties and mandatory sales of foreign currency revenues. The average annual Rouble rate was 85.3 RUB/US$ (2022: 68.6 RUB/US$).
Although, consistent geopolitical tension within the CIS region, global strengthening of the USD as well as a weakening average oil price of US$ 82 per barrel (2022: US$ 101 per barrel) posed significant pressures, the Kazakhstani tenge remained steady at 456 KZT/US$ (2022: 461 KZT/US$) throughout 2023. This has been driven by increased oil exports, and significant sales of foreign currency and gold reserves by the National Bank of Kazakhstan.
Revenue
SALES VOLUMES
2023
2022
Change
Gold, Koz
1,400
1,376
+2%
Silver, Moz
16.6
18.5
-10%
Gold equivalent sold[15], Koz
1,608
1,622
-1%
Sales by metal
(US$m unless otherwise stated)
2023
2022
Change
Volume variance, US$m
Price variance, US$m
Gold
2,640
2,392
+10%
41
206
Average realised price[16]
US$ /oz
1,929
1,764
+9%
Average LBMA price
US$ /oz
1,943
1,802
+8%
Share of revenues
87%
85%
Silver
363
383
-5%
(40)
20
Average realised price
US$ /oz
22.8
21.9
+4%
Average LBMA price
US$ /oz
23.4
21.8
+8%
Share of revenues
12%
14%
Other metals
22
26
-15%
Share of revenues
1%
1%
Total revenue
3,025
2,801
+8%
(13)
237
In 2023, revenue grew by 8% y-o-y driven by the growth of gold and silver average realised prices. Gold sales increased marginally by 2% y-o-y. Silver sales decreased by 10% due to significant tightening of concentrate exports regulations in Russia, which led to material accumulation in sea ports of concentrates from Russian assets.
The Group’s average realised gold price was US$ 1,929/oz in 2023, up 9% from US$ 1,764/oz in 2022, slightly below the average market price of US$ 1,943/oz. The Group’s average realised silver price was US$ 22.8/oz, higher by 4% y-o-y, but 3% below the average market price of US$ 23.4/oz since two-thirds of annual sales were skewed towards the first half of 2023 with weaker average prices.
The share of gold sales as a percentage of total revenue increased from 85% in 2022 to 87% in 2023, driven by a corresponding shift in production and sales volume by metal.
Revenue, US$m
Gold equivalent sold, Koz
OPERATION
2023
2022
Сhange
2023
2022
Сhange
Kazakhstan
893
933
-4%
459
533
-14%
Kyzyl
518
554
-7%
271
322
-16%
Varvara
365
379
-4%
188
212
-11%
Other[17]
10
-
n/a
-
-
n/a
Russia
2,132
1,868
+14%
1,144
1,089
+5%
Total revenue
3,025
2,801
+8%
1,603
1,622
-1%
The decrease in sales volumes during the period had a negative impact on revenues at all operating mines in Kazakhstan, which was partially offset by higher commodity prices. Difficulties with inventory conversion into sales were particularly pronounced with concentrates going through Russian Far Eastern ports, including Kyzyl concentrate being sold to China. Management will continue to work to resolve this issue during the first half of 2024, particularly focusing on Kyzyl.
At Varvara, sales volumes broadly followed production volumes, which decreased as a result of planned grade decline.
COST OF SALES
(US$m)
2023
2022
Change
Cash operating costs
1,454
1,513
-4%
On-mine costs
632
741
-15%
Smelting costs
532
567
-6%
Purchase of metal inventories from third parties
127
69
+84%
Mining tax
163
136
+20%
Costs of production
1,734
1,836
-6%
Depreciation and depletion of operating assets
280
324
-14%
Rehabilitation expenses
-
(1)
n/a
Total change in metal inventories
(282)
(152)
+86%
Increase in metal inventories
(276)
(216)
+28%
(Reversal)/Write-down of inventories to net realisable value
(6)
64
n/a
Idle capacities and abnormal production costs
7
6
+17%
Total cost of sales
1,459
1,690
-14%
CASH OPERATING COST STRUCTURE
2023
2022
US$m
Share
US$m
Share
Services
490
34%
576
38%
Consumables and spare parts
406
28%
438
29%
Labour
257
18%
285
19%
Mining tax
163
11%
136
9%
Purchase of metal inventories from third parties
127
9%
69
5%
Other expenses
11
1%
9
1%
Total cash operating cost
1,454
100%
1,513
100%
The total cost of sales decreased by 14% in 2023 to US$ 1,459 million, reflecting the positive impact of the Russian Rouble depreciating by 24%. The devaluation impact from Russian operations offset domestic inflation (9% y-o-y in Kazakhstan and 7% y-o-y in Russia) and increase in mining tax.
The cost of services and of consumables and spare parts were down 15% and 7% y-o-y, caused mostly by a weaker Rouble compared with 2022.
The cost of labour within cash operating costs was US$ 257 million, a 10% decrease over 2022, mainly stemming from local currency devaluations, which outweighed the annual salary increases (tracking domestic CPI inflation).
Mining tax increased by 20% y-o-y to US$ 163 million, mainly driven by an increase in average realised prices, as well as gold mining tax rates in Kazakhstan increasing from 5% to 7.5%.
The increase in purchases of third-party metal inventories by 84% was mostly driven by larger volumes of high-grade third-party ore processed at the Varvara flotation circuit.
Depreciation and depletion was US$ 280 million, down 14% y-o-y, largely driven by the positive effect of a weaker Rouble. US$ 26 million of depreciation cost are included within the total increase in metal inventories (2022: US$ 52 million).
In 2023, a net metal inventory increase of US$ 276 million (2022: US$ 216 million) was recorded. The increase was mainly represented by concentrate build-up at Russian assets, due to the tightening of concentrate exports regulations in Russia. The Company expects the bulk of this increase to be reversed during the course of 2024, particularly at Kyzyl.
The Group recognised a US$ 6 million reversal (2022: US$ 65 million write-down) to the net realisable value of heap leach ore at Russian mines (see Note 17 of the condensed consolidated financial statements).
General, administrative and selling expenses
(US$m)
2023
2022
Сhange
Labour
215
243
-11%
Services
19
15
+27%
Share-based compensation
11
13
-15%
Depreciation
7
10
-30%
Other
22
30
-27%
Total general, administrative and selling expenses
274
311
-12%
General, administrative and selling expenses (“SGA”) decreased by 12% y-o-y from US$ 311 million in 2022 to US$ 274 million in 2023, mainly reflecting a decrease in staff costs in US Dollar terms driven by devaluation of the Rouble.
Other operating expenses
(US$m)
2023
2022
Change
Exploration expenses
35
62
-44%
Social payments
34
44
-23%
Bad debt allowance
19
(1)
n/a
Provision for investment in Special Economic Zones
15
14
+7%
Taxes, other than income tax
14
15
-7%
Additional tax charges/fines/penalties
-
2
n/a
Change in estimate of environmental obligations
(7)
(2)
n/a
Other expenses
7
7
n/a
Total other operating expenses
117
142
-18%
Other operating expenses decreased to US$ 117 million in 2023 (2022: US$ 142 million) mainly due to the reduction in exploration costs and a scheduled decrease in social payments in accordance with existing partnership agreements.
TOTAL Cash costs
In 2023, total cash costs per gold equivalent ounce sold were US$ 861/GE oz, down 8% y-o-y. The depreciation of the Russian Rouble against the US Dollar outweighed inflationary pressures and planned grade decline.
The table below summarises major factors that have affected the Group’s TCC and AISC dynamics y-o-y:
RECONCILIATION OF TCC AND AISC MOVEMENTS
TCC, US$/oz
Change
AISC, US$/oz
Change
Cost per AuEq ounce 2022
942
1,344
RUB and KZT rate change
(156)
-17%
(209)
-16%
Domestic inflation
66
+7%
93
+7%
Change in average grade processed
22
+2%
22
+2%
Sustaining capex increase
-
n/a
41
+3%
Other
(13)
-1%
(16)
-1%
Cost per AuEq ounce 2023
861
-8%
1,276
-5%
Total cash cost by segment/operation, US$/GE oz
Cash cost per GE ounce, US$/GE oz
Gold equivalent sold, Koz
OPERATION
2023
2022
Change
2023
2022
Change
Kazakhstan
903
728
+24%
459
533
-14%
Kyzyl
704
602
+17%
271
322
-16%
Varvara
1,189
920
+29%
188
212
-11%
Russia
845
1,046
-19%
1,144
1,089
+5%
Total Group TCC
861
942
-9%
1,603
1,622
-1%