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Edited Transcript of POLYP.L earnings conference call or presentation 26-Aug-20 11:00am GMT

Half Year 2020 Polymetal International PLC Earnings Call

LONDON Aug 27, 2020 (Thomson StreetEvents) -- Edited Transcript of Polymetal International PLC earnings conference call or presentation Wednesday, August 26, 2020 at 11:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Maxim Nazimok

Polymetal International plc - CFO

* Vitaly N. Nesis

Polymetal International plc - Group CEO & Executive Director

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Conference Call Participants

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* Anton Fedotov

BofA Merrill Lynch, Research Division - Analyst

* Boris Sinitsyn

VTB Capital, Research Division - Equities Analyst

* Daniel Edward Major

UBS Investment Bank, Research Division - Director and Analyst

* Daniel Harry David Shaw

Morgan Stanley, Research Division - Research Analyst

* Krishan M. Agarwal

Citigroup Inc., Research Division - VP & Analyst

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Presentation

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Operator [1]

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Good day, and welcome to the Polymetal H1 2020 Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Vitaly Nesis, Chief Executive Officer. Please go ahead, sir.

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Vitaly N. Nesis, Polymetal International plc - Group CEO & Executive Director [2]

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Thank you very much. Ladies and gentlemen, welcome to the conference for 2020 first half report for Polymetal International. I will -- I'm joined today by Maxim Nazimok, the CFO of Polymetal, and we together will walk you through the webcast presentation and then have a Q&A session. Let me first start with the disclaimer on Page 2 of the webcast about the forward going statements and then on Page 3, overall, first half 2020 was quite successful for the company. We demonstrated strong operating and financial performance. And crucially, we significantly increased returns to shareholders. Gold production grew 4% year-on-year and against the backdrop of strong commodity prices, EBITDA increased by 53%, underlying EPS increased by 98%. And dividend per share, which we consider to be the key metric of the corporate succes, doubled year-on-year. Now this was made possible not only by strong commodity prices but by rising production and by our ability to maintain all-in sustaining cash costs at very competitive levels. We currently have year-to-date dividend yields of more than 5%, and as we'll see later on, this really puts us among the leaders in the global precious metals industry.

Page 4, more granularity on the company's results. Importantly, we have been able to advance our key projects despite the challenges posed by the COVID-19 pandemic. At POX-2, the key milestone of the project was successfully achieved in August. The Autoclave vessel has successfully arrived and was installed on its permanent foundation within the autoclaving section of the processing plant. This, I believe, is a significant derisking event for the whole project.

At Nezhda, we pressed on with the installation of the key equipment, both mills, flotation equipment, gravity concentration equipment and thickeners have all been installed. Currently, the focus is on the installation of a filtering equipment for the dry tail storage area. Also importantly, we became a part to a financing agreement for which an independent grid management company was funded by the parastatal Far East Development Fund to build the grid connection of Nezhda. This will ensure that the operation will receive relatively cheap grid power while Polymetal will not need to incur any liability on it's balance sheet. We believe this transaction paves the way for a significant cost upside as well as for a meaningful reduction in the overall carbon footprint of the company.

In terms of corporate governance. The first half saw a significant board renewal as 2 of the directors departed and 3 new independent nonexecutive directors joined. As a result, the share of INEDs increased to 67% and share of women on the board increased to 33%. We view both these results as a strong demonstration of our commitment to the best practice in corporate governance. Quorate hybrid AGM drew a strong support for all resolutions, including the approval of the revised remuneration policy. On the ESG front, we continue advancing our key programs. We importantly introduced ESG KPI this year, starting from CEO and COO and cascading down through the levels of the organization. We used to have specific safety and emissions KPIs, but this has now been strengthened by the addition of project-specific parameters throughout the company.

Importantly, following the Norilsk Nickel incident in May, we published detailed permafrost disclosure on our website, and we continue to monitor corporate exposure to permafrost very diligently and believe there is no additional risk from climate change related to the specific situation.

A couple of words on COVID-19 update. Clearly, the first half and particularly the second quarter was very challenging as the team did our best to make sure that there are no interruptions in production, supply chain or sales. And I am proud to report that we have not suffered any material negative impact from the pandemic. We also maintained relatively low level of infection across the organizations. Currently, there are 72 employees tested positive, which obviously is only about 0.5% of our workforce. And importantly, of these 72 people, the vast majority are not or have not been tested positively on site, they've been tested positively during intra-shift breaks or during mandatory, observatory period. We continue to maintain very strict precautionary procedures at all production sites. This is continuing against the backdrop of a gradual relaxation of currency requirements in both Russia and Kazakhstan. We believe that for the time being, the risks of virus spread at operating sites warrants additional costs to maintain these procedures. The additional costs are estimated currently at approximately $2.5 million per month. And this for now is what we expect to last until the end of the year.

We also definitely provide support to the communities where we operate, and so far, we spent about $2 million on medical supplies and equipment. Clearly, the well-being of communities for us is as important as the well-being of our employees. Page 6, another significant achievement for the first half is the improvement in our safety performance. For the first time since 2015, there were no fatalities in the first half of the year. And in general, we have experienced a 12 months running without fatal accidents. Clearly, we remain very vigilant, and we'll try to continue this track record into the future.

Importantly, the overall injury frequency rate has also declined very significantly. And this is true not only for our own employees, but also for our contractors. Safety will remain the focus of the management team going forward, particularly against the backdrop of significantly strengthening competition for labor in the gold mining industry. Page 7, a couple of words on production performance in the half before I yield the floor to Maxim.

Definitely, the increase in production was driven by Kyzyl, which was a star performer in the half. We continue to experience material positive grade reconciliations in the upper levels of the open pit. And some of this will be carried over in the second half as the old mine previously will be processed in the third quarter. Right now, Kyzyl is moving towards the average reserve grade, and we do not expect the repeat of the stellar performance next year. So Kyzyl is kind of now at steady state level. Kyzyl performance more than compensated for the slight decline at other assets, mostly grade-driven at mature operations and for discontinued ops. And I pass the floor to Maxim.

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Maxim Nazimok, Polymetal International plc - CFO [3]

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Thank you. So a more detailed look into the specifics of the financial results. Page 8 summarize them in a single table. So basically, just a recap of what Vitaly just said, revenue up more than 20%, EBITDA was up 53%. Costs were down 4% for total cash costs and 3% for all-in sustaining cash costs. And that combined allowed us to increase both the underlying net earnings and the dividends twofold year-on-year. On the cash flow side, the operating cash flow grew even stronger to $300 million in the first half. Despite the fact that the first half is traditionally seasonally lower for Polymetal.

On CapEx, we have spent $248 million. And remain on track for the full year capital expenditure guidance of $475 million. As a result, from negative free cash flow, seasonal negative free cash flow in 2019, we have reported positive free cash flow of $53 million for the first half. Our net debt-to-EBITDA continues to decline 1.3 on the last 12 months basis, and we expect more material declines as we move throughout the second half.

Page 9, looking into details for revenue. Clearly, the uptick in commodity prices has driven most of the increase. There was an insignificant, like 3%, sales volume decline, which is temporary and will be reversed in the second half. This is mainly represented by our concentrate at Varvara.

Talking about EBITDA, obviously, commodity prices are the key drivers, but we have also benefited from a decline in total cash costs, and as a result, have posted record adjusted EBITDA of $616 million. Looking at cash cost dynamics in more detail, the obvious assumption would be that we were helped by the foreign exchange, yet the decline in the average exchange rate year-on-year wasn't that significant. It was actually only 6%. So the other factors that have contributed to the total cash cost dynamics would obviously be the increased share of sales from Kyzyl. Vitaly has already marked its stellar performance in terms of production and also changes in grade. This is not just Kyzyl, but also a couple of other operations, namely or most importantly, Omolon.

All of these factors have offset domestic inflation, which was running at around 3-point something percent. And the uptick in the mining tax, which is revenue linked. So this will be pushing the cost -- the cash cost further up in the second half. The COVID extra costs added something like $10 per ounce. And everything else is pretty much negligible.

In cash cost structure, we remain heavily skewed towards costs in the local currencies. Ruble, 48%; tenge, 17%. So the foreign exchange rate dynamics will continue to play an important role in how we perform in the second half. Because after a very sharp weakening in March and April, both ruble and tenge have recovered part of their losses to arrive at RUB 70 per dollar by the end of the reporting period. Right now, we see, again, some kind of moderate weakening, but we'll have to see where we end the year.

So looking at Page 13. This sets out our key sensitivities to the macroeconomic assumptions, both the gold price and the foreign exchange. For now, we have consciously maintained the same cash cost guidance for the full year, between $650 million to $700 million, predominantly because the COVID-related costs, as we see them now, are offsetting the impact of the ruble devaluation. We remain very favorably positioned against our competitors in terms of the all-in sustaining cash cost levels, as you can see from the charts on Page 14. We also remain one of the few miners who continue to lower costs in the current environment.

Turning over to the balance sheet. The dynamics of net debt is set out on Page 15. Again, a reminder that our performance on cash flow has been and continues to be pretty seasonal. The first half is traditionally relatively weak on free cash flow due to the seasonality at Mayskoye where we mine and produce all year-round and generate revenue only in the second half. And we also paid the bulk of our dividends in the first half. In this particular period, we have paid almost $300 million including the special dividend and the final dividend for 2019.

The proceeds from M&A have actually generated another $28 million in terms of cash flow. This is mainly represented by a transaction with VTB, with their investments in Veduga, sales of the noncore assets, which generated $22 million of cash proceeds in the first half and our investments in Tomtor in the amount of $20 million.

Turning over to the leverage. It continues to decline. As I mentioned, we maintained a very comfortable net -- sorry, repayment profile. We actually had net cash for 2020. So all of the 2020 repayments are covered by the existing cash balances. The cost of debt has continued to go down in line with the base interest rates, and we maintain ample additional liquidity available to us in case of any sudden stress.

Page 17, an important piece of news for today, the revised dividend policy, which has been just approved by the board. We have looked at the existing dividend policy. And actually, with a view to increase the transparency and to add predictability into both the capital allocation process within the company and also the dividend flow to our shareholders, the board has decided to replace the special dividend with a modified policy for the final dividend payment. So there will be no special dividend effective from 2021. But the board will now have discretion to increase the final dividend amount up to the full amount of free cash flow generated by the company, provided that it is greater than 50% of the underlying net income.

For the interim dividend, the policy remains the same, 50% of underlying net earnings. The minimum final dividend is also 50% of underlying net earnings, both are subject to absolute net debt-to-EBITDA ceiling of 2.5, we are pretty far away from that ceiling, as you can imagine. The beauty of the new policy, as we see it, is more predictability into the dividend flow. And also more comfort internally by the company to declare the additional dividend, as this will be based on the already final audited financial results.

With this, we remain committed to generating the sector-leading dividend yield. A few illustrations to that, Page 18 is our 5-year average, 4.1%, well above most of our peers and very close to FTSE100 in general. Vitaly already mentioned that for the last 12 months, the dividend yield is actually even higher at 5.4%. And on dividend dynamics, Page 19, I think it's important to mention that we are not only generating additional profits on the back of the commodity prices, we are fully translating this into increased dividend flows to our shareholders pretty much instantly with dividend per share going up twofold year-on-year.

This pretty much concludes the detailed analysis of the financial results, and I will hand over to Vitaly for concluding remarks.

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Vitaly N. Nesis, Polymetal International plc - Group CEO & Executive Director [4]

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Page 20 is just the reiteration of 2020 guidance. We are not changing anything presently. Clearly, on the cost side, we continue to benefit from weak ruble and weak tenge. But the additional COVID costs remain a concern. Please note that within the first half, we really had only 2 full months of additional COVID costs. And that translated into roughly $10 per ounce in TCC. So obviously, if -- as we expect, we'll have 6 months of those costs in the second half, that will translate to about $25 per ounce, given the higher sales in the period. So that remains a bit of a drag on our cost performance.

Production-wise, we are very, very certainly very confident that we'll meet our guidance.

Page 21, in terms of key milestones and news flow. We plan to conduct our regular Analyst and Investor Day on the 9th of November. It will be focused on growth projects, clearly Nezhda, together with the grid line POX-2 and more distant growth prospects, including Veduga. In terms of a more granular news flow from the projects, we expect releases on initial Tomtor mineral resources and initial Prognoz ore reserves in September, so very shortly. And in the fourth quarter, we plan to complete the strategic review of Kutyn. To announce initial ore reserve for East Bakyrchik, which is a new open pit at Kyzyl. And importantly, we plan to complete the construction of steel framework for the autoclave building at POX-2. This will pave the way for the start of smaller equipment installation in this area of the project, which is on the critical path towards the completion.

Now I hope that was a good introduction. And now we would be thrilled to answer your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions)

Our first question comes from Kris Agarwal with Citi.

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Krishan M. Agarwal, Citigroup Inc., Research Division - VP & Analyst [2]

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Can you hear me?

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Vitaly N. Nesis, Polymetal International plc - Group CEO & Executive Director [3]

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Hello?

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Krishan M. Agarwal, Citigroup Inc., Research Division - VP & Analyst [4]

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Hello?

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Vitaly N. Nesis, Polymetal International plc - Group CEO & Executive Director [5]

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Yes. Please proceed.

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Krishan M. Agarwal, Citigroup Inc., Research Division - VP & Analyst [6]

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Yes. My question is on the working capital, I mean, given then the lower sales volume you had in the first half, you had close to $200 million of working capital outflow, is there any sense which you can provide us as in what do you expect for the full year working capital?

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Maxim Nazimok, Polymetal International plc - CFO [7]

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This is a pretty traditional thing for Polymetal. I already mentioned, this is mainly represented by Mayskoye, so most of the working capital buildup is related to concentrate produced but not yet sold at Mayskoye. Now we are in August. So the sales and well, the shipments and sales are ongoing in full swing. So we expect effectively a full release of the working capital build up in the second half.

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Operator [8]

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We'll take our next question from Daniel Major with UBS.

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Daniel Edward Major, UBS Investment Bank, Research Division - Director and Analyst [9]

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Can you hear me okay?

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Vitaly N. Nesis, Polymetal International plc - Group CEO & Executive Director [10]

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Yes, please.

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Daniel Edward Major, UBS Investment Bank, Research Division - Director and Analyst [11]

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Great. Two questions. First, on the dividend and the change to dividend policy. I think it's a great move and increases clarity. But just to be clear on how you expect the framework to work with respect to the balance sheet? Is it fair to assume that you're comfortable after adjusting for sort of seasonal fluctuations in working capital with the net debt ranging between $1.4 billion to sort of $1.6 billion on a medium-term basis, obviously, the net debt-to-EBITDA will change with the commodity prices, but is it fair to assume that, that level of net debt you're comfortable and are not looking to bring that down, is that correct?

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Maxim Nazimok, Polymetal International plc - CFO [12]

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Well, Dan, thanks for the question. Actually, a lot of -- again, a relative leverage reduction, i.e., net-debt-to-EBITDA will occur naturally without management even doing anything by virtue of growing EBITDA on the current commodity prices. I think we will be below 1x EBITDA by the end of this year if the current price levels persist until the year-end. So there is no intention to proactively do anything about the absolute size of the debt in the current price environment. In taking any discretionary dividend decisions, the board will definitely take to leverage into considerations. So I think in any case, we will aim to stay meaningfully below 1.5x adjusted EBITDA.

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Daniel Edward Major, UBS Investment Bank, Research Division - Director and Analyst [13]

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Very clear. And then second question on working capital. I guess we're all familiar with this working capital fluctuations. But if you look back over the last 3 years, net working capital has actually consistently increased. If I look forward, can you give any sense of whether you expect structural increases in working capital when POX-2 or Nezhda or Veduga are commissioned, will that see further increases in working capital? Or is that already sort of factored into the CapEx estimates or the existing sort of working capital held in the business?

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Vitaly N. Nesis, Polymetal International plc - Group CEO & Executive Director [14]

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Well, I think this is a very perceptive question. With Nezhda commissioning, the levels of working capital will increase. And actually, the -- overall, the increases in the working capital levels have been related to the commissioning of the new assets, such as Kyzyl and the start of mining at Nezhda now where we have accumulated substantial ore stockpiles. As Nezhda will be commissioned, and for the first 1.5 years or so will sell its concentrate to China, the working capital levels will increase next year. However, with the start-up of POX-2, we expect the working capital levels to go down as we will be able to take all of the concentrate processing in-house, and thereby, to eliminate partially the concentrate stockpile overhang from Nezhda and partially from Mayskoye.

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Operator [15]

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Our next question comes from Dan Shaw with Morgan Stanley.

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Daniel Harry David Shaw, Morgan Stanley, Research Division - Research Analyst [16]

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Just 2 for me. The first one, can just remind us of your budget assumptions that go into your cost guidance? And then the second one, if I can ask a slightly longer-term question. If you think about the COVID situation this year, has anything changed with regards to your longer-term planning in investment, for example, we hear more discussion from companies around greater automation and/or remote working, not just for office employees but mine operators too, is that something you're looking at given the potential safety and productivity benefits? And then following on from that, do you expect to make many changes to your procurement processes going forward just to diversify the source of your purchases and help improve the resilience of your supply chain to disruption in future, is that something you're looking at?

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Vitaly N. Nesis, Polymetal International plc - Group CEO & Executive Director [17]

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Thanks a lot. I think the -- for the first question, the simple answer is, well, I personally don't believe automation or remote working can make a meaningful enough dent in overall employment numbers to make the COVID threat materially less important. Anyway, the key area of infection at the remote site is not the -- it's not working area. It's the mass hole and it's the accommodation. So people would still need to eat together even if you automate or remote for 10% of your workforce. Moreover, what we have seen is against the backdrop of sharp decreases in employment in other sectors, which have been harder hit or particularly hard hit by the pandemic, the governments assume a more muscular position in terms of preventing headcount reduction or actually trying to motivate companies to increase employment. So I think automation, in particular, would be very worth, at least for some time in the mining sector. And we certainly believe that if you take into account all stakeholders' interest, that this is not something that we tend to do.

In terms of diversification of sourcing, we actually have been more or less spared the risks of concentrated supply chains because we always -- almost always have both Russian and Chinese options. However, for several very narrow spare categories, mostly related actually to Autoclave operations, the pandemic really spurred our drive to try to replace imported spares with something made in Russia, particularly around the frequently replaced parts in the POX such as valves and gauges, stainless pipes. So this is a very couple of areas or product categories where we believe we will need to change our sourcing strategy significantly, but this is relatively narrow and very specific.

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Daniel Harry David Shaw, Morgan Stanley, Research Division - Research Analyst [18]

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And just on -- that's very clear. Just on the budget assumptions for costs?

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Maxim Nazimok, Polymetal International plc - CFO [19]

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The budget assumptions were set at RUB 65 at the beginning of the year. When maintaining the current guidance, we assume the range of RUB 70 to RUB 75 per dollar.

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Operator [20]

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Our next question comes from Boris Sinitsyn with VTB Capital.

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Boris Sinitsyn, VTB Capital, Research Division - Equities Analyst [21]

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Congratulation on the impressive results. A couple of follow-ups on costs and CapEx. Firstly, did I understand correctly -- sorry if I missed it, that in the second half of this year, you would see similar COVID-19 negative effect of -- on cost, i.e., $10 per ounce? And second question on costs and CapEx. Is it true that -- is it correct that if the current exchange rate of RUB 73 stays until year-end, you would still see kind of the same guidance for CapEx, at roughly $470 million as stated right now?

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Maxim Nazimok, Polymetal International plc - CFO [22]

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To start with the COVID cost per ounce. What I said was actually that in the first half, COVID costs really impacted only the last 2 months of the period because the quarantine requirements were put in place in late March in Russia, slightly before that in Kazakhstan. For the first half, we mostly lived off the people who already were on site. So the real cost really kicked in, in May. So in the second half, we actually expect the per ounce cost of COVID prevention to increase shortly, roughly to $25 per ounce.

And in terms of the CapEx, the bulk of CapEx spending is actually not denominated in rubles or tenge. And I think given the current rates probably -- and given the -- this year's split of CapEx heavily weighted towards POX, probably 65% of CapEx is in dollar and euro. So I don't think a ForEx rate fluctuation would have a material impact on our expectation when the final CapEx number will come in. We did experience some of the COVID-related extra costs on our capital projects, particularly at POX. But so far, they've been relatively limited due to a limited footprint of our projects.

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Boris Sinitsyn, VTB Capital, Research Division - Equities Analyst [23]

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That's very clear. Actually, I have 3 more questions, if I may. First one is on your probably the new -- any update on the news of new taxation -- cross-border taxation regime between Russia and Cyprus, so if you have any update on this and your expectations on what would be your effective tax rate in this case? Second, given the recent price in -- sorry, the recent increase in gold price, do you see any decrease in attractiveness of offtake terms to China, maybe not in absolute terms, but in relative terms to go? And the last question is like a specific one on Veduga, it looks like your stockpile and some amount of ore there, which contains some more or less material amount of gold because of high grade. Are there any plans to monetize this ore stockpile before you commission POX-2?

That's -- these are the 3 questions.

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Maxim Nazimok, Polymetal International plc - CFO [24]

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Okay. Boris, on your first one, we are pretty much following the news headlines as you do. So what it fears more or less certain is that there will -- the double tax treaty between Russia and Cyprus will stay in place, so it will not be revoked altogether. There was a bit of news that there will be some exemptions in the new tax treaty, allowing the listed companies meeting certain criteria to maintain a 5% rather than 15% withholding tax rate. Yet there is no official text of the new double tax treaty. So although this might present some kind of an exemption available to Polymetal, I cannot yet ascertain this. So for now, we are maintaining a conservative stance on it.

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Vitaly N. Nesis, Polymetal International plc - Group CEO & Executive Director [25]

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In terms of offtake terms to China, I think the spot picture is totally dominated by the shortage of material flow out of Latin America, where Peru and Mexico, the 2 primary sources of concentrates have been hit particularly hard by COVID restrictions. So right now, actually, the market is very favorable. And to give you a sense, even very low-quality materials, low-grade materials, which previously were extremely difficult to sell or impossible to sell to China without blending now flows into China pretty easily. And on the third question, which ore did you refer to, to Kyzyl?

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Maxim Nazimok, Polymetal International plc - CFO [26]

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Veduga.

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Vitaly N. Nesis, Polymetal International plc - Group CEO & Executive Director [27]

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Veduga. Now for Veduga, we will complete the mining, the ore mining in about 2 months. And we'll ship the mined ore to Kyzyl. Process it into the concentrate, and then this concentrate will go to the existing POX. So this quarter, the third quarter of 2020 will be the last mining quarter for Veduga before the new project comes onstream, ore mining quarter. And the next quarter will be the last processing quarter for a high-grade ore before the new project comes onstream.

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Operator [28]

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Our next question comes from Anton Fedotov with Bank of America.

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Anton Fedotov, BofA Merrill Lynch, Research Division - Analyst [29]

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I have 2 questions. First of all, what do you think about the COVID-related risks or risk of a COVID infection in the second half of this year versus the first half? It seems that in Russia, at least, the virus outbreak moved from large cities towards smaller cities and towards more distant areas, will it pose a higher risk to your operations and to your assets in the second half? And my second question relates to the dividend policy announced this morning, it seems to me that you are effectively migrating to 100% of the free cash flow linked to the leverage, although it is not clearly stated in the dividend policy. Is it correct? Or 100% payout will be still exceptional and in a normal situation, you will pay a lower dividend?

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Vitaly N. Nesis, Polymetal International plc - Group CEO & Executive Director [30]

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For the first question, you're right in that there are now more cases in the Far East than it was 2 or 3 months ago. On the other hand, quite a lot of our employees travel to production sites from Central Russia and from Kazakhstan. So I don't think the geographic spread really plays a role. I think what is important is a continued implementation of restrictive measures, pretty much a proactive prevention of infection entry into the sites. So I would rate the COVID risk still as probably #1 short-term risk for our business. By no means, do we believe that the danger is behind us. We will continue to be vigilant.

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Maxim Nazimok, Polymetal International plc - CFO [31]

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Yes. On the dividends, I would probably kind of shift the focus here. So the guaranteed minimum dividend remains the same, 50% of underlying net earnings. There is an option or a discretion by the board to go up to 100% of free cash flow. But I wouldn't take it as kind of the base case assumption. So the board will need to -- as was the case with the special dividend, the board would need to look at the number of factors before being able to distribute all of their free cash flow into dividends. So probably somewhere in between, would be the right assumption to make.

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Operator [32]

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(Operator Instructions)

We'll take our next question from Daniel Major at UBS.

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Daniel Edward Major, UBS Investment Bank, Research Division - Director and Analyst [33]

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Just a couple of quick follow-ups. Firstly, can you just remind us in terms of portfolio M&A disposals, is there anything left to go now in terms of proceeds from disposals you're expecting in the second half of this year or 2021?

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Vitaly N. Nesis, Polymetal International plc - Group CEO & Executive Director [34]

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We have one more asset, which is still undergoing strategic assessment or sale process, which is Kutyn. Given the much higher gold price, our value expectations for Kutyn have increased. And this actually presents a difficulty for the potential volumes because we don't have that much money. We will announce the final resolution for Kutyn, probably in November. We either will try to come up with a creative sales structure or we'll just abandon the sale and try to fit Kutyn within our own portfolio.

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Daniel Edward Major, UBS Investment Bank, Research Division - Director and Analyst [35]

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Great. And then just last one, you mentioned about the reduction in treatment charges. Is this likely to have a meaningful impact on your cost expectations for Mayskoye in the second half, well, full year?

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Vitaly N. Nesis, Polymetal International plc - Group CEO & Executive Director [36]

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All of our concentrates are sold on either annual actually long-term contracts, we don't really choose spot market sales. Maybe small lots every now and then. So the answer to your question is no.

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Operator [37]

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And we have no further questions at this time. I'd like to turn the conference back to our presenters for any additional or closing remarks.

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Vitaly N. Nesis, Polymetal International plc - Group CEO & Executive Director [38]

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Well, thank you very much for active participation. We look forward to receiving additional questions and clarification requests by e-mail or by phone, either to senior management or to IR team. And thank you again, and have a very nice day. Stay healthy. Bye-bye.

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Operator [39]

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And that does conclude today's conference. We thank you for your participation. You may now disconnect.