Polus — Interim / Quarterly Report 2021

Nov 19, 2021

PJSC “Polyus” Condensed Consolidated Interim Financial Statements for the Three and Six Months Ended 30 June 2021 (Unaudited)

PJSC “POLYUS” CONDENSED CONSOLIDATED INTERIM STATEMENT OF PROFIT OR LOSS FOR THE THREE AND SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)

(in millions of US Dollars)

	Three months ended 30 June	Six months ended 30 June
	2021	2020	2021
Notes
Gold sales	5	1,230	1,148
Other sales		15	9
Total revenue		1,245	1,157
Cost of gold sales	6	(355)	(326)
Cost of other sales		(14)	(8)
Gross profit		876	823
Selling, general and administrative expenses	7	(80)	(76)
Other expenses, net		(43)	(45)
Operating profit		753	702
Finance costs, net	9	(51)	(57)
Interest income		3	4
Gain / (loss) on revaluation of derivative financial instruments, net	10	69	73
Foreign exchange gain / (loss), net		2	126
Profit before income tax		776	848
Income tax expense		(133)	(164)
Profit for the period		643	684
Profit / (loss) for the period attributable to:
Shareholders of the Company		644	685
Non-controlling interests		(1)	(1)
		643	684
Weighted average number of ordinary shares ’000
– for basic earnings per share	19	135,005	134,107
– for diluted earnings per share	19	135,345	134,346
Earnings / (loss) per share (US Dollar per share)
– basic		4.78	5.11
– diluted		4.76	5.11

PJSC “POLYUS” CONDENSED CONSOLIDATED INTERIM STATEMENT OF OTHER COMPREHENSIVE INCOME FOR THE THREE AND SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)

(in millions of US Dollars)

	Three months ended 30 June	Six months ended 30 June
	2021	2020	2021
Profit for the period	643	684	1,093
Other comprehensive income / (loss) for the period
Items that may be subsequently reclassified to profit or loss:
Effect of translation to presentation currency	133	178	66
Other comprehensive income / (loss) for the period	133	178	66
Total comprehensive income for the period	776	862	1,159
Total comprehensive income for the period attributable to:
Shareholders of the Company	774	853	1,158
Non-controlling interests	2	9	1
	776	862	1,159

PJSC “POLYUS” CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION AT 30 JUNE 2021 (UNAUDITED)

(in millions of US Dollars)

	30 Jun. 2021	31 Dec. 2020
Notes
Assets
Non-current assets
Intangible assets	11	142
Property, plant and equipment	12	4,402
Inventories	14	580
Deferred tax assets		119
Derivative financial instruments and investments	15	36
Other receivables and non-current assets	27	28
Total non-current assets		5,306
Current assets
Inventories	14	646
Deferred expenditure		41
Advances paid to suppliers and prepaid expenses		55
Trade and other receivables	16	36
Taxes receivable	17	96
Income tax prepaid	14	30
Cash and cash equivalents	18	1,532
Total current assets		2,420
Total assets		7,726
Equity and liabilities
Capital and reserves
Share capital	19	5
Additional paid-in capital	19	2,387
Treasury shares	19	(226)
Translation reserve		(2,979)
Retained earnings		3,667
Equity attributable to shareholders of the Company		2,854
Non-controlling interests	23	91
Total equity		2,877
Non-current liabilities
Borrowings	20	2,882
Derivative financial instruments	15	282
Deferred tax liabilities		301
Site restoration, decommissioning and environmental obligations		63
Other non-current liabilities		45
Total non-current liabilities		3,573
Current liabilities
Borrowings	20	713
Derivative financial instruments	15	40
Trade and other payables	21	395
Taxes payable	22	92
Income tax payable		36
Total current liabilities		1,276
Total liabilities		4,849
Total equity and liabilities		7,726

PJSC “POLYUS” CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)

(in millions of US Dollars)

Equity attributable to shareholders of the Company	Notes	Number of outstanding shares ’000	Share capital	Additional paid-in capital	Treasury shares	Translation reserve	Retained earnings	Total	Non- controlling interests	Total
Balance at 31 December 2019		133,196	5	2,049	(103)	(2,727)	2,586	1,810	103	1,913
Profit for the period		-	-	-	-	-	277	277	18	295
Other comprehensive loss		-	-	-	-	(170)	-	(170)	(13)	(183)
Total comprehensive income / (loss)		-	-	-	-	(170)	277	107	5	112
Equity-settled share-based compensation (LTIP), net of tax		-	-	15	-	-	-	15	-	15
Execution of conversion option by bondholders	449	-	317	43	(3)	-	357	357	-	357
Shares awarded under LTIP	370	-	(13)	36	(5)	(24)	(6)	(6)	-	(6)
Purchase of additional ownership in SL Gold	246	-	5	24	-	2	31	31	(2)	29
Dividends declared to shareholders of non-controlling interests		-	-	-	-	-	-	-	(1)	(1)
Balance at 30 June 2020		134,261	5	2,373	-	(2,905)	2,841	2,314	105	2,419
Balance at 31 December 2020		134,705	5	2,410	(288)	(3,044)	3,272	2,355	91	2,446
Profit for the period		-	-	-	-	-	1,093	1,093	-	1,093
Other comprehensive income		-	-	-	-	65	-	65	1	66
Total comprehensive income		-	-	-	-	65	1,093	1,158	1	1,159
Equity-settled share-based compensation (LTIP), net of tax	19	-	-	11	-	-	-	11	-	11
Shares awarded under LTIP	19	351	-	(34)	74	-	(39)	1	-	1
Share buyback	19	(62)	-	(14)	-	14	-	-	-	-
Dividends declared to shareholders of the Company	19	-	-	-	-	-	(711)	(711)	-	(711)
Dividends declared to shareholders of non-controlling interests		-	-	-	-	-	-	-	(31)	(31)
Decrease of non-controlling interests due to change in the net assets of the subsidiary	19	-	-	-	-	-	38	38	(38)	-
Other	11	-	-	2	-	-	-	2	-	2
Balance at 30 June 2021		135,005	5	2,387	(226)	(2,979)	3,667	2,854	23	2,877

PJSC “POLYUS” CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS FOR THE THREE AND SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)

(in millions of US Dollars)

	Three months ended 30 June	Six months ended 30 June
	2021	2020	2021
Notes
Operating
## (in millions of US Dollars)

Profit before income tax	776	848	1,313	397
Adjustments for:
Finance costs, net	9	51	57	102
Interest income	(3)	(4)	(6)	(15)
(Gain) / loss on revaluation of derivative financial instruments, net	10	(69)	(73)	(57)
Depreciation and amortisation	91	86	172	160
Foreign exchange (gain) / loss, net	(2)	(126)	13	213
Other	17	6	22	19
	794	777	1,295	821
Movements in working capital
Inventories	(30)	(63)	(51)	(116)
Deferred expenditure	(5)	(6)	(22)	(25)
Trade and other receivables	(14)	30	93	108
Advances paid to suppliers and prepaid expenses	(7)	(22)	(23)	(37)
Taxes receivable	(15)	(2)	22	7
Trade and other payables and accrued expenses	(2)	3	14	27
Taxes payable	(6)	1	(28)	15
Cash flows from operations	721	677	1,330	885
Income tax paid	(89)	(83)	(185)	(145)
Net cash generated from operating activities	632	594	1,145	740
Investing activities
Purchase of property, plant and equipment (excluding purchase of additional ownership in LLC SL Gold and construction of the Omchak high-voltage power grid) and intangible assets	(221)	(156)	(417)	(333)
Purchase of additional ownership in LLC SL Gold	-	-	-	(28)
Payments for the Omchak high voltage power grid	5	-	(10)	-
Interest received	4	4	7	15
Loans issued	(17)	-	(17)	-
Net cash utilised in investing activities	(229)	(152)	(427)	(346)
Financing activities
Proceeds from borrowings	-	-	-	112
Repayment of borrowings	(3)	(681)	(7)	(911)
Interest paid	(24)	(48)	(92)	(135)
Commissions on borrowings paid	-	-	-	(4)
Repayments of lease liability	(3)	(4)	(8)	(8)
Net proceeds on exchange of interest payments under cross currency swaps	9	2	6	1
Net payment on exchange of interest payments under interest rate swaps	9	(1)	-	(2)
Payments for close out of revenue stabilizer programme	-	-	-	(32)
Increase of ownership in subsidiaries	-	-	(24)	-
Payment for share buyback	19	-	-	(32)
Dividends paid to shareholders of the Company	19	(702)	-	(701)
Other	-	-	2	-
Net cash utilised in financing activities	(73)	(1,434)	(119)	(1,607)
Net (decrease) / increase in cash and cash equivalents	330	(1,000)	599	(1,213)
Cash and cash equivalents at the beginning of the period	1,800	1,878	1,445	1,801
Effect of foreign exchange rate changes on cash and cash equivalents	4	13	(2)	(17)
Cash and cash equivalents at the end of the period	2,134	891	2,042	571

1. Significant non-cash transactions relating to investing (right-of-use assets recognition and LTIP payments in treasury shares) and financing activities (lease liabilities recognition) are disclosed in the notes 13 and 19 to these condensed consolidated interim financial statements, respectively.

PJSC “POLYUS” NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)

(in millions of US Dollars) 7

1. GENERAL

Public Joint Stock Company Polyus (the “Company” or “Polyus”) was incorporated in Moscow, Russian Federation, on 17 March 2006. The principal activities of the Company and its controlled entities (the “group”) are the extraction, refining and sale of gold. The mining and processing facilities of the group are located in the Krasnoyarsk, Irkutsk, Magadan regions and the Sakha Republic of the Russian Federation. The group also performs research and exploration works. Further details regarding the nature of the business of the significant subsidiaries of the group are presented in note 27. The shares of the Company are “level one” listed on the Moscow Exchange. Global depository shares (“GDSs”) each representing interest in ½ of an ordinary share in the Company are traded on the main market for listed securities of the London Stock Exchange plc (“LSE”). The controlling shareholder of the Company is Polyus Gold International Limited (“PGIL”), a company registered in Jersey. The most senior parent of the Company is Wandle Holdings Limited, a company registered in Cyprus. As of 30 June 2021 and 31 December 2020, the ultimate controlling party of the Company was Mr. Said Kerimov.

2. BASIS OF PREPARATION AND PRESENTATION

2.1. Going concern

In assessing the appropriateness of the going concern assumption, management has taken account of the group’s financial position, expected future trading performance, its borrowings, available credit facilities and its capital expenditure commitments, expectations of the future gold price, currency exchange rates and other risks facing the group. After making appropriate enquiries, management considers that the group has adequate resources to continue in operational existence for at least the next 12 months from the date of signing these condensed consolidated interim financial statements and that it is appropriate to adopt the going concern basis in preparing these condensed consolidated interim financial statements.

2.2. Compliance with the International Financial Reporting Standards (“IFRS”)

These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting (“IAS 34”). Accordingly, the condensed consolidated interim financial statements do not include all information and disclosures required for a complete set of financial statements, and should be read in conjunction with the group’s consolidated financial statements for the year ended 31 December 2020.

2.3. Basis of presentation

The entities of the group maintain their accounting records in accordance with the laws, accounting and reporting regulations of the jurisdiction in which they are incorporated and registered. The accounting principles and financial reporting procedures in these jurisdictions may differ substantially from those generally accepted under IFRS. Accordingly, such financial information has been adjusted to ensure that the condensed consolidated interim financial statements are presented in accordance with IFRS. The condensed consolidated interim financial statements of the group are prepared on the historical cost basis, except for derivative financial instruments and certain trade receivables, which are accounted for at fair value.

2.4. IFRS standards first time applied in 2021

The following is a list of new or amended IFRS standards and interpretations that have been applied by the group in these condensed consolidated interim financial statements:

PJSC “POLYUS” NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)

(in millions of US Dollars) 8

Title	Subject	Effective for annual periods beginning on or after	Effect on the condensed consolidated interim financial statements
Interest Rate Benchmark Reform phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)	Replacement of LIBOR with alternative Risk-free Rates	1 January 2021	No effect
Amendment to IFRS 16	Extension of the availability of the practical expedient for COVID-19-related rent concessions	1 April 2021	No effect

2.5. IFRS standards to be applied after 2021

The following standards and interpretations, which have not been applied in these condensed consolidated interim financial statements, were in issue but not yet effective:

Title	Subject	Effective for annual periods beginning on or after	Effect on the condensed consolidated interim financial statements
Amendment IFRS 3	Updates of references to or from the Conceptual Frameworks to the IFRS standards	1 January 2022	No effect
Amendment IAS 16	Proceeds before Intended Use	1 January 2022	Under review
Amendment IFRS 1	Subsidiary as a first-time adopter	1 January 2022	No effect
Amendment IAS 41	Taxation in fair value measurements	1 January 2022	No effect
Amendment IAS 37	Onerous Contracts—Cost of Fulfilling a Contract	1 January 2022	No effect
Amendment IFRS 9	Fees in the ‘10 per cent’ test for derecognition of financial liabilities	1 January 2022	No effect
IFRS 17	Insurance contracts	1 January 2023	No effect
Amendments to IFRS 17	Insurance contracts	1 January 2023	No effect
Amendment IAS 1	Classification of Liabilities as Current or Non-Current	1 January 2023	No effect
Amendment IAS 8	New definition of the accounting estimates	1 January 2023	No effect
Amendment IAS 1	Disclosure of accounting policy	1 January 2023	No effect

3. SIGNIFICANT ACCOUNTING POLICIES

The same accounting policies, presentation and methods of computation have been followed in these condensed consolidated interim financial statements as were applied in the group’s audited consolidated financial statements for the year ended 31 December 2020. IAS 34 requires calculation of income tax benefit/expense for interim reporting periods to be based on the expected annual effective income tax rate. Non-taxable / (non-deductible) gains / (losses) on revaluation of certain Derivative financial instruments as well as certain other items of less predictable nature are excluded from determining the expected annual effective income tax rate, which may result in significant variations of effective income tax rate between different interim periods. The group presents its condensed consolidated interim financial statements in the US Dollar (“USD”), as management believes it is a more convenient presentation currency for international users of the condensed consolidated interim financial statements of the group as it is a common presentation currency in the mining industry. As of 30 June 2021, quarterly-end RUB/ US Dollar exchange rate used in the preparation of the condensed consolidated interim financial statements was 72.37 (31 December 2020: 73.88).

PJSC “POLYUS” NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)

(in millions of US Dollars) 9# CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

The critical accounting judgements, estimates and assumptions made by management of the group and applied in the accompanying condensed consolidated interim financial statements for the three and six months ended 30 June 2021 are consistent with those applied in the preparation of the consolidated financial statements of the group for the year ended 31 December 2020.

5. SEGMENT INFORMATION

For management purposes the group is organised by separate business segments identified by a combination of operating activities and geographical area bases with separate financial information available and reported regularly to the chief operating decision maker (“CODM”), being the Budget Committee and the Investment Committee. The following is a description of operations of the group’s identified reportable segments and those that do not meet the quantitative reporting threshold:

• Olimpiada business unit (Krasnoyarsk region of the Russian Federation) – mining (including initial processing) and sale of gold from the Olimpiada mine, as well as research, exploration and development work at the Olimpiada deposit.
• Blagodatnoye business unit (Krasnoyarsk region of the Russian Federation) – mining (including initial processing) and sale of gold from the Blagodatnoye mine, as well as research, exploration and development work at the Blagodatnoye deposit.
• Natalka business unit (Magadan region of the Russian Federation) – mining (including initial processing) and sale of gold from the Natalka mine, as well as research, exploration and development work at the Natalka deposit.
• Verninskoye business unit (Irkutsk region of the Russian Federation) – mining (including initial processing) and sale of gold from the Verninskoye mine.
• Kuranakh business unit (Sakha Republic of the Russian Federation) – mining (including initial processing) and sale of gold from the Kuranakh mines.
• Alluvials business unit (Irkutsk region of the Russian Federation) – mining (including initial processing) and sale of gold from several alluvial deposits.
• Exploration business unit (Krasnoyarsk, Irkutsk, Amur and other regions of the Russian Federation) – exploration and evaluation works in several regions of the Russian Federation other than those related to Sukhoi Log deposit.
• Sukhoi Log business unit (Irkutsk region of the Russian Federation) – exploration and evaluation works at the Sukhoi Log deposit.
• Unallocated – the group does not allocate segment results of companies that perform management, investing activities and certain other functions. Neither standalone results nor the aggregated results of these companies are significant enough to be disclosed as operating segments because quantitative thresholds are not met.

The reportable gold production segments derive their revenue primarily from gold sales. The CODM performs an analysis of the operating results based on these separate business units and evaluates the reporting segment’s results, for purposes of resource allocation, based on the measurements of:

• Gold sales;
• Ounces of gold sold, in thousands;
• Adjusted earnings before interest, tax, depreciation and amortisation and other items (Adjusted EBITDA);
• Total cash cost (TCC);
• Total cash cost per ounce of gold sold (TCC per ounce); and
• Capital expenditures.

PJSC “POLYUS” NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED) (in millions of US Dollars)

10

Business segment assets and liabilities are not reviewed by the CODM and therefore are not disclosed in these condensed consolidated interim financial statements. The group’s non-current assets are located in the Russian Federation.

Business units	Gold sales	Ounces of gold sold in thousands	Adjusted EBITDA	TCC	TCC per ounce (US dollar)	Capital expenditures
For the three months ended 30 June 2021
Olimpiada	502	278	370	102	373	36
Blagodatnoye	212	117	160	41	351	46
Natalka	227	125	165	47	369	25
Verninskoye	142	78	109	25	323	14
Kuranakh	101	56	62	32	563	13
Alluvials	46	25	19	23	894	6
Exploration	-	-	-	-	-	3
Sukhoi Log	-	-	-	-	-	13
Unallocated	-	-	14	(4)	-	23
Total	1,230	679	899	266	390	179
For the three months ended 30 June 2020
Olimpiada	489	290	370	92	314	33
Blagodatnoye	200	117	155	38	324	6
Natalka	190	110	136	40	361	28
Verninskoye	118	68	91	21	306	14
Kuranakh	99	57	63	29	511	9
Alluvials	52	30	25	22	746	5
Exploration	-	-	-	-	-	3
Sukhoi Log	-	-	-	-	-	6
Unallocated	-	-	20	(14)	-	23
Total	1,148	672	860	228	340	127
For the six months ended 30 June 2021
Olimpiada	936	521	680	197	383	64
Blagodatnoye	377	209	281	74	355	67
Natalka	432	240	309	90	373	45
Verninskoye	258	143	196	47	330	29
Kuranakh	198	110	121	61	551	25
Alluvials	46	25	14	23	887	10
Exploration	-	-	-	-	-	7
Sukhoi Log	-	-	-	-	-	22
Unallocated	-	-	37	(8)	-	37
Total	2,247	1,248	1,638	484	388	306
For the six months ended 30 June 2020
Olimpiada	846	516	622	177	342	58
Blagodatnoye	365	220	272	75	341	14
Natalka	341	205	230	79	385	66
Verninskoye	226	137	169	45	329	30
Kuranakh	179	108	107	58	538	15
Alluvials	52	30	21	22	746	9
Exploration	-	-	-	-	-	7
Sukhoi Log	-	-	-	-	-	10
Unallocated	-	-	28	(13)	-	42
Total	2,009	1,216	1,449	443	364	251

2 Unaudited and not reviewed

PJSC “POLYUS” NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED) (in millions of US Dollars)

11

Adjusted EBITDA reconciles to the IFRS reported figures on a consolidated basis as follows:

	Three months ended 30 June	Six months ended 30 June
	2021	2020
Profit before income tax	776	848
Finance costs, net (note 9)	51	57
Interest income	(3)	(4)
Depreciation and amortisation	91	86
Foreign exchange (gain) / loss, net	(2)	(126)
(Gain) / loss on revaluation of derivative financial instruments, net (note10)	(69)	(73)
Equity-settled share-based plans (LTIP) (note19)	12	17
Expenses related to COVID-19 (note25)	20	36
Special charitable contributions	16	19
Impairment of property, plant and equipment	5	-
Gain on disposal of property, plant and equipment and intangible assets	2	-
Adjusted EBITDA	899	860

The measurement of TCC per ounce of gold sold reconciles to the IFRS reported figures on a consolidated basis as follows:

	Three months ended 30 June	Six months ended 30 June
	2021	2020
Cost of gold sales before by-product	362	327
Antimony by-product sales	(7)	(1)
Cost of gold sales (note6)	355	326
Adjusted for:
Depreciation and amortisation (note6)	(93)	(115)
Effect of depreciation, amortisation, accrual and provisions in inventory change	13	36
Expenses related to COVID-19 in cost of gold sales	(9)	(19)
TCC	266	228
Ounces of gold sold, in thousands	679	672
TCC per ounce of gold sold, USD per ounce	390	340

Gold sales

	Three months ended 30 June	Six months ended 30 June
	2021	2020
Refined gold	1,216	1,114
Gold in flotation concentrate	14	34
Total	1,230	1,148

Gold sales reported above represent revenue generated from external customers. There were no inter-segment gold sales during the three and six months ended 30 June 2021 and 2020. Gold sales in the Alluvial business unit are more heavily weighted towards the second half of the calendar year, with all annual sales usually occurring from May until October.

Geographical segments of gold sales

	Three months ended 30 June	Six months ended 30 June
	2021	2020
Russian Federation	1,216	1,121
Outside of Russian Federation	14	27
Total	1,230	1,148

Reconciliation of capital expenditures to the property plant and equipment additions (note12) is presented below:

3 Unaudited and not reviewed

PJSC “POLYUS” NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED) (in millions of US Dollars)

12

	Three months ended 30 June	Six months ended 30 June
	2021	2020
Capital expenditures	179	127
Construction of the Omchak high-voltage power grid	-	10
Stripping activity assets additions (note12)	76	49
Less: intangible and other non-current assets additions	(9)	(7)
Property plant and equipment additions (note12)	246	179

6. COST OF GOLD SALES

	Three months ended 30 June	Six months ended 30 June
	2021	2020
Depreciation and amortisation	93	115
Employee compensation	92	102
Consumables and spares	70	72
Mineral extraction tax	61	54
Fuel	26	27
Power	15	15
Other	32	31
Total cost of production	389	416
Increase in stockpiles, gold-in-process and refined gold inventories	(34)	(90)
Total	355	326

7. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

	Three months ended 30 June	Six months ended 30 June
	2021	2020
Employee compensation	58	56
Depreciation and amortisation	7	6
Taxes other than mineral extraction tax and income taxes	5	5
Distribution expenses related to gold flotation concentrate	-	3
Professional services	3	2
Other	7	4
Total	80	76

8. OTHER EXPENSES, NET

	Three months ended 30 June	Six months ended 30 June
	2021	2020
Expenses related to COVID-19 (note25)	11	17
Special charitable contributions	16	19
Gain on disposal of property, plant and equipment and intangible assets	2	-
Impairment of property, plant and equipment	5	-
Other	9	9
Total	43	45

PJSC “POLYUS” NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED) (in millions of US Dollars)

13

9.# FINANCE COSTS, NET

	Three months ended 30 June	Six months ended 30 June
	2021	2020
Interest on borrowings	49	61
Interest on lease liabilities	1	1
Gain on exchange of interest payments under cross currency swaps	(2)	(6)
Loss on exchange of interest payments under interest rate swaps	1	-
Unwinding of discounts	2	1
Bank commission and write-off of unamortised debt cost due to early extinguishment	-	-
Total	51	57

10. GAIN / (LOSS) ON REVALUATION OF DERIVATIVE FINANCIAL INSTRUMENTS, NET

	Three months ended 30 June	Six months ended 30 June
	2021	2020
Revaluation gain / (loss) on cross currency swaps	68	118
Revaluation loss on revenue stabiliser	-	-
Revaluation gain / (loss) on interest rate swaps	1	(1)
Revaluation loss on conversion option	-	(44)
Total	69	73

11. INTANGIBLE ASSETS

	Internally- generated software	Purchased software	Internally- generated other	Total
Cost	85	28	30	143
Accumulated amortisation and impairment	(9)	(8)	(3)	(20)
Net book value at 31 December 2019	76	20	27	123
Additions	11	1	3	15
Reclassification	-	1	-	1
Amortisation charge	(2)	(3)	(1)	(6)
Effect of translation to presentation currency	(9)	(2)	(4)	(15)
Cost	86	26	30	142
Accumulated amortisation and impairment	(10)	(9)	(5)	(24)
Net book value at 30 June 2020	76	17	25	118
Cost	95	28	34	157
Accumulated amortisation and impairment	(12)	(8)	(5)	(25)
Net book value at 31 December 2020	83	20	29	132
Additions	10	2	1	13
Reclassification	2	(2)	-	-
Amortisation charge	(2)	(3)	(1)	(6)
Effect of translation to presentation currency	3	-	-	3
Cost	110	28	36	174
Accumulated amortisation and impairment	(14)	(11)	(7)	(32)
Net book value at 30 June 2021	96	17	29	142

PJSC “POLYUS”
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)
(in millions of US Dollars) 14

12. PROPERTY, PLANT AND EQUIPMENT

	Fixed assets	Stripping activity assets	Capital construction in progress	Exploration and evaluation assets	Total
Cost	4,484	918	717	641	6,760
Accumulated depreciation and impairment	(1,686)	(301)	(63)	(30)	(2,080)
Net book value at 31 December 2019	2,798	617	654	611	4,680
Additions	-	102	230	23	355
Transfers	144	-	(135)	(9)	-
Disposals	(2)	-	(1)	-	(3)
Depreciation charge	(213)	(52)	-	-	(265)
Impairment	-	-	-	(2)	(2)
Effect of translation to presentation currency	(322)	(72)	(76)	(70)	(540)
Other	10	-	-	1	11
Cost	4,097	916	729	580	6,322
Accumulated depreciation and impairment	(1,682)	(321)	(57)	(26)	(2,086)
Net book value at 30 June 2020	2,415	595	672	554	4,236
Cost	4,130	971	629	590	6,320
Accumulated depreciation and impairment	(1,767)	(346)	(61)	(25)	(2,199)
Net book value at 31 December 2020	2,363	625	568	565	4,121
Additions	-	143	243	49	435
Transfers	237	-	(237)	-	-
Disposals	(2)	-	(2)	-	(4)
Depreciation charge	(206)	(40)	-	-	(246)
Impairment	-	-	(5)	-	(5)
Effect of translation to presentation currency	52	15	11	12	90
Other	18	-	(1)	(6)	11
Cost	4,461	1,138	642	646	6,887
Accumulated depreciation and impairment	(1,999)	(395)	(65)	(26)	(2,485)
Net book value at 30 June 2021	2,462	743	577	620	4,402

The carrying value of rights-of-use assets included in fixed assets is disclosed in note13.

Mineral rights

The carrying values of mineral rights included in fixed assets and exploration and evaluation assets were as follows:

Mineral rights presented within:	30 Jun. 2021	31 Dec. 2020
- fixed assets	57	57
- exploration and evaluation assets	356	346
Total	413	403

Exploration and evaluation assets

The carrying values of exploration and evaluation assets were as follows:

PJSC “POLYUS”
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)
(in millions of US Dollars) 15

	30 Jun. 2021	31 Dec. 2020
Sukhoi Log	434	409
Chertovo Koryto	33	31
Olimpiada	44	27
Razdolinskoye	29	29
Burgakhchan area	21	17
Panimba	16	17
Bamsky	16	15
Natalka	7	7
Blagodatnoye	7	6
Other	13	7
Total	620	565

Depreciation and amortisation charges are allocated as follows:

	Three months ended 30 June	Six months ended 30 June
	2021	2020
Depreciation in change in inventory	11	37
Capitalised within property, plant and equipment	21	19
Less: amortisation of intangible and other non-current assets	(3)	(3)
Total depreciation capitalised as part of other assets	29	53
Depreciation and amortisation within cost of production (note6)	93	115
Less: depreciation in change in inventory	(11)	(37)
Selling, general and administrative expenses (note7)	7	6
Cost of other sales	2	2
Total depreciation in profit or loss	91	86
Total depreciation of property, plant and equipment	120	139

13. LEASES

The most significant leases of the group are office leases. Movements of the right-of-use assets presented within Property, Plant and Equipment (note12) were as follows:

	Six months ended 30 June 2021	Six months ended 30 June 2020
	Related party transactions	Non-related party transactions
Carrying value as of the beginning of the period	46	11
Changes in right-of-use assets due to lease indexation, modification and recognition of new contracts	-	16
Depreciation charge	(2)	(3)
Effect of translation to presentation currency	1	1
Carrying value as of the end of the period	45	25

Movements of the lease liabilities presented within Borrowings (note20) were as follows:

PJSC “POLYUS”
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)
(in millions of US Dollars) 16

	Six months ended 30 June 2021	Six months ended 30 June 2020
	Related party transactions	Non-related party transactions
Carrying value as of the beginning of the period	51	19
Changes in lease liabilities due to lease indexation, modification and recognition of new contracts	-	16
Foreign exchange loss, net	(1)	-
Interest on lease liabilities	2	-
Repayments of lease liability	(3)	(3)
Effect of translation to presentation currency	1	-
Carrying value as of the end of the period	50	32

14. INVENTORIES

	30 Jun. 2021	31 Dec. 2020
Stockpiles	565	505
Gold-in-process	15	14
Inventories expected to be used after 12 months	580	519
Stockpiles	170	150
Gold-in-process	124	101
Antimony in gold-antimony flotation concentrate and silver	9	4
Refined gold and gold in flotation concentrate	4	4
Materials and supplies	366	365
Less: obsolescence provision for materials and supplies	(27)	(29)
Inventories expected to be used in the next 12 months	646	595
Total	1,226	1,114

15. DERIVATIVE FINANCIAL INSTRUMENTS AND INVESTMENTS

	30 June 2021	31 December 2020
	Non-Current	Current
Cross currency swaps	19	-
Loans receivable	17	-
Total derivative financial assets and investments	36	-
Cross currency swaps	275	40
Interest rate swaps	7	-
Total derivative financial liabilities	282	40

Cross currency swaps

The following terms were in place as of 30 June 2021:

PJSC “POLYUS”
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)
(in millions of US Dollars) 17

Expiration date	Nominal (USD million)	Interest payments	Frequency
	Group pays (USD million)	Group receives ( RUB million)	Group pays (in USD)
July 2021	173	10,000	semi-annually
July 2021	82	5,300	semi-annually
March 2024	125	8,225	quarterly
April 2024	965	64,801	quarterly
October 2024	310	20,000	semi-annually
March 2025	125	8,169	quarterly

Interest rate swaps

The following terms were in place as of 30 June 2021:

Expiration date	Nominal (USD million)	Interest payments	Frequency
	Group pays	Group receives	monthly
February 2024	150	2.425%-2.44%	LIBOR

16. TRADE AND OTHER RECEIVABLES

	30 Jun. 2021	31 Dec. 2020
Trade receivables for gold-bearing products	16	115
Other receivables	36	32
Less: allowance for other receivables	(16)	(14)
Total	36	133

17. TAXES RECEIVABLE

	30 Jun. 2021	31 Dec. 2020
Reimbursable value added tax	95	118
Other prepaid taxes	1	2
Total	96	120

18. CASH AND CASH EQUIVALENTS

	30 Jun. 2021	31 Dec. 2020
Current USD bank accounts	1,170	1,115
Current RUB bank accounts	20	69
Bank deposits denominated in USD	116	178
Bank deposits denominated in RUB	226	83
Total	1,532	1,445

Bank deposits within cash and cash equivalents include deposits with original maturity less than three months or repayable on demand without loss on principal and accrued interest denominated in RUB and USD and accrue interest at the following rates:

Interest rates:	30 Jun. 2021	31 Dec. 2020
- Bank deposits denominated in USD	0.1-0.7%	0.5-0.9%
- Bank deposits denominated in RUB	3.9-5.7%	4.0-4.7%

PJSC “POLYUS”
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)
(in millions of US Dollars) 18

19. SHARE CAPITAL AND RESERVES

Authorised share capital of the Company as of 30 June 2021 comprised issued and fully paid 136,069 thousand ordinary shares at par value of RUB 1 each, of which 1,064 thousand was included within treasury shares.

Equity-settled share-based compensation (long-term incentive plan)

PJSC Polyus grants long-term incentive awards according to which the members of management of the group are entitled to a conditional award in the form of PJSC Polyus’ ordinary shares, which vest upon achievement of financial and non-financial performance targets on expiry of performance periods.Expenses arising from the LTIP are recognised in the condensed consolidated interim statement of profit or loss within Selling, general and administrative expenses.

Share buyback

During the first quarter of 2021, the group completed a share buyback started in December 2020 by acquiring 62 thousand of the Company’s ordinary shares from its shareholders. As of 31 December 2020, a liability in the amount of USD 14 million was recognised in respect of shares to be delivered.

Dividends

On 27 May 2021, Shareholders of the Company declared dividends of 387.15 RUR per share and equivalent of USD 717 million (at the CBR currency exchange rate as of 27 May 2021) in total in respect of the second half of financial year 2020 (excluding dividends on treasury shares owned by the subsidiary of the Company and equivalent of USD 6 million). During the three months ended 30 June 2021, dividends to non-controlling interests in the amount of USD 31 million were declared. This resulted in a decrease of the share of the subsidiary’s net assets that remained attributable to the non-controlling interests in the amount of USD 38 million.

Weighted average number of ordinary shares

The weighted average number of ordinary shares used in the calculation of basic and diluted earnings per share (“EPS”) is as follows (in thousands of shares):

	Three months ended 30 June	Six months ended 30 June
	2021	2020
Ordinary shares in issue at the beginning of the period	135,005	133,968
Conversion of convertible bond	-	293
Shares awarded for LTIP	-	-
Purchase of additional ownership in SL Gold (payable in treasury shares)	-	-
Share buyback	-	-
Other	-	-
Ordinary shares in issue at the end of the period	135,005	134,261
Weighted average number of ordinary shares – basic EPS	135,005	134,107
Dilutive effect of potentially issuable shares under LTIP	340	239
Weighted average number of ordinary shares – diluted EPS	135,345	134,346
Profit after tax attributable to the shareholders of the Company (million USD)	644	685
Profit after tax attributable to the shareholders of the Company for diluted EPS calculation (million USD)	644	685

PJSC “POLYUS”
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED) (in millions of US Dollars) 19

20. BORROWINGS

Nominal rate %	30 Jun. 2021	31 Dec. 2020
Eurobonds with fixed interest rate due in 2022	4.699%	482
Eurobonds with fixed interest rate due in 2023	5.250%	786
Eurobonds with fixed interest rate due in 2024	4.7%	468
Notes due in 2029 (Rusbonds) with noteholders’ early repayment option in 2024	7.4%	276
Notes due in 2025 (Rusbonds) with noteholders’ early repayment option in 2021	12.1%	207
Credit facilities with financial institutions nominated in RUR with variable interest rates	Central bank rate + 2.3% MosPrime + 0.2% / + 0.27% / - 0.45%	1,145
Credit facilities with financial institutions nominated in USD with variable interest rates	USD LIBOR + 1.65%	149
Lease liabilities nominated in USD and RUR	5.26%	82
Sub-total		3,595
Less: current portion of long-term borrowings due within 12 months		(713)
Long-term borrowings		2,882

Unused credit facilities

As of 30 June 2021, the group has unused credit facilities in the total amount of USD 1,213 million (31 December 2020: USD 1,243 million).

Pledge

As of 30 June 2021 and 31 December 2020, all shares of JSC TaigaEnergoStroy belonging to the group were pledged to secure a credit line. Additionally, the group pledged proceeds from certain gold sale agreements as a security for another credit facility.

Other matters

There were a number of financial covenants under several loan agreements in effect as of 30 June 2021 according to which the respective subsidiaries of the Company and the Company itself are limited in their level of leverage and other financial and non-financial parameters. The group tests covenants quarterly and was in compliance with the covenants as of 30 June 2021.

21. TRADE AND OTHER PAYABLES

	30 Jun. 2021	31 Dec. 2020
Employee compensation payable	67	94
Interest payable	59	57
Trade payables	72	49
Accrued annual leave	44	33
Share buyback (note19)	-	33
Payables for shares of PJSC Lenzoloto	-	24
Dividends payable	60	2
Other accounts payable and accrued expenses	93	107
Total	395	399

PJSC “POLYUS”
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED) (in millions of US Dollars) 20

22. TAXES PAYABLE

	30 Jun. 2021	31 Dec. 2020
Value added tax	20	33
Social taxes	26	24
Mineral extraction tax	22	24
Property tax	5	5
Other taxes	19	15
Total	92	101

23. RELATED PARTIES

There were no transactions with related parties throughout the six months ended 30 June 2021, except for those presented within note13 and compensation of the key management personnel as detailed below.

Key management personnel

	Three months ended 30 June	Six months ended 30 June
	2021	2020
Short-term compensation to key management personnel accrued	4	6
Equity-settled share-based compensation (LTIP)	9	13
Total	13	19

24. COMMITMENTS

Commitments for future lease payments due under non-cancellable lease agreements excluded from the scope of IFRS 16

The Land in the Russian Federation on which the group’s production facilities are located is owned by the state. The group leases this land through operating lease agreements, which expire in various years through to 2065. Future lease payments due under non-cancellable operating lease agreements excluded from IFRS 16 scope (note13) were as follows:

	30 Jun. 2021	31 Dec. 2020
Due within one year	9	8
From one to five years	26	24
Thereafter	50	49
Total	85	81

Capital commitments

The group’s contracted capital expenditure commitments are as follows:

	30 Jun. 2021	31 Dec. 2020
Projects in Krasnoyarsk	106	97
Project Natalka	100	73
Project Sukhoi Log	32	-
Other capital commitments	39	26
Total	277	196

25. OPERATING ENVIRONMENT - IMPACT OF COVID-19 PANDEMIC

During the six months ended 30 June 2021, following an analysis of involvement of each individual member of management in the decision making process within the group, it was concluded that certain members were to be excluded from the list of the key management personnel. Amounts for the three and six months ended 30 June 2020 were updated, respectively.

PJSC “POLYUS”
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED) (in millions of US Dollars) 21

On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. The group may face increasingly broad effects of COVID-19 due to its negative impact on the global economy and major financial markets from production interruptions or closure of facilities, supply chain disruptions, quarantines of personnel, reduced demand and difficulties in raising financing. The significance of COVID-19 on the group’s business largely depends on the duration and the incidence of the pandemic effects on the world and Russian economy. The health and safety of employees remains the group’s utmost focus. The group continues to monitor the COVID-19 threat level and assess the potential health risks for its employees, with all monitoring systems in place. The impact on the group’s operations was principally limited to provision of temporary accommodation and treatment facilities at the group’s production sites for the affected employees, implementation of additional sanitary measures, and charitable contributions to hospitals and other institutions in group’s operating regions. Costs directly attributable to dealing with the COVID-19 pandemic comprise additional compensation paid to employees, donations to regional administrations, hospitals and other institutions as well as additional health and safety expenses. The group’s direct and incremental costs related to COVID-19 were included in the following captions of the condensed consolidated interim financial statements as follows:

	Three months ended 30 June	Six months ended 30 June
	2021	2020
Cost of gold sales (Employee compensation)	9	19
Other expenses, net	11	17
Total expenses related to COVID-19 recognised in profit or loss	20	36
(Decrease) / increase in stockpiles, gold-in-process and refined gold inventories	(1)	9
Property plant and equipment additions (infrastructure facilities and stripping activity asset)	6	11
Total costs related to COVID-19	25	56

26. FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of cash and cash equivalents, current trade and other receivables and accounts payable approximate their fair value given the short-term nature of these instruments. Non-current other receivables are discounted at discount rates derived from observable market input data. Trade receivables for gold-bearing products are carried at fair value through profit or loss (Level 2 of the fair value hierarchy in accordance with IFRS 13).

Determination of fair value of derivative financial instruments

Derivative financial instrument	Valuation technique	Inputs to valuation techniques used to measure fair value	Fair value hierarchy of inputs in accordance with IFRS 13
Cross-currency swaps	Discounted cash flow valuation technique	Spot currency exchange rates, USD LIBOR and RUB interest rates	Level 2
Interest rate swaps	Discounted cash flow valuation technique	USD LIBOR rates	Level 2

The fair value of derivative financial instruments includes an adjustment for credit risk in accordance with IFRS 13. The adjustment is calculated based on the expected exposure.# PJSC “POLYUS” NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED) (in millions of US Dollars)

For positive expected exposures, credit risk is based on the observed credit default swap spreads for each particular counterparty or, if they are unavailable, for equivalent peers of the counterparty. For negative expected exposures, the credit risk is based on the observed credit default swap spread of the group’s peer.

Borrowings and deferred consideration are carried at amortised cost. The fair value of the group’s borrowings excluding lease liabilities is estimated as follows:

	30 June 2021		31 December 2020
	Carrying amount	Fair value	Carrying amount	Fair value
Eurobonds (Level 1)	1,736	1,840	1,734	1,852
Borrowings (Level 2)	1,294	1,299	1,277	1,278
Rusbonds (Level 1)	483	486	473	497
Total	3,513	3,625	3,484	3,627

The fair value of all of the group’s borrowings except for the Eurobonds and Rusbonds is within Level 2 of the fair value hierarchy in accordance with IFRS 13. The fair value of the Eurobonds and Rusbonds is within Level 1 of the fair value hierarchy in accordance with IFRS 13, because the Eurobonds and Rusbonds are publicly traded in an active market. The fair value of borrowings and bonds is determined using a discounted cash flow valuation technique with reference to observable market inputs: spot currency exchange rates, forward USD LIBOR and RUB interest rates, the company’s own credit risk and quoted price of the convertible bonds.

27. INVESTMENTS IN SIGNIFICANT SUBSIDIARIES

The basis of distribution of accumulated retained earnings for companies operating in the Russian Federation is defined by legislation as the current year net profit of the company, as calculated in accordance with Russian accounting standards. However, the legislation and other statutory laws and regulations dealing with profit distribution are open to legal interpretation and accordingly management believes at present it would not be appropriate to disclose an amount for distributable profits and reserves in these condensed consolidated interim financial statements.

Information about significant subsidiaries of the group

Subsidiaries	Nature of business	Effective % held at 30 Jun. 2021	Effective % held at 31 Dec. 2020	Incorporated in Russian Federation
JSC Polyus Krasnoyarsk	Mining (open pit)	100	100	Russian Federation
JSC Polyus Aldan	Mining (open pit)	100	100	Russian Federation
JSC Polyus Verninskoye	Mining (open pit)	100	100	Russian Federation
JSC GMC Lenzoloto	Holding company of Alluvials business unit	100	100	Russian Federation
JSC Polyus Magadan	Mining (open pit)	100	100	Russian Federation
LLC Polyus Stroy	Construction	100	100	Russian Federation
LLC Polyus Sukhoi Log (renamed, previously LLC SL Gold)	Exploration and evaluation of the Sukhoi Log deposit	100	100	Russian Federation
JSC Polyus Krasnoyarsk regional investment project (Blagodatnoye business unit)

JSC Polyus Krasnoyarsk is undertaking an investment project to increase mining and processing facilities of the Blagodatnoye mine (Mill-5 project). According to the Directive of the Government of the Krasnoyarsk region JSC Polyus Krasnoyarsk was included in the register of the participants of regional investment projects (RInvP) starting from 2021. As a result, the subsidiary has been granted a right to apply reduced corporate income tax rates in relation to the Mill-5 project income and reducing MET coefficients in relation to minerals extracted under the Mill-5 project. Considering the expected start of production under the Mill-5 project, JSC Polyus Krasnoyarsk expects to apply the following reduced tax rates:

• Mineral extraction tax (MET): 0% for 2025-2026 increasing by 1.2% every two years thereafter to 6%. The amount of tax savings should not exceed the amount of investments in Mill-5 project;
• Corporate income tax: 5% for 2025-2028.

JSC Polyus Verninskoye regional investment project (Verninskoye business unit)

In July 2021, the amount of mineral extraction tax savings exceeded the amount of investments in the regional investment project, therefore, starting from August 2021, JSC Polyus Verninskoye does not benefit from the reduced mineral extraction tax, and a reduced income tax rate is not applied as well.

28. EVENTS AFTER THE REPORTING DATE

There were no events subsequent to the reporting date that would adjust amounts of assets, liabilities, income or expenses or that should be disclosed in these condensed consolidated interim financial statements, except for the following;

• In July 2021, the group exercised its call-option and repaid in advance of maturity USD 203 million of Rusbonds (RUB 15,000 million translated at exchange rate at the date of transaction). In connection with this on expiration of cross currency swaps the group exchanged principal amounts paying USD 255 million and receiving RUB 15,300 million.

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⁵ Effective % held by the Company, including holdings by other subsidiaries of the group.