Polus — Interim / Quarterly Report 2021

Dec 28, 2021

PJSC “Polyus” Condensed consolidated interim financial statements for the three and nine months ended 30 September 2021 (unaudited)

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

(in millions of US Dollars)

	Three months ended 30 September	Nine months ended 30 September
	2021	2020
	2021	2020
Notes
Gold sales	1,383	1,444
Other sales	17	10
Total revenue	1,400	1,454
Cost of gold sales	6	(428)
Cost of other sales		(14)
Gross profit	958	1,061
Selling, general and administrative expenses	7	(74)
Other expenses, net	8	(41)
Operating profit	843	948
Finance costs, net	9	(45)
Interest income		4
Gain / (loss) on revaluation of derivative financial instruments, net	10	5
Foreign exchange loss, net		(4)
Profit before income tax	803	638
Income tax expense		(139)
Profit for the period	664	516
Profit for the period attributable to:
Shareholders of the Company		657
Non-controlling interests		7
	664	516
Weighted average number of ordinary shares ’000
- for basic earnings per share	19	135,005
- for diluted earnings per share	19	135,380
Earnings per share (US Dollar per share)
- basic		4.87
- diluted		4.85

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

(in millions of US Dollars)

	Three months ended 30 September	Nine months ended 30 September
	2021	2020
	2021	2020
Profit for the period	664	516
Other comprehensive (loss) / income for the period
Items that may be subsequently reclassified to profit or loss:
Effect of translation to presentation currency	(8)	(292)
Other comprehensive (loss) / income for the period	(8)	(292)
Total comprehensive income for the period	656	224
Total comprehensive income for the period attributable to:
Shareholders of the Company		649
Non-controlling interests		7
	656	224

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

(in millions of US Dollars)

Notes	30 Sep. 2021	31 Dec. 2020
Assets
Non-current assets
Intangible assets	11	144
Property, plant and equipment	12	4,573
Inventories	14	593
Deferred tax assets		116
Derivative financial instruments and investments	15	42
Other receivables and non-current assets		27
Total non-current assets		5,495
Current assets
Inventories	14	640
Deferred expenditure	17	17
Advances paid to suppliers and prepaid expenses		58
Trade and other receivables	16	54
Taxes receivable		17
Income tax prepaid		2
Cash and cash equivalents	18	1,675
Total current assets		2,563
Total assets		8,058
Equity and liabilities
Capital and reserves
Share capital	19	5
Additional paid-in capital	19	2,394
Treasury shares	19	(226)
Translation reserve		(2,987)
Retained earnings		3,826
Equity attributable to shareholders of the Company		3,012
Non-controlling interests		30
Total equity		3,042
Non-current liabilities
Borrowings	20	2,870
Derivative financial instruments	15	267
Deferred tax liabilities		317
Site restoration, decommissioning and environmental obligations		62
Other non-current liabilities		46
Total non-current liabilities		3,562
Current liabilities
Borrowings	20	506
Derivative financial instruments	15	-
Trade and other payables	21	823
Taxes payable	22	91
Income tax payable		34
Total current liabilities		1,454
Total liabilities		5,016
Total equity and liabilities		8,058

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

(in millions of US Dollars)

	Equity attributable to shareholders of the Company	Non- controlling interests	Total
Notes	Number of outstanding shares ’000	Share capital	Additional paid-in capital
Balance at 31 December 2019	133,196	5	2,049
Profit for the period	-	-	-
Other comprehensive loss	-	-	-
Total comprehensive income / (loss)	-	-	-
Equity-settled share-based compensation (LTIP), net of tax	-	-	20
Execution of conversion option by bondholders	449	-	317
Shares awarded under LTIP	370	-	(13)
Purchase of additional ownership in SL Gold	246	-	5
Issue of treasury shares to a subsidiary	-	-	436
Increase of ownership in subsidiaries	-	-	-
Dividends declared to shareholders of the Company	-	-	-
Dividends declared to shareholders of non-controlling interests	-	-	-
Other	-	-	-
Balance at 30 September 2020	134,261	5	2,814
Balance at 31 December 2020	134,705	5	2,410
Profit for the period	-	-	-
Other comprehensive income	-	-	-
Total comprehensive income	-	-	-
Equity-settled share-based compensation (LTIP), net of tax	19	-	-
Shares awarded under LTIP	351	-	(34)
Share buyback	19	(62)	-
Dividends declared to shareholders of the Company	19	-	-
Dividends declared to shareholders of non-controlling interests	-	-	-
Decrease of non-controlling interests due to change in the net assets of the subsidiary	19	-	-
Other	11

(in millions of US Dollars)

	Three months ended 30 September	Nine months ended 30 September
Operating activities	2021	2020
Profit before income tax	803	638
Adjustments for:
Finance costs, net	9	45
Interest income	(4)	(4)
(Gain) / loss on revaluation of derivative financial instruments, net	10	(5)
Depreciation and amortisation	96	93
Foreign exchange loss, net	4	77
Other	9	5
	948	1,046
Movements in working capital
Inventories	(7)	(66)
Deferred expenditure	24	20
Trade and other receivables	(18)	(19)
Advances paid to suppliers and prepaid expenses	(6)	26
Taxes receivable	(18)	(15)
Trade and other payables and accrued expenses	12	41
Taxes payable	1	29
	936	1,062
Income tax paid	(110)	(107)
Net cash generated from operating activities	826	955
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	(298)	(160)
Purchase of additional ownership in LLC SL Gold	-	(128)
Payments for the Omchak high voltage power grid	5	(9)
Interest received	4	4
Loans issued	(7)	-
Net cash utilised in investing activities	(301)	(293)
Financing activities
Proceeds from borrowings	-	-
Repayment of borrowings	20	(207)
Interest paid	(70)	(76)
Commissions on borrowings paid	-	-
Repayments of lease liability	(4)	(4)
Net proceeds on exchange of interest payments under cross currency swaps	9	7
Net payment on exchange of interest payments under interest rate swaps	9	(1)
Payments on expiration of cross-currency swaps	20	(47)
Payments for close out of revenue stabilizer programme	-	-
Increase of ownership in subsidiaries	-	-
Payment for share buyback	19	-
Dividends paid to shareholders of the Company	(28)	(430)
Dividends paid to shareholders of non-controlling interests	(31)	(1)
Other	-	-
Net cash utilised in financing activities	(381)	(658)
Net increase / (decrease) in cash and cash equivalents	144	4
Cash and cash equivalents at the beginning of the period	1,532	1,654
Effect of foreign exchange rate changes on cash and cash equivalents	(1)	(25)
Cash and cash equivalents at the end of the period	1,675	1,633

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 NINE MONTHS ENDED 30 SEPTEMBER 2021 (UNAUDITED)

(in millions of US Dollars)

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 September 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:

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 12	Deferred Tax related to Assets and Liabilities arising from a Single Transaction	1 January 2022	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.# PJSC “POLYUS” NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED 30 SEPTEMBER 2021 (UNAUDITED) (in millions of US Dollars)

9 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 September 2021, quarterly-end RUB/ US Dollar exchange rate used in the preparation of the condensed consolidated interim financial statements was 72.76 (31 December 2020: 73.88).

4. 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 nine months ended 30 September 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.

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 ²	Adjusted EBITDA	TCC ²	TCC per ounce (US dollar) ²	Capital expenditures
For the three months ended 30 September 2021
Olimpiada	520	293	383	106	354	62
Blagodatnoye	194	109	141	43	378	61
Natalka	240	134	180	45	338	27
Verninskoye	149	83	111	29	350	22
Kuranakh	117	66	73	37	563	25
Alluvials	163	91	76	81	900	4
Exploration	-	-	-	-	-	3
Sukhoi Log	-	-	1	-	-	16
Unallocated	-	-	21	(9)	-	13
Total	1,383	776	986	332	427	233
For the three months ended 30 September 2020
Olimpiada	592	325	475	91	284	32
Blagodatnoye	226	118	174	42	359	14
Natalka	225	118	174	37	316	23
Verninskoye	130	69	102	22	323	21
Kuranakh	128	67	90	32	485	8
Alluvials	143	75	77	63	837	4
Exploration	-	-	-	-	-	2
Sukhoi Log	-	-	-	-	-	11
Unallocated	-	-	11	(2)	-	15
Total	1,444	772	1,103	285	369	130
For the nine months ended 30 September 2021
Olimpiada	1,456	814	1,063	303	372	126
Blagodatnoye	571	318	422	117	363	128
Natalka	672	374	489	135	360	72
Verninskoye	407	226	307	76	337	51
Kuranakh	315	176	194	98	556	50
Alluvials	209	116	90	104	897	14
Exploration	-	-	-	-	-	10
Sukhoi Log	-	-	1	-	-	38
Unallocated	-	-	58	(17)	-	50
Total	3,630	2,024	2,624	816	403	539
For the nine months ended 30 September 2020
Olimpiada	1,438	841	1,097	268	320	90
Blagodatnoye	591	338	446	117	348	28
Natalka	566	323	404	116	360	89
Verninskoye	356	206	271	67	327	51
Kuranakh	307	175	197	90	518	23
Alluvials	195	105	98	85	811	13
Exploration	-	-	-	-	-	9
Sukhoi Log	-	-	-	-	-	21
Unallocated	-	-	39	(15)	-	57
Total	3,453	1,988	2,552	728	366	381

² Unaudited and not reviewed

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

	Three months ended 30 September	Nine months ended 30 September
	2021	2020
Profit before income tax	803	638
Finance costs, net (note 9)	45	59
Interest income	(4)	(4)
Depreciation and amortisation	96	93
Foreign exchange loss, net	4	77
(Gain) / loss on revaluation of derivative financial instruments, net (note 10)	(5)	178
Equity-settled share-based plans (LTIP) (note 19)	7	22
Expenses related to COVID-19 (note 25)	16	36
Special charitable contributions	23	3
Impairment of property, plant and equipment	-	-
Gain on disposal of property, plant and equipment and intangible assets	1	1
Adjusted EBITDA	986	1,103

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 September	Nine months ended 30 September
	2021	2020
Cost of gold sales before by-product	432	397
Antimony by-product sales	(4)	(11)
Cost of gold sales (note 6)	428	386
Adjusted for:
Depreciation and amortisation (note 6)	(95)	(102)
Effect of depreciation, amortisation, accrual and provisions in inventory change	6	16
Expenses related to COVID-19 in cost of gold sales	(7)	(15)
TCC ³	332	285
Ounces of gold sold, in thousands ³	776	772
TCC per ounce of gold sold, USD per ounce ³	427	369

³ Unaudited and not reviewed

Gold sales

	Three months ended 30 September	Nine months ended 30 September
	2021	2020
Refined gold	1,366	1,337
Gold in flotation concentrate	17	107
Total	1,383	1,444

Gold sales reported above represent revenue generated from external customers. There were no inter-segment gold sales during the three and nine months ended 30 September 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 September	Nine months ended 30 September
	2021	2020
Russian Federation	1,367	1,337
Outside of Russian Federation	16	107
Total	1,383	1,444

³ Unaudited and not reviewed

Reconciliation of capital expenditures to the property plant and equipment additions (note 12) is presented below:

	Three months ended 30 September	Nine months ended 30 September
	2021	2020
Capital expenditures	233	130
Construction of the Omchak high-voltage power grid	-	9
Stripping activity assets additions (note 12)	87	43
Less: intangible and other non-current assets additions	(6)	(10)
Property plant and equipment additions (note 12)	314	172

6. COST OF GOLD SALES

	Three months ended 30 September	Nine months ended 30 September
	2021	2020
Depreciation and amortisation	95	102
Employee compensation	93	108
Consumables and spares	84	80
Mineral extraction tax	70	71
Fuel	32	30
Power	15	15
Other	49	39
Total cost of production	438	445
Increase in stockpiles, gold-in-process and refined gold inventories	(10)	(59)
Total	428	386

7.# SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

	Three months ended 30 September	Nine months ended 30 September
	2021	2020
Employee compensation	48	59
Depreciation and amortisation	6	5
Taxes other than mineral extraction tax and income taxes	5	4
Professional services	5	5
Distribution expenses related to gold flotation concentrate	1	5
Other	9	5
Total	74	83

8. OTHER EXPENSES, NET

	Three months ended 30 September	Nine months ended 30 September
	2021	2020
Special charitable contributions	23	3
Expenses related to COVID-19 (note 25)	9	21
Gain on disposal of property, plant and equipment and intangible assets	1	1
Impairment of property, plant and equipment	-	-
Other	8	5
Total	41	30

PJSC “POLYUS”
NOTES TO THE CONDENSED CONSOLIDAT ED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED 30 SEPTEMBER 2021 (UNAUDITED)
(in millions of US Dollars)

13

9. FINANCE COSTS, NET

	Three months ended 30 September	Nine months ended 30 September
	2021	2020
Interest on borrowings	48	50
Interest on lease liabilities	1	1
Gain on exchange of interest payments under cross currency swaps	(7)	(8)
Loss on exchange of interest payments under interest rate swaps	1	1
Unwinding of discounts	2	4
Bank commission and write-off of unamortised debt cost due to early extinguishment	-	6
Loss on early redemption of deferred consideration	-	5
Total	45	59

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

	Three months ended 30 September	Nine months ended 30 September
	2021	2020
Revaluation gain / (loss) on cross currency swaps	4	(178)
Revaluation loss on revenue stabiliser	-	-
Revaluation gain / (loss) on interest rate swaps	1	-
Revaluation loss on conversion option	-	-
Total	5	(178)

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	17	3	4	24
Reclassification	-	1	-	1
Amortisation charge	(3)	(5)	(1)	(9)
Effect of translation to presentation currency	(19)	(4)	(7)	(30)
Cost	80	24	29	133
Accumulated amortisation and impairment	(10)	(9)	(5)	(24)
Net book value at 30 September 2020	70	15	24	109
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	13	4	2	19
Reclassification	2	(2)	-	-
Amortisation charge	(2)	(5)	(2)	(9)
Effect of translation to presentation currency	2	-	-	2
Cost	112	28	36	176
Accumulated amortisation and impairment	(14)	(11)	(7)	(32)
Net book value at 30 September 2021	98	17	29	144

PJSC “POLYUS”
NOTES TO THE CONDENSED CONSOLIDAT ED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED 30 SEPTEMBER 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	-	145	340	42	527
Transfers	192	-	(183)	(9)	-
Disposals	(5)	-	(3)	-	(8)
Depreciation charge	(310)	(70)	-	-	(380)
Impairment	-	-	-	(2)	(2)
Effect of translation to presentation currency	(611)	(145)	(162)	(139)	(1,057)
Other	4	-	-	1	5
Cost	3,630	845	696	527	5,698
Accumulated depreciation and impairment	(1,562)	(298)	(50)	(23)	(1,933)
Net book value at 30 September 2020	2,068	547	646	504	3,765
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	-	230	443	76	749
Transfers	352	-	(352)	-	-
Disposals	(2)	-	(5)	-	(7)
Depreciation charge	(306)	(58)	-	-	(364)
Impairment	-	-	(5)	-	(5)
Effect of translation to presentation currency	38	12	9	9	68
Other	16	-	-	(5)	11
Cost	4,544	1,004	722	671	6,941
Accumulated depreciation and impairment	(2,083)	(195)	(64)	(26)	(2,368)
Net book value at 30 September 2021	2,461	809	658	645	4,573

The carrying value of rights-of-use assets included in fixed assets is disclosed in note 13.

Mineral rights

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

	30 Sep. 2021	31 Dec. 2020
Mineral rights presented within:
- fixed assets	56	57
- exploration and evaluation assets	354	346
Total	410	403

Exploration and evaluation assets

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

PJSC “POLYUS”
NOTES TO THE CONDENSED CONSOLIDAT ED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED 30 SEPTEMBER 2021 (UNAUDITED)
(in millions of US Dollars)

15

	30 Sep. 2021	31 Dec. 2020
Sukhoi Log	449	409
Olimpiada	46	27
Chertovo Koryto	33	31
Razdolinskoye	29	29
Burgakhchan area	22	17
Panimba	16	17
Bamsky	16	15
Kuranakh	8	4
Blagodatnoye	8	6
Natalka	7	7
Other	11	3
Total	645	565

Depreciation and amortisation charges are allocated as follows:

	Three months ended 30 September	Nine months ended 30 September
	2021	2020
Depreciation in change in inventory	7	18
Capitalised within property, plant and equipment	18	7
Less: amortisation of intangible and other non-current assets	(3)	(3)
Total depreciation capitalised as part of other assets	22	22
Depreciation and amortisation within cost of production (note 6)	95	102
Less: depreciation in change in inventory	(7)	(18)
Selling, general and administrative expenses (note 7)	6	5
Cost of other sales	2	4
Total depreciation in profit or loss	96	93
Total depreciation of property, plant and equipment	118	115

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 (note 12) were as follows:

	Nine months ended 30 September 2021	Nine months ended 30 September 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	(3)	(4)
Effect of translation to presentation currency	1	1
Carrying value as of the end of the period	44	24

Movements of the lease liabilities presented within Borrowings (note 20) were as follows:

PJSC “POLYUS”
NOTES TO THE CONDENSED CONSOLIDAT ED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED 30 SEPTEMBER 2021 (UNAUDITED)
(in millions of US Dollars)

16

	Nine months ended 30 September 2021	Nine months ended 30 September 2020
	Related party transactions	Non-related party transactions
Carrying value as of the beginning of the period	51	18
Changes in lease liabilities due to lease indexation, modification and recognition of new contracts	-	16
Foreign exchange loss, net	(1)	1
Interest on lease liabilities	2	1
Repayments of lease liability	(4)	(6)
Effect of translation to presentation currency	1	1
Carrying value as of the end of the period	49	31

14. INVENTORIES

	30 Sep. 2021	31 Dec. 2020
Stockpiles	577	505
Gold-in-process	16	14
Inventories expected to be used after 12 months	593	519
Stockpiles	181	150
Gold-in-process	109	101
Antimony in gold-antimony flotation concentrate and silver	9	4
Refined gold and gold in flotation concentrate	2	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	640	595
Total	1,233	1,114

15. DERIVATIVE FINANCIAL INSTRUMENTS AND INVESTMENTS

	Non-Current	Current	Total	Non-Current	Current	Total
30 September 2021				31 December 2020
Cross currency swaps	18	-	18	17	-	17
Loans receivable	24	-	24	-	-	-
Total derivative financial assets and investments	42	-	42	17	-	17
Cross currency swaps	261	-	261	321	42	363
Interest rate swaps	6	-	6	9	-	9
Total derivative financial liabilities	267	-	267	330	42	372

Cross currency swaps

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

Nominal (USD million)	Interest payments	Expiration date	Group pays (USD million)	Group receives (RUB million)	Frequency	Group pays (in USD)	Group receives (in RUB)
125	quarterly	March 2024	125	8,225	quarterly	5.09%	MosPrime 3m + 0.2%
965	quarterly	April 2024	965	64,801	quarterly	5.00%	MosPrime 3m - 0.45%
310	semi-annually	October 2024	310	20,000	semi-annually	3.23%	7.4%
125	quarterly	March 2025	125	8,169	quarterly	2.8%	MosPrime 3m + 0.27%

Interest rate swaps

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

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

16. TRADE AND OTHER RECEIVABLES

	30 Sep. 2021	31 Dec. 2020
Trade receivables for gold-bearing products	3	115
Other receivables	67	32
Less: allowance for other receivables	(16)	(14)
Total	54	133

17. TAXES RECEIVABLE

	30 Sep. 2021	31 Dec. 2020
Reimbursable value added tax	116	118
Other prepaid taxes	1	2
Total	117	120

18. CASH AND CASH EQUIVALENTS

	30 Sep. 2021	31 Dec.
		2020

PJSC “POLYUS”
NOTES TO THE CONDENSED CONSOLIDAT ED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED 30 SEPTEMBER 2021 (UNAUDITED)
(in millions of US Dollars)

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

18. Cash and Cash Equivalents

	2020	2021
Current USD bank accounts	1,476	1,115
Current RUB bank accounts	31	69
Bank deposits denominated in USD	68	178
Bank deposits denominated in RUB	100	83
Total	1,675	1,445

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

• Interest rates:
  • Bank deposits denominated in USD: 0.3-0.7% (2020), 0.5-0.9% (2021)
  • Bank deposits denominated in RUB: 4.6-7.3% (2020), 4.0-4.7% (2021)

19. SHARE CAPITAL AND RESERVES

Authorised share capital of the Company as of 30 September 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 RUB 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 (including dividends on treasury shares owned by the subsidiary of the Company and equivalent of USD 6 million).

On 29 September 2021, Shareholders of the Company declared dividends of 267.48 RUB per share and equivalent of USD 502 million (at the CBR currency exchange rate as of 29 September 2021) in total in respect of the first half of 2021 financial year (including dividends on treasury shares owned by the subsidiary of the Company and equivalent of USD 4 million).

Thus during the nine months ended 30 September 2021 the total amount of dividends declared was USD 1,219 million (including dividends on treasury shares owned by the subsidiary of the Company and equivalent of USD 10 million) and the total amount of dividends paid in cash to the shareholders was USD 729 million (at the CBR currency exchange rate ruling at the date of payment).

During the second quarter of 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):

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

	Three months ended 30 September	Nine months ended 30 September
	2021	2020
Ordinary shares in issue at the beginning of the period	135,005	134,261
Conversion of convertible bond	-	-
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	134,261
Dilutive effect of potentially issuable shares under LTIP	375	360
Weighted average number of ordinary shares – diluted EPS	135,380	134,621
Profit after tax attributable to the shareholders of the Company (million USD)	657	482
Profit after tax attributable to the shareholders of the Company for diluted EPS calculation (million USD)	657	482

20. BORROWINGS

	Nominal rate %	30 Sep. 2021	31 Dec. 2020
Eurobonds with fixed interest rate due in 2022	4.699%	482	481
Eurobonds with fixed interest rate due in 2023	5.250%	786	785
Eurobonds with fixed interest rate due in 2024	4.7%	468	468
Notes due in 2029 (Rusbonds) with noteholders’ early repayment option in 2024	7.4%	274	270
Notes due in 2025 (Rusbonds) with noteholders’ early repayment option in 2021	12.1%	-	203
Credit facilities with financial institutions nominated in RUB with variable interest rates	Central bank rate + 2.3% MosPrime + 0.2% / + 0.27% / - 0.45%	1,137	1,128
Credit facilities with financial institutions nominated in USD with variable interest rates	USD LIBOR + 1.65%	149	149
Lease liabilities nominated in USD and RUB	5.26%	80	70
Sub-total		3,376	3,554
Less: current portion of long-term borrowings due within 12 months		(506)	(225)
Long-term borrowings		2,870	3,329

Notes due in 2025 (Rusbonds) with noteholders’ early repayment option in 2021

In July 2021, the group exercised its call-option and repaid in advance of maturity USD 203 million of Rusbonds (RUB 15,000 million translated at exchange rate at the date of transaction). In connection with this on expiration of cross currency swaps the group exchanged principal amounts paying USD 255 million and receiving RUB 15,300 million. Net cash outflow related to payments on expiration of cross-currency swaps amounted to USD 47 million.

Unused credit facilities

As of 30 September 2021, the group has unused credit facilities in the total amount of USD 1,262 million (31 December 2020: USD 1,243 million).

Pledge

As of 30 September 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.

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

Other matters

There were a number of financial covenants under several loan agreements in effect as of 30 September 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 September 2021.

21. TRADE AND OTHER PAYABLES

	30 Sep. 2021	31 Dec. 2020
Dividends payable	500	50
Employee compensation payable	86	94
Trade payables	67	49
Accrued annual leave	35	33
Interest payable	34	57
Share buyback (note 19)	-	33
Payables for shares of PJSC Lenzoloto	-	24
Other accounts payable and accrued expenses	101	107
Total	823	399

22. TAXES PAYABLE

	30 Sep. 2021	31 Dec. 2020
Social taxes	24	24
Value added tax	23	33
Mineral extraction tax	22	24
Property tax	5	5
Other taxes	17	15
Total	91	101

23. RELATED PARTIES

There were no transactions with related parties throughout the nine months ended 30 September 2021, except for those presented within note 13 and compensation of the key management personnel as detailed below.

Key management personnel

	Three months ended 30 September	Nine months ended 30 September
	2021	2020
Short-term compensation to key management personnel accrued	4	3
Equity-settled share-based compensation (LTIP)	6	17
Total	10	20

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 (note 13) were as follows:

	30 Sep. 2021	31 Dec. 2020
Due within one year	8	8
From one to five years	25	24
Thereafter	50	49
Total	83	81

Capital commitments

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

	30 Sep. 2021	31 Dec. 2020
Project Natalka	155	73
Projects in Krasnoyarsk	89	97
Project Sukhoi Log	30	-
Other capital commitments	48	26
Total	322	196

25. OPERATING ENVIRONMENT - IMPACT OF COVID-19 PANDEMIC

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 September	Nine months ended 30 September
	2021	2020
Cost of gold sales (Employee compensation)	7	15
Other expenses, net	9	21
Total expenses related to COVID-19 recognised in profit or loss	16	36
(Decrease) / increase in stockpiles, gold-in-process and refined gold inventories	(3)	8
Property plant and equipment additions (infrastructure facilities and stripping activity asset)	1	6
Total costs related to COVID-19	14	50

	Three months ended 30 September	Nine months ended 30 September
	2021	2020
Cost of gold sales (Employee compensation)	27	34
Other expenses, net	33	38
Total expenses related to COVID-19 recognised in profit or loss	60	72
(Decrease) / increase in stockpiles, gold-in-process and refined gold inventories	-	17
Property plant and equipment additions (infrastructure facilities and stripping activity asset)	14	17
Total costs related to COVID-19	74	106

PJSC “POLYUS”
NOTES TO THE CONDENSED CONSOLIDAT ED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED 30 SEPTEMBER 2021 (UNAUDITED)
(in millions of US Dollars)

22

1. 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

Fair value inputs	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. 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 September 2021		31 December 2020
	Carrying amount	Fair value	Carrying amount	Fair value
Eurobonds (Level 1)	1,736	1,827	1,734	1,852
Borrowings (Level 2)	1,286	1,286	1,277	1,278
Rusbonds (Level 1)	274	273	473	497
Total	3,296	3,386	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.

1. 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.

PJSC “POLYUS”
NOTES TO THE CONDENSED CONSOLIDAT ED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED 30 SEPTEMBER 2021 (UNAUDITED)
(in millions of US Dollars)

23

Information about significant subsidiaries of the group

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

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

1. 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 October 2021, the group issued USD 700 million notes with coupon rate 3.25% and maturity date in October 2028. Proceeds from this issuance were partly used to perform partial buy-back of 2023 and 2024 notes in amount of USD 458 million and USD 148 million respectively.