PETROPAVLOVSK PLC Investor Presentation April 2020
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PETROPAVLOVSK PLC
Investor Presentation
April 2020
1
Cautionary and forward-looking statements
— Some statements contained in this presentation or in documents referred to in it are or may be forward-looking statements, including
references to guidance. Such statements reflect the Company’s current views with respect to future events and are subject to risks,
assumptions, uncertainties and other factors beyond the Company’s control that could cause actual results to differ from those
expressed in such statements. Although the Company believes that such forward-looking statements, which speak only as of the date
of this presentation, are reasonable, no assurance can be given that they will prove to be correct. Therefore, you should not place
undue reliance on these statements
— There can be no assurance that the results and events contemplated by the forward-looking statements contained in this presentation
will, in fact, occur. The Company will not undertake any obligation to release publicly any revisions to these forward-looking
statements to reflect events, circumstances or unanticipated events occurring after the date of this presentation, except as required by
law or by any appropriate regulatory authority. Nothing in this presentation or in documents referred to in it should be considered as a
profit forecast.
— The past performance of the Company and its securities is not, and should not be relied on as, a guide to the future performance of
the Company and its securities
— This presentation does not constitute, or form part of or contain any invitation, recommendation or offer to any person to underwrite,
subscribe for, buy, sell, otherwise acquire, exchange or dispose of any shares or securities in the Company or advise persons to do
so in any jurisdiction, including, but not limited to, the Russian Federation, nor shall it, or any part of it, form the basis of or be relied on
in any connection with or act as an inducement to enter into any contract or commitment therefore or engage in any other investment
activity. In particular, this presentation and the information contained herein are not an offer of securities for sale in the United States.
This presentation does not constitute an advertisement of any securities in the Russian Federation
— No reliance may be placed for any purpose whatsoever on the information or opinions contained in this presentation or on its
completeness and no liability whatsoever is accepted for any loss howsoever arising from any use of this presentation or its contents
or otherwise in connection therewith.
— The development and production plans and estimates set out herein represent the current views of the Company's management. The
Company’s Board reviews the production estimates on an ongoing basis. All planning is subject, inter alia, to available funding and
capital allocation decisions
— English law and English courts will have exclusive jurisdiction over any disputes arising from or connected with this presentation
2Company Overview
A premium-listed Russian gold miner and processor with strong technical capabilities
7.6Moz 18 year 1 620 - 720koz
of only two POX plants in
Gold mined to date Average mine life 2020e production
Russia
Mining & Processing
Pioneer
St Petersburg Albyn
- RDC Hydrometallurgy
Malomir
Pokrovskiy
Moscow Blagoveshchensk
- Petropavlovsk Moscow - Regis Exploration
- PHM Engineering - Kapstroi Construction
London
- Petropavlovsk Plc
- Corporate headquarters
Irkutsk
Open-pit mine Analytical labs - Irgiredmet Institute
Underground mine R&D
POX Hub Offices IRC Ltd. (non-core)(1)
(1) 31.1% equity interest 3Investment Highlights
A major Russian gold producer, operating in the Far East of Russia for over 25 years
1
Future production growth and optionality to process refractory ore at the
Pressure Oxidation (POX) Hub
2
Exploitable long life mineral resource base (20.5Moz) with additional
expansion potential (2,600km2 licence area)
3
Strategic location and access to developed infrastructure
4
Strong track record of mine development, expansion + asset optimisation
5
Experienced management team and skilled workforce, in-house technical
expertise and R&D facilities
6
Strong and experienced Board, fully compliant with the UK Corporate Governance Code
7
ESG focus: sustainable development is a key focus for the Group
4Premium Listing on the London Stock Exchange
Share price and key market drivers(1) Shareholder structure(2)
Price (GBP, pence) 20.20p Uzhuralzoloto
Other 22.4%
52 Week Range 7.58p – 23.50p 28.5%
Avg. Daily Vol (12m) 9,161,456
Shares outstanding 3,310,210,281
Market Cap. £668.7m (US$772.2m)
Canaccord Genuity Wealth Mgt
EV £1,127.4m (US$1,302.0m) 1.2%
BlackRock Inv Mgt - Index
1.2% Prosperity Capital
Gold PM Fix $1,553/oz Mgt
Legal & General Inv Mgt 15.7%
52 Week Range US$1,270/oz - US$1,680/oz 1.8%
Interactive Investor
1.9% Everest Alliance
Dimensional Fund Advisors Ltd
USD:RUB FX 79.22 2.0% 7.1%
Abu Dhabi Inv Authority
52 Week Range 61.01 – 80.68 2.5%
Fortiana Holdings
East Capital Slevin Ltd 4.6%
Hargreaves Lansdown Asset Mgt 3.5%
3.0% 4.5%
Share price and trading volumes(1)
25p 120m
Price Vols
20p 100m
80m
15p
60m
10p
40m
5p 20m
0p 0m
Ma r 2019 Ma y 2019 Jul 2019 Sep 2019 Nov 2019 Jan 2020 Mar 2020
(1) As at 23 Mar 2020 5
(2) As at 29 Feb 20202019 Achievements and 2020 Goals
A significant business turnaround has been achieved, with a clear set of goals for 2020
2019 Achievements 2020 Goals
Production Production
ü 42% yoy increase in gold production to 517.3koz ü Gold production guidance of 620koz - 720koz, including 3rd
ü Avg. realised gold price of US$1,346/oz (+7% vs. FY 2018) party concentrate
Flotation and POX ü Focus on operational efficiencies + cost optimisation at existing
operations
ü Malomir flotation fully ramped-up, operating above design
parameters Flotation and POX
ü POX plant commissioned ahead of schedule and successfully ü Ongoing expansion of POX Hub à reduction in unit costs via
ramped-up the processing of third party concentrates
Balance Sheet ü Pioneer flotation construction to double Group refractory ore
processing capacity from 3.6Mtpa to 7.2Mtpa, on schedule for
ü S&P upgrade outlook to Positive affirming B- rating Q4 2020 launch
Corporate Balance Sheet
ü Convertible bond issue refinanced at a lower coupon ü Focus on net debt reduction targeting an ultimate Net Debt /
ü IRC loan refinanced with a more favorable payment schedule EBITDA ratio of 2.0x
Responsible business / ESG Corporate
ü LTIFR dropped by 36% to 1.61 accidents per 1m hours worked ü Complete acquisition of 25% of TEMI licences not already
owned at reduced price
ü Joined UN Global Compact Initiative on Corporate Sustainability
ü IRC disposal to Stocken to remove debt guarantees
ü 2 x new female Independent Non-Executive Directors appointed
bringing female representation up to c.22% Responsible business / ESG
ü Employee safety during the COVID-19 outbreak is our top
priority
6Q4 / FY 2019
Operating Results
7Q4 / FY 2019 Production Performance
Total 2019 gold production increase of 42% to 517.3koz vs. 2018
FY 2019 vs. 2018 production by mine-site Malomir (47.6koz Q4 / 180.3koz FY 2019)
Koz – Following 2018 flotation commissioning, Malomir has been
transitioning from mining non-refractory to mainly refractory
+132% +13% -11% ores for POX processing, resulting in lower non-refractory
200
volumes through the mill as processing switched
– Flotation plant exceeded design rate / recovery, allowing for
180.3
180 170.9 processing of lower grade material
RIP
– Mining of non-refractory ore in Q4 was mainly at
160 151.0 underground workings with some non-refractory gold from
transitional ores at the upper horizons of the Central pit
140 135.1
Albyn (44.7koz Q4 / 170.9koz FY 2019)
120.4
120 – Strong FY performance due to increased volumes of higher-
grade ore from lower sections of main ore body + southern
RIP POX
100 flank
– In Q4, production from Albyn pit was slightly above budget in
77.6
80 terms of mining, processing, production
Pioneer (36.9koz Q4 / 120.4koz FY 2019)
60
45.7 – Processing of harder ores from bottom of the pits resulted in
40 RIP POX RIP RIP RIP RIP a c.12% decrease in milled ore volumes
POX
– As a result, despite achieving higher recoveries + grades,
20 overall production was slightly lower y.o.y.
POX 3rd party concentrates (32.5koz Q4 / 45.7koz FY 2019)
0
2018 2019 2018 2019 2018 2019 2018 2019 – 32.5kt processed @ 61.6g/t, 94.9% recovery
Malomir Albyn Pioneer POX Plant – Gold doré production lower than gold recovered due to
(3rd party concentrates) fluctuation of gold in circuit
8FY 2019 Environmental Performance
Reporting in line with international standards
Lost Time Injury Frequency Rate (LTIFR) Energy Intensity
Accidents per million hours GJ/oz
-36% -14%
12.03
2.52
1.61
10.40
FY 2018 FY 2019 FY 2018 FY 2019
Greenhouse Gas Emissions (GHG) Intensity Water Intensity
Normalised per ounce of gold produced, t CO2e/oz m3/oz
-11% -10%
1.01 50.25
0.90 45.33
FY 2018 FY 2019 FY 2018 FY 2019
― Significant drop in LTIFR due to Company initiatives, including increased H&S training and stricter onsite safety monitoring procedures
― Increase in overall production led to an inevitable rise in energy and water consumption on an absolute basis
― However, due to a more efficient use of resources across the company’s operations, intensity of consumption has fallen on a per oz basis
as evidenced by a reduction in GHG intensity
9Corporate Update
10Potential Disposal of 29.9% IRC Shareholding and Guarantee Removal
Stocken Board AG to acquire 29.9% holding conditional upon guarantee removal
– Stocken is a Liechtenstein-incorporated investment company
– Under the agreement, Stocken can acquire a 29.9% stake(1) in IRC Ltd for a US$10m cash consideration which is a discount to
the underlying market value of the shares(2)
– The sale is conditional upon Gazprombank agreeing to release Petropavlovsk from its obligation to guarantee IRC’s debt within
180 days
– Stocken has until 31 December 2020 to pay Petropavlovsk for the shares, or return the shares but without the guarantees
(1) Higher than this amount would trigger a mandatory takeover offer for the holding 11
(2) At the time the preliminary agreement was signed, the market value of the 29.9% holding in IRC was around US$18.6mPetropavlovsk’s guarantee of IRC’s new debt facilities
How the IRC guarantees with Gazprombank work…
The Gazprombank debt facility Petropavlovsk guarantee structure
— In Dec 2018, K&S (a subsidiary of IRC) entered into a — New facility comprises of 5 guarantees which fluctuate over life
US$240m facility with Gazprombank of loan
— This new facility was approved by Petropavlovsk shareholders — Current guarantee amount is US$160m (Corporate Guarantee
in Mar 2019 and was drawn down by IRC + Fixed Term Guarantee)
— Replaces an earlier facility with ICBC on more favourable terms — The Corporate Guarantee will be removed subject to certain
operational conditions at the K&S project being met(1)
— Extended repayment period through to 2026
Corporate Fixed Term Total Guarantee
— Principal repayment skewed to the latter part of the loan Guarantee Guarantee Liability
term
2019
— Amortisation schedule better aligned to the ramp-up of US$40m US$160m
the K&S iron ore mine 2020 US$120m
2021 2021: US$160m
US$40m
2022 2022: US$40m
2023
US$40m US$40m
2024
2025
US$120m US$120m
2026
(1) These conditions are considered to be ‘base case’ and the Company expects these will be achieved within a 3 year time-frame
12Option agreement to acquire outstanding 25% stake in TEMI LLC
The prospective Unglichikan, Afanasevskoye and Elginskoye deposits sit within TEMI
About TEMI
– TEMI contains(1) 4.00Moz of JORC Resources, of which
1.95Moz are Reserves (1.53Moz non-refractory)
– Non-refractory reserves suitable for processing at the
Unglichikan nearby Albyn plant
JORC Resources 1.17Moz
JORC Reserves 0.46Moz – The project was discovered and developed by
Petropavlovsk as a 75% owner of the licence
– The Company is currently exercising an option to acquire
the remaining 25% in an arms-length transaction
– Production at Elginskoye is scheduled to begin H2 2020,
coinciding with depletion of Albyn main pit
Albyn
JORC Resources 5.35Moz
JORC Reserves 2.32Moz TEMI option and purchase agreement
– The Option was put in place in May 2019 and secured the
Afanasevskoye purchase price
JORC Resources 0.03Moz
– The Company intends to exercise the option before May
2020 and benefit from a reduced purchase price of
US$53.5m using shares given the strong price performance
Elginskoye – Issuing shares requires shareholder approval and the
Company expects to have a General Meeting in April
JORC Resources 2.78Moz
JORC Reserves 1.48Moz – Under a separate agreement, the shares will be issued at
Scale £0.179 à c.226.3m new shares(2) would be created
– The seller of the 25%, Agestinia Trading Ltd, will own
Open-pit mine = 5km 6.4% of the Company
(1) JORC Reserves and JORC Resources as at 31 Dec 2018 (Consolidate basis) 13
(2) US$53.5m / US$:GBP£ FX of 1:1.3206 = £40.51m / £0.179 price per Ordinary Share = c.226.3m new sharesPOX: Technology Driven
Growth
14POX: Introduction To Refractory And Double Refractory Gold Ores
POX – one of the most efficient and environmentally-friendly ways to extract gold from
refractory ore
Refractory + Double Refractory Ore Refractory Reserves(1) Refractory Resources (1)
— “Refractory” ore contains gold encapsulated in
sulphides which resists recovery via standard methods
— Sulphides need to be broken down chemically or Albyn Pioneer Albyn Pioneer
open-pit 1.1Moz
open-pit open-pit
mechanically open-pit
0.4Moz 2.0Moz
4.2…
0.4Moz 2.0Moz 1.1Moz 4.2Moz
— “Double refractory” ore also contains carbon, which
impacts recoveries à special measures are required to 9%
8%
neutralise carbon’s effect
38% 34%
Main Options to Treat Gold Bearing Refractory Ores 5.3Moz 12.3Moz
Total Total
51%
54% 2%
3%
Pressure 1. POX: oxidation in an
Oxidation autoclave: high pressure
(POX)
+ temperature
Malomir
2.7Moz Pioneer Malomir Pioneer
2. Roasting: oxidation 0.2Moz 6.7Moz 0.3Moz
Roasting open-pit U/G open-pit U/G
via high temperature 2.7Moz 0.2Moz 6.7Moz 0.3Moz
High Grade roasting
Concentrate
3. BIOX: oxidation using
Bio bacteria ‒ 65% (5.2Moz) of the Group’s total Reserves (8.2Moz) are refractory
Oxidation
(BIOX) 4. UFG: fine grinding ‒ 60% (12.3Moz) of the Group’s total Resources (20.5Moz) are refractory
Ultra- releases gold
Fine encapsulated in sulphides
Grinding or other minerals By design, our POX Hub is able to treat some of the most
technologically complex refractory ore concentrates
(1) As at 31 Dec 2018, in accordance with the JORC Code 2012. Reserves are shown as Proven + Probable. Resources are inclusive of Reserves 15The POX Hub
The POX Hub is well positioned in terms of easy access and well developed infrastructure
Concentrate Transportation:
Km
Malomir to POX
Truck: Malomir to Fevralsk 166
Rail: Fevralsk to Tygda 1,134
Truck: Tygda to POX Hub 18
Total 1,318
Albyn
Malomir
Tygda(1)
Pioneer
Pokrovskiy POX Hub
CHINA
Transportation route Fevralsk(1)
Railway
Operating mines
Underground mine Pilot POX Plant
POX
Analytical labs
Blagoveshchensk
Hydro power plant
(1) Fevralsk and Tygda are rail loading facilities 16POX: The Heart of Our Future Strategy
POX to reach full potential by 2021, with 65% of ores mined being refractory(1)
Contribution of Refractory Ores at Malomir +
POX ramp-up (ktpa)(1)(2)
Pioneer (Mtpa)(1)
500 % of total which
16 70
Capacity Range(2) is refractory
450
14 60
4 autoclaves
400
Albyn
12
350 50
300 10
Concentrate (kt)
40
250
Malomir
8
30
200
6
150
2 autoclaves
20
4
100
Pioneer
2 10
50
0 0 0
2018a 2019a 2020e 2021e 2022e 2019a 2020e 2021e 2022e
Pioneer Malomir Albyn 3rd Party Pioneer non-ref Pioneer flotation
Malomir non-ref Malomir flotation
Pioneer Malomir 3rd Party Ore Albyn non-ref % Refractory (RHS)
(1) Assumes 3rd flotation line at Malomir from 2021
(2) Capacity ranges depend on concentrate parameters, particularly Sulphur content 17POX Processing Costs: Fixed vs. Variable
Overall POX processing costs decline rapidly to c.US$100/t as throughput is increased
Unit cost of processing and throughput rates Comment
H1 to H2 2019 FY 2019 to FY 2020
250 – Through the early ramp-up period in H1 2019, the
76kt
proportion of fixed costs was c.2/3 of total POX
processing costs
188kt
Fixed costs decrease rapidly
200 on a per tonne basis as – The share of fixed costs decreases as plant
112kt
throughput is increased
utilisation increases
– H1 2019 processing cost equated to around
150 US$230/t concentrate, which fell to c.US$180/t in
US$/t
H2 2019
340kt
450kt 450kt – As throughput is increased to full capacity,
100
unit processing costs decline rapidly to
c.US$100/t
50
0
H1 2019 H2 2019 FY 2019 FY 2020 FY 2021 FY 2022
Throughput (ktpa) Fixed Cost Variable Cost
18Autoclave Peer Analysis
POX technology around the world
Project Start POX Feed POX Capacity Autoclaves Temp Pressure ~S Feed Reserves
Pueblo Viejo 2012 Whole Ore 24,000tpd 4 230C 3,450kPa 6.8% 2.8g/t
Goldstrike 1990 Whole Ore 16,000tpd 6 220C 2,900kPa 2.5% 3.9g/t
Copler 2018 Whole Ore 6,000tpd 2 220C 3,150kPa 4.8% 2.8g/t
Whole Ore &
Lihir 1997 25,000tpd 4 205C 2,650kPa 6.0% 2.3g/t
Concentrate
Whole Ore &
Twin Creeks 1997 10,400tpd 2 225C 3,170kPa 4.5% 1.8g/t
Concentrate
Kittila 2008 Concentrate 870tpd 1 207C 2,500kPa 18.0% 4.7g/t
Amursk 2012 Concentrate 616tpd 1 200C 2,170kPa 6.5% 5.2g/t
Porgera 1990 Concentrate 16,400tpd 4 197C 1,750kPa 14.0% 4.8g/t
Macraes 1999 Concentrate 650tpd 1 225C 3,140kPa 9.0% 1.1g/t
Corrego do Sitio 2011 Concentrate 240tpd 1 230C 3,600kPa 7.8% 4.1g/t
Pokrovskiy 2018 Concentrate 1,370tpd 4 225C(1) 3,500kPa(1) 23.0% 1.0g/t
Stibnite (Project) 2023E Concentrate 20,000tpd 1 220C 2,400kPa 5.5% 1.6g/t
Donlin (Project) 2025E Concentrate 8,500tpd 2 220C 3,250kPa 7.0% 2.1g/t
Lagunas Norte
2026E Concentrate 6,000tpd 1 - - 8.0% 2.9g/t
(Project)
Certej (Project) - Concentrate 2,600tpd 2 230C 3,547kPa 13.0% 1.7g/t
(1) Pokrovskiy POX Hub achieved autoclave pressure of 3,000kPa and a temperature of 220˚С, as ramp-up to design parameters continues 19POX: A World Class Team
A world class research and development expertise lead by a world class team
Gidrometallurgia: Petropavlovsk’s Scientific Research Centre, established to support the POX project
— Unique laboratory, created the concept of the POX project for the Group, including key technological parameters
— Equipped with state of the art autoclave laboratory facilities (laboratory + pilot testing, feasibility work + audits)
— Unique team of 40 specialists incl. PhD holders, who have undertaken a range of work for c.30 third party companies in addition to POG
Irgiredmet: The Irkutsk Research Institute of Precious and Rare Metals and Diamonds
— Founded in 1871, over 140 years of expertise in R&D, design + engineering
— Helped to develop flotation process / testing, laboratories performed autoclave leaching tests
— 10 specialised technological laboratories with c.300 highly qualified staff, more than 25 patents in the fields of mining / metallurgy
— Annually carries out more than c.200 researches assignments for third party companies, incl. R&D activities to help develop new deposits
Pilot Test Plant: Petropavlovsk’s experimental industrial model pilot processing plant
— Launched in 2009, the plant is the first and only of its kind in Russia
— Small scale autoclave to test all parameters of the process
— Unique asset giving Petropavlovsk the flexibility to test any type of gold recovery process on a smaller scale
— Also carries out test work / scenario analysis for external third party companies
PHM Engineering: engineering and construction supervision of the Group’s processing assets, including the POX Hub
— Responsible for new project feasibility work, technical design, permitting, equipment selection, oversight of manufacturing process,
installation, commissioning
— Over 50 employees including PhD holders
Our partners and industry specialists: over 20 leading industry companies contracted to help us successfully develop / launch the
POX Hub
— Shanghai Morimatsu (autoclaves), LOTERIOS SpA (pressure pipe lines), DSB Säurebau GmbH (titanium inner gear + autoclave linings),
Outotec (flotation, control / automation equipment), Feluwa Pumpen GmbH (acid resistant high-pressure slurry pumps), MOGAS
Industries (valves), Red Mountain Energy Corporation (oxygen plant)
20Balance Sheet
21Liquidity and Debt Overview
Recent bond restructuring has strengthened near-term liquidity position
Group debt maturity schedule (US$m) Targeting mid-term Net Debt / EBITDA of c.2.0x
FY 2018 EBITDA affected by
US$500m notes refractory concentrate
maturing Nov 2022 stockpile build-up during POX 4.0x
with 8.125% commissioning phase
coupon 3.7x
3.5x
500
3.0x 3.0x
US$125m
convertible bond
matures
978 Refractory
Jul 2024 with 930
8.25% coupon
638 610 Target
611 599 596 585 594 568 Refractory
c.2.0x
125
100
2019 2020 2021 2022 2023 2024 2025 2026 2014 2015 2016 2017 2018 2019 - 2022
Total debt Net debt Net debt / Underlying EBITDA
22Improving Credit Rating
An improved credit rating reduces the Company’s cost of capital
Key highlights from latest report Key highlights from latest report
B- (Outlook Positive) B (Outlook Positive)
(outlook upgraded from Negative) (upgraded from CCC)
Last review: Oct 2019 Last review: Aug 2019
– Significant strengthening in liquidity position
– POX commissioning to have a positive impact on 2019
financials – Convertible bond successfully refinanced
Highlights
– IRC debt refinancing to improve liquidity position – Repayment of US$57m bridging loan by IRC
– Increased visibility for production following POX commissioning
– Development of underground operations
– Significant deleveraging by end-2020
– Expanding the Board reinforced corporate governance
– Improved corporate governance
ñ Successful convertible bond refinancing
ñ FFO adjusted gross leverage remaining sustained below 4x
ñ 2019 EBITDA growth in line with S&P base case
Triggers
Upside
ñ Sustained FCF margin with funds used for reduction of gross debt
ñ Improved credit metrics backed by potential sale of IRC stake
ñ Improvement of production volumes and cash costs
ñ Building up successful POX track record
ñ Improvement in corporate governance
ñ Delivery on revised business strategy
Downside
Triggers
ò 2019 EBITDA may not materially improve vs. 2018
ò Deterioration of liquidity and / or aggressive dividend distributions
ò Difficulty in refinancing the US$100m convertible bond due
ò Failure to improve production volumes
2020
Source: S&P and Fitch rating reports 23Responsible Business
24Our Response to Global COVID-19 Pandemic
To address the threat of the virus, Petropavlovsk reinforced its policies and initiatives to protect
its staff and minimise the probability of the virus developing at its operations
Risk mitigation strategies introduced, focused on protecting all employees. Measures include:
— Provision of regular advice to help prevent infection or spread thereof
— Thorough reporting culture of any infection or illness
— Appropriate resourcing to medical facilities across the Group
Zero(1) reported cases of COVID-19 within Amur region or at any of Petropavlovsk’s mining, research or administrative operations in
Russia or London
No disruptions to supply chain or logistics - business operations continue as normal
Continuous monitoring on a day-to-day basis of potential impact the virus may have on the welfare of employees, communities
and the operations of the business
Continuous monitoring of supply chain logistics, which are almost entirely sourced within Russia and remain fully functional
Recent devaluation of the Rouble and fall in oil prices are both beneficial to the Company’s cost of operations
Petropavlovsk continues to actively monitor COVID-19 news and impact, while following regulations and
guidelines imposed by both Russian and UK authorities to protect the health and wellbeing of its staff
(1) As at 17 Mar 2020 25Sustainable Development
Maintaining leading ESG Practices
Health and Safety Corporate Governance
— Full compliance with UK Corporate Governance Code
— Full compliance with applicable health and safety legislation
— Safety, Sustainability and Workforce Committee formed in Nov
— H&S management systems 2018
— Regular external + internal audits / inspections — Annual review + publication of a revised Modern Slavery
— Development of safety culture Statement
— Remuneration disclosure
— Risk management to mitigate impact
— Established Code of Conduct and Business Ethics
— High quality task specific training
Social Responsibility Environmental Management
— Major tax payer in Amur region — Environmental Management system compliant with GOST R
ISO 14001- 2016 (ISO 14001:2015)
— Active engagement with Indigenous communities
— Optimisation of energy consumption, water recycling, GHG
— Establishment of POX Hub part of government’s policy to develop monitoring + reporting in line with international standards
Russian Far East
— Strict control cyanide management
— Accessible and effective grievance procedure
— Fully compliant + insured tailing management facilities
— Trade Union: 1,616 members, 18% of employees
— Ongoing land rehabilitation + conservation of biodiversity
— Equal career opportunities regardless of gender
— Effective waste management (31% of all waste is reused)
— Pokrovskiy Mining College
Petropavlovsk is not only fully compliant with regional, national + international legislation, but is striving to
perform in line with best industry practices
26Strong corporate governance supported by an experienced Board
Board fully compliant with the UK Corporate Governance Code
Sir Roderic Lyne (N*) Dr Pavel Maslovskiy (N) (S) (E*) Mr Harry Kenyon-Slaney (S*) (A) (N)
Non-Executive Chairman Chief Executive Officer – Appointed Nov 2018, became Senior
– Appointed as Chairman following Jun – Re-appointed in Jun 2018 Independent Director April 2019
2018 AGM – Сo-founded the Company in 1994 – Currently holds positions of Non-Ex.
– Previously was a Non-Ex. Director of – CEO of Petropavlovsk 1994-2011 Chairman at Gem Diamonds, Non-Ex.
Aricom PLC and Petropavlovsk PLC (when acted as Senator-Member to Director at Sibanye Gold
– Served as British Ambassador to Federation Council) and again 2014- – 33 years experience, principally with
Russia from Jan 2000 until Aug 2004 2017 Rio Tinto
Mr Damien Hackett (N) (A) (R) (S) Mr Robert Jenkins(A*) (R*) (N) Mr James W Cameron Jr (A) (R)
– Appointed Oct 2018 – Re-appointed June 2018 – Appointed Oct 2018
– Mr Hackett is Chairman of UrAmerica – 25 years of Russia-related investment / – Formerly Founder, CEO + Chairman
– Has 26 years critical research natural resources experience
of Occupational Urgent Care Systems
experience covering globally diverse – Previously CFO of two Russia-focused
natural resources companies – Extensive experience, providing
mining companies expertise and consulting services for
– Former Vice Chairman Mining – Formerly held Board appointments
with Ruspetro PLC and Toledo Mining companies in Russia and the former
Advisory at Canaccord Genuity USSR
PLC
Ms Charlotte Philipps (A) (R) Mrs Katia Ray (R) (S)
– Appointed Nov 2019 13% 12%
– Appointed Nov 2019
– Extensive natural resources sector – Over 25 years’ of mining sector Non-Executive Chairman
corporate finance and transactional experience in senior leadership roles
experience across CIS / CMEA
with Rio Tinto plc and Anglo American 8 Executive Director
– Member of the Strategy / Investment
Committee at Inter RAO plc Directors
– Member of the Advisory Board of – Founded a management consulting
Indep. Non-Exec. Directors
CAPTIS Intelligence Inc. firm advising corporate mining
– Previously held senior positions at companies and private equity groups 75%
EBRD and AIG Russia Century Fund and start-ups
(S) Member of the Safety, Sustainability and Workforce Committee (A) Member of the Audit Committee (E) Chairman of the Executive Committee
27
(N) Member of the Nominations Committee (R) Member of the Remuneration Committee * Denotes role of Chairman of the CommitteeSustainability Management and Governance
The Board of Directors has appointed committees at Board level to oversee different aspects of
business, risks and performance
Board of Directors The Executive Committee
— Consists of both Executive Directors + key
operational management
— Responsible for overseeing implementation of
strategy, business targets + decisions made at Board
level, including decisions made by SS&W Committee
— Reviewing internal control and risk management
Mr Harry Kenyon - Structure for the Monitoring + Reporting of
Dr Pavel Maslovskiy Sustainability Performance Data
Slaney Chief Executive Officer
Chairman
5
Recommendations 1
are given to key HSE Performance
operational data is collected
Dr Alya management, which by key operational
Mr Damien Hackett then provides BoD management
Samokhvalova NED
Deputy CEO with feedback
4 2
A summary is Data + summary
made to the reports are
The newly formed Safety, Sustainability & Workforce Committee Board of submitted to the
(SS&W) is responsible for: Directors CEO + Deputy
3
— Reviewing + monitoring health, safety, environmental, sustainability CEO
Data + summary
processes + procedures reports submitted by
Deputy CEO to
— Assisting with the community relations + workforce engagement Executive + HSE
Committees
28ESG Performance Benchmarking(1)
Petropavlovsk vs. major gold companies
Energy consumption Greenhouse gas emissions (СО2) LTIFR(2) Women employees
(GJ / US$m of revenue) (tonnes / US$m of revenue) (cases per million working hours) (share of the total number of employees)
Pol yus Sib anye Sib anye 1.18 Petrop avlo vsk 24.6%
10,343 1,776
Ne w Go ld Incorp orated 7,080 Pol yus Ang log old Ash anti 1.14 Pol ymetal 20.0%
1,101
Ang log old Ash anti 6,652 Ang log old Ash anti Petrop avlo vsk 0.50 Gold Fie lds 16.0%
795
Sib anye 6,053 Petrop avlo vsk Gold Fie lds 0.45 Pol yus 15.4%
759
Kin ross 5,813 Ce ntamin Eld orad o Go ld Co mpan y 0.33 Ne w Go ld Incorp orated 15.2%
612
Petrop avlo vsk 5,316 Gold Fie lds Ce ntamin 0.26 Sib anye 13.0%
566
Barri ck Gol d 5,105 Pol ymetal Ne w Go ld Incorp orated 0.24 Barri ck Gol d 12.1%
480
Gold Fie lds 4,387 Ne w Go ld Incorp orated Barri ck Gol d 0.15 Ang log old Ash anti 12.0%
464
Pol ymetal 4,362 Kin ross Pol yus 0.09 Kin ross 11.0%
460
Eld orad o Go ld Eld orad o Go ld Co mpan y
Eld orad o Go ld Co mpan y 4,338 Co mpan y 450 Pol ymetal 0.09 10.0%
Ce ntamin 2,073 Barri ck Gol d Kin ross 0.07 Ce ntamin 2.0%
397
Well positioned among peers in terms of implementing ESG standards, with some social aspects better vs. peers (eg.
share of female employees). Room for further improvement to obtain an improved ESG rating in the mid-term
Sources: Thomson Reuters, company data
(1) Data for full year 2018 29
(2) Reporting standards vary, it is not always apparent whether all accidents are reported by a company. Petropavlovsk reports accidents at all facilities while
Russian legislation dictates to report the accidents at hazardous facilities onlySustainable Ratings
Well positioned among peers in the framework of Environmental responsibility and
sustainability disclosure
The Transparency Rating of Environmental ESG/CSR Rating(2)
Responsibility Project for M+M Companies of Russia(1) (out of 100)
80 79
1.59 74 73 73 72 69 68
1.43 67 64
1.33
1.04
0.53 0.48 0.38
Highlan
Polyus
Petropa
Kinross
Kamcha
Polymet
Nordgol
Gold of
d Gold
vlovsk
tka
al
d
Overall Rating Environmental Impact — Well positioned among the peers
22 place — Second best group (60-79)
2018 (0.27) 22-34 place 22-34 place Community
24 place 2017 (0.13) 2018 (0.36)
2017 (0.53)
Employees
Ecological Management Information Disclosure Score of 69 (out of 100)
based on Petropavlovsk’s
17 place 23-31 place disclosure of information
2018 (0.71) 2018 (0.50) Environment
25-26 place 18 place
2017 (0.13) 2017 (0.56)
Improved rating in every category, with the exception of Governance
Information Disclosure, an area where the Company has the
opportunity to improve in 2019
(1) World Wide Fund for Nature Russia 2018 30
(2) CSR Hub 2018Corporate Strategy
31Strategic Priorities
Asset rationalisation, organic and inorganic growth options
Opportunities Goal Implementation
‒ Disposal of controlling stake to a strategic
the business
Streamlining
‒ Eliminate IRC loan guarantee
investor alongside a transfer of the loan
‒ Improve credit rating
guarantee(1)
IRC sale ‒ Improve balance sheet metrics
‒ Alongside subsequent sale of the IRC stake, an
‒ Focus on gold
agreement with Gazprombank to eliminate IRC
‒ Achieve higher market multiples
guarantee
‒ Extend mine life at Albyn ‒ Construction of mine at Elginskoye
Elginskoye ‒ Utilise existing infrastructure ‒ Construction of road to Albyn plant
Organic Growth
‒ Maximise IRR ‒ Transportation of ore to Albyn RIP
‒ Optimise POX utilisation ‒ Construction of Pioneer flotation plant (initially 2
Increase feed of POX
‒ Secure concentrates with the best lines) with further expansion (3rd flotation line)
plant by processing
margins ‒ Expansion of flotation plant at Malomir (3rd
own concentrates
‒ Maximise IRR flotation line)
‒ Identification of higher grade refractory assets
Inorganic Growth
‒ Improve grade of POX feed material which can’t be developed at this moment
New Business ‒ Increase POX utilisation ‒ Identification of the most effective way to bring
‒ Expand margins + increase production together synergies of these assets and the
processing capacity of the POX Hub
‒ Fully benefit from POX facilities and ‒ Financed by JV partner
Autoclaves
POG’s comprehensive in-house R&D ‒ Adjustment of the technological process to
5 + 6 (JV option)
capabilities process complex material (eg. triple refractory)
(1) Petropavlovsk is a 31.1% holder of IRC 32Inorganic Opportunities: Refractory Deposits in Russia
A large number of known refractory deposits exist in the region and across Russia
Kyuchus Mayskoye
(Govt. owned) (Polymetal)
6.9Moz @ 9.3g/t 2.8Moz @ 11.4g/t
Nezhdaninskoye
(Polymetal)
7.9Moz @ 5.0g/t
Bogolubovskoye
(NOK) Zmeinoye
2.3Moz (Polyus)
0.4Moz @ 4.6g/t
Olimpiada
Itakinskoye Albazino
(Polyus) Malomir
1.3Moz @ 6g/t (Polymetal)
41.4Moz @ 2.9g/t 6.9Moz @ 0.8g/t
1.6Moz @ 4.6g/t
Kluchevskoye
(Sun Gold /
Veduga China Gold)
(Polymetal) 2.5Moz
0.9Moz @ 4.8g/t Nasedkino
(Mangazeya
Mining)
0.9Moz @ 2.1g/t
Poputninskoye Taseevskoye
(Polyus) (Highland Gold) Pioneer
POX Hub
4.3Moz @ 3.2g/t 5.1Moz @ 5.1g/t 5.9Moz @ 0.7g/t
33Inorganic Growth: 3rd Party Refractory Concentrates Market
Concentrate markets in Russia and Kazakhstan
1. Russia: 40% of gold resources are refractory
— Only limited refractory treatment capacity exists including two POX plants
— The majority of concentrates are exported to China
— Russia has declared gold as strategic asset and intends to prohibit exports of concentrates
— For environmental reasons, China is shutting down roasters - particularly those treating high arsenic / antimony(1)
2. Kazakhstan: another source of refractory concentrates
— Four refractory mines currently produce flotation concentrate, with potential to expand further
— Petropavlovsk has secured 20Kt of concentrate at 40g/t to 50g/t which it is currently processing at recoveries of 95%
Refractory Mines in Russia and Concentrate Availability (Ktpa)
Own Tonnes Potential Tonnes
Mine Owner Exports
Facilities Available (Kt) Available (Kt)
Olimpiada (Au)(2) Polyus ✘ ✔ 50
Olimpiada (Au,Sb)(2) Polyus ✘ ✔ 150
Bogolyubovskoye NGOK ✘ ✔ 30
Udereyskoye NGOK ✘ ✔ 35
Drazhnoe GV Gold ✘ ✔ 20
Badran Zapadnaya ✘ ✔ 10
Mayskoye(3) Polymetal ✘ ✔ 57
Total available volumes 145 207
(1) Petropavlovsk’s process can stabilise arsenic as scorodite which offers a more environmentally-friendly approach to roasting
(2) Olimpiada produces two types of flotation concentrates: 150Ktpa of concentrate is sold with an antimony content of up to 30% and 50Ktpa of gold 34
concentrates containing some antimony
(3) 57Ktpa of Mayskoye concentrate, which is not processed at the Amursk POX plant, may be availableAutoclaves 5 + 6 (JV Option)
Potential for a JV with another refractory producer or developer
– Existing onsite infrastructure enables two additional autoclaves lines (5 + 6) to be added, although some expansion of
oxygen capacity will be required
– Given the large number of refractory ore bodies in the region, the Company believes the development could be
funded via a JV with another refractory developer or producer
– Adjustment in technology can be made to process very complex refractory materials, including:
– Pyrrhotite-containing concentrates
– Bio-cakes
– Cuprous gold-bearing concentrates
– Carbonaceous concentrates from other deposits
– Concentrates obtained from the tails of existing mills
35Conclusions
36Summary: A Conservative Strategy Focused on Shareholder Returns
A holistic strategy directed at improving long-term shareholder returns
Cost optimisation + — Focus on operational efficiencies and cost optimisation at existing operations
1
margins — Gold price hedging / forward sales agreements are complementary measures
Increase production — Construction of new Pioneer flotation to double existing flotation capacity (Q4 2020 launch)
2 of our own refractory
concentrate — Malomir 3rd flotation line planned for 2023, but may be accelerated
Balance sheet — Improved cash generation via POX ramp-up
3
strengthening — Targeting Net Debt / EBTIDA of 2.0x
IRC:
4 — On 18 March 2020, the Company signed a preliminary agreement for the proposed termination of
realising value from
IRC guarantees and the disposal of 29.9% of the Petropavlovsk’s interest in IRC for US$10m
non-core assets
— Addition of 2 more autoclaves to the existing 4
POX capacity — 50% total processing capacity uplift from 400 – 500Ktpa to 500 – 750Ktpa
5
expansion — Autoclaves 1 to 4 to process own refractory ore, while 5 + 6 to process 3rd party material (JV
opportunities)
— Continue to generate maximum value from core assets via ongoing exploration both surface +
Committed to underground
6
exploration
— Potential licence acquisitions adjacent to the existing infrastructure
37Peer Group Valuation Analysis
A re-rating is underway – Petropavlovsk is the best performing stock over the past 12 months
EV / EBITDA (NTM) EV / Reserves (Gold Equivalent)
Times (x) US$/oz
$354
7.8x 7.6x $315
6.7x $292
6.2x $264
$244
5.0x $212
4.5x 4.4x $175
3.9x $166 $163
3.4x 3.2x
2.7x
$85
Highland $60
Polymetal
Polyus
Centamin
Barrick Gold
Newmont
Endeavour
Highland
Polymetal
Polyus
Centamin
Barrick Gold
Newmont
Endeavour
Centerra
Petropavlovsk
Eldorado
Centerra
Petropavlovsk
Eldorado
P / CF (NTM) Market Performance (LTM)
Times (x) %
152%
8.6x
7.5x 7.1x 6.8x 6.4x 6.3x 5.6x
56%
4.1x 3.8x
3.0x 2.7x 32% 34.3%
31% 26% 24% 21%
8%
-1% -5%
Highland
Polymetal
Polyus
Centamin
Barrick Gold
Newmont
Endeavour
Centerra
Petropavlovsk
Eldorado
Polymetal
Polyus
Centamin
Newmont
Barrick Gold
Endeavour
Highland
Centerra
Petropavlovsk
Eldorado
Source: Thomson Reuters, as 23 March 2020 38Appendix
39Mine By Mine JORC Resource Breakdown
New Resources at Pioneer, Albyn, Malomir + Pokrovskiy
Total JORC Resources (as at 31/12/2018) Non-refractory Resources
Refractory Resources
New Resources -
Explanation
8.2Moz 20.5Moz(1) 12.3Moz
40% 60%
Malomir Pioneer Albyn Pokrovskiy
6.7Moz 4.5Moz 4.2Moz
97% 76% 79%
6.9Moz 5.9Moz 5.3Moz 0.9Moz
1.1Moz
1.4Moz 21%
24% 0.9Moz
0.2Moz 100%
3%
RIP tailings for
Katrin Decrease due to
reprocessing via Albyn main ore body +
Nikolaevskya disposals + sterilisation
flotation + POX and Unglichikanskoye
Ulunginskaya due at POX facility
Quartzitovoye
(1)Total JORC Resources include Tokur asset, not shown in the split below. Tokur contains non-refractory Resources of 1.4Moz. For full details
please refer to the 2018 Petropavlovsk AR 40A Comparison of Russian POX Projects
There are only two gold POX processing plants in Russia, with a third under
construction
Polymetal Amursk POX 1 Polymetal POX 2 Pokrovskiy POX Hub
Commissioned 2012 Q3 2023 Q4 2018
Number of autoclaves 1 1 4
Concentrate processing
225Ktpa 250 - 300Ktpa 400 - 500Ktpa
capacity
Capex US$272m US$431m US$310m
Capital intensity US$1,210/t US$1,437/t - US$1,724/t US$620/t - US$775/t
Operational temperature 200 ˚С 240 ˚С 225 ˚С
Pressure 22 bar 43 bar 35 bar
POX recovery rate 97% 96% 93% - 98%
— A comparable amount of development capex was spent to develop the Pokrovskiy POX Hub vs. the Amursk POX 1 project despite
significant difference in processing capacity
— As such, the new Pokrovskiy POX facility has a low capital intensity
(1) The Pokrovskiy POX Hub achieved pressure of 30 bar and temperature of 220˚С. Ramp-up to design parameters continues 41Malomir And Pioneer Flotation Concentrate Parameters
Design vs. actual performance
Malomir Pioneer
Design
Parameter Design H1 2019a H2 2019e FY 2019e Comments (Stage 1)
H1 throughput on target, up to 10% increase in
Ore 1.8Mt (6m)
1.81Mt 1.8-2.0Mt 3.6-3.8Mt H2 due to better equipment utilisation and 3.6Mtpa
processing 3.6Mtpa (FY)
optimisation of processing operations
Flotation performance exceeded initial design
parameters, affording the opportunity to test
1.25g/t -
Scheduled process low grade ore at c.0.7g/t in Q1 2019
1.35g/t 0.97g/t(1) 1.25-1.30g/t 1.10g/t 1.1g/t
ROM grades
The tests confirmed its feasibility, hence lower
than design processed grades in H1 2019
Concentrate
5.5% 3.3% 3.5% 3.4% Up to 40% improvement in concentrate yield 2.90%
yields
vs. design: lower transportation and POX
Concentrate processing costs and higher grade concentrate
24g/t 26g/t 31g/t 28g/t 24.0g/t
grades
61-70kt (6m) Up to c.40% decrease in processed tonnage
Concentrate 100kt (6m) 59kt (6m)
120-140ktpa 120-130kt due to a positive decrease in yield: more gold 110ktpa
volumes 200ktpa (FY) 120ktpa (FY)
(FY) extracted into a smaller volume of concentrate
Recoveries 86% 87% 86% 86% Stable recoveries in line with the design 82%
— Stage 2 flotation expansion will increase capacity of Malomir and Pioneer flotation from 3.6 to 5.4 – 6.0Mtpa
— Similarly to Malomir, it is entirely possible that Pioneer flotation may outperform initial design parameters
(1) H1 2019a Malomir ROM grades included trial processing of lower grade refractory stripping material to understand the ability of the plant to
treat lower grade ore and the potential for lower cut-off grades 42You can also read
