PETROPAVLOVSK PLC Investor Presentation December 2019
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PETROPAVLOVSK PLC Investor Presentation December 2019 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
2
Petropavlovsk: An Overview
A premium-listed, Russian-focused gold mining and R&D business with in-house services
7.5Moz 18 year 1 450-500koz
of only two POX plants
Gold mined to date Average mine life 2019e Au production
in 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 3
qwasOf The Leading Gold Mining Companies In Russia
One
Vertically integrated gold mining business producing gold in doré
3 x gold mines over 2,600km2
Mix of open pit + underground Total licence area
c.14Mtpa Pressure Oxidation (POX) Hub
RIP processing capacity Successfully commissioned Q4 2018
over 7.5Moz Au c.450 - 500Koz
Produced to date(1) FY 2019 gold
production guidance
20.5Moz of JORC Resources(2)
incl. 8.2Moz of Reserves
US$305m US$83m 27%
Revenue H1 2019 EBITDA H1 2019 EBITDA margin
US$750 - 850/oz
FY 2019 Total Cash
Costs guidance
31% equity interest in IRC Ltd.
c.US$430m A low cost Hong Kong listed premium iron ore
Market cap producer(3)
(1) As at 30 Sept 2019, incl. gold produced by our alluvial operations and JVs (2) As at 31 Dec 2018, in accordance with the JORC Code. Resources (M,I&I) are incl. of Reserves
(3) Market capitalisation of IRC Ltd as at 5 Dec 2019 = US$99.8m, Petropavlovsk’s 31.1% holding on a mark to market basis = US$31.0m
4Investment highlights
1
One of the major gold mining companies in Russia
2
Highly efficient mining + processing operations
3
Strategic location and access to developed infrastructure
4
Potential to grow production via refractory ore processing at the newly launched
Pressure Oxidation (POX) Hub
5
Strong track record of mine development, expansion + asset optimisation
6
Exploitable + long life mineral resource base with high expansion potential
7 Experienced management team + skilled workforce, in-house technical expertise and
R&D facilities
5Premium listing on the London Stock Exchange
Share price and key market drivers(1) Shareholder structure(2)
Price (GBP, pence) 11.56p Roman Trotsenko
Other (via AEON Mining Ltd
52 Week Range 5.80p – 11.56p 31.5% & VTB Bank)
22.4%
Avg. Daily Vol (12m) 4,113,232 Dimensional Fund
Shares outstanding 3,310,210,281 Advisors
2.0%
Market Cap. £382.7m (US$501.4m)
EV £832.8m (US$1,091.2m) Hargreaves
Lansdown Prosperity Capital
Asset Mgt 14.5%
2.5%
Gold PM Fix $1,474/oz
52 Week Range US$1,237/oz - US$1,552/oz Canaccord Genuity
Wealth Mgt Everest Alliance
2.6% 7.5%
USD:RUB FX 63.87
52 Week Range 62.54 – 69.78 Fortiana Holdings
Norges Bank Abu Dhabi Inv
Slevin 4.6%
Inv Mgt Authority
4.5%
Share price and trading volumes(1) 3.4% 4.5%
14p 45m
Price Vols 40m
12p
35m
10p
30m
8p 25m
6p 20m
15m
4p
10m
2p 5m
0p 0m
Dec 2018 Mar 2019 Jun 2019 Sep 2019 Dec 2019
(1) As at 4 Dec 2019 6
(2) As at 5 Dec 2019Exploitable and long life mineral resource base with high expansion potential
Well positioned within the industry in terms of gold reserves and average mine life
P&P Reserves (2018)
In Moz
c.20.5Moz of JORC Resources,
of which c.8.2Moz are JORC Reserves
64 (refractory + non-refractory)
Exploration work suggests potential for
24 the discovery of additional resources
18 17 15
8 7 7 6 5
Polyus Polymetal IAMGOLD Eldorado Gold Nordgold Petropavlovsk Centamin Endeavour Highland Gold Acacia
Mining
Average mine life(1)
Years
49
26
21 20 19 17 15 15
10 9
Eldorado Gold Polyus Highland Gold IAMGOLD Petropavlovsk Nordgold Polymetal Centamin Acacia Endeavour
Mining
Source: Company data, Bloomberg, companies’ annual reports
(1) Calculated as 2018 P&P Reserves divided by annual production in 2018
7Petropavlovsk:
Today & Tomorrow
8Operational and Corporate Achievements
Over the last 12 months, a significant business turnaround has been achieved
Recent Achievements
Flotation
✓ Malomir flotation plant fully ramped-up and operating above design parameters
✓ Ongoing Pioneer flotation construction to double refractory ore processing capacity
POX Hub
✓ POX plant commissioned ahead of schedule and successfully ramped-up
Financial Performance
✓ H1 2019 TCC better than lower end of guided range
Debt
✓ Convertible bonds refinanced at a lower coupon
✓ IRC loan refinanced with a more favorable payment schedule
Corporate
✓ Third party advisor retained to review and assist with ESG ratings / communication
✓ Independent Board constituted
9H1 2019 Financial Results Highlights
Strong set of financials overall: costs and capex down, revenue, EBITDA and profits up
1 Group Revenue (US$m) 2 EBITDA (US$m) 3 Total Cash Costs (US$/oz) 4 Capex (US$m)
+13% +37% -6% -33%
83 899 67
305 841
270
61
45
H1 2018 H1 2019 H1 2018 H1 2019 H1 2018 H1 2019 H1 2018 H1 2019
10H1 2019 Group Total Cash Costs (TCC)
Fall in TCC despite underutilised capacity POX , further improvement expected in H2 2019
Avg. RUB:US$ FX
Electricity (+5%) Higher grades +
End of tax relief on depreciated by 10% Lower stripping in H1
Diesel (+18%) recoveries at Albyn
capital investment(1) from 59.3 (H1 2018) to 2019 vs. H1 2018
Materials (+10%) and Malomir
65.2 (H1 2019)
52 30
80
131 56
32 0.5
US$899/oz US$841/oz
-6%
H1 2018
Inflation
FX
H1 2019
Mining tax
POX ramp-up
Other taxes
recoveries
Deferred
Change in
stripping
related costs
grades /
(1) The Russian statutory mining tax rate is 6%. Under Russian Federal Law 144-FZ dated 23 May 2016 that introduced certain amendments to the
Russian Tax Code, taxpayers who are participants in Regional Investment Projects have the right to apply reduced mining tax rate provided certain 11
conditions are met. Malomir and Albyn met eligibility criteria and applied 1.2% mining tax rate in H1 2019. Pokrovskiy applied full mining tax rate in H1
2019H1 2019 Mine By Mine TCC
Overall H1 2019 Group Total Cash Costs (TCC) reduced by -6% yoy, with all mines profitable at
H1 2019 avg. realised gold price levels
H1 production 11koz above plan H1 production 3.6koz above plan H1 production 7.4koz below plan
1,138
971
884 860 843
622
-30% -12% +35%
Albyn Malomir Pioneer
H1 2018 H1 2019 % change yoy
12H1 2019 AISC and Capex
Decrease in Group AISC and Capex due to strong operating performance and financial
discipline
H1 2018 vs. H1 2019 AISC (US$/oz) H1 2018 vs. H1 2019 Total Capex Spend (US$m)
1,506
1,186 34.0
1,110 1,116
1,013
731
13.0
10.4 9.1 10.2
-34% -15% +35% 8.5 8.2
6.1 5.6
2.8 3.1
1.1
Pioneer
Malomir
Albyn
Pioneer
Exploration
Malomir
Other
POX
Albyn
H1 2018 H1 2019 % change yoy H1 2018 H1 2019
(1) The majority of Pioneer’s capex (US$10.4m of development + US$2.1m of exploration), is categorised as sustaining, resulting in increased AISC
13
in H1 2019Liquidity and Debt Overview
Recent bond restructuring has strengthened near-term liquidity position
Group debt maturity schedule (US$m) Targeting mid-term Net Debt / EBITDA of c.2.0x
US$500m notes
FY 2018 EBITDA affected by
Maturity: Nov 2022
refractory concentrate
Coupon: 8.125% 4.0x
stockpile build-up during POX
Price: 101.7(1)
commissioning phase
YTM: 7.4%(1)
3.7x
3.5x
500
3.0x 3.0x
US$125m convertible bond
Maturity: Jul 2024
Coupon: 8.25% 978 Refractory
930
Price: 121.3(1)
YTM: 3.22%(1)
Target
638 610 611 599 596 585 594 568 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
(1) As at 4 Dec 2019 14Improving 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
– Repayment of US$57m bridging loan by IRC
– IRC debt refinancing to improve liquidity position
– 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
Successful convertible bond refinancing
FFO adjusted gross leverage remaining sustained below 4x
2019 EBITDA growth in line with S&P base case
Triggers
Upside
Sustained FCF margin with funds used for reduction of gross debt
Improved credit metrics backed by potential sale of IRC stake
Improvement of production volumes and cash costs
Building up successful POX track record
Improvement in corporate governance
Delivery on revised business strategy
Downside
Triggers
2019 EBITDA may not materially improve vs. 2018
Deterioration of liquidity and / or aggressive dividend distributions
Difficulty in refinancing the US$100m convertible bond due
Failure to improve production volumes
2020
Source: S&P and Fitch rating reports 15FY2019 Outlook
On track to meet FY 2019 guidance of 450Koz – 500Koz gold with lowered cost guidance
Malomir — c.160Kt – 165Kt of refractory concentrate at 28g/t – 29g/t to be processed this year, of which:
Concentrates — c.35Kt of concentrate at 28g/t produced / stockpiled in 2018
(at POX) — c.125Kt – 130Kt of refractory concentrate at 28g/t – 29g/t produced in FY2019e(1)
3rd Party — 38Kt at 40g/t – 75g/t Au secured H1 2019(2)
Concentrates — Additional c.20Kt at 49g/t - 75g/t Au currently under negotiation
(at POX) — Concentrate is from Russia and Kazakhstan
— TCC revised downwards to US$750 – US$850/oz due to strong operational achievements including a
Costs smoother-than expected ramp-up of the POX Hub (RUB : US$ FX of 66)
— US$45m - US$55m, consisting of sustaining, exploration + remaining POX capex
Capex
— Additional Pioneer flotation spend of c.US$30m (a portion of which falls into 2019)
— Elginskoye (Albyn) – currently open in all directions with drilling expected to increase resource of ore
body extensions
Exploration — NE Bakhmut pit (Pioneer) high grade material identified below pit with extensions of mineralisation to
increase open pit and underground reserves
— Khabarovsk assets (greenfield) showing promising results
(1) c.125Kt – 130Kt processed from 125Kt – 145Kt of concentrate produced at Malomir during FY2019e
(2) Material secured under contract with deliveries to site ongoing 16Q3 2019 Update
17Q3 2019: Increased Production / Sales vs. Q3 2018
Total Q3 2019 production of 130koz - on track to meet FY guidance
Q3 2019 production by mine / processing type Q3 / YTD summary by mine
Koz Albyn (c.47koz Q3 / 126.2koz YTD 2019)
50 47.0
– Q3 production on target in terms of mining, processing and
40 39.5 production
30.8 – YTD output above target due to higher grades
30
Malomir (c.39.5koz Q3 / 132.6koz YTD 2019)
RIP POX
20
RIP
– Refractory ore mining continued at the Centralny open pit, in
13.1
line with expectations for Q3 and FY2019
10
RIP
POX – Mining of non-refractory ore mining continued at
0 Quartzitovoye open pit and underground operations, with
Albyn Malomir Pioneer POX Plant slightly lower grades compensated by higher mining rates
(3rd party
concentrates) Pioneer (c.30.8koz Q3 / 83.5koz YTD 2019)
Q3 2019 headline production / sales
– RIP throughput recently affected by an increasing portion of
Q3 production: 28% increase to c.130koz from Q3 2018: refractory gold in ores
c.102koz
– FY 2019 production affected by Q1 water ingress issues
– c.30% of gold produced (c.43koz) from the POX Hub
Q3 sales: c.126koz vs. Q3 2018 (c.83koz(1)) POX 3rd party concentrates (13.1koz Q3 / 13.2koz YTD 2019)
– Avg. gold sales price: US$1,388/oz (Q3 2018:US$1,228/oz)
– First batch of 3rd party material (c.13kt @ 40 to 50g/t)
– Hedging: 80koz at US$1,300/oz outstanding as at 30 Sept processed in July, 95% recovery rate
2019
(1) Total gold sales in Q3 2018 were affected by the build-up of 19.7koz of gold contained in concentrate stockpiles ahead of POX plant
commissioning 18Option agreement to acquire outstanding 25% stake in TEMI LLC
The prospective Unglichikan, Afanasevskoye and Elginskoye deposits sit within TEMI
Option and purchase agreement
– On 23 Sept 2019, the Company entered into an option
agreement to purchase the outstanding 25% in TEMI
– Option price of US$13m payable by 18 Nov 2019
Unglichikan
– US$7m cash payment made in May 2019
– US$6m outstanding may be paid in cash or shares at a
fixed price of £0.0826 / share
Albyn – Exercise priced depends on when payment is made
– US$60.0m payable in May 2021, or
– US$53.5m on or before 20 May 2020
– Payable in whole or in part using shares or cash, at the
Company’s election
Afanasevskoye Future production
– Elginskoye ores are partly non-refractory and amenable to
processing at the Albyn RIP plant
– Production at Elginskoye to start 2020, coinciding with
depletion of ore currently mined at Albyn main pit
Elginskoye
JORC Reserves & Resources(1)
Scale – Reserves (P&P) of 1.95Moz, of which 1.53Moz are non-
refractory
= 5km – Resources (M&I+I) of c.4.00Moz
(1) As at 31 Dec 2018 19POX: Technology Driven
Growth
20POX: 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 0.4Moz
open-pit 2.0Moz
4.2…
0.4Moz 2.0Moz 1.1Moz 4.2Moz
— “Double refractory” ore also contains carbon, which
impacts recoveries → 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
releases gold refractory
Ultra-
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 21The POX Hub Concept
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 22POX: 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)
23POX: The Heart Of Our Future
POX to reach its full potential by 2021(1): contribution from refractory ore to increase up to c.65%
Contribution of Refractory Ores at Malomir +
POX ramp-up (ktpa)(1)(2)
Pioneer (Mtpa)(1)
500 18 % 70
Capacity Range(2) % of total which is
450 refractory
16
60
4 autoclaves
400
14
350
Albyn
50
12
300
Concentrate (kt)
10 40
250
Refractory
Refractory
Malomir
8 Refractory Refractory 30
200
2 autoclaves
150 6
Refractory
20
100 4
Pioneer
50 Refractory Refractory 10
2
0
2018 2019e 2020e 2021e 2022e - 0
2019e 2020e 2021e 2022e
Pioneer Malomir Albyn 3rd Party
Pioneer non-refract Pioneer flotation Malomir non-refract
Pioneer Malomir 3rd Party Ore Malomir flotation Albyn non-refract % Refractory (RHS)
(1) Assumes 3rd flotation line at Malomir from 2021
(2) Capacity ranges depend on concentrate parameters, particularly sulphur content 24POX 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
250 H1 to H2 2019 FY 2019 to FY 2020 – Through the ramp-up period in H1, the proportion
76kt of fixed costs was c.2/3 of total POX processing
costs; the share of fixed costs is expected to
Fixed costs decrease rapidly
200 on a per tonne basis as decrease with the increase in POX plant utilisation
220kt throughput is increased
– H1 2019 processing cost equated to c.US$230/t
concentrate
144kt
150 – 144Kt – 149Kt of refractory concentrate is
US$/t
expected to be processed in H2 2019:
340kt
450kt 450kt
– 84Kt - 89Kt of our own concentrate
100
– 60Kt from 3rd party sources
– As a result, FY 2019 processing costs expected to
be c.US$175/t concentrate
50
– In future years, the unit processing cost
declines rapidly to c.US$100/t due to
throughput increasing in line with design
0
H1 2019 H2 2019 FY 2019 FY 2020 FY 2021 FY 2022
Throughput (ktpa) Fixed Cost Variable Cost
25A 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 26Autoclave 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 27Corporate Strategy
28Strategic Priorities
Asset rationalisation, organic and inorganic growth options
Opportunities Goal Implementation
‒ Disposal of a 31.1% controlling stake to a
the business
Streamlining
‒ Eliminate IRC loan guarantee
strategic investor alongside a transfer of the
‒ Improve credit rating
loan 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. Gazprombank has been mandated to assess Petropavlovsk’s options
29Organic Growth: Elginskoye to Replace Albyn Pit
Ore body shape is favourable for a low strip-ratio / low dilution operation
– Elginskoye is predominantly a non-refractory ore body, located c.30km west of Albyn plant
– 2.8Moz of JORC Resources including 1.5Moz of JORC Reserves (at avg. 1.1g/t)
– Shallow dipping mineralised zones suitable for low cost open pit mining
– Preparation started to commence production in 2020
– Access road completed
– First mining equipment has been transferred from Albyn to site
30Organic Growth: Pioneer is a High Return Strategic Project
At spot gold prices, Pioneer has an IRR of greater than 130%
Key Project Metrics
– After more than 10 years of production Pioneer is
Total capex spend over 2 yrs US$30m
transitioning to become a mainly refractory deposit
– Project looks attractive in terms of profitability + cash Construction timeframe 12 - 14 months
flow generation under various macroeconomic scenarios
First production H2 2020
Processing capacity 3.6Mtpa
Mine life >10 years
Project Sensitivities
Gold Price (US$/oz) Gold Price (US$/oz)
IRR NPV
1,250 1,300 1,400 1,450 1,250 1,300 1,400 1,450
61 86% 99% 126% 140% 61 137 167 226 256
RUB:US$ FX
RUB:US$ FX
67 119% 134% 165% 182% 67 191 221 281 310
70 136% 152% 186% 204% 70 215 245 304 334
31Inorganic 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 Malomir Albazino
(Polyus)
1.3Moz @ 6g/t 6.9Moz @ 0.8g/t (Polymetal)
41.4Moz @ 2.9g/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
32Inorganic 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 grading 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 33
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
34Responsible Business
35Sustainable 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
— Risk management to mitigate impact — Remuneration disclosure
— High quality task specific training — Established Code of Conduct and Business Ethics
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
36Strong corporate governance supported by an experienced Board
Board fully compliant with the UK Corporate Governance Code
Sir Roderic Lyne (N*)
Non-Executive Chairman
– Appointed as Chairman following Jun
2018 AGM
– Previously was a Non-Ex. Director of
Aricom PLC and Petropavlovsk PLC
– Served as British Ambassador to
Russia from Jan 2000 until Aug 2004
Dr Pavel Maslovskiy (N) (S) (E*) Mr Harry Kenyon-Slaney (S*) (A) (N) Mr James W Cameron Jr (A) (R)
Chief Executive Officer – Appointed Nov 2018, became Senior – Appointed Oct 2018
– Re-appointed in Jun 2018 Independent Director April 2019 – Formerly Founder, CEO + Chairman
– Сo-founded the Company in 1994 – Currently holds positions of Non-Ex. of Occupational Urgent Care Systems
– CEO of Petropavlovsk 1994-2011 Chairman at Gem Diamonds, Non-Ex. – Extensive experience, providing
(when acted as Senator-Member to Director at Sibanye Gold expertise and consulting services for
Federation Council) and again 2014- – 33 years experience, principally with companies in Russia and the former
2017 Rio Tinto USSR
Mr Damien Hackett (N) (A) (R) (S) Mr Robert Jenkins(A*) (R*) (N) Mr Mirzaaziz Musakhanov
– Re-appointed June 2018 – Nominated by AEON Mining Ltd, our
– Appointed Oct 2018
– 25 years of Russia-related investment / largest shareholder, appointed Non-
– Mr Hackett is Chairman of UrAmerica
natural resources experience Executive Director on 14 Oct 2019
– Has 26 years critical research
– Previously CFO of two Russia-focused – Chairman of the Board at Novaport
experience covering globally diverse
natural resources companies Group and a Director at GeoProMining
mining companies
– Formerly held Board appointments Group
– Former Vice Chairman Mining
with Ruspetro PLC and Toledo Mining – Over 20 years of experience in
Advisory at Canaccord Genuity
PLC financing and industry
Ms Charlotte Philipps (A) (R) Mrs Katia Ray (R) (S)
11% 11%
– Appointed Nov 2019 – Appointed Nov 2019
– Extensive natural resources sector – Over 25 years’ of mining sector 11% Non-Executive Chairman
corporate finance and transactional experience in senior leadership roles
experience across CIS / CMEA
with Rio Tinto plc and Anglo American 9 Executive Director
– Member of the Strategy / Investment
Committee at Inter RAO plc Directors Non-Executive Director
– 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 67%
EBRD and AIG Russia Century Fund and start-ups
(S) Member (A) Member (E) Chairman of the Executive Committee
of the Safety, Sustainability and Workforce Committee of the Audit Committee
(N) Member (R) Member * Denotes 37
of the Nominations Committee of the Remuneration Committee 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 Non-Executive Director
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
38Key Performance Indicators Q3 2019
Reporting in line with international standards
Lost Time Injury Frequency Rate (LTIFR) Energy Consumption
Accidents per million manhours Million GJ
+16%
-3%
1.18
1.58
1.02
1.54
Q3 2018 Q3 2019 Q3 2018 Q3 2019
— Decline demonstrates an improvement due to educational — Increase in energy consumption attributable to the POX hub (1)
Health and Safety procedures and stricter site monitoring and increase in production
Greenhouse Gas Emissions (GHG) intensity Water Used
Normalised per ounce of gold produced, t CO2e/oz Million m3
+32%
-8%
0.86 6.28
4.74
0.79
Q3 2018 Q3 2019 Q3 2018 Q3 2019
— GHG intensity declined due to improved efficiency and — Increase in water usage attributable to the POX hub and
increased production increase in production
(1) Oxygen plant electricity needs contribute the increased energy consumption 39ESG 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)
Polyus Sibanye 1,776 Sibanye 1.18 Petropavlovsk 24.6%
10,343
New Gold Incorporated 7,080 Polyus 1,101 Anglogold Ashanti 1.14 Polymetal 20.0%
Anglogold Ashanti 6,652 Anglogold Ashanti 795 Petropavlovsk 0.50 Gold Fields 16.0%
Sibanye 6,053 Petropavlovsk 759 Gold Fields 0.45 Polyus 15.4%
Kinross 5,813 Centamin 612 Eldorado Gold Company 0.33 New Gold Incorporated 15.2%
Petropavlovsk 5,316 Gold Fields 566 Centamin 0.26 Sibanye 13.0%
Barrick Gold 5,105 Polymetal 480 New Gold Incorporated 0.24 Barrick Gold 12.1%
Gold Fields 4,387 New Gold Incorporated 464 Barrick Gold 0.15 Anglogold Ashanti 12.0%
Polymetal 4,362 Kinross 460 Polyus 0.09 Kinross 11.0%
Eldorado Gold
Eldorado Gold Company 4,338 Company 450 Polymetal 0.09 Eldorado Gold Company 10.0%
Centamin 2,073 Barrick Gold 397 Kinross 0.07 Centamin 2.0%
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 40
(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
1.43 68 67 64
1.33
1.04
0.53 0.48 0.38
Kinross
Nordgol
Petropa
Polymet
Highlan
Kamcha
Polyus
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 41
(2) CSR Hub 2018Conclusions
42Summary: 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 — Options include: improvements to existing guarantee structure, outright disposal , payment of a
realising value from
dividend to Petropavlovsk
non-core assets
— Addition of 2 more autoclaves to the existing 4
5 POX capacity — 50% total processing capacity uplift from 400 – 500Ktpa to 500 – 750Ktpa
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
43Appendix
44Mine 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
45
please refer to the 2018 Petropavlovsk ARPeer Group Valuation Analysis
Long term valuation upside potential
EV / EBITDA (NTM) EV / Reserves (Gold Equivalent)
Times (x) US$/oz
8.0 7.7 363 362
7.4 7.3
313 301
5.6 5.5 5.8
234 230
4.6 4.6
4.0 197 188
3.6
142
121
78
Polyus
Eldorado
Polymetal
Newmont
Barrick Gold
Petropavlovsk
Endeavour
Centerra
Highland
Centamin
Polyus
Polymetal
Petropavlovsk
Eldorado
Barrick Gold
Newmont
Endeavour
Centerra
Highland
Centamin
P / CF (NTM) Market performance (YTD)
Times (x) Percentage (%)
141.9
9.8
8.6
7.9 7.6 7.6 75.4 71.5
5.7 6.6 61.5
5.1 4.8 52.5 50
4.7 4.2
31.1 30.6
18.8
10.2 6.0
Polyus
Eldorado
Polymetal
Petropavlovsk
Newmont
Barrick Gold
Endeavour
Centerra
Highland
Centamin
Polyus
Polymetal
Newmont
Eldorado
Petropavlovsk
Endeavour
Barrick Gold
Centerra
Centamin
Highland
Source: Thomson Reuters 46Malomir 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 47Petropavlovsk’s guarantee of IRC’s new debt facilities
A key milestone in de-risking the Group’s finances
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(1) 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(2)
— 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) As at 30 Sept 2019, US$230m was outstanding (2) These conditions are considered to be ‘base case’ and the Company expects these will be achieved within a 3
year time-frame 48You can also read
