Solidcore Resources plc: Half-year report for the six months ended 30 June 2024

EQS Newswire / 16/09/2024 / 05:47 MSK

“Solidcore Resources reports robust financial results, demonstrating growth in sales and positive free cash flow in the first half of the year, underpinned by reliable operating performance and inventory release against the backdrop of strong commodity prices. Despite limited available bank funding this strong financial footing allows the Company to finance substantial capital expenditures, which are expected to exceed US$ 285 million in 2024, above our initial estimates. In 2025-2029, the Company’s investment programme will top US$ 1 billion with a large part of it going towards our ambitious Ertis POX project”, said Vitaly Nesis, Group CEO of Solidcore Resources plc, commenting on the results.

FINANCIAL HIGHLIGHTS

The discussion below covers the results of continuing operations. The comparatives are restated in the same way. Cash flows include amounts of discontinued operations, as required by IFRS 5, unless otherwise stated.

  • In 1H 2024, revenue increased by 79% year-on-year (y-o-y), totalling US$ 704 million (1H 2023: US$ 393 million). The average realised gold price increased by 17%, tracking market dynamics. Gold equivalent (“GE”) production was 252 Koz, an 18% increase y-o-y on the back of higher concentrate shipment volumes to China and production from toll-treated concentrate at Kyzyl. Gold equivalent sales increased by 56% y-o-y to 321 Koz due to substantial progress in unwinding of Kyzyl concentrate stockpiles, previously accumulated due to logistical challenges.
  • Group Total Cash Costs (“TCC”)[1] for 1H 2024 were US$ 960/GE oz, within the Group’s full-year guidance of US$ 900-1,000/GE oz, while being up 10% y-o-y, owing to continuously high domestic inflation.
  • All-in Sustaining Cash Costs (“AISC”)1 remained broadly unchanged at US$ 1,281/GE oz, and within the full-year guidance range of US$ 1,250-1,350/GE, while also reflecting the increase in sales volumes, driven by de-stockpiling and resulting in the spread of sustaining capital expenditure over a larger amount of ounces sold.
  • Adjusted EBITDA1 was US$ 346 million, an increase of 73% y-o-y, driven by higher sales volumes and higher commodity prices. The Adjusted EBITDA margin decreased by 3 percentage points to 49% (1H 2023: 51%).
  • Underlying net earnings[2]  increased by 72% to US$ 243 million (1H 2023: US$ 141 million). Net earnings[3] were US$ 238 million (1H 2023: US$ 272 million due to large forex gains).
  • Capital expenditures on continuing operations were US$ 107 million[4], up 25% compared with US$ 85 million in 1H 2023. The increase is mainly related to the Ertis POX development project. Full-year capex is expected to be approximately US$ 60 million above the original guidance of US$ 225 million, due to prepayments for the green energy projects (solar and gas power plants at Varvara).
  • The Company confirms its earlier announced plans for a massive investment programme exceeding US$ 1 billion in 2025-2029, which will be focused on the implementation of the Ertis POX project.
  • Net operating cash inflow from continuing operations increased by 86% to US$ 344 million (1H 2023: US$ 184 million). The Group reported positive free cash flow1 of US$ 47 million on continuing and discontinued operations, a significant improvement over 1H 2023 negative FCF of US$ 341 million. Free cash flow from continuing operations excluding disposal of Russian business amounted to US$ 240 million (1H 2023: US$ 101 million).
  • Given the cash proceeds from the disposal of the Russian business and strong cash inflow from the sale of inventory, the Company recorded a net cash position of US$ 357 million versus pro forma net debt of US$ 174 million at the end of 2023.
  • The Company notes that financing from Western banks remains constrained with small or no credit limits offered to borrowers in Kazakhstan due to long onboarding duration and existing compliance hurdles. As a result, the Company estimates that its cost of debt is set to rise from its current levels and considers other available options for funding its investment programme.
  • The Company reiterates its full-year guidance for production and costs: production of 475 GE Koz, TCC in the range of US$ 900-1,000/oz and AISC in the range of US$ 1,250-1,350. However, the management does not expect comparable half-on-half results in H2 2024, given the following detrimental factors: high base effect of de-stockpiling, which is not likely to be repeated in the near future, stronger than budgeted year-to-date KZT/USD rate, inflationary pressures, shortage of railcars and congestions of eastbound railroads.

Financial highlights [5]

1H 2024

1H 2023[6]

Change

 

 

 

 

Revenue, US$m

704

393

+79%

Total cash cost[7], US$ /GE oz

960

871

+10%

All-in sustaining cash cost3, US$ /GE oz

1,281

1,285[8]

0%

Adjusted EBITDA3, US$m

346

200

+73%

 

 

 

 

Average realised gold price[9], US$ /oz

2,267

1,934

+17%

 

 

 

 

Net earnings, US$m

238

272

-13%

Underlying net earnings3, US$m

243

141

+72%

Return on Assets3, %

14%

n/a

n/a

Return on Equity (underlying) 3, %

14%

n/a

n/a

 

 

 

 

Basic earnings/(loss) per share, US$

0.50

0.57

-12%

Underlying EPS3, US$

0.51

0.30

+70%

 

 

 

 

Net (cash)/debt3, US$m

(357)

174[10]

n/a

Net (cash) debt/Adjusted EBITDA

(0.61)

0.40[11]

n/a

 

 

 

 

Net operating cash flow from continuing operations, US$m

344

184

+86%

Capital expenditure on continuing operations, US$m

(107)

(85)

+25%

Free cash flow from continuing operations excluding disposal of Russian business, US$m

240

101

+240%

 

 

 

 

Net cash outflow on disposal of subsidiaries, US$m

(215)

n/a

Free cash flow3, total on continuing and discontinued operations, US$m

47

(341)

n/a

 

 

OPERATING HIGHLIGHTS

  • No fatal accidents occurred among the Group’s workforce and contractors in H1 2024 as well as no lost time injuries were recorded (consistent with H1 2023).
  • GE output for H1 was up by 18% y-o-y to 252 Koz.

 

1H 2024

1H 2023

Change

 

 

 

 

PRODUCTION (Koz of GE[12])

252

213

+18%

Kyzyl

169

128

+32%

Varvara

83

86

-3%

 

 

 

 

SAFETY

 

 

 

LTIFR[13] (Employees)

0

0

n/a

Fatalities

0

0

n/a

 

CONFERENCE CALL AND WEBCAST

The Company will not hold a webcast in relation to 2024 half-year financial results.

The Company’s Investor Relations team will be available for all questions related to its financial results disclosure. Please see the contacts below.

 

Investor Relations

Media

Evgeny Monakhov

Alikhan Bissengali

+44 20 7887 1475 (UK)

 

Kirill Kuznetsov

Alina Assanova

+7 7172 47 66 55 (Kazakhstan)

ir@solidcore-resources.com

Yerkin Uderbay

+7 7172 47 66 55 (Kazakhstan)

media@solidcore-resources.kz

 

FORWARD-LOOKING STATEMENTS

This release may include statements that are, or may be deemed to be, “forward-looking statements”. These forward-looking statements speak only as at the date of this release. These forward-looking statements can be identified by the use of forward-looking terminology, including the words “targets”, “believes”, “expects”, “aims”, “intends”, “will”, “may”, “anticipates”, “would”, “could” or “should” or similar expressions or, in each case their negative or other variations or by discussion of strategies, plans, objectives, goals, future events or intentions. These forward-looking statements all include matters that are not historical facts. By their nature, such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the company’s control that could cause the actual results, performance or achievements of the company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the company’s present and future business strategies and the environment in which the company will operate in the future. Forward-looking statements are not guarantees of future performance. There are many factors that could cause the company’s actual results, performance or achievements to differ materially from those expressed in such forward-looking statements. The company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in the company’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based.

 

TABLE OF CONTENTS

Financial review

Principal risks and uncertainties

Going concern

Directors’ responsibility statement

Report on Review of Interim Condensed Consolidated Financial Statements

Condensed Consolidated Income Statement

Condensed Consolidated Statement of Comprehensive Income

Condensed Consolidated Statement of Financial Position

Condensed Consolidated Statement of Cash Flows

Condensed Consolidated Statement of Changes In Equity

Notes to the Interim Condensed Consolidated Financial Statements

Alternative Performance Measures

 

 

Financial review

market summary

Precious metals

In 1H 2024, the spot gold price continued its upward movement, reaching new records due to the continuous deterioration of the geopolitical environment (including uncertainty related to the upcoming US election) and persistent, although lower, inflation. The gold price bottomed in February, reaching US$ 1,985 after a better-than-expected U.S. inflation report, before reaching a record price of US$ 2,444  in May. The average LBMA gold price for the period was US$ 2,204/oz, up 14% y-o-y.

Demand for gold (excluding OTC) for 1H 2024 was mildly down, falling 5% y-o-y to 2,044 tonnes . The key factors of the decrease were a sharp decline in jewellery consumption and net outflows from exchange-traded funds (ETFs), partially offset by steady central bank accumulations.

Accounting for a little below 50% of the overall gold demand, jewellery consumption in 1H reached a two-year low volume of 870 tonnes, which is 10% lower y-o-y, as the gold price peaked in May; notably Chinese jewellery demand reached its lowest volume, even when compared to the period during the COVID pandemic. Bar and coin investment demand remained on par with the 1H 2023 at 574 tonnes, only dropping by 4 tonnes, as Western investors demonstrated selling interest, unlike consistent accumulation across Asia, despite record prices.

Central banks continued to accumulate gold throughout 1H 2024 and added 483 tonnes to reserves, a significant growth of 25% y-o-y. Gold demand in technology and electronics sectors rose by 11% y-o-y to 162 tonnes on the back of rapid growth in demand for AI and high-performance computing infrastructure.

Total 1H 2024 gold supply remained largely stable at 2,441 tonnes, compared to 2,414 in 1H 2023.

Foreign exchange

The Group’s revenues are denominated in US dollars, while the majority of the Group’s operating costs are denominated in local currency (Kazakhstani tenge). As a result, changes in exchange rates affected our financial results and performance. 

In 1H 2024, the Kazakhstani tenge stood at 449 KZT/USD on average, which is 1% lower y-o-y (1H 2023: 452 KZT/USD) and dropped by 4% y-o-y to 471 KZT/USD at the end of the period (1H 2023: 454 KZT/USD) due to the seasonal increase of demand for USD. The annualised inflation rate in the country remained stable, amounting to 8.5% by June 2024.  

Revenue

 (US$m unless otherwise stated)

 

1H 2024

1H 2023

Сhange

Volume variance,  US$m

Price variance,  US$m

Gold

 

694

380

+83%

222

92

Average realised price[14]

US$ /oz

2,267

1,934

+17%

 

 

Average LBMA price

US$ /oz

2,203

1,933

+14%

 

 

Share of revenues

%

  99%

 97%

 

 

 

Other metals

 

10

13

-23%

(4)

1

Share of revenues

%

 1%

 3%

 

 

 

Total revenue

 

704

393

+79%

218

93

In 1H 2024, revenue grew by 79% y-o-y, primarily driven by the growth of gold sales on the back of substantial progress in unwinding of Kyzyl concentrate stockpile, previously accumulated due to logistical challenges.

The Group’s average realised price for gold was US$ 2,267/oz in 1H 2024, up 17% from US$ 1,934/oz in 1H 2023, and 3% above the average market price of US$ 2,203/oz.

 

 

Revenue, US$m

Gold equivalent sold, Koz

OPERATION

1H 2024

1H 2023

Сhange

1H 2024

1H 2023

Сhange

 

 

 

 

 

 

 

Kyzyl

456

214

+113%

207

113

+84%

Varvara

189

179

+5%

85

93

-9%

Other[15]

59

n/a

29

n/a

Total revenue

704

393

+79%

321

206

+56%

                 

The Company’s efforts to unwind the previously accumulated concentrate stockpiles had a positive impact on revenues at Kyzyl. Sales volumes at Varvara decreased as a result of planned grade decline at the leaching circuit, following production dynamics, which was more than offset by the increase in commodity prices during the period.

Cost of sales

 

 

 

 

(US$m)

1H 2024

1H 2023

Сhange

 

 

 

 

 

 

 

 

On-mine costs

81

83

-2%

Smelting costs

58

60

-3%

Purchase of ore and concentrates from third parties

59

35

+69%

Mining tax

43

38

+13%

Cash operating costs

241

216

+12%

 

 

 

 

Depreciation and depletion of operating assets

49

37

+32%

Costs of production

290

253

+15%

 

 

 

 

Сhange in metal inventories

67

(67)

n/a

Idle capacities and abnormal production costs

1

n/a

Total cost of sales

358

186

+92%

           

 

 

CASH OPERATING COST STRUCTURE

1Н 2024

1Н 2023

 

US$m

Share

US$m

Share

 

 

 

 

 

Services

68

28%

54

25%

Consumables and spare parts

48

20%

70

32%

Labour

21

9%

16

7%

Mining tax

43

18%

38

18%

Purchase of ore from third parties

59

24%

35

16%

Other expenses

2

1%

3

1%

Total cash operating cost

241

100%

216

100%

The total cost of sales almost doubled in 1H 2024 to US$ 358 million, reflecting a combination of factors throughout the year:

  • volume-based increase in production and sales (+56% in gold equivalent terms);
  • domestic inflation in Kazakhstan (8% y-o-y);
  • higher cost of services;
  • increase in depreciation charges;
  • price-driven increase in mining tax.

The cost of services was up 26% y-o-y, caused mostly by higher volume of transportation services at Kyzyl.

The cost of consumables and spare parts was down 31% compared to abnormally high level of insurance stocks in 1H 2023.

The cost of labour within cash operating costs was up 31% y-o-y, mainly stemming from annual salary increases (tracking domestic CPI inflation).

The increase in purchases of third-party ore by 69% is attributable to Varvara which was treating higher volumes of third-party purchased ore, which generated additional margin and allowed to partially offset decrease in Komar ore grade at the leaching circuit.

Mining tax increased by 13% y-o-y to US$ 43 million, mainly driven by an increase in production volume combined with an increase in average realised prices.

Depreciation and depletion was US$ 49 million, up 32% y-o-y attributable to expansion of mining.

In 1H 2024, a net metal inventory decrease of US$ 67 million (1H 2023: US$ 67 million increase) was recorded.

 

General, administrative and selling expenses

(US$m)

1H 2024

1H 2023

Change

 

 

 

 

Labour

22

15

+47%

Services

5

1

n/a

Share based compensation

2

9

-78%

Depreciation

1

1

Other

5

4

+25%

Total general, administrative and selling expenses

35

32

+9%

General, administrative and selling expenses (“SGA”) increased by 9% y-o-y from US$ 32 million in 1H 2023 to US$ 35 million in 1H 2024, mainly caused by the increased headcount of administrative personnel with the commencement of Ertis POX project development, as well as regular salary reviews and one-off transaction fees related to divestment of Russian operations and post-divestment restructurings.

 

Other operating expenses

(US$m)

1H 2024

1H 2023

Change

 

 

 

 

Social payments

10

2

n/a

Exploration expenses

2

1

+100%

Taxes, other than income tax

4

2

+100%

Other expenses

3

2

+50%

Total other operating expenses

19

7

+171%

Other operating expenses increased to US$ 19 million in 1H 2024 compared to US$ 7 million in 1H 2023 mainly due to a scheduled increase in social payments in accordance with existing partnership agreements.

TOTAL Cash costs

In 1H 2024, total cash costs per gold equivalent ounce sold (“TCC”) were US$ 960/GE oz, up 10% y-o-y and 3% higher compared to 2H 2023. Domestic inflation combined with KZT rate strengthening and mining tax increase had an overall negative impact on cost levels.

The table below summarises major factors that have affected the Group’s TCC and AISC dynamics y-o-y:

RECONCILIATION OF TCC AND AISC MOVEMENTS

TCC, US$/oz

Change

AISC, US$/oz

Change

Cost per AuEq ounce 1H 2023

871

 

1,285[16]

 

Domestic inflation

56

+6%

84

+6%

KZT rate change

5

+1%

7

+1%

Mining tax change

5

+1%

5

0%

Sustaining capex decrease

0%

(114)

-9%

Other

23

+3%

14

+1%

Cost per AuEq ounce 1H 2024

960

+10%

1,281

-2%

 

Total cash cost by segment/operation, US$/GE oz

 

OPERATION

1H 2024

1H 2023

Change

2H 2023

Change

 

 

 

 

 

 

Kyzyl

 799

649

+23%

743

+8%

Varvara

1,353

1,138

+19%

1,239

+9%

Total Group TCC

 960

871

+10%

928

+3%

  • Kyzyl’s total cash costs were at US$ 799/GE oz, up 23% y-o-y and 8% half-on-half due to inflationary headwinds.
  • At Varvara, TCC were up 19% y-o-y and up 9% half-on-half at US$ 1,353/GE oz on the back of a planned grade declines, combined with a 9% decrease in sales volumes and processing additional feed from higher cost third-party ore.

 

 

ALL-IN SUSTAINING AND all-in cash costs

All-in sustaining cash costs[17] remained broadly unchanged at US$ 1,281/GE oz, reflecting the temporary increase in sales volumes as inventory levels normalise, resulting in the spread of sustaining capital expenditure over a larger amount of ounces sold.

AISC by operations were as follows:

All-in sustaining cash cost by segment/operation, US$/GE oz

OPERATION

1H 2024

1H 2023

Change

 

 

 

 

Kyzyl

 1,015

883

+15%

Varvara

 1,745

1,629

+7%

Total Group AISC

1,281

1,285[18]

0%

 

 

Total, US$m

US$ /GE oz

RECONCILIATION OF

ALL-IN COSTS

1H 2024

1H 2023

Change

1H 2024

1H 2023

Change

 

 

 

 

 

 

 

Cost of sales, excluding depreciation, depletion and write-down of inventory to net realisable value (Note 2 of condensed financial statements)

246

160

+54%

840

776

+8%

adjusted for:

 

 

 

 

 

 

Idle capacities

 (1)

n/a

(3)

n/a

Treatment charges deductions reclassification to cost of sales

 18

5

+221%

60

26

+131%

SGA expenses, excluding depreciation, amortization and share based compensation (Note 2 of condensed financial statements)

 18

14

+26%

62

70

-11%

Total cash costs

 281

180

+57%

961

871

+10%

SGA expenses for Corporate and other segment and other operating expenses

 33

19

+72%

112

91

+23%

Capital expenditure excluding development projects

 36

48

-25%

123

232

-47%

Capitalised stripping

 25

19

+36%

86

91

-5%

All-in sustaining cash costs

 375

265

+41%

1,281

1,2852

-0%

Finance costs (net)

(1)

9

-111%

(4)

44

-109%

Capitalised interest

 1

n/a

3

n/a

Income tax expense/(benefit)

  49

51

-4%

167

248

-33%

After-tax all-in cash costs

423

325

+30%

1,446

1,577

-8%

Capital expenditure for development projects

 46

n/a

159

n/a

SGA and other expenses for development

assets

4

-90%

1

19

-95%

All-in costs

 469

329

+43%

1,605

1,596

+1%

                 

 

Adjusted EBITDA[19] and EBITDA margin

 (US$m)

 

1H 2024

1H 2023

Change

 

 

 

 

Profit for the period

238

272

-13%

Finance cost (net)[20]

(1)

9

-111%

Income tax expense

49

51

-4%

Depreciation and depletion

52

27

+94%

EBITDA

338

359

-6%

 

 

 

 

Net foreign exchange loss/(gain)

6

(165)

-104%

Share based compensation

2

5

-60%

Change in fair value of contingent consideration liability

1

n/a

Adjusted EBITDA

346

200

+73%

Adjusted EBITDA margin

49%

51%

-2%

Adjusted EBITDA per gold equivalent oz

1,078

971

+11%

 

 

Adjusted EBITDA by segment/operation

(US$m)

 

OPERATION

1H 2024

1H 2023

Change

 

 

 

 

Kyzyl

294

143

+106%

Varvara

70

70

-1%

Attributable corporate and other costs

(18)

(13)

+41%

Total Group Adjusted EBITDA

346

200

+73%

In 1H 2024, Adjusted EBITDA was US$ 346 million, 73% higher y-o-y, with an Adjusted EBITDA margin of 49%, reflecting a 42% increase in gold equivalent sold as inventory levels normalise, combined with 17% increase in gold average realised price.

 

Other income statement items

Solidcore Resources recorded a net foreign exchange loss in 1H 2024 of US$ 6 million compared to an exchange gain of US$ 165 million in 1H 2023.

The Group does not use any hedging instruments for managing foreign exchange risk, other than a natural hedge arising from the fact that the majority of the Group’s revenue is denominated or calculated in US Dollars.

Income tax expense for 1H 2024 was US$ 49 million compared to US$ 51 million expense in 1H 2023, charged at an effective tax rate of 20% (1H 2023: 16%), The increase was mainly attributable to the increased profit before foreign exchange and tax. For details refer to Note 12 of the condensed consolidated financial statements.

 

Net earnings, earnings per share and dividends

The Group recorded net profit of US$ 238 million in 1H 2024 versus US$ 272 million in 1H 2023. The underlying net earnings attributable to the shareholders of the parent were US$ 243 million, compared to US$ 141 million in 1H 2023:

Reconciliation of underlying net earnings[21]

(US$m)

 

1H 2024

1H 2023

Change

 

 

 

 

Profit for the financial period attributable to the shareholders of the Parent

 238

272

-13%

Foreign exchange loss/(gain)

 6

(165)

n/a

Change in fair value of contingent consideration liability

 

1

n/a

Tax effect

 (1)

33

n/a

Underlying net earnings

243 

141

+72%

Basic earnings per share was US$ 0.50 compared to US$ 0.57 earnings per share in 1H 2023. Underlying basic EPS[22] was US$ 0.51, compared to US$ 0.30 in 1H 2023.

Capital expenditurE[23]

(US$m)

Sustaining

Development

Capital stripping and underground development

Total

1H 2024

Total

1H 2023

Ertis POX

46

46

19

Kyzyl

16

17

33

25

Varvara

20

8

28

42

Total capital expenditure

36

46

25

107

85

Total capital expenditure increased by 25% y-o-y at US$ 107[24] million in 1H 2024. The increase is mainly related to Ertis POX development project. Capital expenditure excluding capitalised stripping costs was US$ 82 million in 1H 2024 (1H 2023: US$ 67 million).

The major capital expenditure items in 1H 2024 were as follows:

Development projects

  • Capital expenditure of US$ 46 million was related to initial investments into the Ertis POX facility.

Stay-in-business capex at operating assets

  • At Kyzyl, capital expenditure in 1H 2024 comprised US$ 16 million, mainly represented by scheduled technical upgrades, expansion of the concentrator capacity to 2.6 Mtpa and expansion of tailings storage facility.
  • At Varvara, capital expenditure of US$ 20 million was mainly related to the construction of a tailings storage facility and upgrading the mining fleet.

 

Cash flows

Cash flows include amounts of discontinued operations as required by IFRS 5, unless otherwise stated.

(US$m)

1H 2024

1H 2023

Сhange

 

 

 

 

Operating cash flows before changes in working capital

350

382

-8%

Changes in working capital

167

(347)

-148%

Total operating cash flows

517

35

n/a

Continuing operations

344

184

+86%

Discontinued operations

173

(149)

n/a

 

 

 

 

Capital expenditure

(174)

(375)

-54%

Net cash outflow on disposal of subsidiaries

(215)

n/a

Loans advanced

(78)

(14)

n/a

Other

(3)

10

-130%

Investing cash flows

(470)

(379)

+24%

Continuing operations

(319)

(83)

+283%

Discontinued operations

(151)

(296)

-49%

 

 

 

 

Financing cash flows

 

 

 

Net changes in gross debt

(100)

127

-179%

Repayments of principal under lease liabilities

(1)

(12)

-92%

Total financing cash flows

(101)

115

-188%

Continuing operations

(96)

(39)

+144%

Discontinued operations

(5)

154

-104%

 

 

 

 

Net (decrease)/increase in cash and cash equivalents

(54)

(229)

-76%

Cash and cash equivalents at the beginning of the period

842

633

+33%

Effect of foreign exchange rate changes on cash and cash equivalents

(27)

(20)

+35%

Cash and cash equivalents at the end of the period

761

384

+98%

Total operating cash flows in 1H 2024 strengthened y-o-y on the back of a reduction in stockpiles of concentrate inventory. Operating cash flows increased significantly year-on-year to US$ 517 million, as a result of an increase in sales volumes and adjusted EBITDA. 

Total cash and cash equivalents almost doubled compared to 1H 2023 and comprised US$ 761 million, with the following items affecting the cash position of the Group:

  • Operating cash flows of US$ 517 million;
  • Net cash outflow on disposal of subsidiaries of US$ 215 million, see Note 3 of the condensed consolidated financial statements);
  • Capital expenditure of US$ 174 million[25];
  • Loans advanced of US$ 78 million[26]; and
  • The gross borrowings decrease of US$ 101 million.

The Group reported positive free cash flow of US$ 47 million, a significant improvement over 1H 2023 negative FCF of US$ 341 million.

 

balance sheet, Liquidity and funding

NET DEBT

30-Jun-24

31-Dec-23

Change

 

 

 

 

Short-term debt and current portion of long-term debt

219

1,005

-78%

Long-term debt

185

2,220

-92%

Gross debt

404

3,225

-87%

Less: cash and cash equivalents

761

842

-10%

Net debt

(357)

2,383

-115%

   Continuing operations

(357)

174

n/a

   Discontinued operations

 

2,209

n/a

Adjusted EBITDA (continuing operations)

346

439

-21%

Net (cash)/debt / Adjusted EBITDA[27] (continuing operations)

(0.61x)

0.40x

n/a

Due to the cash proceeds from the disposal of the Russian business and strong cash inflow from sale of inventory, the Company recorded a net cash position of US$ 357 million versus pro forma net debt of US$ 174 million as at the end of 2023.

The proportion of long-term borrowings to total borrowings was 46% as at 30 June 2024 (69% as at 31 December 2023). As at 30 June 2024, the Group had US$ 100 million (31 December 2023: US$ 100 million) of available undrawn facilities.

The average cost of debt decreased to 4.5% in 1H 2024 (1H 2023: 5.2%) due to de-consolidation of the Russian business with higher interest rate levels. The Group is confident in its ability to repay its existing borrowings as they fall due.

INVENTORY

Inventory levels decreased by US$ 41 million to US$ 233 million for the 1H 2024.

(US$m)

30 June 2024

Change

1H 2024

31 Dec 2023

Change

2H 2023

30 June 2023

 

 

 

 

 

 

Сoncentrate

30

-36

66

+7

59

Ore stock piles

78

-8

86

0

86

Doré, work in-process, metal for refining and refined metals

64

+13

51

-3

54

Non-metal inventories

61

-10

71

+3

68

Total inventory

233

-41

274

+8

267

 

Payable metals in inventory accumulated at 30 June 2024 were as follows:

(GE Koz)

30 June 2024

31 December 2023

 

 

 

Concentrate

30

65

Doré

10

12

Total payable metals

40

78

2024 YEAR-END outlook
The Company reiterates its full-year guidance for production and costs: production of 475 GE Koz, TCC in the range of US$ 900-1,000/oz and AISC in the range of US$ 1,250-1,350. However, the management does not expect comparable half-on-half results in H2 2024 given the following detrimental factors: high base effect of de-stockpiling, which is not likely to be repeated in the near future, stronger than budgeted year-to-date KZT/USD rate, inflationary pressures, shortage of railcars and congestions of the eastbound railroads.

Principal risks and uncertainties

There are a number of potential risks and uncertainties which could have a material impact on the Group’s performance and could cause actual results to differ materially from expected and historical results.

The principal risks and uncertainties facing the Group are categorised as follows:

  • Operational risks:
    • Production risk
    • Construction and development risk
    • Supply chain risk
    • Exploration risk
  • Sustainability risks:
    • Health and safety risk
    • Environmental risk
    • Human capital risk
  • Political and social risks:
    • Legal and compliance risk
    • Political risk
    • Taxation risk
  • Financial risks:
    • Market risk
    • Currency risk
    • Liquidity risk

A detailed explanation of these risks and uncertainties can be found on pages 68 to 84 of the 2023 annual report which is available at www.solidcore-resources.com.

The directors consider that these principal risks and uncertainties have not changed materially since the publication of the annual report for the year ended 31 December 2023 and continue to apply to the Group for the remaining six months of the financial year.

Further updates will be presented in the full annual financial report for 2024.

 

 

Going concern

In assessing its going concern status, the Group has taken account of its principal risks and uncertainties, financial position, sources of cash generation, anticipated future trading performance, its borrowings and other available credit facilities, its forecast compliance with covenants on those borrowings, and its capital expenditure commitments and plans.

To assess the resilience of the Group’s going concern assessment in light of the macroeconomic volatility, management performed the stress downside scenario that is considered plausible over the next 12 months from the date of approval of the financial statements. As such, this does not represent the Group’s ‘best estimate’ forecast, but was considered in the Group’s assessment of going concern, reflecting the current evolving circumstances and the most significant and plausible changes in macro assumptions identified at the date of approving the press-release.

The Group has already taken precautionary measures to manage liquidity and provide flexibility for the future. Under the stress scenario, the Group’s income and profits are affected by simultaneous decrease of gold prices by 10% and local currency appreciation by 10%, as well as 10% overrun of development capital expenditure.

At the reporting date, the Group holds US$ 761 million of cash and US$ 100 million of undrawn credit facilities, which when combined with the forecast net cashflows under the stress scenario above, is considered to be adequate to meet the Group’s financial obligations as they fall due over the next 12 months. No borrowing covenant requirements are forecast to be breached in the stress scenario. The Group expects to settle obligations as they fall due but also has mitigating actions available such as reducing production volumes and variable mining costs where possible, reducing and deferring non-essential and non-committed capital expenditure.

The Board is therefore satisfied that the Group’s forecasts and projections, including the stress scenario above, show that the Group has adequate resources to continue in operational existence for at least the next 12 months from the date of this report and that it is appropriate to adopt the going concern basis in preparing the interim condensed consolidated financial statements for the period ended 30 June 2024. 


DIRECTORS’ RESPONSIBILITY STATEMENT

Directors are responsible for the preparation of the interim condensed consolidated financial statements of Solidcore Resources plc (the “Company”) and its subsidiaries (the “Group”), which comprise the condensed consolidated statement of financial position as at 30 June 2024, and the condensed consolidated statement of profit or loss and other comprehensive income, condensed consolidated statement of changes in equity and condensed consolidated statement of cash flows for the six months ended 30 June 2024, in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting.

 

In preparing the interim condensed consolidated financial statements, directors are responsible for:

  • properly selecting and applying accounting policies;
  • presenting information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
  • providing additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group’s consolidated financial position and financial performance; and
  • making an assessment of the Group’s ability to continue as a going concern.

 

Directors also are responsible for:

  • designing, implementing and maintaining an effective and sound system of internal controls throughout the Group;
  • maintaining adequate accounting records that are sufficient to show and explain the Group’s transactions and disclose with reasonable accuracy at any time the consolidated financial position of the Group, and which enable them to ensure that the interim condensed consolidated financial statements of the Group comply with IAS 34;
  • taking such steps as are reasonably available to them to safeguard the assets of the Group; and
  • preventing and detecting fraud and other irregularities.

 

 

These interim condensed consolidated financial statements were approved and authorised for issue by the Board of Directors on 13 September 2024 and signed on its behalf by

 

Omar Bahram

Chairman of the Board of Directors

 

 

Vitaly Nesis

Group Chief Executive Officer

 

REPORT ON REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

To: management and shareholders of Solidcore Resources plc

Introduction

We have reviewed the accompanying interim condensed consolidated financial statements of Solidcore Resources plc and its subsidiaries, which comprise the interim condensed consolidated statement of financial position as at 30 June 2024 and the related interim condensed consolidated statements of comprehensive income, changes in equity and cash flows for the six-month period then ended, and selected explanatory notes (interim financial information). Management is responsible for the preparation and presentation of this interim financial information in accordance with IAS 34, Interim Financial Reporting. Our responsibility is to express a conclusion on this interim financial information based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information of Solidcore Resources plc and its subsidiaries is not prepared, in all material respects, in accordance with IAS 34, Interim Financial Reporting.

 fncls.ssp?fn=download2_file&code_str=a9989ec5d8b3f763d8b6d1b2557b9512

 

fncls.ssp?fn=download2_file&code_str=b5826840b03d53e5188b23729665db50

 

License for carrying on ancillary services in accordance with the Acting Law of the Astana International Financial Center (AIFC), No. AFSA-A-LA-2020-0007 issued by AFSA on 28 February 2020.

 

State Audit License for audit activities on the territory of the Republic of Kazakhstan: series МФЮ–2, № 0000003, issued by the Ministry of Finance of the Republic of Kazakhstan on 15 July 2005

050660, Republic of Kazakhstan, Almaty

Al-Farabi ave., 77/7, Esentai Tower

 

        13 September 2024

CONDENSED CONSOLIDATED INCOME STATEMENT

 

 

 

 Period ended

 

 Period ended

 

Note

30 June 2024

 

30 June 2023

 

 

US$m

 

US$m

Continuing operations

 

 

 

 

Revenue

4

704

 

393

Cost of sales

5

(358)

 

(186)

Gross profit

 

346

 

207

 

 

 

 

 

General, administrative and selling expenses

9

(35)

 

(32)

Other operating expenses, net

10

(19)

 

(7)

Operating profit

 

292

 

168

 

 

 

 

 

Foreign exchange (loss)/gain, net

 

(6)

 

165

Change in fair value of financial instruments

18

 

(1)

Finance costs

11

(9)

 

(16)

Finance income

 

10

 

7

Profit before income tax from continuing operations

 

287

 

323

 

 

 

 

 

Income tax

12

(49)

 

(51)

Profit for the period from continuing operations

 

238

 

272

 

 

 

 

 

Discontinued operations

 

 

 

 

Net loss from discontinued operations

3

(2,045)

 

(82)

Net (loss)/profit

 

(1,807)

 

190

 

 

 

 

 

(Loss)/profit for the period attributable to:

 

 

 

 

Equity shareholders of the Parent

 

(1,807)

 

190

 

 

(1,807)

 

190

Earnings per share for continuing operations (US$)

 

 

 

 

Basic

 

0.50

 

0.57

Diluted

 

0.50

 

0.57

 

 

 

 

 

Earnings per share for discontinued operations (US$)

 

 

 

 

Basic

 

(4.32)

 

(0.17)

Diluted

 

(4.32)

 

(0.17)

 

 

 

 

 

Loss/(Earnings) per share for continuing and discontinued operations (US$)

 

 

 

 

Basic

 

(3.81)

 

0.40

Diluted

 

(3.81)

 

0.40

 

 

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

 

 

 

 

 

 

 

 Period ended

 

 Period ended

 

Note

30 June 2024

 

30 June 2023

 

 

US$m

 

US$m

 

 

 

 

 

(Loss)/profit for the period

 

                        (1,807)

 

                                     190

Other comprehensive income/(loss), net of income tax

 

                           924

 

                                    (499)

Items that will not be reclassified subsequently to profit or loss

 

 

 

 

Effect of translation to presentation currency

 

                            (55)

 

                                        

 

 

 

 

 

Items that may be reclassified to profit or loss

 

 

 

 

Fair value gain arising on hedging instruments during period

 

                              (1)

 

                                       (4)

Exchange differences on translating foreign operations

 

                              (4)

 

                                    (445)

Currency translation recycling on disposal of foreign operation

 

                           984

 

 

Currency exchange differences on intercompany loans forming net investment in foreign operations, net of income tax

 

                               

 

                                     (50)

Total comprehensive (loss)/income for the period

 

                          (883)

 

                                    (309)

 

 

 

 

 

Total comprehensive loss for the year attributable to:

 

                          (883)

 

                                    (309)

Equity shareholders of the Parent

 

                          (883)

 

                                    (309)

 

 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

 

 

Note

30 June 2024

 

31 December 2023

Assets

 

US$m

 

US$m

 

 

 

 

 

Property, plant and equipment

14

832

 

2,998

Right-of-use assets

 

3

 

76

Goodwill

 

 

11

Investments in associates and joint ventures

 

6

 

129

Non-current accounts receivable

 

28

 

107

Other non-current financial assets

 

8

 

9

Deferred tax assets

 

5

 

192

Non-current inventories

15

39

 

115

Total non-current assets

 

921

 

3,637

 

 

 

 

 

Current inventories

15

194

 

1,178

Prepayments to suppliers

 

30

 

180

Income tax prepaid

 

17

 

46

VAT receivable

 

47

 

131

Trade and other receivables

 

37

 

261

Other financial assets at FVTPL

 

1

 

5

Cash and cash equivalents

20

761

 

842

Total current assets

 

1,087

 

2,643

 

 

 

 

 

Total assets

 

2,008

 

6,280

 

 

 

 

 

Liabilities and shareholders’ equity

 

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

(71)

 

(240)

Current borrowings

16

(219)

 

(1,005)

Income tax payable

 

(33)

 

(20)

Other taxes payable

 

(31)

 

(81)

Current portion of contingent consideration liability

 

(3)

 

(15)

Current lease liabilities

 

(1)

 

(18)

Total current liabilities

 

(358)

 

(1,379)

 

 

 

 

 

Non-current borrowings

16

(185)

 

(2,220)

Contingent and deferred consideration liabilities

 

(13)

 

(29)

Deferred tax liabilities

 

(54)

 

(252)

Environmental obligations

 

(15)

 

(69)

Non-current lease liabilities

 

(2)

 

(52)

Other non-current liabilities

 

(9)

 

(26)

Total non-current liabilities

 

(278)

 

(2,648)

Total liabilities

 

(636)

 

(4,027)

NET ASSETS

 

1,372

 

2,253

 

 

 

 

 

Share capital

13

14

 

14

Share premium

13

2,436

 

2,436

Share-based compensation reserve

13

4

 

33

Cash flow hedging reserve

 

7

 

8

Translation reserve

 

(1,138)

 

(2,063)

Retained earnings

 

49

 

1,825

Total equity

 

1,372

 

2,253

 

 

 

 

 

Total liabilities and shareholders’ equity

 

                      (2,008)

 

                      (6,280)

 

 

 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

 

 

 

 

 

Period ended[28]

 

Period ended

 

 

 

30 June 2024

 

30 June 2023

Note

US$m

 

US$m

 

 

 

 

 

 

Net cash generated by operating activities

20

 

517

 

35

Relating to:

 

 

 

 

 

Continuing operations

 

 

344

 

184

Discontinued operations

3

 

173

 

(149)

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(174)

 

(375)

Net cash outflow on asset acquisitions

 

 

(6)

 

Investments in associates

 

 

 

(3)

Net cash outflow on disposal of subsidiaries

3

 

(215)

 

Loans advanced

 

 

(78)

 

(14)

Repayment of loans provided

 

 

3

 

8

Contingent consideration received

 

 

 

5

Net cash used in investing activities

 

 

(470)

 

(379)

Relating to:

 

 

 

 

 

Continuing operations

 

 

(319)

 

(83)

Discontinued operations

3

 

(151)

 

(296)

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Borrowings obtained

20

 

359

 

582

Repayments of borrowings

20

 

(459)

 

(455)

Repayments of principal under lease liabilities

20

 

(1)

 

(12)

Net cash (used in)/ from financing activities

 

 

(101)

 

115

Relating to:

 

 

 

 

 

Continuing operations

 

 

(96)

 

(39)

Discontinued operations

3

 

(5)

 

154

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

 

(54)

 

(229)

Cash and cash equivalents at the beginning of the period

20

 

842

 

633

Effect of foreign exchange rate changes on cash and cash equivalents

 

 

(27)

 

(20)

Cash and cash equivalents at the end of the financial period

20

 

761

 

384

 

 

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

 

 

Note

Stated capital account

Share capital

Share premium

Share-based compensation reserve

Cash flow hedging reserve

Translation reserve

Retained earnings

Total equity

 

 

US$m

US$m

US$m

US$m

US$m

US$m

US$m

US$m

 

 

 

 

 

 

 

 

 

 

Balance at 1 January 2023 (audited)

 

2,450

35

16

(1,543)

1,284

2,242

Profit for the financial period

 

190

190

Other comprehensive loss, net of income tax

 

(4)

(495)

(499)

Total comprehensive income/(loss)

 

(4)

(495)

190

(309)

Share-based compensation

 

6

6

Transfer to retained earnings

 

(13)

13

Balance at 30 June 2023 (unaudited)

 

2,450

28

12

(2,038)

1,487

1,939

 

 

 

 

 

 

 

 

 

 

Balance at 1 January 2024 (audited)

 

14

2,436

33

8

(2,063)

1,825

2,253

Loss for the financial period

 

(1,807)

(1,807)

Other comprehensive loss, net of income tax

 

(1)

925

924

Total comprehensive income/(loss)

 

(1)

925

(1,807)

(883)

Share-based compensation

 

 

2

2

Transfer to retained earnings

13

 

 

(31)

31

Balance at 30 June 2024 (unaudited)

 

14

2,436

4

7

(1,138)

49

1,372

 

 

 

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

  1. GENERAL

Solidcore Resources (previously Polymetal International) is a leading gold producer based in Kazakhstan and listed on Astana International Exchange. During the six months ended 30 June 2024 the Group completed the divestment of its Russian business through sale of 100% share of JSC Polymetal (Polymetal Russia) (Note 3) and served an application to delist the Company’s shares from Moscow Stock Exchange.

Solidcore Resources plc (the “Company”) is the ultimate parent entity of Solidcore Resources.

The Company was incorporated on 29 July 2010 as a public limited company under Companies (Jersey) Law 1991 as Polymetal International plc. On 8 August 2023, the Group completed the re-domiciliation of the Company from Jersey to the Astana International Financial Centre (“AIFC”) in Kazakhstan. The Company changed its name on 11 June 2024 following the sale of Polymetal Russia, which retained its former name.

Significant subsidiaries

As of 30 June 2024 the Company held the following significant mining and production subsidiaries:

 

 

 

 

 

Effective interest held, %

Name of subsidiary

Deposits and production facilities

Segment

Country of incorporation

30 June
2024

 

31 December 2023

 

 

 

 

 

 

 

Varvarinskoye JSC

Varvara

Kazakhstan

Kazakhstan

100

 

100

Bakyrchik Mining Venture LLC

Kyzyl

Kazakhstan

Kazakhstan

100

 

100

Komarovskoye Mining Company LLC

Komar

Kazakhstan

Kazakhstan

100

 

100

Ertis Hydrometallurgical Plant LLC

Ertis POX

Kazakhstan

Kazakhstan

100

 

100

 

Basis of presentation

The unaudited interim condensed consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting issued by the International Accounting Standards Board. They should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the 2023 Annual Report of Polymetal International plc and its subsidiaries (“2023 Annual Report”) available at  https://www.solidcore-resources.com.

Accounting policies

These interim condensed consolidated financial statements have been prepared under the historical cost convention as modified by the revaluation of certain financial instruments measured at fair value.

The accounting policies and methods of computation applied are consistent with those adopted and disclosed in the Group’s consolidated financial statements for the year ended 31 December 2023, with the exception of new accounting pronouncements, which became effective on 1 January 2024 and have been adopted by the Group. The adoption of these new accounting pronouncements has not had a significant impact on the accounting policies, methods of

computation or presentation applied by the Group.

 

 

New standards and amendments applicable for the current period

  • Classification of liabilities as current or non-current liabilities with covenants (Amendments to IAS 1 “Presentation of Financial Statements”) specify the requirements for classifying liabilities as current or non-current. The amendments clarify that a right to defer settlement must exist at the end of the reporting period and that classification is unaffected by the likelihood that an entity will exercise its deferral right. In addition, a requirement has been introduced whereby an entity must disclose when a liability arising from a loan agreement is classified as non-current and the entity’s right to defer settlement is contingent on compliance with future covenants within twelve months. The amendments do not have a material impact on the Group
  • Lease liability in a sale and leaseback (Amendments to IFRS 16 “Leases”) specify the requirements that a seller-lessee uses in measuring the lease liability arising in a sale and leaseback transaction. The amendments do not have an impact on the Group.
  • Supplier finance arrangements (Amendments to IAS 7 “Statement of Cash Flows” and IFRS 7 “Financial Instruments: Disclosures”) clarify the characteristics of supplier finance arrangements and require additional disclosure of such arrangements. The amendments do not have a material impact on the Group.

New standards or amendments issued but not yet effective

The Group has not early adopted any amendment, standard or interpretation that has been issued but is not yet effective. It is expected that, where applicable, these standards and amendments will be adopted on each respective effective date.

 

Going concern

In assessing its going concern status, the Group has taken account of its financial position, anticipated future trading performance, its borrowings and other available credit facilities, its forecast compliance with covenants on those borrowings and capital expenditure commitments and plans.

The Board is satisfied that the Group’s forecasts and projections, having taken account of reasonably possible changes in trading performance, show that the Group has adequate resources to continue in operational existence for at least the next 12 months from the date of this report and that it is appropriate to adopt the going concern basis in preparing these interim condensed consolidated financial statements.

Exchange rates

Exchange rates used in the preparation of the interim condensed consolidated financial statements were as follows:

 

Russian Rouble/US Dollar

Kazakh Tenge/US Dollar

 

 

 

As at 30 June 2024

Not applicable

471.46

As at 31 December 2023

89.69

454.56

 

 

 

Average 1H 2024

Not applicable

449.00

 

  1. SEGMENT INFORMATION

The Group’s operating segments are aligned to those businesses that are evaluated regularly by the chief operating decision maker (the CODM) in deciding how to allocate resources and in assessing performance. Operating segments with similar economic characteristics are aggregated into reportable segments.

In March 2024, following the divestment of Russian business (Note 3), the Company re-assessed the presentation of financial information by segments. It was concluded that production hub-based reporting format is more meaningful from a management and forecasting perspective, as well as better aligned to the management structure, internal reporting and processes of the retained Group. Segment information for the period ended 30 June 2023 was restated accordingly.

Therefore the Group has identified two reportable segments:

  • Varvara (Varvarinskoye JSC, Komarovskoye Mining Company LLC); and
  • Kyzyl (Bakyrchik Mining Venture LLP).

 

Minor companies and activities (management, exploration, purchasing and other companies) which do not meet the reportable segment criteria are disclosed within the corporate and other segment.

 

The measure which management and the CODM use to evaluate the performance of the Group is a segment Adjusted EBITDA, which is an Alternative Performance Measure (APM). For more information on the APMs used by the Group, including definitions, please refer to page 40.

The accounting policies of the reportable segments are consistent with those of the Group’s accounting policies under IFRS. Revenue and cost of sales of the production entities are reported net of any intersegmental revenue and cost of sales, related to the intercompany sales of ore and concentrates.

Business segment current assets and liabilities, other than current inventory, are not reviewed by the CODM and therefore are not disclosed in these interim condensed consolidated financial statements. Additionally, net debt is included in performance measures, reviewed by CODM. The segment adjusted EBITDA reconciles to the profit before income tax from continuing operations as follows:

 

  1. Segment information (continued)

 

Period ended 30 June 2024

Period ended 30 June 2023

 

 

Varvara

 

Kyzyl

 

Total reportable segments

 

Corporate and other

 

Total

 

 

Varvara

 

Kyzyl

 

Total reportable segments

 

Corporate and other

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue from external customers

 

189

 

456

 

645

 

59

 

704

 

 

179

 

214

 

393

 

 

393

 

Cost of sales, excluding depreciation, depletion and write-down of inventory to net realisable value

 

105

 

141

 

246

 

61

 

307

 

 

99

 

61

 

160

 

 

160

 

Cost of sales

 

120

 

177

 

297

 

61

 

358

 

 

108

 

78

 

186

 

 

186

 

Depreciation included in cost of sales

 

(15)

 

(36)

 

(51)

 

 

(51)

 

 

(9)

 

(17)

 

(26)

 

 

(26)

 

General, administrative and selling expenses, excluding depreciation, amortisation and share-based compensation

 

9

 

9

 

18

 

14

 

32

 

 

6

 

8

 

14

 

12

 

26

 

General, administrative and selling expenses

 

9

 

10

 

19

 

16

 

35

 

 

7

 

8

 

15

 

17

 

32

 

Depreciation included in SGA

 

 

(1)

 

(1)

 

 

(1)

 

 

(1)

 

 

(1)

 

 

(1)

 

Share-based compensation

 

 

 

 

(2)

 

(2)

 

 

 

 

 

(5)

 

(5)

 

Other operating expenses excluding additional tax charges

 

5

 

12

 

17

 

2

 

19

 

 

4

 

2

 

6

 

1

 

7

 

Other operating expenses, net

 

5

 

12

 

17

 

2

 

19

 

 

4

 

2

 

6

 

1

 

7

 

Share of loss of associates and joint ventures

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

70

 

294

 

364

 

(18)

 

346

 

 

70

 

143

 

213

 

(13)

 

200

 

Depreciation expense

 

15

 

37

 

52

 

 

52

 

 

10

 

17

 

27

 

 

27

 

Share-based compensation

 

 

 

 

2

 

2

 

 

 

 

 

5

 

5

 

Operating profit

 

55

 

257

 

312

 

(20)

 

292

 

 

60

 

126

 

186

 

(18)

 

168

 

Foreign exchange gain/(loss), net

 

 

 

 

 

 

 

 

 

(6)

 

 

 

 

 

 

 

 

 

 

165

 

Change in fair value of contingent consideration liability

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

 

Finance expenses

 

 

 

 

 

 

 

 

 

(9)

 

 

 

 

 

 

 

 

 

 

(16)

 

Finance income

 

 

 

 

 

 

 

 

 

10

 

 

 

 

 

 

 

 

 

 

7

 

Profit before tax

 

 

 

 

 

 

 

 

 

287

 

 

 

 

 

 

 

 

 

 

323

 

Income tax expense

 

 

 

 

 

 

 

 

 

(49)

 

 

 

 

 

 

 

 

 

 

(51)

 

Profit for the financial period from continuing operations

 

 

 

 

 

 

 

 

 

238

 

 

 

 

 

 

 

 

 

 

272

 

Current metal inventories

 

51

 

90

 

141

 

 

141

 

 

59

 

113

 

172

 

 

172

 

Current non-metal inventories

 

20

 

32

 

52

 

1

 

53

 

 

21

 

39

 

60

 

 

60

 

Non-current segment assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

253

 

491

 

744

 

88

 

832

 

 

228

 

509

 

737

 

40

 

777

 

Non-current inventory

 

37

 

2

 

39

 

 

39

 

 

34

 

 

34

 

 

34

 

Investments in associates

 

 

 

 

6

 

6

 

 

 

 

 

11

 

11

 

Total segment assets

 

361

 

615

 

976

 

95

 

1 071

 

 

342

 

661

 

1 003

 

51

 

1 054

 

Additions to non-current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

32

 

37

 

69

 

46

 

115

 

 

43

 

27

 

70

 

18

 

88

 

 

 

  1. DIVESTMENT OF THE RUSSIAN BUSINESS AND DISCONTINUED OPERATIONS

 

Оn 18 February 2024 the Group entered into contracts for the divestment of its Russian business through a sale of 100% JSC Polymetal’s shares to a third party, JSC Mangazeya Plus (the Purchaser).

On 7 March 2024 the transaction was completed following approval at a the General Shareholders Meeting and receipt of the regulatory approvals. Following this date, the Group ceased to have any interest in JSC Polymetal and therefore determined that it lost control over JSC Polymetal on 7 March 2024. As Polymetal Russia was a separate geographical area of operation and a major line of business, the sale represented discontinued operations for the Group.

The transaction entailed US$ 50 million cash consideration which was paid to the Company at completion.

Prior to completion, an aggregate dividend of US$ 1,429 million (before tax) was paid by JSC Polymetal to the Company, of which US$ 278 million were retained by the Company for its general corporate purposes and US$ 1,151 million were used to repay, and fully discharge, the intra-group debt and related interest owed to JSC Polymetal. Net cash proceeds from the Purchaser and through dividends retained by the Company (after tax) amounted to US$ 300 million.

Major classes of assets and liabilities of JSC Polymetal and its subsidiaries (JSC Polymetal Group), net of dividends payable and intercompany loans receivable as described above, that were settled in March 2024 before the actual disposal date and which were not be part of assets and liabilities of the divested subsidiaries as of disposal date, are presented as follows:

 

US$m

Assets

 

Property, plant and equipment

                   2,227

Right-of-use assets

                        79

Goodwill

                        11

Investments in associates and joint ventures

                      124

Non-current accounts receivable

                        107

Deferred tax asset

                          194

Non-current inventories

                      78

Total non-current assets

                   2,820

 

 

Current inventories

                      939

Prepayments to suppliers

                      149

Income tax prepaid

                        16

VAT receivable

                        46

Trade and other receivables

                      310

Cash and cash equivalents

                      265

Total current assets

                   1,725

 

 

Accounts payable and accrued liabilities

                     (218)

Current borrowings

                     (725)

Other taxes payable

                     (185)

Income tax payable

                       (38)

Other current liabilities

                       (30)

Total current liabilities

                  (1,196)

 

 

Non-current borrowings

                  (1,974)

Deferred tax liability

                       (49)

Other non-current liabilities

                     (140)

Total non-current liabilities

                  (2,163)

Total liabilities

                  (3,359)

NET ASSETS

                   1,186

 

 

Loss from discontinued operations is detailed as follows:

 

US$m

Net assets disposed of

                  (1,186)

Cash consideration received

                        50

Currency translation recycling on disposal of foreign operation[29]

                     (984)

Tax expense attributable to disposal of discontinued operations

                         (6)

Loss on disposal of discontinued operations

                  (2,126)

 

 

Profit for the period attributable to the discontinued operations

                        84

Directly attributable expenses

                         (3)

Net loss attributable to the discontinued operations

                  (2,045)

 

 

Disposed cash and cash equivalents as of 7 March

                      265

Cash consideration received

                       (50)

Net cash outflow on disposal of subsidiaries

                     (215)

 

The rationale for the transaction was associated with the significant political and financial risks that the pre-divestment structure posed to the Group, as well as the extreme difficulty and related uncertainty of executing any alternative transaction. Therefore management believes that the transaction terms do not represent an indicator of impairment of any CGU within the JSC Polymetal Group prior to the disposal date.

Re-presentation of Interim Condensed Consolidated Income Statement of the Group

The Group’s interim condensed consolidated income statement was prepared in accordance with IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations” so that the results of discontinued operations would be excluded from the continuing operations and presented as a single amount. The comparatives in the statement of operations were re-presented in the same way. No adjustments to comparative data were made for the assets and liabilities in the statement of financial position.

The consolidated results of the Group were divided into transactions with external parties, which are classified as discontinued operations, and intra-group transactions between continuing and discontinued operations, which were eliminated in the Group’s consolidated financial statements. The Group’s intragroup transactions were eliminated, but adjustments were made to reflect how transactions will be reflected in continuing operations going forward. For that purpose, the sales of Kyzyl doré by discontinued operations during six months ended 30 June 2023 to third parties were reclassified to continuing operations. Presentation is in line with the Group segment reporting as presented in the interim condensed consolidated financial statements for the six months ended 30 June 2023 and consolidated financial statements for the year ended 31 December 2023. Therefore the Group recognised revenue and related cost of sales in the operation where the source ore was mined, regardless of whether it was processed on behalf of that segment at production facilities related to another hub.

The result of the discontinued operations, which were included in the profit and loss for the period, were as follows:

 

Period ended

 

7 March 2024

30 June 2023

 

US$m

US$m

Revenue

                            415

                           922

Expenses

                           (315)

                       (1,010)

Profit/(loss) before tax

                            100

                            (88)

Attributable tax expense

                            (16)

                              6

Profit/(loss) for the period attributable to the discontinued operations

                             84

                            (82)

 

Cash flows from discontinued operations are presented on the face of the cash flow statement.

 

  1. REVENUE

 

 

Six months ended 30 June 2024 (unaudited)

Six months ended 30 June 2023 (unaudited)

 

Thousand ounces/ tonnes shipped

Thousand ounces/ tonnes payable

Average price (US Dollar per troy ounce/tonne payable)

US$m

Thousand ounces/ tonnes shipped

Thousand ounces/ tonnes payable

Average price (US Dollar per troy ounce/tonne payable)

US$m

 

 

 

 

 

 

 

 

 

 

 

Gold (Koz)

328

317

2,190

694

204

200

1,904

380

Silver (Koz)

54

52

19.2

1

45

43

23.3

1

Copper (t)

1,019

956

9,410

9

1,529

1,434

8,370

12

Total

 

 

 

704

 

 

 

393

 

 

Revenue analysed by geographical regions of customers is presented below:

 

 

 

Six months ended

 

 

30 June 2024

 

30 June 2023

 

 

US$m

 

US$m

Sales to Kazakhstan

 

436

 

327

Sales to Asia

 

268

 

62

Other

 

 

4

Total

 

704

 

393

 

Included in revenues for the six months ended 30 June 2023 is revenue from customers with a share of total revenue greater than 10%. These were US$ 381 million and US$ 92 million, respectively (period ended 30 June 2023: US$ 265 million, US$ 63 million and US$ 39 million, respectively).

Presented below is an analysis by revenue streams:

 

 

 

Six months ended

 

 

30 June 2024

 

30 June 2023

 

 

US$m

 

US$m

Doré

 

381

 

264

Concentrate

 

264

 

125

Bullions

 

59

 

4

Total

 

704

 

393

 

 

  1. COST OF SALES

 

 

Six months ended

 

30 June 2024

 

30 June 2023

 

US$m

 

US$m 

Cash operating costs

 

 

 

On-mine costs (Note 6)

81

 

83

Smelting costs (Note 7)

58

 

60

Purchase of ore and concentrates from third parties

59

 

35

Mining tax

43

 

38

Total cash operating costs

241

 

216

 

 

 

 

Depreciation and depletion of operating assets (Note 8)

49

 

37

Total costs of production

290

 

253

 

 

 

 

Increase in metal inventories

67

 

(67)

Idle capacities and abnormal production costs

1

 

Total

358

 

186

 

 

 

  1. ON-MINE COSTS

 

 

Six months ended

 

30 June 2024

 

30 June 2023

US$m

 

US$m

Services

42

 

37

Consumables and spare parts

25

 

34

Labour

12

 

9

Other expenses

2

 

3

Total (Note 5)

81

 

83

 

 

  1. SMELTING COSTS

 

 

Six months ended

 

30 June 2024

 

30 June 2024

US$m

 

US$m

Services

26

 

17

Consumables and spare parts

23

 

36

Labour

9

 

7

Other expenses

 

Total (Note 5)

58

 

60

 

 

  1. Depletion and depreciation of operating assets

 

 

Six months ended

 

30 June 2024

 

30 June 2023

 

US$m

 

US$m

On-mine

39

 

29

Smelting

10

 

8

Total in cost of production (Note 5)

49

 

37

Less: absorbed into metal inventories

2

 

(11)

Depreciation included in cost of sales

51

 

26

 

Depletion and depreciation of operating assets excludes depreciation relating to non-operating assets (included in general, administrative and selling expenses) and depreciation related to assets employed in development projects where the charge is capitalised. Depreciation expense, which is excluded in the Group’s calculation of Adjusted EBITDA (see Note 2), also excludes amounts absorbed into unsold metal inventory balances.

  1. General, administrative and selling expenses

 

 

Six months ended

 

30 June 2024

 

30 June 2023

 

US$m

 

US$m

Labour

22

 

14

Services

5

 

8

Share-based compensation

2

 

5

Depreciation

1

 

1

Other

                                     5

 

4

Total

35

 

32

 

  1. Other operating expenses, net

 

 

Six months ended

 

30 June 2024

 

30 June 2023

 

US$m

 

US$m

Social payments

10

 

2

Taxes, other than income tax

4

 

2

Exploration expenses

2

 

1

Other expenses

3

 

2

Total

19

 

7

 

  1. Finance Costs

 

 

Six months ended

 

30 June 2024

 

30 June 2023

 

US$m

 

US$m

Interest expense on borrowings

7

 

15

Unwinding of discount on environmental obligations

1

 

1

Unwinding of discount on contingent consideration liability (Note 20)

1

 

Total

9

 

16

 

Interest expense on borrowings excludes borrowing costs capitalised in the cost of qualifying assets of US$ 1 million during the six months ended 30 June 2024 (30 June 2023: US$ 1 million). These amounts were calculated based on the Group’s general borrowing pool and by applying an effective annualised interests rates of 3.83% and 4.86%, respectively, to cumulative expenditure on such assets.

  1. Income Tax

 

 

Six months ended

30 June 2024

 

30 June 2023

US$m

 

US$m

 

 

 

 

Current income taxes

(204)

 

(53)

Deferred income taxes

155

 

2

Total 

(49)

 

(51)

Current income taxes recognised during six months ended 30 June 2024 include withholding income tax paid of US$ 143 million (2023: nil) related to the dividends from Polymetal, which were remitted as a part of divestment from the Russian operations (Note 3). The provisional amount of the withholding income tax was recognised as a deferred tax liability of US$ 152 million as of 31 December 2023 and was released during six months ended 30 June 2024.

No deferred tax liabilities for taxes that would be payable on the unremitted earnings of the Group subsidiaries was recognised as of 30 June 2024 as the Group determined that the undistributed profit of its subsidiaries would not be distributed in the foreseeable future (judged to be one year).

 

  1. shareholders’ Equity and Earnings per share

 

The movements in the Stated capital account in the period were as follows:

 

 

Share capital

 

Share capital

 

Share premium

 

Treasury shares

no. of shares

US$m

 

US$m

 

no. of shares

 

 

 

 

 

 

 

 

Balance at 31 December 2023

473,645,141

 

14

 

2,436

 

41,614,678

 

 

 

 

 

 

 

 

Own shares exchanged during period

                 14,424,003

 

 

 

14,424,003

Own shares issued in exchange

14,424,003

 

 

 

Deferred shares issued

45,179

 

 

 

Balance at 30 June 2024

473,690,320

 

14

 

2,436

 

56,038,681

 

On 23 November 2023, the Board announced its intention to conduct an exchange offer, which was approved by Shareholders at the General Meeting on 8 December 2023. The exchange offer invited shareholders whose rights have been affected by the sanctions imposed on NSD, subject to fulfilling eligibility criteria, to tender such shares for exchange in consideration for the issuance of a certificated share, on a one-for-one basis. In total, 14,424,003 shares were repurchased since the beginning of the Exchange Offer during the six months ended 30 June 2024. The exchange of shares did not give rise to any cash settlement and hence does not give rise to any financial liability. The shares were exchanged at par, on a one-for-one basis and the exchange does not affect the Company’s net asset and resources position or capital structure.

 

As of 30 June 2024 total number of voting rights in the Company amounted to 473,690,320 ordinary shares of nominal value US$ 0.03 each (31 December 2023: to 473,645,141 ordinary shares with no par value), each carrying one vote, and additionally the Company held 56,038,681 shares in treasury and such shares did not enjoy any voting or economic rights (31 December 2023: 41,614,678 shares).

 

The ordinary shares reflect 100% of the total issued share capital of the Company.

 

The calculation of the basic and diluted earnings per share is based on the following data:

Weighted average number of shares: Diluted earnings per share

Both basic and diluted earnings per share were calculated by dividing profit for the period attributable to equity holders of the parent by the weighted average number of outstanding common shares before/after dilution respectively. The calculation of the weighted average number of outstanding common shares after dilution is as follows:

 

 

Six months ended

 

30 June 2024

 

30 June 2023

 

 

 

 

Weighted average number of outstanding common shares

473,666,489

 

473,626,239

Weighted average number of outstanding common shares after dilution

473,666,489

 

473,626,239

 

There were no adjustments required to earnings for the purposes of calculating the diluted earnings per share in the current period (period ended 30 June 2023: nil).

There were no adjustments to weighted average number of shares for the purposes of calculating the diluted earnings per share in the current period (period ended 30 June 2023: none), as there are no outstanding Long-Term Incentive Plan (LTIP) awards which represent dilutive potential ordinary shares with respect to earnings per share from continuing operations as these awards are out of money as of the reporting date (30 June 2023: no dilutive potential ordinary shares).

The LTIP tranche, granted in 2020 lapsed during first half 2023 and accordingly, the related balance of US$ 24 million in the share-based payment reserve was transferred into retained earnings (2023: US$ 13 million was transferred into retained earnings in related to 2018 LTIP tranche). Additionally, the balance of US$ 7 million, related to the LTIP tranche, granted in 2021 to the employees of the divested Russian business (Note 3) was transferred into retained earnings.

 

  1. property, plant and equipment

 

 

Development assets

 Exploration assets

 Mining assets

 Non-mining assets

 Capital construction in-progress

 Total

Cost

US$m

US$m

US$m

US$m

US$m

US$m

 

 

 

 

 

 

 

Balance at 31 December 2023 (audited)

165

111

3,725

74

1,058

5,133

Additions

7

2

74

4

111

198

Transfers

(4)

(6)

18

1

(9)

Change in environmental obligations

(6)

(6)

Acquisition of assets

13

13

Eliminated on disposal of subsidiary (Note 3)

(163)

(100)

(2,550)

(63)

(1,005)

(3,881)

Disposals and write-offs including fully depleted mines

(1)

(12)

1

(12)

Translation to presentation currency

(1)

(1)

(62)

(3)

(12)

(79)

Balance at 30 June 2024 (unaudited)

4

18

1,187

14

143

1,366

 

 

 

 

 

 

 

 

Development assets

Exploration assets

Mining assets

Non-mining assets

Capital construction in-progress

Total

Accumulated depreciation, amortisation

US$m

US$m

US$m

US$m

US$m

US$m

 

 

 

 

 

 

 

Balance at 31 December 2023 (audited)

(7)

(11)

(1,930)

(44)

(143)

(2,135)

Charge for the period

(89)

(5)

(94)

Transfers

Eliminated on disposal of subsidiary (Note 3)

7

11

1,452

44

140

1,654

Disposals and write-offs including fully depleted mines

9

9

Translation to presentation currency

31

1

32

Balance at 30 June 2024 (unaudited)

(527)

(5)

(2)

(534)

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

31 December 2023

158

100

1,795

30

915

2,998

30 June 2024

4

18

660

9

141

832

 

 

  1. Inventories

 

 

30 June 2024

 

31 December 2023

US$m

 

US$m

Inventories expected to be recovered after twelve months

 

 

 

Ore stock piles

31

 

51

Consumables and spare parts

8

 

43

Work in-process

 

13

Сopper, gold and silver concentrate

 

8

Total non-current inventories

                            39  

 

                               115  

 

 

 

 

Inventories expected to be recovered in the next twelve months

 

 

 

Ore stock piles

47

 

208

Work in-process

61

 

146

Сopper, gold and silver concentrate

30

 

324

Doré

3

 

70

Metal for refining

 

25

Refined metals

 

45

Total current metal inventories

                          141  

 

                               818  

 

 

 

 

Consumables and spare parts

53

 

360

Total current inventories

                          194  

 

                             1,178  

 

 

  1. BORROWINGS

 

The Group has a number of borrowing arrangements with various lenders. As of 30 June 2024 these borrowings consist of unsecured and secured loans and credit facilities denominated in US Dollar and Euros.

 

 

 

Effective interest rate at

30 June 2024

31 December 2023

 

Type of rate

30 June 2024

31 Dec 2023

Current

Non-current

Total

Current

Non-current

Total

Secured loans from third parties

 

 

 

US$m

US$m

US$m

US$m

US$m

US$m

U.S. Dollar denominated

fixed

4.58%

4.32%

32  

93  

125  

        27  

             114  

      141  

Total secured loans from third parties

32  

93  

125  

        27  

             114  

      141  

Unsecured loans from third parties

 

 

 

 

 

 

 

 

 

U.S. Dollar denominated

floating

2.17%

6.74%

40  

80  

120  

      240  

             100  

      340  

U.S. Dollar denominated

fixed

2.17%

3.50%

145  

  

145  

      432  

             274  

      706  

Euro denominated

floating

4.13%

4.32%

2  

12  

14  

          2  

               18  

        20  

RUB denominated

floating

n/a

17.95%

  

  

  

        20  

             694  

      714  

RUB denominated

fixed

n/a

13.17%

  

  

  

        19  

             142  

      161  

CNY denominated

fixed

n/a

5.54%

  

  

  

      265  

             808  

   1,073  

CNY denominated

floating

n/a

4.95%

  

  

  

             

               70  

        70  

Total unsecured loans from third parties

      187  

               92  

        279  

      978  

          2,106  

   3,084  

Total loans from third parties

 

 

 

      219  

             185  

        404  

   1,005  

          2,220  

   3,225  

 

 

 

 

 

 

 

 

 

 

 

Movements in borrowings are presented in Note 20 below.

 

The table below summarises maturities of borrowings:

 

 

Period ended

 

30 June 2024

 

31 December 2023

 

US$m

 

US$m

Less than 1 year

                         219  

 

                              1,005  

1-5 years

                         181  

 

                      1,752  

More than 5 years

                             4  

 

                         468  

Total

404  

 

                        3,225  

 

There are financial and non-financial covenants attached to the Group’s borrowings. As at 30 June 2024 and for the period then ended the Group had no violations of covenants.

 

  1. Commitments and Contingencies

Capital commitments

The Group’s budgeted capital expenditure commitments as at 30 June 2024 amounted to US$ 42 million net of VAT (31 December 2023: US$ 171 million).

Social commitments

In accordance with a memorandum with Kostanay Oblast Akimat (local Kazakhstan government), the Group participates in financing of certain social and infrastructure development project of the region. The total social expense commitment as at 30 June 2024 amounts to US$ 7 million, payable in the future periods.

Taxation

Kazakh tax, currency and customs legislation is subject to varying interpretations, and changes, which can occur frequently. Management’s interpretation of such legislation as applied to the transactions and activities of the companies of the Group may be challenged by the relevant regional and federal authorities and as a result, significant additional taxes, penalties and interest may be assessed. Fiscal periods remain open to review by the authorities in respect of taxes for five calendar years preceding the year of review. Under certain circumstances reviews may cover longer periods.

Management has not identified any tax exposure in respect of contingent liabilities (31 December 2023: US$ 41 million), mainly related to income tax. Change in the amount is attributable to the divestment of Russian operations (Note 3).

  1. Fair Value Accounting

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable as follows:

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly; and

Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

At 30 June 2024 and 31 December 2023, the Group held the following financial instruments at fair value through profit or loss (FVTPL):

 

 

30 June 2024

 

Level 1

 

Level 2

 

Level 3

 

Total

 

US$m

 

US$m

 

US$m

 

US$m

 

 

 

 

 

 

 

 

Receivables from provisional copper, gold and silver concentrate sales

                           

 

                          26

 

                      

 

                  26

Interest rate swap

                           

 

                            7

 

                      

 

                   7

Shares held at FVTPL

                           1

 

                           

 

                      

 

                   1

Contingent consideration liability

                           

 

                           

 

                   (16)

 

                 (16)

 

                           1

 

                          33

 

                   (16)

 

                  18

 

 

 

 

 

 

 

 

 

31 December 2023

 

Level 1

 

Level 2

 

Level 3

 

Total

 

US$m

 

US$m

 

US$m

 

US$m

Receivables from provisional copper, gold and silver concentrate sales

                           

 

135

 

                      

 

                135

Interest rate swaps

                           

 

8

 

                      

 

                   8

Contingent consideration receivable

                           

 

                           

 

                      4

 

                   4

Shares held at FVTPL

                           2

 

                           

 

                      

 

                   2

Royalty liabilities payable

 

 

 

 

                   (24)

 

                 (24)

Contingent consideration liability

                           

 

                           

 

                   (44)

 

                 (44)

 

                           2

 

                        143

 

                   (64)

 

                  81

 

 

 

 

 

 

 

 

 

During both reporting periods presented, there were no transfers between levels of fair value hierarchy.

 

Additionally, as of 30 June 2024 the Group held an interest rate swap contract, recognised within non-current accounts receivables and other financial instruments in the amount of US$ 7 million (31 December 2023: US$ 8 million). An interest rate swap contract exchanging floating rate interest amounts for rate interest amounts is designated as cash flow hedges to reduce the Group’s cash flow exposure resulting from variable interest rates on borrowings. As the critical terms of the interest rate swap contracts and their corresponding hedged items are the same, the Group performs a qualitative assessment of effectiveness and it is expected that the value of the interest rate swap contracts and the value of the corresponding hedged items will systematically change in opposite direction in response to movements in the underlying interest rates. As of 30 June 2024 and 30 June 2023 it was determined that there is no hedge ineffectiveness identified and therefore change of fair value was recognised within other comprehensive income.

The estimated fair value of the Group’s debt, calculated using the market interest rate available to the Group as at 30 June 2024 is US$ 384 million (31 December 2023: US$ 2,699 million), and the carrying value as at 30 June 2024 is US$ 404 million (31 December 2024: US$ 3,225 million).

The fair value of receivables arising from copper, gold and silver concentrate sales contracts that contain provisional pricing mechanisms is determined using the appropriate quoted forward price from the exchange that is the principal active market for the particular metal. As such, these receivables are classified within Level 2 of the fair value hierarchy.

Valuation methodologies used in the measurement of fair value for Level 3 financial liabilities

The main level 3 inputs used by the Group in measuring the fair value of contingent consideration assets and liabilities, represented by net smelter returns (NSR), are derived and evaluated as follows:

  • The relevant valuation model simulates expected production of metals at respective mines and are based on life of mine models prepared using applicable ore reserves and mineral resource estimations.
  • Commodity prices – Commodity prices are based on latest internal forecasts, benchmarked against external sources of information. The Group used flat real long-term silver price of US$ 27 per ounce (2023: US$ 23 per ounce), respectively.
  • Discount rates – The Group used a post-tax real discount rate of 14.5% (31 December 2023: 12.5%). For the Monte-Carlo modelling, where inflation is incorporated into volatility estimation, a nominal discount rate of 17.2% (31 December 2023: 15.2%) is applied.
  • Where the percentage of net NSR or royalty receivable or payable depends on commodity prices or foreign exchange rates reaching certain levels, the Group applies the Monte-Carlo modelling to incorporate the volatility measure into the valuation, which is applied to the prevailing market prices/rates as of the valuation date.

The key assumptions used in the Monte-Carlo calculations are silver price of US$ 28.85 per ounce and silver price volatility of 31%.

During six months ended 30 June 2023 the Group recognised the loss from revaluation of its Level 3 financial instruments at FVTP of US$ 4 million (30 June 2023: US$ 1 million), representing loss on contingent consideration payable revaluation.

The Directors consider that a reasonably possible change in a valuation assumption would not have a material impact on the interim condensed consolidated financial statements for contingent considerations receivable and payable.

  1. Related Parties

Related parties are considered to include shareholders, associates, joint ventures and entities under common ownership and control with the Group and members of key management personnel.

During the period ended 30 June 2024 there were no transactions with the related parties (30 June 2023: miscellaneous purchases of US$ 1.1 million and various sales to the related parties of US$ 0.3 million).

Outstanding balances with related parties as of 30 June 2023 are nil (31 December 2023: US$ 1 million).

  1. Supplementary cash flow information

 

 

 

 

Period ended[30]

 

Period ended

 

Notes

 

30 June 2024

 

30 June 2023

 

US$m

 

US$m

 

 

 

 

 

 

Loss/(Profit) before tax

 

 

(1,736)

 

235

Adjustments for:

 

 

 

 

 

Depreciation and depletion recognised in the statement of comprehensive income

 

 

82

 

123

Impairment of non-current assets

 

 

 

12

Loss on disposal of subsidiaries

3

 

2,120

 

Write-down of inventories to net realisable value

 

 

2

 

10

Share-based compensation

 

 

2

 

6

Finance costs

 

 

83

 

69

Finance income

 

 

(19)

 

(8)

Change in fair value of financial instruments

18

 

 

5

Foreign exchange gain/(loss), net

 

 

8

 

105

Other non-cash items

 

 

(1)

 

(2)

 

 

 

541

 

555

Movements in working capital

 

 

 

 

 

Change in inventories

 

 

29

 

(205)

Change in VAT and other taxes

 

 

172

 

26

Change in trade and other receivables

 

 

(37)

 

(130)

Change in prepayments to suppliers

 

 

(1)

 

(7)

Change in trade and other payables

 

 

4

 

(31)

Cash generated from operations

 

 

708

 

208

Interest paid

 

 

(38)

 

(79)

Interest received