Solidcore Resources plc: Half-year report for the six months ended 30 June 2024
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“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.
OPERATING HIGHLIGHTS
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.
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 Principal risks and uncertainties 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 reviewmarket 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
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.
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
The total cost of sales almost doubled in 1H 2024 to US$ 358 million, reflecting a combination of factors throughout the year:
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
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
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:
Total cash cost by segment/operation, US$/GE oz
ALL-IN SUSTAINING AND all-in cash costs All-in sustaining cash costs[17] remained broadly unchanged at US$ 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$/GE oz
Adjusted EBITDA[19] and EBITDA margin (US$m)
Adjusted EBITDA by segment/operation (US$m)
In 1H 2024, Adjusted EBITDA was US$ 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$m)
Basic earnings per share was US$ 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.
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
Stay-in-business capex at operating assets
Cash flows Cash flows include amounts of discontinued operations as required by IFRS 5, unless otherwise stated.
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:
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
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.
Payable metals in inventory accumulated at 30 June 2024 were as follows:
Principal risks and uncertaintiesThere 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:
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 concernIn 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 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:
Directors also are responsible for:
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
REPORT ON REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTSTo: management and shareholders of Solidcore Resources plc IntroductionWe 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 reviewWe 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.
ConclusionBased 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.
050660, Republic of Kazakhstan, Almaty Al-Farabi ave., 77/7, Esentai Tower
13 September 2024 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
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:
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. 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
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.
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:
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:
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:
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:
Loss from discontinued operations is detailed as follows:
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:
Cash flows from discontinued operations are presented on the face of the cash flow statement.
Revenue analysed by geographical regions of customers is presented below:
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:
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.
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.
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).
The movements in the Stated capital account in the period were as follows:
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:
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.
Movements in borrowings are presented in Note 20 below.
The table below summarises maturities of borrowings:
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.
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 commitmentsIn 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. 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).
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):
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 liabilitiesThe 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 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. 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).
During the period ended 30 June 2023, the capital expenditure related to the new projects, increasing the operating capacity amounts to US$ 46 million (period ended 30 June 2023: US$ 89 million). Cash and cash equivalents
Changes in liabilities arising from financing activitiesThe table below details changes in the Group's liabilities arising from financing activities, including both cash and non-cash changes. Liabilities from financing activities are those for which cash flow were, or future cash flows will be, classified in the Group's consolidated cash flow statements as cash flows from financing activities.
On 4 September 2024 the Group received approval from the Moscow Exchange to delist the Company’s shares, effective on 15 October 2024.
Alternative Performance MeasuresIntroduction The financial performance reported by the Group contains certain Alternative Performance Measures (APMs), disclosed to complement measures that are defined or specified under International Financial Reporting Standards (IFRS). APMs should be considered in addition to, and not as a substitute for, measures of financial performance, financial position or cash flows reported in accordance with IFRS. The Group believes that these measures, together with measures determined in accordance with IFRS, provide the readers with valuable information and an improved understanding of the underlying performance of the business. APMs are not uniformly defined by all companies, including those within the Group’s industry. Therefore, the APMs used by the Group may not be comparable to similar measures and disclosures made by other companies. Purpose APMs used by the Group represent financial KPIs for clarifying the financial performance of the Group and measuring it against strategic objectives, given the following background:
APMs and justification for their use
[1] The financial performance reported by the Group contains certain Alternative Performance Measures (APMs) disclosed to compliment measures that are defined or specified under International Financial Reporting Standards (IFRS). For more information on the APMs used by the Group, including justification for their use, please refer to the “Alternative performance measures” section below. [2] Adjusted for the after-tax amount of impairment charges, write-downs of metal inventory, foreign exchange gains/losses and other change in fair value of contingent consideration. [4] On a cash basis, representing cash outflow on purchases of property, plant and equipment in the consolidated statement of cash flows. [5] Totals may not correspond to the sum of the separate figures due to rounding. % changes can be different from zero even when absolute amounts are unchanged because of rounding. Likewise, % changes can be equal to zero when absolute amounts differ due to the same reason. This note applies to all tables in this release. [6] The amounts were restated to reflect adjustments made in connection with presentation of discontinued operations. [7] Defined in the “Alternative performance measures” section below. [8] Allocation factors for corporate costs were revised, 1H 2023 were restated accordingly. [9] In accordance with IFRS, revenue is presented net of treatment charges which are subtracted in calculating the amount to be invoiced. Average realised prices are calculated as revenue divided by gold and silver volumes sold, without effect of treatment charges deductions from revenue. [10] As at 31 December 2023. [11] On a last twelve months basis. Adjusted EBITDA for 2H 2023 was US$ 239 million. [12] Based on 80:1 Au/Ag conversion ratio and excluding base metals. Discrepancies in calculations are due to rounding. [13] LTIFR = lost time injury frequency rate per 200,000 hours worked. Company employees only are taken into account. [14] Without effect of treatment charges deductions from revenue. [15] Commission sales of third-party materials [16] Allocation factors for corporate costs were revised, 1H 2023 were restated accordingly. [17] All-in sustaining cash costs comprise total cash costs, all selling, general and administrative expenses for operating mines and head office not included in TCC (mainly represented by head office SGA), other expenses (excluding write-offs and non-cash items, in line with the methodology used for calculation of Adjusted EBITDA), and current period capex for operating mines (i.e. excluding new project capital expenditure (development capital), but including all exploration expenditure (both expensed and capitalised in the period) and minor brownfield expansions). For more information refer to the Alternative performance measures section below. [18] Allocation factors for corporate costs were revised, 1H 2023 were restated accordingly. [19] Defined in the “Alternative performance measures” section below. [21] Underlying net earnings represent net profit for the period excluding the impact of key items that can mask underlying changes in core performance. [22] Underlying basic EPS are calculated based on underlying net earnings. [23] On a cash basis. [24] On accrual basis, capital expenditure was US$ 115 million in 1H 2024 (1H 2023: US$ 150 million). [25] Including US$107 million on continuing operations and US$67 million from discontinued operations. [26] Relates to discontinued operations. [27] 1H 2024 – on a last twelve months basis. [28] Consolidated cash flow include amounts of discontinued operations (Note 3). [29] The functional currency of Polymetal is the Russian rouble, which is different from the Solidcore Resources plc functional currency (US dollar to 1 January 2015 and Kazakh tenge from 1 August 2023). The exchange differences arising on translation of the assets, liabilities and income statements of Polymetal were recorded in other comprehensive income and accumulated in the separate component of equity. On disposal of Polymetal the cumulative amount of the exchange differences relating to Polymetal was recycled to the Solidcore Resources plc’s income statement.
[30] Consolidated cash flow include amounts of discontinued operations as required by IFRS 5 (Note 3). [31] Annualised basis for half-year results. [32] Excluding lease liabilities and royalty payments.
16/09/2024 Dissemination of a Financial Press Release, transmitted by EQS News. |