Sanctions impact on business

What is the sanctions’ impact on your business?

Sanctions announced in the period since9 March 2022 did not have a direct material impact on the business of the Group. The Group complies rigorously with all relevant legislation and is implementing comprehensive measures to observe all applicable international sanctions. The scope and impact of any new potential sanctions (and any countersanctions) are yet unknown. However, they might further affect key Russian financial institutions as well as mining companies. Polymetal believes that targeted sanctions on the Company remain unlikely, but are not impossible. Contingency planning has been initiated proactively to maintain business continuity.
For more details, please, see our recent press releases on the topic here and production results announcement at the link.

It was announced that Polymetal is planning to dispose of its Russian business. Is that correct? What options do you consider?

Polymetal is evaluating various options that could restore shareholder value by seeking to allow the market to appropriately value the Company’s Kazakhstani assets and de-risk its ongoing operations. Such options include potential modification of asset holding structure which would ensure distinct ownership in various jurisdictions in which the Company operates. Early stage deliberations are ongoing and accordingly, there can be no certainty as to the outcome. A further announcement will be made as and when appropriate. Please see the latest press release on the topic at the link.

Are you able to sell gold in the current circumstances? Have sanctions affected this ability?
  • Sales of gold bullion and concentrates from Kazakhstan continue as usual.
  • Sales of gold bullion and concentrates from Russian mines to diverse Asian markets is returning to regular schedule after significant COVID-related slowdown in Q2. The sales terms remain broadly consistent with those received earlier. Polymetal currently does not sell any of its products to Russian Central Bank or its affiliates, directly or indirectly. The Company is conducting thorough evaluation of the impact of the recent EU sanctions on Russian gold.
  • Sales logistics continue to experience significant challenges due to the COVID restrictions in China and impact of the sanctions, leading to slower inventory turnover and higher selling costs.
Are you able to attract funding in the current environment? Do you have enough liquidity?

Lending is available in both RUB and USD. RUB interest rates decreased significantly following gradual Russian Central Bank’s benchmark rate decrease. Polymetal is currently financing its short-term working capital requirements with USD-denominated debt at lower interest rates.

Are you able to maintain production in the current environment?

Polymetal operations in Russia and Kazakhstan continue undisrupted. Production guidance of 1.7 Moz for 2022 is maintained, the management however notes a risk of underperformance given persistent lockdowns and logistical constraints in Chinese ports and railway.

Are you able to buy equipment and consumables in the current environment?

Procurement continues to adapt to the current environment with orderly replacement of sanctioned equipment, consumables and supplies with alternatives from Russia and other countries. The majority of existing deliveries with foreign suppliers continue to be honored and the Company maintains significant safety stock for critical consumables and spares.

Securities and dividends

What kind of securities do you have?
  • Shares on LSE, MOEX, AIX with POLY ticker. Security and therefore ISIN is the same for all exchanges, JE00B6T5S470.
  • ADR with AUCOY ticker is traded OTC. It is a sponsored ADR program administrated by BNY Mellon. See Q. no. 15 for more details.
  • Unsponsored ADR program — ticker POYYF.
Why do brokers refuse to take orders in POLY LN?

We are aware that many international and UK brokers restricted trading in Polymetal. However, there are no regulatory, technical, or administrative reasons to do so. Trading in Polymetal is still facilitated by a number of brokers, such as Peel Hunt, Hargreaves Lansdown, AJ Bell and Oberon. Please note that we may be not aware of other names trading our stock so we would recommend investors to do their own research if they want to trade with other brokers.

In case the stock trading is suspended from LSE, will a shareholder retain their shares?

Yes, the ownership is not affected by trading suspension.

In case the stock trading is suspended from LSE, will a shareholder be able to trade shares?

Trading will be still available over-the-counter. Centralized exchange trading will continue on AIX and MOEX (only available for local investors) even in case of suspension on LSE (other than in case of direct sanctions on the company).

In case the stock trading is suspended from LSE will a shareholder be still entitled to dividends and participation in other corporate actions?

Yes. If a shareholder owns a stock bought on an exchange where listing is suspended, they are still entitled to receive dividends unless the Company’s cash distribution is restricted due to sanctions.

My shares are held in the Russian National Settlement Depositary (NSD), how are they impacted?

On the 3rd of June the European Union imposed sanctions on the NSD effectively blocking the operations between Euroclear and NSD. The Company is advised that this development makes it impossible for those shareholders who keep their shares in NSD (~22% of our share capital) to receive dividends and/or take part in any Company’s corporate actions. Polymetal is consulting with its legal advisors and regulators to confirm the outcomes of these sanctions and measures that could be taken to secure shareholders’ rights.

If my broker in Russia is on a sanction list, how can I continue to trade and receive dividends?

In this case, our advice is to transfer your shares to a broker who is not on a sanction list.

Does the Russian government regulation requiring to delist Russian issuers’ depositary receipts from foreign exchanges impact your securities?

No, as:

  • a) Shares are issued by Polymetal International plc which is a non-Russian entity so the regulation does not apply to us.
  • b) The regulation applies to depositary receipts, while Polymetal International plc has shares not DRs on both LSE and Moscow exchange.
Is the ADR program still open? Can we convert DRs into shares?

Trading in ADRs in the USA was largely frozen by the 6th June announcement made by OFAC clarifying the scope of the US E.O. 14066 (https://home.treasury.gov/policy-issues/financial-sanctions/faqs/1055 and https://home.treasury.gov/policy-issues/financial-sanctions/faqs/1054). US brokers and banks consequently stopped executing orders.

After consulting with the depositary bank administering the program and our legal advisors regarding the situation the Company confirms that no shareholder rights are affected by this event, including right to receive dividends and voting rights. Shareholders holding ADRs can apply for conversion and receive underlying shares. Instruction from the depositary bank, BNY Mellon, is below:

Please refer to the general cancellation process below. Please note that all correspondence with BNY Mellon should be done only by a broker. Brokers could reach us by e-mail: drsettlements@bnymellon.com.

  • Deliver the DRs via DTC to BNY Mellon DR DTC account 2504. Please note if there are standing settlement instructions for the DTC participant and market in place we can action. However, if there are no SSI currently in place, we will require one of the following and either condition must be met to process.
  • a. SWIFT MT599 must be sent to IRVTUS3NADR from the delivering DTC participant, this must contain.

    Security Name

    CUSIP Number

    Date

    Number of DRs

    Name and BIC code of the bank the ordinary shares will be delivered to in the local market, beneficiary name, and beneficiary account number

    b. We can accept valid instructions via email to  drsettlements@bnymellon.com, this will require a call back to authenticate the details before transactions can be processed. Instructions must be on the company’s letterhead, signed (electronic signatures are valid), in a non-editable format, such as PDF, as an attachment to the email and must contain the following information:

    Security Name

    CUSIP Number

    Date

    Number of DRs

    Name and BIC code of the bank the ordinary shares will be delivered to in the local market, beneficiary name, and beneficiary account number

    If option B is chosen, brokers must provide a list of multiple contacts that are privy to and can authenticate instructions. Each contact should have a listed phone number and an email address. The list must be sent in a PDF format, on company letterhead, and signed by someone from the broker’s management team (digital signatures are acceptable) and medallion stamped. BNY Mellon will ring a designated and authorized person other than the person who issued the instructions, and to the telephone number provided in the contact list.

  • BNY Mellon will then charge an applicable cancelation fee of 5 cents per DR rounded up to the nearest 100 DR +$17.50 per instruction.
  • After BNY Mellon DRs receives the DRs, valid instructions and fee payment, it will instruct its custodian to deliver the ordinary shares. Ensure that your custodian is set up to accept delivery of the ordinary shares from the local SSI’s.
  • SSI: The Bank of New York London Branch

    BIC: IRVTGB2X

    PSET: CRSTGB22XXX

    SAFE: 144029 — BANK OF NEW YORK ADR

We have been also advised that ADRs continue to trade through the Frankfurt exchange as these ADRs are traded by non-US persons.

Will you pay the final dividend for 2021 and will you continue to pay dividends in the future?

The Board and the management continuously evaluate stability, liquidity and solvency of the business in light of multiple external uncertainties. The Company will announce its full-year 2021 and interim 2022 dividend decisions at the time of 1H 2022 financial results publication on the 22nd of September. Significant challenges and delays in establishing new sales channels and the resulting decline in operating cash flows will be the key factor informing these decisions.

Can you pay dividends in RUB?

No. We also cannot distribute dividends to shareholders through NSD (i.e. those trading on MOEX) — see above.

Do you consider buyback?

The Board and the management strongly believe that share buy-backs are presently inappropriate given short-term liquidity challenges, grave business uncertainties, and NSD challenges outlined above (see Q. no. 12) which make it impossible to offer buyback on equal terms to London and Moscow exchanges.

Do you consider moving your listing to a different exchange?

This option could be considered in due course as it is not a company’s priority at the moment.

Corporate governance

Do you still comply with premium listing rules after the previous Board resigned?

In March 2022, six independent non-executive directors stepped down from the Board of Directors. In the same month, the company announced new appointments and now the Board consists of eight members, of which six are independent non-executive directors, and is fully compliant with the UK Corporate Governance Code requirements.

What happened to your auditor?

Following Deloitte LLP’s decision, at its own initiative, not to stand for election by the shareholders at the AGM that took place in April 2022 (please see the related press release at the link) the Audit and Risk Committee of the Board of Directors of Polymetal International plc held a competitive tender process in compliance with the Competition and Markets Authority regulations, applicable EU requirements and Financial Reporting Council guidance. As a result of evaluation of the tender participants, the option of engaging MHA MacIntyre Hudson LLP (an independent member of Baker Tilly International Limited) as a group auditor jointly with AO Business Solutions and Technologies (previously AO Deloitte & Touche CIS) as a component auditor was considered a preferred option, which was recommended by the Audit and Risk Committee and approved by the Board. MHA MacIntyre Hudson LLP will act until the conclusion of the 2023 AGM at which meeting the Group auditor will be proposed to shareholders for appointment by ordinary resolution.

Do you consider redomiciliation?

This option could be considered in due course as it is not a company’s priority at the moment.

You are downloading Integrated Annual Report . Please note that some ESG data are available in Sustainability Performance Data 2021 (GRI and SASB) that outlines our key non‑financial performance information for financial year 2021. While the selected annual report is being downloaded, we want to draw your attention to the Sustainability Report. It provides detailed information on ESG indicators.

While the selected files are being downloaded, we want to draw your attention to the reports on the sustainable development of the company. They provide detailed information on ESG indicators.

You can also download historical data on sustainable development.

2019