Hello, and welcome to the EQS Q3 2022 production results conference. My name is Priscilla, and I'll be your coordinator for today's event. Please note this call is being recorded, and your lines will be on listen-only. However, you will have the opportunity to ask questions at the end during the Q&A session. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero and you will be connected to an operator. I will now hand you over to your host, Mr. Vitaly Nesis, the Group CEO, to begin today's conference. Please go ahead, sir. Thanks a lot. Ladies and gentlemen, welcome to the traditional quarterly production results call. I will first briefly walk you through the operational results, provide you with an update on our corporate initiatives, and then we'll conclude with the traditional Q&A session. Overall, in the third quarter of 2022, Polymetal International started to catch up with the decline in production experienced in the first half of the year. In the third quarter, the gold equivalent production year-on-year increased by 7%, mostly the function of our new mine at Nezhda ramping up and first production generated at the new Kutyn heap leach project within the Albazino Hub. We expect that the fourth quarter production will continue on the uptrend, and we are cautiously optimistic about our ability to meet the original production guidance of 1.7 million ounces in 2022, despite significant challenges through the year. In terms of our development projects, they progress in line, and specifically POX-2 is successfully overcoming challenges related to the supply chain issues. Particularly, we note that logistical hurdles presented by the COVID restrictions in China are starting to relax, which obviously helps our strategy of changing the sources of some of the materials and spares to China and other Asian countries. As you well know, the key challenge in the first half of the year has been the accumulation of unsold finished goods inventory, specifically bullion and doré. September marked the first month when we really started to draw down that inventory, and in October, we already witnessed a significant decrease in bullion inventory, pushing down our net debt compared with the peak number by about $150 million. By the end of October, we already are actually below $2.7 billion mark. We expect that November and December to be particularly strong in terms of free cash flow generation, thanks both to the seasonal cash inflows, but also to the continued unwinding of very significant metal stockpile that we accumulated since the beginning of the year. Clearly, this bodes well for deleveraging, and we remain cautiously optimistic that the continued strong free cash flow generation will enable us to seriously consider the resumption of dividend payments in 2023. In general, we reiterate our full year production guidance and maintain our cost guidance for the year. We also provide formal initial guidance for 2023 and 2024. In each of those years, we expect stable production of 1.7 million ounces of gold equivalent. We note that supply chain risks, although continuing to mitigate, still are present, and the management is applying our best efforts to ensure that they are well contained and addressed. We will provide cost guidance for 2023 in late January 2023, together with the 2022 full year production results. In terms of the corporate update, in October, we have completed shareholder votes on the share exchange offer for shares held through the National Settlement Depository in Russia. The shareholders overwhelmingly supported the share exchange. So far, about 10.5% of all company shares have been submitted for the share exchange, and we are continuing to work with our share depository to successfully close the offer. The board also continues its search for to recruit the new board members to replace the two board members that have left the board earlier in the month. In terms of our other strategic initiatives, we are continuing with our analysis of strategic options, including the option to redomicile the company to another jurisdiction, and also the options related to the shares that will continue to be held in NSD following the conclusion of the share exchange offer. We will update the market as we progress our analysis of those options. We definitely expect to have a full final understanding of where and how we are moving by the time we present full year production results in the second half of January. I guess with this I conclude my brief introductory remarks and would be happy to answer any questions. Any online questions? Hello? Hi there. Sorry for the delay. Thank you. Ladies and gentlemen, as a reminder, if you would like to ask a question or make a contribution on today's call, please press star one on your telephone keypad. To withdraw your question, please press star two, and we'll pause for a moment to allow everyone an opportunity to signal for questions. We'll now take our first question from Leonard Lawson. Please go ahead. Your line is open. Thank you. In the previous call, you mentioned that you expect by today's call to provide some information on the impact of the partial mobilization in Russia. Would you be able to comment on that? Well, thanks for the question. Obviously, I cannot give you any specific details, but generally, we believe that the partial mobilization will not have a material impact on our production or cost guidance this year or next year. Okay. Thank you. All right. Thank you. We'll now take our next question from Mitchell Martin, from Mitchell Advisory Company. Please go ahead. Your line is open. Yes, thank you. Good morning. In your last presentation, I mean, I know you were projecting, you know, for your own internal planning, higher gold prices and a better ruble dollar exchange rate. Now that it's not as favorable, how do you see the reductions? You know, obviously, you're selling, you know, much more of your inventory now, which is fantastic. But given lower gold prices, you know, less favorable dollar ruble exchange rate than you projected, how do you see net debt going down? Has it, you know, dramatically impacted your planning for this? You can just address that, please. Thanks. Thank you very much. No, we still expect a significant reduction of net debt by year-end. I think the optimistic number is probably close to $2 billion, but the achievement of this optimistic estimate will be contingent mostly on the ruble-dollar exchange rate. Still, you know, we believe that we can push down the current net debt number within the next two months down by $300-$400 million. The substantial deleveraging will definitely be achieved. I think the deleveraging will continue into the first quarter of the next year, because although we will be able to monetize more or less all of our bullion and the rare earths stockpiles this year, some of the concentrate stockpiles will only be cashed in the first quarter of the next year. We will retain some of the positive cash flow momentum into the start of the next year. I think in general, despite the macroeconomic variables being slightly worse than what we expected at the beginning of the year or a couple of months ago, we're still in very good shape. Thank you. That's music to my ears. Thank you very, very much. Great job. Thank you. Thank you, Mitchell. Once again, ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. It appears there is no further questions at this time. I'd like to turn the conference back to you, Mr. Vitaly Nesis. Oh, all right, we have one more question. Please. Any questions? Or alternatively, I will start answering the questions provided through the webcast. Hello? Operator, are you there? Hello? Hi there. Are you able to hear me? Yes, I'm able to hear you now. All right. Okay. Not sure there was a technical issue. We have Mr. Oliver from Berenberg. Please go ahead, sir. Your line is open. Hi. Thank you. Just one question from me, please. When do you expect the recovery rate at Nezhda to kind of get towards the design level, please? Thank you. Nezhda is currently operating at design levels, both in terms of throughput grade and recoveries. The only deviation from our original plan is the fact that some of the high arsenic concentrate is temporarily unmonetizable, so we are stockpiling this concentrate in anticipation of the startup of POX-2. However, even with this complication, the asset is free cash flow positive starting from this quarter, and the accumulation of the concentrate will be resolved once the POX-2 is fully operational in 2024. That's very helpful. Thank you. Thank you, Mr. Oliver. Once again, ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. It appears there is no further question at this time. I'd like to turn the conference back to you for any additional closing remarks. Well, actually, we have quite a few questions from the webcast, so we'll try to go through them. First question is, in the news update on September 22, you stated you had supply chain issues. Have you managed to resolve this, especially the procurement of equipment and critical spare parts? This is a very good question. I think that in terms of short-term impact just on the operations and on the projects, we have no critical issues. We managed to secure both operational consumables and equipment from alternative sources, mostly in Asia, but also from Russia. Longer term, we will need to continue hard work to find alternative sources, mostly of underground mine equipment in China, Turkey, other countries. I think the situation is well under control. Unless there is further substantial tightening of sanctions regime, we believe that the supply chain issues will not impact our production guidance. Although we will face some of the cost headwinds, mostly related to sometimes decline in productivity and mechanical availability of non-European, non-Western equipment. Due to the sanctions on Russian banks, will you be able to pay back all your debt during 2023? The short answer is yes. First of all, we are fully compliant with all of the relevant sanctions, and this is our critical intention to continue to be in full compliance. We believe that the payments due in 2023 and beyond that time horizon will be fully compliant with the sanctions. Any update on relocating the Pacific POX in Kazakhstan? Yes. We more or less have identified the broader region in which we want to locate this project. The final decision about the specific site will be made by the end of this quarter. We will announce the site together with our full year production update in late January. I hope you can keep the company together and keep the Russian assets. What are the chances of keeping the Russian assets? As we have said during the shareholder meeting, sale of the Russian assets is no longer an option. We are not even considering it. The goal is to preserve the shareholder value by not selling the assets but by rather the optimal scenario is a legal separation of assets into two different jurisdictions, which would allow the shareholders to retain full exposure to the value of assets in both countries. What can you tell us about sales of the concentrates to China? Do you think that normalization will last? Yes. I think normalization that we have been observing for the last couple of months will last. The logistical hurdles are slowly being relaxed. Definitely we are not back to full normal pre-COVID logistics. I'm optimistic that within the next three months we will see a full resolution of all constraints, and this would actually be helpful in terms of reducing the shipment times and freeing up some working capital from the concentrates path to the final buyer. Could you comment on the decision of temporarily suspending activity at Nezhda open pit, and the same with open pit mining at Saum? These are mostly the measures that relate to our desire to reduce our current operating expenditures and to monetize substantial ore stockpiles that have accumulated at the respective operations. As you may remember, we have aggressively pre-stripped Nezhda during the project build-up stage. Now we can actually reduce mining activity without any serious impact on production and actually with an improvement in economics. More or less, we are cashing up our active investment during the construction stage. Can you see HIC retreating back in the future to levels of two years ago? Would the resolution in the Ukrainian-Russian conflict translate into very significant declines in costs? I think most likely there is no way back to pre-COVID levels, mostly because of the global inflation. Structurally, definitely peaceful resolution would be helpful, but I don't think it will be able to fully neutralize the accumulated cost creep over the last three years. Any news about future underground equipment? Could you comment on Ekaterinskaya underground mine transition to care and maintenance? Well, it's a similar story to Nezhda. We have a substantial accumulated stockpile of ore. Putting one of the underground mines on temporary care and maintenance will not impact future production and will be able to buttress our free cash flows thanks to inventory monetization. Yes, partially this decision is related to our desire to have extra level of security in terms of underground equipment. We are transitioning to mostly Chinese kit, but it will take some time, so we are consciously idling some of the current underground equipment in order to use the older units as sources of spares for the newer units. So we are consciously cannibalizing some of the equipment. We will need two-three years to effect a full-scale transition to non-Western underground equipment. Throughout this period, we will need to have this additional kind of level of safety in our underground mine equipment availability. What is your outlook for gold prices? Honestly, I don't have a strong opinion. Definitely we'll hope that gold price will go up, but this is by no means certain. What moves you to accelerate the execution of the second stage of the Urals flotation project and to delay other projects? We are prioritizing the projects that are shorter term and less capital intensive. Currently, the leverage definitely is very much on the top of the list of the management concerns. Longer dated, more capital-intensive projects are pushed down on the list of priorities, and we are trying to execute smaller and shorter scheduled projects with the goal to strengthen our free cash flow generation. From the point of view of the traditional kind of NPV calculations, that may be suboptimal, but realistically, we are responding to the environment which, in effect, demands higher discount rate from our investments. Higher discount rate prioritizes shorter-lived fast payback projects. Hence, our decision to slow down Veduga and to accelerate the second stage of Urals flotation. Would you expect the debt level to come down? What will be the new optimum debt level? When do you expect dividend resumption? Well, I believe we can push down the absolute debt level below the absolute $2 billion mark, and definitely be below 2x net debt over EBITDA. In terms of dividend resumption, the board traditionally considers the ability to pay dividend in March. Definitely a lot will depend on the macroeconomic variables at the time. I think I hope it will be a substantive discussion because the financial position of Polymetal by that time should improve enough to make a dividend payment possible from the point of view of financial strength. Is Kazakhstan still in the list of possible candidate countries for new registration of Polymetal International? Yes, it definitely is. It's one of the top contenders. If we don't exchange our shares and we keep them in the LSE, we will lose our dividend in 2023. No, definitely not. In general, regardless of the decision we make in terms of changing the potential change in domicile of the company, the management intends to keep the LSE listing. This is one of the priorities that we pursue as we evaluate various options. LSE listing is not at risk, we hope, and dividends of shares listed on the LSE are not at risk. Would you consider acquisitions in Africa? No. Do you expect meaningful changes in head grades in 2023? Well, I just announced the stable production guidance for the next year. Given the fact that the processing volumes will roughly stay the same, that more or less means that the head grades are roughly stable. There will be some fluctuation at the individual mine levels, but company-wide, the head grade is likely to stay more or less stable. How can you comment your positive LTIFR dynamics? Well, I think we had a small uptick nine months year on year. In general, I am satisfied with our safety performance year to date. We had no fatalities, no serious accidents, and definitely we will continue to view the safety of our employees and contractors as our top priority. When is the next mine opening? Well, our next mine is very likely still to be Veduga. We originally planned to launch it in 2025. Right now, we believe the realistic start-up date for that asset shifted to 2027. Do you have any updates on POX-3, especially after the statement on provision of land in the Khabarovsk region by the Federal Agency for State Property Management? That land acquisition has been a long time in the works, and is kind of the delayed impact of our activities on the site in the Khabarovsk region. Right now, POX-3 siting is definitely in Kazakhstan, so that land, for now, will be kept on the back burner with no project specifically linked to it. Is there a risk of not receiving dividends on shares held at NSD? Yes, there is such a risk because currently, as far as we understand, Euroclear does not allow the passing of dividends to NSD. Huh? Do you hear me? We can hear you loud and clear. All right. Thank you. Going back to the dividends on shares held at NSD, this is one of the thorniest issues the management faces. Obviously, we understand that all shareholders are entitled to dividends. On the other hand, we can't really do anything with Euroclear, really. We are currently working closely with our legal counsel and with our corporate brokers to try to find a solution to this issue. Now, we will do our best to ensure that when dividend payment is resumed, shareholders holding shares at NSD have access to dividends. However, I would like to highlight the risk that the position of Euroclear vis-à-vis NSD will make this difficult or impossible. If we are in sanctioned nations, how will we receive our dividends? Well, the entity paying the dividends is located in Jersey right now. Post potential redomicile, it will be located in a jurisdiction which is not Russian. There should be no issue with paying dividends either out of Jersey or out of the new jurisdiction. Can you please remind us who you sell your gold to, split by geography, and how this changed over the past year? Well, last year, we sold most of our gold through Russian banks to London. In Kazakhstan, we sold our gold to the National Bank of Kazakhstan. Presently, we continue to sell our gold in Kazakhstan to the National Bank of Kazakhstan, and our Russian gold is sold to a variety of buyers in Asia, several countries. I would prefer not to split out the geographies because it's now pretty competitive market, and being able to sell to several jurisdictions is important to ensure the robustness of the sales channels. What is the implication of the transfer to non-Western equipment on CapEx and OpEx? I think it's a very good question. I think in terms of CapEx, we may expect a slight decline. In terms of OpEx, on the mining side, particularly on the underground mining side, we expect increase in OpEx because the Chinese equipment is less productive and has lower availability, so we can expect more units needed to be used for the same volumes and more expenditures on maintenance. We are trying to proactively address this challenge. For example, at Mayskaya, we have commissioned the conveyor transportation system for moving material underground. We are studying similar options at a couple of our other underground operations. In general, yes, this is the source of some cost pressures in our underground mines. Couple of questions on Kazakhstan. We keep our production forecast for Kazakhstan at 500,000 ounces for the next two years. None of the minor last-minute incidents in the third quarter happened in Kazakhstan. No Kazakh shareholders exchanged their blocked shares recently because Kazakh shareholders that I know of, they all held their shares either in London or through our listing at the Astana International Exchange. They were not really subject to restrictions related to NSD. Have you completely ceased Russian-mined gold sales locally? The main reason is the discount to global prices. We currently do not sell any gold within Russia. The main reason is our desire to ensure full sanctions compliance, because the majority of the Russian banking system is under some type of international sanctions. We want to be 100% sure that we don't come into commercial relationships with sanctioned Russian banks, even if it's through an intermediary. In terms of the speed with which we are closing our gap between sales and production, yes. We actually started to do this a bit later than we expected at the end of the second quarter, so only in the second half of September we really started to move gold in big volumes. Right now, there is no issue to sell gold or silver bullion, either in Russia or in Kazakhstan. Do Kazakh authorities have any issues against processing Kyzyl concentrate in Almaty because of the sanctions? What is the ratio now between the amounts of Kyzyl concentrate sent to China and to POX? The ratio is approximately 60% goes to POX, and 40% goes to China. This is gold contained, not physical tonnage of concentrate. No, there are no issues in terms of processing Kyzyl concentrate at POX. Gold in Kyzyl concentrate is Kazakhstan gold, and it is not subject to international sanctions. In what order of priority is net debt reduction? Well, I think we want to decrease our net debt enough to be able to resume dividends. This is the key priority. Obviously we don't want to pay dividends while having a debt level which is either unsustainable or dangerous. I think the key metric to consider is net debt over Adjusted EBITDA. I think 2x would be the level which we need to pass moving down in order to seriously consider paying dividends. Do you see growth potential in near future? No, I don't see growth potential in near future. The growth potential is substantial only over the timeframe of, let's say, five years with the startup of Veduga. Any outlook for inflation in Russia and Kazakhstan? Well, I think inflation in Russia has come down. I think it's now trending below 12%. Kazakhstan is a bit higher. In terms of outlook, I think a lot will depend on the moves by the Fed and other central banks, so don't really have any outlook. We are penciling in 10% for Russia and 12% for Kazakhstan in next year's budgets. Do you expect any promising junior exploration projects at the upcoming competition? Yeah, we will hold our fifth junior contest in a couple of months. We have received so far only a handful of applications, but I expect strong interest, and I confirm that we continue to be interested in finding and funding the right type of exploration progress in both Russia and Kazakhstan. You say you aim to get to net debt to EBITDA 2x with a net debt of $2 billion. Does it suggest a $1 billion EBITDA? I think no. I think those, broadly, are kind of preliminary. These are broad estimates, and I definitely don't suggest a $1 billion EBITDA, 'cause this number depends hugely on gold price and on ruble-dollar exchange rate. I think $2 billion is something we definitely can expect short term, mostly on the heels of substantial sell down of inventory. 2x is a longer term metric that we will benchmark ourselves against in order to ensure that our dividend payment doesn't jeopardize the financial health of the company. Would dividend payments be made even if shares held on the NSD could not receive them? That's a very good question. I would say that my gut feel is the answer is yes. We hope to successfully complete the exchange, the recent share exchange of some of the shares through NSD. We'll do our best to continue the unlocking of NSD shares in the future. Obviously, even if some shareholders will continue to be stuck, we will not be able to continue to disenfranchise all of the shareholders from the ability to receive the dividend. Okay. I see no further questions in the webcast. Any questions from the line? All right. We have Oliver from Berenberg again for the question. Just give me a moment. Please go ahead, sir. Your line is open. Thank you. Could you provide an update on what the latest is with the Kutyn rare earths deposit, please? Thank you. The rare earths project is currently on complete hold. We're not really spending anything on it, just maintaining a skeleton crew. Actually fired some people, transferred some people to Polymetal. Honestly, I don't expect any change in this status quo for some time. Thank you. Thank you, Mr. Oliver. Once again, if you would like to ask a question, please press star one on your telephone keypad. It appears there is no further questions at this time. Sir, I would like to turn the conference back to you. All right. We have Joe as a private investor for the next question. Hello. So I'd just like to ask. In your Q2 results, you did say that you would close the gap between the production and sales by Q3, and this has now been moved back to the end of the year. I'm wondering, are you struggling to sell this gold at the current price? Are you considering cutting the price of the gold? Thank you. Well, I actually tried to answer this question. We have started the full-blown sales of gold bullion a bit later than we originally planned, hence the move of the target date to sell all of the accumulated bullion. This is not related to pricing. This is related to the compliance considerations that we wanted to ensure that we sell gold in such a way that there is absolutely no sanctions compliance risk. Right now we are selling our gold and our silver more or less with no discount to gold prices. We will not consider a price cut. We believe our current sales channels, multiple sales channels, provide us with ample opportunity to sell our product at full price. Thank you. It appears there is no further questions at this time, sir. I'd like to turn the conference back to you. Well, thank you very much for active participation. Please feel free to send us further questions, either to top management or to the investor relations team. Have a very nice day. Thank you very much. Bye-bye. Thank you for joining today's call. You may now disconnect.