Good day, and welcome to the Polymetal H1 2022 financial results conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Vitaly Nesis, CEO. Please go ahead. Ladies and gentlemen, welcome to our traditional financial report for six months ended on the 30th June 2022. This call will be more expansive than traditionally, because we will cover not only the financial results, but also give a strategic update on the company's direction and also explain the proposed exchange offer. Well, in terms of the financial highlights, clearly the first six months of this year have been extremely challenging, mostly due to the huge external pressures generated by geopolitical events. Now, we first faced significant disruption in traditional supply chains and sales channels, and then the overall market for precious metals has deteriorated. Still we managed to maintain operational stability and, despite all of the challenges, continue to stick to the original production guidance of 1.7 million oz. Of gold equivalent, although we do note that that guidance is at risk, but we still believe it is within reach. In terms of the financial results, clearly, profitability have suffered massively on the back of the significant backlog of sales, which we believe will fully unwind before the end of the year. Adjusted EBITDA declined by 35%. Total cash costs increased by 20%, and all-in sustaining cash costs increased very significantly by 34%. We would like to note that this huge increase is only partially driven by inflation and various supply chain-related challenges. At least part of this is due to the accumulation of unsold metal inventory, and we expect the cash costs to decline in the second half as we unwind that inventory. As a result of the financial results and increasing pressure on the balance sheet, the board of directors has made a decision to finally irrevocably cancel the dividends, both the full year 2021 dividend and the interim 2022 dividends. This decision was taken against the backdrop of a significant increase in net debt to $2.8 billion, and a significant increase in leverage from 1.1 to 2.3 net debt to adjusted EBITDA. The company definitely remains liquid and solvent and has plentiful access to various forms of financing, but the board unanimously decided it would be unwise to further strain the balance sheet by paying a dividend. We definitely hope that the dividend payment can be resumed in the near future as the company fully settles into the new sales channels and successfully resolves the issues related to the supply chain issues. in terms of the strategy of the company, we have previously announced that Polymetal has been considering the potential modification of its asset holding structure, which will ensure distinct ownership in the various jurisdictions in which the company operates. We also announced that we were evaluating the potential disposal of the company's assets located in the Russian Federation. However, following the recent developments, specifically, Russian presidential decree of the 5th August, now we believe that the previously considered transaction structure is now very challenging, if not outright impossible. Definitely the decree has added significant restrictions on our ability to execute the straight disposal transaction. Now, therefore, we continue to evaluate all available options to modify its asset holding structure. The ultimate goal of this exercise is to partially at least restore and maximize shareholder value. The current focus of analysis is potential redomiciliation of the parent company, Polymetal International, to a friendly jurisdiction friendly under the meaning of the relevant Russian law. Now, this is definitely a necessary step, which could unblock the ability to execute further corporate actions. No decision has been made in relation to the various options available to the company. We would like to stress that any corporate actions will be fully compliant with all applicable international sanctions, counter-sanctions, and regulatory requirements in all jurisdictions that the company operates. I finally come to the proposed exchange offer. As most of you probably know, a significant chunk of the company's issued share capital, approximately 22%, is currently held by shareholders through the Russian National Settlement Depository, or NSD. These shares are completely denied currently all of the rights of shareholders due to the international sanctions imposed on the NSD. We believe that any further corporate action, including, first of all, a dividend, and secondly, potential a change in corporate structure such as a dissolution, all of these steps are not possible both from the corporate governance perspective and from the practical voting perspective until the issue of shares stuck in NSD is resolved. We are announcing today our intention to conduct an exchange offer which invites shareholders whose rights have been affected by NSD sanctions, subject to fulfilling eligibility criteria, to tender such shares for exchange in exchange for the issuance of a certificated share on a one-for-one basis. Fundamentally, we are exchanging NSD-locked shares for shares not subject to NSD restrictions on one-for-one basis. There will be no change to the shareholder structure, and there will be definitely no value leakage in such transaction. Further details of the exchange offer can be found in a separate announcement, now which is both on our site and on RNS. I would like to conclude now with a statement that we believe the company still is doing fine in terms of stability and long-term viability of our operations. The best proof of that is the recent launch of our newest mine, Kutyn, which is a part of the Albazino hub. We believe significant cash outflows of the first half will be significantly reversed in the second half despite recent decline in gold prices. Now we also note recent news flow out of the Russian Federation. We continue to evaluate how this may impact our operations and our development projects. We plan to issue a third quarter operational update probably in the end of October, and we'll definitely provide more details about the ongoing dynamics of the company's business during that call. With this, I thank you for attention, and we would be happy to answer any questions. Thank you. If you would like to ask a question, please press star one on your telephone keypad. Please ensure the mute function on your phone is switched off to allow your signal to reach our equipment. If you find that your question has already been answered, you may remove yourself from the queue by pressing star two. Again, please press star one to ask a question. Again, ladies and gentlemen, to ask a question, please press star one. We'll take our first question from Jonathan Paul. Please go ahead. Yeah. Hello? Yes. Yeah. Hello, and congratulations on the launch of the new mine. I just wanted to ask about the sale of gold. In your last update you gave, you said that you were hoping for progress in Q3. In this half year results, you still said the same thing. I was just asking, has there been any increase in the sale of gold to Asian countries, especially as China has now come out of lockdown? Thank you. Thanks for the question. Yes. We have successfully established several channels of sales into Asia, and particularly, recently in September, the sales have really picked up and, we are seeing significant operational cash inflows. Now I would probably abstain from detailed comments on the geographic destination of these sales. We do realize that diversification of these channels is essential to maintain operational and financial stability. Thank you. Thank you. As a reminder, to ask a question, please press star one. As there are no further questions on the phone, I will hand the call back over to Mr. Nesis for any closing remarks. Let's wait for the text questions that we are receiving through the webcast, and then we'll answer those questions in the order received. While we wait for the web questions, again, as a reminder to ask a question over the phone, it's star one. Yeah, let's wait a little bit for the text questions, and then we'll decide whether we conclude the call. For your information, Mr. Nesis, there is one question after coming through on the phone. Sorry? There is one question after coming through on the phone, Mr. Nesis. Yeah, let's do this, yes. Yeah. We'll take the question from Jamie Wheatley, who is a private investor. Please go ahead. Your line is open. Hello there. Do you see the net debt into 2023 increasing, or do you see a reduction, going into 2023? Thanks for the question. We see a meaningful reduction in the second half of this year, so by the end of the year. In 2023, unless we see additional deterioration in operating conditions, we definitely expect a positive free cash flow. We more or less expect that the net debt of $2.8 billion as of the end of the first half is the peak net debt, again, unless we face some additional significant negative developments. Thank you very much. Do you think that your sales routes may be in danger? Can you put some color about what the latest sanctions in July are about? Obviously the geopolitical situation is very fluid, and it's difficult to forecast with certainty how the additional restrictions may be put in place. My personal view is that some of the countries where we sell are extremely unlikely to introduce any restrictive measures at all. Other countries may introduce some measures which may have an impact. That's why sales channel diversification is such an important part of our strategy right now. Overall, I'm reasonably optimistic because all of the Western world, the United States, the European Union, the U.K., have already introduced the sanctions, mostly in July, that have effectively blocked the import of Russian gold and silver for that matter into those countries. The impact of the July sanctions has already been fully established and incorporated in the current market dynamics. These countries, U.S., U.K., and EU, have already done everything they could do to block the sales of our product. The actions of additional countries I think are significantly less likely, so I'm cautiously optimistic. How will Kyzyl do in relation with new regulation by the Chinese government about high arsenic concentrates in the case of Kyzyl having no relation at all with Polymetal Russian assets? Will it be affected by 13% penalty VAT? Well, I think, in the option where Russian business and Kazakh business are separated, realistically, there will be some transitional period, which will see our Russian POX facility continue to toll treat Kyzyl concentrates. Now if this relationship becomes for some reason fully impossible, I think Kyzyl will face a very material deterioration in profitability because it's not only 13% penalty VAT, it's also a direct smelter penalty on arsenic content. The costs will go up very significantly. The operation will remain profitable, but its profitability will deteriorate very significantly. Are you close to any major decisions about shutting down certain parts of the operations and increases in the cut-off grade? Well, we are actually in the middle of the asset rationalization program as we speak. We have already made some decisions to curtail operations. We are in the process of evaluating other decisions, and we will present all of the steps that we decided to take at the time of our third quarter operational update. Up to what point do you think that net debt level could be a problem for Polymetal in the near future? What about debt refinancing for Polymetal? Do you have any recent feedback from financial entities in relation with today's published net debt to EBITDA ratio? Our CFO, Maxim Nazimok, will take that question. Yeah, sure. We are obviously engaging with, you know, quite a number of financial institutions, and we did so over the course of the third quarter where the net debt number was already in public domain. We don't see any major concerns on the side of the banks, and we have actually been continuing refinancing the business over the course of Q3, extending maturities, sometimes swapping dollar-denominated debt into rubles where rates have become more pleasant and more competitive as the central bank continued its downward slope on the rate. We don't see. With this level of net debt, we don't see any meaningful pressure from the lenders, especially as we have the plan to unwind working capital increase. Now please discuss the friendly jurisdictions and what they might be. Well, all jurisdictions that are not on the list of unfriendly jurisdictions are friendly. The options which have been floated during the recent internal discussion include Hong Kong, Mainland China, Kazakhstan, and the Emirates. Now there's a lot of work that will need to go into the definition of the criteria for the potential transaction and the due diligence of the deal. Given how difficult it will be to do the separation, is it really worth giving up being in the Jersey jurisdiction to go somewhere arguably with worse governance just to do this transaction? Well, this is the issue. This transaction, as far as I understand, refers to the potential split up of the company. This transaction, under the Jersey holding structure, is next to impossible because it requires a very heavy level and very high level of government's approvals in Russia. It also has a lot of risks in terms of what may happen if such approval is not granted. If we're talking about the separation, my personal belief is if there is no redom, there is no separation. I would probably add into this that redom doesn't automatically mean a decline in corporate governance standard because it doesn't mean a delisting from the London market, for example. What will be the effect of the mineral tax increase in Kazakhstan in 2023 for Polymetal? Well, the mineral tax has increased by 50% in Kazakhstan, so this will translate in approximately 5%-6% increase in all-in sustaining cash costs for our Kazakhstan operations. When do you plan to move your Pacific autoclave facility project from Russia to Kazakhstan? Well, first of all, it's not about moving the facility, it's more like resiting the project because there is no specific facility. We are very close to making a final decision about the specific location. We'll present that decision and conceptual action plan at the time of our third quarter results production results release. What will be the consequences of partial mobilization in Russia on the human resources of Polymetal? Does it bring any risk for relocation of the company to the friendly jurisdiction? Well, the partial mobilization has been announced only yesterday, and it started in earnest today, so definitely it's very difficult to assess. The consequences, particularly the scale and the scope of mobilization effort. This is something that we obviously are living with and need to understand. My expectation is that in about a month when we report production results, there will be more clarity. I don't think there is any impact on relocation from the partial mobilization. There will be an impact on operations, but not on the core productions. As far as I understand, there are questions from the call, so let's take them. We will take the next question from Leonard Lawson, who is a private investor. Please go ahead. Yes, hello. Can you hear me? Yes, please. Yes. My question is regarding the redomiciliation and potential realistic. I understand that the supposed exchange offer is due to the sanctions between the London Stock Exchange and the Russian clearing house. Potentially this could be resolved by moving the listing to another market that is not subject to such sanction. Has this been considered as part of the redomiciliation effort? And if you could comment on that would be helpful. Look, in our thinking, the question of additional listing in a friendly jurisdiction is really a secondary one. We first need to deal with the legal part of the issue, which is the company domicile in a non-friendly jurisdiction. Once the redomiciliation has been effected, we can consider further enhancements such as additional listing in, say, Hong Kong or some other place. This is an enhancement, really. The company needs to deal with the legal part first. Do you consider share buybacks? The answer is no. Any further questions from the call? Yes, we do have a follow-up question from Jonathan Paul, who is a private investor. Please go ahead. Yes, thank you. Thank you. I just wanted to ask you, what would you say are the top three things keeping you up at night now from your last update? Well, number one, definitely and with a huge gap is the mobilization, the partial mobilization recently announced. We are watching in real time how many employees are being called up, what employees are those, how we can deal with the reduction in human resources available. This is definitely number one on the agenda. Number two is diversification of sales channels. The more we have, the better we are positioned to deal with the potential expansion and strengthening of the international sanctions against Russia. I would say three is carefully weighing the pros and cons of a couple of large scale projects that we have in our pipeline. Specifically, Veduga, which will be ready for full-scale launch in about half a year, and the power line to Albazino, which is also pretty close to being shovel ready. It's a difficult call. Both projects definitely make economic sense, but we also need to weigh liquidity and leverage considerations as well as the potential fallout from the partial mobilization. Thank you. Thank you. We now have a follow-up question from Leonard Lawson, who's a private investor. Please go ahead. Yes, thank you for your previous answer. Regarding the redomiciliation, I understand. I agree with you, it is the first priority in this regard. However, do you see any risk that further sanctions could prevent such redomiciliation? If so, do you intend to accelerate the timeline, or what timeline do you have in mind? Well, this is a natural question. Unfortunately the, you know, the geopolitical developments this year have demonstrated that it's next to impossible to forecast or predict the dynamics of international sanctions against Russia. Unfortunately, everything is possible. We hope that there will be no impact. We understand that the faster we move, the better our chances of completing the transaction. However, we will not compromise the integrity of the company in terms of fair treatment of shareholders and compliance with all relevant international Russian and Kazakhstan regulations. We will try to move fast, but we will not cut corners. Thank you. Do you have an estimate of what the timeline that would imply? We probably, you know, will have an idea in a couple of months. I think a lot will depend on the outcome of the tender offer that we have announced today. We will be engaging with our institutional shareholders. We still have a sizable portion of our shares held by institutionals, so we need to listen to their views and concerns. I think we'll have an action plan hopefully in a couple of months. Okay. Thank you. We will take the next question from Mitchell Martin from Mitchell Advisory. Please go ahead. Yes. Hi. Good afternoon. Obviously from the first half financial report, I'm most concerned about, of course, the tremendous negative free cash flow of, you know, $630 million, and of course, adding a tremendous amount to your net debt. You did say that you see that as $2.8 billion as the maximum. Can you forecast for us, you know, how you intend to get that debt paid down, what you anticipate in coming quarters? I mean, are we ever gonna have a first half like we've had? If you could just address what you're doing to reduce your net debt and how you can save, of course, continuing to face operational challenges given the sanctions and the war, what you're planning to do to get your balance sheet in better shape? Yep, thanks for the question. In terms of the plan, it's relatively straightforward. As Vitaly mentioned on the call, we have over the last few months accumulated quite significant amount of unsold metal inventory. This is, you know, doré gold, which is readily convertible into cash. It was an issue of resetting the sales channels, the logistics of those sales channels and so on that prevented us from monetizing that inventory. We already see that process of sales gradually resuming, and this is kind of the major part. The other thing that we did, especially in the first half of the year, we rapidly increased the funding of, you know, buying critically important spare parts, equipment, consumables and so on. Everything that was at risk of becoming unavailable due to either sanctions or self-imposed restrictions by the suppliers, and that was basically another half of the increase in the working capital. As now the logistics and supply chains stabilize and we find alternative routes, we'll also be gradually, you know, winding down the excess working capital level. I think we have, you know, a pretty firm plan of how we get to lower net debt. Hopefully, by the time we announce the third quarter results in terms of production, we will be reporting already lower net debt number as of 30th September. What do you see as the optimal amount of operationally, you know, the ratio of net debt that you're looking for? I mean, you're over two, you know, to EBITDA, what is it, you're at two something. Where would you like to be, any kind of forecast in the next year of where you would like to be? Well, thanks for the question. You know, in previous reality, we did have like a soft target of 1.5x net debt adjusted EBITDA as a target. So everything below 1.5 was good. I think, presently we're probably prepared to be more leveraged because, you know, the situation has changed in many, many ways, including the macroeconomics because commodity prices have somewhat come down and exchange rate in Russia is actually strong. So we see, you know, lower fundamental profitability of the operations just solely because of the macro parameters. But just as a reminder, in our dividend policy, everything below 2.5 was marked as, you know, the level of comfort. So I think below 2.5, we do feel ourselves pretty comfortable. Well, I would add that, I would unpack your question into two parts. The first part is what is the level above which we start to feel kind of acute discomfort? I think 2.5 is that level, which Maxim has stressed. The second question is, what would be the leverage level, if other structural issues are resolved, at which we would consider resuming dividend? I think it's definitely below two and hopefully closer to 1.5. 1.5 definitely is comfortable, and probably above two is not comfortable. Within that continuum, there will be some discretion applied to whether we can afford resuming dividend payments. Thank you for your very clear answer. Just one other thing. We should really see, you know, as investors, these improvements, these operational improvements of which you've mentioned in the update that you said we should be hearing from the end of October. Is that correct? Yes. I wouldn't call that operational improvements. I would call that liquidity improvements. So yes. Good. Okay. Well, thank you very much. Thank you. We will now take the next question from. Yes, sure. We'll take the next question from Jatin Shah. Please go ahead. Your line is open. Jatin Shah, your line is now open. Maybe you might have the mute button on. Okay, it seems he's stepped away. There's no further questions on the phone at this time. There is a question from the webcast. Is there any problem with servicing EBRD debt provided previously for Kyzyl project? No, there is no problem there. We are in active dialogue with EBRD, and we are servicing this debt pretty much as usual. It appears we are having some technical issues with webcast, so please send your questions to the IR@polymetalinternational.com, and we will pick up your questions through email. Well, seeing no further questions, I would like to thank all of the participants for being active and perceptive at this call. Please don't hesitate to contact the company by email, either our investor relations department or the top management. Have a very nice day. Bye-bye. Thank you. That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.