Polyus Gold
Deutsche Bank 6th Annual BRICS Metals & Mining ConferenceLondon, 9-10 November, 2009
The information contained herein has been prepared using information available to Polyus Gold Group at the time of preparation of the presentation. External or other factors may have impacted on the business of the Polyus Gold Group and the content of this presentation, since its preparation. In addition all relevant information about Polyus Gold Group may not be included in this presentation. No representation or warranty, expressed or implied, is made as to the accuracy, completeness or reliability of the information.
Any forward looking information herein has been prepared on the basis of a number of assumptions which may prove to be incorrect. Forward looking statements, by the nature, involve risk and uncertainty and Polyus Gold Group cautions that actual results may differ materially from those expressed or implied in such statements.
Nothing herein should be construed as either an offer to sell or
a solicitation of an offer to buy or sell securities in any jurisdiction.
Cautionary Statements
2
* -
B+C1+C2
3
Zholymbet
Olimpiada ZapadnoyeKuranakh
Nezdaninskoye
Natalka
TitimukhtaBlagodatnoe
Aksu Bestobe VerninskoeAlluvials
Overview: key operations and facts
3
Polyus Gold key facts and operations, ex KazakhGold2008 1H2009
Gold sales, $M 1,062 442 Gold production, M OZ 1.2 0.4 TCC, $/OZ 392 361EBITDA, $M 436 218EBITDA margin, % 41 48JORC 2P, M OZ 74.1 74.1 Hedge free, Debt free
World’s champion in long-term 2P growth
2005- 2009 2P additions, m oz**
+60.8 of 2P in 3 yearsFinding cost: < $1 per ouncePotential to grow: over 30 licenses*** to
give additional ounces of 2P reserves*Sources: U.S. Geological Survey, GFMS **Sources: companies’
web-sites***Including KazakhGold 4
Market capitalization/2P, US$/oz
One of the cheapest in terms of 2P
1 share of Polyus = 0.39 oz of goldEvery US$1000 of investments in Polyus = 8.7 oz = US$9 000
+60.8
+49.9
+23.3+17.5
+12 +11.9 +11.9
-3.9 -6.7 -11.8
PLZL ABX GG GFI NCM AU KGC FCX NEMHMY
Poly
us
Bar
rick
Gol
dcor
p
Gol
dfie
lds
New
cres
t
Ang
logo
ld
Ash
anti
Kin
ross
Free
port
New
mon
t
Har
mon
y
PLZLABXGG GFINCM AUNEM HMYKGC
Poly
us
Bar
rick
Gol
dcor
p
Gol
dfie
lds
New
cres
t
Ang
logo
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Ash
anti
Kin
ross
New
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Har
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Low-cost growth leader
Sources: BMO Capital Markets, companies’
web-sites 5
Highest growth, lowest costs
ABX
GFI
NCM
NEM
600HMY
Newcrest
Newmont
Harmony
0300
1H 2
009
TCC
, USD
/oz
KGC
KinrossBarrick
Goldfields
PLZLGG
+75%
Goldcorp
Polyus Gold
5-year production growth
+150%
450
CapEx program
The company invested almost USD 1 billion in development and construction since 2007
Now Polyus is the fastest growing gold miner who benefits from previous intensive investments
6
USD million
365
422459 476
571
630
116
0
100
200
300
400
500
600
700
2007 2008 1H2009
Capex, ex M&A and strippingCapex, ex. M&ATotal Capex
One of the fastest growing gold miners
Since the company’s inception in 20062 large-scale mining projects launched. . .
. . .2 large-scale mining projects at advanced construction stageOlimpiada Mill-3: launched in 2007 Titimukhta: launched in 2009
Blagodatnoye: to be launched in 2010 Verninskoye: to be launched in 2011
5.7 MTPA added
8.2 MTPA to be added
7
Current throughput of Russian peers: Polymetal –
3.4 mtpa, Petropavlovsk –
3.3 mtpa
Low cost of construction
8
Capex/designed mill capacity, USD/tpa*
Capex/projected annual gold production, USD thousand/oz*
*Source: Companies’
web-sites.
Polyus’s costs of new mine construction are among the lowest on the list of upcoming development projects in the global gold industry.
51 57 70 88113
129 146183
304341
0
50
100
150
200
250
300
350
Mill N
o.3 (P
olyus)
Santa
Luz (
Yama
na)
Blago
datn
oye (
Polyu
s)
Cerro
Coro
na (G
old Fi
elds)
Verni
nsko
ye (P
olyus)
Hidde
n Vall
ey (N
ewcre
st/Ha
rmon
y)
Albaz
ino (P
olyme
tal)
Pascu
a Lam
a (Ba
rrick
)
Merce
des (
Yama
na)
Pueb
lo Vie
jo (Ba
rrick/
Goldc
orp)
0.3 0.5 0.7 1.0 1.4 1.4 1.42.2
3.0 3.23.8
8.4
0123456789
Mill
No.3
(Poly
us)
Corte
z Hills
(Bar
rick)
Malo
mir (
Petro
pavlo
vsk)
Blago
datn
oye (
Polyu
s)
Vern
insko
ye (P
olyus
)
Alba
zino (
Polym
etal)
Lobo
‐Mar
te (K
inros
s)
Hidd
en Va
lley (
Newc
rest/
Harm
ony)
Pueb
lo Vie
jo (B
arric
k/Go
ldcor
p)
Pena
squit
o (Go
ldcor
p)
Pasc
ua La
ma (
Barri
ck)
Cerro
Casa
le (B
arric
k/Kin
ross)
Recent developments: KazakhGold acquisition
9
KZG key facts
One of the largest gold producers in CIS;LSE-listed and Jersey-registered entity;3 key mines: 300 k oz of gold produced over 2 years;60 m oz of resources (Russian classification);Well-developed infrastructure.
Recent developments: KazakhGold acquisition
50.1% acquired for $256M($191M cash+0.9%PLZL shares), when MCap of KazakhGold at the beginning of 2008 was USD 1.5 bln.Complex and novel transaction;Offer value decreased three times since the start of negotiations.
Partial offer completed
$13 per oz of resources;Attractive pricing.
Deal favorable conditions
New Board composition and new management team;New strategy to be announced in Feb 2010;First steps to be to restore output to the level of over 200 k oz and then expand it through an increase in open-pit mining and via construction.
Integration underway
10
Recent M&A deals comparison79
5142 41
21
14 13
0
10
20
30
40
50
60
70
80$/oz of resources
Severst
al/
High RiverKinross/
AurelianKinross/
Lobo-Marte
Polymetal/
Quartz Hill
IAMGold/
Orezone
Polymetal/
Mayskoe
Polyus/
Kazakh
Gold
Item Comments
Sales KZG produced 300k oz in the recent 2 years
Labour Relatively cheap labour in Kazakhstan
Power Cascade of HP-station in proximity to the mines
Mining tax
Relatively low mining tax rate in Kazakhstan (5% vs 6% in Russia)
Corporatetax
Relatively low corporate tax rate (15% in Kazakhstan vs 20% in Russia)
Debt Debt obtained at a competitive annual interest rate – 9.375%
Fuel Cheaper oil products and coal in Kazakhstan vs Russia
1H2007 1H2008 1H2009
347 449
341
69
68
74
37
31
34 16
11
11 17
Titimukhta
Zapadnoye mine
Alluvials
Kuranakh mine
Olimpiada mine
11
Gold production, k oz
Olimpiada
mine:40 k oz of Dore gold (the metal before refining) were
delivered to the refining plant, but were not refined in the reporting period;
Completed switch to processing of sulfide ores, which have a lower grade, compared to the oxide ores;
Mill-2 was closed to perform regular maintenance works.
Processing of stock-piled ore (with different qualities compared to the ore from the pit)
Alluvials:
Increase in volumes of sands washed.
Zapadnoye
mine:
Maintained the stable level of production compared to 1H2008.Kuranakh
mine:
Increase in gold grade of ore processed
(up to
1.52 g/t).
1H2009 production amounted to 477 k oz
Total:
477470
559
The major factors influencing 1H2009 operating results:
Recent developments: 1H09 results
The Group confirms the FY2009 production target at 1.3 m oz
56% 55% 54%52%
50% 49%45%
35%33%
9%
0%
10%
20%
30%
40%
50%
60%
Recent developments: 1H09 results
Among global leaders in terms of gross margin;1H09 margins: EBITDA – 48%, Pretax – 42%,
Operating – 39%, and Net – 33%SGA – USD 45.5 mln: a 30% y-o-y decrease
Peer comparison – gross margin, %
12
PLZL ABX GGGFINCM AUKGC NEMBVN
Poly
us
Bar
rick
Gol
dcor
p
Gol
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cres
t
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logo
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shan
ti
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ross
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Bue
nave
ntur
a
HMY
Har
mon
y
* Calculated using the companies’
average gold selling prices in 1H2009.** Calculated using the average London PM fixing price of USD915/oz.
361
565
353
562
359
556
377
542
427
484
427
479
467
456
492
421
458
420
599
316
0
100
200
300
400
500
600
700
800
900
1000
TCC and cash margin* of world’s leading producers in 1H2009, USD/oz
The largest cash margin in the industry;
Ranking 3rd among the global gold miners in terms of TCC
Cas
h m
argi
nTC
C
PLZL ABXGG GFINCM AUKGCNEMBVN
Poly
us
Bar
rick
Gol
dcor
p
Gol
dfie
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New
cres
t
Ang
logo
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Ash
anti
Kin
ross
New
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t
Bue
nave
ntur
a HMYH
arm
ony*
*
Source: Companies’
web-sites.
Strong balance sheet
USD'000 30 June 2009 31 Dec 2008ASSETS
Non-current assets 1,965,080 1,990,817Current assets, including 1,181,692 1,088,045
Cash and cash equivalents 441,367 398,826
Investments in securities and other financial assets 291,092 285,236
TOTAL ASSETS 3,146,772 3,078,862EQUITY AND LIABILITIESEQUITY 2,814,540 2,794,541LIABILITES 332,232 284,321
Non-current liabilities 193,512 182,623Long-term borrowings 0 0
Current liabilities 138,720 101,698
Short-term borrowings 0 0
TOTAL EQUITY AND LIABILITIES 3,146,772 3,078,862
Condensed statement of financial position at 30 June 2009 (unaudited)
Strong cash position, crucial in the current conditions on theglobal financial market
13
~~
14
Projects update: Titimukhta
9 km from the Olimpiada mine;Nov 2007 – the feasibility study approved
by the BoD;July 2008 – JORC reserves audit
completed;January 2009 – permitting completed; The Titimukhta’s ores are processed at
former Mill-1 after its reconstruction with new crushing complex and expanded capacity.
Facts:Highlights of the feasibility study:
Mine life 2009 –
2021
P&P reserves 2.2 m oz at 3.3 g/t
Mill capacity 2.2 mtpa
Recovery 88%
Average annual gold production 170 k oz
Capex (ex VAT) US$ 98.7 million
Average TCC 260 US$/oz
Commissioning in time and on budgetApril
2009 –
mining started
1H2009 –
17 k oz produced
Projects update: Blagodatnoye
Mill construction in progress;Site for tailings dam and diversion facilities
prepared;Mining and transport equipment supply in
progress; Camp and canteen construction completed;Coal power plant is under construction;Water pipe laying;Power grid and roads constructed;Percentage of readiness of different objects
varies from 50 to 100%;43% of budgeted investments drawn @
1/07/09.Permitting completed as of Sept 01,2009
15
Highlights of the feasibility study: 1H2009 CAPEX update:
* Data according to the Reserves Audit completed by Micon Int. Co Ltd. In November 2008.
Commissioning in time (2H2010)
Mine life 2010 –
2031
P&P reserves 9.9 m oz at 2.3 g/t*
Mill capacity 6 mtpa
Recovery 88.6%
Average annual gold production 412 k oz
Capex (ex VAT) US$ 419 million
Average TCC 244 US$/oz
Projects update: Verninskoye
Highlights of the feasibility study:
Mining started;
Camp and canteen construction completed;
Works on main building and crushing plant in progress;
Core mining and transport equipment acquired;
Road construction began;
Tailings facilities preparation in progress;
25% of budgeted investments drawn @ 1/07/09.
1H2009 CAPEX update:
16
Mine life 2011 –
2025
P&P reserves(exploration underway)
1.7 m oz at 3.0 g/t
Mill capacity 2.2 mtpa
Recovery 86.9 %
Average annual gold production 183 k oz
Capex (ex VAT) US$ 249 million
Average TCC 281 US$/oz
Commissioning in 2011
6 9 10 10 10 16 19 20 20 3238
40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40
15
-
5
10
15
20
25
30
35
40
2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041
Ore processed, m tonnes
679
1 9051 675
1 016
3 678
9821 056
1 330
2 697
1 434 1 593
1 643
832
3030
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
Gold production, k oz
Projects update: NatalkaNew development plan
Insufficient power generating facilities;Insufficient power transportation facilities;High cost of borrowing due to credit crunch.
17
Mine life 2013 –
2041
P&P reserves 40.8 m oz at 1.13 g/t
Mill capacity 10 mtpa
(2013-2017), 20 mtpa
(2017-2021) and 40 mtpa
(2022-
2041)
Recovery 85 %
Av. annual gold production 1400 k oz
Capex
(ex VAT) US$1.1 bln
(1st
stage) + US$1.1 bln
(2nd
and 3rd
stages)
Average TCC 340 US$/oz
In Feb 2009 the amended plan of Natalka development prepared by Polyus team, approved by the BoD in Mar 2009.
The plan will work on the following grades:in 2013-2017 -
3.15 to 3.85 g/tin 2018-2023 -
2.35 –
3.32 g/tin 2024-2036 –
1.34 –
1.76 g/t
Rationale for the staged development:
Project status:Feasibility study and
construction plans preparation to be completed by end of
2009.Permitting to be completed by
end of 1H2010
Projects pipeline
FURTHERUPSIDE POTENTIAL:+ Nezhdaninskoye,+ Chertovo Koryto,+ Bamskoe,+ Panimba,+ Razdolinskoe/Poputnenskoe.0.5
1.5
2.5
3.0
0.0
1.0
2.0
2008 1H 2009 2H 2009E 2010E 2011E 2012E 2013E 2014E
0.90.3 0.4
0.7 0.7 0.7 0.7 0.7
Olimpiada
0.2 0.2 0.2 0.2 0.2
Kuranakh
0.2
0.2
0.2 0.2 0.2 0.2 0.2
Alluvials Zapadnoe
0.2 0.2 0.2 0.2 0.2
Titimukhta
0.2 0.4 0.4 0.4 0.4
Blagodatnoye
0.2 0.2 0.2
Verninskoye
0.71.0
Natalka
Approximately 140% output increase is expected to come from existing and approved development projects
18
1.21.5
1.81.9
∑=1.3
2.62.9
Promised growth delivery
●Commissioning of Mill-3 at Olimpiada
●Commissioning of Titimukhta
● Expansion to CIS
●Construction of Blagodatnoye
●Construction of Verninskoye
●Construction of Natalka
STATUSPROJECT
Done
Done
Done
Near completion
Underway
FS underway
19
Successful completion of KazakhGold acquisition: Polyus Gold becoming an international mining company with FSU focus;Attractive deal conditions and excellent growth potential;Strong and experienced new management appointed at KZG;
Strong operational and financial results;Increasing production and stable profitability level;Hedge free - Debt freeOutstanding growth of the 2P reserves.
Polyus met previously announced capacity expansion targets:Titimukhta: successful launch in 1H2009;Blagodatnoye: 50-100% readiness of all the facilities;Re-launch of Verninskoye development project;Development plan for Natalka approved by the Board;
Favorable market conditions: strong gold price and devaluation of national currency.
Conclusions
20
3
Why Polyus?
21
No 1 in Russiaand
one of the best positioned
gold miners globally
International company
Growth leader
Strong margins
Low costs
No debt
No hedge
Favorable market