ISE Irish Stock Exchange : Trading update 4Q16

Release time IMMEDIATE

23 January, 2017

Polyus Gold International Limited ('PGIL') announces that its subsidiary PJSC Polyus (MOEX - PLZL) ('Polyus', 'the Company'), the largest gold producer in Russia, today released its operating results for 4Q 2016 and FY 2016 ended 31 December 2016.

FY 2016 Highlights

Ø Total gold output increased 12% y-o-y to 1,968 koz driven by higher production volumes at all the hard rock deposits.

Ø Volumes of ore processed increased 7% y-o-y to 26.4 mt with throughput capacity expansion projects at the Olimpiada, Blagodatnoye, Verninskoye and Kuranakh being either completed or entering the second stage of implementation.

Ø Volumes of ore mined increased 35% y-o-y to 29.7 mt, following prolonged and extensive stripping works which were completed in 1Q 2016 as part of a pit cutback at Olimpiada.

Ø Annual gold sales estimated at $2,429 million (up 13% y-o-y) with the estimated average selling price (incl. the impact from the Strategic Price Protection Programme (SPPP)) of $1,287/oz, 3% above the LBMA spot price.

Ø Estimated net debt was $3,241 million compared to $364 million as of the end of 2015. Net debt position as of the end of December 2016 reflects a prepayment of RUB 8.5bn transferred to Rosnedra as part of the application process for the Sukhoi Log auction.

4Q 2016 Highlights

Ø Total gold output increased 23% y-o-y to 573 koz (up 3% q-o-q).

Ø Volumes of ore processed increased 10% y-o-y to 7.0 mt (up 7% q-o-q) with increased volumes of ore treated at Olimpiada, Verninskoye and Kuranakh.

Ø The reconfiguration of Mill No. 1 to process higher-grade ore from the Olimpiada deposit was completed in September 2016.

Ø Volumes of ore mined increased 57% y-o-y to 9.1 mt (up 33% q-o-q).

Ø Quarterly gold sales estimated at $660 million (up 26% y-o-y) with the estimated average selling price (incl. the impact from the Strategic Price Protection Programme (SPPP)) of $1,244/oz, 2% above the LBMA spot price.

Pavel Grachev, Chief Executive Officer of PJSC Polyus, commented:

'In 2016, Polyus beat production guidance for the third consecutive year, achieving gold output of 1.97 million ounces, a 12% y-o-y increase. This is above the initial guidance of 1.76-1.80 million ounces and the increased guidance of 1.87-1.90 million ounces. The Group's outstanding progress has again been underpinned by its strict focus on operational excellence and tight cost control.

This has been a key year in the Company's development - in 2016, we entered an active execution stage of our development projects, which will support the continued organic growth of our existing operations.

The reconfiguration of Mill No. 1 was completed in September 2016 and it is now processing higher grade Olimpiada ores. Meanwhile, significant progress has been made on debottlenecking at Olimpiada, Blagodatnoye, Verninskoye and Kuranakh. The first stages of these projects are now complete, delivering over 2.0 million tons per annum of additional processing capacity.

The development of our Natalka mine remains a strategic priority for the Company and, following a thorough review, its execution was relaunched in 2016. We have revised the model for the project's mining and processing operations and look forward to commissioning Natalka by the end of 2017.

In 2017, we anticipate another year of production growth for the Company and expect our total gold output to exceed 2.0 million ounces as previously guided and total 2.075-2.125 million ounces.

Management are confident that Polyus has strong opportunity for growth based on its existing portfolio, and that with the development of Natalka the Company will achieve the announced output target of at least 2.7 million ounces by 2020.'

Health and safety update

The LTIFR rate in FY 2016 was 0.12, 50% higher than the FY 2015 level.

Key health and safety development initiatives during 2016 included:

· HSE Management System development and improvement in partnership with DuPont at all the business units.

· Introduction of the contractors safety management, personal protective equipment and traffic safety management standards.

· Obtainment of the licenses for the activities related to handling industrial waste (hazard classes 1-4).

Technical and HSE management of the business units and professional services attended an ICMM conference on critical risk control and management.

Lost Time Injury Frequency Rate (LTIFR)
FY'16	FY'15	FY'14	FY'13
0.12	0.08	0.09	0.11

Consolidated operating results

	4Q'16	3Q'16	Q-o-Q	2Q'16	1Q'16	4Q'15	Y-o-Y	2016	2015	Y-o-Y
Olimpiada [2]	272.3	213.9	27%	179.9	150.9	196.1	39%	816.9	741.1	10%
Blagodatnoye	119.7	115.9	3%	120.8	100.2	126.7	-6%	456.5	424.6	8%
Titimukhta	-	-	n/a	11.7	28.4	17.0	-100%	40.2	102.3	-61%
Poputninskoye	-	3.1	-100%	2.8	1.5	2.4	-100%	7.4	2.4	3.1x
Verninskoye	43.6	42.7	2%	44.3	55.9	38.6	13%	186.5	161.1	16%
Alluvials	39.5	95.7	-59%	33.1	0.2	47.4	-17%	168.5	168.3	0%
Kuranakh	42.0	39.9	5%	39.8	37.9	34.9	20%	159.7	144.8	10%
Natalka	1.3	4.4	-71%	-	-	-	n/a	5.7	-	n/a
Refined gold, koz	518.3	515.6	1%	432.5	375.0	463.1	12%	1,841.4	1,744.4	6%
Gold in flotation concentrate, koz	55.0	39.3	40%	22.7	9.4	2.8	20x	126.4	18.9	6.7x
Gold payable in concentrate, koz	35.8	25.6	40%	14.8	6.1	1.8	20x	82.2	12.3	6.7x
Total gold output, koz	573.4	555.0	3%	455.2	384.3	465.9	23%	1,967.8	1,763.4	12%
Rock moved, kt	37,753	36,707	3%	33,042	37,632	40,224	-6%	145,135	162,305	-11%
Stripping ratio, t/t	3.2	4.4	-28%	3.8	4.7	6.1	-48%	3.9	6.4	-39%
Ore mined, kt	9,085	6,818	33%	6,948	6,832	5,786	57%	29,682	22,012	35%
Ore processed, kt	6,993	6,521	7%	6,535	6,396	6,380	10%	26,445	24,824	7%
Recovery rate, %	83.1%	84.3%	-1.2 ppts	84.2%	84.1%	83.9%	-0.8 ppts	83.9%	83.7%	0.2 ppts
Total doré & slime gold output, koz	535.5	565.4	-5%	466.8	398.7	444.0	21%	1,966.4	1,767.4	11%

In 2016, the Company produced 1,968 koz of gold (including 126 koz of gold contained in concentrate from Olimpiada), a 12% increase on 2015. This growth was achieved despite the ceasing of Titimukhta operations following the reconfiguration of Mill-1, and reflects the strong performance at all of Polyus' hard rock deposits. The growth in output was mainly driven by an increase in volumes of ore processed, which reflects the results of the throughput capacity expansion projects at Olimpiada, Blagodatnoye, Verninskoye and Kuranakh. Further improvement in the recovery rates were achieved at Olimpiada and Verninskoye.

In 4Q 2016, the Company produced 573 koz of gold (including 55 koz of gold contained in concentrate from Olimpiada), 23% higher y-o-y due to increased throughput capacity of the mills at Olimpiada, Blagodatnoye, Verninskoye and Kuranakh. Average recoveries declined 0.8 ppts y-o-y to 83.1% due to lower rate at Blagodatnoye. An increase in volumes of ore processed by 10% y-o-y was mainly due to higher ore treatment at Olimpiada, Kuranakh and Verninskoye. Volumes of ore mined grew 57% y-o-y, as a result of increased mining activity at Olimpiada, Blagodatnoye and Kuranakh.

Operating results by mine

Olimpiada

In 2016, doré gold output increased 26% y-o-y, achieving a record of 956 koz, driven by higher processed volumes, improved recoveries and an increase in gold contained in concentrate production. Total gold output (refined and concentrate) was 943 koz, up 24% y-o-y.

Following the prolonged period of extensive stripping works as part of a pit cutback completed in 1Q 2016, the stripping ratio was reduced by 79% y-o-y to 4.3 t/t, while volumes of ore mined rose significantly, 3.5 times y-o-y to 9.8 mt in 2016. Moreover, in August 2016, mining activity was re-commissioned at the previously mothballed Zapadny pit. This helped to offset the impact of the pit wall failure at Olimpiada on 23 May, which led to a temporary suspension of mining operation at the Vostochny pit from 23 May through 1 June.

Processed ore volumes improved further during 2016, up 19% y-o-y to 11.3 mt, despite reduced hourly throughput at Mill-2, and reflected the results of the reconfiguration of Mill-1, which was completed in September 2016 and started processing Olimpiada ores. Furthermore, physical properties of Olimpiada ore supported an increase in throughput capacity at Mill No. 1 from 2.4 mtpa to 3.0 mtpa on an annualised basis. The recovery rate increased to 81% in 2016 driven by efficiencies at the pre-sorption cyanidation stage, lower losses in sorption tailings and improved efficiency of the flotation and gravitation circuits at Mills No. 2-3. Average grades in ore processed slightly increased to 3.3 g/t, up 4% y-o-y.

Gold in concentrate volumes grew significantly y-o-y reflecting an increase in ore processing volumes during the respective period whereas BIOX capacities remaining unchanged. The Company is implementing a project to expand BIOX capacities at Olimpiada, which is expected to be completed by mid-2017 with sufficient capacity to process gold in concentrate into doré gold introduced.

In 4Q 2016, doré gold output increased 22% q-o-q to 314 koz primarily due to higher processing volumes and improved grades, which resulted from selective ore feeding and fully offset a decline in recoveries.

Mining works and ore processing

	4Q'16	3Q'16	Q-o-Q	2Q'16	1Q'16	4Q'15	Y-o-Y	2016	2015	Y-o-Y
Rock moved, kt	15,588	12,251	27%	10,186	14,661	15,062	3%	52,686	60,317	-13%
incl. stripping, kt	11,348	10,081	13%	8,154	13,321	14,107	-20%	42,904	57,541	-25%
Stripping ratio, t/t	2.7	4.6	-42%	4.0	9.9	14.8	-82%	4.3	20.7	-79%
Ore mined, kt	4,240	2,170	95%	2,032	1,340	955	4.4x	9,782	2,777	3.5x
Average grade in ore mined, g/t	3.42	3.34	3%	3.42	3.18	2.79	23%	3.37	2.67	26%
Ore processed[3]kt	3,356	2,778	21%	2,693	2,509	2,432	38%	11,336	9,506	19%
incl. purchased ore from Veduga mine, kt	105	203	-48%	-	242	-	n/a	551	50	10.9x
Average grade in ore processed, g/t	3.76	3.43	10%	2.93	2.99	2.96	27%	3.31	3.18	4%
Recovery, %	80.6%	81.7%	-1.1 ppts	81.3%	80.2%	79.5%	1.1 ppts	81.0%	80.1%	0.9 ppts
Doré gold (incl. gold in concentrate), koz	313.9	256.8	22%	206.1	179.5	186.5	68%	956.3	758.4	26%
Refined gold output, koz	272.3	213.9	27%	179.9	150.9	196.1	39%	816.9	741.1	10%
Gold contained in concentrate, koz	55.0	39.3	40%	22.7	9.4	2.8	20x	126.4	18.9	6.7x
Total gold output, koz	327.3	253.3	29%	202.6	160.2	198.9	65%	943.4	760.0	24%

OPERATING RESULTS BY MINE

Blagodatnoye

In 2016, doré gold output increased 8% y-o-y to 455 koz due to the growth of processing volumes and higher grades in ore processed. Refined gold output amounted to 457 koz, up 8% y-o-y.

Volumes of ore mined increased 51% y-o-y to 11.5 mt following an increase in mining activity with volumes of rock moved reaching 49 mt, which partially reflects the utilization of the mining fleet from the Vostochny pit (Olimpiada mine). Moreover, the stripping ratio declined to 3.3 in line with the mining plan. Grades in ore mined remained stable throughout the year.

Ore processed volumes were up 3% y-o-y, to 7.8 mt, reflecting ongoing initiatives to further expand throughput capacity at the Blagodatnoye Mill to 8.0 mtpa. The Company completed the first stage of this project, with throughput capacity reaching 8.0 mtpa on an annualised basis. In 2017, the Company expects these levels to stabilise and recoveries to increase. In 2016, recoveries remained high, at 88%, rising
0.1 ppts y-o-y.

In 4Q 2016, doré gold production at Blagodatnoye declined 10% q-o-q to 109 koz primarily due to lower processing volumes, which resulted from the scheduled maintenance works at the 2nd grinding circuit.

Mining works and ore processing

	4Q'16	3Q'16	Q-o-Q	2Q'16	1Q'16	4Q'15	Y-o-Y	2016	2015	Y-o-Y
Total rock moved, kt	12,054	14,242	-15%	12,019	10,711	11,735	3%	49,025	45,654	7%
including stripping, kt	9,228	11,334	-19%	9,107	7,837	9,785	-6%	37,506	38,026	-1%
Stripping ratio, t/t	3.3	3.9	-16%	3.1	2.7	5.0	-35%	3.3	5.0	-35%
Ore mined, kt	2,822	2,907	-3%	2,912	2,874	1,950	45%	11,515	7,628	51%
Average grade in ore mined, g/t	2.01	2.01	0%	2.01	2.00	2.01	0%	2.01	1.97	2%
Ore processed, kt	1,852	2,080	-11%	1,982	1,840	1,983	-7%	7,753	7,512	3%
Average grade in ore processed, g/t	2.07	2.08	-1%	2.05	2.07	2.06	0%	2.07	1.99	4%
Recovery, %	87.9%	87.7%	0.2 ppts	87.6%	88.7%	89.4%	-1.5 ppts	88.0%	87.9%	0.1 ppts
Doré gold, koz	108.8	121.3	-10%	115.0	109.9	116.3	-6%	455.0	421.0	8%
Refined gold output, koz	119.7	115.9	3%	120.8	100.2	126.7	-6%	456.5	424.6	8%

OPERATING RESULTS BY MINE

Titimukhta

In line with the completion of the Mill-1 reconfiguration project in September 2016, mining and processing activities at Titimukhta have been idled in favour of treating Olimpiada ores.

Mining works and ore processing

	4Q'16	3Q'16	Q-o-Q	2Q'16	1Q'16	4Q'15	Y-o-Y	2016	2015	Y-o-Y
Total rock moved, kt	-	-	n/a	-	1,040	2,377	n/a	1,040	14,002	-93%
including stripping, kt	-	-	n/a	-	628	1,539	n/a	628	10,776	-94%
Stripping ratio, t/t	-	-	n/a	-	1.5	1.8	n/a	1.5	3.3	-54%
Ore mined, kt	-	-	n/a	-	412	838	n/a	412	3,225	-87%
Average grade in ore mined, g/t	-	-	n/a	-	1.61	1.58	n/a	1.61	1.58	2%
Ore processed[4], kt	-	-	n/a	85	415	269	n/a	500	1,515	-67%
Average grade in ore processed, g/t	-	-	n/a	2.48	2.22	2.89	n/a	2.26	2.43	-7%
Recovery, %	-	-	n/a	84.5%	85.4%	85.4%	n/a	85.2%	87.1%	-1.9 ppts
Doré gold , koz	-	-	n/a	7.5	25.0	21.4	n/a	32.5	103.1	-68%
Refined gold output, koz	-	-	n/a	11.7	28.4	17.0	n/a	40.2	102.3	-61%

OPERATING RESULTS BY MINE

Verninskoye

In 2016, doré gold output increased 12% y-o-y to 186 koz, on the back of ore processed volumes and recovery rates growth. Refined gold output amounted to 187 koz, up 16% y-o-y.

The stripping ratio increased 24% y-o-y to 3.9 due to the planned reduction of low-grade ore mining and the corresponding growth in stripping works. In turn, the volumes of ore mined fell 15% y-o-y to 3.4 mt at the expense of low-grade ores, leading to a 5% y-o-y increase in the average grade in ore mined.

Processed ore volumes increased 10% y-o-y to 2.5 mt. The Mill's improved performance resulted from the enhanced hourly throughput of grinding equipment following the replacement of the Mill's cone crusher with a more efficient model, the commissioning of pulp pumps with higher capacity and reduced downtime during the maintenance period. Grades in ore processed remained stable. Recoveries reached 87.3% following improvements at the flotation circuit due to optimisation of reagents' and enhancements at the sorption and cyanidation circuits.

The aforementioned operational efficiency improvements came as a reflection of the Company's development project to further expand throughput capacity at the Verninskoye Mill to 3.0 mtpa. The first stage of the project was completed by the end of 2016, with throughput capacity reaching 2.5 mtpa on annualised basis. The target designed throughput capacity is expected to be achieved over several stages during 2017-2018.

In 4Q 2016, doré gold output surged by 23% q-o-q to 52 koz due to the growth in ore processed volumes during the respective period as scheduled short-term maintenance works were completed in September 2016. This was accompanied by a stable average grade in ore processed and recovery rates. To recap, the Verninskoye Mill has been operating above the designed recovery rate of 86.0% for seven consecutive quarters.

Mining works and ore processing

	4Q'16	3Q'16	Q-o-Q	2Q'16	1Q'16	4Q'15	Y-o-Y	2016	2015	Y-o-Y
Total rock moved, kt	3,658	3,804	-4%	4,410	4,429	4,170	-12%	16,300	16,270	0%
including stripping, kt	2,733	3,138	-13%	3,472	3,602	3,355	-19%	12,945	12,317	5%
Stripping ratio, t/t	3.0	4.7	-37%	3.7	4.4	4.1	-28%	3.9	3.1	24%
Ore mined, kt	924	666	39%	938	827	815	13%	3,355	3,954	-15%
Average grade in ore mined, g/t	2.28	2.24	2%	2.03	2.28	2.29	0%	2.20	2.09	6%
Ore processed, kt	694	566	23%	656	586	645	8%	2,501	2,284	10%
Average grade in ore processed, g/t	2.63	2.62	0%	2.64	2.72	2.60	1%	2.65	2.63	1%
Recovery, %	87.5%	87.5%	-	87.1%	87.0%	86.4%	1.1 ppts	87.3%	86.1%	1.2 ppts
Doré gold , koz	51.5	41.8	23%	48.8	43.7	46.2	12%	185.9	166.1	12%
Refined gold output, koz	43.6	42.7	2%	44.3	55.9	38.6	13%	186.5	161.1	16%

OPERATING RESULTS BY MINE

Alluvials

In 2016, Alluvial deposits produced 168 koz of gold in slime, which was flat y-o-y. Refined gold output totalled 169 koz (flat y-o-y).

An increased number of hydraulic sluicing sites, which have higher average grades than dredging sites, drove an uptick in Alluvials average grades by 9% y-o-y to 0.61 g/m. That drove volumes of sands washed down by 8% y-o-y to 8.6 million m.

In 4Q 2016, due to the seasonality of placer operations, gold in slime production declined 79% q-o-q to 22 koz. The latter was down 34% y-o-y, as in 2016 the washing season at placer deposits was closed in the beginning of November compared to a slightly longer washing season in 2015.

Sands washing

	4Q'16	3Q'16	Q-o-Q	2Q'16	1Q'16	4Q'15	Y-o-Y	2016	2015	Y-o-Y
Sands washed, 000 m³	1,246	5,296	-76%	2,069	-	1,685	-26%	8,611	9,370	-8%
Average grade, g/m³	0.54	0.61	-12%	0.65	-	0.60	-11%	0.61	0.56	9%
Gold in slime, koz	21.5	103.6	-79%	43.2	0.0	32.7	-34%	168.3	168.3	0%
Refined gold output, koz	39.5	95.7	-59%	33.1	0.2	47.4	-17%	168.5	168.3	0%

OPERATING RESULTS BY MINE

Kuranakh

In 2016, doré gold output increased by 8% y-o-y to 158 koz due to higher volumes of ore processed. Refined gold output amounted to 160 koz, up 11% y-o-y.

Volumes of ore mined increased 7% y-o-y to 4.3 mt in order to provide feed for the expanded processing capacities.

Ore processing efficiency improvement initiatives at the Kuranakh Mill led to a 8% y-o-y increase in ore treatment volumes, to 4.2 mt. This resulted from the enhanced performance of the thickening circuit and improved ore blending. Recoveries were flat y-o-y at 88.2%.

At the end of 2016 the Company completed the first stage of a development project to further expand throughput capacity at the Kuranakh Mill to 5.0 mtpa, and reached 4.5 mtpa on annualised basis. The Company expects to achieve the Mill's target designed throughput capacity in 2017.

In 4Q 2016, doré gold output at Kuranakh decreased 5% q-o-q to 39 koz primarily on the back of the temporary decline in average grades and lower volumes of ore processed. Specifically, lower grades in ore processed negatively impacted recoveries due to a higher share of zinc in ore feed, which was well absorbed by the resin and reduced the amount of gold content.

Mining works and ore processing

	4Q'16	3Q'16	Q-o-Q	2Q'16	1Q'16	4Q'15	Y-o-Y	2016	2015	Y-o-Y
Total rock moved, kt	6,453	6,410	1%	6,387	6,294	6,358	1%	25,545	24,771	3%
including stripping, kt	5,334	5,336	0%	5,332	5,264	5,328	0%	21,267	20,775	2%
Stripping ratio, t/t	4.9	5.0	-2%	5.1	5.1	5.2	-6%	5.0	5.2	-4%
Ore mined, kt	1,098	1,074	2%	1,055	1,030	1,030	7%	4,257	3,996	7%
Average grade in ore mined, g/t	1.28	1.30	-1%	1.28	1.31	1.29	-1%	1.29	1.31	-1%
Ore processed, kt	1,076	1,085	-1%	1,064	998	982	10%	4,223	3,909	8%
Average grade in ore processed, g/t	1.28	1.31	-2%	1.29	1.34	1.31	-2%	1.30	1.31	0%
Recovery, %	87.5%	88.3%	-0.8 ppts	88.4%	88.5%	87.4%	0.1 ppts	88.2%	88.2%	-
Doré gold, koz	39.0	41.2	-5%	39.9	37.9	36.6	6%	157.9	146.2	8%
Refined gold output, koz	42.0	39.9	5%	39.8	37.9	34.9	20%	159.7	144.8	10%

OPERATING RESULTS BY MINE

Natalka

The Natalka project, which was put on hold in December 2013, had been revisited and redesigned.

In 2016, processing at the 100 kt pilot plant continued, producing 5.0 koz of doré gold.

The project execution was recommissioned in 2016. The construction of the primary crushing and main conveyor complex, including a 1 km underground tunnel, was completed. Installation of the crushed ore storage and reclaim facility is progressing well. Equipment for the grinding circuit has been installed and construction of power facilities and auxiliary infrastructure are ongoing, with headcount reaching almost 2,000 people as of December 2016, including contractors and the Group's employees.

The Company expects to take delivery of the remainder of the main beneficiation equipment such as gravity concentrators, screening equipment, main conveyors, main slurry pumps and the Carbon in Leach (CIL) equipment in early 2017.

The Company anticipates the commissioning of Natalka by the end of 2017.

	4Q'16	3Q'16	Q-o-Q	2Q'16	1Q'16	4Q'15	Y-o-Y	2016	2015	Y-o-Y
Total rock moved, kt	-	-	n/a	1	420	224	-100%	421	1,102	-62%
including stripping, kt	-	-	n/a	-	158	135	-100%	158	868	-82%
Stripping ratio, t/t	-	-	n/a	-	0.6	1.6	-100%	0.6	3.8	-84%
Ore mined, kt	-	-	n/a	1	255	87	-100%	255	227	12%
Average grade in ore mined, g/t	-	-	n/a	1.21	1.20	0.79	-100%	1.20	0.66	81%
Ore processed, kt	16	13	23%	5	11	9	79%	45	38	18%
Average grade in ore processed, g/t	1.85	2.16	-14%	1.61	1.45	1.56	18%	1.81	1.74	4%
Recovery, %	77.7%	75.8%	1.9 ppts	38.4%	72.9%	75.7%	2.0 ppts	72.3%	71.1%	1.2 ppts
Doré gold, koz	0.8	0.7	21%	3.1	0.4	-	n/a	5.0	-	n/a
Refined gold output, koz	1.3	4.4	-71%	-	-	-	n/a	5.7	-	n/a

FINANCIAL UPDATE for PJSC Polyus

In 2016, the Company solda total of 1,915 koz of gold, up 8% y-o-y.

Polyus estimates its 2016 gold sales (including the SPPP effect) will be approximately $2,429 million, which is a 13% y-o-y increase.

The estimated weighted-average gold selling price (excluding the SPPP effect) in 2016 was $1,250/oz, up 8% y-o-y. However, with the inclusion of the SPPP, the estimated weighted-average gold selling price amounted to $1,287/oz, up 5% y-o-y. Correspondingly, the positive effect from the SPPP totalled $67 million.

As at 31 December 2016, the Company's estimated cash position was $1,740 million (30 September 2016: $1,710 million) and its estimated net debt position amounted to $3,241 million (30 September 2016: $3,240 million). The latter reflects a prepayment of RUB 8.5bn transferred to Rosnedra as part of the application process for the Sukhoi Log auction.

On 26 October 2016, Polyus Gold International Limited ('PGIL') issued USD 500 million notes due 28 March 2022 with a coupon of 4.699% per annum (the 'Notes'). The Notes are guaranteed by JSC 'Gold Mining Company Polyus', a 100% subsidiary of PJSC Polyus.

Polyus continued to proactively manage its loan portfolio. Specifically, in the 4Q 2016 loans of $500 million maturing in 2017-2019 were repaid with the proceeds from the Eurobonds. Also, the Group refinanced debt of $210 million maturing in 2018-2019 with the loans with lower interest rates and longer maturities.

Managing interest rate risk, the Group has opted to increase the share of fixed rate debt in its portfolio, which was achieved via new lending facilities and swaps of several loans from floating into fixed rate. These brought the overall share of fixed-rate liabilities to 46% as of the end of 4Q 2016 (as compared to 3% as of the end of 3Q 2016).

Following the PJSC Polyus EGM's approval of the merger of LLC Polyus-Invest into PJSC Polyus holders of the local rouble bonds became entitled to an early redemption of the bonds. The bondholders must notify the issuer up to 13 March 2017 to exercise their right. The Group envisages low risk of the local rouble bonds early redemption taking into account bonds' market price (trading at a premium to par value as of 18 January 2017). Nevertheless, local rouble bonds in a total amount of $250 million were temporarily reclassified into a short-term debt.

	2017	2018	2019	2020	2021	2022	2023
Debt maturities [5], $ mln	282	21	571	777	687	956	1,748
Pro-forma debt maturities [6], $ mln	32	21	571	777	937	956	1,748

	Local rouble bonds	Bank loans	Eurobonds	$2.5 bln Sberbank loan
Share of debt by source as of the end of 4Q 2016	5%	20%	25%	50%

	4Q'16	3Q'16	Q-o-Q	2Q'16	1Q'16	4Q'15	Y-o-Y	2016	2015	Y-o-Y
Refined gold sold, koz	484	508	-5%	437	400	432	12%	1,830	1,752	4%
Gold contained in concentrate, koz	66	19	3.5x	-	-	14	4.7x	85	16	5.3x
Gold payable in concentrate, koz	48	13	3.7x	-	-	9	5.4x	61	10	6x
Total gold sales, koz	550	527	4%	437	400	447	23%	1,915	1,768	8%
Estimated gold sales (incl. an SPPP effect), $ mln	660	700	-6%	564	505	526	26%	2,429	2,159	13%
Estimated weighted-average refined gold selling price (excl. SPPP), $/oz	1,206	1,335	-10%	1,257	1,186	1,108	9%	1,250	1,159	8%
Estimated weighted-average refined gold selling price (incl. SPPP), $/oz	1,244	1,344	-7%	1,292	1,260	1,193	4%	1,287	1,225	5%
Estimated SPPP effect, $ mln	18	4	4.6x	15	30	37	-51%	67	116	-42%
Average LBMA price, $/oz	1,222	1,335	-8%	1,260	1,183	1,105	11%	1,251	1,159	8%
Estimated net debt, $ mln	3,241	3,240	0%	3,469	3,500	364	8.7x	3,241	364	8.7x

FINANCIAL UPDATE for Polyus Gold International LIMITED (for reference)

As of 31 December 2016, the estimated cash position of Polyus Gold International Limited amounted to $1,905 million (30 September 2016: $2,006 million) and its estimated net debt totalled $3,080 million
(30 September 2016: $2,941 million).

Polyus Gold International Limited and PJSC Polyus share the same debt structure and debt maturities schedule.

	4Q'16	3Q'16	Q-o-Q	2Q'16	1Q'16	4Q'15	Y-o-Y	2016	2015	Y-o-Y
Estimated net debt, $ mln	3,080	2,941	5%	3,171	3,092	146	21.1x	3,080	146	21.1x

CORPORATE UPDATE

New dividend policy

On 7 October 2016, the Board of Directors (the 'Board') approved the Company's dividend policy, pursuant to which the Company will pay dividends on a semi-annual basis in the amount of 30% of the EBITDA of PJSC Polyus for the respective reporting period. Payment will be calculated on the basis of the consolidated financial statements of the Company in accordance with IFRS requirements, provided that the net debt/adjusted EBITDA (last 12 months) ratio based on the consolidated financial statements of PJSC Polyus is lower than 2.5х.

Should the net debt / adjusted EBITDA (for the last 12 months) ratio increase to higher than 2.5x, the Board will exercise discretion on dividend payments, considering the Company's financial position, free cash flow, outlook and macro environment.

The Board may consider the possibility of payment of special dividends, subject to the Company's liquidity position, capex requirements, free cash flows and leverage.

Treasury shares cancelation process

On 22 December 2016, PJSC Polyus' Extraordinary General Shareholder Meeting approved the reorganization of PJSC Polyus by way of a merger of LLC Polyus-Invest into PJSC Polyus and the decrease of PJSC Polyus' charter capital by way of cancellation of PJSC Polyus' ordinary shares held by LLC Polyus-Invest following the completion of the merger. The Group expects 63,082,318 treasury shares held by Polyus Invest LLC to be canceled by end June 2017.

S&P Global Ratings revised outlook on Polyus to Positive and affirmed 'BB-' rating

On 19 January 2017, S&P Global Ratings Services ('S&PGR', or the 'Agency') revised its outlook on the Company and its controlling shareholder Polyus Gold International Limited ('PGIL') to Positive from Stable and
affirmed 'BB-'long-term corporate credit ratings on both companies.

The S&PGR also affirmed its 'BB-' issue ratings on PGIL's USD 750 million 5.625% Eurobonds due in 2020 and USD 500 million 4.699% Eurobonds due in 2022.

PJSC Polyus to become a guarantor under Polyus Gold International Limited's notes

On 23 January 2017, the Board of Directors approved granting of the unconditional and irrevocable guarantee under the guaranteed notes of its controlling shareholder Polyus Gold International Limited ('PGIL'). The USD 500 million 4.699% guaranteed notes due 28 March 2022 (the 'Notes') were issued by PGIL on 26 October 2016.

The transaction is in line with the terms and conditions of the Notes, according to which PJSC Polyus was to become a guarantor under the Notes not later than 24 April 2017. The Notes are also guaranteed by JSC Polyus, a key operating subsidiary of PJSC Polyus.

CONFERENCE CALL INFORMATION

Polyus will host an analyst conference call on 23rd January 2017 at 1 pm London time (4 pm Moscow time) to present and discuss the 4Q and 12M 2016 operating results.

To join the conference call, please dial:

UK local access [phone]

UK toll free 0800 358 6377

USA local access [phone]

USA toll free 888 349 9618

Russia local access [phone]

Russia toll free 8 800 500 9283

A replay of the conference call will be available from 3 pm London time (6 pm Moscow time) on 23 January 2017, for the duration of 30 days.

To access the replay, please dial:

UK local access [phone]

UK toll free 0 808 101 1153

USA local access [phone]

USA toll free 888 203 1112

Russia toll free 8 800 2702 1012

Access number 2881571#

Forward looking statements

This announcement may contain 'forward-looking statements' concerning PGIL. Generally, the words 'will', 'may', 'should', 'could', 'would', 'can', 'continue', 'opportunity', 'believes', 'expects', 'intends', 'anticipates', 'estimates' or similar expressions identify forward-looking statements. The forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Forward-looking statements include statements relating to future capital expenditures and business and management strategies and the expansion and growth of PGIL's operations. Many of these risks and uncertainties relate to factors that are beyond PGIL's ability to control or estimate precisely and therefore undue reliance should not be placed on such statements which speak only as at the date of this announcement. PGIL assumes no obligation in respect of, and does not intend to update, these forward-looking statements, except as required pursuant to applicable law.