Polymetal International plc

Dear ladies and gentlemen, welcome to the Solidcore Resources Full Year 2025 Financial Results Webcast. Joining us today are Vitaly Nesis, Chief Executive Officer; and Evgenia Onuschenko, Chief Financial Officer.

[Operator Instructions] Vitaly, over to you.

Thanks a lot, Kirill. Welcome to the traditional financial results call for Solidcore Resources.

Today, we will cover the results for financial year 2025, and we'll provide an update on our strategic projects and outlook for 2026. I will start with the conventional disclaimer on forward-looking statements.

Please take care to read it carefully. And I will start with the key figures for 2025.

Obviously, this year -- the last year rather, was quite successful for the company despite a material decrease in payable production, of which more later, Solidcore managed to demonstrate substantial improvements in all measures of profitability. Obviously, this was mostly due to very favorable gold price environment.

But nonetheless, we are pleased to report a very strong set of results. And I think the -- probably the most important result in 2025 was the fact that the company reported no lost time injuries among our employees and our contractors.

We also had 0 days lost to work-related injuries. And we are proud to report that 2025 was the eighth consecutive year with no fatalities at Solidcore's operation in Kazakhstan.

In terms of highlights for 2025, production went down, payable production went down mostly as a result of inventory accumulation at Amursk POX in Russia, but we managed to report a 37% increase in adjusted EBITDA on only 13% rise in revenue. So the margins have improved quite strong.

In terms of cost performance, I will just briefly note that the dynamics was almost fully due to external factors. And as a result, our underlying net earnings increased by 40%.

Net operating cash flow suffered again as a result of inventory accumulation, but that is a temporary phenomenon, which will be reversed this year. CapEx continued to grow, plus 23% as has been highlighted many times earlier, Solidcore is ramping up our very aggressive CapEx program and 2025 indicated the move in that direction.

In terms of net cash, it increased. So our leverage levels are very comfortable.

We are very well funded for our CapEx program. Turning to ore reserves and mineral resources.

The year was marked by relatively stable dynamics. We did not replace all of our reserve and resource base through reevaluation, but we continue to expect material increases as we remain very consistent and persistent in our exploration.

In terms of production, annual payable gold equivalent output was 395,000 ounces, and that was mostly driven by the decrease of payable gold production at Kyzyl due to delays in third-party concentrate processing. More or less mine level output was more or less stable at 508,000 ounces of gold.

And the difference between payable production and mine output was almost fully tied up in inventory at Kyzyl operations. Turning to inventory specifically.

We are now substantially -- we have substantially went down the path of winding down the excess payable metal inventory, mostly at Kyzyl. In the middle of the last year, the inventory was 258,000 ounces.

Now it's 158,000 ounces. So we still have approximately dependent on the month of the year, 80,000 to 100,000 ounces of excess payable gold inventory tied up in concentrate as of the end of the last year.

We have continued to bring those levels down in 2026. I would like to highlight the start of commercial operation with Kazakhmys, where we have started to ship our concentrate for Tau processing in December of last year.

We expect that the operation with Kazakhmys will further 2 strategic goals of Solidcore. First of all, the reduction of dependence on Russian POX processing.

And secondly, the sustainable and quick reduction of concentrate inventory levels. So far, the amount of concentrate processed through Kazakhmys is significantly lower than what we do in Russia at POX.

But we are optimistic about the dynamics later this year and hopeful that this step will unlock other strategic opportunities for Solidcore. So overall, not yet fully done with the reduction in working capital, but making good progress on this very important front.

And I pass the presentation to Evgenia, who will take you through the detailed analysis of financial statements.

Thank you very much, Vitaly. So as Vitaly mentioned, thanks to the favorable gold price environment, our revenue rose this year to $1.5 billion, up by 13%.

So at Kyzyl, revenue increased 4% to $892 million. So higher gold prices more than compensated 34% drop in volumes.

And at Varvara, revenue jumped 48% to $608 million on stable volumes and also stronger pricing. The remaining excess of Kyzyl concentrate inventories are expected to be released during 2026, which will drive our production guidance and sales guidance to 540,000 ounces.

Next, please. So in terms of the total cash costs, they were 17% up to $1,100 per ounce.

And the 3 main drivers behind the increase were the Kyzyl sales deferrals spreading cost over a few ounces, domestic inflation above 12% and higher mineral extraction tax linked to the gold price. The tenge depreciation by 11% provided a partial offset of this increase.

In terms of the total cash cost by mine, at Kyzyl, TCC rose 8% and at Varvara, the increase was 13% to $1,556, basically driven by the same factors, as I mentioned before. On the next slide, you can see the cost breakdown.

So 30% is price-linked mineral extraction tax in dollars and then 30% is the dollar and oil-linked cost and 30% of our costs that then get denominated. So that means that the gold-linked mining tax is becoming an increasing share as prices rise and the mineral extraction rate increased to 11% from 7.5% starting from the January 2026.

All-in sustaining cash costs were slightly above $1,500 per ounce, and the 18% increase was driven by the same factors which were driven total cash cost plus higher sustaining capital expenditure and SG&A expenses. At Kyzyl, all-in sustaining cash cost was flat at roughly $1,000 per ounce as lower sustaining CapEx offset inflation and demonstrated an incredible free cash flow generation at current gold prices.

At Varvara, all-in sustaining cash costs rose 15% to slightly above $2,000 per ounce, reflecting investments in tailings storage construction as well as railroad spur at Komar and fleet upgrades. In terms of the adjusted EBITDA, which grew 37% to $972 million.

So Kyzyl contributed almost $700 million to the group EBITDA and Varvara contributed $332 million. The EBITDA margin expanded to 65%, up from 54%.

And in the bridge, you can see that higher gold prices added more than $500 million and partially offset by $231 million from lower sales volumes and $69 million from higher unit costs. So turning to the net cash position.

Net cash increased 24% to $464 million. We generated net operating cash flow of $600 million and deployed it towards capital expenditures, so $255 million went to CapEx.

And we spent $150 million on M&A and other investments. This included also the mandatory share buyback.

So the gross debt was reduced to $267 million, and the average cost of debt was 5.7%. I would like to say that we are advancing negotiations with several international banks for up to $600 million to $700 million financing for Ertis POX construction.

So in February, we signed an indicative term sheet with KfW, which is a German development bank, another $300 million is expected to be provided by European Bank for construction and development and another $300 million by a club of international lenders. We expect the main facility agreement to be signed in the second -- at the end of the second quarter this year.

And with that, Vitaly, over to you in terms of capital expenditure.

As I have mentioned already, CapEx has continued to increase on the upward path. Clearly, the single most important project for Solidcore in 2025 was Ertis POX, which claimed more or less half of total capital expenditures for the company.

But we continue to invest in other initiatives as well. Against the background of very favorable commodity prices, we ramped up investments in same business capital, including tailings storage facilities upgrades, fleet renewals and other sort of improvement initiatives.

We have done so consciously. It's been a long-standing corporate policy with Solidcore to invest more in stay in business projects during the periods of positive market conditions with a view to be able to reduce discretionary CapEx spending if in the future, the market conditions deteriorate.

So we spent quite a lot on stay in business and in -- also on the green energy initiatives. The capitalized stripping on the other hand is going down as the life of the open pit at Kyzyl is approaching its end, and this year will mark the first year of heavy spending on Kyzyl underground.

And on balance sheet, Evgenia will continue the presentation.

So at the year-end, we held $731 million in cash and $135 million of undrawn credit lines. We also invested roughly $100 million in short-term investments.

So it's a very strong liquidity position. And overall, we feel comfortable in the current environment.

And over to you, Vitaly, in terms of capital allocation.

Nothing really changes in terms of capital allocation priorities. We continue to advance our long-term capital-heavy projects, the POX, Syrymbet and potentially Besshoky.

M&A, to be frank, we have not been able to be really that active in M&A in 2025. The market for assets has been overheated from my perspective, given the dynamics in gold and actually copper price.

So M&A remains an important direction, but I'm not sure how much we will be able to allocate to that. We continue to step up the exploration effort.

And as I have mentioned, invest in business efficiency. Clearly, the one question that preoccupies the Board of Directors very much is the dividend issue or rather capital distribution, speaking more broadly.

We have set out 3 preconditions to kind of unblock that allocation of capital. We have successfully addressed what I believe is the single most difficult issue, which is the blocked shares in NSD.

The mandatory buyback of those shares held under Euroclear has been successfully completed. In terms of third-party concentrate calling legal risks, as I've mentioned again, we have made some progress in terms of diversifying the processing of concentrate away from POX in Russia, but we are still some way off kind of full protection or full derisking from that risk.

We also are in the process of requesting the extension of the comfort letter to continue cooperation with Amursk POX from OPEC. I think as we ramp up cooperation with Kazakhmys and maybe with other non-Russian dollars of our concentrate, and we receive OPEC extension and we see continued progress towards the completion of our own POX facility in Kazakhstan, this red cross will start to move into check.

In terms of sufficient financing, this is really work in progress. Evgenia outlined our recent advances in terms of project financing for EPOX.

We also have started discussions on project financing for Syrymbet. So I think this third precondition is unlikely to be a blocking issue for capital distributions.

To ramp up, we are not yet there. The company is not yet ready to seriously consider a dividend.

That's why the Board did not recommend dividend based on the results of 2025. But the general feel is that we are making steady albeit slow progress towards resolution of this vaccine issue.

And I do hope that we will see that resolution in 2026. Turning to 2026 guidance.

As has already been mentioned, we expect a big jump in payable production, but that actually will be driven by the inventory release in terms of the mine level production. It will be more or less flat, a couple of percent increase from 2025.

Total cash costs, I expect it to increase sharply. There are 2 factors that drive our expectation of this jump.

First of all, the new mineral extraction tax rate is now linked to gold prices in a staggered manner with the maximum rate now set at 11% and that kicks in at relatively low price levels. So we expect almost doubling of MT in 2026.

And secondly, Kazakh tenge has appreciated sharply against U.S. dollar in the second half of 2025 and continue to strengthen in 2026.

So we expect the strong headwinds from domestic currency and strong headwinds from the continued persistent strong domestic inflation in Kazakhstan, definitely above 10%. So almost 20% expected increase in TCC and the corresponding increase in all-in sustaining cash costs.

However, the biggest jump we will see in CapEx, 2026 will be one of the 2 peak CapEx years for Ertis POX and we will start spending heavily on Syrymbet and to a lesser extent, on Kyzyl underground, while maintaining a heavy pace of investment in exploration. So almost doubling of CapEx we expect in 2026, fully in line with our strategy to invest to increase the size of the CapEx.

Turning to sensitivity. Just to give you a sense of how external parameters impact our profitability measures.

Clearly, gold price is crucially important. But increasingly, Kazakh tenge plays a big role, then tenge per dollar movement doesn't look on this page to produce a big impact.

But just to give you a sense, the rate was hovering about KZT 550 per dollar 6, 8 months ago, but now it's KZT 470, 480. So we are talking about a pretty significant impact even before we take into account the inflationary impact.

Turning to projects update. I will briefly walk you through 3 key projects.

At Ertis POX, engineering and contracting of key equipment and contractors is more or less fully completed, autoclave delivered and installed. We have successfully completed the public hearings process and are very near the completion of international environmental and social impact assessment.

Those things are the prerequisite for signing definitive documentation with the consortium of international banks. So the project is moving along nicely.

At Syrymbet, engineering is 60% complete. The statutory documentation is under development.

This will be the first project, which will be designed fully in-house by Falco Engineering as opposed to Ertis POX, where the Canadian engineering firm Hatch is taking the lead on engineering. The definitive feasibility study on Syrymbet is nearing completion, and we target Board approval of the project together with the full financial model in September.

And in terms of Besshoky, the flagship project of Bai Tau Minerals, where we have a stake. Exploration is ongoing.

We expect the mineral resource update in May and final investment decision is still targeted for the second half of 2026. Just a couple of picture slides.

This is the POX building at Ertis POX construction site. As you can see, the structural steel for the building house in the autoclave is completed.

We have started to put on the roof and sidings and the autoclave itself is now fully grounded in the final position. At Syrymbet, we have started site preparation ahead of the final investment decision.

We are quite confident that the Board will approve the project. Just to give you a sense of why I'm so positive, the base case feasibility study is done at $30,000 per tonne of tin with a conservative scenario of $25,000 per tonne of tin, whereas the spot price is now close to $45,000 per tonne.

So I think this project will be a huge beneficiary of positive market conditions. And with this, I will wrap up the presentation, and we'll turn to questions.

We'll start with online questions. Can you please provide some additional information about your growth projects such as production, CapEx or industry cost level?

Furthermore, is there any news of Bai Tau or POX? In terms of Ertis POX, I think all of the relevant information you can find on our site in section with historical presentations.

The financial and production details for Syrymbet will be released after the Board approves the project, hopefully, in September of this year. [ Besshoky ] has been stalled somewhat by the permitting process by about 6 months as we resolve agricultural land usage issues with our farming neighbors, but we still expect first production closer to the end of this year, maybe early next year.

And for Tokhtar, we are still awaiting the government approval for the transaction. And judging from the multiple recent transactions in the Kazakhstan mineral extraction industry, it's not unlikely that we will need to discuss this project, not with the previous owner, but maybe with the new owner.

So now, Tokhtar is fully on ice. Could you please comment about your thinking about opportunities in Middle East, North Africa, including Oman becoming recently more attractive due to geopolitical uncertainty and pricing volatility.

Well, we continue to push ahead in Oman, and we actually have signed a couple of term sheets in that country and hopefully transitioning to documentation stage and closing of the transactions in the second quarter of this year. We also are looking at other countries, but I think the recent upheaval related to Iran is not likely to have an immediate impact on availability and dueability of budget.

So we continue to press ahead at our own pace. You have talked about $400 million, $500 million CapEx for 2026, 2028 in your recent orders.

This is a massive expansion versus the original guidance. Can you explain this?

Yes. This is very easily explained.

Previously, we have not included Syrymbet, and this is probably the single largest contributor to the increased guidance. We also now factor in our investment outside of Kazakhstan, first and foremost, in Oman and also realistically with the strengthening of Kazakh tenge, we will also see some CapEx inflation within the same scope.

So those would be the 3 factors. The company is currently trading at 3.5x LTM EBITDA multiple.

Why is this? What is the company doing to improve its valuation?

I think this is already a big improvement compared with 12 months ago. I personally continue to view limited liquidity as the key restriction on the company's valuation.

And we are pursuing multiple paths to improvement in liquidity. One of the key obstacles is the limitations related to AIX infrastructure.

Solidcore will lead the discussion on the ways AIX can improve its performance at the mine expo in Astana in mid-April. We're in very active and constructive dialogue with the exchange on what they can do to improve the infrastructure.

So I'm hopeful this concerted effort will lead to better liquidity and better valuations. In terms of dividends, there are several questions on that.

I think I have covered this issue during the basic presentation. Just to wrap up, we are moving towards that goal, but not yet there.

When are we going to relist on a major exchange? This is a great question.

We have had private discussions with regulators and exchanges in multiple locations. The unpleasant answer to that is as long as reliance on U.S.

sanctioned POX facility remains in place. This is probably not on the books or at least, let me put it this way, the freedom from the Russian POX should be reasonably close at hand to ensure a smooth passage through the regulatory approvals at the Exchange.

We do not provide updates on interim financial positions. So we'll need to wait until the release of our first half financial statements.

What are the legal risks you're referring to regarding third-party concentrate law? With the legality of this not clarified and guaranteed prior to signing the divestment of Russian assets.

It is clarified and guaranteed on the Russian side. But I would like to remind you that we operate under a 1-year comfort letter issued by OFAC, and that letter permits Solidcore to continue commercial and production interaction with Amursk POX.

This comfort letter will last until late May of this year. We need an extension.

And obviously, we are quite optimistic about receiving this extension. But the risk that it's not received or it's not received promptly weighs pretty heavily on our valuation of legal risks, which are important for Solidcore.

What are CapEx levels expected for 2027 and '28. What is maintenance CapEx for Kyzyl and Varvara going forward.

CapEx levels, I think, should stabilize at around $500 million per year for the next -- for this year and next years. And maintenance CapEx for Kyzyl, the key driver will obviously be an underground mine project, we will need to spend about $200 million to $250 million on starting this year and completing in 2029.

Varvara, on the other hand, will be relatively light. Is the high gold price encouraging refractory gold project developments in the region that may offer potential concentrate feed for EPOX.

Absolutely, this is spot on. We are seeing huge activity in Kazakhstan.

The interest in the gold sector has skyrocketed. On the one hand, this reduces our own ability to find and execute attractive M&A transactions.

On the other hand, the optionality of POX over the last couple of years has increased tremendously, and we are seeing a lot of preliminary interest from those would be producers of refractory POX. Over the long term, what capital structure do you consider optimal?

Maybe you can provide any range in terms of debt to equity and net debt to EBITDA. Historically, 5, 6 years back, we indicated the comfort range from about 1 to about 2x net debt over EBITDA over the cycle.

I still think this is a pretty reasonable target. But to move towards those parameters, we need to have unrestricted access to international capital markets, which we currently don't.

So this is still some way off in the future, and we need a substantial liquidity cushion maintained as we move forward with our aggressive CapEx program. What are the milestones for your Kyzyl plant construction and the time line for these milestones?

What are economics of gold being processed by Kazakhmys compared to Amursk. In terms of the milestones, I think the key milestone is the completion of permitting process, full completion, which we are targeting for the first quarter of 2027.

The second substantial milestone is the completion of physical construction and transition to the completion of the engineering systems. Those would be fourth quarter of 2027.

And then the start of commissioning, which should be late -- in terms of the economics of Kazakhmys versus Amursk, given the strength in tenge and ruble, Kazakhmys is actually better, mostly because of a significant reduction in transportation costs, not hugely what we are talking about maybe $30, $50 per ounce. Kazakhmys is better, but the throughput is so.

That's why we continue to rely on Amursk for the majority of our concentrate. In terms of updated production guidance and CapEx guidance, as I have said, both CapEx and production should be quite stable 2026 to -- what is driving the shift towards selling most of the gold domestically in Kazakhstan?

Well, we sell all of our gold domestically in Kazakhstan. This is the policy of the Central Bank.

We process concentrate in Amursk, Kazakhmys and then we sell the rate domestically. This is a state policy.

Has there been any recent changes in the taxation regime? As I have mentioned, the mineral extraction tax or more or less the world rate has increased substantially and is now dependent on the gold price.

It's difficult to forecast whether this regime will be stable. We obviously see substantial tightening of tax administration, and we have recently gone through a 3-year tax audits at Kyzyl and Varvara.

And we definitely see that tax authorities are taking a much more muscular approach on contentious issues and on the great areas in regulation. So nothing positive should come from taxation.

I will ask Evgenia to answer the question about the cost of funding.

Sure. So our average cost of funds last year was roughly 5.5%.

We are still benefiting from the low rate loans that we attracted several years ago. But if you -- I mean, speaking of our cost of funds today, I think any new funding will come at a cost of, I don't know, SOFR plus 2% or plus 3%.

So we will see a gradual increase in our cost of debt going forward.

Will you disclose the operating inputs of Syrymbet this year? Well, Syrymbet will be no operations there this year, it's just the start of construction.

Did you already pay any money to previous top shareholders? No, we did not.

But we have spent some money on exploration and metallurgical evaluation of the deposit. This money is notionally linked to the asset.

So we are waiting for the clarification of the government's position vis-a-vis this asset. Mr.

Nesis, I enjoy your role presently. Any aspiration to continue as CEO indefinitely?

I think I definitely don't have any aspiration to continue as CEO indefinitely. But I feel both moral obligation and objective necessity to continue at least to see both POX and Syrymbet fully ramped up and operation to design capacity.

So for the next 5 years, I see myself with Solidcore for sure. What is the potential structure of investments in Oman?

Those would be classical permian joint ventures targeted or focused on late-stage exploration properties. So we invest to drill and perform other studies.

And by completing these activities, we gain a certain percentage of ownership in the asset. Then as the asset progresses further, we fund the pre-feasibility study to earn.

So relatively clean vanilla permian. What is the sensitivity of AAC with respect to crude oil price, which oil benchmark is relevant to Solid.

I think the euro is the relevant benchmark because the bulk of diesel price fuel is exported from Russia. Local diesel is mostly reserved for agriculture and other socially important activities.

We -- I would say that the doubling of oil price should have approximately $50, maybe $60 per ounce impact on our TCC. M&A seems very active in Kazakhstan.

How could this impact Solidcore's corporate strategy? It's a great question.

It has already impacted our corporate strategy by focusing our M&A aspirations more on other less travel jurisdictions. I've mentioned Oman, we have opened a representative office in Tajikistan.

We are looking at other kind of less conventional jurisdictions. Kazakhstan is -- has received a huge amount of attention from the global mining industry.

And as a result, it's extremely difficult, as I have already mentioned, to find interesting and value accretive deals. Can you update us on current processing operations on Russian POX?

Is everything running okay. Well, we have no transparency on processing operations on POX.

What I can say that -- what I can say is that there is no accumulation of material. So whatever we send there, we receive back reasonably regularly and without delays.

However, I have to admit that without Kazakhmys trading the free, it would have been difficult to wind down the accumulated stockpile. So the Russian POX is treating the current flow nicely and Kazakhmys is instrumental in reducing the accumulated -- could you please provide your assessment of probability of closure of Tokhtar.

I personally think that the deal we have submitted for government approval has next to zero chances of closing. And I would venture to say that probably we'll need to negotiate something from the scratch with most likely the new.

Then the total CapEx for Ertis POX spot remains estimated at $1 billion. Yes, we see so far no scope.

And given the fact that imported equipment and materials represent a very hefty chunk of CapEx, the appreciation of Kazakh tenge will have an impact on CapEx, but not very dramatic. I think for the other hand, assuming that where we'll try to get as much CapEx as possible domestically, the impact of strong tenge will be materially more significant.

And as a result, the original CapEx figure of $250 million is likely to be reestimated high. So we are done with questions from the webcast.

Kirill, do we have any other sources of questions?

No, there are no other sources of questions.

Ladies and gentlemen, thank you very much for your active participation in the webcast. Please do not hesitate to direct further questions to our IR team.

We'll respond promptly. Again, thank you very much.