Polyus : PJSC Polyus Annual Review'22 15 MB

We remain resilient, responsible and sustainable

FOCUS ON OPERATIONAL EFFICIENCY

Polyus produced 2.6 moz of doré gold in 2022. Its total gold output was 2.5 moz, down 6% year-on-year. This decrease was primarily due to lower refined gold production at Olimpiada caused by a temporarily lower head grades as well as an anticipated decline in average grades in ore processed at Blagodatnoye and Natalka.

In 2022, considering the elevated risks of potential disruptions in supply chains for spare parts and mining equipment, the Company's management decided to temporarily downscale excavation volumes at Olimpiada compared to the initial mining calendar. This led to a delay in access to high-grade zones of the ore body. Polyus is already back to the initially planned ore mining volumes at Olimpiada, with an ongoing improvement in grades in ore mined.

The Company anticipates gold production for the full year 2023 to reside within the range of 2.8-2.9 moz. The year-on-year increase in production is expected to be mainly driven by higher grades in ore processed at Olimpiada since Polyus will be mining rich gold-bearing zones of the Vostochny pit.

Despite all the headwinds, Polyus continued to advance all its previously announced projects in 2022. The Company was also able to identify and develop new initiatives to boost production across its existing assets.

At Olimpiada, the Company proceeded with a number of initiatives aimed at stabilizing the current processing parameters at 15.0 mtpa, including the start of an additional flotation concentrate thickener. Polyus has also improved its efficiency at the BIO complex by launching four additional reactors at BIO-2.

At Natalka, the Company continues to successfully implement operational initiatives targeted at maximizing the recovery rate. The Natalka mill also reached its targeted hourly throughput rate of 1,550 t/h and is currently running at the annualized capacity of 12.5 mtpa. Over the year, Natalka was the second-largest asset in terms of output, producing 444.7 koz of gold. The Company has also decided to introduce a flotation circuit at Natalka, which is expected to improve the recovery rate at the mill and add process flexibility to address potential fluctuations in ore's chemical composition.

Volumes of ore processed at Verninskoye amounted to 3,902 thousand tonnes, a 8% increase on the previous year. This growth reflects improved the hourly throughput of the mill, which stood at a new historical high of

468 t/h, as well as the implementation of operational enhancements resulting in less maintenance downtime related to the reline of the SAG mill.

Polyus is at the active phase of construction activities under the Kuranakh mill expansion to 7.5 mtpa project. Most of the long-lead key technological equipment units, including components for the ball mill, were delivered to the site. The Company completed construction works at thickeners, commissioned new compressor stations, and finished the installation of 16 sorption columns. The Company also announced two new projects at Kuranakh: expanding throughput capacity at Kuranakh's existing heap leaching facilities aimed at increasing capacity from

1.5 mtpa to 5.0 mtpa, and constructing a 12.5 mtpa heap leaching facility at Kuranakh's Southern group of deposits.

The Company also continued to implement all activities under its project to construct Mill 5 at Blagodatnoye as scheduled. Commissioning is slated for 2025. Major parts of the foundation works for the in-pit crushing and conveying (IPCC) system were completed during 2022. Polyus also finished installation of the SAG-mill and desorption site equipment. Construction of the Yenashimo River bridge was finalized, which is now operational.

At Sukhoi Log, our flagship project to develop a greenfield deposit, the Company has progressed with the construction project for the Vitim substation and 220 kV gridline, which are within the Polyus project scope for the technical connection of Sukhoi Log to the existing power grid. We have completed a general layout of the project and are progressing on the design documents for the auxiliary infrastructure and tailings storage facility.

Due to the current geopolitical environment, the Company postponed completion of the Bankable Feasibility Study. Polyus discontinued working with several international processing equipment manufacturers but has already identified alternative suppliers for the project. The Polyus engineering team will now proceed with amendments to the initial project design with a focus on mill reconfiguration, including redesign of the mill's building and foundation, taking into account the updated equipment list. Polyus expects to provide an updated schedule and details on the project in 2023.

MAINTAINING FINANCIAL STABILITY AMID A FAST-PACED MARKET ENVIRONMENT

Revenue for the full year 2022 was $4.3 bln, down 14% from 2021. This was driven by the decline in production volumes and by the lower average realized refined gold price compared to the previous year.

Total cash costs (TCC) were $519 per ounce, (2021: $405 per ounce). This reflects lower average grades in ore processed at almost all the hard-rock deposits. The Company notes that the consumables price inflation, wage indexation, and ruble appreciation have also negatively impacted the Company's cost performance in 2022, and those factors were common to all operations of the group.

Despite increased TCC, Polyus is still in the first decile of the global cash cost curve amid persisting inflationary pressures in the global mining industry. Moreover, the Company expects to keep its TCC within the range of $500 to $550 per ounce in 2023. The improvement in cost performance at Olimpiada, on the back of an increase in head grades and higher antimony by-product credit as well as ongoing cost-containment initiatives across the asset portfolio, is expected to mitigate inflationary headwinds in key consumables and labor.

The group's adjusted EBITDA for the full year stood at $2,584 mln, a 27% decrease compared to 2021. The decline was driven by lower gold sales and higher TCC on a per ounce basis.

In 2022, capital expenditures increased to $1,119 mln from $928 mln in the previous year. This year-on-year increase reflects higher capital expenditures across all business units. The bulk of the capex program related to the Company's Krasnoyarsk assets, in particular at Blagodatnoye to progress the Mill 5 project and at Kuranakh, which is at the active phase of construction activities under the mill expansion to 7.5 mtpa project; Polyus is proceeding with the engineering of a new project that envisages the construction of a 12.5 mtpa heap leaching facility at Kuranakh's Southern group of deposits and is finalizing the technical solutions to expand throughput capacity at Kuranakh's existing heap leaching facilities aimed at increasing capacity from 1.5 mtpa to 5.0 mtpa.

Net debt stood at approximately $2.3 bln at the end of 2022, an increase of 3% year-on-year. The net debt to EBITDA ratio stood at 0.9x (2021: 0.6x).

Despite the expected year-on-year decline in financial performance in 2022, the Company was able to generate positive free cash flow of $415 mln (subject to debt).

TOWARD A SUSTAINABLE FUTURE

In 2022, Polyus published its Climate Strategy. Aimed at supporting the UN Sustainable Development Goals, the Strategy has been developed in line with the International Task Force on Climate Change Financial Disclosure (TCFD) and the Intergovernmental Panel on Climate Change (IPCC) recommendations while also reflecting industry best practices. The Climate Strategy sets medium- and long-term goals for reducing greenhouse gas emissions and identifies measures to promote decarbonization. The Strategy also includes an assessment of climate risks and an internal carbon pricing mechanism.

The share of recycled water in the Company's production processes is currently around 93.2%.

In December 2021, Polyus - along with other companies that acknowledge the importance of strong ESG practices - signed an agreement to create the National ESG Alliance. This inter-sectoral platform will stimulate dialogue and joint action on sustainable development across business, society, and the state. Polyus was closely involved in the activities of the National ESG Alliance in 2022 as a member of three committees.

In 2022, Polyus continued its engagements with international ESG rating agencies such as MSCI, Sustainalytics, FTSE Russell, ISS, and CDP, and also received a new rating from The Nature Benchmark. FTSE and ISS upgraded their Polyus ratings during the year. The Company also started engaging with Russian rating agencies, including Expert RA and ACRA, which assigned high ratings to Polyus. This is a clear recognition of our sustainability credentials, including in areas such as climate, water resources, health and safety, and risk management.

We are working hard to ensure stable supplies of materials and equipment for production. Polyus remains a reliable, attractive employer, committed to environmental and social responsibility, fulfilling its obligations to its employees, regions of operation, and partners.

Overview

STRATEGIC REPORT

03 At a glance

1. Our investment case

1. Business model
2. Understanding our stakeholders

1. Key performance indicators
2. Risk management

1. Operational review

1. Financial review

SUSTAINABILITY REVIEW

OUR PURPOSE

We are committed to unlocking the potential of our high-quality operating assets and greenfield projects. We will accomplish this by evolving into the most efficient, responsible, and advanced business at the forefront of the industry.

1. Our approach to sustainability

1. Ethics and human rights

1. Human capital

1. Health and Safety

1. Environmental stewardship

1. Energy and climate change

1. Local communities

CORPORATE GOVERNANCE

1. Corporate governance system

1. General Meeting of Shareholders

1. The Board

1. Senior Management
2. Anti-corruptionefforts

1. Human rights
2. Report of the Board of Directors

FINANCIAL STATEMENTS ADDITIONAL INFORMATION

92 Report on compliance with the

principles and recommendations of the Corporate Governance Code

104 TCFD report

119 Report on payments to governments

1. Cautionary statement

1. Contacts

OUR KEY FIGURES

1 In 2022, 89% of Polyus' purchased electricity came from renewable energy sources. At the time of publication of this Annual Review, The Company is finalizing the process to supply the remaining 11% of consumed electricity with green certificates by issuing and offsetting national energy certificates of origin for hydropower. As in 2021, the hydropower will be supplied by the Mamakan HPP in the Irkutsk Region. The updated information will be disclosed in Polyus PJSC Sustainability Report 2022.

Climate change management

Page 8

Our investment case

Page 4

Business model

Page 10

At a glance

Polyus has a robust business model, stable investment portfolio, and efficient processes in place to remain resilient, responsible, and sustainable.

We advocate for responsible mining that takes account of all stakeholders' needs and expectations.

WHERE WE OPERATE

Our large-scale production assets are spread across Russia's richest gold mining provinces in Eastern Siberia and the Far East. Our principal operations are located in Krasnoyarsk Territory, the Irkutsk, Magadan, and Amur Regions, and the Republic of Sakha (Yakutia).

OUR VALUES

Polyus' values are the guiding work principles for all our employees and motivate our Company to achieve a high level of performance.

KEY: Production assets

Greenfield sites

6

7

SUKHOI LOG

Page 28

8 CHULBATKAN

• Location: Khabarovsk Territory
• Review of the key outcomes of previous studies on the project is ongoing, including the identification of the best processing technology and project configuration
• In 2022, integration of Chulbatkan into Polyus' structure and business processes was underway
• 170 - average headcount

Our investment case

In 2022, we successfully carried out a series of events focused on two key tasks: to verify that employees actually adopt Polyus' production system tools post training and to boost their data and statistics skills. In particular, employees were trained in Lean Six Sigma and certified to Six Sigma Green Belt and Black Belt. The training program has enabled a more thorough and detailed design of operational efficiency projects. In addition, Lean Thinking trainings were held for the top managers of Polyus' business units to drive the effectiveness of the organization and the management of day-to-day operations. These efforts are expected to boost the number of suggestions for improving or optimizing both production and business processes and enhance the quality of their development so that they include the potential economic impact and value for the Company. We believe in the importance of improving the organizational and management skills of managers, and pay significant attention to these aspects.

Polyus also continued to use the electronic format for submitting employee suggestions via the "Polyus of Ideas" portal. The portal contains a knowledge base of all initiatives implemented through the employee suggestion scheme. At any time, employees can learn from the experience of other business units and replicate their colleagues' ideas. Employee suggestions mostly centered on boosting mill productivity and optimizing operations. The Company provides employees with additional remuneration for

active participation in the improvement process. In 2022, 11,600 suggestions were submitted by more than 5,000 employees, and nearly $0.5 mln was allocated for incentive payments.

Our employees' proactive approach is a key driver behind Polyus' operational excellence. Involving them in the process of continuous improvement is the most important task for the Company. Our culture is generally shaped by the Company's management, while each member of the Board of Directors brings their unique experience, knowledge, and expertise to the table.

This enables constructive collaboration that has a positive impact on all aspects of the Company's activities. Ensuring a safe environment and decent professional development opportunities for our employees, regardless of their role at the Company, is our top priority and a key focus of our efforts. With a particular emphasis on internal human capital, we grow our talent pipeline, encourage promotion from within, and help increase the diversity of our workforce. It is essential for us to build a culture that makes our people feel valued and appreciated and offers opportunities for professional growth.

Team

Industry position and asset quality

Growth prospects

Sustainable development

Operational excellence and technological advancement