Petropavlovsk PLC (PPLKF) CEO Pavel Maslovskiy on Q4 2019 Results - Earnings Call Transcript

Petropavlovsk PLC (OTC:PPLKF) Q4 2019 Results Earnings Conference Call May 27, 2020 3:30 AM ET

Company Participants

Patrick Pittaway - Head of Investor Relations.

Roderic Lyne - Non-Executive Chairman

Pavel Maslovskiy - CEO

Alfiya Samokhvalova - Deputy CEO

Danila Kotlyarov - CFO

Conference Call Participants

Operator

And 5 4 3 2 1. And you are good to go.

Patrick Pittaway

Hello and welcome to the Petropavlovsk Full Year 2019 Financial Results and Q1 2020 Production Update Presentation. We will begin with the presentation and then continue with a Q&A session. Throughout the presentation you may send through your questions via the Q&A platform in the top left hand corner. When sending questions, please include your name and the name of your firm, we will answer as many as we can during the allotted time. Please note, this webcast is being recorded and will be accessible on the company's website under LSE, Issuer Services page. Today I am pleased to present the Right Honourable Sir Roderic Lyne, Non-Executive Chairman, Dr. Dr. Pavel Maslovskiy, Chief Executive Officer, Dr. Alfiya Samokhvalova, Deputy CEO and Mr. Danila Kotlyarov, Chief Financial Officer.

Pavel, please go ahead. The floor is yours.

Pavel Maslovskiy

Good morning, ladies and gentlemen. Thank you very much for joining our conference and because it's a very new technique, so I apologize if sometimes somebody will go on mute, while thinking that he is talking, as it happened to me right now.

So if you will look at slide six of our presentation, the highlights, I would be absolutely happy to repeat many times what this slide says, because it's indeed impressive, I believe results, it was 19 – 2019 was good year, all like winemakers are saying vintage year. So - and that is reflected by our share price performance. My colleagues very modestly put a five years curve of share price growth, but if you look at one year we outperformed - we outperformed all the peers.

One of the most important thing in operating the company is the corporate governance and you can see that we now have a - absolutely the composition of the board was absolutely matching the FTSE 250 requirements where we actually - I mean, Index get this year. The board is I believe strong independent, highly qualified and have a very good I would say optimal proportion of executives and independent non-executive directors.

It's very sad that Sir Roderic is retiring. We used to work with him for - with small break for 12 years on - more than 12 years on board of the company and I met Sir Roderic even earlier when he was ambassador of UK in Russia and was very interested in details of unique operation and unique at that time joint venture between the UK and Russia.

Patrick Pittaway

Pavel, I'm very sorry. I believe there is a technical issue and no one's actually being able to watch this. So I've just been asked to stop the presentation for now. I'm getting the message we need to start again essentially. I can see operator available.

Operator

Yes, indeed.

Unidentified Company Representative

How many people are - there's no one watching this correct.

Unidentified Company Representative

We should be streaming to the London Stock Exchange page.

Unidentified Company Representative

I think there's an issue with that stream to the LSE page. The LSE team are trying to fix that now. Currently I don't think anyone is able to gain access to the LSE platform via the link that we have been given.

Unidentified Company Representative

That's the one on the RNS and on our website.

Unidentified Company Representative

The one on the RNS, the one on the website and the one that was circulated by the team. And so I think it must be an issue with the LSE platform. And no one is watching this right now. The LSE are working to fix this Mark, can you help at all. [Technical Difficulty] Yeah, I can confirm that it is fixed. I think if people reload the page it now works, great. I'm very sorry. I think it's best if we perhaps start from the beginning. Ready. [Technical Difficulty] All set. Good for you.

Patrick Pittaway

Hello and welcome to the Petropavlovsk Full Year 2019 Financial Results and Q1 2020 Production Update Presentation. We will begin with the presentation and then continue with the Q&A session. Throughout the presentation, you may send through your questions by the Q&A platform, top left hand corner. When sending questions please include your name and the name of your firm. We will answer as many as we can during the allotted time. Please note this webcast is being recorded and will be accessible on the company's website and the LSE Issuer Services page. Today I am pleased to present the Right Honourable Sir Roderic Lyne, Non-Executive Chairman, Dr. Dr. Pavel Maslovskiy, Chief Executive Officer, Dr. Alfiya Samokhvalova, Deputy CEO and Mr Danila Kotlyarov, Chief Financial Officer.

Pavel, please go ahead when you're ready.

Pavel Maslovskiy

Good morning, ladies and gentlemen. Thank you very much for joining us and sorry for this technical disruptions. If you look at the highlights page of our presentation its number five, you can see that 2019 was indeed good year as winemakers are saying vintage year, we outperformed on all the major metrics and further you can see that this performance is reflected by our share price, this graph shows the evolution of the growth of share price for five years, but if to take one year curve we outperformed all our peers.

One of the most important for issues for the company with us is in Russia and listed on the London Stock Exchange and included in FTSE 250 is a strong corporate governance.

And so this year, thanks to Sir Roderic Lyne, especially, we build a strong independent, highly qualified and diverse board. It's very sad that Sir Roderic is leaving the chairmanship. We worked with him for a small break for 12 years on board of the company and his input to the success and growth of the company is absolutely great.

The executive team are almost the same as it was in previous years. And we're all at the moment doing our business as usual, are fighting with consequences and reality of COVID pandemic.

On page 12 you can see the list of all the measures, all the actions we are taking to make our operations continuous and not disrupted. My guess is that these type of measures are very typical or very similar to all the companies, all the companies of our major mining gold mining companies. So the most important and I will say crucial is how management is serious and consistent in implementing this actions.

At the moment we don't have cases of coronavirus, but you understand that life is much more complicated than any models of our life. So another aspect of approaching pandemic is to be ready for emergencies situation and to take actions if it will be necessary. We believe also that all necessary arrangements are in place and we can mitigate the situation if somebody will be infected.

Turning to operational review. Slide number 14. You can see that it's a normal advantage of multi-mine operations. Some mines did better, some mines slightly worse than 2018, but in general we meeted our budget, we meeted our forecast and produced as I said good results.

I believe and I will - maybe mentioned it further that one of the major results of 2019, it's a stable work of pressure oxidation. We were very happy and reported many times that the ramping up, commissioning, ramping up process was very smooth. But now almost a year and a half of performance shows that it's indeed reliable operations for our company. We can be sure that it will continue its good performance.

Talking about 2020, you can see that we are in good shape to meet our forecast. We are giving quite a broad range for – sorry, little bit ahead of the slides, so first quarter was quite successful. On the side of operations - of our own operations of mining our own ore, as well as processing third-party concentrate.

We're also on schedule of construction of the flotation unit on Pioneer which will double our flotation operating capacity, and on schedule to commission it in first [ph] quarter of 2020.

You can see that our target, slide number 17 is to consistently enlarge processing through POX of our own concentrate and reduce our dependence on third-party concentrate. One of the major reason is that processing of our own concentrate is more margin risk higher according to [indiscernible] and one more take away of this slide, if you look on the right side the contribution of refractory, the plan of contribution of refractory ores on our processing facilities starting from 2019 and up to 2022, if to take away that out of this graph, refractory material you will see it how - what could be the possibility of declining of our production, if we will stay only with non-refractory material and would not having pressure oxidation. So the strategy taking company more than 10 years ago appeared to be absolutely justified.

We have historically very good track record of adding our reserves and resources. I can remind you that except the across [ph] the deposit which is now depleted all of that gold mines and all the reserves and resources we have at the moment it's a result of our own exploration success.

In this numbers and figures you will not see any – anything we bought, anything non-organic and there is one note on this slide, which is very important which says about Tokur, we still have quite interesting and promising potential for enlarging and improving the quality - I mean, first of all grades of our reserves.

There is a big potential of Elginskoye [ph] deposit again from the amount of the reserves and resources, but also we are allocating at the moment higher grades which can boost the production on Albyn and we started more detailed exploration of total deposit because it's our big - and satellite's of Tokur [ph] deposits. It's our good potential to enlarge production on organic basis.

All this action's, measures we are taking, efforts on the production side they reflect in our balance sheet and derisking [ph] of balance sheet, reducing the costs of debt, our financial director will mention this in more details and reducing our - one of the most important metric is the ratio of net debt to EBITDA to the end of 2019 it's around 2 and we are looking today over 2020 to reduce it further.

As I said that guidance for 2020, slide 20. On production side is quite broad. And the major reason for this is the access to third parties concentrates. We are much more certain about our own production, but we seriously depend on third party concentrates.

And when we were giving this forecast at the beginning of the year the uncertainty was about from that concentrate we will manage to finalize two contracts and it's still uncertain there. The reason why we are reiterating this broad forecast in May of the year is now we believe that there is uncertainty of impact of COVID, of pandemic on our suppliers. That's why we are still staying with this broad projections, though it's almost half a year past.

We are hoping to maintain reasonably robust total cash cost, and reduce CapEx and of course, utilize - start utilizing the Pioneer flotation, new Pioneer flotation facilities to the end of the year in first quarter. And also you can see some guidance on our performance in 2021 to 2024 and I will be glad to answer any questions regarding this.

So actually in my short report, I mentioned all this items we reflected on slide 21, that group strategy is first of all operation efficiency, efficiency of pressure oxidation through increasing production of our own concentrate, strengthening balance sheet, dealing with IRC issue and organically maintain and grow our reserves and resources.

Now comes financial part of our presentation, so Danila, will you please switch in.

Danila Kotlyarov

[Technical Difficulty] Ladies and gentlemen, please you can look at slide number 23 with the key financial results of the last year, which Pavel said, which has – or mentioned already are exceptional. As you can see on the slide the volume of sales of gold is a main driver of the increase and amount of the – in the volume of revenues and the underlying [indiscernible] metric EBTIDA of the group.

On the next slide 24 you can see the key highlights of the results. As you can – or know the majority of the caters are in green, except of the TCC which I will give the comments later. And basically the results of the net profit which was a result of the number of the factors which affected this - which affected the profit last year and the year 2018 which are mostly non-cash like devolution [ph] write-off of RFC we have reduced capitalization of the interest.

On the next slide you can see the bridge between the - between the EBITDA of the year 2018 and the last year assuring that the vast majority will increase, as I mentioned already the increase of the volume of sales of the gold.

On next slide 26 you can see the breakdown and explanation of the mine increase in the course, so as you can see there was a 10% increase in the total TCC of the group. [Technical Difficulty] non-refractory – further refractory work of [indiscernible] as Pavel Maslovskiy mentioned as well.

Separately you can see the additional costs related to the procurements of external concentrate we are processing versus the production of our own. I will mention also ruble inflation which adversely affected - which adversely affected the cost of operations, including the cost of the diesel for electricity and partly this was set with improvement in the grades and recoveries, and also with the mining depreciation of the ruble.

On the next slide you can see the breakdown of the cost - the breakdown of the cost across our mines and an explanation of the variations. As I mentioned already the majority of the negative change is because of the additional costs associated with the processing of refractory of ores.

On the next slide you can see the structure of operating and of course last year against the year 2018 with a notable difference of the cost associated with the procurement of the external concentrate process on the pressure oxidation.

On the next slide with information about the CapEx, the total amount of capital expenditures last year against the previous year and that is the results of the commissioning on the pressure oxidation of course.

And the last slide I want to draw your attention to is that as a number of the initiatives which our group was taken which are aiming on the improvement of the liquidity and the marginal of the volatility of the price.

As a number one I would like to - like to give information that we received the confirmation - the confirmation of the distributor Gazprombank for a great increase in extending the available limit of the gold advances until the year 2024 and with the total amount if using the current exchange rate which is nearly US$0.5 billion and this is an important source of the liquidity which company is able to utilize if required.

And secondly I would like to mention and to draw attention, that hedging arrangement which the group had before and which then been fixed at the lower level of the gold prices fully expired last year and for this year in line with the group's Viability analysis, the company has entered into the number of the fixed and gold hedges, primarily using the instrument of the zero cost course allowing for significant participation in the positive movement both in the price of the gold, and also exchange rate, although given the protection on the desired level in light - in line with the Viability analysis.

I guess that's the end of the part which I must talk about and I'm handing over to Alfiya now.

Alfiya Samokhvalova

Thank you, Danila. Moving next to another very important aspect of our business which is the central to the waiver run into Petropavlovsk’s [ph] sustainability. Let's go to slide number 32. And in this part of presentation I would like to talk about our extensive work that we have already done in 2019 where we are now and what are our aspirations going forward.

Sustainability was all this very important to the way we are running our business. But 2019 became a transformational year truly for the company, not only from operational and financial point of view from the improvements we made in those areas, but from the way we started bringing sustainability thinking in every aspect of our business and in every decision making process.

Let's look at the results. Our aspirations in 2019 were to improve key aspects of health and safety, corporate social responsibility and environmental management. If we are talking about health and safety, we achieved unprecedented decrease in LTIFR, 36% and this is one of the most important parameters measuring safety or working environment for our employees.

Significant – we’re in the part of all contributors to this reduction where safety campaign to raise awareness amongst our staff and also our updates we've done two forks [ph] and underground safety policies.

We also made a very good progress on corporate social responsibility, where we set for ourselves a comprehensive program of our shareholder relationship engagement and we started building up - well improving and building upon what we already have with our relationship with all stakeholders. And we will proceed with further implementations of this program in 2020 as well.

We also were able to obtain independent limited assurance statement from independent agency in order to bring our reporting standards in line with the best international practices.

From an environmental perspective, we have made tremendous progress. We achieved 15% reduction in greenhouse gas emissions. Also we achieved a zero reduced discharge of water. I will talk about all this achievements in through the details in the following slide.

And I just wanted to probably go around this slides to emphasize that in line with our growing focus on ESG. Last year we conducted a materiality assessment to define the sustainability topics that are most important to our business, to our stakeholders. This will enable us to report on these themes in accordance with core option – with core principles of GRI standards.

Let's look at the slide number 33. Let's talk about a very important initiative which has - was developed by the company in 2019. We have joined the UN Global Compact which is a core part of our commitment to align our business with the global initiatives in the area of sustainable development.

We recognize that the number of sustainable development goals within this - the UN Global Compact are quite wide. So we try to in order to achieve the biggest impact, we tried to identify SDGs which will benefit the most, the communities, the environment, our stakeholders. And we've chosen five of such SDGs which you can see on the slide 33.

So the findings and conclusions of management were presented to their members of sustainability committee of the board and who carried out an unprecedented amount of work on this and that sustainability committee agreed with the management that this probably should be for 2019 and 2020 the areas of focus of the company. So though we do recognize the importance of 17 [ph] other SDGs we will be focusing on those five in 2020.

Let's look at slide 34. So I wanted to talk a little bit in more details here about improvements to our health and safety track record. We recognized both the personal responsibility of each employee at every site and workplace and the group's accountability for the safety measures and actions to create the safety environment. And we are striving for zero injury records.

So during 2019 we continue to implement stricter and more rigorous safety controls across the group's operations, whilst also addressing any gaps in knowledge of safety procedures. Training was conducted for relevant departments to reinforce the drive to create a safer workplace and to highlight everyone's personal responsibility in achieving these goals, as well.

As a result, in addition to a 36% decrease in lost time injury frequency rate, which I've already mentioned before, we were able to report zero fatalities in 2019 of which we are very proud of.

Talking about a little bit more general about our workforce, I would like to emphasize one aspect of which we engineer of - we are very proud of and this is our diversity of our workforce and the gender diversities which we manage to - which we managed to secure in spite of the fact the company operates in a male dominated industry. You can see that almost 25% of our staff are female.

Moreover picking up on the themes of corporate governance, about which Pavel Maslovskiy was talking a little bit earlier, I am pleased to note that now we have three female directors on the board of mining company, 40 to 50 company and I think it's pretty much an achievement. And the fact that very soon we have female leader of the board is really - does really distinguish our company, as a company which is led on the basis, on the principles of diversity and inclusion.

Let's now move to slide 35. So our success was not only limited last year to health and safety record, but also it could be seen in the environmental stewardship. Obviously, working in the industry like mining why environmental safety is one of the most important aspects of ESG for us and we were always committed to applauding the highest standards of environmental management.

Effective environmental protection is the key element of business strategy and fundamental to day to day operations, fundamental to our planning, to our decision making. Recognizing that our operations involve a number of environmental risks, we have developed environmental management systems that help identify and manage those risks and achieve resource and energy efficiency.

EMS at all our operational sites are fully certified for compliance with ISO 14001. Our environmental risk management strategies are based on continuous and rigorous monitoring, training, external assurances by the state bodies and emergency preparedness. Hence we had no moderate or serious environmental incidents and received no environmental fines in 2019, which is I think pretty impressive.

Using modern technology code by DESC [ph] that doesn't require open points or expose tanks, we were able to maintain zero water discharge. On the energy and emission front, whilst our total energy consumption did indeed decrease by slightly less than 9%, this was far less than our production volumes increase, resulting in 11% improvement in intensity.

Similarly we saw 13% [ph] improvement in our greenhouse gas emission intensity in 2019. This was aided by multiple factors, key and one of which are the reduce usage of coal and series [ph] of energy saving initiatives, like the waste heat recovery system and at the POX Hub.

Let's move to the slide 36 and we can talk about our engineer [indiscernible] amongst our peers. And though as I mentioned we had pretty impressive - we have done pretty impressively in ESG area in 2019. This achievements of last year they don't mean obviously that we will stop striving to get even better results in every ESG parameter.

We constantly monitor every industry's new development, best practices, engineering improvements and obviously we check our achievements against our peer group. And whilst we already in a number of indicators, like for example mentioned gender diversity or greenhouse gas emission, we are really leaders of the industry. There are obviously a number of parameters where we need to work more to be at the same level, as the best industry performance. So we recognized these areas and these areas will be truly our focus in 2020 and hopefully next year I will be here to report to you about those achievements of which we will do this year.

And with this let's move to the last slide. Let's talk about our vision of going forward. So you can see here are some key - just really main plans, goals and aspirations for 2020 and obviously beyond because I'm not going to stop on that and on the health and safety front, we remain committed to strive towards zero harm environment and that will be done via robust policies, ongoing group wide training programs and aim to perform in 2020. No worse in terms of LTIFR as we did this year, when as I said we achieved significant reduction.

And those measures which Pavel Maslovskiy which was talking about implemented by the company in response to pandemic situation. There are speed of this measures. Their comprehensiveness of them and which resulted so far at zero cases on our enterprises, shows you actually the efficiency of management and the way we are approaching health and safety of our employees.

On the corporate social responsibility, we plan to develop through the direct engagement between management and personnel and that will be built up on our open dialogue with local communities and we will implement the policies we've developed throughout last year and throughout this year. And we will be improving this policies and looking for others to implement which will put us in the line with - in line with top performance in the industry worldwide.

Last but by no means least. This year marks the first time we have included a measurable target for greenhouse gas emission intensity reduction. Yes, it is not huge. It's 1% from 2019 levels. But I think it is very important to bear in mind that 2020 is the first full year of POX Hub operations [ph] which in itself is fairly energy intensive operation. And even with this in mind we are managing to achieve a reduction in this keep [indiscernible] in term.

So we will be developing on our long term intensity targets in 2020 as well. And as I already mentioned, I really hope that in a year or years time we will be able to report to you about our field achievements, not only in operational and financial field, but also everything which concerns sustainability of our business.

Thank you very much. With this, I would like to pass to Patrick who will be holding Q&A session.

Patrick Pittaway

Thank you, Alfiya. Very impressive indeed. I've just received a note that people are trying to submit Q&A via the link that I mentioned before, that doesn't seem to be working. If you can see my name it's been switched to my email address pp@ petropavlovsk.net. If you could please email me your questions and I'll talk to them to the speakers.

While waiting for that I had a couple that came in during the presentation, so we might just start with those.

Question-and-Answer Session

Operator

Q - Unidentified Analyst

The first one the Pioneer flotation plants assuming commissioning goes smoothly at the end of 2020. So at the end of this year what will be the increase in total owned gold production next year versus this year?

Patrick Pittaway

Pavel, would you want to pick that one up.

Pavel Maslovskiy

Yes. On this slide and our forecast for 2020 we are showing that we are expecting roughly between - around 7%, 8% of gross [ph] for 2021 in gross of our own production. The major impact is the flotation plant.

Patrick Pittaway

Thank you, Pavel.

Alfiya Samokhvalova

I think maybe worth mentioning and this is vitally important and this is part of our strategy because those answers are really highly margin answers as opposed to third parties.

Unidentified Analyst

Thank you. The next question Malomir’s throughput of 4 million tonnes per year is exceeding nameplate capacity by 10%. Is there any further upside left at Malomir and can the same success be applied to the Pioneer flotation plant once it becomes operational? Again to you Pavel.

Pavel Maslovskiy

Indeed we’re successful 4 million while the design capacity of the plant is 3.6 [ph] is good achievement. So if anything we can do it maybe 5% [ph] we can't expect more throughput to the plant.

Unidentified Analyst

Thank you. And another question, we would like to understand how third party processing expenses are spread across or incorporated in the different divisions which could be Albyn, Malomir or Pioneer, so it's understanding whether third party processing expenses are being allocated?

Pavel Maslovskiy

Danila?

Danila Kotlyarov

Yes, I can answer that. Although the costs associated with the growth of third party concentrate allocated to Pioneer mine.

Unidentified Analyst

Thank you, Danila. A question from Tim Yate [ph] of J.S. Funds. Could you give a little bit more detail about the guidance on your working capital for this year, financial year 2020 working capital and our guidance?

Danila Kotlyarov

If I might, I can answer that one. In terms of the working - just give a second. In terms of a change in the working capital we can give a comment. We have a number of the big items over the course of last year and I think what probably are interested in is the amount of gold advances and probably also the moment in - the moment in the working capital in relation with the procurement of the Asian [ph] constant rate which we are buying internally.

In terms of the gold advances we are in accordance with the schedule with the banks. We are looking at significant decline on the gold advances at the end of the year. [Technical Difficulty] and utilized as a instrument of the optimal structuring of the process of the buying the constant rate and [indiscernible] is closely related with the schedule of the procurement of the constant rate and we cannot give exact sales outlook on that. As I mentioned in terms of the of the gold advances over the longer term, our gold advances which I mentioned before we expect that is amount to be significantly lower at the year end. I hope that answers the question.

Unidentified Analyst

Another question on Albyn and the shift from the Albyn pit to the Elginskoye pits. If we could please just have an update on how that's progressing as that transition is ongoing at the moment?

Pavel Maslovskiy

We are planning to start shipping from Elginskoye and start processing it in the fourth quarter of 2020. This target is – moves because we have some additional excessive to original estimates or on the main Albyn pit. But at the moment the road is - and the infrastructure there [indiscernible] from the plant is ready and we are doing stripping on the deposit. So we are absolutely even slightly ahead of the plan. Originally it was August, September, but now we see that it's not earlier than October we will need to switch to Elginskoye [ph]

Unidentified Analyst

Thank you, Pavel. I have a question from Ray Faison, bank analyst MacLeod's Solidale [ph] Could you please understand the effect of the gold hedges on our achieved price in the first quarter of this year, for the quarter that just passed and how that compares with the first quarter of last year and what the hedging effect was on the achieved gold price?

Danila Kotlyarov

Patrick, I can answer that. I can answer this one. In terms of the effects of the hedges over the course of the Q1 of this year as we mentioned already, or as I mentioned already earlier, all the hedges which we entered at the level of the price which is much lower against the spot [ph] they have expired at the end of this - of the last year and hence we have no - we have no any adverse effect of the hedges on the realized price over the gold over the Q1 of this year.

If talking about what was an adverse effect of the hedges on the gold price over the Q1 of the last year, I need to check the number, although in terms of the - if you look at the accounts if I recollect correctly, the overall negative effect on the realized price of the gold over the course of the last year was around $50 an ounce. About the Q1 I need to check this information.

Unidentified Analyst

We can come back on that one. But perhaps just continuing on the hedging theme, I've had a question from a private investor, just trying to understand the size of the new hedging program we have in place.

For example 3.5000 [ph] ounces a month doesn't sound like very much. Could you perhaps give a little bit more detail on the intentions for that program?

Danila Kotlyarov

Yes, it's an excellent question I believe. Yes, if we look at the price environments and the volatility of the price environment over the course of the Q1 and basically each one of this yeah, obviously we know what is going on. And what's kind of swing we noticed in terms of the price of the gold in terms of the exchange rate, interest rates and obviously we have the more - we are looking at what kind of the actions are appropriate in that regard.

And the last slide which is - which I was talking about, I basically would like to add that we are in the process of relating to [ph] policy in regard to with the viability analysis and the viability on the group which is a part of our annual accounts and also in light of the changes in the market.

If we look at the amount of hedges of the gold [indiscernible] the amount - the total volume is not legal though. We believe that this deal we entered to is in line with the strategy of the company, in light of the trends in the markets, Alfiya mentioned already we are looking at this, we are analyzing the future of the price of the gold. And we will get back with [Technical Difficulty] At this point of time, yes, the amount of hedges is not big. And it's more opportunistic.

Unidentified Analyst

Thank you, Danila. I have a question on IRC, so obviously we announced a transaction this quarter. Would it be possible to update the audience on how that deal is progressing with stock in these?

Pavel Maslovskiy

Well, we are aware through the communication with Gazprombank that they are in process of financial and legal due diligence, some questions are coming from them. So it's not confirmed, it's job in progress. So I can't estimate, it's their decision. But one thing I can confirm that they are working on it because they're chasing us with questions, us and the counterparty.

Unidentified Analyst

Thank you, Pavevl. I'm joining two questions from two different analysts here. One is what is - what was at the end of 2019 the status of our gold repays. What level were they. And where do we expect that to be over the course of 2020.

Pavel Maslovskiy

Danila?

Danila Kotlyarov

Yes, Pavel. I can answer that. The total amount of the gold - total amount of the gold advances and the details of that are in power - in our annual accounts, is roughly 180 million and out of which about 2 million was that - was really [indiscernible] which I talked about already. At this moment of time the total amount of the gold advances is low, at the level which is roughly 120 million [ph] And as I mentioned already answering another question about this, we expect a significant decline of the gold advance until the year end.

Unidentified Analyst

Thank you, Danila. I think we only have time for a couple more questions. One more from a covering analyst. Are you renegotiating the terms for the buy in of the minority stake - so that's a 25% stake that we're looking to acquire another transaction announced this year. What is the timeline here and could we please have an update please.

Pavel Maslovskiy

Thank you. We have almost a year time to exercise the option. It will expire in May 2021. So in the environment of growing share price and changing situation with the company we are looking to try to the extent it's possible to renegotiate and fix the higher price - with a higher price for the shares which were paying in another way how we're fixing this price. To remind you when we fixed for the deal which was announced and then put it into the circular and it's happened at the end of January we fixed the highest achievable price almost 19 P. But between that time and the AGM the share price went up to 26 P. So the number of our shareholders required to review this approach trying to renegotiate which the management will try to do, but at the moment when we will be released from this COVID situation it's very difficult to do by computer, by TV.

Unidentified Analyst

Thank you, Pavel. So I've only really got one more question. Do we have any plans to improve the cost of debt in 2020?

Pavel Maslovskiy

Danila?

Danila Kotlyarov

Yes, I can answer that one. As Pavel Maslovskiy already mentioned at the beginning of the improvement of leverage - decrease of leverage [ph] and improvement of the cost of the boring and maturity of the boring is the priority of the management and on the basis of the innovation or the levels where the public debt of the company is traded at the moment we believe we have to be clear looking on the possibility on the improvement over the cost of the boring. And as I mentioned already it's a priority.

I can add also that although the gold advances of the banks which we are talking about although this is not really debt, it's a different kind of instrument, although we can [Technical Difficulty] mentioned that over the course of this year we have achieved a significant improvement of the cost of this. I hope that answers.

Alfiya Samokhvalova

Maybe I can add that, the debt which we have now was attractive historically when the company was in a very different situation. There are absolutely unprecedented and impressive turnaround when the company - which company has made last year hopefully should be reflected in the agency's rating agencies assessment of the business and obviously it will depend on the market.

But having defined results like these and hopefully some ratings improvements, I said that Danila's optimism that the company's business is in a much more robust position to secure much better terms of debt.

Patrick Pittaway

Thank you, Alfiya. I have no more questions. So really just to wrap up. Thank you for the presenters. I do apologize for the technical issues. Thank you for the questions that did come in. You can always reach out to us during the day if you have further questions, But this now concludes our webcast. Thank you for joining us.

Alfiya Samokhvalova

Thank you very much.+