RU

INTEGRATED REPORT 2016

Provisions

  Note Provision for filling cavities Restruc- turing provision Resettle- ment provision Mine flooding provision Legal provision Provision for asset retirement obligations Total
Carrying amount at 1 January 2015   44,966 4,822 22,930 20,852 - - 93,570
Recognition of asset retirement obligations and changes in estimates added to property, plant and equipment 8 33,646 - - - - 35,084 68,730
Changes in estimates   - 4,675 - - - - 4,675
Accrual of provision   - - - 22,310 17,031 - 39,341
Utilisation of provision   (10,975) (2,772) (21,162) (24,655) - - (59,564)
Reversal of provision   - - - (7,546) - - (7,546)
Unwinding of the present value discount   5,528 361 - - - - 5,889
Effect of translation to presentation currency   (14,869) (1,475) (1,768) (3,138) (2,787) - (24,037)
Current liabilities   9,678 438 - 1,060 - - 11,176
Non-current liabilities   48,618 5,173 - 6,763 14,244 35,084 109,882
Carrying amount at 31 December 2015   58,296 5,611 - 7,823 14,244 35,084 121,058
                 
Changes in estimates added to property, plant and equipment 8 31,094 - - - - 16,216 47,310
Changes in estimates   - (703) - 207 140 - (356)
Accrual of provision   - - 9,792 - - - 9,792
Utilisation of provision   (11,997) (318) - (1,219) - - (13,534)
Unwinding of the present value discount   6,345 611   850 1,570 3,818 13,194
Effect of translation to presentation currency   14,444 1,086 1,030 1,562 3,052 9,172 30,346
Current liabilities   11,639 200 10,822 1,460 19,006 - 43,127
Non-current liabilities   86,543 6,087 - 7,763 - 64,290 164,683
Carrying amount at 31 December 2016   98,182 6,287 10,822 9,223 19,006 64,290 207,810

Provision for filling cavities

A provision for filling cavities is recorded in respect of the Group’s obligation to replace the earth extracted from its mines.

A technical program for mining operations was agreed with the local State mine supervisory body in 2012 - 2016. Based on this framework program, the Group prepares annual mining plans and agrees them with the local State mine supervisory body.

The balance of the provision at the reporting date equals the total of expected future discounted cash outflows associated with replacing the earth extracted from the mine in accordance with the plan of filling cavities work agreed with the State mine supervisory body. The relevant cash flows are discounted at a rate reflecting the time value of money.

Restructuring provision

In 2011 the Board of Directors decided to abandon the ore-treatment plant and carnallite plant at Berezniki 1. The decision to abandon the plants was driven by the lack of the raw materials base due to the flooding of Mine 1. The Company ceased production at the plants at the end of 2011 and commenced dismantling them. The provision is for costs of dismantling of the plants which is expected to be completed in 2019.

Resettlement provision

In 2013 the Government of the Perm Region and the Administration of the town of Berezniki signed an agreement outlining the financing plan for the period between 2013 and 2015 for the relocation of people living in inadequate housing facilities in Berezniki, including the construction of new infrastructure facilities and demolition of the vacated buildings. The agreement was effected pursuant to the State programme on “Securing quality housing and facilities for the citizens of the Perm Region” and was in line with the decisions adopted by the Governmental Commission on 24 May 2013. As part of its commitment to corporate social responsibility, the Group had undertaken to provide US$ 34,851 (RUB 2,540 mln at the exchange rate on 31 December 2015) to the Perm Region and the town of Berezniki by instalments in 2013-2015. In 2013-2015 the liability was paid out in full.

In 2016, the Government of the Perm region requested additional funding from the Company to complete the resettlement programme. At 31 December 2016, it remained the Company’s intention to provide additional future financing of the resettlement programme of US$ 10,822. As at the date of approval of the consolidated financial statement the Company has not signed any agreements with the Government of the Perm region. 

Mine flooding provision

During the twelve months ended 31 December 2016, the Group re-estimated costs required for liquidation of the accident consequences. The updated provision for future expenses as of 31 December 2016 is US$ 9,223.

Asset retirement obligations

During 2015, the Group completed its assessment of future costs to fulfil its decommissioning obligations for mines located in Berezniki and Solikamsk. Total estimated provision for asset retirement obligations amounts to US$ 64,290 as at 31 December 2016 (2015: US$ 35,084).

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