Acquisition of Maminskoye gold deposit (Replacemen

RNS Number : 2662Y

Polymetal International PLC

20 February 2013

 



Release time	IMMEDIATE
Date	20 February 2013

Polymetal International plc

Polymetal agrees to acquire Maminskoye gold deposit

Polymetal International plc (LSE: POLY) (together with its subsidiaries, including JSC "Polymetal" - "Polymetal", the "Company", or the "Group") is pleased to announce that its wholly owned subsidiary JSC Polymetal has entered into a binding memorandum of understanding with Vitalex Investments Ltd and Arrowline Investments Ltd to acquire a 100% interest in ZAO "Maminskaya Gornorudnaya kompania"("MGK"), which holds an exploration and mining licence for the Maminskoye gold mining field ("Maminskoye") valid until 2023 (the "Transaction"). The agreed enterprise value of MGK is US$95.5 million.

The total consideration payable for the shares in MGK at completion of the Transaction is equal to approximately US$77.2 million, being the agreed enterprise value reduced by the amount of debt of MGK outstanding at completion (estimated to be US$18.3 million). The consideration will consist of US$3.9 million payable in cash, with the balance of US$73.3 million payable in Polymetal's shares. The exact number of Polymetal shares to be issued to the sellers will be based on the weighted average price of a Polymetal share on the London Stock Exchange in US dollars during the 30 calendar days prior to completion. Completion of the Transaction is conditional on prior approval by the Federal Antimonopoly Service of the Russian Federation, completion by MGK of the acquisition of the site as described below, and necessary MGK lenders' consents. The long-stop date for satisfaction of these conditions is 30 April 2013.

Maminskoye is located in the Sverdlovsk region of Russia, approximately 70 km from the regional capital Yekaterinburg and 30 km from the city of Kamensk-Uralsk (population 130,000). Polymetal's Voro operating mine is approximately 450 km to the north. The 17.8 sq km licence area is accessible by a paved highway and is adjacent to a 10 kV power line. At completion, MGK will own a 1205 ha (2978 acre) site which covers the potential mine, processing facilities, and waste rock stockpile.

Gold was first discovered in the area in 1933, but no systematic exploration took place until 1986. Between 1999 and 2012, 447 diamond drill holes covering a total length of 46 km were made on the property. Free-milling quartz and quartz-carbonate mineralization occurs as a series of stacked lodes with varying dip and an average thickness of 6-10m. Ore bodies outcrop on the surface. All potential future mining will be by open pit.

The probable ore reserves at Maminskoye have been estimated by Snowden in accordance with JORC guidelines at 12.2 Mt of ore at 1.9 g/t gold representing 0.7 Moz of contained gold. Mineral resources (additional to reserves) were estimated at 5.1 Mt at 1.9 g/t representing 0.3 Moz of contained gold. These estimates were prepared for the previous owner and are based on construction of a CIP mill on site. Ore bodies have been drilled out to a depth of 200-250m and remain open at depth and along strike in one direction.

Polymetal believes that heap leaching is the preferable option to treat mineralized material at Maminskoye, as it is expected to be significantly less capital intensive and likely to result in lower unit operating costs. Lower costs, in turn, may permit expansion of both resources and reserves. Extensive test work is ongoing to determine the optimum parameters (crushing size and stacking height) for heap leaching at the property. Scoping study-level estimates indicate the potential for a 2-3 Mtpa operation yielding 80-120 Koz of gold per year.

Polymetal expects the following timeframe for the development of Maminskoye:

•     Complete feasibility study on the heap leaching route and update reserve estimate accordingly - Q1 2014

•     Start construction - Q3 2014

•     Produce first gold - Q2 2016

•     Reach full capacity - Q2 2017

Polymetal believes the acquisition of Maminskoye is attractive for the following reasons:

•     Sizeable mineral endowment at decent grade and with substantial exploration upside

•     Favorable location and excellent infrastructure in a familiar region, with easily available qualified labour

•     Easy metallurgy with flexibility in terms of choosing the treatment route

•     Simple open-pit mining conditions

 "Maminskoye is the type of project Polymetal is keen on - capital-light, low-risk, and with significant optionality", said Vitaly Nesis, CEO of Polymetal. "The current size of the resource base is not very large, but we are optimistic about its exploration potential and satisfied with the first addition to Polymetal's portfolio of third generation assets".

CJSC "Sberbank CIB" is acting as a financial advisor to the Company in connection with the Transaction.

Maminskoye Mineral Resources and Ore Reserves estimates, as at December 2012

Ore Reserves 1,2	Tonnage	Au grade	Au content
	Mt	g/t	Koz
Proved	-	-	-
Probable	12.2	1.9	730
Total	12.2	1.9	730

      ¹ COG= 0.8 g/t

² Au price 1,300 $/oz

Mineral Resources 1,2,3	Tonnage	Au grade	Au content
	Mt	g/t	Koz
Indicated	3.9	1.8	220
Inferred	1.2	2.3	90
Total	5.1	1.9	310

¹ Mineral Resources are reported in additional to Ore Reserves

² Resources reported within an optimized pit shell at COG = 0.43 g/t Au. Resources are undiluted.

As at 30 September 2012 the book value of MGK's gross assets was 398 million Roubles (US$12.9 million) and the reported loss before tax for the 9 months ending 30 September 2012 was 177,000 Roubles (US$5,696).

Enquiries

Media		Investor Relations
College Hill Leonid Fink Tony Friend	[phone]	Polymetal Maxim Nazimok Evgenia Onuschenko Elena Revenko	[e-mail] [phone] (Russia) [phone] (UK)
Joint Corporate Brokers
Morgan Stanley Bill Hutchings Sam McLennan	[phone]	Canaccord Genuity Andrei Kroupnik Roger Lambert	[phone]

FORWARD-LOOKING STATEMENTS

THIS RELEASE MAY INCLUDE STATEMENTS THAT ARE, OR MAY BE DEEMED TO BE, "FORWARD-LOOKING STATEMENTS".  THESE FORWARD-LOOKING STATEMENTS SPEAK ONLY AS AT THE DATE OF THIS RELEASE. THESE FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY, INCLUDING THE WORDS "TARGETS", "BELIEVES", "EXPECTS", "AIMS", "INTENDS", "WILL", "MAY", "ANTICIPATES", "WOULD", "COULD" OR "SHOULD" OR SIMILAR EXPRESSIONS OR, IN EACH CASE THEIR NEGATIVE OR OTHER VARIATIONS OR BY DISCUSSION OF STRATEGIES, PLANS, OBJECTIVES, GOALS, FUTURE EVENTS OR INTENTIONS.  THESE FORWARD-LOOKING STATEMENTS ALL INCLUDE MATTERS THAT ARE NOT HISTORICAL FACTS.  BY THEIR NATURE, SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER IMPORTANT FACTORS BEYOND THE COMPANY'S CONTROL THAT COULD CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS.  SUCH FORWARD-LOOKING STATEMENTS ARE BASED ON NUMEROUS ASSUMPTIONS REGARDING THE COMPANY'S PRESENT AND FUTURE BUSINESS STRATEGIES AND THE ENVIRONMENT IN WHICH THE COMPANY WILL OPERATE IN THE FUTURE. FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE.  THERE ARE MANY FACTORS THAT COULD CAUSE THE COMPANY'S ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN SUCH FORWARD-LOOKING STATEMENTS. THE COMPANY EXPRESSLY DISCLAIMS ANY OBLIGATION OR UNDERTAKING TO DISSEMINATE ANY UPDATES OR REVISIONS TO ANY FORWARD-LOOKING STATEMENTS CONTAINED HEREIN TO REFLECT ANY CHANGE IN THE COMPANY'S EXPECTATIONS WITH REGARD THERETO OR ANY CHANGE IN EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH ANY SUCH STATEMENTS ARE BASED

 

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