Acquisition of the Kyzyl gold project

RNS Number : 7848H

Polymetal International PLC

22 May 2014

 

Release time	IMMEDIATE
Date	22 May 2014

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF THAT JURISDICTION. THIS ANNOUNCEMENT DOES NOT CONSTITUTE OR FORM A PART OF ANY OFFER TO SELL OR SOLICITATION OF AN OFFER TO PURCHASE OR SUBSCRIBE FOR SECURITIES IN THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN OR ANY JURISDICTION IN WHICH IT WOULD BE UNLAWFUL TO DO SO.

 

Polymetal International plc

Acquisition of the Kyzyl gold project in Kazakhstan for an initial consideration of US$618.5 million

Polymetal International plc (LSE, MOEX: POLY; ADR: AUCOY) ("Polymetal", the "Company") is pleased to announce that it has entered into binding agreements with Sumeru Gold B.V. and Sumeru LLP (together referred to as "Sumeru") for the acquisition of Altynalmas Gold Ltd ("AAG"), the holding company for the Kyzyl gold project (the "Acquisition").

The Kyzyl gold project (the "Kyzyl Project") comprises the Bakyrchik and Bolshevik gold deposits and is located in north-eastern Kazakhstan.

HIGHLIGHTS

The Board of Directors of Polymetal believes that the Kyzyl Project represents an excellent opportunity to expand the Company's existing reserve base with the addition of high grade gold deposits in Kazakhstan characterised with a long expected mine life and significant exploration upside. In particular:

·     Expansion of existing reserves and mine life: The Acquisition will increase Polymetal's gold equivalent reserves by approximately 50% with a single large high-grade property containing 6.7 Moz gold at 7.5 g/t (JORC), and a life of mine of 20 years based on reserves at Bakyrchik;

·     Exploration upside: The Kyzyl Project offers further substantial potential of additions to existing reserves, through resource-to-reserve conversion at Bakyrchik from additional Inferred Resources of 2.9 Moz gold at 6.6 g/t and mineralisation not closed at depth, and the exploration of the mineralised potential at adjacent properties which are covered by the Bakyrchik and Bolshevik exploration licences;

·     Access to infrastructure: The Bakyrchik and Bolshevik gold deposits are located within a traditional mining region with good infrastructure including easy access to power and rail;

·     Potential optimisation of mining methods: A substantial part of the Kyzyl Project is potentially amenable to conversion from underground mining to conventional open-pit mining;

·      Processing technology: The Acquisition leverages Polymetal's core competencies in pressure oxidation processing and refractory gold concentrate trading; and

·      Core jurisdiction: The Kyzyl Project will strengthen Polymetal's position in Kazakhstan, a country in which it has successfully operated since 2009.

OVERVIEW OF THE TERMS OF THE ACQUISITION

Polymetal has conditionally agreed to purchase the entire issued share capital of AAG from Sumeru, together with Shareholder Debt (as defined below) owed by AAG to Sumeru. The consideration for the acquisition of AAG and related Shareholder Debt comprises:

·      an initial consideration of

(i)         US$318.5 million in cash; and

(ii)         the issue of new Polymetal shares with an aggregate value of US$300 million, as determined in the binding agreements (the "Consideration Shares");

·      deferred additional cash consideration up to an agreed cap up to a maximum of US$500 million, contingent on certain conditions being met and dependent on the relative dynamics of the gold price and the price of Polymetal's shares over up to the next seven (7) years. The additional consideration is intended to compensate Sumeru for any negative difference between the market performance of the Consideration Shares and the gold price in the seven-year period following completion of the acquisition. Further details on the terms of the deferred consideration are set out below.

Sumeru has agreed not to dispose of any interest in any of the Consideration Shares during the one-year period commencing on the Completion Date (the "Lock-up Period") subject to customary terms and exclusions.

Sumeru is entitled to a put option giving it a right to require Polymetal to acquire the Consideration Shares by notice to Polymetal during the one month period immediately following the end of the Lock-up Period (subject to adjustment in certain circumstances) at a price per Consideration Share equal to the Initial Share Price (as defined below).

No representative from Sumeru will be appointed to Polymetal's board of directors as a result of the acquisition of the Consideration Shares or under the terms of the Agreements.

Polymetal expects to fund the cash element of the initial consideration from its available undrawn facilities currently totalling USD 1.3 billion. Polymetal expects to finance the projected capital expenditure with project finance debt and cash flows generated from its existing operations.

The acquisition of AAG is conditional upon receipt of the required regulatory approvals and fulfilment of other conditions. The acquisition of AAG constitutes a Class 1 transaction under the UK Listing Rules and is therefore also conditional upon the approval of Polymetal shareholders. A circular containing further details of the Acquisition together with a notice convening a General Meeting seeking such approval will be sent to Polymetal shareholders in due course.

Assuming all conditions are satisfied or waived, the Acquisition is expected to complete in Q4 2014.

Polymetal envisages the following development timeline for the Kyzyl Project:

·      Revised feasibility study with updated reserve estimate: Q4 2015;

·      Start of construction: Q1 2016; and

·      First production: 2018, to be confirmed upon completion of the feasibility study.

Further details on the terms of the Acquisition are set out below.

Commenting on the Acquisition, Vitaly Nesis, CEO of Polymetal said:

"The Kyzyl Project fully meets our definition of a suitable acquisition opportunity: a large, high-grade asset with a clear path to production and cash flow generation leveraging Polymetal's core strengths in selective mining and refractory ore processing. We believe it is an excellent chance to deploy our skills in a long-term project that can generate substantial value for our shareholders"

CONFERENCE CALL AND WEBCAST

Polymetal will hold a conference call to discuss the Acquisition on Thursday, 22 May 2014 at 9:00 am London time (12:00 noon Moscow time).

To participate in the call, please dial:

8 10 8002 4902044 (toll-free from Russia), or

0808 109 0700 (toll-free from the UK), or

[phone] (toll-free from the US), or

[phone] (from outside the UK, the US and Russia), or

follow the link: http://webcast.instinctif.tv/p/795-1028-14368/en 

Please be prepared to introduce yourself to the moderator or register.

A recording of the call will be available immediately after the call at [phone] (from within the UK), [phone] (from within the US) and 8 10 8002 4832044 (from within Russia), access code 2961130, from 11:00 am London time Thursday, 22 May until 11:00 am London time Thursday, 29 May 2014.

This summary should be read in conjunction with the full text of this announcement.

Enquiries

Media		Investor Relations
Instinctif Partners 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]	RBC Europe Limited Stephen Foss Jonny Hardy	[phone]

NOTES

This announcement is not for distribution, directly or indirectly, in or into and does not contain or constitute an offer of, or the solicitation of an offer to buy or subscribe for, securities to any person in Australia, Canada, or Japan. The securities referred to herein may not be offered, or sold in the United States absent registration under the US Securities Act of 1933, as amended, (the "Securities Act") or another exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Subject to certain exceptions, the securities referred to herein may not be offered or sold in Australia, Canada or Japan or to, or for the account or benefit of, any national, resident or citizen of Australia, Canada or Japan. The offer and sale of the securities referred to herein has not been and will not be registered under the Securities Act or under the applicable securities laws of Australia, Canada or Japan.

This announcement does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase or subscribe for any shares in Polymetal, including its ordinary shares, or any other securities nor shall it (or any part of it) or the fact of its distribution, form the basis of, or be relied on in connection with, any contract therefore. The distribution of this announcement and other information in connection with the offer in certain jurisdictions may be restricted by law and persons into whose possession any document or other information referred to herein comes should inform themselves about, and observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

Morgan Stanley & Co International plc, which is authorised by the Prudential Regulation Authority and regulated in the United Kingdom by the Prudential Regulation Authority and the Financial Conduct Authority, is acting as sole financial advisor and corporate broker to Polymetal in connection with the Acquisition and will not be responsible to anyone other than Polymetal for providing the protections afforded to clients of Morgan Stanley or for providing advice in relation to the Acquisition, the contents of this announcement or any other matter referred to herein.

Save for the responsibilities and liabilities, if any, of Morgan Stanley under Financial Services and Markets Act 2000 or the regulatory regime established thereunder, Morgan Stanley assumes no responsibility whatsoever and makes no representations or warranties, express or implied, in relation to the contents of this announcement, including its accuracy, completeness or verification or for any other statement made or purported to be made by Polymetal or on Polymetal's behalf or by Morgan Stanley or on Morgan Stanley's behalf and nothing contained in this announcement is, or shall be relied on as a promise or representation in this respect, whether as to the past or the future, in connection with Polymetal or the Acquisition. Morgan Stanley accordingly disclaims to the fullest extent permitted by law all and any responsibility and liability whether arising in tort, contract or otherwise which it might otherwise be found to have in respect of this announcement or any such statement.

Closed Joint-Stock Company "Sberbank CIB" acted as a strategic advisor to Polymetal on certain matters related to the transaction.

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.

INTRODUCTION

Polymetal is pleased to announce that it has entered into binding agreements with Sumeru Gold B.V. and Sumeru LLP for the acquisition of the entire issued share capital of Altynalmas Gold Ltd, the holding company for the Kyzyl Project, and related Shareholder Debt owed to Sumeru. The Kyzyl Project comprises the Bakyrchik and Bolshevik gold deposits and is located in north-eastern Kazakhstan.

BACKGROUND TO AND REASONS FOR THE ACQUISITION

The Board believes that the Kyzyl Project represents an excellent opportunity to expand the Company's existing reserves with the addition of high grade gold deposits in Kazakhstan with a long expected mine life and significant exploration upside. The Board believes there is the opportunity to create significant added value for Polymetal shareholders from the Kyzyl Project.

INFORMATION ON THE KYZYL PROJECT

AAG is incorporated in British Columbia, Canada and indirectly owns the Kyzyl Project, comprising the Bakyrchik and Bolshevik gold deposits.

Location

The Kyzyl Project is located in north-eastern Kazakhstan, 750 km east of the capital city of Astana, and 75 km west of the mining and metallurgical industry centre of Oskemen (formerly known as Ust-Kamenogorsk, population of approximately 300,000). The Kyzyl Project site is adjacent to the village of Auezov (population of approximately 3,000), 120 km from the Kazakhstan-Russia border and 330 km from the Kazakhstan-China border. A railway station and railhead are operational at Chalobai, six kilometres from the Kyzyl Project site on the new railway line connecting Oskemen to Shar (in eastern Kazakhstan). This line provides rail connections to Russia, China, and Europe. The Kazakhstan-China railway crossing at Alashankou is 510 km away.

The Bakyrchik mining licence covers an area of 5.6 km² and is valid until October 2020, which can be extended until the exhaustion of the reserves in the mining licence area. There is a further exploration licence covering an area of 47.5 km², which is valid until April 2026. AAG has made an application to convert two areas covered by this exploration licence into mining areas. The Bolshevik mining licence covers an area of 4.31 km² (which adjoins the Bakyrchik exploration licence area) and is valid until May 2016, but which may be prolonged by approval of the relevant authorities in Kazakhstan.

History

The Kyzyl Shear was discovered in the early 1950s by surface trenching. Surface drilling began in 1955. Open pit production at Bakyrchik commenced in 1956 at approximately 19,000 tpa (grading 9.4 g/t Au) and increased to 165,000 tpa (grading 8.5 g/t Au) by 1969. By the time open pit production ceased in 1994, approximately 2.1 Mt of ore grading 7.6 g/t Au had been produced. Underground mining at Bakyrchik commenced in 1963 with production ranging from 20,000 tpa to 95,000 tpa. At the suspension of underground mining in 1997, approximately 1.7 Mt grading 7.4 g/t Au had been produced. Ore was mostly sold to smelters as gold-bearing flux.

In 1992, an international joint venture was formed to operate Bakyrchik. A pilot-scale processing plant with a capacity of 150,000 tpa was constructed in 1994, incorporating conventional flotation, nitric-acid sulfide oxidation (Redox) and CIP. Operating results overall were negative and this option was abandoned in 1996. Since 1996, extensive metallurgical testwork and multiple scoping studies were undertaken to determine a potentially viable development approach to Bakyrchik. A number of options were investigated, including combinations of open pit and underground mining at various production rates, and rotary kiln or fluidised-bed roasting processes. A 100,000 ktpa single-stage roaster using a rotary kiln operated at Bakyrchik in 2009 and 2010. Gold recoveries between 30% and 60% were achieved at less than the designed throughput rate.

Open pit production at Bolshevik commenced in 1985 and ceased in 2004. Approximately 1.1 Mt of ore grading 5 g/t Au were produced. Ore was mostly sold to smelters as gold-bearing flux. A 100 ktpa pilot plant involving flotation followed by bioleaching and CIL operated in 2003-2004, but did not achieve positive economic results.

No meaningful production activity has taken place at the Kyzyl Project after 2010.

Geology

The Kyzyl gold deposits are a result of intrusions, shearing, and hydrothermal activity. Compressional forces along regional structures resulted in a deformation zone where the Kyzyl Shear Zone ("KSZ") was formed. Gold mineralisation in the Kyzyl Project area is predominantly hosted in the KSZ.

The East-West striking KSZ is 11.5 km long, dips 30° to 40° north and attains widths of 10 m to 240 m. From drilling it has been identified by shear foliation, brecciation, alteration, and sulphide mineralisation. The KSZ has been traced to depths of 1.0 km to 1.5 km in the west and 3.0 km to 3.5 km in the east.

Potentially economic mineralisation is represented by fine-grained gold associated with arsenopyrite and pyrite. Disseminated gold-sulphide mineralization is irregular in shape and thickness and occurs predominantly in foliated mudstone, siltstone, and sandstone with quartz veining.

Reserves and Resources

The Bakyrchik drill hole database contains 3,855 records consisting of 2,713 diamond drill holes and 1,142 chip-sampled crosscuts represented as drill holes, totaling 822,477 m.

A feasibility study prepared by Roscoe Postle Associates in October 2013 based on drill hole data available as of 31 July 2013 estimated mineral resources for Bakyrchik in accordance with the JORC Code of approximately 10.5 Moz of gold. The mineral resources summary table is presented below:

Mineral Resource Summary (Mineral Resources are inclusive of Mineral Reserves) ⁽⁾

	Tonnes (Mt)	Au Grade (g/t)	Au Metal (Moz)
Indicated	26.5	8.8	7.5
Inferred	13.8	6.6	2.9
Total	40.3	8.1	10.5

Roscoe Postle Associates also estimated mineral reserves for Bakyrchik based on the mineral resources, as of 31 July 2013. The estimate is based on a 1.5 Mtpa underground mine with ore processed by flotation followed by BIOX^®-Carbon-in-Leach ("CIL"). The mineral reserves summary table is presented below:

Mineral Reserves Summary ⁽¹⁾

	Tonnes (Mt)	Au Grade (g/t)	Au Metal (Moz)
Probable	27.6	7.5	6.7
Total	27.6	7.5	6.7

At Bolshevik, sulphide resources under GKZ statutory rules (С2 category) are estimated at 5.3 Mt grading 4.6 g/t containing 0.8 Moz of gold.

Financial Information

For the year ended 31 December 2013, AAG did not produce any gold and accordingly had nil revenue, resulting in a net loss of US$23.7 million. As at 31 December 2013, AAG had gross assets of US$100.6 million.

Mining

Polymetal believes that, given the flat dip and high grade of the deposit, Bakyrchik may initially be amenable to open-pit mining. Challenging underground mining conditions may make the open-pit mining option more attractive from the point of view of risk mitigation and capital expenditure reduction, despite the expected high stripping ratio. Polymetal plans to pursue geotechnical and other studies to define the optimal mining method with the goal to make this choice by the time the revised feasibility study is ready in Q4 2015.

Processing

The most recent feasibility study prepared by Roscoe Postle Associates is based on a flotation-BIOX^®-CIL process as the main production method.

Polymetal believes Pressure Oxidation may be the most suitable processing technology for the Kyzyl Project, as it should enable a higher and a more sustainable gold recovery ratio. The Company has successfully deployed this technology at its Amursk pressure oxidation ("POX") facility and believes it may bring certain material metallurgical, economic and environmental benefits for the Kyzyl Project. Polymetal intends to assess and compare various processing options including whole-ore POX, flotation followed by POX and sale of flotation concentrate to third-party off-takers with the goal to make the final choice by the time the revised feasibility study is ready in Q4 2015.

Development plan

Polymetal envisages the following development timeline for the Kyzyl Project:

·      Revised feasibility study with updated reserve estimate: Q4 2015;

·      Start of construction: Q1 2016; and

·      First production: 2018, to be confirmed upon completion of the feasibility study.

SUMMARY OF THE TERMS OF THE ACQUISITION

Polymetal, together with PMTL Mining Limited and PMTL Netherlands B.V. (two newly incorporated, wholly owned subsidiaries of Polymetal) entered into agreements with Sumeru Gold B.V. and Sumeru LLP on 21 May 2014 to acquire one hundred percent (100%) of the common shares of AAG ("AAG Shares") and the debt owed by AAG to Sumeru or its affiliates (the "Shareholder Debt") (the "Agreements").

The Agreements are conditional upon certain matters including:

(i)         obtaining a waiver from the Republic of Kazakhstan of its pre-emptive right in respect of the sale of AAG Shares by Sumeru Gold B.V.;

(ii)         the receipt of a written permission from the Ministry of Industry and New Technologies (MINT) to transfer the AAG Shares to be sold by Sumeru Gold B.V. to PMTL Mining Limited;

(iii)        the receipt of a written consent for the acquisition of AAG by PMTL Mining Limited from the Agency of the Republic of Kazakhstan for Competition Protection (Antimonopoly Agency);

(iv)        the approval of the transactions being the subject of the Agreements by Polymetal shareholders;

(v)         Admission of the Consideration Shares to the Official List and to trading on the London Stock Exchange; and

(vi)        certain other tax related and customary conditions.

Polymetal proposes to acquire fifty per cent (50%) of the AAG shares via the Kazakhstan Stock Exchange and the remaining fifty per cent (50%) of the AAG Shares will be sold by Sumeru Gold B.V. to PMTL Mining Limited by way of private sale and purchase agreement. PMTL Mining Limited has undertaken to acquire, or to procure the redemption and cancellation of, any of the AAG Shares proposed to be acquired via the Kazakhstan Stock Exchange and not so acquired.

The initial consideration (the "Initial Consideration") for the acquisition of 100% of the shares in AAG and the assumption of the Shareholder Debt comprises:

1.   US$318.5 million payable in cash; and

2.   the issue of new Polymetal shares with an aggregate value of US$300 million, as determined in the Agreements (the "Consideration Shares").

The number of Consideration Shares will be determined by dividing US$300 million by the unweighted mean average closing price of Polymetal ordinary shares on the main market of the London Stock Exchange in the twelve calendar months ending three trading days before the completion of the acquisition of the AAG Shares (the "Initial Share Price"). The number of Consideration Shares is subject to a maximum of 9.99% of the number of Polymetal ordinary shares in issue during the period of one year prior to completion. If the number of Consideration Shares which would otherwise have been issued exceeds this limit, the excess Consideration Shares will not be issued and Sumeru Gold B.V. will be paid a cash amount equal to the Initial Share Price multiplied by the number of excess Polymetal ordinary shares

The consideration to be paid by PMTL Mining Limited also includes contingent deferred cash payments (the "Additional Consideration") payable to Sumeru Gold B.V. The amount of the Additional Consideration is calculated as at each of the first five (5) (or in certain circumstances seven (7)) anniversaries of the Completion Date (each an "Adjustment Date" with the year ending on each Adjustment Date referred to as an "Adjustment Year").

Sumeru has agreed not to dispose of any interest in any of the Consideration Shares during the Lock-up Period subject to customary terms and exclusions.

Sumeru is entitled to a put option giving it a right to require Polymetal to acquire the Consideration Shares by notice to Polymetal during the one month period immediately following the end of the Lock-up Period (subject to adjustment in certain circumstances) at a price per Consideration Share equal to the Initial Share Price.

The Additional Consideration is intended to compensate the Seller for any negative difference between the market performance of the Consideration Shares and the gold price in the five-year (or, in certain circumstances, seven-year) period following completion of the acquisition of the AAG Shares by PMTL Mining Limited (the "Completion Date"), subject to an agreed cap. The Additional Consideration is not payable in any event until certain further conditions have been satisfied.

The adjustment in respect of the average annual gold price (the "Gold Performance Adjustment") is calculated by reference to:

a)   US$500,000 multiplied by the amount by which the average annual gold price exceeds the threshold gold price of $1,250/troy oz at each of the first five Adjustment Dates; and

b)   US$700,000 multiplied by the amount by which the average annual gold price exceeds the threshold gold price of $1,250/troy oz on the sixth and seventh Adjustment Dates.

The adjustment in respect of the performance of the Consideration Shares (the "Share Performance Adjustment") is calculated by reference to the post-completion increase in the value of the Consideration Shares (calculated using the difference between Polymetal's average share price during the year preceding the given Adjustment Date and Polymetal's Initial Share Price).

The Additional Consideration payable in respect of any Adjustment Year is the difference between the Gold Performance Adjustment and the Share Performance Adjustment, net of the cumulative additional cash payments made after previous Adjustment Dates. The Additional Consideration is payable in cash within 30 business days after each of the Adjustment Dates. No further cash payments are made if the total cash paid due to the Additional Consideration reaches US$450 million cap at any of the first five Adjustment Dates or US$500 million cap at the sixth or seventh Adjustment Dates.

The Additional Consideration calculation is subject to certain adjustments including adjustments for any split or consolidation of Polymetal ordinary shares and any delisting of Polymetal ordinary shares. The Additional Consideration is payable even if Sumeru has disposed of the Consideration Shares (whether pursuant to the put option or otherwise).

By way of illustration:

·      assuming all period to period prices move on a straight line basis, if the gold price were to increase in equal annual increments to US$1,500/oz (representing a 2.6% CAGR to benchmark gold price of US$1,250/oz) by the end of the seventh year, provided Polymetal's share price at such time was equal to or greater than US$14.88/share (6.9% CAGR from Polymetal's closing share price of US$9.30/share on 20 May 2014 taken as the Initial Share Price for the purposes of this illustration), no Additional Consideration would be payable.

·      based on the same illustrative gold price assumption above, the maximum Additional Consideration payable over the seven year period if the Polymetal share price does not increase would be US$175 million.

·      if the gold price were to remain at its current level of US$1291.5/oz at the end of the seventh year, and Polymetal's share price at such time was equal to US$9.30/share (Polymetal's closing share price of US$9.30/share on 20 May 2014 taken as the Initial Share Price for the purposes of this illustration), total Additional Consideration of US$29 million would be payable during the seven year period.

Each of Sumeru Gold B.V. and Sumeru LLP has provided certain warranties and indemnities concerning itself and, in the case of Sumeru Gold B.V., AAG and its subsidiaries (subject to customary limitations on liability) and Sumeru Gold B.V. has given undertakings in relation to the operation of the business of AAG and its subsidiaries during the period between the date of the Agreements and the Completion Date. 

No representative from Sumeru will be appointed to Polymetal's board of directors as a result of the acquisition of the Consideration Shares or under the terms of the Agreements. 

FINANCIAL EFFECTS OF THE ACQUISITION

The Acquisition will increase Polymetal's gold equivalent reserves by approximately 50% with a single large high-grade property containing 6.7 Moz gold at 7.5 g/t (JORC).

As a revised feasibility study with an updated reserve estimate for the Kyzyl Project is only expected to be ready by Q4 2015, the Board expects the Acquisition will not have any material impact on the Group's earnings and capital expenditure in 2014.

EXPECTED TRANSACTION FINANCING

Polymetal expects to fund the cash element of the initial consideration from its available undrawn facilities currently totalling USD 1.3 billion. Polymetal expects that it will finance the projected capital expenditure with project finance debt and cash flows generated from its existing operations.

 

END

 

 

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