Ore reserve estimate for Kutyn gold project

RNS Number : 5213I

Polymetal International PLC

26 March 2015

 



Release time	IMMEDIATE
Date	26 March 2015

Polymetal International plc

Ore reserve estimate for Kutyn gold project

Polymetal International plc (LSE, MOEX: POLY, ADR: AUCOY) (together with its subsidiaries - "Polymetal", the "Company", or the "Group") is pleased to announce the successful completion of an audit of Ore Reserves and Mineral Resources completed by Snowden Mining Industry Consultants ("Snowden") for the Kutyn open pit mining project and an audit of Mineral Resources completed by CSA Global Pty Ltd ("CSA Global") for the Kutyn underground mining project.

HIGHLIGHTS

·      Snowden has confirmed total open-pit Ore Reserves reported in accordance with the 2012 JORC Code of 3.6 Mt at 3.3 g/t Au for 0.4 Moz of contained gold. Mineral Resources (additional to Ore Reserves) are estimated at 2.3 Mt at 3.1 g/t Au for 0.2 Moz of contained gold.

·      The pre-feasibility study audited by Snowden entails a 700 Ktpa open pit all year round heap leach operation with an initial mine life of 5 years. Annual average production is estimated to be 50 Koz of gold with average all-in sustaining costs of US$ 750/oz. Primary (non-oxide) mineralisation is not included in the current study and therefore not included in the Ore Reserve.

·      Pre-production capital expenditure is estimated at US$ 52 million.

·      A project IRR of 30% was estimated at a gold price of US$ 1,200/oz and a RUB/USD exchange rate of 50.

·      In addition to that, CSA Global has reported a Mineral Resource for the Kutyn underground mining project of 2.6 Mt at 5.0 g/t Au for 0.4 Moz of contained gold.

·      Polymetal is considering strategic options for the project, including either a sale or establishing a joint venture with an exploration company.

"We are pleased with the results of exploration work at Kutyn. This capital-light heap-leaching project has excellent potential to generate cash flows in the medium-term; it also offers upside from conversion of the underground resources to ore reserves and a further exploration upside. However, we are now focused on development of the Kyzyl project which is our key priority project and we will, therefore, consider sale or partnership to advance the development of the asset," said Vitaly Nesis, Group CEO of Polymetal.

ASSET OVERVIEW AND HISTORY

Kutyn deposit is located in the Khabarovsk Territory, Far East Russia, 113 km north-east of the Albazino mine operated by Polymetal and 10 km from the Sea of Okhotsk. The Kutyn site can be accessed using air transport as well as a winter road and by sea through the deep-water of the Gulf of Ulban from July through October. The project area is unpopulated and covered with taiga forest.

There has been active gold placer mining in the licence area since the 1970s, with hard-rock gold mineralisation discovered in 1979. Limited exploration was carried out from 1978 through 1980 and from 2003 through 2008 and consisted mostly of trenching and surface diamond core drilling.

Polymetal acquired the deposit in 2011. During the extensive mining campaign from 2012 through 2014, the Company completed a total of 31.793 m drilling and 245 thousand m³ of trenching with the focus on near-surface heap leachable mineralisation including the extensions of known ore bodies.

In September 2014, following the acquisition of the Kyzyl project, Polymetal announced the decision to postpone development of the Kutyn project and suspended further exploration activities. The deposit area remains underexplored with only two thirds of the licence area covered and a limited number of anomalies tested to date.

GEOLOGY AND MINING

Kutyn deposit is located in the north-western margin of the Ulbanskaya geosyncline zone and refers to the Kutyn gold-bearing node. The area comprises Lower Jurassic terrigenous deposits of the Kutynskaya and Algatinskaya strata, the Lower Cretaceous andesitic volcanics, and subvolcanic and plutonic formations of the Later Cretaceous Ulbanskaya volcanic zone. Subvolcanic formations are represented by mafic-felsic dykes.

The deposit has favourable geological structure with mineralisation associated with carbonate-sericite-quartz metasomatic bodies with sulphide-quartz veins, similar to the multi-million ounce Albazino deposit.

To date, 11 zones of mineralisation have been identified with a combined thicknesses up to 100-180 m and extending for 1.5-2 km along strike. The zones of mineralisation are represented by several subparallel lenses with thicknesses up to 20-30 m.

The mineralisation outcrops were further explored by trenches and inclined vertical diamond drillholes to 200-240 m depth. Near-surface material is oxidised to a depth of 30-60 m. The primary mineralisation lenses were traced to 150-240 m depth and remain open at depth. Kutyn exploration database consists of a total of 427 trenches and 593 diamond drillholes.

The oxide Ore Reserves will be mined from three pits, namely the Sedlovinnaya, Rodnikovaya, and Geofizicheskaya zones, which are the largest and the most explored deposits. The average strip ratio for the reserve is 7.5.  

METALLURGY AND PROCESSING

The Kutyn pre-feasibility study envisions gold production from the oxidised ore will be extracted by placing crushed ore on a heap leach followed by exposure to a weak cyanide solution. Gold will removed from the lixiviante solution using the Merrill Crowe process. The gold precipitate produced at the process plant will be refined into Dore gold bars for final sale.

Metallurgical testing (carried out by CJSC Polymetal Engineering) showed average gold recoveries of approximately 71%.

ORE RESERVE AND MINERAL RESOURCE STATEMENT

The Ore Reserve and Mineral Resource statements audited by Snowden and reported in accordance with the JORC Code (2012) are presented below:

Kutyn Open Pit Ore Reserves

Ore Reserves 1,2,3	Tonnage	Grade	Content
	Kt	Au, g/t	Au, Koz
Proved
Sedlovinnaya	1,540	3.2	157
Rodnikovaya	40	9.6	13
Total Proved	1,580	3.3	169
Probable
Sedlovinnaya	220	3.4	24
Rodnikovaya	1,090	3.6	125
Geofizicheskaya	760	2.8	68
Total Probable	2,070	3.3	217
Proved + Probable
Sedlovinnaya	1,760	3.2	181
Rodnikovaya	1,130	3.8	138
Geofizicheskaya	760	2.8	68
Total Proved + Probable	3,650	3.3	386

¹  As of 01.01.2015

² Cut-off grade was not calculated for any of the pits developed as part of the Kutyn project. The recovery of gold from the ore is dependent upon gold grade and so a general cut-off grade is meaningless. Instead, the pits were optimised on the basis of total value for each of the blocks generated.

³ Au price US$ 1,300/oz

Kutyn Open Pit Mineral Resources

Mineral Resources1,2,3	Tonnage	Grade	Content
	Kt	Au, g/t	Au, Koz
Measured
Sedlovinnaya	190	2.8	17
Total Measured	190	2.8	17
Indicated
Sedlovinnaya	190	3.0	18
Rodnikovaya	280	3.3	30
Geofizicheskaya	270	2.6	23
Total Indicated	740	3.0	71
Measured + Indicated
Sedlovinnaya	380	2.9	35
Rodnikovaya	280	3.3	30
Geofizicheskaya	270	2.6	23
Total Measured + Indicated	930	2.9	88
Inferred
Sedlovinnaya	60	3.1	6
Rodnikovaya	220	2.8	20
Geofizicheskaya	380	3.2	39
Itylskaya	160	5.2	26
Otkrytaya	210	3.0	21
Dzhuaty	330	2.7	28
Total Inferred	1,360	3.2	140
Measured + Indicated + Inferred
Sedlovinnaya	440	2.9	41
Rodnikovaya	500	3.1	50
Geofizicheskaya	650	3.0	62
Itylskaya	160	5.1	26
Otkrytaya	210	3.1	21
Dzhuaty	330	2.6	28
Total Measured + Indicated + Inferred	2,290	3.1	228

¹ The Mineral Resources are reported exclusive of Ore Reserves and are calculated from the total Mineral Resource inclusive of Ore Reserves by excluding all Mineral Resource material within Ore Reserve blocks. Where Mineral Resource part blocks are cut by the Ore Reserve shape the tonnages may or may not be reported depending on the location of the centroid of the block. Small differences between total Mineral Resource gold ounces calculated inclusive of the Ore Reserves and sum of Ore Reserve gold ounces plus the reported additional Mineral Resource gold ounces will occur but are not significant. Inferred Mineral Resource blocks within the Ore Reserve shapes are calculated as waste. The total Inferred Mineral Resource is reported as it has been calculated that the Inferred blocks within the Ore Reserve are not significant

Resources are reported within an optimised pit shell. Resources are undiluted.

Small discrepancies may occur due to rounding.

² As of 01.01.2015

³ Au price US$ 1,300/oz.

The documentation regarding this estimate was compiled by Mr. Rod Carlson and Mr. Murray Lytle.

Mr. Carlson (BSc (Geology), MSc (Ore Deposit Models and Evaluation), University of Western Australia) is a Member of the Australian Institute of Geoscientists and a Registered Professional Geologist (Exploration and Mining) with the AIG, he is also a member of the Australian Institute of Mining and Metallurgy. Mr. Carlson was a Senior Principal Consultant with Snowden at the time of the Resource Estimate. Mr. Carlson has over 28 years of experience in the exploration and mining industry and sufficient experience (20 years) relevant to the style of mineralisation and type of deposit under consideration and to the activity for which he is undertaking to qualify as a Competent Person as defined under the 2012 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves".

Mr. Lytle, P.Eng. (PhD, Mining Engineering, University of British Columbia) is a Senior Principal Consultant with Snowden.Mr. Lytle has over 35 years of experience in the mining industry and sufficient experience (20 years) relevant to the type of deposit under consideration and to the activity for which he is undertaking to qualify as a Competent Person as defined under the 2012 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves".

Mr. Carlson and Mr. Lytle consent to the inclusion in this statement of the matters based on this information in the form and context in which it appears. The full Mineral Resource and Ore Reserves reports are available upon request.

Kutyn Underground Mineral Resources

The Mineral Resource statement audited by CSA Global and reported in accordance with The JORC Code (2012) is presented below:

Mineral Resources	Tonnage	Grade	Content
	Kt	Au, g/t	Au, Koz
Measured
Sedlovinnaya	550	4.5	80
Total Measured	550	4.5	80
Indicated
Sedlovinnaya	590	4.9	95
Rodnikovaya	460	4.9	73
Geofizicheskaya	280	4.4	40
Total Indicated	1,330	4.8	208
Measured + Indicated
Sedlovinnaya	1,140	4.7	175
Rodnikovaya	460	4.9	73
Geofizicheskaya	280	4.4	40
Total Measured + Indicated	1,880	4.8	288
Inferred
Sedlovinnaya	340	4.8	54
Rodnikovaya	180	6.7	39
Geofizicheskaya	230	5.3	40
Total Inferred	750	5.5	133
Measured + Indicated + Inferred
Sedlovinnaya	1,480	4.7	229
Rodnikovaya	640	5.4	112
Geofizicheskaya	510	4.8	80
Total Measured + Indicated + Inferred	2,630	5.0	421

¹ Small discrepancies may occur due to rounding

² As of 01.01.2015

³ COG: 3.0 g/t Au

⁴ Au price US$ 1,300/oz

The information in this report that relates to underground Mineral Resources for the Kutyun deposit is based on and fairly represents information compiled by Mr Dmitry Pertel and Mr Aaron Meakin.

Mr Pertel is a member of the Australian Institute of Geoscientists and Mr Meakin is a member of the Australasian Institute of Mining and Metallurgy. Mr Pertel and Mr Meakin have sufficient experience relevant to the styles of mineralisation and type of deposit under consideration and to the activity that is being undertaken to qualify as a Competent Person, as defined in the 2012 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves". Mr Pertel and Mr Meakin are full time employees of CSA Global Pty Ltd and consent to the inclusion in the report of the matters based on their information in the form and context in which it appears.

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 Darrell Uden Jonny Hardy	[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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