Ore reserve estimate for Svetloye gold project

RNS Number : 8127G

Polymetal International PLC

12 May 2014

 



Release time	IMMEDIATE
Date	12 May 2014

Polymetal International plc

Ore reserve estimate for Svetloye 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 Reserves and Resources Audit ("Audit") performed by Snowden Mining Industry Consultants ("Snowden") for the Svetloye gold deposit.

HIGHLIGHTS

·      Total Ore Reserves in accordance with the 2012 JORC Code are estimated at 7.3 Mt at the average grade of 2.8 g/t Au with 0.7 Moz of gold contained.

·      Total Mineral Resources (additional to Ore Reserves) are estimated at 1.1 Mt of ore at the average grade of 2.3 g/t Au containing 0.1 Moz of gold. Further substantial exploration potential exists within the existing license area of 40 km2.

·      The pre-feasibility study envisions 1.0 Mtpa open pit heap leach operation with initial mine life of 8 years. Svetloye expects to produce an annual average of 70 Koz of gold at an average All-in Sustaining Cost (AISC) of US$ 750-800/oz of gold.

·      Pre-production capital expenditures are estimated at US$ 90 million and do not take into account potential synergies with Khakanja (mining equipment) and Omolon (equipment from postponed Sopka heap leach project).

·      Project IRR of 44% was estimated at gold price of US$ 1,250/oz, Brent oil price of US$ 110/bbl, and RUB/USD exchange rate of 33. Project IRR for the stress scenario at gold price of US$ 1,000/oz (in accordance with the Company policy to stress the project at a 20% discount to spot price) was estimated for 23%.

·      The project is expected to be reviewed by the Company's Board of Directors in Q3 2014. In case the development decision is positive, construction will commence in 2015 with first production in Q3 2017.

"Svetloye can give Polymetal capital-light, low-risk and low-cost production and cash flows in the medium-term," said Vitaly Nesis, CEO of Polymetal. "More value is likely to be generated by leveraging synergies with Khakanja and expanding the reserve base of the project".

ASSET OVERVIEW AND HISTORY

Svetloye is located in the Okhotsk district of the Khabarovsk Krai in the Far East of Russia. The project lies in unpopulated remote mountainous area with taiga forest in the valleys and tundra covering hilltops. 

Svetloye is located 240km south-west of Okhotsk, the access port for the Company's Khakanja mine and approximately the same distance from Khakanja itself. It is accessible by a 380 km winter road from Okhotsk and by 92 km winter road from Unchi seaport which will be used for delivery of fuel and supplies during the summer navigation period. Between May and November access to the site is by helicopter.

The deposit was discovered in 1973. Significant exploration was undertaken between 2003 and 2005 with a total of 38 trenches excavated and 28 diamond drillholes drilled. Between 2006 and 2009 further 62 trenches were excavated and 273 diamond drillholes drilled. Total drilling amounted to 42,730 m and total trenching comprised 124,994 m3.

Polymetal acquired Svetloye exploration and mining license in December 2010 for the total consideration of US$ 9.25 million. In 2013 Polymetal drilled 17 diamond drillholes totaling 2,956 m and 33 reverse circulation (RC) drillholes totaling 6,474 m.

GEOLOGY AND MINING

Gold mineralisation at Svetloye is formed by vuggy silica (secondary quartzite) associated with a high-sulphidation epithermal system. Most of gold mineralisation is very fine grained and disseminated. Gold-bearing silicification occurs as flat lenses or pods, which outcrop at the surface and have true widths of between 20 and 120 m. Higher-grade zones are adjacent to breccias. The oxidation zone develops to a depth of 150 m.

Three ore zones (Emmy, Elena and Tamara) are proposed to be mined at Svetloye. Open pit mining will be conducted by conventional drill-and-blast and truck haulage. The average strip ratio over the life of the mine is 1.4 t/t. The open pits will reach the maximum depth of 130 meters.

METALLURGY AND PROCESSING

Svetloye ore will be processed by heap leaching with the pads and the plant located within 5 km from the main pits. Ore will be crushed only in warm season to minus 20 mm, mixed with crushed limestone, and stacked by trucks in lifts with the height of 15 meters.

Solution from the heap leach pad will be processed through the 400 m3/h capacity Merrill-Crowe plant. The precipitate will be dried and packed at the existing Khakanja plant and sent for further processing to the third-party refinery. The leach solution will be heated to +12 C by coal-fired 6MW boiler. Electricity will be provided by the Company-owned diesel generators with installed capacity of 5MW.

Metallurgical testing (carried out by CJSC Polymetal Engineering) showed average recoveries of approximately 82% for gold, of which 65% is expected to be recovered in the first year from stacking.

PROJECT DEVELOPMENT TIMELINE

Below is an estimated Svetloye gold mine project development timeline:

·      Complete project design and permitting - Q1 2015;

·      Start construction - Q3 2015;

·      First production - Q3 2017;

·      Full year of production at nameplate capacity - 2018.

The project will be managed by Khakanja team. Polymetal will provide regular updates on the progress of the development of the Svetloye gold project.

RESERVE AND RESOURCE STATEMENT

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

Svetloye Ore Reserves

Ore Reserves 1,2,3	Tonnage	Grade	Grade	Grade	Content	Content	Content
	Kt	Au, g/t	Ag, g/t	GE, g/t	Au, Koz	Ag, Koz	GE, Koz
Probable
Elena	4,210	3.0	3.8	3.1	409	498	417
Emmy	2,780	2.6	3.0	2.6	231	246	235
Tamara	330	2.4	2.0	2.4	25	21	26
Total Probable	7,320	2.8	3.5	2.9	664	765	677

¹  As of 01.01.2014

² Open Pit COG: Elena/Tamara (0-60m depth) - 0.9 g/t, Elena/Tamara (60-108m depth) - 1.0 g/t, Emi (0-40m depth) - 0.9 g/t, (40-70m) - 1.0 g/t, (70-100m) - 1.4 g/t, (100-153m) - 3.8 g/t

³ Au price US$ 1,300/oz, Ag price US$ 22.5/oz. Au/Ag conversion ratio= 58.8:1

Svetloye Mineral Resources

Mineral Resources 1,2,3,4	Tonnage	Grade	Grade	Grade	Content	Content	Content
	Kt	Au, g/t	Ag, g/t	GE, g/t	Au, Koz	Ag, Koz	GE, Koz
Indicated
Elena	340	1.9	2.2	1.9	20	24	21
Emmy	270	1.5	2.2	1.5	13	19	13
Tamara	20	1.8	1.7	1.8	1	1	1
Subtotal Indicated	630	1.7	2.2	1.7	35	44	35
Inferred
Elena	110	4.9	4.3	5.0	17	15	17
Emmy	350	2.5	4.3	2.5	27	48	28
Tamara	-	-	-	-	-	-	-
Subtotal Inferred	460	3.0	4.3	3.0	44	63	45
Indicated+Inferred
Elena	450	2.6	2.7	2.6	37	39	38
Emmy	620	2.0	3.4	2.1	40	67	41
Tamara	20	1.8	1.7	1.8	1	1	1
Total Indicated+Inferred	1,090	2.3	3.1	2.3	79	107	80

¹ Mineral Resources are reported exclusive of Ore Reserves

² As of 01.01.2014

³ Open Pit COG: Elena/Tamara (0-60m depth) - 0.9 g/t, Elena/Tamara (60-108m depth) - 1.0 g/t, Emi (0-40m depth) - 0.9 g/t, (40-70m) - 1.0 g/t, (70-100m) - 1.4 g/t, (100-153m) - 3.8 g/t

⁴ Au price US$ 1,300/oz, Ag price US$ 22.5/oz.

The documentation regarding this estimate was compiled by Mr. Ivor Jones and Mr. Murray Lytle.

Mr. Jones is a Fellow of the Australasian Institute of Mining and Metallurgy and a chartered professional in geology.  As an Executive Consultant with Snowden, Mr. Jones has sufficient experience relevant to the style of mineralization and type of deposit under consideration and to the activity which he is undertaking 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. Lytle, P.Eng. (PhD candidate, 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. Jones 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.

The previous assessment of Mineral Resources for Svetloye was reflected in the Group's Annual Report 2013 as a part of Ore Reserves and Mineral Resources update.

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]

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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