Q1 2015 production results

RNS Number : 3892K

Polymetal International PLC

16 April 2015

 

Release time	IMMEDIATE
Date	16 April 2015

Polymetal International plc

Q1 2015 production results

Polymetal International plc (LSE, MOEX: POLY, ADR: AUCOY) (together with its subsidiaries - "Polymetal", the "Company", or the "Group") is pleased to announce the Group's production results for the first quarter ended March 31, 2015.

HIGHLIGHTS

·     Polymetal produced 299 Koz of gold equivalent in the first quarter of 2015, down 5% year-on-year, mainly due to planned grade declines at Dukat and Omolon as well as a temporary suspension of the float circuit at Varvara.  Quarterly gold production was 186 Koz, down 3% year-on-year. Silver production in Q1 was 6.8 Moz, down 7% year-on-year.

·     Sales lagged production by 39 Koz of gold equivalent as a result of usual expected seasonal factors, including New Year stoppages at refineries and annual contract re-negotiation with silver concentrate off-takers. This lag is expected to be fully reversed by the year-end.

·     Kyzyl project development is on track with both design and permitting activities on schedule with the feasibility study release expected in October 2015.

·     Net debt (including dividend payable of US$ 55 million) remained broadly flat at US$ 1,258 million at 31 March 2015 as compared to 31 December 2014, as the Company continues to generate significant free cash flows despite the first quarter traditionally being the weakest one in this respect.

·     Polymetal deeply regrets to report two fatalities at our mines from 1 January 2015 to the date of this report. The Company is continuing the comprehensive safety review of these and prior cases. As part of its immediate response, Polymetal has meaningfully increased weighting for safety KPIs for senior management remuneration, including the Group CEO, and managing directors of its operations.

·     The Company reconfirms its production guidance of 1.35 Moz of gold equivalent in 2015, along with its total cash cost guidance of US$ 575 - 625/GE oz and all-in sustaining cash costs of US$ 750-800/GE oz. The cost guidance is contingent on the Rouble/Dollar exchange rate dynamics which has a significant effect on the Group's Rouble-denominated operating costs. The Russian Rouble continued to display high volatility against the US Dollar in the first quarter 2015.

"We are on track to deliver on our production and cost targets for the current year", said Vitaly Nesis, Group CEO of Polymetal, commenting on the results. "I regret to report that there were two fatal accidents at our facilities during the first quarter. I would personally like to extend my heart-felt condolences to the families and friends of the two men who lost their lives in these tragic accidents."

	3 months ended Mar 31,		% change1
	2015	2014
Waste mined, Mt	16.0	20.0	-18%
Underground development, km	17.3	14.5	+19%
Ore mined, Kt	3,323	2,799	+19%
Open-pit	2,560	2,133	+20%
Underground	764	666	+15%
Ore processed, Kt	2,644	2,565	+3%
Production
Gold, Koz	186	191	-3%
Silver, Moz	6.8	7.3	-7%
Copper, tonnes	-	709	-100%
Gold equivalent, Koz2	299	316	-5%
Sales
Gold, Koz	171	170	+1%
Silver, Moz	5.2	6.0	-14%
Copper, tonnes	438	-	NA5
Revenue, US$m3	298	336	-11%
Net debt4	1,258	1,2494	+1%
Safety6
LTIFR	0.24	0.22	+9%
FIFR	0.10	0.04	+127%
Notes:     (1) % changes can be different from zero even when absolute numbers are unchanged because of rounding. Likewise, % changes can be equal to zero when absolute numbers differ due to the same reason. This note applies to all tables in this release.                 (2) Based on 1:60 Ag/Au and 5:1 Cu/Au conversion ratios.                 (3) Calculated based on the unaudited consolidated management accounts. Concentrate sales are recorded based on forward prices for the expected dates of final settlement and concentrate revenue is presented net of refining and treatment charges. (4) Non-IFRS measure, based on unaudited consolidated management accounts. Net debt equals to current and non-current borrowings less cash and cash equivalents and includes the liability for dividend payable. Comparative information is presented for 31 December 2014.                 (5) NA = not available.                 (6) LTIFR =lost time injury frequency rate per 200,000 hours worked; FIFR = fatal injury frequency rate per 200,000 hours worked.

PRODUCTION BY MINE

	3 months ended March 31,		% change1 (Y-o-Y)	3 months ended Dec 31,	% change1 (Q-o-Q)
	2015	2014		2014
GOLD EQ. (KOZ) 2
Dukat operations	119	128	-7%	86	37%
Albazino-Amursk	56	62	-9%	51	11%
Mayskoye	11	2	447%	98	-88%
Omolon operations	29	36	-19%	41	-28%
Voro	41	38	7%	43	-3%
Varvara	20	27	-26%	29	-31%
Khakanja	22	23	-1%	43	-47%
TOTAL	299	316	-5%	391	-23%

Notes:     (1) % changes can be different from zero even when absolute numbers are unchanged because of rounding. Likewise, % changes can be equal to zero when absolute numbers differ due to the same reason. This note applies to all tables in this release.

                (2) Based on 1:60 Ag/Au and 5:1 Cu/Au conversion ratios.

CONFERENCE CALL AND WEBCAST

Polymetal will hold a conference call and webcast on Thursday, 16 April, 17:30 Moscow time (15:30 London time).

To participate in the call, please dial:

8 10 8002 041 4011 access code 235510# (free from Russia), or

[phone] (free from the UK), or

[phone] (free from the US), or

any of the above numbers (from outside the UK, the US and Russia) or follow the link: http://www.audio-webcast.com/cgi-bin/visitors.ssp?fn=visitor&id=2707

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

Webcast replay will be available on Polymetal's website (www.polymetalinternational.com) and at http://www.audio-webcast.com/cgi-bin/visitors.ssp?fn=visitor&id=2707. A recording of the call will be available immediately after the call at [phone] (from within the UK), [phone] (from within the US) and [phone] (from within Russia), access code 293518#, from 6:30 pm Moscow time Thursday, April 16, till 6:30 pm Moscow time Thursday, April 23, 2015.

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 Tristan Lovegrove 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

DUKAT OPERATIONS

	3 months ended Mar 31,		% change
	2015	2014
MINING
Dukat
Underground development, m	8,881	7,720	+15%
Ore mined (underground), Kt	384	359	+7%
Goltsovoye
Underground development, m	1,774	1,751	+1%
Ore mined (underground), Kt	63	42	+47%
Lunnoye + Arylakh
Waste mined, Kt	-	132	-100%
Underground development, m	1,397	1,476	-5%
Ore mined, Kt	94	96	-2%
Open-pit	-	17	-100%
Underground	94	79	+20%
PROCESSING
Dukat
Ore processed, Kt	439	399	+10%
Head grades
Gold, g/t	0.5	1.0	-49%
Silver, g/t	417	485	-14%
Recovery1
Gold	83.6%	86.9%	-4%
Silver	84.4%	87.7%	-4%
Production
Gold, Koz	6.2	11.7	-47%
Silver, Moz	5.0	5.8	-13%
Lunnoye
Ore processed, Kt	104	91	+15%
Head grades
Gold, g/t	1.7	1.2	+51%
Silver, g/t	556	356	+56%
Recovery1
Gold	89.3%	78.9%	+13%
Silver	88.0%	90.3%	-3%
Production
Gold, Koz	5.2	2.8	+84%
Silver, Moz	1.4	1.0	+42%
TOTAL PRODUCTION
Gold, Koz	11.4	14.5	-21%
Silver, Moz	6.4	6.8	-5%

Note:       (1) Technological recovery, includes gold and silver within work-in-progress inventory (concentrate, precipitate)

Quarterly silver and gold production at Dukat hub decreased by 5% and 21%, respectively year-on-year as the grades at the Dukat mine were closer to the average reserve grades after exceptionally high levels recorded in the first half of 2014. On the other hand, quarter-on-quarter gold and silver production increased by 43% and 37%, respectively, driven by normalisation of grades after weak Q4 of 2014.

Processing volumes at both Dukat and Lunnoye increased as the processing plants benefited from the results of the continuous improvement program.

The amount of ore mined at Dukat underground mine grew 7% year-on-year to 384 Kt as the mine capacity continues to increase steadily to match expanded throughput at the Omsukchan concentrator. Similarly, at Goltsovoye, the amount of ore mined grew 47% year-on-year to 63 Kt.

Lunnoye has demonstrated a very strong set of the results, with significantly improved grades due to input of ore from Arylakh underground and related improvement in recoveries.

ALBAZINO-AMURSK

	3 months ended Mar 31,		% change
	2015	2014
MINING
Waste mined, Kt	3,922	3,880	+1%
Underground development, m	985	695	+42%
Ore mined (open pit), Kt	399	369	+8%
PROCESSING
Albazino concentrator
Ore processed, Kt	398	393	+1%
Gold head grade, g/t	5.0	4.9	+2%
Gold recovery1	88.2%	87.6%	+1%
Concentrate produced, Kt	32.2	28.0	+15%
Concentrate gold grade, g/t	54.9	60.2	-9%
Gold in concentrate, Koz2	56.9	54.2	+5%
Amursk POX
Concentrate processed, Kt	39.4	41.3	-5%
Gold head grade, g/t	49.8	54.2	-8%
Recovery	94.1%	93.4%	+1%
Gold produced, Koz	56.1	61.8	-9%
TOTAL PRODUCTION
Gold, Koz	56.1	61.8	-9%

Notes:     (1) To concentrate

(2) For information only; not considered as gold produced and therefore not reflected in the table representing total production. Included in total production upon completion of downstream processing at the Amursk POX

Gold production at Albazino/Amursk in the first quarter was 56.1 Koz, up 11% quarter-on-quarter mainly due to increase in throughput at the Amursk POX. Production was down 9% year-on-year driven by a decrease in average grade in concentrate processed. The recoveries remain at the design levels both at the flotation plant and at the POX plant.

Gold in concentrate produced at Albazino in Q1 increased by 5% year-on-year to 57 Koz mainly driven by higher recoveries and grades in ore processed.

Ore mining volumes at the Albazino open-pit continue to improve to fully match the increased concentrator capacity. Underground development at the Olga zone continues at steady pace in order to prepare recently upgraded reserves for production.

MAYSKOYE

	3 months ended Mar 31,		% change
	2015	2014
MINING
Underground development, m	2,825	2,528	+12%
Ore mined (underground), Kt	223	186	+20%
PROCESSING
Ore processed, Kt	223	201	+11%
Gold head grade, g/t	8.1	7.5	+8%
Gold recovery1	87.8%	80.5%	+9%
Concentrate produced, Kt	24.0	21.0	+14%
Concentrate gold grade, g/t	66.2	57.9	+14%
Gold in concentrate, Koz2	51.1	39.1	+31%
Amursk POX
Concentrate processed, Kt	7.0	1.7	+299%
Gold head grade, g/t	58.4	46.3	+26%
Recovery	94.1%	79.5%	+18%
Gold produced, Koz	11.4	2.1	+447%
TOTAL PRODUCTION
Gold, Koz	11.4	2.1	+447%

Notes:     (1) To concentrate

(2) For information only; not considered as gold produced and therefore not reflected in the table representing total production. Included in   total production upon sale to off-taker or internal downstream processing to saleable metal product.

Gold production at Mayskoye was 11.4 Koz, up 53% quarter-on-quarter (excluding the off-take sales) and was fully generated by in-house POX processing. The POX plant continued to achieve above-design recoveries of more than 94%.

Gold in concentrate produced at the Mayskoye concentrator increased by 31% year-on-year and 12% quarter-on-quarter to 51 Koz of gold produced in concentrate, driven by an 11% increase in throughput year-on-year and recoveries exceeding the design levels and amounting to 87.8%. Concentrate produced is being stockpiled in the port of Pevek until the start of the summer navigation period.

Grade processed improved to 8.1 g/t as a result of a further improvement in grade control and dilution through optimisation of underground mining methods, and is now slightly below the average reserve grade of 8.5 g/t.

OMOLON OPERATIONS

	3 months ended Mar 31,		% change
	2015	2014
MINING
Sopka
Waste mined, Kt	-	1,239	-100%
Ore mined (open pit), Kt	-	229	-100%
Dalneye
Waste mined, Kt	1,032	879	+17%
Ore mined (open pit), Kt	625	176	+255%
Tsokol
Waste mined, Kt	383	1,053	-64%
Ore mined (open pit), Kt	165	80	+108%
Birkachan
Waste mined, Kt	4	199	-98%
Underground development, m	680	-	NA
Ore mined (open pit), Kt	-	65	-100%
TOTAL HUB
Waste mined, Kt	1,420	3,370	-58%
Ore mined (open pit), Kt	791	549	+44%
PROCESSING
Kubaka Mill
Ore processed, Kt	206	197	+5%
Grade
Gold, g/t	4.6	6.0	-23%
Silver, g/t	42	23	+84%
Recovery1
Gold	95.4%	94.2%	+1%
Silver	83.7%	82.8%	+1%
Gold production, Koz	28.2	35.2	-20%
Silver production, Moz	0.1	0.1	-5%
TOTAL PRODUCTION
Gold, Koz	28.2	35.2	-20%
Silver, Moz	0.1	0.1	-5%

Note:       (1) Technological recovery, includes gold and silver within work-in-progress inventory

At Omolon, gold production decreased by 20% year-on-year mainly driven by lower grade ore from Tsokol. The decrease in grades was partially offset by increase in throughput and better recoveries.

At Tsokol, open pit mining is nearing completion in Q2 2015 with underground development planned to commence in Q3 2015. Stripping volumes significantly decreased by 64%.

At Birkachan, underground development continued at a stable pace of 680 m for the quarter. Technical studies are under way to re-commence open-pit mining after a sharp drop in mining costs following oil price decline and Russian Rouble devaluation.

543 Kt of ore have been trucked by winter road from Sopka and Dalneye since December 2014. Open-pit mining at Dalneye is expected to wind down by Q3 2015 with the mining fleet moving to Oroch.  Related infrastructure will be put on care and maintenance until 2017 when underground mining at these deposits is planned to commence.

VORO

	3 months ended Mar 31,		% change
	2015	2014
MINING
Voro
Waste mined, Kt	2,617	2,514	+4%
Ore mined (open pit), Kt	357	232	+54%
-     primary	302	232	+30%
-     oxidised	55	-	NA
PROCESSING
Voro Heap Leach
Ore stacked, Kt	-	-	NA
Gold head grade, g/t	-	-	NA
Gold production, Koz	5.0	6.1	-19%
Voro CIP
Ore processed, Kt	222	223	NM
Gold head grade, g/t	4.2	5.4	-22%
Gold recovery1	78.2%	80.2%	-3%
Gold production, Koz	35.8	31.9	+12%
TOTAL PRODUCTION
Gold, Koz	40.8	38.1	+7%
Silver, Moz	0.026	0.021	+23%

Note:       (1) Technological recovery, includes gold within work-in-progress inventory 

Gold production at Voro in Q1 2015 increased by 7% year-on-year to 40.8 Koz despite planned decreased in grades as some of the work-in-progress was released from the previous quarter processing. Processing at the CIP plant continued at a stable pace.

Mining at Voro was concentrated on the primary ore as oxidised ore reserves are nearing depletion; the amount of primary ore mined increased 30% year-on-year to 302 Kt while stripping increased by 4% year-on-year.

Near-mine exploration programme continues to focus on the potential sources of heap leachable mineralisation. It is expected that heap leach will continue to operate till 2018 at approximately 400-500 Ktpa. 

VARVARA

	3 months ended Mar 31,		% change
	2015	2014
MINING
Waste mined, Kt	7,075	7,374	-4%
Ore mined (open pit), Kt	800	635	+26%
PROCESSING
Flotation
Ore processed, Kt	-	242	-100%
Grade
Gold, g/t	-	1.0	-100%
Copper	-	0.38%	-100%
Recovery1
Gold	-	46.3%	-100%
Copper	-	82.4%	-100%
Production
Gold (in concentrate), Koz	-	3.4	-100%
Copper (in concentrate), t	-	709	-100%
Leaching
Ore processed, Kt	898	670	+34%
Gold head grade, g/t	0.9	1.2	-31%
Gold recovery1	79.9%	76.4%	+4%
Gold production (in dore), Koz	20.2	20.5	-2%
TOTAL PRODUCTION
Gold, Koz	20.2	23.8	-15%
Copper, t	-	709	-100%

Note:       (1) Technological recovery, includes gold and copper within work-in-progress inventory

At Varvara, gold production in Q1 2015 decreased by 15% to 20.2 Koz on the back of decreased gold head grades and also as a result of a temporary suspension of the flotation circuit in July 2014. Re-start of the copper circuit is likely to be delayed till 2016. Historic copper concentrate stockpile has been largely sold with the remaining 1.7 Kt to be shipped in Q2. 

Mining was re-directed and focused on the gold ore. In Q1, the amount of ore mined increased by 26% year-on-year while stripping ratio improved from 11.6 t/t in Q1 2014 to 8.8 t/t in Q1 2015.

The throughput at the leaching circuit increased by 34% as the mills used in flotation were temporarily redirected to process the gold ore in order to compensate the suspension of flotation circuit.

Gold recoveries increased to 80% in the first quarter thanks to several metallurgical improvements performed in the second half of 2014. Recoveries and grades will continue to be volatile through the year as 3^rd-party ore sources are actively investigated.

OKHOTSK OPERATIONS

	3 months ended Mar 31,		% change
	2015	2014
MINING
Khakanja
Waste mined, Kt	949	1,215	-22%
Ore mined (open-pit), Kt	76	7	NM
Avlayakan
Underground development, m	797	1,066	-25%
Ore mined (underground), Kt	31	2	NM
Ozerny
Waste mined, Kt	42	1,165	-96%
Ore mined (open pit), Kt	105	321	-67%
TOTAL HUB
Ore mined, Kt	213	331	-36%
Open-pit	181	328	-45%
Underground	31	2	NM
PROCESSING
Ore processed, Kt	153	150	+3%
Grade
Gold, g/t	3.8	3.7	+2%
Silver, g/t	89	118	-25%
Recovery1
Gold	94.9%	85.3%	+11%
Silver	66.6%	79.6%	-16%
TOTAL PRODUCTION
Gold, Koz	17.8	15.2	+17%
Silver, Moz	0.3	0.4	-37%

Note:       (1) Technological recovery, includes gold and silver within work-in-progress inventory (precipitate)

Gold production at Okhotsk operations in Q1 2015 increased by 17% year-on-year to 17.8 Koz, while silver production was down 37% year-on-year to 0.3 Moz. The decrease was mainly driven by the depletion of high-silver ore blocks in the Khakanja open pit. Gold recoveries were relatively stable quarter-on-quarter and increased meaningfully year-on-year due to the change in the mix of ores processed.

Quarter-on-quarter gold production decreased by 51% as the Company was only processing ore from Khakanja and Ozerny mine. Processing of high-grade material from Avlayakan underground mine will start in Q3.

At Ozerny, open pit mining has now been completed with total 105 Kt of ore mined during the quarter. Ore is now being trucked to the plant by winter road. At Khakanja, open pit mining is nearing completion in Q2 2015. Mining fleet from both mines will be re-directed to Svetloye project. 

In 2014 the Company completed all preparatory works at Svetloye ahead of construction in 2015. Sea-side access point and all-season road from the shore to the site have been fully established. Mining at Svetloye is expected to start in Q4 2015.

KYZYL PROJECT

In Q1 2015, Polymetal obtained approval by Statutory Reserve Committee in Kazakhstan of the TEO Konditsyi (non-JORC ore reserve estimate and conditions feasibility study).

Decommissioning of old infrastructure, site clearing, and various permitting activities, including ESIA preparation, have continued as planned. Pilot metallurgical testing of the Kyzyl ore has confirmed viability of conventional flotation with consistent recoveries to concentrate between 90% and 92%.

Polymetal is on track to publish the full feasibility study for the project in Q4 2015 and start full-scale construction in Q2 2016.

HEALTH AND SAFETY

Polymetal regrettably reports the loss of two colleagues during the first quarter 2015. Both fatalities occurred at the Lunnoye mine. A miner was fatally injured by a rock mass fall in the underground mine on 11 February, and a truck driver suffered fatal injuries as a result of a road accident on 30 March.

Polymetal places great value in its workers' health and safety. In response to these and earlier events, the Company has tightened safety procedures across all its operating mines and implemented additional measures to ensure proper enforcement of these tightened safety standards. The review of these cases is ongoing and the results will be incorporated in our overall safety review and response. As part of its immediate response, Polymetal has meaningfully increased weighting for safety KPIs for senior management remuneration, including the Group CEO, and managing directors of its operations.

PERSONNEL

Evgeny Tsybin (38) was appointed Managing Director of Mayskoye. Mr. Tsybin joined Polymetal in 2009 as Chief Engineer at the Dukat mine and then worked as a superintendent at the mine, and later, as VP-Operations at Dukat. In 2014, Mr. Tsybin graduated from Zhezkazgan University (Kazakhstan) majoring in underground mining.

The previous MD of Mayskoye, Igor Nikolishin (39), was transferred to a position at the Company's Urals Regional office and will lead regional underground development projects (including North Kaluga).

 

END

 

 

MSCSFUSIMFISELL