Q2 and H1 2012 production results

RNS Number : 8826I

Polymetal International PLC

31 July 2012

 



Release time	IMMEDIATE
Date	31 July 2012

Polymetal International plc

Q2 and H1 2012 production results announcement

Polymetal International plc (LSE: POLY) (together with its subsidiaries, including JSC "Polymetal" - "Polymetal", the "Company", or the "Group") is pleased to announce the Group's production results for the second quarter and six months ended June 30, 2012.

HIGHLIGHTS

·     The Company demonstrated an excellent operating performance in Q2 2012, with quarterly gold equivalent production growing 54% year-on-year and reaching a new high of 298 Koz. For the six month period the Group produced more than 500 Koz of gold equivalent, growth of 48% year-on-year. Omolon, now running at full capacity, and Dukat Hub were the key growth contributors, supported by a strong performance at other mines.

·     Sales lagged production due to temporary increases in work-in-progress (precipitate and concentrate) at Omolon, Albazino, and Dukat. These increases in work-in-progress, accompanied by corresponding cash outflows, are expected to be reversed before year-end with cash inflows in the second half of 2012.

·     First gold was poured at the Amursk POX plant, a major achievement for the Company and another crucial step towards full ramp-up of the facility in Q4 2012. The recovery ramp-up profile is fully in line with plans with no material metallurgical issues encountered so far.

·     The Company is firmly on track to deliver on its FY2012 production guidance of more than 1 Moz of gold equivalent thanks to the stronger than planned performance at Dukat and Khakanja. Updated guidance for 2012, 2013, and 2014 will be released together with Q3 operational results in mid-October.

"The first pour at Amursk and successful completion of the Omolon project are great achievements for our Company" said Vitaly Nesis, CEO of Polymetal. "We are now looking to achieve full capacity at the POX facility by year-end and to start-up Mayskoye as the next crucial steps on our growth path".

	3 months ended Jun 30,		% change1	6 months ended Jun 30,		% change1
	2012	2011		2012	2011
Waste mined, Kt	23,760	21,979	+8%	42,516	40,731	+4%
Underground development, m	11,416	8,177	+40%	22,575	15,856	+42%
Ore mined, Kt	2,667	2,547	+5%	5,778	4,439	+30%
Open-pit	2,256	2,174	+4%	4,963	3,765	+32%
Underground	411	373	+10%	815	674	+21%
Ore processed, Kt	2,676	2,387	+12%	4,871	4,070	+20%
Production
Gold, Koz	154	102	+52%	256	184	+39%
Silver, Moz	8.1	5.0	+63%	13.8	8.2	+67%
Copper, tonnes	1,624	1,768	-8%	3,179	3,512	-9%
Gold equivalent, Koz2	298	194	+54%	501	338	+48%
Sales
Gold, Koz	122	94	+29%	226	188	+20%
Silver, Moz	6.5	4.3	+51%	12.5	7.3	+71%
Copper, tonnes	1,645	1,490	+10%	3,627	2,728	+33%
Revenue, US$m3	376	315	+19%	765	544	+41%
Safety
LTIFR	0.48	0.50	-4%	0.6	0.7	-14%
FIFR	-	-	NA4	-	-	NA
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 the 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 (except for the 1H 2011 results which are based on the audited   consolidated financial statements). Concentrate sales are recorded based on forward prices for the expected dated of final settlement and concentrate revenue is presented net of refining and treatment charges.                 (4) NA = not available

DUKAT OPERATIONS

	3 months ended Jun 30,		% change	6 months ended Jun 30,		% change
	2012	2011		2012	2011
MINING
Dukat
Waste mined, Kt	280	211	+33%	596	366	+63%
Underground development, m	5,701	3,579	+59%	11,736	6,608	+78%
Ore mined, Kt	347	276	+26%	719	552	+30%
Open-pit	43	33	+32%	114	79	+46%
Underground	304	243	+25%	604	473	+28%
Goltsovoye
Underground development, m	1,203	831	+45%	2,113	1,715	+23%
Ore mined (underground), Kt	14	61	-78%	20	79	-75%
Lunnoye + Arylakh
Waste mined, Kt	636	790	-19%	1,378	1,361	+1%
Underground development, m	1,264	688	+84%	2,179	1,059	+106%
Ore mined, Kt	102	90	+14%	192	159	+21%
Open-pit	48	46	+5%	90	84	+7%
Underground	54	44	+24%	102	75	+36%
PROCESSING
Dukat
Ore processed, Kt	387	384	+1%	771	665	+16%
Head grades
Gold, g/t	0.75	0.63	+20%	0.67	0.70	-6%
Silver, g/t	461	386	+19%	411	382	+7%
Recovery1
Gold	78.4%	72.3%	+8%	78.8%	72.8%	+8%
Silver	84.0%	72.7%	+16%	83.0%	73.6%	+13%
Production
Gold, Koz	7.1	5.9	+21%	13.0	9.8	+32%
Silver, Moz	4.6	3.4	+35%	8.3	5.3	+57%
Lunnoye
Ore processed, Kt	79	86	-8%	164	153	+7%
Head grades
Gold, g/t	1.1	1.4	-17%	1.3	1.3	+2%
Silver, g/t	419	409	+2%	422	401	+5%
Recovery1
Gold	90.9%	92.5%	-2%	91.6%	92.1%	-1%
Silver	87.3%	87.5%	NM2	87.5%	87.4%	NM
Production
Gold, Koz	2.5	3.5	-26%	6.3	5.8	+7%
Silver, Moz	0.9	1.0	-11%	1.9	1.7	+8%
TOTAL PRODUCTION
Gold, Koz	9.7	9.3	+4%	19.2	15.6	+23%
Silver, Moz	5.5	4.4	+24%	10.2	7.0	+45%

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

                (2) NM = not meaningful

Quarterly silver production at the Dukat hub increased 24% compared to same period of 2011 ("year-on-year") and 18% compared to Q1 2012 ("quarter-on-quarter") driven mainly by increased head grades processed and further improvements in recoveries at the Omsukchan concentrator.

Quarterly throughput at the Omsukchan concentrator hit an all-time record in the quarter and exceeded the nameplate capacity of 1.5 Mtpa. Throughput in Q3 2012 is expected to be approximately 20% lower quarter-on-quarter due to the replacement of the old SAG mill on one of the processing lines.

At Dukat underground mine, silver grades in ore mined continued to increase due to the extraction of pillars.  Grades will continue to be volatile quarter to quarter.

At Goltsovoye, underground mining concentrated on access to ore body 9 which required a further increase in underground development. The bulk of ore mining from stopes is expected to take place in Q4 2012.

At Lunnoye, underground development on the new Zone 7 underground mine has commenced with first ore to be mined in Q2 2013 and sent for processing to the Omsukchan concentrator.

KHAKANJA

	3 months ended Jun 30,		% change	6 months ended Jun 30,		% change
	2012	2011		2012	2011
MINING
Khakanja + Yurievskoye
Waste mined, Kt	1,590	2,499	-36%	3,378	5,045	-33%
Underground development, m	439	552	-20%	882	882	-
Ore mined, Kt	307	86	+257%	632	168	+276%
Open-pit	274	82	+235%	562	163	+246%
Underground	33	4	NM	70	5	NM
Avlayakan
Waste mined, Kt	349	308	+13%	704	522	+35%
Ore mined (open pit), Kt	16	47	-65%	25	62	-60%
PROCESSING
Ore processed, Kt	159	153	+3%	308	312	-1%
Grade
Gold, g/t	4.1	3.5	+17%	3.9	4.1	-4%
Silver, g/t	330	120	+175%	295	139	+112%
Recovery1
Gold	94.5%	94.2%	+0%	94.7%	94.5%	+0%
Silver	78.5%	76.7%	+2%	78.0%	74.7%	+5%
TOTAL PRODUCTION
Gold, Koz	20.5	17.1	+20%	36.7	38.8	-5%
Silver, Moz	1.3	0.5	+185%	2.3	1.1	+111%

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

Gold and silver production at Khakanja increased by 20% and 185%, respectively, year-on-year as the plant treated higher gold grade ore from Yurievskoye and started to process high silver grade ore from deep levels of Khakanja's pit 3.

At Avlayakan, ore mined increased 90% quarter-on-quarter. To expand ship loading capacity the Company has completed construction of a temporary berth for the mobile stacker unit in the port of Kiran with the objective of taking ore volumes shipment to 60 ktpa.

VORO

	3 months ended Jun 30,		% change	6 months ended Jun 30,		% change
	2012	2011		2012	2011
MINING
Voro
Waste mined, Kt	3,000	2,510	+20%	5,632	5,254	+7%
Ore mined (open pit), Kt	245	240	+2%	429	439	-2%
-     primary	60	71	-15%	60	76	-21%
-     oxidised	185	170	+9%	369	363	+2%
Degtyarskoye
Waste mined, Kt	444	442	+1%	718	857	-16%
Ore mined (open pit), Kt	5	54	-90%	27	113	-76%
PROCESSING
Voro Heap Leach
Ore stacked, Kt	319	399	-20%	319	399	-20%
Gold head grade, g/t	1.4	1.5	-3%	1.4	1.5	-3%
Gold recovery1	-	-	NA	-	-	NA
Gold production, Koz	7	6	+4%	12	12	NM
Voro CIP
Ore processed, Kt	232	229	+1%	451	439	+3%
Gold head grade, g/t	5.2	6.0	-13%	5.4	5.8	-6%
Gold recovery	78.4%	76.6%	+2%	78.5%	77.6%	+1%
Gold production, Koz	30	34	-11%	57	57	NM
TOTAL PRODUCTION
Gold, Koz2	38	40	-5%	70	69	+2%
Silver, Moz	0.034	0.044	-22%	0.067	0.074	-10%

Notes:       (1) Heap leach recoveries are meaningful for full year only due to the influence of seasonality                                                                       (2) Including the effect of rounding

Gold production at Voro for the six months increased 2% year-on-year. Modest increases in throughputs and recoveries at the CIP plant offset the planned decline in grades processed.

Waste stripping at the Voro mine intensified, with a major increase related to the mining of oxidised ore in the Southern pit. Mining at Degtyarskoye continues to decline as the mine is nearing depletion. The Fevralskoye deposit has been placed on care and maintenance and is available for sale.

VARVARA

	3 months ended Jun 30,		% change	6 months ended Jun 30,		% change
	2012	2011		2012	2011
MINING
Waste mined, Kt	6,596	7,796	-15%	12,453	14,322	-13%
Ore mined (open pit), Kt	1,007	939	+7%	1,923	1,707	+13%
PROCESSING
Flotation
Ore processed, Kt	259	237	+9%	487	467	+4%
Grade
Gold, g/t	1.3	1.3	+6%	1.4	1.3	+9%
Copper	0.73%	0.87%	-16%	0.77%	0.88%	-13%
Recovery1
Gold	68.1%	64.2%	+6%	61.7%	63.4%	-3%
Copper	92.0%	88.9%	+3%	91.3%	89.5%	+2%
Production
Gold (in concentrate), Koz	6.9	5.9	+17%	12.0	11.4	+5%
Copper (in concentrate), t	1,624	1,768	-8%	3,179	3,512	-9%
Leaching
Ore processed, Kt	714	619	+15%	1,394	1,220	+14%
Gold head grade, g/t	1.0	1.2	-17%	1.1	1.1	-1%
Gold recovery1	83.6%	82.2%	+2%	85.4%	80.8%	+6%
Gold production (in dore), Koz	18.3	20.1	-9%	37.8	33.2	+14%
TOTAL PRODUCTION
Gold, Koz	25.2	26.1	-3%	49.8	44.6	+12%
Copper, t	1,624	1,768	-8%	3,179	3,512	-9%

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

At Varvara, gold production for the six months 2012 grew 12% year-on-year, while gold production for Q2 was 3% lower year-on-year, due to the decrease in volumes of high-grade third-party ore.

The stripping ratio has declined meaningfully as ore body geometry became simpler and more uniform with depth.

Throughput at both float and leach circuits grew by 9% and 15% year-on-year with capacity utilisation of the processing plant approaching 90%.

Copper production for the quarter grew by 4% quarter-on-quarter as the scheduled reduction in head grades was compensated by increased throughput of the flotation circuit and a slight improvement in recoveries.

OMOLON OPERATIONS

	3 months ended Jun 30,		% change	6 months ended Jun 30,		% change
	2012	2011		2012	2011
MINING
Sopka
Waste mined, Kt	3,210	1,198	+168%	4,931	1,789	+176%
Ore mined (open pit), Kt	128	177	-28%	529	207	+155%
Birkachan
Waste mined, Kt	3,325	2,580	+29%	4,876	4,156	+17%
Ore mined (open pit), Kt	105	302	-65%	590	501	+18%
Tsokol
Waste mined, Kt	1,009	-	NA	1,313	-	NA
Ore mined (open pit), Kt	19	-	NA	31	-	NA
PROCESSING
Kubaka Mill
Ore processed, Kt	177	164	+8%	348	299	+17%
Grade
Gold, g/t	8.0	1.9	+313%	6.1	1.9	+228%
Silver, g/t	244	30	+711%	139	6.7	NM
Recovery1
Gold	96.0%	91.0%	+5%	95.2%	90.4%	+5%
Silver	87.1%	36.2%	+141%	86.4%	42.1%	+105%
Gold production, Koz	46.1	9.2	+402%	65.0	15.7	+313%
Silver production, Moz	1.2	0.016	NM	1.2	0.028	NM
TOTAL PRODUCTION
Gold, Koz	46.1	9.4	+391%	65.0	15.9	+308%
Silver, Moz	1.2	0.02	NM	1.2	0.03	NM

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

Gold production at Omolon in the quarter increased nearly 5-fold year-on-year driven mostly by grade improvement as processing of high-grade ore from Sopka started in the quarter. Silver production increased dramatically for the same reason. The refurbished processing plant with Merrill Crowe section is performing fully in line with expectations.

The total amount of ore trucked by the winter road from Sopka to Kubaka comprised 334 Kt, significantly above budget. 177 Kt were processed in H1 2012, and it is planned that processing of the remaining Sopka ore will be completed in Q3 2012. Q4 production is expected to decline quarter-on-quarter.

Mining activities at both Sopka and Birkachan focused on waste stripping as the existing ore stockpiles are being drawn down to feed the plant. Open-pit mining at Tsokol intensified with a gradual improvement in gold grade profile after accessing deeper levels of mineralisation.

ALBAZINO-AMURSK

	3 months ended Jun 30,		% change	6 months ended Jun 30,		% change
	2012	2011		2012	2011
MINING
Waste mined, Kt	3,322	3,587	-7%	6,472	6,927	-7%
Ore mined (open pit), Kt	365	253	+44%	644	405	+59%
PROCESSING
Albazino concentrator
Ore processed, Kt	351	116	+201%	629	116	+440%
Gold head grade, g/t	4.9	3.8	+30%	4.6	3.8	+30%
Gold recovery1	87.9%	65.7%	+34%	86.3%	65.7%	+34%
Concentrate produced, Kt	29.6	7.5	+296%	51.3	7.5	+296%
Concentrate gold grade, g/t	51.4	38.3	+34%	48.9	38.3	+34%
Gold in concentrate, Koz2	48.9	9.2	+432%	80.6	9.2	+432%
Concentrate sold, Kt	5.4	-	NA	5.4	-	NA
Payable gold in concentrate sold, Koz3	8.3	-	NA	8.3	-	NA
Amursk POX
Concentrate processed, Kt	6.4	-	NA	6.4	-	NA
Gold head grade, g/t	38.3	-	NA	38.3	-	NA
Gold produced, Koz	6.5	-	NA	6.5	-	NA
Recovery	90%	-	NA	90%	-	NA
TOTAL PRODUCTION
Gold, Koz	14.8	-	NA	14.8	-	NA

Notes:     (1) To concentrate

                (2) For information only; not considered as gold produced and therefore not reflected in the table representing total production

                (3) Included in total production upon sale to off-taker

Albazino achieved design recovery and throughput with further improvement expected before year-end.  

The Company resumed sales to a Chinese off-taker in June 2012. Further sales are scheduled for Q3 this year to maximise cash flows during the ramp-up of the Amursk POX plant.

The POX plant is in the middle of the ramp-up stage with lower-grade concentrate and third-party material processed so far to avoid excessive gold losses to tailings. The recovery ramp-up profile is fully in line with plans with no material metallurgical issues encountered so far.

Certain mechanical issues, most importantly defective stainless pipe welding and break-down of dry cake filter presses necessitated several maintenance shutdowns which led to the current operations lagging the original ramp-up schedule by 4-6 weeks. The Company now plans to achieve full design capacity of the POX facility in late October/early November.

MAYSKOYE

	3 months ended Jun 30,		% change	6 months ended Jun 30,			% change
	2012	2011		2012		2011
MINING
Underground development, m	2,809	2,527	+11%	5,665	5,592		+1%
Ore mined (underground), Kt	6	21	-70%	18	41		-56%

Underground development at Mayskoye continued at a stable pace with the commencement of stoping scheduled for Q4 2012 to coincide with the planned start-up of the concentrator in December 2012. 

With the start of the navigation, the remaining equipment is being shipped to the site. Equipment installation at the concentrator is continuing and now focusing on ventilation, piping and instrumentation. Coal-fired boiler house, tailings storage facility and water storage dam have been fully commissioned.

PERSONNEL

To align the organisational structure of Polymetal with the growing scale of Company's operations two regional business units have been created to coordinate the management of operating assets in the Far East.

Magadan Business Unit (MBU) will manage the Dukat Hub, Omolon, and all exploration projects of the Company in the Magadan region. Gennady Kuzmenko, 41, will be the head of the MBU. He joined Polymetal in 2004 and most recently was the MD of Dukat hub since 2010. Earlier, Gennady held various senior positions at Karelsky Okatysh JSC. Mr. Kuzmenko holds a degree in mineral preparation engineering from the G. Plekhanov St. Petersburg Mining Institute and degree in economics from the St. Petersburg Engineering and Economics University, and also holds an MBA from the Russian Presidential Academy of the National Economy.

Mikhail Egorov, 52, was promoted to the position of MD of the Dukat Hub. Mikhail joined Polymetal in 2006 and most recently was Site Manager at Dukat. Mr. Egorov holds a degree in mining engineering from the Karaganda Polytechnic Institute. Prior to joining Polymetal Mikhail held various senior positions at Kazakhmys companies.

Vladimir Bloshkin, 52, was promoted to the position of MD of Omolon. Vladimir joined Polymetal in 2007 and most recently was Site Manager at Lunnoye. Prior to joining Polymetal Vladimir held various senior positions at Kazakhmys companies.

Khabarovsk Business Unit (KBU) will manage Albazino, Amursk, Khakanja and all exploration projects of the Company in the Khabarovsk region. Valentin Martynenko, 36, will be the head of KBU. He joined Polymetal in 2007 and most recently was VP-Technical Services for Albazino. Valentin graduated from the Irkutsk State Technical University with a degree in Underground Mining. He had been working in Khabarovsk region government in a position of Public Civil Counselor for 8 years.

Sergei Antipin, 47, previously MD of Omolon was transferred to the position of MD of Svetloye and Kutyn projects. He joined Polymetal in 2001 and has extensive experience in taking greenfield projects to production having worked previously as, consecutively, MD of Lunnoye, Khakanja and Albazino. Sergei will be responsible for the intensified development of Svetloye and Kutyn, before the Board considers large investments in these projects in the second half of 2013. Earlier, Sergey worked as the Head of refining at the Kolyma precious metals refinery and held a number of senior positions at the Deputatsk Concentrator in Yakutia. Mr. Antipin holds a degree in mineral preparation engineering from the Irkutsk Polytechnic Institute. In 2000 he received a degree in banking and finance from the Novosibirsk State Academy of Economics and Law.

CONFERENCE CALL AND WEBCAST

Polymetal will hold a conference call and webcast on Tuesday, July 31, 2012 at 5:30 pm Moscow time (2:30 pm London time; 9:30 am New York time).

To participate in the call, please dial:

810 8002 198 4011 (toll-free from Russia), or

0800 358 5263 (toll-free from the UK), or

1 877 941 6013 (toll-free from the US), or

44 20 7190 1590 (from outside the UK, the US and Russia), or follow the link:

http://www.cyber-presentation.de/cgi-bin/visitors.ssp?fn=visitor&id=1796

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

A recording of the call will be available on Polymetal's website (www.polymetalinternational.com) and at http://polymetal310712-live.audio-webcast.com immediately after the call. It will also be available at 0800 358 9369 (toll-free from the UK) or 44 20 7959 6720 (from outside the UK), access code 4556889#, from 7:30 pm Moscow time Tuesday, July 31, till 11:59 pm Moscow time Tuesday, August 07, 2012.

Enquiries

Media		Investor Relations
College Hill Leonid Fink Tony Friend	[phone]	Polymetal Pavel Danilin Maxim Nazimok	[phone]
Joint Corporate Brokers
Morgan Stanley Edward Knight Sandip Patodia	[phone]	Canaccord Genuity John Prior 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

 

END

 

 

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