Q4 and Full Year 2012 production results

RNS Number : 6669W

Polymetal International PLC

30 January 2013

 



Release time	IMMEDIATE
Date	30 January 2013

Polymetal International plc

Q4 and Full Year 2012 production results

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 fourth quarter and twelve months ended December 31, 2012.

HIGHLIGHTS

·     Polymetal demonstrated strong operational performance throughout the year. Total gold equivalent production of 1,063 Koz was up 31% compared to 2011 and exceeded the original guidance of 1 Moz by 6%. These excellent results were driven by stable performance at all mature mines, with a notable improvement achieved at Dukat, and successful ramp-up at Omolon and Albazino;

·     Metal sales for the full year exceeded production for both gold and silver, representing an expected de-stockpiling of concentrate and refined metals inventories (most importantly, at Dukat and Omolon) and thus contributing to stronger operating cash flows.

·     Annual gold production was 589 Koz, up 33% year-on-year driven mainly by the successful ramp-up at Omolon and Albazino. Annual silver production was 26.5 Moz, up 33% year-on-year as a result of higher grades and recoveries at Dukat, successful processing of high-grade Sopka ore at Omolon, and increased silver grades at Khakanja.

·     Design daily concentrate throughput at Amursk POX was achieved in late November 2012. However, due to the presence of unexpectedly high chlorine concentrations in process water and certain design weaknesses the plant had to be shut down in late December and currently operates at 60% of design throughput and 9-14 percentage points below design recovery (80-85%). The Company is implementing a series of corrective measures and expects that recovery will slowly improve over Q2 and Q3 while full throughput will be reached in Q4. Polymetal is reviewing the option of resuming Albazino concentrate sale to 3^rd-party off-takers for 2013.

·     A dramatic increase of resource base at Albazino to 6 Moz of gold contained and successful exploration at Kutyn and Svetloye indicate that Polymetal is on track to make development decisions on new asset development in H2 of 2013.

·     The first special dividend in the Company's history of US$ 0.50 per share was paid in January, demonstrating Polymetal's commitment to capital discipline and resulting in a sector-leading dividend yield.

·     The Company re-confirms its 2013 production guidance of 1.2 Moz of gold equivalent. Polymetal currently views as moderate the risk of this guidance not being achieved (amounting to approximately 5% of total gold equivalent production) due to delays in ramping up to the design capacity at the POX facility.

·     Given current macroeconomic environment and particularly recent significant appreciation of the Russian rouble vs. the US Dollar, Polymetal expects total cash costs in 2013 to be approx. US$ 700-725/GE oz and capital expenditures (inclusive of exploration) of approx. US$ 300 million.

"2012 became a year of solid operating results, with reliable delivery on increased production guidance and the successful ramp-up of new mines", said Vitaly Nesis, CEO of Polymetal, commenting on the results. "The operating performance was further supported by substantial increase in resource base, paving the way for development decisions on the third generation of growth assets. In 2013 Polymetal team will be fully focused on unlocking the potential of the Amursk POX plant and the launch of Mayskoye".

	3 months ended Dec 31,		% change1	12 months ended Dec 31,		% change1
	2012	2011		2012	2011
Waste mined, Kt	20,001	18,501	+8%	85,173	80,683	+6%
Underground development, m	12,779	10,515	+22%	46,717	35,150	+33%
Ore mined, Kt	3,099	3,012	+3%	12,591	11,002	+14%
Open-pit	2,677	2,672	+0%	10,937	9,636	+14%
Underground	422	340	+24%	1,654	1,366	+21%
Ore processed, Kt	2,418	2,142	+13%	9,925	8,821	+13%
Production
Gold, Koz	137	136	+1%	589	443	+33%
Silver, Moz	5.9	6.4	-7%	26.5	19.9	+33%
Copper, tonnes	1,670	1,608	+4%	6,567	6,915	-5%
Gold equivalent, Koz2	244	250	-3%	1,063	810	+31%
Sales
Gold, Koz	178	187	-5%	593	448	+32%
Silver, Moz	7.8	7.2	+9%	27.8	17.0	+63%
Copper, tonnes	1,733	2,569	-33%	6,620	6,363	+4%
Revenue, US$m3	571	544	+5%	1,855	1,326	+40%
Safety5
LTIFR	0.90	0.75	+20%	0.59	0.63	-6%
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. 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                 (5) LTIFR =lost time injury frequency rate; FIFR = fatal injury frequency rate

CONFERENCE CALL AND WEBCAST

Polymetal will hold a conference call and webcast on Wednesday, January 30, 2013 at 5:30 pm Moscow time (1:30 pm London time; 8:30 am New York time).

To participate in the call, please dial:

810 8002 097 2044 (toll-free from Russia), or

0800 694 0257 (toll-free from the UK), or

1 866 966 9439 (toll-free from the US), or

44 1452 555 566 (from outside the UK, the US and Russia), or follow the link:

https://webconnect.webex.com/webconnect/onstage/g.php?t=a&d=297111623 

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) immediately after the call. It will also be available at 0871 700 0145 (toll-free from the UK) or 44 14 525 50000 (from outside the UK), access code 92824369#, from 7:30 pm Moscow time Wednesday, January 30, till 16:30 pm Moscow time Wednesday, February 6, 2013.

Enquiries

Media		Investor Relations
College Hill 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]	Canaccord Genuity Andrei Kroupnik 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

DUKAT OPERATIONS

	3 months ended Dec 31,		% change	12 months ended Dec 31,		% change
	2012	2011		2012	2011
MINING
Dukat
Waste mined, Kt	102	252	-59%	967	810	+19%
Underground development, m	6,826	4,946	+38%	24,311	15,705	+55%
Ore mined, Kt	298	336	-11%	1328	1197	+11%
Open-pit	18	78	-76%	149	217	-31%
Underground	279	258	+8%	1,178	981	+20%
Head grades
Open-pit
Gold, g/t				0.5	0.7	-23%
Silver, g/t				267	331	-19%
Underground
Gold, g/t				0.7	0.8	-10%
Silver, g/t				402	400	+1%
Goltsovoye
Underground development, m	1,592	1,316	+21%	5,248	4,238	+24%
Ore mined (underground), Kt	34	8	+331%	84	126	-33%
Silver head grade, g/t				548	467	+17%
Lunnoye + Arylakh
Waste mined, Kt	606	709	-15%	2,591	2,837	-9%
Underground development, m	1,298	831	+56%	4,601	2,444	+88%
Ore mined, Kt	90	86	+4%	370	321	+15%
Open-pit	34	37	-8%	167	158	+6%
Underground	56	50	+13%	203	163	+24%
Head grades
Open-pit
Gold, g/t				0.7	0.9	-16%
Silver, g/t				519	473	+10%
Underground
Gold, g/t				1.3	1.7	-24%
Silver, g/t				294	324	-9%
PROCESSING
Dukat
Ore processed, Kt	366	391	-6%	1,439	1432	+0%
Head grades
Gold, g/t	0.7	0.8	-17%	0.7	0.7	-5%
Silver, g/t	382	430	-11%	401	383	+5%
Recovery1
Gold	84.4%	80.2%	+5%	81.0%	75.6%	+7%
Silver	85.9%	81.7%	+5%	84.3%	77.0%	+10%
Production
Gold, Koz	6.9	8.2	-15%	25.2	24.9	+1%
Silver, Moz	4.0	4.4	-9%	15.5	13.6	+14%
Lunnoye
Ore processed, Kt	82	82	+0%	333	301	+11%
Head grades
Gold, g/t	0.9	1.6	-43%	1.2	1.3	-14%
Silver, g/t	373	474	-21%	411	414	-1%
Recovery1
Gold	88.6%	92.6%	-4%	90.2%	92.1%	-2%
Silver	87.7%	87.5%	+0%	87.7%	87.4%	+0%
Production
Gold, Koz	2.1	3.7	-44%	11.0	11.7	-6%
Silver, Moz	0.8	1.0	-21%	3.7	3.4	+9%
TOTAL PRODUCTION
Gold, Koz	9.0	11.8	-24%	36.2	36.6	-1%
Silver, Moz	4.8	5.4	-11%	19.2	17.0	+13%

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

Quarterly silver production at Dukat increased by 14% compared to previous quarter ("quarter-on-quarter") after SAG mill replacement in August. Silver production for full year 2012 was up 13% compared to 2011 ("year-on-year") driven by increased average grades and sustainably strong recoveries at the Omsukchan concentrator.

The increased amounts of concentrate processed internally at Lunnoye boosted silver sales in Q4 to 5.8 Moz and allowed to achieve a net reduction in concentrate inventories for the full year 2012 despite meaningful production growth. Sales of concentrate to third party off-takers will continue in 2013, while the Company will seek to diversify off-taker base in order to achieve an optimal combination of transportation costs and treatment charges/recoveries.

At Dukat underground mine, ore mined in Q4 grew 8% year-on-year. For the FY 2012, the growth was 20% with total ore mined exceeding 1.17 Mt and average grades stable at ca. 400 g/t silver. Open-pit mining at Dukat is now approaching completion.

At Goltsovoye, mining in 2012 was focused on providing development access to ore body 9 with increased ore tonnage and grade expected in 2013.

At Lunnoye, ore mined in FY 2012 increased by 24% year-on-year, and by 26% quarter-on-quarter. At Arylakh, the deepest levels in the pit were mined with increased silver grades with open-pit mining nearing completion. Underground development is expected to start in Q2 2013.

At Lunnoye plant, throughput increased by 11% year-on-year, with stable recoveries nearing 88% for silver, resulting in increase in silver production to 3.7 Moz, a 9% growth year-on-year. Ongoing debottlenecking at the plant is expected to increase throughput to 400 ktpa by 2014 with additional ore to be sourced from the recently acquired Olcha property.

KHAKANJA

	3 months ended Dec 31,		% change	12 months ended Dec 31,		% change
	2012	2011		2012	2011
MINING
Khakanja + Yurievskoye
Waste mined, Kt	401	1,806	-78%	4,435	9,601	-54%
Underground development, m	225	617	-64%	1,489	1,764	-16%
Ore mined, Kt	368	228	+61%	1359	528	+157%
Open-pit	330	216	+52%	1,211	510	+137%
Underground	38	11	+239%	148	18	+719%
Head grades
Open-pit
Gold, g/t				2.2	2.7	-18%
Silver, g/t				220	206	+7%
Underground
Gold, g/t				6.3	8.5	-27%
Silver, g/t				12	13	-7%
Avlayakan
Waste mined, Kt	470	392	+20%	1,637	1,191	+37%
Ore mined (open pit), Kt	20	34	-40%	79	128	-38%
Head grades
Gold, g/t				15.0	17.1	-12%
Silver, g/t				124	38	+229%
Ozerny
Waste mined, Kt	449	-	NA	449	-	NA
Ore mined (open pit), Kt	56	-	NA	56	-	NA
Head grades
Gold, g/t				4.8	-	NA
Silver, g/t				46	-	NA
PROCESSING
Ore processed, Kt	160	148	+8%	622	617	+1%
Grade
Gold, g/t	5.2	6.6	-21%	4.8	4.6	+4%
Silver, g/t	233	244	-4%	277	173	+60%
Recovery1
Gold	96.2%	87.0%	+11%	95.6%	92.3%	+4%
Silver	80.2%	78.3%	+2%	80.0%	77.7%	+3%
TOTAL PRODUCTION
Gold, Koz	25.3	26.3	-4%	90.8	84.4	+8%
Silver, Moz	0.9	0.9	+10%	4.4	2.6	+66%

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

Annual gold and silver production at Khakanja increased by 8% and 66% year-on-year, respectively, due to increased grades processed from Khakanja's pit 3 (silver) and Avlayakan (gold). Production in Q4 was lower quarter-on-quarter as mining and processing of Yurievskoye ore have been completed, resulting in decrease in overall average grade.

Ore mining at Ozerny commenced in Q4 in accordance with schedule, with first 13Kt successfully processed in 2012. In Q1 2013 ore mined will be trucked by winter road, and the mine will then build up ore stockpile for processing in 2014.

At Avlayakan, stripping intensified in Q4 to prepare for active ore mining for further shipment to Khakanja in the summer navigation 2013. It is expected that open-pit mining at Avlayakan based on current resources will be completed in 2014, followed then by underground development.

Polymetal deeply regrets the loss of Amurskaya ship and its crew in the Okhotsk Sea in October 2012. This third party vessel was contracted by a subsidiary of Polymetal to transport the Avlayakan ore from the local port of Kiran for further processing at Khakanja. In order to secure ore supplies and ensure appropriate safety procedures in this complex logistic chain in the future, the Company is currently engaged in consultations with the regulatory authorities on that issue, and has decided to invest ca. US$ 10 mln in its own barge fleet in the region.

VORO

	3 months ended Dec 31,		% change	12 months ended Dec 31,		% change
	2012	2011		2012	2011
MINING
Voro
Waste mined, Kt	2,747	2,483	+11%	11,265	10,954	+3%
Ore mined (open pit), Kt	325	209	+56%	1,684	1,665	+1%
-     primary	183	171	+7%	758	751	+1%
-     oxidised	142	37	+279%	926	914	+1%
Gold head grades
-     primary, g/t				5.8	5.8	-1%
-     oxidized, g/t				1.7	1.7	-0%
Degtyarskoye
Waste mined, Kt	74	302	-75%	1,125	1,591	-29%
Ore mined (open pit), Kt	35	46	-24%	104	194	-46%
Gold head grade, g/t				3.0	4.2	-28%
PROCESSING
Voro Heap Leach
Ore stacked, Kt	142	82	+72%	901	902	-0%
Gold head grade, g/t	1.2	1.7	-29%	1.6	1.7	-9%
Gold recovery1				74.1%	74.3%	-0%
Gold production, Koz	9.6	9.4	+2%	32.2	31.7	+1%
Voro CIP
Ore processed, Kt	225	230	-2%	917	901	+2%
Gold head grade, g/t	5.0	6.1	-17%	5.3	5.9	-11%
Gold recovery	79.5%	78.4%	+1%	78.9%	77.7%	+2%
Gold production, Koz	30.1	32.1	-6%	118.5	125.4	-6%
TOTAL PRODUCTION
Gold, Koz2	39.6	41.5	-4%	154.4	157.2	-2%
Silver, Moz	0.033	0.031	+8%	0.154	0.151	+2%

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

                (2) Including the effect of rounding

Annual gold production at Voro for the year was essentially flat, with heap leach facility operating at design parameters and CIL plant increasing both throughput and recoveries by 2% year-on-year thus compensating for decline in average grade processed.

In Q4 the Company has completed mining and subsequently sold Degtyarskoye deposit. Fevralskoye was also sold in Q4.

The open-pit mine at Voro demonstrated stable performance in terms of both volume and grade. In 2013 primary ore will continue to be mostly sourced from the Central pit with potential additional third-party supplies, and oxidized ore - from the South pit.

VARVARA

	3 months ended Dec 31,		% change	12 months ended Dec 31,		% change
	2012	2011		2012	2011
MINING
Waste mined, Kt	6,597	6,392	+3%	26,072	25,993	+0%
Ore mined (open pit), Kt	811	1,143	-29%	3,609	3,983	-9%
- float ore				1,031	1,508	-32%
- leach ore				2,577	2,475	+4%
Head grades
- gold, float ore, g/t				1.3	1.1	+13%
- copper, float ore, %				0.8%	0.6%	+31%
- gold, leach ore, g/t				0.9	0.8	+11%
PROCESSING
Flotation
Ore processed, Kt	256	232	+11%	992	950	+4%
Grade
Gold, g/t	1.0	1.2	-17%	1.2	1.3	-4%
Copper	0.75%	0.82%	-9%	0.76%	0.87%	-13%
Recovery1
Gold	57.1%	56.1%	+2%	60.7%	60.9%	-0%
Copper	91.4%	90.6%	+1%	91.6%	89.4%	+2%
Production
Gold (in concentrate), Koz	4.3	4.4	-0%	22.4	22.1	+1%
Copper (in concentrate), t	1,670	1,608	+4%	6,567	6,915	-5%
Leaching
Ore processed, Kt	673	633	+6%	2,654	2,523	+5%
Gold head grade, g/t	1.1	1.1	+8%	1.2	1.1	+9%
Gold recovery1	83.9%	84.6%	-1%	84.6%	81.9%	+3%
Gold production (in dore), Koz	22.0	17.2	+28%	78.6	69.9	+13%
TOTAL PRODUCTION
Gold, Koz	26.4	21.5	+23%	101.0	92.0	+10%
Copper, t	1,670	1,608	+4%	6,567	6,915	-5%

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

At Varvara, gold production in Q4 grew 23% year-on-year, and by 10% for full year 2012 achieving more than 100 Koz level. The growth was mainly attributable to leach circuit where throughput, grades and recoveries increased by 5%, 9% and 3%, respectively. The leverage in throughput was achieved by securing sources of third-party ore in the region, and the Company expects to continue this practice in 2013.

Copper production in 2012 was 6.6 Kt, down 5% year-on-year as a result of lower grades in ore processed in the period, partially compensated by increased throughput and improved recoveries (+4% and +2% year-on-year, respectively). Copper production in Q4 was up 4% year-on-year driven by increased throughput at the flotation circuit.

Ore mining at Varvara was 9% lower year-on-year due to volatility of the stripping ratios at different parts of the deposit. However, the average gold grades for both float and leach ores demonstrated positive dynamics.

In 2013 the Company will continue mining works in the central and northern parts of the pit and plans to start stripping in the pit's southern part.

OMOLON OPERATIONS

	3 months ended Dec 31,		% change	12 months ended Dec 31,		% change
	2012	2011		2012	2011
MINING
Sopka
Waste mined, Kt	1,580	1,320	+20%	9,054	4,956	+83%
Ore mined (open pit), Kt	295	244	+21%	1271	735	+73%
Head grades
Gold, g/t				2.3	2.6	-14%
Silver, g/t				97	86	+13%
Birkachan
Waste mined, Kt	1,664	1,299	+28%	9,133	7,925	+15%
Ore mined (open pit), Kt	445	345	+29%	1,290	1,192	+8%
Gold head grade, g/t				1.8	1.6	+7%
Tsokol
Waste mined, Kt	1,054	-	NA	3,284	-	NA
Ore mined (open pit), Kt	46	-	NA	101	-	NA
Gold head grade, g/t				5.2	-	NA
PROCESSING
Kubaka Heap Leach
Ore stacked, Kt	44	-	NA	116	-	NA
Gold head grade, g/t	1.2	-	NA	1.1	-	NA
Gold production, Koz	-	0.7	-100%	-	4.0	-100%
Kubaka Mill
Ore processed, Kt	184	116	+59%	724	574	+26%
Grade
Gold, g/t	3.7	3.6	+1%	5.9	2.4	+141%
Silver, g/t	14.7	18.9	-22%	135.1	12.1	NM
Recovery1
Gold	89.4%	93.1%	-4%	94.2%	91.8%	+3%
Silver	69.1%	62.9%	+10%	87.9%	62.9%	+40%
Gold production, Koz	20.1	11.1	+81%	129.0	39.2	+229%
Silver production, Moz	0.1	0.1	+92%	2.7	0.2	NM
TOTAL PRODUCTION
Gold, Koz	20.1	11.8	+71%	129.0	43.2	+199%
Silver, Moz	0.1	0.1	+92%	2.7	0.2	NM

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

(2) NM = not meaningful

At Omolon, the quarterly gold and silver production decrease was driven by completion of processing high-grade ore from Sopka and seasonal scheduled switching to relatively lower-grade ores from Birkachan and Tsokol. Total gold equivalent produced at Omolon for FY 2012 was 173 Koz, or 16% of the Group's total gold equivalent production, exceeding expectations due to the shift of high-grade ore trucking and processing from 2013 to 2012.

At Birkachan, ore mined grew 74% quarter-on-quarter as active ore mining both for CIP and HL circuits continues after a massive stripping campaign earlier in the year. At Sopka, trucking of ore by winter road successfully commenced in January 2013 (with more than 85 Kt trucked during the first 4 weeks of the year) and is on track to transport more than 250 Kt of ore during January-April. At Tsokol, ore mining increased 88% quarter-on-quarter as the initial stripping had been completed.

Low-grade ore stacking at Birkachan HL continues, with a total 116 Kt of ore stacked in the second half of 2012. Stationary carbon-in-column plant at Birkachan to recover gold from heap leaching is on track to be commissioned in June 2013.

ALBAZINO-AMURSK

	3 months ended Dec 31,		% change	12 months ended Dec 31,		% change
	2012	2011		2012	2011
MINING
Waste mined, Kt	4,256	3,546	+20%	15,160	14,584	+4%
Ore mined (open pit), Kt	263	321	-18%	1216	841	+45%
Gold head grade, g/t				5.4	4.3	+27%
PROCESSING
Albazino concentrator
Ore processed, Kt	286	228	+25%	1226	620	+98%
Gold head grade, g/t	6.0	4.0	+50%	5.3	4.3	+23%
Gold recovery1	87.8%	79.2%	+11%	86.9%	70.2%	+24%
Concentrate produced, Kt	31.8	18.0	+77%	114.8	43.1	+166%
Concentrate gold grade, g/t	47.1	39.2	+20%	49.0	42.7	+15%
Gold in concentrate, Koz2	48.3	22.7	+112%	180.7	59.2	+205%
Concentrate sold, Kt	8.6	15.3	-44%	40.1	20.0	+101%
Payable gold in concentrate sold, Koz3	13.0	22.9	-43%	63.5	29.8	+113%
Amursk POX
Concentrate processed, Kt	5.7	-	n/a	15.9	-	n/a
Gold head grade, g/t	36.5	-	n/a	38.0	-	n/a
Recovery	71%	-	n/a	79%	-	n/a
Gold produced, Koz	3.4	-	n/a	14.0	-	n/a
TOTAL PRODUCTION
Gold, Koz	16.4	22.9	-29%	77.5	29.8	+160%

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 concentrator reached design throughput and recovery in Q2. Q4 performance was negatively impacted by mechanical issues at diesel gensets which were fully addressed in the period. A total of 181 Koz of gold in concentrate was produced, with 63.5 Koz of payable gold included in total production upon sale to Chinese off-takers. Shipments of concentrate to China in Q4 were limited due to weather-related shipment restrictions in the sea of Okhotsk.

Ore mined grew 45% year-on-year, along with a 27% increase in average grade mined. In 2013 the operation plans to implement the program of continuous improvement aimed at tighter dilution control and plant debottlenecking.

After a significant increase in resources Polymetal is on track to deliver a reserve estimate and the development plan for potential expansion of Albazino in Q3 2013. Underground in-fill drilling required to upgrade resources and convert them to reserves has started in November.  

In October-November the Amursk POX plant was steadily ramping up to target daily throughput, with several scheduled shutdowns, which were required to complete the necessary upgrades of high-pressure stainless-steel pipes, weighing down on total amount of concentrate processed and average recoveries. In early December the plant successfully ramped up to full throughput and ~90% recovery.

However, in mid-December the presence of chlorine in process water caused significant decrease in recoveries and accelerated corrosion of certain parts of the circuit made from complex alloys (Inconel). To prevent loss of gold to tailings the facility was shut down in late December. Subsequently, the source of chlorine in process water has been traced to limestone used to neutralize discharge from the autoclave. Limestone supply has been changed accordingly and measures to implement chlorine control for all incoming consumables have been put in place.

Gold production at the POX plant for Q4 was lower than planned at 3.4 Koz, in addition, negatively impacted by a significant build-up of work-in-progress inventory in the circuit (mostly in the form of loaded carbon).

The POX facility was successfully restarted in mid-January. Gold recoveries are expected to normalize once all chlorine is removed from the flow sheet (with water in dry tailings) and additional water treatment equipment is installed to handle fluctuations in the chemical composition of concentrate and make-up process water.

Throughput will continue to be affected until Inconel parts are replaced by the ones made from titanium and ferralium (not susceptible to corrosion in the presence of chlorine-ion). Full replacement of Inconel for Titanium will require a 6-week shutdown in Q2 2013. During this shutdown certain changes to lime/limestone preparation and concentrate intake sections will be undertaken as the actual properties of concentrate in the process differ from certain design assumptions. The Company expects to achieve steady-state operation of the facility at design throughput and recovery in Q4 of this year.

To avoid build-up of excessive concentrate stockpiles, the Company is reviewing the possibility to restart sale of concentrates from Albazino in Q2 of 2013.

MAYSKOYE

	3 months ended Dec 31,		% change	12 months ended Dec 31,			% change
	2012	2011		2012		2011
MINING
Underground development, m	2,838	2,805	+1%	11,068	10,999		+1%
Ore mined (underground), Kt	15	13	+9%	40	79		-49%
Gold head grade, g/t				9.9	9.8		+1%

Underground development at Mayskoye continues in line with the plan, with first ore mined from stopes in December. Ore stockpile currently accumulated at the mine is sufficient for more than three months of concentrator throughput.

Air-lifting of the remaining minor equipment to be delivered on-site for the construction of Mayskoye concentrator continues. Construction is on track for the revised concentrator start-up deadline in April 2013, with works currently concentrated on installation of electrical, controlling, and auxiliary equipment.

Given the more than two-fold resource expansion at Albazino and targeted construction decision for the expansion of Albazino mine and concentrator in H2 2013, the Company will assess and make the decision on 3^rd-party concentrate off-take for 2013 in Q2. This will potentially allow the Company to significantly reduce the capital expenditure on the expansion project by fully re-allocating the existing POX capacity to processing of concentrate from Albazino.

Capital expenditure

The Company increases its capital expenditure plans for 2013 from US$ 210 mln to US$ 300 mln as a result of:

·      accelerated development of infrastructure at key advanced greenfield exploration targets, Kutyn and Svetloye (approx. US$ 30 mln);

·      additional expenses for continued underground exploration and feasibility study for Albazino-2 (approx. US$ 10 mln);

·      decision to invest in own barge fleet in the Far East of Russia to ensure stability and safety of complex logistics chains (approx. US$ 10 mln);

·      additional capital expenditure required for completion of Mayskoye concentrator (approx. US$ 15 mln);

·      additional expenditure required for replacement of Inconel parts at Amursk POX (approx. US$ 10 mln);

·      exploration at the recently acquired Svetlobor Platinum project;

·      other minor revisions to maintenance capex.

 

END

 

 

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