Q4 and full year 2014 production results

RNS Number : 4650D

Polymetal International PLC

29 January 2015

 



Release time	IMMEDIATE
Date	29 January 2015

Polymetal International plc

Q4 and full year 2014 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 fourth quarter and twelve months ended December 31, 2014.

HIGHLIGHTS

·     In 2014 Polymetal increased its gold equivalent ("GE") production by 12% to 1.43 Moz and exceeded both its original production guidance of 1.3 Moz of GE by 10% and the updated production guidance of 1.365 Moz by 5%. This achievement was mostly driven by the full ramp-up of Mayskoye and strong operational delivery at Dukat and Omolon.

·     Annual gold production for the year increased by 17% to 945 Koz. Annual silver production increased by 5% to 28.7 Moz. The share of gold in revenue composition increased to 69% compared to 63% in 2013.

·     On 23 January 2015 the Company paid a special dividend of US$ 0.20 per share, representing approximately US$ 84 million, which brings total dividends paid for the previous twelve months to US$ 0.36 per share, or US$ 149 million (representing an annual dividend yield of 3.9%¹).

·     Net debt at 31 December 2014 decreased by US$ 83 million compared to 30 September 2014 to US$ 1,249 million (this figure already includes the liability for special dividend payable) as the Company continued to generate free cash flow driven by of strong operating and cost performance.

·     Polymetal continues to benefit from the depreciation of the Russian rouble against the US dollar. The Company reaffirms its full-year Total Cash Cost ("TCC) guidance of US$ 625-675 per GE oz, and expects All-in Sustaining Cash Cost ("AISC") of US$ 900-950 per GE oz.

·     The Company reiterates its production guidance of 1.35 Moz of GE for 2015 and 2016. In 2015, Polymetal expects a lower TCC of US$ 575-625 per GE oz and AISC of US$ 750-800 per GE oz. Capital expenditure in 2015 is expected to total approximately US$ 240 million (including exploration, capitalised stripping and spending on the Kyzyl project). This guidance is heavily dependent on the RUB/USD exchange rate, inflation in Russia, and oil price dynamics and is based on management's current estimates of these variables in 2015.

"In 2014 Polymetal materially exceeded its production guidance for the third consecutive year despite a challenging market environment. Over the last several years, Polymetal has continued to consistently deliver value to shareholders through substantial dividend payments", said Vitaly Nesis, the Group CEO, commenting on the results. "We are confident in our outlook for 2015 and intend to continue dividend payments in the current market environment."

___________________

(1)   For the last twelve months ended January 23, 2015. Dividend yield is calculated as dividends paid during the period divided by average share price.

	3 months ended Dec 31,		% change1	12 months ended Dec 31,		% change1
	2014	2013		2014	2013
Waste mined, Kt	17,665	21,028	-16%	77,458	84,956	-9%
Underground development, m	15,832	14,694	+8%	61,417	56,258	+9%
Ore mined, Kt	3,693	2,581	+43%	13,706	10,376	+32%
Open-pit	2,973	1,983	+50%	11,046	7,975	+39%
Underground	720	598	+20%	2,660	2,404	+11%
Ore processed, Kt	2,771	2,728	+2%	11,300	10,749	+5%
Production
Gold, Koz	299	212	+41%	945	805	+17%
Silver, Moz	5.5	5.7	-3%	28.7	27.2	+5%
Copper, tonnes	-	749	-100%	1,631	4,841	-66%
Gold equivalent, Koz2	391	310	+26%	1,431	1,282	+12%
Sales
Gold, Koz	337	268	+26%	943	818	+15%
Silver, Moz	8.1	7.8	+4%	29.3	27.4	+7%
Copper, tonnes	729	1,204	-39%	1,029	6,165	-83%
Revenue, US$m3	513	492	+4%	1,689	1,715	-2%
Net debt4	1,249	1,332	-6%	1,249	1,045	+20%
Safety5
LTIFR	0.70	1.20	-42%	0.65	0.59	+10%
FIFR	-	0.24	-100%	0.18	0.06	+200%
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. Comparative information is presented for 30 June 2014 (for the three months period) and 31 December 2013 (for the nine months period).                 (5) LTIFR =lost time injury frequency rate per one million hours worked; FIFR = fatal injury frequency rate per one million hours worked.

PRODUCTION BY MINE

	3 months ended Dec 31,		% change1 (Y-o-Y)	3 months ended Sep 30,	% change1 (Q-o-Q)	12 months ended Dec 31,		% change1 (Y-o-Y)
	2014	2013		2014		2014	2013
GOLD EQ. (KOZ) 2
Dukat operations	86	94	-8%	113	-24%	443	409	9%
Albazino-Amursk	51	68	-25%	62	-18%	227	238	-4%
Mayskoye	98	13	668%	42	134%	143	48	195%
Omolon operations	41	25	61%	69	-41%	226	158	43%
Voro	43	36	20%	42	2%	159	154	3%
Varvara	29	31	-5%	24	23%	106	131	-19%
Khakanja	43	44	-3%	37	17%	127	144	-12%
TOTAL	391	310	26%	388	1%	1,431	1,282	12%

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, 29 January 17:30 Moscow time (14:30 London time).

To participate in the call, please dial:

8 10 8002 041 4011 access code 679755# (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=2515

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=2515. 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 291542#, from 6:30 pm Moscow time Thursday, January 29, till 6:30 pm Moscow time Thursday, February 5, 2015.

Enquiries

Media		Investor Relations
Instinctif Partners Leonid Fink Tony Friend	[phone]	Polymetal Maxim Nazimok Evgenia Onuschenko	[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.

DUKAT OPERATIONS

	3 months ended Dec 31,		% change	12 months ended Dec 31,		% change
	2014	2013		2014	2013
MINING
Dukat
Underground development, m	8,354	7,302	+14%	31,204	30,717	+2%
Ore mined, Kt	392	308	+28%	1,468	1,253	+17%
Head grades
Gold, g/t				0.76	0.91	-16%
Silver, g/t				392	423	-7%
Goltsovoye
Underground development, m	1,617	1,873	-14%	6,742	7,102	-5%
Ore mined (underground), Kt	53	44	+21%	191	168	+14%
Silver head grade, g/t				624	624	-
Lunnoye + Arylakh
Waste mined, Kt	-	144	-100%	233	1,034	-78%
Underground development, m	953	1,540	-38%	4,876	6,612	-26%
Ore mined, Kt	89	85	+4%	384	394	-3%
Open-pit	-	12	-100%	36	86	-58%
Underground	89	73	+22%	348	308	+13%
Head grades
Open-pit
Gold, g/t				0.35	0.52	-33%
Silver, g/t				384	442	-13%
Underground
Gold, g/t				1.46	1.26	+16%
Silver, g/t				421	345	+22%
PROCESSING
Dukat
Ore processed, Kt	444	393	+13%	1,711	1,574	+9%
Head grades
Gold, g/t	0.38	0.72	-47%	0.66	0.73	-9%
Silver, g/t	315	425	-26%	406	425	-5%
Recovery1
Gold	79.7%	80.8%	-1%	85.4%	83.7%	+2%
Silver	83.4%	85.9%	-3%	86.5%	86.3%	+0%
Production
Gold, Koz	4.3	6.7	-36%	31.5	30.3	+4%
Silver, Moz	3.7	4.3	-13%	19.5	18.3	+7%
Lunnoye
Ore processed, Kt	102	81	+26%	400	338	+18%
Head grades
Gold, g/t	1.4	1.2	+18%	1.4	1.1	+21%
Silver, g/t	385	348	+11%	411	391	+5%
Recovery1
Gold	89.5%	86.3%	+4%	85.6%	85.6%	+0%
Silver	91.3%	89.7%	+2%	91.8%	89.3%	+3%
Production
Gold, Koz	3.7	2.5	+47%	13.9	10.2	+36%
Silver, Moz	1.0	0.8	+26%	4.4	3.8	+16%
TOTAL PRODUCTION
Gold, Koz	8.0	9.2	-13%	45.3	40.6	+12%
Silver, Moz	4.7	5.1	-7%	23.9	22.1	+8%

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

At Dukat, silver production for the full year 2014 was 23.9 Moz, up 8% year-on-year, while gold production grew to 45.3 Koz, up 12% year-on-year, driven by a solid improvement in throughput and stable grades. Quarterly silver production at Dukat decreased to 4.7 Moz, a decrease of 7% year-on-year, which was driven by the planned decline in grade profile at the Dukat underground mine due to mine sequencing.

At Dukat, the amount of ore mined in Q4 and for the full year increased respectively by 28% and 17% year-on-year in line with the expanded processing capacity of the plant. At Goltsovoye, the amount of ore mined in Q4 increased 20% quarter-on-quarter and 21% year-on-year due to sustained improvements in dilution control and the reduction of mining losses.

The scheduled quarterly decrease in grades processed at the Omsukchan concentrator was partially offset by growth in plant throughput, which increased by 13% year-on-year to 444 Kt. The throughput increase was achieved as the plant was debottlenecked by shifting from three-stage to two-stage milling. Average recoveries during the quarter decreased slightly to 83.4% for silver and 79.7% for gold as a result of the scheduled decrease in grades.

At Arylakh, the underground development continued following the completion of open-pit mining in Q2. The ore is still predominantly sourced from Lunnoye underground mine with a variable grade profile driven by stope sequencing.

ALBAZINO-AMURSK 

	3 months ended Dec 31,		% change	12 months ended Dec 31,		% change
	2014	2013		2014	2013
MINING
Waste mined, Kt	4,243	3,494	+21%	16,321	16,135	+1%
Underground development, m	994	811	+23%	3,325	919	+262%
Ore mined (open pit), Kt	377	398	-5%	1,566	1,338	+17%
Gold head grade, g/t				4.9	5.5	-12%
PROCESSING
Albazino concentrator
Ore processed, Kt	395	406	-3%	1,609	1,513	+6%
Gold head grade, g/t	5.0	5.0	-0%	4.8	5.6	-13%
Gold recovery1	86.8%	88.5%	-2%	87.6%	88.2%	-1%
Concentrate produced, Kt	36.6	34.7	+5%	136.0	139.8	-3%
Concentrate gold grade, g/t	46.5	51.3	-9%	50.0	53.1	-6%
Gold in concentrate, Koz2	54.7	57.3	-4%	218.5	238.6	-8%
Concentrate sold, Kt	-	5.5	-100%	-	49.3	-100%
Payable gold in concentrate sold, Koz	-	9.4	-100%	-	79.1	-100%
Amursk POX
Concentrate processed, Kt	32.6	40.2	-19%	152.7	127.2	+20%
Gold head grade, g/t	48.3	50.1	-4%	50.1	49.8	+1%
Recovery	94.5%	93.0%	+2%	93.8%	86.0%	+9%
Gold produced, Koz	50.7	58.7	-14%	227.3	158.7	+43%
TOTAL PRODUCTION
Gold, Koz	50.7	68.0	-25%	227.3	237.7	-4%

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.

At Albazino/Amursk, gold production in 2014 amounted to 227.3 Koz, down 4% year-on-year after de-stockpiling through sales to off-takers in 2013.

The amount of ore mined at Albazino open-pit in 2014 increased by 17% to 1,566 Kt, driven by the start of mining at the new Olga pit and commensurate with increased processing capacity.

Underground development originally excavated for exploration purposes will be used in 2015 to mine trial stopes to finalize the parameters of the future underground mine comprising Olga and Nadezhda zones.

Gold production at the POX plant in Q4 decreased by 18% quarter-on-quarter to 50.7 Koz as the POX plant went through a scheduled maintenance shutdown in October. Recoveries at the POX plant, at 94.5% in the quarter, exceeded the design level of 94%.

MAYSKOYE

	3 months ended Dec 31,		% change	12 months ended Dec 31,		% change
	2014	2013		2014	2013
MINING
Underground development, m	2,395	2,357	+2%	10,536	9,989	+5%
Ore mined (underground), Kt	186	174	+7%	653	667	-2%
Gold head grade, g/t				8.4	7.4	+14%
PROCESSING
Ore processed, Kt	201	176	+15%	807	488	+66%
Gold head grade, g/t	8.1	7.8	+5%	8.7	7.1	+22%
Gold recovery1	86.7%	81.9%	+6%	83.6%	77.7%	+8%
Concentrate produced, Kt	21.5	19.6	+10%	92.7	48.7	+90%
Concentrate gold grade, g/t	66.2	57.3	+16%	63.1	55.3	+14%
Gold in concentrate, Koz2	45.8	36.1	+27%	188.1	86.6	+117%
Concentrate sold, Kt	50.1	7.6	+559%	72.4	30.3	+139%
Payable gold in concentrate sold, Koz	90.9	12.8	+610%	130.2	48.4	+169%
Amursk POX
Concentrate processed, Kt	6.4	0.02	NM3	9.9	0.02	NM
Gold head grade, g/t	57.4	54.3	+6%	55.3	54.3	+2%
Recovery	94.5%	-	NA4	92.2%	-	NA
Gold produced, Koz	7.5	-	NA	12.4	-	NA
TOTAL PRODUCTION
Gold, Koz	98.4	12.8	+668%	142.6	48.4	+195%

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.

(3) NM = not meaningful.

(4) NA = not applicable.

Total gold produced at Mayskoye during 2014 increased almost three-fold to 142.6 Koz. This was primarily driven by higher than average grades and increased processing volumes, as well as the commencement of concentrate processing at the Amursk POX plant and greater than two-fold increase of concentrate sales to China.

At the Mayskoye underground mine, underground development and the amount of ore mined increased by 5% in 2014 compared to 2013. The average grade processed in 2014 at the Mayskoye concentrator increased 22% year-on-year to 8.7 g/t bringing the 12 month average in line with the reserve average. This has also had a positive impact on recoveries at the concentrator, which were 86.7% in Q4.

Sales to off-takers in China peaked in October and November. During the quarter, the company sold 50 Kt of concentrate with the average grade of 63 g/t of gold, contributing 91 Koz of payable gold to the annual production. Total sales of concentrate in 2014 amounted to 130.2 Koz of payable gold.

Almost 10 Kt of concentrate was processed at the Amursk POX plant together with Albazino concentrate during 2014. In the fourth quarter the POX plant achieved above-design recoveries of 94.5% and contributed 7.5 Koz to total gold production from Mayskoye in Q4. The share of material processed at the Amursk POX compared to off-take sales is expected to be larger in 2015 as a sufficient amount of concentrate has now been delivered to the POX plant. The actual split will be determined on the basis of metallurgical properties of the material in order to optimise costs and recovery.

OMOLON OPERATIONS

	3 months ended Dec 31,		% change	12 months ended Dec 31,		% change
	2014	2013		2014	2013
MINING
Sopka
Waste mined, Kt	133	995	-87%	3,670	5,912	-38%
Ore mined (open pit), Kt	80	159	-50%	922	672	+37%
Head grades
Gold, g/t				4.6	3.9	+18%
Silver, g/t				175	142	+23%
Dalneye
Waste mined, Kt	1,230	1,986	-38%	2,385	3,695	-35%
Ore mined (open pit), Kt	335	268	+25%	550	584	-6%
Head grades
Gold, g/t				3.5	3.6	-3%
Silver, g/t				74	74	-
Tsokol
Waste mined, Kt	489	1,442	-66%	3,774	4,998	-25%
Ore mined (open pit), Kt	130	68	+91%	317	223	+42%
Gold head grade, g/t				4.3	4.8	-11%
Birkachan
Waste mined, Kt	-	-	NA	535	1,932	-72%
Underground development, m	649	-	NA	929	-	NA
Ore mined (open pit), Kt	-	-	NA	698	586	+19%
Gold head grade, g/t				2.6	1.8	+43%
TOTAL HUB
Waste mined, Kt	1,852	4,423	-58%	10,364	16,537	-37%
Ore mined , Kt	545	495	+10%	2,487	2,065	+20%
PROCESSING
Birkachan Heal Leach
Gold production, Koz	1.9	-	NA	6.0	-	NA
Kubaka Mill
Ore processed, Kt	215	217	-1%	825	767	+8%
Grade
Gold, g/t	4.6	4.0	+15%	6.7	5.1	+31%
Silver, g/t	44	8	+462%	133	118	+13%
Recovery1
Gold	93.7%	93.9%	-0%	94.7%	95.3%	-1%
Silver	78.8%	78.8%	+0%	83.5%	88.4%	-6%
Gold production, Koz	32.7	24.0	+36%	170.4	115.2	+48%
Silver production, Moz	0.4	0.1	+381%	2.9	2.6	+14%
TOTAL PRODUCTION
Gold, Koz	34.5	24.0	+44%	176.4	115.2	+53%
Silver, Moz	0.4	0.1	+390%	2.9	2.6	+15%

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

At Omolon, gold and silver production increased by 53% and 15% year-on-year, respectively, driven by a higher grade profile, as well as an 8% increase in Kubaka mill throughput. In Q4, the Kubaka plant focused on processing Birkachan and Tsokol ores.

Open pit mining at Tsokol is nearing completion in Q2 2015 with underground development planned to commence in Q3 2015.

At Sopka, open-pit mining was completed in Q4 2014 with ore processing to be completed in Q3 2015. Potential for underground mining will be evaluated after the completion of detailed in-fill drilling campaign.

At Birkachan, open pit mining was completed in June, and the underground development started in Q3. Ore stoping is scheduled to start in Q4 2015. Open-pit mining at Oroch will start in Q2 2015. Ore from Oroch will be trucked by winter road starting from Q4 2015 for processing in 2016.

In 2015, processing will be split between Sopka, Birkachan, Dalnee and Tsokol with major volumes to be processed from Sopka and Birkachan.

At the Birkachan heap leach, irrigation of the existing leach pads continued in the quarter and 6 Koz of gold were recovered from the solution during twelve months 2014. There will be no additional ore stacking in 2015 as multi-year recoveries will continue to be monitored.

VORO

	3 months ended Dec 31,		% change	12 months ended Dec 31,		% change
	2014	2013		2014	2013
MINING
Voro
Waste mined, Kt	2,881	2,745	+5%	11,030	11,099	-1%
Ore mined (open pit), Kt	296	347	-15%	1,893	1,787	+6%
-     primary	221	205	+7%	935	807	+16%
-     oxidised	76	141	-46%	958	981	-2%
Gold head grades
-     primary, g/t				5.2	5.7	-8%
-     oxidized, g/t				1.8	1.5	+17%
PROCESSING
Voro Heap Leach
Ore stacked, Kt	60	164	-63%	747	850	-12%
Gold head grade, g/t	1.3	1.2	+8%	1.4	1.4	+6%
Gold recovery	74.4%	72.9%	+2%	74.2%	73.7%	+1%
Gold production, Koz	9.2	8.0	+15%	27.7	23.5	+18%
Voro CIP
Ore processed, Kt	219	230	-5%	915	924	-1%
Gold head grade, g/t	5.2	5.0	+5%	5.6	5.7	-1%
Gold recovery	78.8%	79.7%	-1%	82.5%	79.9%	+3%
Gold production, Koz	33.0	27.4	+20%	129.8	129.2	+0%
TOTAL PRODUCTION
Gold, Koz1	42.2	35.4	+19%	157.5	152.7	+3%
Silver, Moz	0.030	0.014	+115%	0.101	0.079	+27%

Note:       (1) Including the effect of rounding

Gold production at Voro in 2014 increased slightly by 3% year-on-year to 157.5 Koz as higher recoveries at CIP plant offset lower grades.

Ore mined during 2014 was 6% higher year-on-year, with the majority of the increase attributable to primary ore.

Ore stacking at the heap leach plant will be nearing completion in 2015, with the 400-450 Kt of ore to be stacked during the year. Processing at the CIP plant will continue at a steady pace. Near-mine exploration continues to focus on the potential sources of heap leachable mineralisation.

VARVARA

	3 months ended Dec 31,		% change	12 months ended Dec 31,		% change
	2014	2013		2014	2013
MINING
Waste mined, Kt	6,759	7,883	-14%	30,552	31,053	-2%
Ore mined (open pit), Kt	1,295	558	+132%	3,985	2,008	+98%
- float ore				750	499	+50%
- leach ore				3,235	1,510	+114%
Head grades
- gold, float ore, g/t				1.4	1.3	+6%
- copper, float ore, %				0.45%	0.64%	-30%
- gold, leach ore, g/t				1.2	1.2	-3%
PROCESSING
Flotation
Ore processed, Kt	-	244	-100%	547	1,005	-46%
Grade	-
Gold, g/t	-	1.4	-100%	1.1	1.3	-10%
Copper	-	0.39%	-100%	0.40%	0.58%	-31%
Recovery1
Gold	-	52.9%	-100%	47.3%	56.2%	-16%
Copper	-	81.5%	-100%	80.7%	88.5%	-9%
Production
Gold (in concentrate), Koz	-	5.2	-100%	7.8	21.1	-63%
Copper (in concentrate), t	-	749	-100%	1,631	4,841	-66%
Leaching
Ore processed, Kt	976	662	+47%	3,117	2,671	+17%
Gold head grade, g/t	1.1	1.3	-10%	1.1	1.3	-10%
Gold recovery1	81.1%	80.0%	+1%	77.7%	81.7%	-5%
Gold production (in dore), Koz	29.4	22.0	+34%	90.3	85.7	+5%
TOTAL PRODUCTION
Gold, Koz	29.4	27.2	+8%	98.0	106.8	-8%
Copper, t	-	749	-100%	1,631	4,841	-66%

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

At Varvara, gold and copper production in 2014 declined by 8% and 66% respectively as a result of a temporary suspension of the flotation circuit in July in order to prevent accumulation of excess concentrate stockpiles in a weaker copper concentrate market. Mining was re-directed and focused on the gold ore. As a result of further deterioration in copper price in the beginning of 2015, re-start of the copper circuit is likely to be delayed till 2016.

In Q4, the amount of ore mined increased by 10% quarter-on-quarter and more than two-fold year-on year as the mine has switched to mining ore at the South pit. The total amount of ore mined in 2014 increased by 98% from the previous year.

Recoveries dropped to 78% in Q3 as leaching time decreased on the back of throughput expansion at the leaching circuit. As several metallurgical initiatives were implemented, gold recoveries increased to 81% in Q4 with further improvements expected in 2015.

KHAKANJA

	3 months ended Dec 31,		% change	12 months ended Dec 31,		% change
	2014	2013		2014	2013
MINING
Khakanja + Yurievskoye
Waste mined, Kt	1,140	922	+24%	4,671	3,096	+51%
Ore mined, Kt	94	-	NA	271	294	-8%
Open-pit	94	-	NA	271	290	-6%
Underground	-	-	NA	-	5	-100%
Head grades
Open-pit
Gold, g/t				3.0	1.4	+106%
Silver, g/t				142	143	-1%
Underground
Gold, g/t				-	7.9	-100%
Silver, g/t				-	12	-100%
Avlayakan
Waste mined, Kt	-	178	-100%	-	1,287	-100%
Underground development, m	870	811	+7%	3,805	919	+314%
Ore mined, Kt	24	21	+12%	42	84	-50%
Open-pit	-	19	-100%	-	81	-100%
Underground	24	3	+811%	42	3	NM
Head grades
Open-pit
Gold, g/t				-	9.1	-100%
Silver, g/t				-	122	-100%
Underground
Gold, g/t				13.8	3.6	+284%
Silver, g/t				105	18	+498%
Ozerny
Waste mined, Kt	789	1,239	-36%	4,288	4,714	-9%
Ore mined (open pit), Kt	341	153	+123%	764	319	+139%
Head grades
Gold, g/t				4.0	3.6	+12%
Silver, g/t				28	40	-29%
TOTAL HUB
Ore mined, Kt	459	174	+164%	1,077	697	+54%
PROCESSING
Ore processed, Kt	159	156	+2%	622	619	+1%
Grade
Gold, g/t	7.7	8.2	-6%	5.3	5.7	-7%
Silver, g/t	108	116	-7%	117	147	-20%
Recovery1
Gold	96.0%	87.3%	+10%	93.9%	92.3%	+2%
Silver	71.7%	84.6%	-15%	74.3%	84.2%	-12%
TOTAL PRODUCTION
Gold, Koz	36.4	35.7	+2%	97.9	103.4	-5%
Silver, Moz	0.4	0.5	-22%	1.7	2.4	-29%

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

Gold production at Khakanja in 2014 decreased 5% year-on-year to 97.9 Koz, while silver production was 1.7 Moz, down 29% year-on-year. These decreases were driven by planned grade declines as the Khakanja mine is nearing depletion and the mill feed is complemented by material from lower-grade stockpiles.

Quarter-on-quarter gold production increased by 2% as the Company was processing high-grade material from Avlayakan mine. Quarterly silver production decreased by 22% as significant amounts of feedstock came from stockpiles with lower recovery rates.

In Q4 mining at Ozerny increased 4 times to 341 Kt quarter-on-quarter, ahead of winter road operating season. At Ozerny and Khakanja, open pit mining will be completed in 2015 in Q1 and Q2 respectively with mining fleet to be re-directed to Svetloye.

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 is expected to start in Q4 2015.

KYZYL

Pilot metallurgical testing of the Kyzyl ore has confirmed the viability of ore flotation to concentrate and signals the potential to improve the parameters achieved in previous test work.

Decommissioning of old infrastructure, site clearing, and various permitting activities, including ESIA preparation, have continued as planned. Preliminary public consultations with the Bakyrchik community have been successfully completed.

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 three colleagues during the calendar year 2014. There was also one workplace fatality at a contractor's operation.

The increased fatality rate is currently a major area of focus at both the Board and at the executive management level. The analysis performed shows that the decline in safety performance was partially attributable to the increased scope of underground mining at our operations in complex geotechnical conditions.

The Company intends to significantly reduce risks and improve health and safety performance by employees of the Company and our contractors during the year ahead aiming for zero fatalities in 2015. The Company has already launched new risk assessment systems and started the implementation of additional measures to ensure proper enforcement of existing safety standards and management procedures. We are also taking further actions to extend and refine personal safety and risk awareness across our operating mines.

PERSONNEL

Aleksandr Simon (41), former Managing Director of Albazino, was appointed Director General of Varvara. Mr. Simon joined Polymetal in 2003 as a Deputy Managing Director for Production at Lunnoye and then served as Managing Director. Starting from 2008, Mr. Simon worked as a Chief Engineer and then as an Executive and Managing Director of Albazino. Mr. Simon graduated from St. Petersburg Mining Institute majoring in open pit mining.

Aleksey Sharabarin (41) was appointed Managing Director of Albazino. Mr. Sharabarin joined Polymetal in 2006 as drilling-and-blasting section superintendent at Voro and then worked as a Chief Engineer at Dukat, and later, starting from 2011, worked as a Chief Engineer at Albazino. Mr. Sharabarin graduated from Krasnoyarsk State Academy of Precious Metals and Gold majoring in open pit mining. In 2006, he underwent professional retraining in the International Management Institute LINK on the management program.

Polymetal has published an updated Company presentation today. A copy of the presentation is available on the Company's website at: http://www.polymetalinternational.com/investors-and-media/presentations-webcasts/presentations/2015.aspx?sc_lang=en

 

END

 

 

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