Q4 and full year 2015 production results

RNS Number : 5445M

Polymetal International PLC

21 January 2016

 

Release time	IMMEDIATE
Date	21 January 2016

Polymetal International plc

Q4 and full year 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 fourth quarter and twelve months ended December 31, 2015.

HIGHLIGHTS

·     Polymetal reports another year of strong operational delivery. Gold equivalent production for the year (based on 1:60 Ag/Au conversion ratio) comprised 1.40 Moz and exceeded the original production guidance for 2015 of 1.35 Moz by 4%.

·     Gold production was 861 Koz, down 9% year-on-year, while silver production was 32.1 Moz, an increase of 12% compared to 2014. Gold sales were 864 Koz, down 8% year-on-year while silver sales were 31.2 Moz, up 6% year-on-year, in line with production dynamics and volume.

·     Polymetal continued to generate free cash flow in the fourth quarter. On the back of robust cash flow generation for the year, the Company paid out US$ 127 million of special dividends to shareholders, bringing the total amount of dividends declared during 2015 to US$ 216 million.

·     Net debt at 31 December 2015 was US$ 1,298 million, an increase of just US$ 30 million compared to 30 September 2015.

·     Given the persistent change in gold/silver market price ratio, Polymetal has decided to change the gold/silver ratio used in presenting gold equivalent (GE) production from 1/60 to 1/80. The comparative numbers for prior periods and production guidance were restated accordingly in this release. The effect of this restatement on reported production numbers and guidance is summarised in the table below. There is no impact on the projected and reported cash costs metrics as they have been and will continue to be based on actual realised prices. Any further revisions to the new conversion ratio would only be triggered by a change in market ratio by more than 20%.

	Guidance		Actual
	FY 2017	FY 2016	FY 2015	FY 2014
Production
Gold, Koz			861	945
Silver, Moz			32	29
Copper, t			827	1,631
Gold equivalent production, Koz - old ratio (1/60)	1,400	1,350	1,401	1,431
Gold equivalent production, Koz - new ratio (1/80)	1,300	1,230	1,267	1,312
Change, %	-7%	-9%	-10%	-8%

·     Gold equivalent production in the fourth quarter (based on the new 1:80 Ag/Au conversion ratio) was 310 Koz, a decrease of 16% year-on-year. Quarterly gold production was 219 Koz, down 27% year-on-year, mainly driven by change of mining method at Mayskoye and planned grade declines at Varvara, Omolon, and Voro. Silver production in the fourth quarter was 7.2 Moz, up 30% year-on-year, driven by continued strong performance at Dukat.

·     The newly established Safety and Sustainability Committee of the Board has started in-depth review of safety and environmental management systems of the Company and the measures currently being undertaken to achieve substantial improvement in safety performance, with significant focus placed on safety of underground operations and preventive risk management activities.

·     The Company reconfirms its production guidance for 2016 and 2017, which will comprise 1.23 Moz of gold equivalent and for 2017 at 1.30 Moz of gold equivalent (after restatement of the gold/silver price ratio to 1/80).

·     Total cash cost guidance for 2016 remains unchanged at US$ 525-575/GE oz and all-in sustaining cash costs of US$ 700-750/GE oz, with an update to be provided along with the preliminary financial results release in March 2016. A further reduction of cash costs is expected from continuing devaluation of the Russian Rouble and Kazakh Tenge.

"Polymetal has delivered consistent operating performance against the backdrop of weak commodities prices, maintaining robust free cash flow and dividend payments to our shareholders", said Vitaly Nesis, Group CEO of Polymetal. "In the year ahead, we will focus on safety and consistent operational delivery at our existing mines, as well as moving Kyzyl towards production in 2018".

	3 months ended Dec 31,		% change1	12 months ended Dec 31,		% change1
	2015	2014		2015	2014
Waste mined, Mt	15.3	17.7	-13%	65.3	77.5	-16%
Underground development, km	19.0	15.1	+26%	73.1	60.7	+20%
Ore mined, Kt	3,555	3,693	-4%	12,679	13,706	-7%
Open-pit	2,772	2,973	-7%	9,626	11,046	-13%
Underground	783	720	+9%	3,053	2,660	+15%
Ore processed, Kt	2,532	2,771	-9%	10,821	11,300	-4%
Production
Gold, Koz	219	299	-27%	861	945	-9%
Silver, Moz	7.2	5.5	+30%	32.1	28.7	+12%
Copper, tonnes	20	-	NA	827	1,631	-49%
Gold equivalent, Koz2	310	368	-16%	1,267	1,312	-3%
Gold equivalent based on 1/60 Au/Ag ratio, Koz7	340	391	-13%	1,401	1,431	-2%
Sales
Gold, Koz	249	337	-26%	864	943	-8%
Silver, Moz	8.8	8.1	+8%	31.2	29.3	+6%
Copper, tonnes	790	729	+8%	1,488	1,029	+45%
Revenue, US$m3	391	513	-24%	1,441	1,689	-15%
Net debt, US$m4	1,298	1,268	+2%	1,298	1,249	+4%
Safety5
LTIFR	0.16	0.14	+14%	0.20	0.13	+54%
FIFR	0.05	-	NA	0.08	0.04	+100%
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 1:80 Ag/Au and 5:1 Cu/Au conversion ratios (Polymetal previously used 1:60 Ag/Au ratio). Comparative data for 2014 restated accordingly.                 (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 30 September 2015 (for the three months period) and 31 December 2014 (for the twelve months period). (5) LTIFR =lost time injury frequency rate per 200,000 hours worked; FIFR = fatal injury frequency rate per 200,000 hours worked.  (6) NA - not available. (7) Based on 1:60 Ag/Au and 5:1 Cu/Au conversion ratios.

PRODUCTION BY MINE

	3 months ended Dec 31,		% change1	12 months ended Dec 31,		% change1	3 months ended Sep 30,	Q-o-Q, % change1
	2015	2014		2015	2014		2015
GOLD EQ. (KOZ)2
Dukat operations	96	67	+43%	393	344	+14%	108	-11%
Albazino-Amursk	47	51	-8%	220	227	-3%	64	-27%
Mayskoye	46	98	-53%	138	143	-3%	71	-35%
Omolon operations	33	39	-15%	188	213	-12%	60	-44%
Voro	36	42	-16%	141	159	-11%	34	+5%
Varvara	14	29	-52%	72	106	-32%	20	-30%
Okhotsk operations	37	41	-9%	114	119	-4%	33	+15%
TOTAL	310	368	-16%	1,267	1,312	-3%	390	-21%

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 1:80 Ag/Au and 5:1 Cu/Au conversion ratios (Polymetal previously used 1:60 Ag/Au ratio). Comparative data for 2014 restated accordingly.

CONFERENCE CALL AND WEBCAST

Polymetal will hold a conference call and webcast on Thursday, 21 January, 17:30 Moscow time (14:30 London time).

To participate in the call, please dial:

8 10 800 2041 4011 access code 344520# (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=3271

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=3271. 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 298660#, from 17:30 Moscow time Thursday, January 21, till 17:30 Moscow time Thursday, January 28, 2016.

Enquiries

Media		Investor Relations
FTI Consulting  Leonid Fink Jenny Payne	[phone]	Polymetal Maxim Nazimok Evgenia Onuschenko Elena Revenko	[e-mail] [phone] (Russia) [phone] (UK)
Joint Corporate Brokers
Morgan Stanley 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 Dec 31,		% change	12 months ended Dec 31,		% change
	2015	2014		2015	2014
MINING
Dukat
Underground development, m	8,325	8,354	-0%	34,573	31,204	+11%
Ore mined (underground), Kt	427	392	+9%	1,656	1,468	+13%
Head grades
Gold, g/t				0.72	0.76	-5%
Silver, g/t				443	392	+13%
Goltsovoye
Underground development, m	1,776	1,617	+10%	7,391	6,742	+10%
Ore mined (underground), Kt	49	53	-7%	201	191	+5%
Silver head grade, g/t				486	624	-22%
Lunnoye + Arylakh
Waste mined, Kt	-	-	NA	-	233	-100%
Underground development, m	1,436	953	+51%	5,624	4,876	+15%
Ore mined, Kt	108	89	+22%	401	384	+4%
Open-pit	-	-	NA	-	36	-100%
Underground	108	89	+22%	401	348	+15%
Head grades
Open-pit
Gold, g/t				-	0.35	-100%
Silver, g/t				-	384	-100%
Underground
Gold, g/t				1.55	1.46	+6%
Silver. g/t				417	421	-1%
TOTAL HUB
Underground development, m	11,537	10,924	+6%	47,588	42,822	+11%
Ore mined (open pit), Kt	-	-	NA	-	36	-100%
Ore mined (underground), Kt	585	534	+10%	2,257	2,006	+13%
PROCESSING
Dukat
Ore processed, Kt	454	444	+2%	1,817	1,711	+6%
Head grades
Gold, g/t	0.7	0.4	+93%	0.7	0.7	+1%
Silver, g/t	407	315	+29%	452	406	+11%
Recovery1
Gold	87.7%	79.7%	+10%	85.3%	85.4%	-0%
Silver	85.1%	83.4%	+2%	85.7%	86.5%	-1%
Production
Gold, Koz	9.8	4.3	+128%	32.9	31.5	+4%
Silver, Moz	5.4	3.7	+46%	22.3	19.5	+14%
Lunnoye
Ore processed, Kt	106	102	+4%	416	400	+4%
Head grades
Gold, g/t	1.4	1.3	+8%	1.5	1.3	+15%
Silver, g/t	411	368	+12%	422	383	+10%
Recovery1
Gold	90.0%	89.5%	+1%	90.5%	85.6%	+6%
Silver	90.4%	91.3%	-1%	89.3%	91.8%	-3%
Production
Gold, Koz	4.2	3.7	+13%	18.1	13.9	+30%
Silver, Moz	1.2	1.0	+15%	5.0	4.4	+15%
TOTAL PRODUCTION
Gold, Koz	14.0	8.0	+75%	51.0	45.3	+12%
Silver, Moz	6.6	4.7	+39%	27.4	23.9	+15%

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

Quarterly silver production at the Dukat hub increased by 39% year-on-year to 6.6 Moz and annual production increased by 15% to 27.4 Moz due to continued strength of grades at the Dukat mine and steady increase in mine and plant throughput during the year.

The annual amount of ore mined at the Dukat hub at the underground mines grew 13% year-on-year to 2.2 Mt while underground development increased 11% year-on-year to match the increased mill throughput.

Processing volumes at Omsukchan concentrator and Lunnoye plant continued to increase (up 6% and 4% year-on-year, respectively) due to the debottlenecking through continuous improvement programmes.

Lunnoye has demonstrated a very strong set of the results, with significantly improved grades due to input of high-grade ore from Arylakh and Zone 7 underground mines.

ALBAZINO-AMURSK

	3 months ended Dec 31,		% change	12 months ended Dec 31,		% change
	2015	2014		2015	2014
MINING
Waste mined, Kt	4,592	4,243	+8%	17,307	16,321	+6%
Underground development, m	1,516	994	+53%	5,030	3,325	+51%
Ore mined (open pit), Kt	415	377	+10%	1,533	1,566	-2%
Ore mined (underground), Kt	49	-	NA	49	-	NA
Gold head grade, g/t				5.2	4.9	+6%
PROCESSING
Albazino concentrator
Ore processed, Kt	416	395	+5%	1,607	1,609	-0%
Gold head grade, g/t	5.0	5.0	+1%	5.2	4.8	+8%
Gold recovery1	85.3%	86.8%	-2%	86.9%	87.6%	-1%
Concentrate produced, Kt	35.9	36.6	-2%	136.1	136.0	+0%
Concentrate gold grade, g/t	48.8	46.5	+5%	53.3	50.0	+7%
Gold in concentrate, Koz2	56.2	54.7	+3%	233.1	218.5	+7%
Amursk POX
Concentrate processed, Kt	28.1	32.6	-14%	143.0	152.7	-6%
Gold head grade, g/t	50.5	48.2	+5%	52.3	50.1	+4%
Recovery	94.0%	94.5%	-1%	94.0%	93.8%	+0%
Gold produced, Koz	46.8	50.7	-8%	220.2	227.3	-3%
TOTAL PRODUCTION					-
Gold, Koz	46.8	50.7	-8%	220.2	227.3	-3%

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

Albazino produced 46.8 Koz of gold in the fourth quarter, 8% lower year-on-year due to scheduled maintenance shutdown at POX during the quarter. POX recoveries remained stable at 94%.

Gold production for the twelve months was 220 Koz, decreasing by 3% year-on-year due to a 4% reduction in throughput, which was partially offset by the increase in grades and recoveries.

Underground development at the Olga zone continued at a stable pace. First stopes were successfully completed meeting tonnage and grade estimates.

MAYSKOYE

	3 months ended Dec 31,		% change	12 months ended Dec 31,		% change
	2015	2014		2015	2014
MINING
Underground development, m	4,388	2,395	+83%	13,828	10,536	+31%
Ore mined (underground), Kt	109	186	-41%	628	653	-4%
Gold head grade, g/t				6.4	8.4	-24%
PROCESSING
Mayskoye concentrator
Ore processed, Kt	49	201	-76%	683	807	-15%
Gold head grade, g/t	5.4	8.1	-34%	6.7	8.7	-22%
Gold recovery1	84.6%	86.7%	-2%	85.9%	83.6%	+3%
Concentrate produced, Kt	4.9	21.5	-77%	67.9	92.7	-27%
Concentrate gold grade, g/t	45.7	66.2	-31%	57.9	63.1	-8%
Gold in concentrate, Koz2	7.2	45.8	-84%	126.4	188.1	-33%
Concentrate sold, Kt	22.6	50.1	-55%	52.3	72.4	-28%
Payable gold in concentrate sold, Koz	38.0	90.9	-58%	97.6	130.2	-25%
Amursk POX
Concentrate processed, Kt	5.5	6.4	-14%	22.3	9.9	+125%
Gold head grade, g/t	56.4	57.4	-2%	57.9	55.3	+5%
Recovery	94.0%	94.5%	-1%	94.0%	92.2%	+2%
Gold produced, Koz	8.3	7.5	+11%	40.2	12.4	+224%
TOTAL PRODUCTION
Gold, Koz	46.3	98.4	-53%	137.8	142.6	-3%

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.

Mayskoye produced 138 Koz of gold during twelve months 2015, a slight decrease compared to 143 Koz in 2014. The production was split between the in-house POX processing (40 Koz) and concentrate offtake to China that amounted to 98 Koz. Quarterly gold production was 46 Koz as most off-take sales were shipped in the third quarter.

Mayskoye underground mining is ramping up as stopes are re-developed using a new mining method (sublevel open stoping with backfill). The current rate is approximately 1000 tpd with dilution in line with forecasts. Fresh stopes with higher grades are expected to be brought into production by March. The grades and ore volumes are expected to return to reserve averages in Q2 2016 after the transition to the new mining method is completed.

The processing plant was stopped in November 2015 with the schedule re-start in February 2016, as the mine will need to accumulate sufficient amounts of high-quality ore to maintain full capacity.

OMOLON OPERATIONS

	3 months ended Dec 31,		% change	12 months ended Dec 31,		% change
	2015	2014		2015	2014
MINING
Sopka
Waste mined, Kt	-	133	-100%	1	3,670	-100%
Ore mined (open pit), Kt	-	80	-100%	-	922	-100%
Head grades, g/t
Gold, g/t				-	4.6	-100%
Silver, g/t				-	174.8	-100%
Dalneye
Waste mined, Kt	-	1,230	-100%	1,042	2,385	-56%
Ore mined (open pit), Kt	-	335	-100%	635	550	+15%
Head grades, g/t
Gold, g/t				2.9	-	NA
Silver, g/t				56.7	0.0	NA
Tsokol
Waste mined, Kt	-	489	-100%	396	3,774	-90%
Underground development, m	748	-	NA	1,533	-	NA
Ore mined (open pit), Kt	-	130	-100%	176	317	-45%
Ore mined (underground), Kt	4	-	NA	4	-	NA
Gold head grade, g/t				3.9	4.3	-9%
Birkachan
Waste mined, Kt	574	-	NA	2,021	535	+277%
Underground development, m	-	649	-100%	1,254	929	+35%
Ore mined (open pit), Kt	338	-	NA	779	698	+12%
Gold head grade, g/t				1.7	2.6	-32%
Oroch
Waste mined, Kt	1,585	-	NA	4,213	-	NA
Ore mined (open pit), Kt	168	-	NA	400	-	NA
Head grades, g/t
Gold, g/t				3.1	-	NA
Silver, g/t				132	-	NA
TOTAL HUB
Waste mined, Kt	2,159	1,852	+17%	7,673	10,364	-26%
Underground development, m	748	649	+15%	2,787	929	+200%
Ore mined (open pit), Kt	506	545	-7%	1,990	2,487	-20%
Ore mined (underground), Kt	4	-	NA	4	-	NA
PROCESSING
Birkachan Heap Leach
Gold production, Koz	-	1.9	-100%	0.1	6.0	-98%
Kubaka Mill
Ore processed, Kt	213	215	-1%	835	825	+1%
Grade
Gold, g/t	4.3	4.6	-7%	5.6	6.7	-16%
Silver, g/t	55	44	+25%	151	133	+14%
Recovery1
Gold	92.7%	93.7%	-1%	95.0%	94.7%	+0%
Silver	80.9%	78.8%	+3%	86.8%	83.5%	+4%
Gold production, Koz	28.9	32.7	-11%	144.2	170.4	-15%
Silver production, Moz	0.4	0.4	-3%	3.5	2.9	+20%
TOTAL PRODUCTION
Gold, Koz	28.9	34.5	-16%	144.4	176.4	-18%
Silver, Moz	0.4	0.4	-5%	3.5	2.9	+19%

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

                (2) NM - not material

At Omolon, quarterly gold production decreased by 16% year-on-year and silver production decreased by 5% as the Kubaka plant was processing ore from Dalneye and Sopka stockpiles, with lower gold grades. Annual gold production was 188 Koz of gold equivalent, down 12% year-on-year.

Birkachan open pit operations are continuing, with 338 Kt of ore mined during the quarter. At Tsokol, underground development continued while the first 4 Kt of ore were mined from development openings.

Throughput and recoveries at the Kubaka mill remained stable, with 835 Kt of ore processed during 2015.

VORO

	3 months ended Dec 31,		% change	12 months ended Dec 31,		% change
	2015	2014		2015	2014
MINING
Voro
Waste mined, Kt	2,383	2,881	-17%	10,202	11,030	-8%
Ore mined (open pit), Kt	328	296	+11%	1,750	1,893	-8%
-     primary	278	221	+26%	1,364	935	+46%
-     oxidised	50	76	-34%	386	958	-60%
Gold head grades
-     primary, g/t				3.3	5.2	-37%
-     oxidised, g/t				1.7	1.8	-6%
PROCESSING
Voro Heap Leach
Ore stacked, Kt	27	60	-56%	450	747	-40%
Gold head grade, g/t	1.8	1.3	+37%	1.8	1.4	+24%
Gold production, Koz	7.9	9.2	-14%	27.1	27.7	-2%
Voro CIP
Ore processed, Kt	227	219	+4%	924	915	+1%
Gold head grade, g/t	4.5	5.2	-14%	4.2	5.6	-25%
Gold recovery1	77.9%	78.8%	-1%	78.5%	82.5%	-5%
Gold production, Koz	27.6	32.9	-16%	112.3	129.8	-13%
TOTAL PRODUCTION
Gold, Koz	35.4	42.1	-16%	139.4	157.5	-12%
Silver, Moz	0.019	0.030	-38%	0.101	0.101	-0%

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

Gold production at Voro in Q4 2015 decreased by 16% year-on-year to 35.4 Koz driven by the planned decrease in grade and related decline in CIP recoveries, while annual gold production decreased by 12% to 139 Koz.

Heap leach operation entered seasonal stoppage earlier than usual due to the shortage of oxidized ore. It is expected that heap leach will operate at 40-50% capacity in 2016.

VARVARA

	3 months ended Dec 31,		% change	12 months ended Dec 31,		% change
	2015	2014		2015	2014
MINING
Waste mined, Kt	6,112	6,759	-10%	28,583	30,552	-6%
Ore mined (open pit), Kt	1,523	1,295	+18%	4,068	3,985	+2%
-     float ore	24	145	-83%	142	750	-81%
-     leach ore	1,498	1,150	+30%	3,926	3,235	+21%
Head grades
-     gold, float ore, g/t				0.9	1.4	-38%
-     copper, float ore, %				0.29%	0.45%	-35%
-     gold, leach ore, g/t				0.7	1.2	-39%
PROCESSING
Flotation
Ore processed, Kt	4	-	NA	315	547	-42%
Grade
Gold, g/t	1.4	-	NA	1.1	1.1	+1%
Copper	0.38%	0.00%	NA	0.36%	0.40%	-9%
Recovery1
Gold	NA	0.0%	NA	45.2%	47.3%	-4%
Copper	39.5%	0.0%	NA	71.8%	80.7%	-11%
Production
Gold (in concentrate), Koz	0.2	0.0	NA	4.2	7.8	-45%
Copper (in concentrate), t	20	0	NA	827	1,631	-49%
Leaching
Ore processed, Kt	877	976	-10%	3,142	3,117	+1%
Gold head grade, g/t	0.8	1.1	-32%	0.8	1.1	-27%
Gold recovery1	68.7%	81.1%	-15%	75.6%	77.7%	-3%
Gold production (in dore), Koz	14.0	29.4	-53%	64.0	90.3	-29%
TOTAL PRODUCTION
Gold, Koz	14.1	29.4	-52%	68.2	98.0	-30%
Copper, t	20	0	NA	827	1,631	-49%

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

At Varvara, gold production in Q4 2015 decreased by 52% driven by lower grades and complex metallurgy in the currently mined ore. An improvement both in grade and recovery is expected in January as mining works will be re-directed to other ore zones and additional measures to improve geotechnical mapping will be implemented.

The continued devaluation of the Kazakh Tenge will further improve the economics of Varvara production in the current year. Purchases of 3^rd party ore are expected to resume in Q1 2016 on the back of lower Tenge rate and lower transportation costs through the recently opened railway spur.

OKHOTSK OPERATIONS

	3 months ended Dec 31,		% change	12 months ended Dec 31,		% change
	2015	2014		2015	2014
MINING
Khakanja
Waste mined, Kt	-	1,140	-100%	1,478	4,671	-68%
Ore mined (open-pit), Kt	-	94	-100%	180	271	-34%
Head grades, g/t
Gold, g/t				2.3	3.0	-24%
Silver, g/t				123.5	142	-13%
Avlayakan
Underground development, m	856	870	-2%	3,846	3,805	+1%
Ore mined (underground), Kt	36	24	+51%	114	42	+171%
Gold head grade, g/t
Gold, g/t				11.0	13.8	-20%
Silver, g/t				170.7	105	+63%
Ozerny
Waste mined, Kt	-	789	NA	42	4,288	-99%
Ore mined (open pit), Kt	-	341	NA	105	764	-86%
Head grades, g/t
Gold, g/t				4.9	4.0	+22%
Silver, g/t				6.7	28	-76%
Svetloye
Waste mined, Kt	59.6	-	NA	59.6	-	NA
TOTAL HUB
Waste mined, Kt	60	1,930	-97%	1,580	8,959	-82%
Ore mined, Kt	36	459	-92%	399	1,077	-63%
Open-pit	-	435	-100%	285	1,035	-72%
Underground	36	24	+51%	114	42	+171%
PROCESSING
Ore processed, Kt	160	159	+1%	631	622	+1%
Grade
Gold, g/t	6.7	7.7	-12%	5.2	5.3	-2%
Silver, g/t	75	108	-31%	81	117	-30%
Recovery1
Gold	95.0%	96.0%	-1%	94.9%	93.9%	+1%
Silver	78.6%	71.7%	+10%	72.0%	74.3%	-3%
TOTAL PRODUCTION
Gold, Koz	33.6	36.4	-8%	99.8	97.9	+2%
Silver, Moz	0.3	0.4	-22%	1.2	1.7	-32%

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

Annual gold production at Okhotsk operations during FY 2015 increased by 2% year-on-year to in accordance with expectations while silver production decreased by 32% to 1.2 Moz, as the Khakanja open pit was depleted and the plant processed ore from Ozerny and Avlayakan as well as historic stockpiles. Quarterly gold production was 34 Koz, up 16% quarter-on-quarter due to processing of higher grade Avlayakan ore.

At Svetloye, construction is progressing on schedule. Open pit mining was suspended due to very heavy snowfall with the equipment diverted to construction activities. Mining is expected to resume in Q1 2016.

KYZYL

Go-ahead development decision was taken by the Board on the back of the positive Feasibility Study results. Polymetal is on track to start full-scale construction in Q2 2016.

Major mining equipment contracts for trucks (BELAZ from Belarus) and electric shovels (OMZ from Russia) signed, with equipment expected to arrive on site in the first half of 2016.

Site activities progressed as planned with focus on the construction of external infrastructure, including access road, coal-fired boiler house, and water pipeline.

PERSONNEL

Sergey Pekus (43) was appointed General Director of SVMC, the joint venture between Polymetal and Polyus Gold at the Nezhdaninskoye gold deposit. Mr. Pekus joined Polymetal in 2004 as a leading logistics specialist.  Since 2008, Sergey held a number of management positions in the Supply Chain Management department at Magadan regional office, Khabarovsk regional office, and most recently at Mayskoye. He graduated from St. Petersburg Branch of the Russian Customs Academy named after V.B. Bobkov majoring in Economics and Management.

Vadim Kipot (38) was appointed Managing Director of Amursk POX Plant. Viktor Nikitanov, the MD of Amursk since 2012, passed away in November 2015. Mr. Kipot joined Polymetal in 2011 as a lead metallurgist in the Production Department with the focus on the ramp-up of the POX facility. Mr. Kipot graduated from the Moscow State Exploration University majoring in Mineral Resources Exploration Technology and Technics.

Kanat Dosmukametov (43) was appointed Head of Polymetal' representative office in Kazakhstan. He worked as a Deputy Chairman of the Management Board in the Kazakhstan's Development Bank. Before that, he held similar position in the Eurasian Development Bank. He started his career in the National Bank of the Republic of Kazakhstan where he worked for 9 years. Mr. Dosmukametov graduated from the Kazakh State Management Academy (National Economy Academy) majoring in Business and Management.

 

END

 

 

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