Q1 2014 production results

RNS Number : 1918F

Polymetal International PLC

22 April 2014

 



Release time	IMMEDIATE
Date	22 April 2014

Polymetal International plc

Q1 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 first quarter ended March 31, 2014.

HIGHLIGHTS

·     Polymetal delivered a strong start of the year and produced 316 Koz of gold equivalent in the first quarter of 2014, up 34% year-on-year. Strong performance at the Amursk POX plant enabled a steady processing of Albazino concentrate at design throughput and recovery. Production growth was also driven by increased throughput and grades at the Dukat hub, as well as by a stronger grade profile at Omolon. Quarterly gold production was 191 Koz, up 57% year-on-year. Silver production in Q1 was 7.3 Moz, up 14% year-on-year.

·     The Amursk POX plant successfully performed pilot processing of Mayskoye concentrate. As a result, the concentrate produced at Mayskoye in 2014 is likely to be split between third party off-take and processing at the POX plant. The Company is progressing with negotiations for Mayskoye concentrate off-take, with contracts expected to be signed during Q2.

·     Sales lagged production by 46 Koz of gold equivalent as a result of the seasonal factor (New Year holidays at refineries), with reversal of this gap expected to be achieved during the year. Net debt remained almost flat at US$ 1,044 million at 31 March 2014. This would have reduced if it were not for the aforementioned timing difference between production and sales.

·     Polymetal deeply regrets to report two fatalities at our mines from 1 January 2014 to the date of this report. The Company has commenced a comprehensive safety review to identify the systemic root causes of these cases, and will promptly implement additional enforcements to existing rules and procedures in order to achieve a meaningful improvement in safety performance.

·     The Company is fully on track to deliver on its production guidance of 1.3 Moz of gold equivalent in 2014.

"The Company has delivered a strong start of the year", said Vitaly Nesis, CEO of Polymetal, commenting on the results. "Our strong operating performance allows the management team to concentrate on growth projects, including our development assets and potential acquisition opportunities".

	3 months ended Mar 31,		% change1
	2014	2013
Waste mined, Mt	19,649	20,374	-4%
Underground development, km	14,541	13,558	+7%
Ore mined, Kt	2,799	2,893	-3%
Open-pit	2,133	2,320	-8%
Underground	666	574	+16%
Ore processed, Kt	2,568	2,285	+12%
Production
Gold, Koz	191	121	+57%
Silver, Moz	7.3	6.4	+14%
Copper, tonnes	709	1,355	-48%
Gold equivalent, Koz2	316	235	+34%
Sales
Gold, Koz	170	104	+63%
Silver, Moz	6.0	5.8	+3%
Copper, tonnes	0	1,094	-100%
Revenue, US$m3	336	341	-2%
Net debt4	1,044	1,0454	-0%
Safety6
LTIFR	1.10	0.23	+378%
FIFR	0.22	-	NA5
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 31 December 2013.                 (5) NA = not available.                 (6) LTIFR =lost time injury frequency rate per one million hours worked; FIFR = fatal injury frequency rate per one million hours worked

CONFERENCE CALL AND WEBCAST

Polymetal will hold a conference call and webcast on Tuesday, April 22, 2014 at 2:30 pm London time (5:30 pm Moscow time).

To participate in the call, please dial:

[phone] (free from Moscow), or

[phone] (free from the UK), or

[phone] (toll-free from the US), or

any of the above numbers (from outside the UK, the US and Russia), followed by the access code 286856#, or follow the link: http://www.audio-webcast.com/cgi-bin/visitors.ssp?fn=visitor&id=2235 

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=2235. A recording of the call will be available immediately after the call at [phone], [phone] and [phone], access code 286856#, from 6:30 pm Moscow time Tuesday, April 22, till 6:30 pm Moscow time Tuesday, April 29, 2014.

Enquiries

Media		Investor Relations
Instinctif Partners Leonid Fink Tony Friend	[phone]	Polymetal Maxim Nazimok Evgenia Onuschenko Elena Revenko	[e-mail] [phone] (Russia) [phone] (UK)
Joint Corporate Brokers
Morgan Stanley Bill Hutchings Sam McLennan	[phone]	RBC Europe Limited Stephen Foss Jonny Hardy	[phone]

FORWARD-LOOKING STATEMENTS

THIS RELEASE MAY INCLUDE STATEMENTS THAT ARE, OR MAY BE DEEMED TO BE, "FORWARD-LOOKING STATEMENTS". THESE FORWARD-LOOKING STATEMENTS SPEAK ONLY AS AT THE DATE OF THIS RELEASE. THESE FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY, INCLUDING THE WORDS "TARGETS", "BELIEVES", "EXPECTS", "AIMS", "INTENDS", "WILL", "MAY", "ANTICIPATES", "WOULD", "COULD" OR "SHOULD" OR SIMILAR EXPRESSIONS OR, IN EACH CASE THEIR NEGATIVE OR OTHER VARIATIONS OR BY DISCUSSION OF STRATEGIES, PLANS, OBJECTIVES, GOALS, FUTURE EVENTS OR INTENTIONS. THESE FORWARD-LOOKING STATEMENTS ALL INCLUDE MATTERS THAT ARE NOT HISTORICAL FACTS. BY THEIR NATURE, SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER IMPORTANT FACTORS BEYOND THE COMPANY'S CONTROL THAT COULD CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH FORWARD-LOOKING STATEMENTS ARE BASED ON NUMEROUS ASSUMPTIONS REGARDING THE COMPANY'S PRESENT AND FUTURE BUSINESS STRATEGIES AND THE ENVIRONMENT IN WHICH THE COMPANY WILL OPERATE IN THE FUTURE. FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE. THERE ARE MANY FACTORS THAT COULD CAUSE THE COMPANY'S ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN SUCH FORWARD-LOOKING STATEMENTS. THE COMPANY EXPRESSLY DISCLAIMS ANY OBLIGATION OR UNDERTAKING TO DISSEMINATE ANY UPDATES OR REVISIONS TO ANY FORWARD-LOOKING STATEMENTS CONTAINED HEREIN TO REFLECT ANY CHANGE IN THE COMPANY'S EXPECTATIONS WITH REGARD THERETO OR ANY CHANGE IN EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH ANY SUCH STATEMENTS ARE BASED

DUKAT OPERATIONS

	3 months ended Mar 31,		% change
	2014	2013
MINING
Dukat
Underground development, m	7,720	7,990	-3%
Ore mined, Kt	359	312	+15%
Open-pit	-	-	NA
Underground	359	312	+15%
Goltsovoye
Underground development, m	1,751	1,506	+16%
Ore mined (underground), Kt	42	38	+12%
Lunnoye + Arylakh
Waste mined, Kt	132	408	-68%
Underground development, m	1,476	1,419	+4%
Ore mined, Kt	96	110	-13%
Open-pit	17	36	-52%
Underground	79	74	+6%
PROCESSING
Dukat
Ore processed, Kt	399	412	-3%
Head grades
Gold, g/t	0.98	0.67	+46%
Silver, g/t	485	400	+21%
Recovery1
Gold	86.9%	83.2%	+4%
Silver	87.7%	85.2%	+3%
Production
Gold, Koz	11.7	7.5	+55%
Silver, Moz	5.8	4.6	+27%
Lunnoye
Ore processed, Kt	91	86	+5%
Head grades
Gold, g/t	1.2	1.0	+10%
Silver, g/t	356	419	-15%
Recovery1
Gold	78.9%	88.7%	-11%
Silver	90.3%	88.5%	+2%
Production
Gold, Koz	2.8	2.7	+5%
Silver, Moz	1.0	1.1	-9%
TOTAL PRODUCTION
Gold, Koz	14.5	10.2	+42%
Silver, Moz	6.8	5.7	+20%

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

Quarterly silver production at Dukat increased by 20% compared to the same period of the prior year ("year-on-year") thanks to the ongoing debottlenecking of capacity at the Omsukchan concentrator and the Dukat underground mine. The increased average grades at both Dukat and Lunnoye are also contributing to the production growth and have an additional positive effect on the average recoveries.

The amount of ore mined at Dukat underground mine grew by 17% quarter-on-quarter and 15% year-on-year to 359 Kt as the mine capacity increased to match the larger throughput at the Omsukchan concentrator, with additional mining fleet being commissioned in early 2014. Similarly, at Goltsovoye, the amount of ore mined grew 12% year-on-year to 42 Kt.

Average silver grade in ore processed at the Omsukchan concentrator grew by 21% year-on-year to 485 g/t as mining works at Dukat were developing at the new ore zones (Brave and Eastern), and additional dilution control techniques were implemented. The installation of on-line XRF analyser enabling flexible reagent addition rates led to a 3% increase in silver recovery and 4% increase in gold recovery year-on-year.

The open-pit at Arylakh is continuing to wind down while underground development is ramping up to start stoping in Q2. The decreased tonnage of ore from Arylakh was compensated for by the expansion at Zone 9 underground mine and resulted in 15% year-on-year decline in average silver grade of ore processed.

At Lunnoye plant, the ramp-up in capacity following the installation of the new SAG mill is under way, with amount of ore processed increasing 5% year-on-year to 91 Kt.

ALBAZINO-AMURSK

	3 months ended Mar 31,		% change
	2014	2013
MINING
Waste mined, Kt	3,880	3,893	-0%
Ore mined (open pit), Kt	369	285	+30%
PROCESSING
Albazino concentrator
Ore processed, Kt	393	318	+24%
Gold head grade, g/t	4.9	6.5	-24%
Gold recovery1	87.6%	88.8%	-1%
Concentrate produced, Kt	28.0	33.8	-17%
Concentrate gold grade, g/t	60.2	54.4	+11%
Gold in concentrate, Koz2	54.2	59.1	-8%
Amursk POX
Concentrate processed, Kt	41.3	21.1	+96%
Gold head grade, g/t	54.2	49.7	+9%
Recovery	93.4%	75.3%	+24%
Gold produced, Koz	61.8	12.9	+379%
TOTAL PRODUCTION
Gold, Koz	61.8	12.9	+379%

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

Gold production at Albazino/Amursk in Q1 was 62 Koz, up 5% quarter-on-quarter as the Amursk POX plant delivered another quarter of stable operation at the design throughput and recovery.

Average recovery for Albazino concentrate was 93.4%, slightly below target level of 94% due to pilot joint processing of the Albazino and Mayskoye concentrates in February-March, which required fine-tuning of technological parameters.

The continuous improvement project at the Amursk POX is ongoing. Construction of liquid oxygen storage is on schedule with commissioning scheduled for Q4 2014.

Gold in concentrate produced at Albazino in Q1 decreased by 8% year-on-year to 54 Koz mainly driven by lower grades in ore processed, which are now closer to the average reserve grade of the mine. In the meantime, Albazino plant throughput is now stable at 1,600 Ktpa level.

In-fill drilling for potential Albazino expansion is ongoing, and the Company is on track ton deliver resource-to-reserve conversion for new zones at Albazino (Olga, Nadezhda, Ekaterina-1 and 2) by the end of the year. Underground geotechnical studies are complete and indicate that underground mining is feasible at moderate costs. The option of a large open pit with high stripping ratio will not be further pursued in evaluating Albazino-2 expansion project.

MAYSKOYE

	3 months ended Mar 31,		% change
	2014	2013
MINING
Underground development, m	2,528	2,643	-4%
Ore mined (underground), Kt	186	145	+29%
PROCESSING
Ore processed, Kt	201	-	NA
Gold head grade, g/t	7.5	-	NA
Gold recovery1	80.5%	-	NA
Concentrate produced, Kt	21.0	-	NA
Concentrate gold grade, g/t	57.9	-	NA
Gold in concentrate, Koz2	39.1	-	NA
Amursk POX
Concentrate processed, Kt	1.7	-	NA
Gold head grade, g/t	46.3	-	NA
Recovery	79.5%	-	NA
Gold produced, Koz	2.1	-	NA
TOTAL PRODUCTION
Gold, Koz	2.1	-	NA

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.

Total gold in concentrate produced at Mayskoye during Q1 was 39 Koz. The concentrate is now stockpiled in the port of Pevek until the start of the summer navigation period.

Ore mining at Mayskoye increased by 7% quarter-on-quarter and by 29% year-on-year. Grade processed remained below reserve grade as the development ore stockpiles were preferentially depleted during winter months. Grade profile is expected to demonstrate steady improvement through the year.

Throughput at the Mayskoye concentrator increased further by 15% quarter-on-quarter and comprised 201 Kt. Average recoveries were lower at 80.5% as the plant coped with the deficit of fresh process water. Fresh water impoundment will be repaired and enlarged during the summer to ensure water availability going forward.

Pilot processing of Mayskoye concentrate with different metallurgical properties were performed at the Amursk POX plant in February-March. A total 1.7 Kt of concentrate were treated, with an average recovery of 79.5% achieved, and 2 Koz of gold in Dore was produced during the testing. Relatively low average recovery reflects disproportionate impact of sub-optimal start-up recoveries. Design recovery was successfully achieved by the end of the trial period.

The detailed metallurgical results were largely in line with design parameters and will allow taking the informed decision on the split of Mayskoye concentrate between off-take and processing at the POX. The split will mostly be driven by organic carbon grade in concentrate produced from different ore zones at Mayskoye.

OMOLON OPERATIONS

	3 months ended Mar 31,		% change
	2014	2013
MINING
Sopka
Waste mined, Kt	1,239	1,745	-29%
Ore mined (open pit), Kt	229	393	-42%
Dalneye
Waste mined, Kt	879	-	NA
Ore mined (open pit), Kt	176	-	NA
Tsokol
Waste mined, Kt	1,053	583	+81%
Ore mined (open pit), Kt	80	50	+60%
Birkachan
Waste mined, Kt	199	891	-78%
Ore mined (open pit), Kt	65	369	-83%
TOTAL HUB
Waste mined, Kt	3,370	3,220	+5%
Ore mined (open pit), Kt	549	812	-32%
PROCESSING
Kubaka Mill
Ore processed, Kt	197	185	+7%
Grade
Gold, g/t	6.0	3.4	+78%
Silver, g/t	23	6	+264%
Recovery1
Gold	94.2%	94.2%	-0%
Silver	82.8%	77.0%	+8%
Gold production, Koz	35.2	19.3	+83%
Silver production, Moz	0.1	0.0	+45%
TOTAL PRODUCTION
Gold, Koz	35.2	19.3	+83%
Silver, Moz	0.1	0.0	+45%

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

At Omolon, gold production increased by 83% year-on-year mainly driven by processing of higher grade ore from Tsokol, in line with the amended mine plan, and a 7% increase in throughput. Recoveries were stable for gold but increased significantly to 82.8% for silver as a result of much higher silver grade in ore processed during the period.

At Tsokol, the amount of ore mined continued to grow (up 17% quarter-on-quarter to 80 Kt) compensating for the reduction of mining at Birkachan.

At both Sopka and Dalneye mining progressed in line with expectations, with ore mined at Sopka increasing seasonally by 44% quarter-on-quarter to allow for larger volumes to be trucked by winter road to the Kubaka mill. Ore trucking has now been completed, with more than 500 Kt transported from Sopka and Dalneye since December 2013.

At the Birkachan open pit, mining resumed in late March and is expected to continue until end of Q2 in accordance with the revised mine plan, which also implies reduced stripping ratios and higher cut-off grades for this short mining campaign. Underground development at Birkachan is expected to start in 2015.

VORO

	3 months ended Mar 31,		% change
	2014	2013
MINING
Voro
Waste mined, Kt	2,514	3,154	-20%
Ore mined (open pit), Kt	232	264	-12%
-     Primary	232	204	+14%
-     oxidised	-	61	-100%
PROCESSING
Voro Heap Leach
Ore stacked, Kt	-	-	NA
Gold head grade, g/t	-	-	NA
Gold production, Koz	6.1	4.1	+48%
Voro CIP
Ore processed, Kt	223	214	+4%
Gold head grade, g/t	5.4	6.0	-10%
Gold recovery	80.2%	80.2%	+0%
Gold production, Koz	31.9	33.7	-5%
TOTAL PRODUCTION
Gold, Koz1	38.1	37.8	+1%
Silver, Moz	0.021	0.019	+10%

Note:       (1) Including the effect of rounding

Gold production at Voro in Q1 2014 increased by 1% year-on-year to 38 Koz. Moderate increase in throughput at the CIP plant partially offset the planned decline in grade. Heap leaching circuit demonstrated stronger performance on the back of introduction of the CIC circuit in Q3 2013.

Mining at Voro was seasonally concentrated on the primary ore, with the amount of primary ore mined increasing 14% year-on-year to 232 Kt while stripping decreased by 20% year-on-year.

VARVARA

	3 months ended Mar 31,		% change
	2014	2013
MINING
Waste mined, Kt	7,374	8,013	-8%
Ore mined (open pit), Kt	635	515	+23%
PROCESSING
Flotation
Ore processed, Kt	242	251	-4%
Grade
Gold, g/t	1.0	1.1	-13%
Copper	0.38%	0.66%	-43%
Recovery1
Gold	46.3%	59.2%	-22%
Copper	82.4%	89.7%	-8%
Production
Gold (in concentrate), Koz	3.4	4.9	-32%
Copper (in concentrate), t	709	1,355	-48%
Leaching
Ore processed, Kt	670	668	+0%
Gold head grade, g/t	1.2	1.3	-1%
Gold recovery1	76.4%	80.9%	-6%
Gold production (in dore), Koz	20.5	19.7	+4%
TOTAL PRODUCTION
Gold, Koz	23.8	24.6	-3%
Copper, t	709	1,355	-48%

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

At Varvara, gold production in Q1 2014 was 24 Koz and remained broadly flat year-on-year.

Availability of float ore was restricted in the period due to the pushback activity in South and North-West pits with feed partially coming from lower-grade stockpiles. This led to a 48% year-on-year reduction in copper production and had a knock-on effect on the recoveries in the flotation circuit.

The throughput at both flotation and leaching circuits was stable. The improvement in grade profile is expected from Q3 as the pushback is completed. Recovery at the leaching circuit was down by 6% year-on-year on the back of poor performance of stockpiled material while the modest decline in grade was mainly driven by the discontinued purchases of higher grade third-party ore.

The amount of ore mined in Q1 was 635 Kt, up 23% year-on-year and 14% quarter-on-quarter while stripping volumes decreased by 8% and 6% respectively as the mine is gradually returning to a normalised stripping ratio.

KHAKANJA

	3 months ended Mar 31,		% change
	2014	2013
MINING
Khakanja + Yurievskoye
Waste mined, Kt	1,215	293	+315%
Ore mined, Kt	7	287	-97%
Open-pit	7	282	-97%
Underground	-	5	-100%
Avlayakan
Waste mined, Kt	-	381	-100%
Underground development, m	1,066	-	NA
Ore mined, Kt	2	15	-84%
Open-pit	-	15	-100%
Underground	2	-	NA
Ozerny
Waste mined, Kt	1,165	1,012	+15%
Ore mined (open pit), Kt	321	111	+190%
TOTAL HUB
Ore mined (open pit), Kt	331	412	-20%
PROCESSING
Ore processed, Kt	150	150	-0%
Grade
Gold, g/t	3.7	3.6	+3%
Silver, g/t	118	176	-33%
Recovery1
Gold	85.3%	95.2%	-10%
Silver	79.6%	81.6%	-2%
TOTAL PRODUCTION
Gold, Koz	15.2	16.5	-8%
Silver, Moz	0.4	0.7	-34%

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

Gold production at Khakanja in Q1 2014 was 15.2 Koz and decreased by 8% year-on-year, while silver production was 0.4 Moz, down 34% year-on-year. The decrease was mainly driven by the depletion of high-silver ore blocks from the Khakanja open pit.

Processing of deep-level ore from Ozerny had a negative impact on recoveries. The trend in recoveries is expected to reverse starting from the second quarter of 2014.

Underground development at Avlayakan increased by another 31% quarter-on-quarter to more than 1 km and active stoping is scheduled for Q3 2014.

HEALTH AND SAFETY

A fatal incident occurred in Q1 at the Dukat underground mine, where the engineer was injured by electric current as a result of serious violation of safety rules and risk negligence by the employee.

Another fatal incident was reported on 15 April at Mayskoye underground mine. An underground worker was severely injured by a piece of rock in one of the adits. The investigation of this case is ongoing.

The Company is implementing additional measures to ensure proper enforcement of existing rules and safety risk management procedures. Unscheduled safety trainings were given to all workers, the knowledge and application of safety rules by engineers was checked. All hazardous facilities access and isolation rules have been re-visited. A comprehensive safety review was launched to identify the roots of the recent deterioration in safety performance.

OTHER DEVELOPMENTS

Polymetal notes recent statements in the press regarding "deoffshorisation" and proposals made by certain government officials intended to encourage the redomicile of Russian businesses currently listed abroad. As all operating entities of the Group are domiciled in Russia and Kazakhstan, Polymetal generates all of its revenues and profits and pays all related taxes in these countries. Therefore the Company does not expect any material impact from the "deoffshorisation" proposals on its operations.

The Company further confirms that it has no intention to change the current corporate structure of the Group and remains committed to its Premium Listing status on the London Stock Exchange, as well as the secondary trading of its shares on the Moscow Exchange.

 

END

 

 

MSCSESSIEFLSELL