3rd Quarter Results

RNS Number : 7781C

Polymetal International PLC

20 October 2015

 

Release time	IMMEDIATE
Date	20 October 2015

Polymetal International plc

Q3 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 third quarter and nine months ended September 30, 2015.

HIGHLIGHTS

·     Polymetal reports another strong set of the results, with 1,061 Koz of gold equivalent produced during the nine month period ended 30 September 2015, an increase of 2% year-on-year.

·     Gold equivalent production in the third quarter was 429 Koz, an increase of 28% quarter-on-quarter and 10% year-on-year driven by seasonal de-stockpiling of Mayskoye concentrate and a strong performance at Dukat and Albazino. Quarterly gold production was 270 Koz, up 4% year-on-year. Silver production in the third quarter was 9.3 Moz, up 21% year-on-year.

·     Polymetal continued to generate free cash flow in the third quarter and paid out US$ 34 million of interim dividends to shareholders. Net debt at 30 September 2015 increased by US$ 35 million compared to 30 June 2015 to US$ 1,268 million as the Company paid a net consideration of US$ 68 million for the settlement of the Kyzyl put option. As is normal, silver sales lagged production during the first three-quarters of the year, as most of silver is sold in the form of concentrate to offtakers which results in a longer work-in-progress cycle. This trend is expected to be reversed before year-end with the corresponding cash inflows.

·     At Kyzyl, the external audit of the feasibility study is nearing completion, and the release of its results is scheduled for the third week of November. A significant capital expenditure reduction vs. earlier projections is expected, mostly due to the impact of depreciation of the Russian Rouble. Site preparation is already under way and full-scale construction is on track to commence in Q3 2016.

·     Polymetal will host an Analyst and Investor Day on November 16 in London to present and discuss the results of the Kyzyl feasibility study

·     Polymetal is especially focused on remedial measures in response to three fatalities at our mines from 1st of August to the date of this report. The Company has established a dedicated Safety and Sustainability Committee of the Board. The Committee's role will be to oversee the results of in-depth external audit of safety management systems, and to assist and monitor Polymetal's management in developing and implementing additional measures to improve safety performance and overall risk management efficiency in this area.

·     The Company remains in a strong position to meet its annual production guidance of 1.35 Moz of gold equivalent in 2015, along with its total cash cost guidance of US$ 525-575/GE oz and all-in sustaining cash costs of US$ 700-750/GE oz.

·     Guidance for 2016 reconfirmed at 1.35 Moz of gold equivalent and for 2017 at 1.4 Moz of gold equivalent.

"We are pleased to report another quarter of consistently strong operating results with significant free cash flow generation, underpinned by a disciplined business model that prioritizes shareholder returns", said Vitaly Nesis, Group CEO of Polymetal. "With the support of the new Board committee, our focus is to promptly address safety issues at our operations, and underground operations in particular, in order to ensure optimal working conditions for our employees".

	3 months ended Sep 30,		% change1	9 months ended Sep 30,		% change1
	2015	2014		2015	2014
Waste mined, Mt	17.2	19.5	-12%	50.0	59.8	-16%
Underground development, km	18.1	14.6	+24%	54.0	44.9	+20%
Ore mined, Kt	3,116	3,582	-13%	9,124	10,013	-9%
Open-pit	2,360	2,219	-19%	6,855	8,073	-15%
Underground	755	633	+14%	2,269	1,939	+17%
Ore processed, Kt	2,852	3,056	-7%	8,289	8,529	-3%
Production
Gold, Koz	270	259	+4%	642	646	-1%
Silver, Moz	9.3	7.7	+21%	24.9	23.2	+8%
Copper, tonnes	670	104	+543%	808	1,631	-50%
Gold equivalent, Koz2	429	388	+10%	1,061	1,040	+2%
Sales
Gold, Koz	261	254	+3%	614	606	+1%
Silver, Moz	8.4	7.3	+15%	22.4	21.3	+5%
Copper, tonnes	300	-	NA6	699	300	+133%
Revenue, US$m3	402	451	-11%	1,050	1,176	-11%
Net debt, US$m4	1,268	1,233	+3%	1,268	1,249	+2%
Safety5
LTIFR	0.17	0.05	+240%	0.18	0.13	+38%
FIFR	0.08	-	NA	0.07	0.05	+40%
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 and includes the liability for dividend payable. Comparative information is presented for 30 June 2015 (for the three months period) and 31 December 2014 (for the nine 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

PRODUCTION BY MINE

	3 months ended Sep 30,		% change1	9 months ended Sep 30,		% change1	3 months ended Jun 30,	Q-o-Q, % change1
	2015	2014		2015	2014		2015
GOLD EQ. (KOZ)2
Dukat operations	140	113	+23%	384	357	+8%	127	+10%
Albazino-Amursk	64	62	+3%	173	177	-2%	54	+19%
Mayskoye	71	42	+69%	91	44	+107%	9	+694%
Omolon operations	66	69	-4%	168	185	-9%	72	-9%
Voro	34	42	-19%	105	117	-10%	30	+14%
Varvara	20	24	-15%	58	77	-24%	18	+16%
Okhotsk operations	34	37	-8%	81	84	-4%	25	+37%
TOTAL	429	388	+10%	1,061	1,040	+2%	334	28%

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 Tuesday, 20 October, 15:30 Moscow time (13:30 London time).

To participate in the call, please dial:

8 10 8002 041 4011 access code 840470# (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=3127

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=3127. 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 296938#, from 16:30 Moscow time Tuesday, October 20, till 16:30 Moscow time Tuesday, October 27, 2015.

Enquiries

Media		Investor Relations
Instinctif Partners David Simonson Saule Jandossova	[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 Sep 30,		% change	9 months ended Sep 30,		% change
	2015	2014		2015	2014
MINING
Dukat
Underground development, m	8,218	7,389	+11%	26,248	22,850	+15%
Ore mined (underground), Kt	434	381	+14%	1,228	1,076	+14%
Goltsovoye
Underground development, m	1,996	1,640	+22%	5,615	5,125	+10%
Ore mined (underground), Kt	40	44	-10%	151	138	+10%
Lunnoye + Arylakh
Waste mined, Kt	-	-	NA	-	233	-100%
Underground development, m	1,478	1,180	+25%	4,188	3,923	+7%
Ore mined, Kt	106	89	+20%	293	295	-1%
Open-pit	-	-	NA	-	36	-100%
Underground	106	89	+20%	293	259	+13%
TOTAL HUB
Underground development, m	11,692	10,209	+15%	36,051	31,898	+13%
Ore mined (open pit), Kt	-	-	NA	-	36	-100%
Ore mined (underground), Kt	581	514	+13%	1,672	1,472	+14%
PROCESSING
Dukat
Ore processed, Kt	484	443	+9%	1,363	1,267	+8%
Head grades
Gold, g/t	0.7	0.6	+25%	0.6	0.8	-14%
Silver, g/t	477	388	+23%	467	437	+7%
Recovery1
Gold	84.2%	84.4%	-0%	84.4%	86.4%	-2%
Silver	86.4%	86.1%	+0%	85.8%	87.3%	-2%
Production
Gold, Koz	9.3	7.2	+29%	23.1	27.2	-15%
Silver, Moz	6.3	4.9	+30%	17.0	15.8	+7%
Lunnoye
Ore processed, Kt	101	103	-2%	311	298	+4%
Head grades
Gold, g/t	1.4	1.4	+1%	1.5	1.3	+17%
Silver, g/t	418	392	+7%	426	388	+10%
Recovery1
Gold	92.3%	89.3%	+3%	90.7%	84.2%	+8%
Silver	89.7%	93.2%	-4%	88.9%	92.0%	-3%
Production
Gold, Koz	4.4	4.1	+5%	13.9	10.2	+37%
Silver, Moz	1.2	1.3	-2%	3.8	3.3	+15%
TOTAL PRODUCTION
Gold, Koz	13.7	11.3	+21%	37.0	37.4	-1%
Silver, Moz	7.6	6.1	+23%	20.8	19.2	+8%

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

Quarterly silver production at the Dukat hub increased by 23% year-on-year and by 11% quarter-on-quarter as the grades at the Dukat mine were significantly above the average reserve grades due to mining a very high-grade (~2,000 g/t Ag Eq) and newly discovered apophyse (off-shoot) at one of the veins. This is expected to be a one-off event, while quarterly volatility of the grades around the average reserve grade has been typical for the Dukat mine.

Quarterly gold production at the Dukat hub increased by 21% year-on-year and by 10% quarter-on-quarter as a result of higher grades processed at the Dukat plant and improved recoveries at both the Lunnoye and Dukat processing plants.

The amount of ore mined at the underground mines grew 13% year-on-year while underground development continued to grow and increased 15% year-on-year.

Processing volumes continued to increase (up 10% quarter-on-quarter) as the processing plants benefited from the results of the continuous improvement program.

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

ALBAZINO-AMURSK

	3 months ended Sep 30,		% change	9 months ended Sep 30,		% change
	2015	2014		2015	2014
MINING
Waste mined, Kt	4,576	4,104	+11%	12,715	12,078	+5%
Underground development, m	1,310	852	+54%	3,514	2,331	+51%
Ore mined (open pit), Kt	389	402	-3%	1,119	1,189	-6%
PROCESSING
Albazino concentrator
Ore processed, Kt	388	418	-7%	1,191	1,214	-2%
Gold head grade, g/t	5.5	4.8	+15%	5.3	4.8	+11%
Gold recovery1	86.0%	88.2%	-3%	87.4%	87.8%	-1%
Concentrate produced, Kt	34.7	35.7	-3%	100.3	99.4	+1%
Concentrate gold grade, g/t	52.6	49.1	+7%	54.8	51.3	+7%
Gold in concentrate, Koz2	58.6	56.5	+4%	176.8	163.8	+8%
Amursk POX
Concentrate processed, Kt	41.9	44.8	-6%	115.4	120.1	-4%
Gold head grade, g/t	55.3	46.7	+18%	52.6	50.6	+4%
Recovery	94.0%	94.0%	+0%	94.1%	93.6%	+0%
Gold produced, Koz	63.8	61.7	+3%	173.4	176.7	-2%
TOTAL PRODUCTION					-
Gold, Koz	63.8	61.7	+3%	173.4	176.7	-2%

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 63.8 Koz of gold in the third quarter, 3% higher year-on-year due to processing of higher grade material. Quarter-on-quarter gold production grew by 19% both because of higher grades and increased concentrate processing volumes at the Amursk POX plant. POX recoveries remained stable.

Gold production for the nine months was down slightly by 2% year-on-year driven by 4% throughput reduction, but was partially offset by the increase in grades and recoveries.

Underground development at the Olga zone continued at a stable pace. First ore from the stopes is scheduled to come into production during Q4 2015.

MAYSKOYE

	3 months ended Sep 30,		% change	9 months ended Sep 30,		% change
	2015	2014		2015	2014
MINING
Underground development, m	3,446	2,983	+16%	9,440	8,141	+16%
Ore mined (underground), Kt	152	149	+2%	519	467	+11%
PROCESSING
Mayskoye concentrator
Ore processed, Kt	197	214	-8%	634	606	+5%
Gold head grade, g/t	5.3	9.1	-42%	6.8	8.8	-23%
Gold recovery1	83.2%	86.1%	-3%	86.0%	82.7%	+4%
Concentrate produced, Kt	17.6	24.8	-29%	63.0	71.2	-11%
Concentrate gold grade, g/t	49.1	68.0	-28%	58.8	62.2	-5%
Gold in concentrate, Koz2	27.8	54.2	-49%	119.2	142.3	-16%
Concentrate sold, Kt	29.7	22.3	+33%	29.7	22.3	+33%
Payable gold in concentrate sold, Koz	59.6	39.3	+52%	59.6	39.3	+52%
Amursk POX
Concentrate processed, Kt	4.1	1.8	+130%	16.8	3.5	+378%
Gold head grade, g/t	59.4	56.6	+5%	58.4	51.5	+13%
Recovery	94.0%	94.1%	-0%	94.1%	87.6%	+7%
Gold produced, Koz	11.5	2.8	+307%	31.8	4.9	+549%
TOTAL PRODUCTION
Gold, Koz	71.1	42.1	+69%	91.5	44.2	+107%

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 91.5 koz of gold during 9M 2015. The production was split between the in-house POX processing and concentrate offtake to China that accounted for 65% of 9-months production. As at September 30, available for shipping stockpiles at Mayskoye amounted to 25 Kt of concentrate containing 47 Koz of gold.

Persistent geotechnical problems with ore stability were partially responsible for the recent fatalities. In response to these events the management has accelerated a planned changeover from drift-and-fill mining to sublevel open stoping with backfill. The new mining system will ensure that employees are not exposed to rock falls in the partially broken stopes as all development and production drilling will be done from waste openings.

As a result, the drift-and-fill stopes prepared for mucking now need to be re-developed which will negatively impact 2H 2015 ore tonnage and grade, forcing the processing of lower-grade historic stockpiles in Q3 and a 3-week concentrator stoppage in Q4.

The grades and ore volumes are expected to return to reserve averages in Q1 2016.  The change in the mining system is expected to benefit the grade profile at the same time increasing mining costs with more precise estimates of the overall impact to become available in Q2 2016.

OMOLON OPERATIONS

	3 months ended Sep 30,		% change	9 months ended Sep 30,		% change
	2015	2014		2015	2014
MINING
Sopka
Waste mined, Kt	-	1,080	-100%	1	3,536	-100%
Ore mined (open pit), Kt	-	341	-100%	-	842	-100%
Dalneye
Waste mined, Kt	-	276	-100%	1,042	1,155	-10%
Ore mined (open pit), Kt	-	39	-100%	635	215	+195%
Tsokol
Waste mined, Kt	-	905	-100%	396	3,285	-88%
Underground development, m	684	-	NA	785	-	NA
Ore mined (open pit), Kt	-	63	-100%	176	188	-6%
Birkachan
Waste mined, Kt	777	7	NM	1,447	535	+170%
Underground development, m	-	280	-100%	1,254	280	+348%
Ore mined (open pit), Kt	256	3	NM	441	698	-37%
Ore mined (underground), Kt	0	-	NA	1	-	NA
Oroch
Waste mined, Kt	1,127	-	NA	2,628	-	NA
Ore mined (open pit), Kt	195	-	NA	232	-	NA
TOTAL HUB
Waste mined, Kt	1,904	2,267	-16%	5,515	8,511	-35%
Underground development, m	684	280	+144%	2,039	280	+628%
Ore mined (open pit), Kt	451	446	+1%	1,484	1,943	-24%
Ore mined (underground), Kt	-	-	NA	1	-	NA
PROCESSING
Birkachan Heap Leach
Gold production, Koz	-	3.0	-100%	0.1	4.2	-97%
Kubaka Mill
Ore processed, Kt	207	211	-2%	622	610	+2%
Grade
Gold, g/t	6.3	7.6	-17%	6.1	7.4	-18%
Silver, g/t	227	200	+13%	184	165	+12%
Recovery1
Gold	94.6%	95.0%	-0%	95.6%	94.9%	+1%
Silver	88.3%	83.3%	+6%	87.4%	83.9%	+4%
Gold production, Koz	41.8	46.9	-11%	115.3	137.8	-16%
Silver production, Moz	1.5	1.1	+29%	3.1	2.6	+23%
TOTAL PRODUCTION
Gold, Koz	41.8	49.9	-16%	115.4	141.9	-19%
Silver, Moz	1.5	1.1	+28%	3.1	2.6	+22%

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

                (2) NM - not material

At Omolon, gold production decreased by 16% year-on-year while silver production increased 28% as the Kubaka plant was processing ore from Dalnee and Sopka stockpiles, with lower gold grades, but higher silver grades.

Birkachan open pit operations have resumed in full with underground mining pushed back by 5 to 6 quarters. This was made possible by significant drop in waste mining costs and changes in pit wall angles.

Open pit mining started at Oroch in Q2 and volumes continued to increase steadily in the third quarter.

At Tsokol, underground development continued with the goal to start ore stoping in Q1 2016.

VORO

	3 months ended Sep 30,		% change	9 months ended Sep 30,		% change
	2015	2014		2015	2014
MINING
Voro
Waste mined, Kt	2,636	2,928	-10%	7,818	8,149	-4%
Ore mined (open pit), Kt	506	710	-29%	1,422	1,597	-11%
-     primary	379	237	+60%	1,086	714	+52%
-     oxidised	127	473	-73%	336	883	-62%
PROCESSING
Voro Heap Leach
Ore stacked, Kt	243	376	-35%	423	686	-38%
Gold head grade, g/t	1.9	1.4	+41%	1.8	1.4	+23%
Gold production, Koz	8.3	8.0	+4%	19.2	18.6	+3%
Voro CIP
Ore processed, Kt	243	238	+2%	698	696	+0%
Gold head grade, g/t	4.0	5.3	-26%	4.1	5.7	-28%
Gold recovery1	79.2%	85.9%	-8%	78.8%	83.6%	-6%
Gold production, Koz	25.5	33.5	-24%	84.8	96.9	-12%
TOTAL PRODUCTION
Gold, Koz	33.8	41.5	-18%	104.0	115.4	-10%
Silver, Moz	0.020	0.029	-31%	0.082	0.071	+16%

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

Gold production at Voro in Q3 2015 decreased by 18% year-on-year to 33.8 Koz driven by the planned decrease in grade and related decline in CIP recoveries. Quarter-on-quarter gold production was up 15% mostly as a result of 40% increase in gold production at the heap leach plant driven by higher grades and the switch from Merrill Crowe recovery to Carbon-In-Column technology.

VARVARA

	3 months ended Sep 30,		% change	9 months ended Sep 30,		% change
	2015	2014		2015	2014
MINING
Waste mined, Kt	8,051	7,848	+3%	22,471	23,793	-6%
Ore mined (open pit), Kt	1,014	1,178	-14%	2,546	2,690	-5%
PROCESSING
Flotation
Ore processed, Kt	234	54	+337%	311	547	-43%
Grade
Gold, g/t	1.2	1.8	-34%	1.1	1.1	+1%
Copper	0.39%	0.37%	+4%	0.36%	0.40%	-9%
Recovery1
Gold	48.1%	52.6%	-8%	46.2%	47.3%	-2%
Copper	72.3%	75.3%	-4%	72.2%	80.7%	-10%
Production
Gold (in concentrate), Koz	3.3	0.9	+284%	4.1	7.8	-47%
Copper (in concentrate), t	670	104	+543%	808	1,631	-50%
Leaching
Ore processed, Kt	594	844	-30%	2,265	2,141	+6%
Gold head grade, g/t	0.9	1.1	-17%	0.8	1.1	-25%
Gold recovery1	76.8%	75.2%	+2%	78.1%	76.1%	+3%
Gold production (in dore), Koz	13.7	22.6	-39%	50.0	60.9	-18%
TOTAL PRODUCTION
Gold, Koz	17.1	23.5	-27%	54.1	68.6	-21%
Copper, t	670	104	+543%	808	1,631	-50%

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

At Varvara, gold production in Q3 2015 decreased by 27% driven by lower grade and lower throughput.

In the third quarter, throughput at the leaching circuit temporarily decreased by 30% due to planned care and maintenance shutdown, while the copper circuit continued to process low-grade copper-gold ore from the stockpiles.

In July 2015, Polymetal completed construction and launched a 13 km railway spur at Varvara enabling long-distance transportation of 3rd-party material and leading to a meaningful reduction in concentrate transportation costs.

The Kazakh tenge has lost more than 30% of its value after Kazakhstan government introduced a freely floating exchange rate for the currency. Devaluation of the tenge will have a major positive impact on Varvara's operating cost level in the second half of the year.

OKHOTSK OPERATIONS

	3 months ended Sep 30,		% change	9 months ended Sep 30,		% change
	2015	2014		2015	2014
MINING
Khakanja
Waste mined, Kt	-	1,153	-100%	1,478	3,530	-58%
Ore mined (open-pit), Kt	-	94	-100%	180	177	+2%
Avlayakan
Underground development, m	985	950	+4%	2,990	2,935	+2%
Ore mined (underground), Kt	22	10	+116%	78	18	+330%
Ozerny
Waste mined, Kt	-	1,165	-100%	42	3,499	-99%
Ore mined (open pit), Kt	-	78	-100%	105	423	-75%
TOTAL HUB
Waste mined, Kt	-	2,319	-100%	1,520	7,029	-78%
Ore mined, Kt	22	183	-88%	363	618	-41%
Open-pit	-	172	-100%	285	600	-53%
Underground	22	10	+116%	78	18	+330%
PROCESSING
Ore processed, Kt	161	156	+3%	471	463	+2%
Grade
Gold, g/t	6.0	6.2	-3%	4.6	4.4	+4%
Silver, g/t	73	116	-37%	84	120	-30%
Recovery1
Gold	94.9%	95.6%	-1%	94.9%	92.6%	+2%
Silver	75.7%	71.9%	+5%	70.0%	75.1%	-7%
TOTAL PRODUCTION
Gold, Koz	28.9	29.5	-2%	66.2	61.6	+8%
Silver, Moz	0.3	0.4	-31%	0.9	1.3	-35%

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

Gold production at Okhotsk operations during 9M 2015 increased by 8% year-on-year as the company was processing high-grade material from Avlayakan underground mine. Silver production during nine months was down 35% driven by the depletion of high-silver ore blocks in the Khakanja open pit where mining was completed in Q2.

Gold recoveries were relatively stable quarter-on-quarter and increased meaningfully year-on-year due to the change in the mix of ores processed.

At Svetloye, construction is progressing on schedule. Summer navigation was successfully completed with all materials delivered to the access point at Unchi. The accommodation camp and fuel storage depot are now commissioned. 

Open-pit mining is on track to start in Q4 2015.  

KYZYL

Project feasibility study has been completed and is currently being reviewed by the independent auditor. The release of findings is scheduled for the third week of November. Polymetal will host the Analyst and Investor Day on November 16 in London to present and discuss the results of the feasibility study.

Equipment selection process under way with final commercial bids submitted and preferred suppliers identified. Contracts for the design of the tailings dump and relocation of historic waste stockpiles have been awarded.

Polymetal is on track to start full-scale construction in Q3 2016.

HEALTH AND SAFETY

Polymetal suffered two fatalities during the third quarter 2015 at the Mayskoye underground mine. A drift miner was fatally injured by a rock mass fall in the underground mine on September 6, and a blastman suffered fatal injuries because of an accident with a charging machine on 7 September. On October 10, at the Avlayakan underground mine (Okhotsk operations) a blastman was fatally injured by unstable rock mass fall.

Polymetal places great value on its workers' health and safety. In response to these and earlier events, considering the results of in-depth external audit of safety management systems, the Company continues to develop and implement additional measures to improve risk management efficiency. Polymetal has also launched pilot projects to test a more protective underground development system, and increased and upgraded the mining fleet.  

Safety and Sustainability Committee and Change to composition of Remuneration Committee

To address the recent deterioration in the safety performance and oversee management commitment to continuous improvement in health, safety and sustainability performance at all levels of the organisation, and, inter alia, review the HSE incidents, the Company further announces that it has established a new Safety and Sustainability Committee of the Board (the "Committee") to assist the Board of Directors in fulfilling its oversight responsibilities on matters relating to safety, health, environment, and social responsibility. The Committee will be comprised of Mr Homeniuk as Chair, Mr Skirrow, Ms Grönberg (all non-executive directors), and Mr Vitaly Nesis, the Group CEO. 

Following the appointment of Leonard Homeniuk as the Chairman of the Committee, Christine Coignard, Senior Independent Non-Executive Director would replace Mr Homeniuk as Chair of Remuneration Committee and Mr Homeniuk would continue to serve as its member.

Terms of reference of the Committee is available on the Company's website www.polymetalinternational.com.   

PERSONNEL

Igor Finogenov, the former President of the Eurasian Development Bank, joined the Boards of Kyzyl and Varvara as Chairman. Mr. Finogenov will be responsible for coordinating Polymetal's relations with the government authorities in Kazakhstan, including permitting, transaction vetting, taxation, and licencing. 

 

END

 

 

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