Acquisition of the Komarovskoye Gold Deposit

RNS Number : 0115U

Polymetal International PLC

04 April 2016

 

Release time	IMMEDIATE
Date	4 April 2016

Polymetal International plc

Acquisition of the Komarovskoye Gold Deposit in Kazakhstan

Polymetal International plc (LSE, MOEX: POLY; ADR: AUCOY) (together with its subsidiaries - "Polymetal", the "Company", or the "Group")  is pleased to announce that it has entered into a binding agreement with Kazzinc LTD, a subsidiary of Glencore plc, for the acquisition of Orion Minerals LLP ("Orion"), the holding company for the Komarovskoye Gold Deposit ("Komarovskoye") in the Republic of Kazakhstan (the "Acquisition"). 

INFORMATION ON THE PROPERTY

Komarovskoye is located in the north-western Kazakhstan, 10 kilometres from the city of Zhitikara (population 35,000) and approximately 187 kilometres by rail from Polymetal's Varvarinskoye mine ("Varvara"). The total area of subsoil licenses at the project is 104km².

As of 31 December 2015, JORC compliant inferred resources were estimated at 28 Mt at 1.5g/t gold containing approximately 1.4 Moz¹. Resources are estimated only to the depth of 280m, while mineralisation is traced to the depth of 450m.

The asset comprises an active open pit mine and a 500 ktpa heap leach facility with grid power available on site. Mining at the property commenced in 2006 and has been focused on the oxide mineralization, which now is largely depleted. Over 200 Koz of gold was produced so far. Mining of primary ore and its sale to Varvara commenced in 2010. A total of over 1 Mt at an average grade of 2.5 g/t have been processed at Varvara in 2010-2013 with average recovery of 88%.

Komarovskoye has a direct railway access to Varvara; the nearest railway spur is located less than 2km from the pit. 

Komarovskoye is a low-sulphide quartz gold deposit located along the contact of the granite intrusion. Mineralisation occurs within the fault zone and consists of steeply dipping quartz-carbonate-micaceous metasomatites hosted by schists. The overall strike length of Komarovskoye is approximately 6,800m with individual mineralised zones generally 500-600m in length, 4-6m in width. Oxidation depth is limited to 30-50m below surface.

STRATEGIC RATIONALE

The acquisition of Komarovskoye is in line with Polymetal's processing hub strategy and provides a high grade, open-pittable and easily accessible ore feed for Varvara with simple and well-understood metallurgy.

Polymetal aims to mine, deliver by rail and process at Varvara up to 1 Mtpa of ore with potential to increase Varvara's annual production by approximately 70 Koz at lower cash costs. Komarovskoye ore will partially replace the lower-grade own feed at the Leach Circuit and will significantly extend its life of mine. Polymetal expects to estimate JORC compliant ore reserves at the property by the end of 2016.

The initial investment is expected to be less than US$ 5 million as mine fleet will be mostly transferred from Varavara and complemented by contractors. Ore processing at Varvara plant is expected to start within three months after transaction completes.

"Komarovskoye has long been in our sights as a natural close fit for our Varvara hub. We are very excited about the transaction which is expected to strengthen production profile, lower costs, and provide substantial incremental cash flows at Varvara in the near term" said Vitaly Nesis, Group CEO of Polymetal.

TRANSACTION DETAILS

The total consideration payable to Orion at completion is US$ 100 million in cash, which will be satisfied from Polymetal's existing cash balances and available credit facilities. In addition, Kazzinc will receive a deferred consideration ("Royalty") linked to future production from the Komarovskoye and future gold price performance. The royalty will be calculated on a quarterly basis, payable at gold prices above US$ 1,250 per ounce, and capped at a total consideration of US$ 80 million².

Completion of the Acquisition is conditional on certain regulatory approvals, including approval by the Ministry of Investment and Development and anti-monopoly approval in Kazakhstan. Completion is expected to occur in 2016. Polymetal's Net debt/ Adjusted EBITDA will not materially change after the Acquisition compared to 2015 year end (1.97x as at 31/12/2015).

The value of gross assets of the company subject to the transaction (on a 100% share basis) is US$ 28 million and a reported pre-tax loss attributable to these assets is US$ 23 thousand based FY2015 financial accounts³.

Scotiabank Europe plc acted as financial advisor to Polymetal.

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Notes:

¹ Source: Glencore plc 2015 Reserves & Resources Report. Competent person - Aline Côté, Project Manager, Glencore Zinc.

² Royalty = (US$35 * ((Average Quarterly Gold Price - 1,250)/100)) * Contained Gold in Ore Mined per Relevant Quarter (in troy ounces)

³ Based on Audited Financial Statements (applied KZT / US$ exchange rates of 339 KZT per US$ as of 31 December 2015 and 223 KZT per US$ as average for 2015FY)

Enquiries

Media		Investor Relations
FTI Consulting  Leonid Fink Jenny Payne	[phone]	Polymetal Maxim Nazimok Evgenia Onuschenko Maryana Nesis	[e-mail] [phone] (Russia) [phone] (UK)
Joint Corporate Brokers
Morgan Stanley Sam McLennan Richard Brown	[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.

 

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