Polymetal Agrees to Acquire Goltsovoye Silver Deposit
Saint-Petersburg, Russia, November 19,
2008 - JSC "Polymetal" (LSE, MICEX, RTS: PMTL) ("Polymetal" or the
"Company") announces that it has made a proposal to purchase 100% of CJSC
"Artel of prospectors "Ayax" ("Ayax") from Ovoca Gold Plc. for US$11
million in cash, 7.5 million of Polymetal's common shares and a cash
payment for such assets of Ayax as Polymetal agrees to acquire based on
their book value in addition to the exploration and mining license
for Goltsovoye silver deposit located in the Magadan region of
Russia ("Goltsovoye"), approximately 81 km from Polymetal's Dukat
processing plant.
The transaction is subject to agreeing detailed terms with Ovoca Gold Plc.
and approval from the shareholders of Ovoca Gold Plc. and the Russian
Federal Antimonopoly Service.
Measured and indicated silver resources at Goltsovoye, as estimated
by Wardell Armstrong International in February 2007, amount to 1.5Mt of
ore at an average grade of 993g/t for 47.2Moz of contained silver.
Inferred resources, according to the same estimate, amount to 0.9Mt
at 738g/t silver for 21.8Moz contained silver. Average ore body width is
approximately 2.5 meters which the Company believes will
allow for significant mechanization of the mine.
The conceptual mining plan prepared by Polymetal in the course of due
diligence of Goltsovoye envisions a 120-170Ktpa mechanized underground
mine with crushed ore being trucked to the Dukat processing plant for
blending with Dukat ore and flotation followed by cyanidation
at the Lunnoye processing plant.
Ore metallurgy has been extensively tested indicating recoveries to Dore
in the order of 83-87%. Goltsovoe-type ore from one of Dukat's satellite
deposits has been successfully processed at Dukat in 2007 confirming test
results. The expanded gravity circuit at Dukat plant will provide for the
presence of coarse-grained sulfides in the feed.
The Company believes that substantial exploration potential exists
on the 5.6 square kilometre property which is the subject of the
Goltsovoye exploration and mining license with only two out of
five identified ore zones drilled on a regular grid.
Polymetal's strategic rationale for the proposed transaction is as
follows:
* to expand its silver resource base (Goltsovoye resources represent 10%
of Polymetal's M&I and 13% of MI&I resources as of January 1, 2008) in
the vicinity of operating processing facilities with the ability to
leverage existing infrastructure
* to provide high-grade long-term feed to the expanded Dukat processing
plant
* to improve the cost position of Dukat/Lunnoye operations by adding
higher-grade ore to the feed
* to consolidate land position around Dukat and ensure maximum exposure
to exploration upside in highly prospective silver belt
The goals the Company has set for Goltsovoye (assuming the proposed
acquisition of Goltsovoye closes in Q1 2009) are to:
* produce a JORC-compliant reserve statement with detailed development
plan and capital/operating expenditures estimates in 3Q 2009
* start capital development and infrastructure construction in 4Q 2009
* start stoping in 2Q 2010
"Goltsovoye represents a unique opportunity to add high-grade silver
resources literally in Dukat's backyard and thus leverage 90%-complete
expansion of Dukat processing plant in the nearest future," said Vitaly
Nesis, CEO of Polymetal. "We are particularly pleased that this
transaction has a great potential to become strongly accretive on
resource-per-share and, in the future, reserve-per-share and cash
flow-per-share basis. It demonstrates Polymetal's continued focus on M&A
opportunities that create substantial value for shareholders through
easy-to-understand synergies".
Polymetal's Board of Directors is supportive of the potential transaction.
Pavel Danilin
VP, Corporate Finance and Investor Relations
Tel. +7 812 334 3666
E-mail: danilin@polymetal.ru
Website: www.polymetal.ru
***
This release includes statements that are, or may be deemed to be,
"forward-looking statements". These forward-looking statements can be
identified by the use of forward-looking terminology, including the words
"targets", "believes", "expects", "aims", "intends", "will", "may",
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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
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Company's control that could cause the actual results, performance or
achievements of the Company to be materially different from future
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forward-looking statements. Such forward-looking statements are based on
numerous assumptions regarding the Company's present and future business
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future. Forward-looking statements are not guarantees of future
performance. Many factors that could cause the Company's actual results,
performance or achievements to differ materially from those expressed in
such forward-looking statements. These forward-looking statements speak
only as at the date of this release. 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.
The release, publication or distribution of this announcement in
jurisdictions other than the United Kingdom or the Russian Federation may
be restricted by law and, therefore, any persons who are subject to the
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requirements. The information disclosed may not be the same as that which
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outside England or the Russian Federation.
This announcement does not constitute an offer or invitation to purchase
any securities.
This information is provided by RNS
The company news service from the London Stock Exchange
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