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Nezhda

Russia’s 4th largest gold deposit

Key facts

Location North-east Yakutia, Russia
Ownership 17.7% with call option to increase ownership to 100%
Mining open-pit +underground
Processing flotation + off-take/ POX
Ore Reserves (JORC) 2.0 Moz GE, 4.0 g/t average grade
Mineral Resources (JORC) 8.9 Moz GE, 5.0 g/t average grade
Production start date 2022
Life of mine 2033

Overview

Nezhda is Russia’s fourth largest gold property based in the Republic of Sakha (Yakutia) with a resource inventory of 55.9 Mt of mineralized material containing 8.9 Moz of gold equivalent (GE) with an average grade of 5.0 g/t GE based on the latest resource estimate.

Currently, the Company envisions the construction of an open-pit mine and a conventional on-site concentrator followed by concentrate processing at the Amursk POX or 3rd-party off-take. This ensures low capital intensity for the project, making it an excellent fit for Polymetal’s core capabilities. Total capital costs for Nezhda are estimated at US$ 249 million, including US$ 15 million capitalised pre-stipping costs, with approximately US$ 30 million to be invested in 2018 into project design, permitting and exploration.

The first JORC-compliant reserve statement was published in November 2017 with the development decision to be made in Q4 2018. Polymetal first entered into the joint venture for the property in 2015, acquiring a 15.3% stake in the South-Verkhoyansk Mining Company («SVMC») which owns the mining and exploration license for the property. In July 2017, the company has agreed to increase its stake to 24.7% with a call option to buy out the remaining 75.3% in 2018, subject to certain conditions.

Location History Geology and Mineralisation Mineral Reserves and Resource Operations Project development timeline

Nezhda is the fourth largest gold deposit in Russia, located in northeast Yakutia in the Tompon municipal district, approximately 480 km east from the city of Yakutsk (population of 350,000). The property is remote with access by an all-season unpaved road and no grid connection. The nearest federal highway is 110 km away from the deposit by all-year unpaved road. The highway provides direct access to the Khandyga river port (170 km) and the Nizhniy Bestiakh railway spur (370 km). The climate is characterized by long severe winters and short hot summers. The relief is moderately mountainous with relative altitudes above valley floors not exceeding 600 m.

The Nezhdaninskoye gold deposit was discovered in 1951 during the Allakh-Yunskaya geological exploration expedition. From 1959, the deposit was subject to several exploration and evaluation initiatives resulting in newly identified ore zones. In 1975, a 180 Kt per annum underground mine and concentrator was commissioned at Nezhda with over 2 Mt of ore mined and processed before the operation was placed on care and maintenance in 2005. Polyus acquired the asset in 2006, subsequently undertaking an extensive exploration program and completing several technical studies.

Polymetal entered into the joint venture with Polyus Gold for the Nezhda gold deposit in 2015, completing a total 42,479 m of diamond drilling by 2017, which resulted in an initial JORC-compliant mineral resource estimate reported on July 17, 2017.

The property lies on the northern flank of the Allakh-Yunsk gold bearing belt where the western and central structural zones of the South Verkhoyansk syncline merge.The deposit is composed of large mineralised zones, representing areas of intense brecciation comprised of crushed and sheared, hydrothermally altered, sedimentary rocks that have been variably enriched in quartz. The Nezhda mineralisation is double refractory due to the encapsulation of fine gold particles within sulphide minerals and significant presence of preg-robbing carbonaceous material.

The Nezhda Ore Reserve estimate for the open pit is reported in accordance with the JORC Code (2012) as at 1 July 2017 using a gold price of US$ 1,200/oz and silver price of US$ 16/oz. A cut-off grade of 2.0 g/t gold equivalent (GE) has been applied. The Ore Reserve statement was prepared by Polymetal.

Additional Mineral Resources for Nezhda for the open pit and underground are reported in accordance with the JORC Code (2012) as at 1 July 2017 using a gold price of US$ 1,200/oz and silver price of US$ 16/oz. The revaluation of Mineral Resources was prepared by Polymetal based on new geomechanical data for the deposit.

The estimate is based on data from 42,479 m of diamond drilling completed by Polymetal in 2015 and 2017 in addition to the 339,392 m of drilling completed by previous owners. Mineral resources for the open pit were estimated up to a depth of 250 m from the surface.

The largest mineralised structure is mineralised zone 1 («MZ 1») which has a strike length of 4,900 m and a vertical extent over 1,800 m and comprises 80% of currently estimated Mineral Resources at Nezhda in terms of gold contained. For MZ 1, top cutting at 80 g/t gold was applied to reduce outlier grade influence on local estimation.

Nezhda Open-pit Ore Reserves estimate
Ore Reserves Tonnage Grade Content
Mt Au, g/t Ag, g/t GE, g/t Au, Moz Ag, Moz GE, Moz
Proved 7.6 4.0 25 4.2 1.0 6.2 1.0
Probable 7.9 3.7 15 3.8 0.9 3.8 1.0
Proved+Probable 15.5 3.8 20 4.0 1.9 10.0 2.0
Nezhda Additional Mineral Resource estimate
Additional Mineral Resources Tonnage Grade Content
Mt Au, g/t Ag, g/t GE, g/t Au, Moz Ag, Moz GE, Moz
Measured Underground 1.2 5.3 13 5.4 0.2 0.5 0.2
Total Measured 1.2 5.3 13 5.4 0.2 0.5 0.2
Indicated Open-pit 0.8 2.9 21 3.0 0.1 0.5 0.1
Underground 5.5 5.2 16 5.3 0.9 2.9 0.9
Total Indicated 6.3 4.9 17 5.0 1.0 3.4 1.0
Measured+Indicated Open-pit 0.8 2.9 21 3.0 0.1 0.5 0.1
Underground 6.7 5.2 15 5.3 1.1 3.3 1.2
Total Measured+Indicated 7.5 5.0 16 5.1 1.2 3.9 1.2
Inferred Open-pit 1.8 3.0 13 3.1 0.2 0.7 0.2
Underground 46.7 4.9 10 5.0 7.4 15.4 7.5
Total Inferred 48.4 4.9 10 4.9 7.6 16.1 7.7
Measured + Indicated + Inferred Open-pit 2.6 3.0 15 3.1 0.2 1.3 0.3
Underground 53.4 5.0 11 5.1 8.5 18.7 8.7
Total Measured + Indicated + Inferred 55.9 4.9 11 5.0 8.8 20.0 8.9
Mining

The mine plan envisages two large open pits that will be mined over 11 years via conventional drill-and-blast and truck-shovel methods. Evaluation of subsequent underground mining potential is under way.

The ultimate contours of the open pits were determined via pit optimization, including trade-off studies with underground mining. An open-pit cut-off grade of 2.0 g/t GE was used. Average pit slope angles of 45-55 degrees for open-pit No.1 and 39-55 for open-pit No.2 were applied, with the upper and lower levels estimated at +1,475 m above sea level (asl) and +680 m asl, respectively.

Projected open-pit mining volumes are currently set at 1.5 Mtpa of ore with an average stripping ratio of 12:1.

Metallurgy and processing

Currently expected flotation plant capacity is 1.5 Mt of ore per annum, followed by concentrate offtake or POX processing. Gold recovery to concentrate is anticipated at 85% with a mass pull ratio of 5.3%.

The current estimate envisages 1.5 Mtpa concentrator incorporating crusing, two-stage grinding, and flotation and gravity circuits. Tailings will be filtered and dry stacked within the existing historic storage facility. Dried flotation concentrates will be sold to third party off-takers while gravity concentrate will processed at the Amursk POX facility.

Polymetal envisages the following conceptual development timeline for the Nezhda gold Project:

  • Completion of Feasibility Study and investment decision in Q4 2018
  • Start of construction in Q4 2018 subject to positive investment decision
  • Pre-stripping to start in 2019
  • First production: 2022
  • Full capacity: 2023