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Polymetal acquires interest in Prognoz silver property

19 January 2017

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 an agreement with Polar Silver Resources Ltd (“Polar”), under which Polymetal will participate in the development of the Prognoz silver deposit in Yakutia, Russia (“Prognoz”). The arrangement will allow Polymetal to acquire up to 50% indirect interest in Prognoz.

HIGHLIGHTS

  • Prognoz is the largest undeveloped primary silver deposit in Russia, with JORC-compliant Indicated and Inferred Resources (estimated by Micon in 2009) of 292 Moz at 586 g/t silver. LLC Prognoz Silver is the Russian legal entity that holds the mining and exploration licence for the deposit which covers an area of 56 km2.
  • Under the agreement, Polymetal will acquire a 5% indirect interest in Prognoz for US$3 million in cash through the purchase of 10% of Polar’s share capital. Polar currently indirectly holds a 50% interest in Prognoz, with the remaining 50% owned by a group of private investors.
  • Polymetal will have an obligation to undertake 25 km of diamond drilling, and complete a technical study resulting in an externally audited JORC-compliant reserves estimate for the property before 31 March 2019. Total capital expenditures required to perform the drilling and complete the technical study are expected at US$ 10 million per annum during FY 2017-2019.
  • Upon completion of the technical study and the reserve estimate, but no later than on 31 March 2020, Polymetal will have an option to increase its effective share in Prognoz to 50%. The consideration for the remaining 45% stake will be determined at the time of the option exercise. It will depend, among other things, on spot silver prices and the size of estimated reserves.
  • Should Polymetal decide not to exercise the option, the agreement will terminate with no further amounts to be paid or received by the parties.

STRATEGIC RATIONALE

The Prognoz transaction fits well with Polymetal’s stated strategy:

  • Very large high-grade resource with excellent exploration upside;
  • Potential for relatively low-capital and fast development approach based on open-pit mining and conventional processing;
  • Flexible transaction structure preserving strategic optionality and deferring any capital allocation decision until the key geological risk is significantly reduced.

“The transaction structure gives us an inexpensive opportunity to de-risk the asset before considering a sizeable investment decision. Prognoz is unique in terms of size and grade. It may, in time, succeed Dukat as one of the largest primary silver deposits in the world”, said Vitaly Nesis, Group CEO of Polymetal.

LOCATION

The Prognoz licence is located in the Verkhoyansk municipal district in the Republic of Sakha (Yakutia), part of the Russian Far East. The property is located 444 km north of the regional center, Yakutsk (population of approximately 300,000), and approximately 220 km southwest of the municipal center, Batagai (population of approximately 3,700). The site is remote with seasonal access from Batagai by winter road. There is no infrastructure at or near the property.

GEOLOGY

The licence area is located within the Verkhoyansk mobile belt of northeastern Yakutia. Silver-lead-zinc mineralization, represented by quartz-carbonate-sulphide veins, is located in a sequence of sedimentary rocks composed of Triassic sandstones and siltstones. Nine mineralised zones are defined, with zones Glavnaya and Boloto being the largest (strike length of up to 2 km) and explored in more detail. Average vein thickness is 3 m.

HISTORICAL EXPLORATION

Prognoz was discovered in 1973. Further prospecting and evaluation activities were undertaken between 1987 and 1998 with 89 drill holes totaling 17,806 m completed at the property. Between 2006 and 2008, an intensive in-fill drilling program aimed at the expansion of resources was completed with 873 drill holes totaling 78,925 m. Since 2009, the asset was on care and maintenance. A JORC-compliant resource estimate for the deposit was prepared by Micon in 2009. Resources were estimated up to the depth of 400 metres. As part of the resource estimate, pilot plant testwork was performed, demonstrating robust silver recovery levels into both gravity and flotation concentrates.

Prognoz Mineral Resources estimate in accordance with the JORC Code (2012) as at 30 May 2009

Tonnes

Ag Grade

Ag Content

(Mt)

(g/t)

 

(Moz)

Indicated

5.86

773

146

Inferred

9.64

473

147

Indicated+Inferred

15.5

586

292

Notes: Silver cut-off grade of 100 g/t

In addition to the resource estimate, Micon performed an evaluation of the conceptual mineral potential for 18 of the other known mineralised zones which were not included in the resource estimate. The additional mineral potential is estimated between 7.9 - 18.1 Mt of ore at 469 g/t silver for 119 - 273 Moz of silver contained.

Enquiries

Media

Investor Relations

FTI Consulting
Leonid Fink
Jenny Payne

+44 20 3727 1000

Polymetal
Maxim Nazimok
Evgenia Onuschenko
Maryana Nesis

ir@polymetalinternational.com

+7 812 313 5964 (Russia)

+44 20 7016 9503 (UK)

Joint Corporate Brokers

Morgan Stanley
Sam McLennan
Richard Brown

+44 20 7425 8000

RBC Europe Limited
Tristan Lovegrove
Marcus Jackson

+44 20 7653 4000

 

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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