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19 Nov 2008 07:21
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", "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. 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 law of any jurisdiction other than the United Kingdom or the Russian Federation should inform themselves about, and observe, any applicable requirements. The information disclosed may not be the same as that which would have been prepared in accordance with the laws of jurisdictions outside England or the Russian Federation.
This announcement does not constitute an offer or invitation to purchase any securities.
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