PLZL.L Regulatory News (PLZL)

31 Jan 2008 13:10

OJSC Polyus Gold31 January 2008 For immediate release Moscow, January 31, 2008 Polyus Gold releases operating results of the year 2007. OJSC Polyus Gold (RTS, MICEX and LSE - PLZL), Russia's leading gold producer,today announces the operating results of the year 2007. The FY2007 goldproduction amounted to 37.8 tonnes (1 214 k oz) of refined gold maintaining thelevel of the year 2006. At the same time, production of Dore gold showed 1.65%year-on-year growth from 36,95 tonnes (1 187 k oz) in 2006 to 37,56 tonnes (1207 k oz) in 2007 .(1) In the reporting year the company's production units mined 9.4 million tonnes ofore comparing to 12.7 million tonnes in 2006. The ore processed in 2007 amountedto 10.7 million tonnes comparing 8.8 million tonnes in the previous year.(2) Significant progress was made in the development of the mineral reserves base.Successful completion of Natalka exploration project resulted in substantialreserves growth. The group's total proved and probable reserves (JORC) increasedfrom 50.8 million ounces in 2006 to 68.6 million ounces in 2007. In 2007 the exploration works were carried out in all the regions of thecompany's operations. The drilling works almost doubled to 365.5 km compared to192.1 km in 2006. Polyus Gold continued to grow its mineral resources potential by acquiring newlicenses. During 2007 the company acquired 7 new exploration licenses for thetotal amount of prognostic resources (Russian P1+P2+P3) of over 1 700 tonnes ofgold (55 million ounces). According to preliminary estimations, the company's revenue in accordance withIFRS (not audited) in 2007 amounted to US$855 million, comparing to US$735million in 2006. The 16% year-on-year growth in revenue is primarily a result ofincrease in gold price and the company's non-hedging sales policy allowing thesubstantial gold price increase to be fully reflected in 2007 financial results.The weighted-average price of gold sales grew from US$604 in 2006 to US$706.48.In 2007 the weighted-average price of gold sales exceeded the average Londonfixing (PM) by US$10, compared to US$0.23 last year. According to preliminary estimates, EBITDA in 2007 is expected at the levelUS$300-320 million, slightly exceeding the level of 2006. Total cash costs (TCC) are expected at the level US$365-375 per ounce comparingto US$ 278 per ounce in 2006. The major factors driving the growth of TCC in2007 were: 1) deterioration on mining conditions at Olimpiada mine: a 30%year-on-year increase in stripping works, decrease of the oxide ore share in thetotal volumes of processed ore from 33% in 2006 to 23% in 2007; 2) macroeconomicfactors, such as depreciation of US dollar (the currency of sales), againstRussian ruble (the currency of expenses), and gold price growth leading toincrease in royalty payments; 3) inflation growth of labour and consumables. According to preliminary estimates, total investments of Polyus Gold in 2007amounted to US$ 363 million. This includes exploration expenses in the amount ofapproximately US$ 109 million and investments into capital construction totalingapproximately US$ 175 million and including: - Expenses on the construction of a new ore processing plant (Mill-3) at Olimpiada mine in Krasnoyarsk region, amounting to US$98 million; - Expenses on Verninkoye project development in Irkutsk region, totaling US$ 27 million. Commenting on the company's performance in 2007 General Director of Polyus GoldEvgueni Ivanov said: "In 2007 the company continued to develop in accordancewith the strategy approved by the Board in September 2006, aimed at a three-foldgrowth in gold production by the year 2015 and substantial increase of themineral resources base. I am pleased that the company achieved all the targetsset by its strategy for the year 2007 - both in terms of gold production andgrowth of reserves, and in terms of corporate development, production facilitiesupgrade and developing new projects". The company's production units in 2007 Olimpiada mine Production growth at the company's flagship production unit - Olimpiada mine inKrasnoyarsk region - resulted from, first of all, successful launch of the thirdmill (Mill-3), which became the largest ore processing plant in Russia. Theaddition of a new plant with a capacity of 5 million tonnes of ore per year willhelp maintain stable production volumes at Olimpiada for the coming years andsignificantly increase the life of the mine. Kuranakh mine The reduction in gold production at Kuranakh mine in the Sakha Republic(Yakutia) stems from decrease in average grade. The comprehensive modernizationprogramme carried out at the mine is expected to result in the productionincrease in the coming years. Zapadnoye mine Zapadnoye mine in Irkutsk region maintained stable production volumes. Theprogramme aimed at upgrading the processing technology carried out at the minein 2007-2008 will lead to gradual increase in production in the coming years. Alluvials The growth in alluvial production is a result of modernization programme atproduction units of Lenzoloto in Irkutsk region, new appointments, as well asincrease in the average grade of gold bearing sands. 2007 highlights January - Russian state audit of Natalka reserves; Natalka became Russia'slargest gold deposit with 1,500 tonnes (over 48 m oz) of reserves. June - Knight Piesold Consulting invited to prepare feasibility study forNatalka project. July - Launch of Mill-3 at Olimpiada mine in Kransoyarsk region. The mill'scapacity is 5 million tonnes of ore. August - International audit of Natalka completed. November - Feasibility studies for Blagodatnoye and Titimukhta approved by theBoard. December - Russian state audit of Titimukhta reserves Table 1. Ore mining and processing Production unit Mining of ore, k tonnes Processing of ore, k tonnes 2007 2006 2007 2006 Olimpiada mine ( total) 4 473 8 035 6 231 4 557including: Oxide ore 928 1 646 1 458 1 511Sulfide ore 3 545 6 389 4 773 3 046Zapadnoye mine 750 789.6 517,8 522Kuranakh mine 4 154 3 847 3 905 3 736.9 TOTAL 9 377 12 672 10 653 8 816Alluvials, Sands washed, k i3 9 091 9 428 Table2. Gold production Production unit 2007 2006 tonnes k oz tonnes k oz Olimpiada mine 26.8 861 26. 6 854Zapadnoye mine(3) 1 32 1 32Alluvials 5.6 179 5.3 172Kuranakh mine 4.4 142 4.8 156Nezhdaninskoye(4) 0.036 1 0.032 1Total: 37.8 1 215 37.8 1 215 For further information please contact For investors: Alexey V. Chernushkin, Director, CM and IR Evguenia V.Buydina, IR manager +7(495) 641-3377 +7(495) 785-4031 ir@polyusgold.com For press: Victoria V. Vergelskaya, PR DirectorElena D. Evstigneeva, Media Relations+7 (495) 641-3365+7 (495) 544-5496 pr@polyusgold.com Note for editors: Polyus Gold is the largest gold producer in Russia. Headquartered in Moscow,Polyus Gold's operating mines and development/exploration projects are locatedin five major gold mining regions of Russia - Krasnoyarsk, Irkutsk, Magadan,Amur regions and the Republic of Sakha (Yakutia). -------------------------- (1) Normally not all the volumes of the metal produced are refined during thesame reporting period, which creates disparities between the volumes of Doregold and refined gold produced. (2) In 2007 some volumes of the ore were supplied from the stock piles of ore. (3) Zapadnoye gold production includes insignificant volumes produced at thepilot plant at Chertovo Koryto. (4) The insignificant volumes of the metal were obtained as a result of wasteclean-up at non-operational Nezhdaninskoye mine. This information is provided by RNS The company news service from the London Stock Exchange