PLZL.L Regulatory News (PLZL)

RNS Number : 7956Q

OJSC Polyus Gold

09 August 2010

 

 

 

Polyus Gold releases its preliminary operating results for the 1H 2010, announces the approval of the Natalka mine construction by the State Expertise Committee of Russia, as well as the successful launch of the Blagodatnoye mine.

OJSC Polyus Gold (RTS, MICEX and LSE - PLZL) today releases its operating results for the first six months of 2010.

In the first six months of 2010 the Group produced 15.6 tonnes (503 k oz) of gold, compared to 14.9 tonnes (477 k oz) in the same period of the previous year.[1] The 5 % growth of production volumes resulted from enhanced capacities of the Titimukhta project launched in 2009, precommissioning at the Blagodatnoye mine and acquisition of operating assets in Kazakhstan in August 2009.

The volume of total rock moved throughout the Polyus Group in the first half of 2010 amounted to 27.3 million cubic meters, compared to 23.3 million cubic meters in the same period of last year.

In the reporting period the Polyus Group mined 11.5 million tonnes of ore, compared to 7.3 million tonnes mined in the first half of 2009. Increased volumes of ore mining were due to the launch of the Titimukhta, pre-commissioning at Blagodatnoye, enhanced ore mining at the Olimpiada mine, and acquisition of the Kazakshtan mines.

The volume of ore processing during the first six months of 2010 was 9.1 million tonnes as compared to 6.6 million tonnes in the same period of last year. Significant growth of ore processing was related primarily to commencement of operations at the Blagodatnoye mine in a precommissioning mode.

In the first half of 2010 the Polyus Group sold 16.3 tonnes (524 k oz) of gold, compared to 14.9 tonnes (477 k oz) in the first half of 2009. [2] According to preliminary estimates, the Group's revenue from gold sales in the reporting period amounted to USD 604 million (unaudited), compared to USD 442 million (unaudited) in the same period of the previous year. The 37% growth in revenue resulted from higher realized gold price and increased sales volumes. Weighted-average gold selling price in the first half of 2010 is estimated at USD 1154 per troy ounce compared to USD 926 per ounce in the first half of 2009.[3]

In the reporting period total volume of exploratory drilling amounted to 101.57 thousand meters compared to 71.68 thousand meters in the same period of the previous year. This included 71.12 thousand meters of drilling at the deposits located in the Russian Federation, which is approximately at the level of the first half of 2009. The increase in drilling volumes during the reporting period was mainly due to exploration works carried out in the Republic of Kazakhstan.

 

 

Approval of the Natalka mine construction

On August 4, 2010 the Federal State Expertise Committee of Russia (GlavGosExpertiza) issued the positive opinion on the project documentation and engineering survey results for the construction of the Natalka mine.

In June 2010, international audit of the project documentation by SRK Consulting also started.

'The approval of the Natalka mine construction project is an important step which allows the company to start large-scale construction works as well as begin contracting mining equipment of prolonged manufacturing cycle, to make sure the mining at Natalka begins in 2013', - stated Polyus CEO Evgueni Ivanov.

The launch of the Blagodatnoye mine

In July 2010 the Polyus Group successfully completed one of the largest projects within the long-term development strategy: the Blagodatnoye mine in the Krasnoyarsk region was commissioned. Construction of the mine took slightly more than 2.5 years. The construction team, as well as the equipment previously engaged in construction of Mill-3 of the Olimpiada mine, were involved in the Blagodatnoye project.

The designed mill capacity is 6 mtpa. The average gold output is expected at 12.8 tonnes (412 k oz) at designed recovery of 88.6%. The mine is expected to reach its designed capacity in 2011. Total capital expenditures for the project were USD 450 million. In the first half of 2010 main construction and assembling works at the pit and the mill were completed and a 24-MW power plant was launched. In 2010 the Group plans to finalize construction of warehouses, garage-repair shop, diversion facilities and tailing dam in line with the schedule and within the approved budget.

During the precommissioning operations in the first half of 2010 2,302 thousand tonnes of ore were mined and 2,250 thousand tonnes were processed. The volume of refined gold output in the reporting period amounted to 80 k oz.

Blagodatnoye gold deposit is located in the Severo-Eniseysk district of the Krasnoyarsk region 25 km to the north of the Olimpiada mine. Due to proximity of the deposit to the Olimpiada mine the Company has a unique opportunity to use available social and repair infrastructure. Proved and probable reserves (P&P) according to JORC standards equal 9.9 mln oz (306.7 tonnes), the average gold grade is 2.27 g/t.

Commencement of HL production at Akzhal

In the first half of 2010 exploration works were implemented at the Akzhal deposit in Eastern Kazakhstan. Oxidized ore pit quarrying began, construction of pit roads was underway.

In April 2010 a 0.3-mtpa pilot heap leaching facility was launched to model the technology of oxidized ore processing. The HL facility produces gold-bearing sorbent which is further processed at an in-house plant in Ust-Kamenogorsk (maximum processing capacity up to 5 tonnes of 160 k oz of Dore gold per annum) to produce Dore gold. In April - June 2010 gold production from the ore of the Akzhal deposit amounted to 2.4 k oz.

Polyus Group's operating results for the first half of 2010

 

Refined gold production (k oz)	1H 2010	1H 2009	Change	FY2009
Olimpiada mine
Olimpiada deposit	233	341	-32%	839
Titimukhta	39	17	129%	39
Blagodatnoye mine	80	-		-
Kuranakh mine	56	74	-24%	135
Zapadnoye mine	12	11	9%	24
Alluvials	36	34	6%	194
KazakhGold Group, including*	46	-		30
Aksu	12	-		7
Bestobe	13	-		11
Zholymbet	20	-		12
Akzhal	2	-		-
Total gold production	503	477	5%	1,261
*KazakhGold Group's operating results for 2009 only include results for the last five months of the year. Totals may not add due to the rounding error.

 

Total rock moved (thousand m3)	1H 2010	1H 2009	Change	FY2009
Olimpiada mine
Olimpiada deposit	11,545	11,728	-2%	24,055
including stripping	9,577	10,294	-7%	20,084
Stripping ratio (m3/tonne)	1.8	2.7		1.9
Titimukhta deposit	3,570	3,208	11%	5,003
including stripping	3,129	2,815	11%	4,296
Stripping ratio (m3/tonne)	2.9	3.2		2.7
Blagodatnoye mine	5,032	2,156	133%	7,740
including stripping	4,179	2,156	94%	7,519
Stripping ratio (m3/tonne)	1.8	-		12.6
Kuranakh mine	4,647	4,749	-2%	8,606
including stripping	3,659	3,693	-1%	6,589
Stripping ratio (m3/tonne)	2.1	2.0		1.8
Zapadnoye mine	1,013	847	20%	1,733
including stripping	892	603	48%	1,305
Stripping ratio (m3/tonne)	2.7	0.9		1.1
Verninskoye	967	645	50%	1,340
including stripping	955	645	48%	1,198
Stripping ratio (m3/tonne)	-	-		3.12
KazakhGold Group*
Aksu	136	-		35
including stripping	50	-		11
Stripping ratio (m3/tonne)	0.4	-		0.2
Bestobe	116	-		73
including stripping	25	-		10
Stripping ratio (m3/tonne)	0.2	-		0.1
Zholymbet	115	-		45
including stripping	44	-		26
Stripping ratio (m3/tonne)	0.6	-		0.6
Akzhal	153	-		-
including stripping	111	-		-
Stripping ratio (m3/tonne)	1.1	-		-
Total rock moved, KazakhGold Group	521	-		153
Total stripping, KazakhGold Group	230	-		47
Total rock moved	27,295	23,333	17%	48,630
Total stripping	22,621	20,206	12%	41,038

 

Ore mining (thousand tonnes)	1H 2010	1H 2009	Change	FY2009
Olimpiada mine
Olimpiada deposit
Ore mined	5,312	3,826	39%	10,603
Average gold grade (g/t)	3.07	2.53		3.03
Titimukhta deposit
Ore mined	1,063	884	20%	1,618
Average gold grade (g/t)	2.01	2.25		2.11
Blagodatnoye mine
Ore mined	2,302	-		595
Average gold grade (g/t)	2.00	-		2.15
Kuranakh mine
Ore mined	1,757	1,889	-7%	3,606
Average gold grade (g/t)	1.34	1.49		1.39
Zapadnoye mine
Ore mined	328	659	-50%	1,155
Average gold grade (g/t)	1.74	1.79		1.78
Verninskoye
Ore mined	32	-		384
Average gold grade (g/t)	2.00	-		2.71
KazakhGold Group*
Aksu
Ore mined	214	-		121
Average gold grade (g/t)	2.37	-		2.60
Bestobe
Ore mined	200	-		188
Average gold grade (g/t)	2.74	-		2.29
Zholymbet
Ore mined	162	-		123
Average gold grade (g/t)	4.85	-		4.08
Akzhal
Ore mined	104	-		-
Average gold grade (g/t)	1.44	-		-
Total,  KazakhGold Group	681	-		432
Total ore mined	11,475	7,258	58%	18,393

 

Ore processing (thousand tonnes)	1H 2010	1H 2009	Change	FY2009
Olimpiada mine, including
Olimpiada deposit	3,537	4,371	-19%	8,877
Sulfide ore	3,537	3,557	-1%	7,398
Mixed type ore	-	498		1,163
Olenye deposit	-	316		316
Average gold grade (g/t)
Olimpiada deposit
Sulfide ore	3.68	3.46	5%	3.60
Mixed type ore	-	5.80		6.24
Olenye deposit	-	4.60		4.60
Recovery (%)
Olimpiada deposit
Sulfide ore	63. 7	73.3		73.1
Mixed type ore	-	78.7		79.7
Olenye deposit	-	81.3		75.4
Titimukhta deposit
Ore processed	759	232	227%	602
Average gold grade (g/t)	2.21	2.86	-24%	2.84
Recovery (%)	79.6	82.2		76.3
Blagodatnoye mine
Ore processed	2,250	-
Average gold grade (g/t)	1.93	-
Recovery (%)	72.8	-
Kuranakh mine
Ore processed	1,646	1,798	-8%	3,463
Average gold grade (g/t)	1.33	1.52		1.40
Recovery (%)	85.1	84.0		84.2
Zapadnoye mine
Ore processed	298	237	26%	505
Average gold grade (g/t)	1.86	2.20		2.18
Recovery (%)	70.2	70.1		69.1
KazakhGold Group*
Aksu
Ore processed at plant	126	-		132
Average gold grade (g/t)	2.9	-		2.71
Recovery (%)	81.6	-		69.0
Ore processed at HL	50	-		-
Average gold grade (g/t)	1.1	-		-
Bestobe
Ore processed at plant	58	-		158
Average gold grade (g/t)	5.80	-		2.62
Recovery (%)	83.4	-		83
Ore processed at HL	133	-		-
Average gold grade (g/t)	1.0	-		-
Zholymbet
Ore processed at plant	140	-		106
Average gold grade (g/t)	3.80	-		4.39
Recovery (%)	77.3	-		75
Akzhal
Ore processed at HL	106	-
Average gold grade (g/t)	1.45	-
Total, KazakhGold Group	612	-		397
Total ore processed	9,102	6,638	37%	13,844
Sand washing (Alluvials)
Sands washed (mln m3)	2.4	2.5	-4%	9.0
Average gold grade (g/m3)	0.71	0.60		0.66
* KazakhGold Group's operating results for 2009 only include results for the last five months of the year.

 

Business units operating results for the 1H 2010

 

Olimpiada mine (Krasnoyarsk region)

Processing of Olimpiada deposit ores

In the first half of 2010 Olimpiada mine produced 233 k oz of refined gold from Olimpiada deposit ores as compared to 341 k oz in the same period of the previous year. The decline in gold output resulted from the decreased volumes of ore processing from 4,371 thousand tonnes in the first half of 2009[4] to 3,537 thousand tonnes in the first half of 2010, and the decreased recovery rate. The volume of sulfide ores processed remained approximately at the level of the first half of 2009.

In the reporting period modernization program at the Olimpiada mine went on. A number of measures were undertaken to raise operational efficiency of the mine. The second cone crusher was assembled. Installation of metalware of the forth hydrocyclone unit for classification of ground ore was underway. Additional equipment was installed at oxidation and sorption operations in the hydrometallurgical workshop. Bio-pulp thickener reactor was reconstructed, additional hydrocyclone equipment assembled. Construction and assembly of gravitation equipment for hydrocyclone sands were implemented. Lime department reconstruction commenced. Implementation of these measures will increase the Olimpiada sulfide ores processing efficiency.

Processing of Titimukhta deposit ores

In the first half of 2010 Olimpiada mine produced 39 k oz of refined gold from Titimukhta deposit ores.

At Mill-1 of the Olimpiada mine adjustment of processing technology for the ores of Titimukhta continued. [By the end of the reporting period the mill reached its designed recovery ratio. Processing results for the reporting period and grade control drilling data indicated the average gold grade at the level of 2.2 g/t.]

By the end of the reporting period the balance of work-in-progress at the refinery, OJSC Krastsvetmet, amounted to approximately 18 k oz. Besides, significant volumes of unrefined gold produced in the first half of 2010 by the Krasnoyarsk business unit (Olimpiada mine and Blagodatnoye mine), were left as unshipped goods at the Olimpiada mine storage.

Alluvials (Irkutsk region)

In the first half of 2010 gold output of the Group's alluvial enterprises amounted to 36 k oz, compared to 34 k oz in the same period of the previous year.

Early commencement of mine preparation works enabled to achieve higher gold grade in the sands washed. This resulted in a 6% growth of gold output.

Kuranakh mine (Republic of Sakha (Yakutia))

In the reporting period the Kuranakh mine produced 56 k oz of refined gold. The decline in production volumes resulted from the decreased volumes of ore processing. Poor state of the pit roads in the spring period hindered stable supply of the ore mined to the plant. Due to on-going modernization of the Kuranakh mine the recovery rate remained stable despite the decrease of the gold grade in the ore processed. In the first half of 2010 implementation of measures aimed at increasing the plant's processing capacity from 3.6 to 4.5 mtpa continued.

Zapadnoye mine (Irkutsk region)

In the reporting period the mine produced 12 k oz of gold, giving a 9% increase over 11 k oz produced in the first half of 2009. Processing of stockpiled ore resulted in a planned decrease in the volumes of ore mining. The decrease of gold grade in the ore processed was offset by 26% growth in the volumes of ore processing.

Projects development in the 1H 2010

Verninskoye deposit (Irkutsk region)

In June 2010 the Subsoil Usage Agency of the Irkutsk Region granted the permission to commence mining operations at the Verninskoye pit.

In the first half of 2010 capital mining operations at the Verninskoye deposit went on. In the first six months of 2010 32 thousand tonnes of ore were mined, 967 thousand cubic meters of rock were moved.

In the reporting period frame and walling of the main building were assembled, electric power objects were constructed and heat network laid. Construction works on the forth camp, laundry, oil products storage and tailing facilities continued. During the reporting period 10 units of mining transport were purchased.

Launch of the Verninskoye mine is expected on schedule in 2011.

Natalka (Magadan region)

In the first half of 2010 additional geological engineering survey was carried out at the Natalka deposit. Construction of access roads and preparation of sites for future facilities is underway. Exploratory works at the Omchak ore cluster were implemented to calculate inferred resources and reserves. Seismological zoning and operational exploration is planned for 2010 to define precise pit bounds.

Technological tests were carried out at the Pilot plant to optimize grinding and classification processes. In the second quarter testing of removal of the carbonaceous sludge before flotation started. In the first half of 2010 24 tonnes of ore were mined at the experimental pit. During testing works 11 thousand tonnes of ore were processed, 215 k oz of associated gold was produced.

KazakhGold Group

In the first half of 2010 repair works were implemented at the operating mines of KazakhGold Group in Northern Kazakhstan to stabilize the production process and ensure gradual output growth. In particular, at the Bestobe mine a new mill №8 was installed, a new press-filter assembled and construction of a new sludge line was on. Construction of a new flotation shop commenced. Plant metalware was reinforced at the Aksu mine. Overhaul of the mills, water conduit and power transmission lines was performed. At the Zholymbet mine repair works were carried on the mills, thickeners, sorption and desorption equipment. The central compressor house was reconstructed. Besides, works on enhancement of heap leaching production capacities were performed at Aksu and Bestobe. Surface exploratory drilling was implemented at the Aksu, Zholymbet and South Karaultube deposits.

In the reporting period oxidized ore reserves were calculated at the Kaskabulak deposit in Eastern Kazakhstan. Exploration works at the deposit are planned for the second half of 2010.

In May 2010 KazakhGold Group's Board of Directors approved the development strategy for the Kazakhstan assets of the company until 2020. The strategy includes modernization of the existing production facilities, exploration program, construction of new plants at Aksu, Bestobe and Zholymbet, and construction of the Central Metallurgical plant to produce Dore gold. The strategy provides base-case and optimistic scenarios, which will form the basis for further development subject to the results of geological exploration. The new strategy will allow to increase gold output from 73 k oz in 2009 to 500 k oz in base-case scenario or to over 600 in optimistic scenario in 2016.

 

OJSC Polyus Gold is an international company, Russia's leading gold producer and one of the world's largest gold mining companies in terms of market capitalization, mineral reserves base and output. The Company's international asset portfolio includes ore and alluvial deposits in the Krasnoyarsk, Irkutsk, Magadan and Amur Regions, the Republic of Sakha (Yakutia), as well as in the Republic of Kazakhstan and Romania. The company produced 1.3 m oz of gold in 2009.

 

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 media:

Anton A. Arens, PR Director +7 (495) 641-3365 +7 (495) 544-5496pr@polyusgold.com

 

 

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