28 Jan 2009 18:30
28 January 2009
OJSC POLYUS GOLD
PRELIMINARY OPERATING RESULTS FOR 2008
OJSC Polyus Gold (RTS, MICEX and LSE - PLZL) ("Polyus Gold" or the "Group"), Russia's leading gold producer, today released its operating results for the full year 2008. During the period under review the Group produced 38.0 tonnes (1 222 k oz) of refined gold, compared to 37.8 tonnes (1 214 k oz) produced in 2007, achieving the production target set for the year. At the same time, the production of Dore gold (the metal before refining stage) showed a 1.9% increase from 37.6 tonnes (1 208 k oz) in 2007 to 38.3 tonnes (1 233 k oz) in 2008 (normally not all the volumes of the metal produced are refined during the same reporting period, which creates disparities between the volumes of Doré gold and refined gold).
In 2008 the Group's production units moved 43.6 million cubic meters of total rock, compared to 47.9 million cubic meters of total rock moved in 2007.
The mining of ore in 2008 amounted to 6.6 million tonnes, compared to 9.4 million tonnes in 2007. In 2008, the Group processed 10.8 million tonnes of ore, compared to 10.7 million tonnes in 2007. During 2008, at Olimpiada mine in Krasnoyarsk region some volumes of ore were supplied to the mills from the stockpiles, which is the reason of the surplus of ore processed over the ore mined. In the beginning of the period under review 15.4 million tonnes of ore were stockpiled at Olimpiada mine.
The Group achieved its targets on the exploration front. The combined volume of drilling in 2008 amounted to 332.1 thousand meters, compared to 356.6 thousand meters in 2007. The decrease is a result of the completion of the fist stage of the long-term exploration programme, which included additional explorations works on a number of advanced-stage deposits. At the end of reporting period the company's P&P reserves reached 74.1 million ounces, compared to 68.6 million ounces in 2007.
In 2008 all the produced gold was sold as well as the volumes remaining at the warehouse at the beginning of the reporting period in the amount of 0.12 tonnes (4 k oz), therefore the sales amounted to 38.1 tonnes (1 226 k oz), compared to 37.6 tonnes (1 210 k oz) in 2007. In 2008 all the volumes of the metal were sold on the domestic market, whereas in 2007 5.0 tonnes (161 k oz), or 13.3% of gold was exported. The gradual increase of sales in the domestic market and reduction of exports is primarily due to more favorable contracts terms concluded with Russian banks.
According to the preliminary estimates, the Group's capital expenses in 2008, amounted to USD443 million. This figure includes USD310 million spent on new projects and well as expansion and modernization projects, and innovations. Investments into exploration amounted to USD67 million.
The Group's cash, cash equivalents and investments in securities and other financial assets as at the end of the reporting period amounted to USD 668 million. As at December 31, 2008 the Company had no debt.
In 2008 Boris Zakharov was appointed as Deputy General Director, production, a new senior managerial position introduced in Polyus Gold in the period under review. Mr. Zakharov's duties will cover coordination of the production process of all the Group's business units.
During 2008 substantial progress was made in the domain of new projects development. All targets were met for all the Group's new projects.
Commenting on Polyus' 2008 operating results, General director of Polyus Gold Evgueni Ivanov said: "We are pleased with the Group's performance in 2008. All the targets set for the year were either met or exceeded. All the production units demonstrated stable performance, and the Group's key mine - Olimpiada increased its output, in spite of the challenging period relating to the mine's transition to sulfide ores."
The Group's production units in 2008
Krasnoyarsk region
Olimpiada mine
Production growth at Olimpiada mine was mainly a result of Mill-3 achieving its project capacity of 5 million tonnes of ore per year. The recovery rate amounted to 82%. In 2009 the technological improvements of Mill-3 continued.
The factors that influenced the performance of Mill-3 in 2008 included the shut down of Mill-1 after the depletion of oxide ores at Olimpiada deposit. In 2008 the Group's key production unit was successfully transferred to sulfide ores, that being achieved without temporary reduction in output. Olimpiada's transition to sulfide ores substantially extended the life of the mine, creating an opportunity to fully uncover the potential of the deposit, rich with sulfide ore reserves.
During 2008, within the framework of the mine's transition to mining and processing of sulfide ores (Olimpiada mine expansion project) the construction of drainage system and pit dewatering system at the Eastern pit was completed. 17.2 MW diesel power station was launched. Total expenditure on Olimpiada mine expansion project in 2008 amounted to USD 42 million.
In 2008 about 77% of processed ore were supplied for the stock piles (compared to 28% in 2007). The increase in stockpiled ore processing in 2008 was envisaged by the Olimpiada mine expansion project.
Table 1. Ore balances at stockpiles of Olimpiada mine
| (k tonnes) | 2008 | 2007 | 2006 |
| Olimpiada deposit |
|
|
|
| Oxide ore at the beginning of the period | 413.8 | 458.2 | 144.6 |
| Ore added to stockpiles | 0 | 928.3 | 1 646.4 |
| Ore taken from stockpiles | 413.8 | 972.8 | 1 332.8 |
| Oxide ore stockpiled at the end of the period | 0 | 413.8 | 458.2 |
| Sulfide ore at the beginning of the period | 13 475.1 | 16 293.1 | 13 479.3 |
| Ore added to stockpiles | 1 254.1 | 2 433.6 | 6 022.9 |
| Ore taken from stockpiles | 4 801.4 | 5 251.6 | 3 208.9 |
| Sulfide ore stockpiled at the end of the period | 9 927.8 | 13 475.1 | 16 293.1 |
| Olenye deposit |
|
|
|
| Ore at the beginning of the period | 1 463.1 | 358.3 | 0 |
| Ore added to stockpiles | 261.1 | 1 110.9 | 366.1 |
| Ore taken from stockpiles | 1 408.2 | 6.1 | 7.8 |
| Ore stockpiled at the end of the period | 316.0 | 1 463.1 | 358.3 |
| Titimukhta deposit |
|
|
|
| Ore at the beginning of the period |
|
|
|
| Ore added to stockpiles | 211.3 |
|
|
| Ore taken from stockpiles |
|
|
|
| Ore stockpiled at the end of the period | 211.3 |
|
|
Blagodatnoye deposit
In 2008 the Group continued to develop its new projects, particularly, substantial progress was made at Blagodatnoye deposit in Krasnoyarsk region. During the period under review the main building, as well as hydrometallurgical shop of the future mill were under construction. Key camp facilities' construction was completed, including residential building for 987 people and a canteen for 200 people. In 2008 mining equipment supplies continued, the site for tailings facilities was prepared, the construction of the boiler began, water-pipe laying and diversion facilities construction carried on, roads construction and power grid construction were completed. Total investments into Blagodatnoye project in 2008 amounted to USD72 million. As of the end of 2008 approximately 37% of budgeted investments have been spent.
Blagodatnoye project is developing in accordance to approved schedule, with the expected launch in 2010 with mill capacity of 6 million tonnes of ore per year and average annual gold production of 412 k oz.
In November 2008 the reserves audit in accordance with JORC standards was done at Blagodatnoye deposit. The audit followed additional exploration programme carried out at the deposit in 2007 -2008. The area between the North-West and the South-East ore bodies was explored using high-frequency exploration grid. The explored zone was included into the pit outline, which lead to reserves growth. Proved and probable (P&P) reserves were increased to 9.9 m oz, compared to 8.1 m oz based on the audit carried out in 2006. Measured and indicated resources of the deposit amounted to 10.5 m oz.
The reserves calculation was made at 1.0 g/t cut-off grade (the same cut-off grade was used for reserves calculation in 2006) and the gold price of USD712 per ounce.
Following the JORC audit of Blagodatnoye, the Group's total P&P reserves were increased to 74.1 m oz. Measured and indicated resources (M&I) amounted to 80.4 million ounces, inferred resources amounted to 29.8 million ounces.
Titimukhta deposit
In 2008 the reconstruction of Mill-1 of Olimpiada mine to process Titimikhta ores was successfully implemented. The reconstruction of Mill-1 was done between June and November 2008, exceeding the initial schedule by 6 months. The technological scheme was amended, which included the addition of a crushing stage. Some new equipment was installed at the plant: better mills, crushing units, modernized hydrocyclones.
In 2008 the road between the Titimukhta deposit and the plant was constructed, as well as a power grid. The substation foundation laying was carried out, the crushing complex was under construction, mining equipment supplies began.
In 2008, USD42 million were invested to Titimukhta project development. Therefore, as at 31.12.2008, approximately 54% of the budgeted investments have been spent. Titimukhta project is expected to be launched in the current year, within the initial timeframe, with the project annual mill capacity of 2.2 million tonnes of ore to be achieved in 2010.
Irkutsk region
Zapadnoye mine
The production decrease at Zapadnoye mine is related to the modernization programme being carried out at the mine aimed at improving the plant's technological process.
Verninskoye deposit
During 2008, at Verninkoye deposit in Irkutsk region the construction of the main building of the plant began, as well as ore receiving and crushing unit. Camp facilities preparation was underway, as well as power and heating facilities. Road construction was carried out.
During 2008, USD 37 million was invested into the Verninskoye project development. As at the end of the reporting period, approximately 36% of the budgeted investments were spent on the project.
Alluvials
The increase of gold production at the alluvial production units in the period under review is a result of the acquisition of a new alluvial enterprise in February 2008.
The Sakha Republic (Yakutia)
Kuranakh Mine
In 2008 the modernization programme at the Kuranakh mine was carried on. The programme is aimed at raising the plant's capacity from 3.6 million tonnes to 4.5 million tonnes of ore per annum. The modernization is expected to be completed in Q2 of 2009. The capital expenditure on the Kuranakh plant expansion in 2008 amounted to USD25 million. In the period under review the new truck operational control complex introduction was started. The production processes standardization (including excavation and transportation) was underway.
The year-on-year gold production growth at Kuranakh mine in 2008 is a result of the increase of the average grade of the ore processed.
Nezhdaninskoye deposit
On January 26, 2009, Polyus Gold and Kinross Gold Corporation concluded a Memorandum of understanding about the joint development of Nezhdaninskoye deposit in the Sakha Republic (Yakutia). According to the Memorandum, within the time frame of 18 months the companies are planning to jointly prepare a Feasibility Study for the industrial development of the Nezhdaninskoye deposit. Upon completion of the Feasibility Study and, if warranted by its results, the parties will review the possibility to enter into a joint venture agreement for developing the Nezhdaninskoye deposit. In accordance with the Memorandum, should such decision to set up a joint venture be made, Polyus and Kinross Gold Corporation will own 51% and 49% interest, respectively, in the proposed joint venture. In case the said joint venture is set up, Kinross Gold will be designated as the operator of the project.
Kinross Gold is one of the world's leading gold producers, and up till recent times was the leading producer of the metal in Russia. The two companies' rich experience in constructing and operating large gold mining complexes, coupled with the support of the government of the Sakha Rebuplic (Yakutia) will provide the firm ground for successful development of the project.
Magadan region
Natalka deposit
On July 24, 2008 a pilot plant was launched at Natalka deposit with a capacity of 87-100 thousand tonnes of ore per annum. The plant is the exact model of industrial-scale ore processing plant with professional equipment from world's leading producers. High reliability of results obtained in conditions identical to industrial will guarantee preciseness of technology to be applied at Natalka mine.
In 2008 the preparation of pre-feasibility study of Natalka mine continued.
Table 2. Operating results for 2006-2008
|
| 2008 | 2007 | 2006 |
| Total rock moved (km3) |
|
|
|
| Olimpiada mine (Note 1) | 30 622.4 | 32 840.9 | 26 737.9 |
| including stripping | 30 061.2 | 30 947.6 | 23 343.3 |
| Stripping ratio | 17.4 (Note 2) | 6.9 | 2.9 |
| Kuranakh mine | 11 084.0 | 13 073.0 | 10 411.0 |
| including stripping | 8 875.0 | 10 723.0 | 8 237.0 |
| Stripping ratio | 2.3 | 2.6 | 2.1 |
| Zapadnoye mine | 1 916.8 | 2 018.9 | 1 619.8 |
| including stripping | 1 565.1 | 1 741.1 | 1 327.2 |
| stripping ratio | 1.6 | 2.3 | 1.7 |
| Total rock moved | 43 623.2 | 47 932.8 | 38 768.7 |
| Ore mined (in k tonnes or as stated) |
|
|
|
| Olimpiada mine |
|
|
|
| Ore mined |
|
|
|
| Olimpiada deposit |
|
|
|
| Oxidized ore | - | 928 | 1 646 |
| Sulfide ore | 1 254 | 2 434 | 6 023 |
| Olenye deposit (sulfide ore) | 261 | 1 111 | 366 |
| Titimukhta deposit | 211 | - | - |
|
| 1 727 (Note 3) | 4 473 | 8 035 |
| Average grade(g/t) |
|
|
|
| Olimpiada deposit |
|
|
|
| Oxide ore | - | 14.2 | 14.3 |
| Sulfide ore | 2.6 | 4.9 | 4.1 |
| Olenye deposit | 3.1 | 6.2 | 7.6 |
| Titimukhta deposit | 1.5 | - | - |
| Kuranakh mine |
|
|
|
| Ore mined | 3 899 | 4 154 | 3 847 |
| Average grade (g/t) | 1.4 | 1.4 | 1.5 |
| Zapadnoye mine |
|
|
|
| Ore mined | 950 | 750 | 803 |
| Average grade (g/t) |
| 2.0 | 1.97 |
| Total more mined | 6 575.2 | 9 377 | 12 685 |
|
|
|
|
|
| Ore processed (in k tonnes or as stated) |
|
|
|
| Olimpiada mine |
|
|
|
| Olimpiada deposit (Note 4) |
|
|
|
| Oxide ore | 414 | 973 | 1 333 |
| Sulfide ore | 4 801 | 5 252 | 3 208.9 |
| Olenye deposit (sulfide ore) | 1 408.2 | 6 | 8 |
| Total for Olimpiada | 6 623.4 | 6 231 | 4 550 |
| Average grade (g/t) |
|
|
|
| Olimpiada deposit |
|
|
|
| Oxide ore | 14.6 | 14.3 | 13.2 |
| Sulfide ore | 3.9 | 3.4 | 3.5 |
| Olenye deposit | 6.3 | 5.1 | 7.7 |
|
|
|
|
|
| Recovery (%) |
|
|
|
| Olimpiada deposit |
|
|
|
| Oxide ore | 96.9 | 95.4 | 96.9 |
| Sulfide ore | 76.0 | 75.9 | 82.1 |
| Olenye deposit | 86.0 | - | - |
|
|
|
|
|
| Kuranakh mine |
|
|
|
| Ore processed | 3 696 | 3 905 | 3 737 |
| Average grade (g/t) | 1.44 | 1.35 | 1.54 |
| Recovery (%) | 84.6 | 85.6 | 86.5 |
| Zapadnoye mine |
|
|
|
| Ore processed | 495 | 518 | 522 |
| Average grade (g/t) | 2.2 | 2.2 | 2.4 |
| Recovery (%) | 74.4 | 75.0 | 76.5 |
| Total ore processed | 10 814 | 10 654 | 8 809 |
| Sands washed (Alluvials) |
|
|
|
| Sands washed (million m3) | 9.7 | 9.1 | 9.4 |
| Average grade (g/m3) | 0.6 | 0.6 | 0.6 |
|
|
|
|
|
| Gold production (in k oz) |
|
|
|
| Olimpiada mine | 873 | 861 | 854 |
| Kuranakh mine | 144 | 142 | 156 |
| Zapadnoye mine | 24 | 32 | 32 |
| Alluvials | 181 | 179 | 172 |
| Total refined gold production (Note 5) | 1 222 | 1 214 | 1 215 |
Notes:
1. The volumes of total rock moved at Olimpiada mine don't include the volumes of total rock moved at Titimukhta and Blagodatnoye deposits.
2. Substantial increase of the stripping ratio in 2008 is a result of excessive stripping works at the Eastern pit of Olimpiada deposit.
3. The reduction of ore mining at Olimpiada mine in 2007 - 2008 is foreseen by the plan of mining and processing works. Certain portions of ore are supplied from the stockpiles. The increase in volumes of ore mined is to begin in 2009.
4. The insignificant difference in volumes of oxide and sulfide ore processed at Olimpiada compared to previously stated is a result of analyses made by the scientific and technical council of Polyus Gold following which certain volumes of mixed-type ore previously classified as oxide ores were re-classified as sulfides.
5. The total gold production of Polyus Gold includes insignificant volumes of the metal obtained during waist clean-up of the closed production of OJSC SVMC.
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:
Anton A. Arens, PR Director
+7 (495) 641-3365
pr@polyusgold.com
Note for Editors:
Boris A. Zakharov
Deputy General Director, production
Born on November 18, 1954.
Mr. Zakharov graduated from the Moscow Institute of Steel and Alloys in 1978.
Mr. Zakharov held or continues to hold, as applicable, the following other posts:
From 1977 to 1985 - various positions of measuring-floatation shop of processing plant of Norilsk
Mine, the final position being chief foreman;
From 1985 to 1992 - chief foreman of processing plant at Erdenet mine in Mongolia;
From 1992 to 2008 - deputy head of mesuring-floatation shop of Norilsk processing plant, chief engineer of processing plant, head of R&D department of OJSC Norilsk Nickel.
Mr. Zakharov has been Deputy General Director on production of CJSC Polyus since November 1, 2008.
Mr. Zakharov is the candidate of technical sciences.
Polyus Gold is the largest gold producer in Russia. Headquartered in Moscow, Polyus Gold's operating mines and development/exploration projects are located in five major gold mining regions of Russia - Krasnoyarsk, Irkutsk, Magadan, Amur regions and the Republic of Sakha (Yakutia).
Forward Looking Statements
This announcement, including information included or incorporated by reference in this announcement, may contain "forwardߛlooking statements" concerning Polyus Gold. Generally, the words "will", "may", "should", "continue", "believes", "expects", "intends", "anticipates" or similar expressions identify forwardߛlooking statements. The forwardߛlooking statements involve risks and uncertainties that could cause actual results to differ materially from those suggested by them. Many of these risks and uncertainties relate to factors that are beyond the companies' abilities to control or estimate precisely, such as future market conditions and the behaviours of other market participants, and therefore undue reliance should not be placed on such statements which speak only as at the date of this announcement. Polyus Gold assumes no obligation and does not intend to update these forwardߛlooking statements, except as required pursuant to applicable law.