POLY.L Regulatory News (POLY)

For immediate release  24 December 2015

Polyus Gold International Limited

Joint venture with Polymetal at the Nezhdaninskoye gold deposit

Polyus Gold International Limited ("PGIL"), the largest gold producer in Russia, is pleased to announce that its subsidiary OJSC Polyus Gold (MOEX - PLZL) ("Polyus Gold", "the Group") has entered into a joint venture with Polymetal International plc (LSE, MOEX: POLY; ADR: AUCOY) ("Polymetal"), under which Polymetal will participate in advancing the development of the Group's Nezhdaninskoye gold deposit in Yakutia, Russia ("the Property"). The arrangement will allow Polymetal to acquire up to 50% in the joint venture entity ("JV") holding 100% of JSC South-Verkhoyansk Mining Company ("SVMC") through an earn-in mechanism. SVMC, which is currently a 100% subsidiary of the Group, holds the mining and exploration license for the Property as well as certain infrastructure adjacent to the deposit.

Transaction Details

· During the first stage ("Stage 1") Polymetal will obtain 15.3%1 interest in the JV. The total amount of Polymetal's investment at this stage will be $18 million[1] in cash, of which $10 million1 will be ultimately paid to the Group and $8 million1 will be invested in SVMC and used to fund exploration activities and expenses of SVMC during the first 15 months;

· Upon completion of Stage 1, Polymetal will have an option to participate in the second stage ("Stage 2") through an earn-in arrangement which will allow Polymetal to increase its share in the JV to 50%;

· Stage 2 investment will comprise $72 million1 in cash and will be carried out from month 16 to month 52 from the date of forming the joint venture. The investment will be used to finance construction and ramp-up of the underground mine and processing plant. Polymetal will prepare a Definitive Feasibility Study for the development of the Property and will be responsible for engineering and construction management as a party to the EPCM contract with SVMC;

 · Upon completion of Stage 2, SVMC will operate as a 50:50 joint venture between Polymetal and Polyus Gold, with Polymetal acting as a managing partner;

· Should Polymetal decide not to proceed with Stage 2, the joint venture arrangement will terminate after Stage 1 with no further amounts to be paid or received by the parties, and the whole of Polymetal's interest in the JV will be redeemed by the JV for nominal value;

· Stage 2 of the joint venture arrangement will be subject to approval by the Russian Federal Government's Commission on Foreign Investments into Companies of Strategic Importance ("Strategic Clearance") and by the Russian Federal Antimonopoly Service;

· Upon receipt of the Strategic Clearance, Polymetal will have the right to nominate the General Director of SVMC and Polyus Gold will have the right to nominate the Chief Financial Officer of SVMC;

· Prior to receipt of the Strategic Clearance, Mr. Sergey Pekus, who will be appointed as a General Director of SVMC, will supervise the day-to-day activities of SVMC, and Mr. Evgeny Bairbiliktuev, who will be appointed as a Chief Financial Officer of SVMC, will supervise the financial operations of SVMC.

· The closing of Stage 1 is expected in January 2016.

Pavel Grachev, Chief Executive Officer of Polyus Gold, commented:

"We believe that this arrangement will result in the fast tracking of the Nezhdaninskoye development, which is beneficial for both shareholders and the region. This transaction is in line with Polyus' strategy of streamlining its growth portfolio in a disciplined manner and its structure will enable us to focus management resources on the current pipeline of brownfield and greenfield projects ensuring a substantial uplift in output over the medium term horizon."

Vitaly Nesis, Group CEO of Polymetal, commented:

"We believe Nezhdaninskoye fits perfectly with Polymetal's core competencies in remote asset development, selective underground mining, and refractory ore processing. The size of the deposit underscores significant potential for a high-grade mine with a very long mine-life."

The Nezhdaninskoye Project

Nezhdaninskoye is the fourth largest gold deposit in Russia. It is located in the north-east of Yakutia, in Tomponsky district, approximately 480 km east from the city of Yakutsk. The Property is remote with access by all-season unpaved road and no grid connection.  The climate is characterized by long severe winters and short hot summers. The relief is moderately mountainous with relative altitudes above valley floors not exceeding 600 m.

The deposit is composed of large scale mineralised zones, representing zones of intense brecciation comprised of crushed and sheared, hydrothermally altered, sedimentary rocks that have been variably enriched in quartz. The quartz occurs as randomly oriented stringers, lenses, and veins. Within the lateral limits of these zones, there are lean bands of variably silicified sedimentary protolith. There are also veins composed of quartz with relics of the host rocks.

Nezhdaninskoye mineralization is double refractory due to the encapsulation of fine gold particles within sulphide minerals and significant presence of preg-robbing carbonaceous material.

A 180 Kt per annum underground mine and concentrator were commissioned in 1975. Over 2 Mt of ore was mined and processed at an average gold grade of 7.6 g/t before the operation was placed on care and maintenance in 2005.

Polyus Gold acquired Nezhdaninskoye in 2006. Since then, the Group has undertaken an extensive exploration program and completed several technical studies aimed at defining a workable strategy for the development of the Property. Both Polyus Gold and Polymetal expect to adopt a development approach characterized by low capital intensity.

According to the Russian State Reserves Commission (GKZ), the gold reserves (C1+C2) amount to 20.3 mln ounces (632 tonnes) at the grade of 5.1 g/t[2].

Polyus Gold

Polyus Gold is the largest gold producer in Russia and one of the top 10 gold miners globally by ounces produced and mineral resources base. The key operations and projects are located in the Krasnoyarsk, Irkutsk and Magadan regions and the Sakha Republic (Yakutia). In 2014, Polyus Gold produced 1,696 thousand ounces (52.75 tonnes) of gold.

Enquiries:

Investor contact

Sergey Krivokhizhin, Director Investor Relations

+44 (0) 203 713 42 90 ir@polyusgold.com

Media contact

Artem Gorbachev, Press Secretary

+44 (0) 203 713 42 90 gorbachevav@polyusgold.com

Forward looking statements

This announcement may contain "forward-looking statements" concerning PGIL. Generally, the words "will", "may", "should", "could", "would", "can", "continue", "opportunity", "believes", "expects", "intends", "anticipates", "estimates" or similar expressions identify forward-looking statements. The forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Forward-looking statements include statements relating to future capital expenditures and business and management strategies and the expansion and growth of PGIL's operations. Many of these risks and uncertainties relate to factors that are beyond PGIL's ability to control or estimate precisely and therefore undue reliance should not be placed on such statements which speak only as at the date of this announcement. PGIL assumes no obligation in respect of, and does not intend to update, these forward-looking statements, except as required pursuant to applicable law.