POLY.L Regulatory News (POLY)

Polymetal International plc

Ore Reserves, Mineral Resources and Exploration update as at 1 January 2017

Polymetal International plc (LSE, MOEX: POLY, ADR: AUCOY) (together with its subsidiaries - "Polymetal", the "Company", or the "Group") is pleased to provide an Exploration update for the year ended 31 December 2016, and report its Ore Reserves and Mineral Resources as at 1 January 2017 in accordance with the JORC Code (2012).

2016 HIGHLIGHTS 

· Polymetal's Ore Reserves decreased by 5% to 19.8 Moz of gold equivalent (GE) mainly due to mining depletion and a downgrade at Varvara which were partially offset by reserve additions from the new acquisition at Komar, Dolinnoye and an upgrade at Svetloye;

· Mineral Resources (additional to Ore Reserves) increased by 29% to 16.5 Moz of GE, mainly driven by the acquisitions of Kapan and Komar, as well as the initial Mineral Resources estimates at Levoberezhny and Lichkvaz;

· Mineral Resources (inclusive of Ore Reserves) at gold equivalent grew by 5% to 36.4 Moz;

· The average grade in Ore Reserves decreased by 8% to 3.8 g/t GE mainly due to additions from Komar. The average grade for Mineral Resources decreased by 11% to 4.2 g/t GE, mainly as a result of additions from Kapan; 

· In 2016, we continued to use conservative gold and silver price assumptions in our reserve and resource estimates, US$1,200/oz and US$16/oz, respectively (2015: US$1,100/oz and US$15/oz);

· Exploration drilling volumes increased by 40% year-on-year to 324 km, as the Company expanded its scope of exploration to include newly acquired assets and joint ventures;

· 9 new licences were obtained over the course of 2016, bringing the total number to 86, of which 47 currently involve active exploration activities.

"In the course of 2016 we significantly strengthened the resource base of our operating mines and successfully advanced our long-term growth strategy." - said Vitaly Nesis, Group CEO of Polymetal, commenting on the results. "In 2017, we plan to focus on converting resource additions into reserves growth. The key elements of this plan involve initial reserve estimates at Nezhda and Kapan as well as material resource-to-reserve conversion at Kapan, Lichkvaz, Omolon and Komar." 

Ore Reserves and Mineral Resources summary(1)

1) Mineral Resources are additional to Ore Reserves. Mineral Resources and Ore Reserves of Lead and Zinc are not presented due to the immateriality and are not included in the calculation of the gold equivalent. PGM Mineral Resources are presented separately and are not included in the calculation of the gold equivalent.

Differences are due to rounding.

FY2017 OUTLOOK

In 2017, Polymetal will continue to invest in exploration with the goal to expand the pace and scope of drilling, as well as prospect evaluation. The key objectives are as follows:

· To achieve resource-to-reserve conversions and resource upgrades at our brownfield projects with particular focus on shorter life-of-mine assets. At Omolon the focus will be on Irbychan and Yolochka; at Voro - on Saum and Tamunier; at Okhotsk - on Levoberezhny, Gyrbykan, and Maimakan-Kundumi; at Dukat - on Primorskoye;

· To initiate a comprehensive exploration campaign at the deeper levels of Dukat with a goal to extend the scope of resource estimates at least 300 meters below current underground workings;

· To produce an initial JORC reserve and resource estimate at Nezhda JV's Zone 1 and continue drilling on smaller, potentially mineralised zones;

· To complete at least 25 km of diamond drilling at the Prognoz silver deposit;

· To publish a JORC-compliant reserve estimate and a combined LOM plan for Kapan and Lichkvaz;

· To complete a step-out drilling campaign at Komar and update the reserve and resource estimates for the deposit;

· To continue step-out and deep-level drilling at Kyzyl.

Ore Reserves reconciliation, gold equivalent, Moz

1) Please refer to the Appendix for the gold equivalent conversion ratios and applicable methodology.

Mineral Resources and Ore Reserves as at 1 January 2017(1) 

1) Mineral Resources and Ore Reserves in accordance with the JORC Code (2012). Mineral Resources are additional to Ore Reserves. Mineral Resources and Ore Reserves of Lead and Zinc are not presented due to the immateriality and are not included in the calculation of the gold equivalent. PGM Mineral Resources are presented separately and are not included in the calculation of the gold equivalent.

Discrepancies in calculations are due to rounding.

1) Discrepancies in calculations are due to rounding.

EXPLORATION RESULTS

Dukat hub

· 17 km have been drilled at the near flanks of the Dukat property at the Khrustalny, Mglystiy and Smeliy ore zones. Following on from last year's exploration, additional ore bodies have been traced to the north at Khrustalny. In 2017, we plan to carry out prospecting activities at the deeper levels of Dukat to confirm the presence of a second horizon of mineralisation and other targets around the Dukat hub area.

· At the Primorskoye property (250 km from the Omsukchan concentrator), 11 km of exploration drilling was carried out in ore zones 1 and 3, along with detailed metallurgical and geomechanical studies. A bonanza section with anomalous high grade content was identified (17.9 g/t for gold, 4700 g/t for silver), holding more than 60% of all resources of ore zone 1. Mineral resource estimate comprised 311 Koz GE at 19.6 g/t GE. In 2017, we plan to continue drilling in order to expand the resources and produce a JORC-compliant reserve estimate for the property in 2018.

Omolon

· An increased reserve estimate of 213 Koz GE at 2.3 g/t GE at Sopka (180 km from Kubaka mill) was a result of revaluation which made feasible the restart of open-pit mining, now scheduled for 2017.

· A resource estimate at the Central, Northern and Eastern zones of the Irbychan deposit (veinlet-disseminated mineralisation type) has been completed, with the feasibility study being prepared. We plan to issue an initial reserve estimate in 2017 with the goal to start open-pit mining at the property in 2H 2019.

· At Yolochka (veined and veinlet-disseminated ore bodies of low-sulphide gold-silver formation), as a result of infill drilling (6 km), new rich ore zones were discovered on the western flank. Core drilling will continue in 2017 with an aim to expand the resource base and prepare for the reserve and resource estimate in 2017.

· At Nevenrekan, 8 km of drilling was completed at ore zone 2, as well as zones 1 and 5. In ore zone 1, high-grade ore sections were discovered, which, with further exploration, are expected to increase the resource base of the property. Drilling will continue in 2017 with a goal to upgrade resources into higher categories and prepare for the reserve estimate in 2018.

Okhotsk

· At Maimakan-Kundumi (a new property approx. 30 km from Avlayakan), as a result of 2.5 km of prospecting drilling, 3 ore bodies containing high-grade gold and silver mineralisation were identified. An initial mineral resource estimate for the property has been prepared and comprises 106 Koz of GE at an average grade of 13.7 g/t GE with further mineral potential estimated at 100-500 Koz of gold at an average grade of 6-15 g/t. In 2017, prospecting and evaluation activities will continue with 13 km of planned drilling.

· Polymetal will continue exploration at areas adjacent to the Khakanja plant with the goal to expand its mine life. Further exploration potential is associated with Khotorchan and Gyrbykan (180 km from the Khakanja mill), where new ore intercepts have been identified. The anticipated mineral potential for the properties is estimated at 100-200 Koz of gold at average grades of 10-15 g/t. In 2017, prospecting and evaluation activities are set to continue.

· At Svetloye, advanced exploration activities yielded an increase in reserves for the second consecutive year, adding 157 Koz of GE through positive mine-to-model reconciliation and additional step-out drilling.

· Evaluation activities at Levoberezhny (35 km from Svetloye) yielded positive results, confirming its future prospects. An initial mineral resource estimate at the property comprises 378 Koz of GE at 4.2 g/t GE. Further metallurgical testing and exploration activities are set to continue in 2017 with a goal to gain approval on the feasibility study and prepare an ore reserve estimate.

Albazino

· Exploration drilling at the Farida and Ekaterina 1 & 2 ore zones was mainly focused on the deposit to prepare ore bodies for open-pit mining. The Company continues to work on outlining ore bodies and on upgrading resource categories. In 2017, we will continue exploration works within the license area in order to establish new prospective ore bodies.

Voro hub

· At the recently acquired Saum property with VMS-style mineralisation, we plan to perform metallurgical studies and near-deposit geophysics in 2017.

· 6 km of drilling has been completed at Tamunier, identifying 38 ore intercepts that meet the project targets. The traced mineralisation along strike is between 120 m to 800 m with the thickness varying between 0.5 m - 9.6 m, explored at a depth of 30-320 m. The average grade traced through the ore bodies varies from 1.02 - 23.0 g/t. In 2017, drilling aimed at outlining ore bodies will continue. A reserve estimate is expected in 2017.

Varvara hub

· At the newly acquired Komar (187 km from Varvara plant), detailed in-fill and step-out exploration drilling (45 km) at the flanks of the deposit have been finished, leading to initial reserve and resource estimate in 2016. As at 1 January 2017 ore reserves and mineral resources comprise 873 Koz of gold at 1.8 g/t and 517 Koz of gold at 2.2 g/t, respectively. Additional prospecting activities aimed at the discovery of new ore bodies and the expansion of the resource base around the property are set to continue in 2017.

· Additional exploration drilling totalling 7 km was conducted at the North-Eastern and Northern areas of the Dolinnoye deposit within the optimised pit outline that was established based on exploration results from 2015. An initial reserve and resource estimate was prepared by CSA Global based on Polymetal's share in the deposit, amounting to 101 Koz of GE at 2.4 g/t GE in reserves and 247 Koz of GE at of 2.5 g/t GE in resources.

· Exploration activities at Tarutin (150 km from Varvara plant) have been finalised. The feasibility study for the property has been completed and the deposit has now a clear path to production as another component of the hub strategy at Varvara. 

Kapan/Lichkvaz

· At Kapan, a revised JORC-compliant resource estimate was prepared by Polymetal and as at 1 January 2017 mineral resources comprise 1,928 Koz of GE (excludes zinc) at an average GE grade of 4.0 g/t.

· An initial resource estimate for Lichkvaz (70 km from Kapan plant) prepared by CSA Global Pty Ltd. comprises 582 Koz of GE at 4.2 g/t GE. 24 km of further in-fill and step-out drilling aimed at identifying and delineating ore bodies has been completed in 2016 with a goal to establish an additional resources upgrade of existing resources into a higher category.

· Polymetal plans to conduct additional drilling in 2017 to produce a JORC-compliant ore reserve estimate and combined life-of-mine plan for Lichkvaz and Kapan in Q3 2017.

Kyzyl

· At Bakyrchik, drill testing of several targets near the main deposit (Promezhutochny and Gluboky) have yielded positive results. Out of 35 drill holes completed in 2016, 26 have ore intercepts with an average thickness varying from 0.5 m to 6.75 m, and gold content varying between 2.4 g/t to 24.2 g/t. In 2017, step-out drilling of existing ore bodies will continue to prepare the property for mining.

· At Bolshevik, a satellite deposit to Bakyrchik, we completed drilling and sampling assessments paving the way for the preparation of a feasibility study, which is expected to be translated into an initial resource estimate in 2017.

PGM's

· The exploration licence for the Viksha project has been successfully converted into a mining licence effective from July 18, 2016. An initial Mineral Resource estimate for the PGM Viksha project in Karelia comprises 9.5Moz of PdEq, making Viksha one of the largest open-pittable PGM resources in the world. The depth of the open-pit is 150 m below surface with an average thickness of 7 m. In 2017, we will proceed with further exploration program. A feasibility study for an ore reserve estimate is planned for Q3 2019.

· Prospecting drilling activities at Kuolisma property, a new ore licenсe area, totalled 9 km as a result of which platinum and palladium mineralisation zones were identified.

Prognoz

· Polymetal acquired a 5% indirect interest in Prognoz in 2017. It is the largest undeveloped primary silver deposit in Russia, estimated to hold 292 Moz of silver at 586 g/t in JORC mineral resources as estimated by Micon (not included in the statement as of 1 January 2017). Polymetal plans to undertake 25 km of diamond drilling, and complete a technical study resulting in an externally audited JORC-compliant reserves estimate for the property before 31 March 2019. Preparations are already underway for the 2017 drilling campaign.

Nezhda

· During the year, Polymetal performed an extensive exploration campaign at Nezhda JV obtaining significant additional comfort on the geology and metallurgy of the deposit.

· Diamond drilling totaling 39 km was completed at ore zone 1 of the Nezhda deposit in 2016. 141 ore intercepts have been traced in the southeast part of ore zone 1 with an average thickness of 5.3 m, and average grades from 2.3 g/t to 74.5 g/t for gold and 1.7 g/t to 54.6 g/t for silver. At the northwestern part of ore zone 1, 121 ore intercepts have been identified with an average thickness of 20.9 m, and grades from 1.1 g/t to 18.7 g/t for gold and 1.4 to 49.6 g/t for silver. In 2017 further exploration of ore zone 1 and adjacent areas is planned to expand open-pittable resources.

Ore Reserves as at 1 January 2017(1)

1) Ore Reserves are reported in accordance with the JORC Code (2012). Discrepancies in calculations are due to rounding.

2) Initial estimate prepared by Polymetal as at 01.01.2016. Price: Ag = US$15/oz, Pb = US$1,700/t. Revised estimate was not performed due to lack of material changes.

3) Cu grade in Ore Reserves only represents average grade of Float feed. Ore Reserves of Float feed: 2.7 Mt Proved and 4.7 Mt Probable.

4) Initial estimate prepared by Polymetal as at 01.07.2016. Price: Au= US$1,100/oz. Revised estimate as at 01.01.2017.

5) Estimate prepared by Polymetal as at 01.01.2014. Price: Au= US$1,300/oz. Revised estimate was not performed due to lack of material changes.

6) Initial estimate prepared by Polymetal as at 01.01.2016. Price: Au= US$1,100/oz, Ag = US$15/oz, Cu = US$5,000/t. Revised estimate was not performed due to lack of material changes. Ore Reserves are presented in accordance with the Company's ownership equal to 75%.

7) Initial estimate prepared by CSA as at 28.07.2016. Price: Au= US$1,100/oz. Revised estimate prepared by Polymetal as at 01.01.2017 (only stoping). Ore Reserves are presented in accordance with the Company's ownership equal to 25%.

8) Stockpiled Ore Reserves.

9) Initial estimate prepared by Polymetal as at 01.01.2016. Price: Au= US$1,100/oz, Ag = US$15/oz. Revised estimate was not performed due to lack of material changes.

10) Initial estimate prepared by Polymetal as at 01.07.2014. Price: Au= US$1,300/oz, Ag = US$20/oz, Cu = US$7,000/t, Zn = US$1,700/t. Revised estimate was not performed due to lack of material changes.

11) Stockpiled Ore Reserves.

12) Stockpiled Ore Reserves.

13) Estimate prepared by RPA Inc. as at 01.01.2015. Price: Au = US$1,200/oz. Revised estimate was not performed due to lack of material changes.

14) Initial estimate prepared by Snowden as at 01.01.2014. Price: Au= US$1,300/oz. Revised estimate prepared by Polymetal as at 01.01.2017 (only stoping without Au price change). Ore Reserves are presented in accordance with the Company's ownership equal to 42.65%.

15) Initial estimate prepared by Snowden as at 01.01.2015. Price: Au= US$1,300/oz (only Ore Reserves estimate for Heap Leach). Revised estimate was not performed due to lack of material changes.

Mineral Resources as at 1 January 2017(1)