TIDMPOLY
RNS Number : 2137L
Polymetal International PLC
17 July 2017
Release IMMEDIATE
time
Date 17 July 2017
Polymetal International plc
Polymetal announces an initial resource estimate for Nezhda and
enters into a legally binding agreement for the increase of its
stake in the project to 24.7% with an option to acquire the
remaining 75.3%.
Polymetal International plc (LSE, MOEX: POLY; ADR: AUCOY)
(together with its subsidiaries - "Polymetal", the "Company", or
the "Group") has agreed to acquire an additional 7% in the joint
venture Nezhdaninskoye gold deposit ("Nezhda") from its partner,
Ivan Kulakov. Simultaneously, Polymetal has acquired an option to
buy out the remaining 75.3% in Nezhda.
A resource estimate for Nezhda has been prepared in accordance
with the JORC Code (2012) and was audited by CSA Global. The
resource inventory comprises 71 Mt of mineralized material
containing 11 Moz of gold equivalent (GE) at an average grade of
4.8 g/t GE.
TRANSACTION DETAILS
Based on the highly encouraging resource estimate at Nezhda,
Polymetal has decided to increase its share in the Nezhda JV and
has been able to renegotiate the key terms and conditions of the
previous JV agreement. As such, the existing Nezhda JV agreement
and the related earn-in arrangement have been terminated with
immediate effect.
Under the new shareholder agreement, Polymetal will acquire an
additional 7% share in the JV for a cash consideration of US$8
million. As a result, Polymetal's share in Nezhda will increase to
24.7%. Mr. Kulakov's investment vehicle, Pallavicino Holdings Ltd,
will hold 75.3%.
Polymetal has also acquired a call option to buy out the
remaining 75.3% in Nezhda (the "Call Option") on the following
terms:
-- The Call Option premium will comprise US$12 million in cash payable upfront;
-- Following the preparation of the initial JORC-compliant ore
reserve estimate for the open-pittable reserves, Polymetal will
have the option to acquire the remaining stake for US$100 per ounce
of attributable gold reserves (equivalent to US$75.3/oz multiplied
by total reserve ounces). The total consideration shall not be less
than US$105 million and not more than US$180 million;
-- US$10m of the consideration will be paid in cash, and the
remaining amount will be paid in the Company's shares (the
"Consideration payable in shares"). The number of shares will be
determined by dividing the amount of Consideration payable in
shares by the unweighted average closing price of Polymetal
ordinary shares on the main market of the London Stock Exchange in
the 5 trading days ending two trading days before the call option
completion date. The consideration shares will be subject to a
lock-up period of 180 days;
-- The Call Option is exercisable between 1 February and 1 June
2018 entirely at Polymetal's discretion;
-- Should Polymetal decide not to proceed with the exercise of
the Call Option, Polymetal will have a put option to sell its 24.7%
stake to Pallavicino Holdings Ltd at a notional cost of EUR 1
thousand.
Completion of the sale and purchase of the additional 7% share
in the JV and exercise of the Call Option are subject to approval
by the Russian Federal Government's Commission on Foreign
Investments into Companies of Strategic Importance. Exercise of the
Call Option is also subject to approval by the Russian Federal
Antimonopoly Service.
In the meantime, Polymetal will continue to advance
pre-feasibility activities at Nezhda and aims to publish the
initial reserve estimate by the end of 2017. RBC acted as financial
adviser to Polymetal.
"Exploration at Nezhda confirmed a very large high-grade
property with substantial open-pit potential. The asset fits
perfectly with Polymetal's core competencies in refractory ore
processing and remote asset development" said Vitaly Nesis, Group
CEO of Polymetal. "We are very pleased that the new terms of the
agreement on Nezhda give us significant decision-making flexibility
and offer Polymetal a clear path to consolidating full ownership in
this highly prospective asset."
MINERAL RESOURCE STATEMENT
The Nezhda Mineral Resources are reported in accordance with the
JORC Code (2012) as at 1 July 2017 using US$1,200/oz gold price and
US$16/oz silver price. The Mineral Resource statement has been
audited by independent consultant CSA Global.
Polymetal completed 42,479 m of diamond drilling in 2015 and
2017 in addition to the 339,392 m of drilling completed by previous
owners. Mineral resources were estimated with the following
classification parameters: Measured Mineral Resources are reported
within the first ellipsoid (20 m by 30 m) and Indicated Mineral
Resources are reported within the second ellipsoid (40 m by 50 m).
The remaining blocks are classified as Inferred. A total of 117
mineralised structures have been identified. Mineral resources for
the open pit were estimated up to a depth of 250 m from the
surface.
The largest identified mineralised structure is mineralised zone
1 ("MZ 1") which has a strike length of 4,900 m and a downdip
extent over 1,800 m and comprises 80% of total Mineral Resources at
Nezhda in terms of gold contained. For MZ 1, top cutting at 80 g/t
gold was applied to reduce outlier grade influence on local
estimation.
Nezhda Mineral Resources
Mineral Resources Tonnage Grade Content
--------------------------
Mt Au, Ag, GE, Au, Ag, GE,
g/t g/t g/t Moz Moz Moz
-------------------------- -------- ----- ----- ----- ----- ----- -----
Measured
Open-pit 7.5 4.1 26 4.2 1.0 6.3 1.0
Underground 1.3 5.2 13 5.2 0.2 0.5 0.2
Total Measured 8.8 4.2 24 4.4 1.2 6.8 1.2
Indicated
Open-pit 7 .3 3.8 15 3.8 0.9 3.6 0.9
Underground 6.1 5.1 17 5.2 1.0 3.2 1.0
Total Indicated 13.4 4.4 16 4.5 1.9 6.8 1.9
Measured+Indicated
Open-pit 14.8 3.9 21 4.0 1.9 9.8 1.9
Underground 7.4 5.1 16 5.2 1.2 3.8 1.2
Total Measured+Indicated 22.2 4.3 19 4.4 3.1 13.6 3.2
Inferred
Open-pit 1.8 3.0 13 3.0 0.2 0.7 0.2
Underground 46.7 4.9 10 5.0 7.4 15.4 7.5
Total Inferred 48.4 4.9 10 4.9 7.6 16.1 7.7
Measured + Indicated
+ Inferred
Open-pit 16.6 3.8 20 3.9 2.0 10.5 2.1
Underground 54.1 5.0 11 5.0 8.6 19.1 8.8
Total Measured +
Indicated + Inferred 70.6 4.7 13 4.8 10.7 29.7 10.9
-------------------------- -------- ----- ----- ----- ----- ----- -----
Notes: Cut-off grades of 3.0 and 2.0 g/t gold equivalent (GE)
have been applied for the underground and open pit Mineral
Resources, respectively. Gold equivalent was calculated using a
conversion factor of 147 for silver (kAg). Metal prices used were
US$1,200/oz for gold and US$16/oz for silver. For the conversion
factor formula (1) and full gold equivalent conversion formula (2),
please refer to the appendix section of the press release. Due to
the effects of rounding, the sum of individual values will not
necessarily equal the total.
INFORMATION ON NEZHDA
Nezhda is the fourth largest gold deposit in Russia. It is
located in northeast Yakutia, in the Tompon municipal district,
approximately 480 km east from the city of Yakutsk. The property is
remote with access by an 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 mineralised zones, representing
areas of intense brecciation comprised of crushed and sheared,
hydrothermally altered, sedimentary rocks that have been variably
enriched in quartz.
The Nezhda mineralisation is double refractory due to the
encapsulation of fine gold particles within sulphide minerals and
significant presence of preg-robbing carbonaceous material.
Polymetal currently envisions the construction of an open-pit
mine and a conventional concentrator on-site with concentrates
processed at the Amursk POX or sold to 3(rd) -party off-takers.
The gross assets of Nezhda are US$56 million and a reported
pre-tax loss of US$5.4 million has been attributable to these
assets in 2016.
APPIX
Competent persons
The CSA Global review was completed by Mr Dmitry Pertel -
Principal Resource Geologist.
The information in this Report that relates to the Mineral
Resources is based on and fairly represents information which has
been compiled by Mr Dmitry Pertel who is a member of the Australian
Institute of Geoscientists. Mr Pertel has sufficient experience
relevant to the style of mineralisation and type of deposit under
consideration and to the activity that is being undertaken to
qualify as a Competent Person, as defined in the 2012 Edition of
the "Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves". Mr Pertel is a full time
employee of CSA Global Pty Ltd and has consented to the inclusion
of the matters in this report based on his information in the form
and context in which it appears.
Ratios
(1) Conversion factor for silver to gold equivalent was
calculated using the following formula:
kAg= ((Au Price/31.1035 - (Au Price/31.1035-Au Refinery cost)
*(Taxes Au) /100 - (Au Refinery cost Au)) *(Au Recovery) / ((Ag
Price/31.1035 - (Ag Price/31.1035-Ag Refinery cost) *(Taxes Ag)
/100 - (Ag Refinery cost)) *(Ag Recovery))
where,
Taxes - mining taxes;
Recovery - complete recovery from ore to refined metal.
(2) Gold equivalent (g/t) was calculated using the following
formula:
AuE = CAu + CAg / kAg
where,
CAu - in-situ gold grade, g/t,
CAg - in-situ silver grade, g/t.
Enquiries
Media Investor Relations
----------------- ------------------ ----------------------------------------------------
FTI Consulting +44 20 3727 1000 Polymetal ir@polymetalinternational.com
Leonid Fink Evgenia Onuschenko +44 20 7016 9505 (UK)
Jenny Payne Maryana Nesis
Michael Vasiliev +7 812 334 3666 (Russia)
----------------- ------------------ -------------------- ------------------------------
Joint Corporate Brokers
------------------------------------- ----------------------------------------------------
Morgan Stanley
Sam McLennan
Richard Brown +44 20 7425 8000
Panmure Gordon RBC Europe Limited
Adam James Tristan Lovegrove
Tom Salvesen +44 20 7886 2500 Marcus Jackson +44 20 7653 4000
----------------- ------------------ -------------------- ------------------------------
FORWARD-LOOKING STATEMENTS
THIS RELEASE MAY INCLUDE STATEMENTS THAT ARE, OR MAY BE DEEMED
TO BE, "FORWARD-LOOKING STATEMENTS". THESE FORWARD-LOOKING
STATEMENTS SPEAK ONLY AS AT THE DATE OF THIS RELEASE. THESE
FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE USE OF
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"BELIEVES", "EXPECTS", "AIMS", "INTENDS", "WILL", "MAY",
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OR INTENTIONS. THESE FORWARD-LOOKING STATEMENTS ALL INCLUDE MATTERS
THAT ARE NOT HISTORICAL FACTS. BY THEIR NATURE, SUCH
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER IMPORTANT FACTORS BEYOND THE COMPANY'S
CONTROL THAT COULD CAUSE THE ACTUAL RESULTS, PERFORMANCE OR
ACHIEVEMENTS OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM FUTURE
RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH
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BASED ON NUMEROUS ASSUMPTIONS REGARDING THE COMPANY'S PRESENT AND
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WILL OPERATE IN THE FUTURE. FORWARD-LOOKING STATEMENTS ARE NOT
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CAUSE THE COMPANY'S ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS TO
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IN THE COMPANY'S EXPECTATIONS WITH REGARD THERETO OR ANY CHANGE IN
EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH ANY SUCH STATEMENTS
ARE BASED
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