19th Sep 2016 11:17
LONDON (Alliance News) - Polymetal International PLC re-entered the FTSE 100 index on Monday and published a maiden resource estimate for "one of the largest open-pittable platinum group metal resources in the world" within the Viksha project earlier than first expected.
Vishka is a palladium, platinum, gold and copper deposit located in the mineral-rich Republic of Karelia, part of the Russian Federation. The Republic of Karelia is a federal subject of Russia that is located in the northwest of the country bordering Finland, taking an intervening position between the White and Baltic Seas.
Polymetal acquired the asset back in 2012 and the miner drilled 166 diamond drill holes on the asset in the first two years of ownership, with the mining licence also being extended by authorities earlier this year, giving the miner a 20-year hold over the asset.
The mineral resource estimate was independently audited by AMC Consultants, which has estimated Viksha could hold up to 6.6 million ounces of PGMs. Notably, the resource has also been delivered ahead of the original schedule that had envisaged a resource being declared in the final quarter of 2016.
To put that into perspective, the previous reserve at Viksha stood at around 4.2 million ounces of platinum equivalent. The major difference between reserves and resources is that reserves are known to be extractable on a technical basis whilst resources are known to be extracted on an economic basis.
Polymetal is primarily a gold producer and reported production of 522,000 ounces of gold equivalent in the first half of the year, with the expectation for huge growth in the second half.
Russia is thought to contain the second highest levels of PGM reserves in the world, but it is still dwarfed by South Africa which is thought to have over 2.00 trillion ounces and over 95% of global reserves.
London-listed Johnson Matthey PLC published a report in May that said total palladium supply in 2015 was 6.4 million ounces whilst demand sat much higher at 9.3 million ounces, requiring a drawdown of stocks. South Africa contributed 2.7 million ounces in supply in the year whilst Russia contributed 2.4 million ounces.
That suggests that, whilst Russia has nowhere near the level of known reserves as South Africa, it is contending in terms of production.
Looking at platinum, the World Platinum Investment Council estimates total platinum supply in 2015 amounted to 7.9 million ounces versus demand of 8.2 million ounces, again requiring a drawdown of stockpiles in order to manage the deficit.
"Viksha successfully delivered our maiden PGM resource", said Vitaly Nesis, chief executive of Polymetal. "I believe that the project's size, combined with the absence of significant technical challenges, makes it a unique investment opportunity within the global PGM space".
The PGM resource will sit alongside Polymetal's existing resources, which focus on gold and silver. At the start of 2016, Polymetal had total mineral resources of 83.2 million tonnes of ore thought to contain 11.3 million ounces of gold, 48.6 million ounces of silver and 132,000 tonnes of copper. Total ore reserves stood at 154.7 million tonnes with 17.7 million ounces of gold and 207.2 million ounces of silver.
The resource makes Viksha "one of the largest open-pittable PGM resources in the world," according to Polymetal, which now intends to complete a feasibility study for an ore reserve estimate by the third quarter of 2019.
If the study proves successful, Polymetal said production from Viksha could start in 2022.
The combined indicated and inferred mineral resource estimate, which is JORC-compliant, stands at 213.0 million tonnes of ore averaging 0.98 grammes of PGM per tonne, plus 0.1% copper.
The Viksha deposit comprises three adjacent areas within the north-west limb of the syncline structure: Viksha proper, Kenti, and Shargi.
Breaking the resource down, the indicated resource at Viksha proper stands at 27.0 million tonnes of ore graded 0.6 grammes of palladium per tonne, 0.2 grammes of platinum, 0.1 grammes of gold and 0.1% copper.
That indicated resource, therefore, is considered to hold around 500,000 ounces of palladium, 1,000 ounces of platinum, 100,000 ounces of gold and 29,600 tonnes of copper.
The inferred resource stands at 52.0 million tonnes of ore that holds the same grade as the indicated resource, except for the copper grade which was slightly lower at 0.09%. The inferred resource is thought to contain 1.0 million ounces of palladium, 300,000 ounces of platinum, 200,000 ounces of gold and 49,500 tonnes of copper.
The inferred resource at the Kenti area stands at 98.0 million tonnes of ore that also holds the same PGM grades and a copper grade of 0.11%. That is thought to contain 1.9 million ounces of palladium, 600,000 ounces of platinum, 400,000 ounces of gold and 109,600 tonnes of copper.
Lastly, the inferred resource at the Shargi area stands at 36.0 million tonnes of ore with the same PGM grades and a copper grade of 0.08%. Shargi is forecast to hold 700,000 ounces of palladium, 200,000 ounces of platinum, 100,000 ounces of gold and 31,700 tonnes of copper.
Notably, all the figures provided were rounded, meaning the individual values will be slightly higher or lower than stated.
"Polymetal believes that the newly established mineral resource of more than 6.0 million ounces of precious metals offers a good probability that a standalone mining operation is both feasible technically and financially viable. Importantly, the geological and metallurgical conditions are favorable," said Polymetal.
The near surface reefs, zones that hold high concentrations of metals, have contiguous ore bodies of considerable width that Polymetal said is amenable to low-cost mechanised bulk open-pit mining. The shallow dip of mineralised zones enables selection of the acceptably low stripping ratios.
The deposit is located in a well-developed region with satisfactory infrastructure and a qualified workforce. The property has no population and is covered by forest with no agricultural activity.
Favourable mineralogy will also enable the company to use a conventional flotation process producing bulk copper-platinum group metal sulfide concentrate that can be processed through either PGM refineries or copper smelters with a PGM circuit.
Polymetal shares were up 2.7% to 1,039.0 pence per share on Monday.
By Joshua Warner; [email protected]; @JoshAlliance
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