6th Oct 2020 09:38
(Alliance News) - Polymetal International PLC on Tuesday said its directors have approved the construction of the USD80 million Kutyn Kutyn project in the Far East region of Russia.
Kutyn is located in the Khabarovsk territory, some 114 kilometres north-west of Polymetal's Albazino mine and 10 kilometres from the Sea of Okhotsk. It was purchased in 2011 for USD65.5 million in shares, but activity was stopped in late 2014 and the project was put up for sale. Exploration did restart in 2017. However, the mine was earmarked for sale due to its small size compared to other assets in Polymetal's portfolio.
On Tuesday, however, Chief Executive Vitaly Nesis said: "After thorough evaluation, the board has concluded that Kutyn belongs in Polymetal's asset portfolio. The key factors behind this decision are quick and capital-light path to significant free cash flows as well as potential for a long mine life as a part of the Albazino hub".
Polymetal said ore reserves for Kutyn as at October 1, 2019, were estimated at 8.4 million tonnes of oxide ore with an average grade of 3.0 grams per tonne containing 0.812 million ounces of gold.
An estimate of refractory reserves is planned for the first quarter of 2023 following completion of an extensive drilling campaign of 50 kilometres and preparation of the feasibility study. Conventional open-pit mining will commence with pre-stripping in the third quarter of 2021, with first ore mined in the first quarter of 2022.
Gold production is expected to comprise 575,000 ounces. Average annual output from 2023 to 2028 is estimated at roughly 90,000 ounces with average all-in sustaining costs of USD590 per ounce. First gold is expected to be produced in the second quarter of 2023.
The Cyprus-headquartered company spent USD55 million on exploration and site infrastructure from 2012 to the first half of 2020. Remaining initial project capital expenditures from the second half of 2020 are estimated at USD80 million. The project's internal rate of revenue - net of sunk costs - stands at 29% at USD1,200 per ounce rising to 42% at USD1,500 per ounce.
Net present value is estimated at USD79 million and USD157 million at USD1,200 per ounce and USD1,500 per ounce gold price, respectively.
Polymetal said that the development of Kutyn will not result in changes to the current production and capital expenditure guidance, noting that incremental production from Kutyn will compensate for the decline at Albazino. It stated that challenging geotechnical conditions at Albazino has resulted in management deciding not to proceed with the project to double underground mining capacity to 1.2 Mtpa. The capital expenditure reduction stemming from this decision will balance increased spending at Kutyn.
Shares in Polymetal were trading 1.3% lower at 1,669.50 pence each on Tuesday morning in London.
By Ife Taiwo; [email protected]
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