Polymetal: Q3 2019 production results

Polymetal International plc

Q3 2019 production results

Polymetal reports solid production results for the third quarter and nine months ended September 30, 2019.

"Continued strong performance at Kyzyl is driving our production dynamics. We now expect to exceed our full-year production guidance", said Vitaly Nesis, Group CEO of Polymetal.

HIGHLIGHTS

PRODUCTION BY MINE

Notes: (1) Based on 1:80 Ag/Au, 5:1 Cu/Au, 2:1 Pb/Au and 2:1 Zn/Au conversion ratios.

CONFERENCE CALL AND WEBCAST

Polymetal will hold a conference call and webcast on Thursday, 24 October 2019 at 12:00 London time (14:00 Moscow time).

To participate in the call, please dial:

From the UK:

+44 330 336 9411 (local access)

0800 279 7204 (toll free)

From the US:

+1 929 477 0324 (local access)

800 458 4121 (toll free)

From Russia:

+7 495 646 9190 (local access)

8 10 8002 867 5011 (toll free)

To participate from other countries, please dial any of the local access numbers listed above.

Conference code: 2360288

To participate in the webcast follow the link: https://webcasts.eqs.com/polymetal20191024. Please be prepared to introduce yourself to the moderator or register.

A recording of the call will be available immediately after the call at +44 20 7660 0134 (from the UK), +1 719 457 0820 (from the USA) and 8 10 8002 702 1012 (from Russia), access code 2360288, from 17:30 Moscow time Thursday, 24 October, till 17:30 Moscow time Thursday, 31 October, 2019. Webcast replay will be available on Polymetal's website (www.polymetalinternational.com) and at https://webcasts.eqs.com/polymetal20191024.

About Polymetal 

Polymetal International (LSE, MOEX: POLY, ADR: AUCOY) (together with its subsidiaries - "Polymetal", the "Company", or the "Group") is the top-20 global gold producer and top-5 global silver producer with assets in Russia and Kazakhstan. The Company combines strong growth with a robust dividend yield.

Enquiries

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 forward-looking terminology, including the words "targets", "believes", "expects", "aims", "intends", "will", "may", "anticipates", "would", "could" or "should" or similar expressions or, in each case their negative or other variations or by discussion of strategies, plans, objectives, goals, future events 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 forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the company's present and future business strategies and the environment in which the company will operate in the future. Forward-looking statements are not guarantees of future performance. There are many factors that could cause the company's actual results, performance or achievements to differ materially from those expressed in such forward-looking statements. The company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in the company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based.

KYZYL

Note:  (1) For information only; not considered as gold produced and therefore not reflected in the table representing total production. It will be included in total production upon shipment to off-taker or dore production at Amursk POX.

Kyzyl continued to exceed budget on throughput and grade. Gold in concentrate in Q3 was 106 Koz while payable gold production amounted to 94 Koz.

Q3 is expected to be the last quarter with significant positive grade reconciliation. Starting from Q4 mining will continue beyond the near-surface area with significant high-grade lenses and the average grade will revert to open-pit reserve average.

The Chinese market for refractory concentrates is continuing to tighten. In response, the Company moved to increase the share of gold contained in low-carbon concentrate processed at Amursk POX to 70% (versus 50% planned). This drove POX recoveries lower, but will ensure higher production and lower costs at Kyzyl at the expense of reducing 3rd-party concentrate processing.

Following the successful completion of several improvement projects, Kyzyl concentrator achieved steady-state throughput of 2.0 Mtpa, 11% above the original design. Several initiatives are under way to evaluate pushing throughput to 2.1 Mtpa level by H2 2020.

Polymetal Engineering is finalizing a FS-level technical study to re-optimize the open pit under updated operational and economic assumptions. The results, including the updated Ore Reserves estimate, will be presented on November 11 at the Analyst and Investor Day.

DUKAT OPERATIONS

Note: (1) Technological recovery, includes gold and silver within work-in-progress inventory.

At Dukat, quarterly silver and gold production were down 8% and 6% year-on-year respectively. The decline was driven by the Omsukchan concentrator processing larger volumes of lower-grade ore as well as by planned reduction in silver grade at Lunnoye mostly attributable to the depletion of higher-grade Zone 9.

Given the significant increase in the silver price, management is evaluating the postponement of the mine closure at Goltsovoye by bringing marginal stopes and areas into production. Such a development will enable full utilization of the Dukat concentrator in 2020.

ALBAZINO

Notes: (1) To concentrate.

(2) For information only; not considered as gold produced and therefore not reflected in the table representing total production. Included in total production after dore production at the Amursk POX.

At Albazino, production dynamics continued to be affected by lower-grade ore from the Ekaterina-1 open pit. Quarterly production of gold in concentrate decreased by 6% year-on-year.

However, a 62% jump in underground ore mined ensured positive quarter-on-quarter grade dynamics despite challenging ground conditions thanks to careful customization of mining methods to specific stope conditions.

AMURSK POX

Notes: (1) Veduga and purchased concentrates which are included in reportable production in the Albazino segment.

(2) For information only. Already accounted for in production at operating mines.

Q3 gold production at the Amursk POX increased by 52% year-on-year driven by the introduction of high-grade Kyzyl concentrate to the feed.

By implementing tight feed management procedures, the POX team managed to increase the recovery ratio in comparison with the previous quarter and stabilize it at the level above 94%. In Q2, the beginning of processing of large quantities of Kyzyl concentrate had significantly changed the operating parameters and led to a decline in recoveries.

Increased volumes of high-grade low-carbon Kyzyl concentrate displaced 3rd party materials.

OMOLON OPERATIONS

Note: (1) Technological recovery, includes gold and silver within work-in-progress inventory.

At Omolon, gold output was up 8% year-on-year while silver output was down 37% as the processing plant switched away from Sopka ore towards feed from Birkachan and Olcha.

Following a successful in-fill drilling campaign, open-pit mining recommenced at the Bikarchan mine with a view to extend the operation of the heap leach facility.

Quarterly volume of ore processed at the Kubaka mill decreased by 16% year-on-year due to the planned 14-day maintenance shutdown to complete SAG headgear replacement.

MAYSKOYE

Notes: (1) To concentrate.

(2) For information only; not considered as gold produced and therefore not reflected in the table representing total production. Included in total production upon sale to off-taker or dore production at Amursk POX.

(3) Gold produced from carbon at Amursk POX.

In Q3, Mayskoye switched back to processing sulphide ore from the underground mine. Consequently, grade fell and recoveries jumped. Gold in concentrate produced increased by 24% year-on-year.

Shipments of Mayskoye concentrate to Chinese off-takers commenced with the start of navigation period in August. Payable gold in concentrate shipped was up 55% year-on-year. The Chinese concentrate market continues to be challenging with high arsenic material starting to attract heavy penalties. This is likely to have an approximately $150-200/oz negative impact on Mayskoye's TCC and AISC for 2019.

VARVARA

Notes: (1) Technological recovery, includes gold and copper within work-in-progress inventory. Does not include toll-treated ore.

(2) To be further processed at Amursk POX.

At Varvara, gold output decreased by 1% year-on-year as the leaching circuit underwent the planned replacement of the mill lining.

Gold grade processed increased thanks to higher mining and railing volumes at Komar. New company-owned loco has been successfully commissioned and is expected to further drive down Komar ore transportation costs.

VORO

Note: (1) Technological recovery, includes gold within work-in-progress inventory.

Q3 gold production at Voro climbed by 19% year-on-year as the CIP plant processed high-grade oxide ore from the southern pit.

Waste volume decreased sharply as the open pit is approaching the end of its life.

SVETLOYE

At Svetloye, gold production contracted by 22% year-on-year as ore stacking was negatively affected by wet and cold weather in Q3.

DEVELOPMENT UPDATE

At Nezhda, pre-stripping and construction proceeded according to plan. Repair of the road from the Kolyma federal highway to the mine site was completed. The road is ready for the delivery of technological equipment of the plant and the power station in Q1 2020. The installation of the metal framework of the processing plant building was completed, and the manufacturing of internal metal structures is under way. The construction of foundations for the power station and the underground tunnel from the crusher to the concentrator started. The lining of the dry-stack tailings storage facility commenced.

A positive conclusion of the state environmental review of the project documentation was received.

At POX-2, the autoclave foundation boxcut was excavated and the foundation concrete bed prepared. Polymetal signed contracts for high-pressure auxiliary equipment around the autoclave through Hatch. Active construction started at the new concentrate storage area.

SUSTAINABILITY, HEALTH AND SAFETY

In Q3, our LTIFR stood at 0.11 versus 0.07 in Q3 2018 with a total of 3 work-related incidents recorded across the Group (2 incidents in Q3 2018). The increase was driven by minor incidents that occurred at remote sites outside of production shifts (falls, slips). Accordingly, risk assessment and safety training will be adjusted to take into account higher frequency of this type of incidents.

In the reporting quarter Polymetal had its ESG ratings upgraded - MSCI ESG Ratings score improved from BBB to A, and ISS-Oekom Corporate Rating was raised to C+. Furthermore, the Company was reaffirmed as a member of the Dow Jones Sustainability Index and FTSE4Good Index Series.

As a way to further align our ESG efforts to financial results, Polymetal signed a new US$ 75 million sustainability-linked credit facility with Societe Generale. The interest rate is tied to the Company's performance on specific ESG KPIs set by the agreement.

PERSONNEL

Oleg Voronin (50) was appointed as Managing Director at Albazino. Mr. Voronin graduated from the Krasnoyarsk Institute of Non-Ferrous Metal with a degree in underground mining. From 1993 until 2009 he held various positions with the Zyryanovsky mining and processing complex (now part of Kazzinc), all the way up to the chief engineer. In 2009, Oleg joined Polymetal as the chief engineer of Dukat operations. In 2015, he assumed the position of chief engineer at Albazino.