Thursday, January 26 2017 16:11
Alexandr Avanesov

Polymetal: Total production at Kapan mine amounted to 26 Koz of gold equivalent

Polymetal: Total production at Kapan mine amounted to 26 Koz of gold  equivalent

ArmInfo. Total production at  Kapan amounted to 26 Koz of gold equivalent since the acquisition on  28 April 2016. The quarterly reduction in grade and a related  decrease in recovery and production in the fourth quarter is related  to underground mine sequencing and is expected to revert in early  2017, according to the report of Q4 and Full Year 2016 Production  Results of the Polymetal International plc.  

The improvement measures  are proceeding as planned and on schedule. They include integration  activities and modifications to operating practices with changes to  the motivation system, productivity gap analysis, as well as targeted  in-fill drilling.  Polymetal is using teams comprising local and  seconded employees in order to advance best practices at Kapan from  other underground operations in the company's portfolio. In the  meantime, in-fill and step-out drilling is underway at Lichkvaz, a  satellite deposit that is expected to provide additional tonnage to  the existing concentrator.

A JORC-compliant reserve estimate and a combined LOM for Kapan and  Lichkvaz is anticipated in Q3 2017, as originally planned. In 2017,  production should see a meaningful jump on the back of higher  throughput and full-year contribution from the asset.  The Company  reconfirms its production guidance for 2017 and 2018 of 1.40 Moz and  1.55 Moz of gold equivalent, respectively. Traditionally, production  in both years will be skewed towards the H2. The increase in  production in 2017 will be driven by Varvara (Komar), Okhotsk  (Svetloye), Ћmolon, and Kapan. 

Kapan mine was acquired by Polymetal International in 2016 and  represents its first operating asset in Armenia. The asset comprises  a fully mechanised underground mine with a current capacity of  approximately 400 ktpa, a conventional 750 ktpa flotation  concentrator and various infrastructure facilities. The mine produces  gold-copper-silver and zinc concentrates sold to international  markets. More than US$ 75 million has been invested in Kapan over the  last 5 years.

The Kapan property is located in the south-eastern Armenia, 320  kilometres from the capital city of Yerevan. The area surrounding the  operation hosts a number of other prospective deposits, including  100%-owned high-grade Lichkvaz gold deposit located approximately 70  km from Kapan.

Polymetal believes that the acquisition of Kapan is attractive as it  provides the opportunity to: enable synergies with Lichkvaz deposit  by employing processing hub approach utilising excess capacity at the  Kapan concentrator, Debottleneck underground mine and improve  concentrator utilization, streamline the cost structure leveraging  Polymetal's experience in mechanised narrow-vein underground mining  in the FSU, establish a strong operating platform to pursue further  opportunities in Armenia. An improvement of the concentrator  utilization is planned in 2 stages: 650 ktpa to be achieved by 2H  2017, 900 ktpa to be achieved by 2H 2018 (including feed from  Lichkvaz)

In 2015, Kapan mined 410 Kt and processed 411 Kt of ore. 21 Koz of  gold, 1 Kt of copper, 5 Kt of zinc and 0.4 Moz of silver were sold  during 2015. Over the same period, Kapan recorded net revenue of  US$35 million with EBITDA of US$5 million and cash costs,  net-of-product, of US$709 per ounce of gold sold. "We believe  Polymetal can transform Kapan from a low-margin asset into a capital-  light profitable regional processing hub with sizable production"  said Vitaly Nesis, Group CEO of Polymetal. "We believe that  opportunistic acquisitions in jurisdictions we know well is the right  way to create shareholder value at the current point in the cycle".

Earlier, Polymetal International plc (together with its subsidiaries  - "Polymetal", the "Company", or the "Group") announced that it  increased its interest in the Lichkvaz property in Armenia to 100%.

Polymetal purchased an additional 75% stake in the company holding  Lichkvaz property in Armenia, and increased its ownership from 25% to  100%. The consideration comprises 1,084,853 Polymetal shares equal to  US$9.7 million (0.26% of increased share capital). Details of the  Transaction on the acquisition of a 25% stake can be found in the  Company's announcement from 15 April 2015. The decision to increase  the Company's interest to 100% was taken following successful results  of exploration drilling performed during surveying season 2015.

Drilling has been completed, with 15,800 metres drilled across 70  diamond drill holes. To date, samples taken from 20 drill holes have  been analysed (representing c.25% of total number of samples). Based  on the first data obtained, nine productive intersections have been  discovered with the average grade of 6.4 g/t GE per average true  width of 4.5 metres.  The Company plans to further analyse  exploration data obtained during 2015 and to prepare a resource  estimate (JORC compliant) for release in Q2 2016.

Lichkvaz is located in the Meghri area of the Syunik-Marz province of  southern Armenia, 380 km south of Yerevan. The infrastructure in the  area is developed with power, water, accommodation and skilled labour  force available.

A previous resource estimate (not JORC compliant) puts the total  mineral endowment of the property at 2.4 Mt of material at 6.9 g/t in  the inferred category for approximately 0.5 Moz of gold equivalent  contained.

The geology of the project is characterised by a series of  near-vertical shears and steep westerly dipping vein sets ranging up  to 4-5 metres in width, hosted in andesite. The strike length of the  system is about 800 metres, with northern extension covered by  glacial till. The Lichkvaz property area is a part of the Tethyan  Belt. The Company believes that property retains significant  exploration potential.  Polymetal is a leading gold and silver mining  group, operating in Russia and Kazakhstan.  Company's shares are  listed on London and Moscow Stock Exchanges.  Polymetal is a  constituent of FTSE 250 and FTSE Gold mines.

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