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.