REG-Polymetal International plc Polymetal International plc: Feasibility Study results and construction approval for POX-2

Polymetal International PKAnnouncement

11/02/2019 07:05

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   Polymetal International plc (POLY)
   Polymetal International plc: Feasibility Study results and construction
   approval for POX-2

   11-Feb-2019 / 10:00 MSK
   Dissemination of a Regulatory Announcement that contains inside information
   according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
   The issuer is solely responsible for the content of this announcement.

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   Release time IMMEDIATE                              LSE, MOEX: POLY / ADR:
                AUCOY
   Date         11 February 2019

    

    

   Polymetal International plc

   Feasibility Study results and construction approval for POX-2

   The Board of Polymetal  International plc approved the  POX-2 project on  the
   basis of the  recently completed  Feasibility Study (FS)  and authorised  the
   immediate start of construction.

   "POX-2 leverages  our core  technical  capabilities and  creates  substantial
   value. It also fully de-risks our business model by eliminating dependence on
   concentrate off-take markets",  said Vitaly  Nesis, Group  CEO of  Polymetal.
   "Emerging trends in  the global  gold mining  industry make  POX-2 a  crucial
   element of the Company's long-term strategy".

   STRATEGIC RATIONALE

     • The second POX line will  meaningfully increase the value of  Polymetal's
       refractory reserve  base,  comprising  approximately  55%  of  total  ore
       reserves. The facility will  process concentrates from Polymetal's  mines
       at Kyzyl, Nezhda, Mayskoye, and Voro.
     • POX-2 is  expected  to  generate significant  economic  benefits  as  all
       refractory concentrates  will  be  retained for  in-house  processing  as
       opposed to selling to third-party off-takers. The project will result  in
       the incremental production of  approximately 30-35 Koz  of gold per  year
       from the same amount of feedstock and will, on average, lower TCC by  US$
       100-150/oz per ounce for 500 Koz of annual gold production.
     • POX-2 will ensure strategic security of downstream processing against the
       backdrop of tightening environmental regulations in China, currently  the
       main market for refractory gold concentrates.
     • The project  will allow  Polymetal to  create capacity  for treatment  of
       third-party  refractory   concentrates,   a  market   which   has   grown
       considerably in Russia and globally in recent years.
     • POX-2  will   further   our   sustainable   development   strategy.   The
       environmental  footprint  of  the  Company's  value  chain  will   shrink
       drastically on the back of substantial reductions in air pollution, water
       usage, and solid toxic waste.

   FS HIGHLIGHTS

     • The project's base case IRR is 14% with an NPV of US$ 112 million,  based
       on the following assumptions:

          ◦ 10% discount rate
          ◦ US$ 1,200/oz gold price
          ◦ 65 RUB/USD exchange rate
          ◦ A total of 4.3 Mt of concentrate containing 9.3 Moz of gold
            processed from Kyzyl, Nezhda, Mayskoye, and Voro over a period of 23
            years

     • Pre-production capital expenditures are estimated at US$ 431 million  and
       will be entirely funded out of Company's operating cash flows.
     • The plant's design  throughput capacity is  250-300 Ktpa of  concentrate,
       depending on  the  levels of  sulphur  content.  Maximum  sulfide  sulfur
       processing capacity is  48 Ktpa.  This will  complement the  200 Ktpa  of
       concentrate and 30  Ktpa of sulfur  capacity of the  existing Amursk  POX
       facility.
     • The facility will utilise titanium-lined steel autoclave operating at 240
       ˚С and the pressure of 43 bar.
     • Hatch Inc. (Toronto,  Canada) is responsible  for the basic  engineering,
       detailed  engineering,  POX  procurement   support  and  the  supply   of
       custom-made equipment  for  high-pressure and  acidic  processing  areas.
       Polymetal Engineering is responsible for other processing areas,  general
       site layout, and infrastructure.
     • Polymetal project  team  will  include more  than  30  professionals  who
       actively participated in  the successful  execution of  the original  POX
       (2013) and POX debottlenecking (2018) projects.

    

   PROJECT DEVELOPMENT TIMELINE

   Polymetal envisages  the following  conceptual development  timeline for  the
   POX-2 Project:

     • Start of detailed engineering and construction Q2 2019
     • Receipt of all permits Q1 2020
     • Delivery of the autoclave on-site Q3 2020
     • Completion of civil construction works Q3 2021
     • Completion of main equipment installation Q1 2022
     • Completion of external infrastructure Q3 2022
     • Mechanical completion and start of commissioning activities Q4 2022
     • End of commissioning and first production Q3 2023
     • Full ramp-up by end of Q4 2023

   PROCESSING

   The POX-2 site  is immediately adjacent  to the current  Amursk POX  facility
   within the city of Amursk and will share some of the external  infrastructure
   (gas  main,  access  road,  water  main)  with  the  existing  POX  facility.
   Additional electricity supply will be provided via a new dedicated power line
   from the regional 110Kw grid.

   The project will include a new hydrometallurgical area (POX proper), CIL  and
   intensive cyanidation areas, an oxygen plant, an upgrade to the existing  dry
   tailings facility,  reverse osmosis  water  treatment facility,  and  several
   smaller infrastructural facilities (warehouses, maintenance areas, etc.).

   POX-2 is  designed  for  processing  double  refractory  concentrates,  which
   contain micron gold particles encapsulated  in sulfides (pyrites and  arsenic
   pyrites) together with  high concentrations  of organic  carbon. High  carbon
   content drives high sorption activity (preg-robbing) and dictates the use  of
   high-temperature (240˚С) pressure oxidation compared with  medium-temperature
   (200˚С) oxidation utilized at the existing Amursk POX facility.

   Pressure oxidation  (POX)  was  selected  as  the  most  feasible  processing
   technology for double refractory ores. It is able to achieve gold  recoveries
   of 96%  by  utilizing high  temperatures,  elevated pressure  and  oxygen  to
   recover encapsulated  gold,  while  conventional  cyanidation  methods  would
   result in sub-optimal recovery rates of 20-40%. Completed metallurgical tests
   on Kyzyl and Mayskoye high-carbon  concentrates confirm the recovery rate  of
   96%.

   The total  design  capacity  of  the  POX-2  plant  will  be  250-300  Kt  of
   concentrate per annum. The design of the new POX facility enables the Company
   to process feed with different properties without impacting any of the design
   parameters. 

   CAPITAL EXPENDITURE

   Total capital costs for  the construction of the  POX-2 project in  2019-2023
   are estimated  at  US$ 431  million,  and will  be  funded out  of  Company's
   operating cash flows.

                              Capital Cost,
   Category
                               US$ million
                                     
   Engineering                     31
   Processing plant equipment      149
   Construction                    138
   Infrastructure                  56
   Owner's team                     9
   Contingency                     48
   Initial Capital Costs           431

   In 2017-2018, Polymetal spent approximately US$ 26 million on POX-2, of which
   US$ 12 million was for engineering  activities and feasibility study and  US$
   14  million  dedicated  to   pre-manufacturing  engineering  with   equipment
   suppliers. 

   SUSTAINABLE DEVELOPMENT

   The FS incorporates several important design features that will minimise  its
   environmental impact and mitigate related risks:

     • Tailings from the plant will be in the form of dry cake. No  impoundments
       or dam structures will be required.
     • The project will have zero  water discharge off-site. Process water  will
       be fully recycled.
     • The project will have minimal carbon  dioxide discharge and no sulfur  or
       arsenic oxides discharge. 

   The Project  will  boost social  investments  as Polymetal  plans  to  invest
   approximately US$  6  million  into  more than  10  long-term  projects  most
   important to city  residents, as well  as our employees  and their  families.
   This will  include the  renovation and  upgrade of  educational, medical  and
   sports facilities, as  well as the  enhancement of the  Amursk city look  and
   attractiveness. Polymetal also  plans to build  new apartment buildings  that
   will house 100 families.

   POX-2 will create more than 400 permanent jobs and generate approximately US$
   20 million per year in taxes for all levels of government. 

   Enquiries

       Media            Investor Relations
   FTI              Polymetal                    1 ir@polymetalinternational.com
   Consulting
              +44   Eugenia Onuschenko          +44 20 7016 9505 (UK)
   Leonid     20
   Fink       3727  Timofey Kulakov              
              1000
   Viktor           Michael                     +7 812 334 3666 (Russia)
   Pomichal         Vasiliev                   
       Joint
       Corporate         
       Brokers
   Morgan     +44
   Stanley    20
              7425
   Sam        8000
   McLennan
               
   Richard
   Brown            RBC Europe Limited

                    Tristan Lovegrove           +44 20 7653 4000

   Panmure          Marcus Jackson
   Gordon
               
   James
   Stearns    +44
              20
   Atholl     7886
   Tweedie    2500

    

   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

    

    

    

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   ISIN:          JE00B6T5S470
   Category Code: MSCH
   TIDM:          POLY
   Sequence No.:  7427
   EQS News ID:   774197


    
   End of Announcement EQS News Service

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References

   Visible links
   1. mailto:ir@polymetalinternational.com


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