REG-Polymetal International plc Polymetal: The Board approves construction of the Veduga gold project
08/11/2021 07:05
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Polymetal International plc (POLY)
Polymetal: The Board approves construction of the Veduga gold project
08-Nov-2021 / 10:00 MSK
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
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Release IMMEDIATE
time LSE, MOEX, AIX: POLY / ADR: AUCOY
Date 08 November 2021
Polymetal International plc
The Board approves construction of the Veduga gold project
The Board of Polymetal has approved a US$ 447 million investment in the
4.0 Moz asset, based on the results of the Preliminary Feasibility Study
("PFS"). First production is expected in Q2 2025.
"The large high-grade reserve base, robust economics, and clear execution
path to significant cash flows underpinned the Board's decision to approve
Veduga", said Vitaly Nesis, Group CEO of Polymetal. "The management is
currently planning a full consolidation of the asset in H1 2022".
HIGHLIGHTS
• The updated Ore Reserve estimate as at 1 February 2021 comprises 31.9
Mt of ore with an average gold grade of 3.9 g/t containing 4.0 Moz of
gold. This is a 50% or 1.3 Moz increase compared to the previous
estimate.
• Open-pit reserves increased by 89% to 1.4 Moz and now represent 35% of
the total Ore Reserves. Underground reserves extended by 35% to 2.6
Moz.
• Mineral Resources additional to Ore Reserves stand at 8.7 Mt of ore
with an average grade of 4.5 g/t containing 1.3 Moz of gold
representing an opportunity for significant conversion into reserves.
• The mine plan assumes 10 years of conventional open-pit mining until
2031 (including pre-production stripping in 2022-2024), and 12 years
of underground mining using a skip shaft for hauling from 2030 to
2041.
• The PFS is based on a 2.0 Mtpa flotation concentrator with
dry-stacking of tailings. Flowsheet development has been supported by
extensive external and in-house metallurgical testing.
• Flotation concentrate will be processed at the future POX-2, while
volumes in excess of the facility's capacity will be sold to 3rd
parties. Veduga could also potentially become a source of feed for the
future Pacific POX project.
• Average LOM annual production is 200 Koz of gold at TCC in the range
of US$ 725-775/oz and AISC in the range of US$ 800-850/oz.
• First production is planned for Q2 2025 with full ramp-up by the end
of Q3 2025.
• The project will materially contribute to Polymetal's carbon emission
reduction targets. The mine will rely on hydro power ensuring
relatively low emission intensity level of 405 kg CO2e/oz GE in
2025-2030 on average (well below the Group's target of 560 kg CO2e/oz
GE by 2030).
• Total project CAPEX is estimated at US$ 447 million (including
capitalised pre-stripping costs) and includes a post-launch skip shaft
and underground infrastructure construction of US$ 77 million in
2027-2029. The extended open pit allows to shift underground
development capital costs beyond the start-up CAPEX.
• The project's IRR is estimated at 19% with NPV of US$ 292 million
(using a 10% discount rate, US$ 1,500/oz gold price, RUB/USD exchange
rate of 72).
• Veduga has obtained the status of a Regional Investment Project, so
should benefit from reduced income tax for the project in 2025-2028
and reduced Mineral Extraction Tax until 2034.
• Polymetal currently owns 59.4% stake in Veduga and holds a call option
to increase its stake to 100% at a pre-determined price giving VTB a
fixed rate of return on initial investment. Following the final
statutory clearance which is expected in Q2 2022, Polymetal plans to
fully consolidate the asset.
Ore Reserves reconciliation
Ore Reserves Category 01.03.2019 01.02.2021 Change, %
Tonnage, Mt 6.7 13.3 +99%
Open pit Au grade, g/t 3.5 3.3 -5%
Au content, Moz 0.8 1.4 +89%
Tonnage, Mt 11.9 18.6 +55%
Underground Au grade, g/t 5.1 4.4 -13%
Au content, Moz 2.0 2.6 +35%
Tonnage, Mt 18.6 31.9 +71%
Total Au grade, g/t 4.5 3.9 -12%
Au content, Moz 2.7 4.0 +50%
Notes: Ore Reserves are reported on a 100% ownership basis in accordance
with the JORC Code (2012) and are estimated using a gold price of US$
1,500/oz. Cut-off grades for open-pit and underground are 0.7 g/t and 1.8
g/t of gold respectively. Ore Reserve estimate as at 01.03.2019 accounts
for depletion in 2019-2020. Open-pit reserves Includes stockpiles.
Discrepancies in calculations are due to rounding.
PROJECT TIMELINE
Polymetal envisages the following conceptual development timeline for the
Veduga gold project:
• Federal Anti-Monoploy Service approval and increase of Polymetal's
share to 100% via call-option execution: Q2 2022
• Start of construction: Q3 2022
• Commissioning: Q1 2025
• First production: Q2 2025
• Full ramp-up: Q3 2025.
CAPITAL EXPENDITURE
Project capital costs in 2022-2029 are estimated at US$ 447 million,
including US$ 77 million spend on a skip shaft and underground
infrastructure construction incurred after the launch of the processing
plant in 2027-2029, and US$ 58 million of capitalized stripping costs.
CAPEX will be fully funded out of free cash flow.
Capital Cost,
Area
US$ million
Processing plant construction 98
Processing plant equipment 69
Infrastructure 94
Mining equipment 52
Capitalized stripping 58
Pre-launch Capital Costs 371
Skip shaft 55
Underground infrastructure 22
Total Project Capital Costs 447
During 2018 1 1 -2021, Polymetal has invested approximately US$ 68
million in Veduga, including exploration, evaluation and engineering
activities, capitalized stripping as well as a significant infrastructure
upgrade.
GEOLOGY
The Veduga deposit is a gold-sulphide mineralised formation and belongs to
the pyrite-arsenopyrite-antimonite mineral type.
Mineralisation is represented by two contiguous sub-vertical ore bodies
with an average true width of 20 and 35 m. Thickness of the ore bodies
varies from 5 to 70 meters. Down dip, the mineralized bodies have been
traced for 150-980 m and are currently open at depth.
MINING
Five open pits will be mined over 10 years starting from 2022 using
conventional drill and blast, load and haul mining methods with electrical
and diesel excavators, and diesel trucks. LOM stripping ratio is 15 t/t
(without pre stripping).
The underground mine will utilise open stope mining followed by cemented
paste backfill, with ore hauling by skip shaft. Further studies will be
undertaken to evaluate alternative ore transportation options that could
reduce the capital spending. Polymetal plans to utilize exclusively
battery electric vehicles throughout the underground mine. Ore mining will
start in 2030 and continue until 2041. This could be potentially extended
by another 10 years following additional exploration to improve the
confidence of the remaining Mineral Resources.
METALLURGY AND PROCESSING
Veduga ore is single refractory. Gold is closely associated with sulphides
in the form of finely dispersed inclusions which determines the need for
fine primary grinding of the ore prior to froth flotation.
The concentrator with a capacity of 2.0 Mtpa incorporates crushing,
grinding, primary flotation and secondary flotation followed by
carbon-in-pulp cyanidation of secondary (free-milling pyrite) concentrate.
Primary (refractory) concentrates will be thickened, filtered, dried and
bagged for off-site processing at Amursk POX-2 and off-take facilities.
Loaded carbon from pyrite concentrate cyanidation will be transported to
Amursk POX-2 for carbon stripping and dore production. Tails will be
thickened, filtered, and dry stacked in tailings storage facility. Part of
tailings will be used for backfill at the underground mine. Gold recovery
to concentrate is expected to average 85%, with a mass pull ratio of 8%.
Average concentrate gold grade expected at 43 g/t is expected. An
additional 96.5% will be recovered to dore.
SUSTAINABLE DEVELOPMENT
Veduga gold project will further reinforce Polymetal's sustainable
development strategy. The environmental footprint of the project is
minimised on the back of several important design features.
Energy is expected to be mostly sourced from Boguchanskaya Hydroelectric
Power Plant ensuring an increase in the Group's share of renewable
electricity. The emission intensity level is expected to stand at an
average of 405 kg CO2e/oz GE in 2025-2030, which is below the Group's
target for carbon footprint reduction (560 kg CO2e/oz GE by 2030).
The processing plant will have a recycled water supply system, with the
share of recycled water at 85%. In order to achieve this level and reduce
freshwater withdrawal, storm and drainage water will be used, driving the
freshwater intensity to 1.22 m3/oz GE, well below the average Group's
current level (2.2 m3/oz GE in 2020).
Tailings from the plant will be stored in the form of dry cake, and no
impoundments or dam structures will be required. The share of dry stack
tailings on the Group level will increase to 18% (2020 - 11%).
Veduga currently employs more than 300 workers, and 627 new jobs will be
created by 2027 for specialists in mining and metal processing. Employees
will be mainly attracted locally from the Krasnoyarsk region. The Project
will boost social development as Polymetal plans to invest approximately
US$ 11.5 million in the social projects until 2028, with the focus on
high-quality professional education and urban infrastructural improvements
in the Krasnoyarsk region (sports, healthcare, etc.).
Veduga project will not disturb the wildlife and land in the area of its
operation. The license area does not interfere with any protected natural
areas, cultural heritage sites, or deer pastures. Archaeological material
and signs of the presence of cultural heritage objects were not found.
Rare or endangered species of animals are absent.
ABOUT VEDUGA
Veduga is a high-grade refractory gold deposit located in a prolific
Northern Yenisey gold belt in the Krasnoyarsk Region, the top gold
producing region of Russia, 520 km north from regional centre of
Kranoyarsk (population of approximately 1.1 mln) and 160 km south from
municipal centre of Severo-Eniseyskiy (population of approximately 6,700).
Veduga comprises 4 license plots with the total area of 18 sq.km. The
property is accessible by an all-year road and has direct access to the
federal power grid.
Veduga was discovered in 1977 and extensively explored between 1988 and
1996. Polymetal has been a partial owner of the property since 2006 with
the original 50% stake acquired through the JV with AngloGold Ashanti. The
new exploration campaign was carried out thereafter. In 2012, mining of
oxide ore started. In 2014, initial NI-compliant Ore Reserves and Mineral
Resources estimate was prepared. In 2016, open-pit mining of sulfide ore
commenced. In October 2018, the Company increased its ownership in Veduga
to 74.3%. In 2019, JORC-compliant reserves grew from 1.3 Moz to 2.8 Moz of
gold. In April 2020, VTB Bank invested US$ 71 million in exchange for a
40.6% stake in Veduga, while Polymetal was granted a call option to
acquire the VTB's stake at a fixed implied rate of return, and thus
increase its share in the asset to 100%.
ORE RESERVE AND MINERAL RESOURCE STATEMENT 2 2
The Ore Reserve and Mineral Resource estimates are reported on a 100%
basis in accordance with the JORC Code (2012) as at 1 February 2021 using
a gold price of US$ 1,500/oz and was prepared by CSA Global Pty Ltd. A
cut-off grade of 0.7 g/t of gold has been applied for the open pit and 1.8
g/t for the underground.
Veduga Ore Reserve estimate as at 1 February 2021
Ore Reserves Tonnage Gold grade, Gold content,
Mt g/t Koz
Proved
Stockpiles 1.1 2.5 87
Open-pit 0.8 3.6 91
Total Proved 1.8 3.0 178
Probable
Open-pit 11.5 3.4 1,242
Underground 18.6 4.4 2,628
Total Probable 30.0 4.0 3,870
Total Proved + Probable 31.9 3.9 4,048
Notes: Discrepancies in calculations are due to rounding.
Veduga additional Mineral Resource estimate as at 1 February 2021
Mineral Resources Tonnage, Gold grade, Gold content,
Mt g/t Koz
Measured
Stockpiles 0.5 0.8 11
Open-pit 0.0 2.1 2
Total Measured 0.5 0.9 13
Indicated
Open-pit 0.4 1.6 21
Underground 1.1 3.3 112
Total Indicated 1.5 2.8 133
Measured + Indicated
Stockpiles 0.5 0.8 11
Open-pit 0.5 1.6 24
Underground 1.1 3.3 112
Total Measured + Indicated 2.0 2.3 146
Inferred
Open-pit 0.1 4.1 15
Underground 6.6 5.2 1,095
Total Inferred 6.7 5.1 1,110
Measured + Indicated + Inferred
Stockpiles 0.5 0.8 11
Open-pit 0.6 2.1 39
Underground 7.7 4.9 1,206
Total Measured + Indicated + Inferred 8.7 4.5 1,256
Notes: Discrepancies in calculations are due to rounding.
COMPETENT PERSONS
The quality assurance/quality control (QAQC) analysis to support the
Mineral Resource estimate was completed by Mr Alexander Sobolev, Principal
Geologist of GeoConsult Group. Alexander assumes Competent Person status
for the data which supports the reported Mineral Resource. Alexander has
the necessary qualifications and relevant experience in the style of
mineralisation under consideration at Veduga to qualify as a Competent
Person under the JORC Code.
The Mineral Resource modelling methodology review was completed by Mr
Dmitry Pertel, Principal Resource Geologist of CSA Global. Dmitry has the
necessary qualifications and relevant experience in the style of
mineralisation under consideration at Veduga to qualify as a Competent
Person under the JORC Code. Mr Dmitry Pertel assumes Competent Person
status for the reported Mineral Resource.
The Ore Reserve review was completed by Mr Mark Laing, Principal Mining
Engineer of CSA Global. Mr Laing has the necessary qualifications and
relevant experience in the style of mineralisation under consideration at
Veduga to qualify as a Competent Person under the JORC Code. Mr Mark Laing
assumes Competent Person status for the reported Ore Reserves.
About Polymetal
Polymetal International plc (together with its subsidiaries - "Polymetal",
the "Company", or the "Group") is a top-10 global gold and silver producer
with assets in Russia and Kazakhstan. The Company combines strong growth
with a robust dividend yield.
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Forward-looking statements
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"forward-looking statements". These forward-looking statements speak only
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forward-looking statements all include matters that are not historical
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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
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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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4 1 Year of consolidation of Veduga in IFRS statements.
5 2 Please see the compliance letter on our 6 website for the full MR
and OR estimate disclosure (including total Mineral Resources).
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ISIN: JE00B6T5S470
Category Code: MSCM
TIDM: POLY
LEI Code: 213800JKJ5HJWYS4GR61
OAM Categories: 3.1. Additional regulated information required to be
disclosed under the laws of a Member State
Sequence No.: 126184
EQS News ID: 1246803
End of Announcement EQS News Service
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