Polymetal International plc

Q2 2015 production results

Polymetal International plc (LSE, MOEX: POLY; ADR: AUCOY) (together with its subsidiaries - "Polymetal", the "Company", or the "Group") is pleased to announce the Group's production results for the second quarter and six months ended June 30, 2015.

HIGHLIGHTS

·     Polymetal has demonstrated solid operating results in the second quarter of 2015. The Company reported gold equivalent production of 334 Koz matching the results of the second quarter of 2014. Quarterly gold production was 186 Koz, down 5% as compared to Q2 2014 ("year-on-year"), while silver production in the second quarter was 8.9 Moz, up 9% year-on-year.

·     Production for the 1H 2015 was 633 Koz of gold equivalent, down 3% year-on-year. Traditionally, higher production is expected in the second half of the year driven by seasonal de-stockpiling of Mayskoye concentrate accumulated during 1H of the year.

·     Polymetal continued to generate free cash flow (after capital expenditure) in the second quarter. Net debt at 30 June 2015 decreased by US$ 16 million compared to 31 December 2014 to US$ 1,233 million while US$ 139 million of dividends was paid out to shareholders. Free cash flow generation is expected to be even stronger in the second half of the year due to the planned de-stockpiling at Mayskoye and the seasonal reduction of the gap between production and sales.

·     At Kyzyl, the final statutory certification of open-pit reserves has been successfully received which represents a major milestone on the path toward full permitting of the project. Site preparation works have commenced with all major engineering contracts for external infrastructure in place. The feasibility study release is scheduled for October 2015 with construction targeted to commence in Q2 2016.

·     Polymetal deeply regrets to report a fatality at one of our mines in May. The Company is continuing the comprehensive safety review and expects the results of that review in Q3 2015.

·     The Company remains in a strong position to meet its annual production guidance of 1.35 Moz of gold equivalent in 2015, along with its total cash cost guidance of US$ 575 - 625/GE oz and all-in sustaining cash costs of US$ 750-800/GE oz.

"We continue to demonstrate strong operational and financial delivery. It is deeply satisfying to have largely stable production and free cash flow generation against the backdrop of weakening commodity prices", said Vitaly Nesis, Group CEO of Polymetal, commenting on the results.

PRODUCTION BY MINE

Notes:     (1) % changes can be different from zero even when absolute numbers are unchanged because of rounding. Likewise, % changes can be equal to zero when absolute numbers differ due to the same reason. This note applies to all tables in this release.

                (2) Based on 1:60 Ag/Au and 5:1 Cu/Au conversion ratios.

(3) NA = not available.

(4) NM = not material

CONFERENCE CALL AND WEBCAST

Polymetal will hold a conference call and webcast on Tuesday, 14 July, 17:00 Moscow time (15:00 London time).

To participate in the call, please dial:

8 10 8002 041 4011 access code 363612# (free from Russia), or

+44 (0) 20 3043 2439 (free from the UK), or

+1 855 402 7761 (free from the US), or

any of the above numbers (from outside the UK, the US and Russia) or follow the link: http://www.audio-webcast.com/cgi-bin/visitors.ssp?fn=visitor&id=2873

Please be prepared to introduce yourself to the moderator or register.

Webcast replay will be available on Polymetal's website (www.polymetalinternational.com) and at http://www.audio-webcast.com/cgi-bin/visitors.ssp?fn=visitor&id=2873. A recording of the call will be available immediately after the call at +44 (0) 20 3367 9460 (from within the UK), +1 87 7642 3018 (from within the US) and +7 495 745 7948 (from within Russia), access code 295114#, from 6:00 pm Moscow time Tuesday, July 14, till 6:00 pm Moscow time Tuesday, July 21, 2015.

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

DUKAT OPERATIONS

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

Quarterly silver and gold production at Dukat hub increased by 6% and 10%, respectively year-on-year and by 10% and 8% respectively quarter-on-quarter as the grades at the Dukat mine were significantly above the average reserve grades thus fully compensating for the lower-than-average grades experienced in Q1.

Processing volumes at both Dukat and Lunnoye increased as the processing plants benefited from the results of the continuous improvement program.

The amount of ore mined at Dukat underground mine grew 22% year-on-year as mine capacity increased to match the expanded throughput at the Omsukchan concentrator. This was made possible by a significant increase in the amount of underground development.

Recoveries from Dukat ore declined largely as a result of switching from 3^rd-party concentrate sales to in-house concentrate processing (leaching) at Dukat and Lunnoye. The decision to re-direct concentrate flows was made in response to lower silver prices and weaker rouble. The impact of both factors made cost savings from internal processing outweigh revenue losses from 3^rd-party recoveries.

Lunnoye has demonstrated a very strong set of the results, with significantly improved grades due to input of ore from Arylakh underground and related improvement in recoveries.

ALBAZINO-AMURSK

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 completion of downstream processing at the Amursk POX

As Albazino/Amursk is now operating at its full design capacity, the gold production, recoveries, and ore and concentrate processing volumes in the second quarter generally remained stable quarter-on-quarter.

Gold production for the six months was down 5% year-on-year driven by throughput reduction related to the 3-week planned maintenance of the POX plant in April.

Ore mining volumes at the Albazino open-pit decreased by 21% as mining increasingly concentrated on pre-stripping at the new Olga pit. Underground development at the Olga zone continues to grow with the goal to start ore stoping in Q4 2015.

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 internal downstream processing to saleable metal product.

For the first six months, gold production at Mayskoye was fully generated by in-house POX processing of the material delivered in the 2014 navigation season. Concentrate is currently stockpiled in the port of Pevek until the start of the 2015 navigation period in July.

Three off-take contracts with the Chinese processors have been agreed including one long-term (5-year) agreement and the concentrate shipments to China will start in August.

Grade processed decreased to 6.8 g/t. Both reduction in the cut-off grade driven by lower rouble and higher recoveries and higher mining dilution during the thawing season contributed to this dynamics. Grade is expected to improve as the mine becomes drier in the summer and autumn.

OMOLON OPERATIONS

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

At Omolon, gold production decreased by 20% year-on-year while silver production increased 19% as the Kubaka plant was processing ore from Sopka stockpiles, which has a lower gold grade, but a high silver grade.

At Tsokol, underground mining has started following the cessation of open-pit activity. First ore stoping is planned for Q1 2016.

At Dalneye, open-pit mining was completed in the quarter and the mining fleet was moved to Oroch where first 37 Kt of ore were mined.

VORO

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

Gold production at Voro in Q2 2015 decreased by 18% year-on-year to 29.4 Koz driven by the planned decrease in grade and related decline in CIP recoveries.

Heap leach stacking continues at a reduced throughput as mining concentrates on primary ore in the deeper levels of the open pit.

VARVARA

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

At Varvara, gold production in Q2 2015 decreased by 21% driven by lower grade. Throughput at the leaching circuit increased by 23% as the mills used in the flotation circuit continued to be temporarily redirected to process the gold ore in order to compensate the suspension of the circuit.

The copper circuit was restarted on June 1, after positive feedback was received from a European copper concentrate off-taker based on trial product shipped in Q1. Currently the circuit processes low-grade stockpiled copper-gold ore. Mining will be re-directed towards the float feed on a stable basis once a long-term off-take contract is secured.

A trial lot of 3rd-party gold ore will arrive on site shortly with further efforts under way to find external sources of feed.

OKHOTSK OPERATIONS

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

Gold production at Okhotsk operations in Q2 2015 increased by 16% year-on-year while silver production was down 35%. The decrease was mainly driven by the depletion of high-silver ore blocks in the Khakanja open pit.

Gold recoveries were relatively stable quarter-on-quarter and increased meaningfully year-on-year due to the change in the mix of ores processed. Processing of high-grade material from Avlayakan underground mine will start in Q3.

At Khakanja, open pit mining has now been completed. The mining fleet from Ozerny and Khakanja will be re-directed to the Svetloye project.

In 1H 2015 the Company has obtained full set of construction permits for the Svetloye project. Summer navigation started on time, and the construction is progressing on schedule. Mining at Svetloye is on track to start in Q4 2015.

KYZYL PROJECT

In Q2 2015, Polymetal obtained a final statutory certification of the open-pit reserves with Statutory Reserve Committee in Kazakhstan (non-JORC ore reserve estimate and conditions feasibility study). This paves the way for the submission of the statutory feasibility study for construction permitting. Development of the engineering design criteria is now competed. Site preparation works have commenced and all major engineering contracts for external infrastructure (water pipeline, power grid, heat supply, road diversion) have been awarded.

Polymetal is on track to publish the full feasibility study for the project in Q4 2015 and start full-scale construction in Q2 2016.

HEALTH AND SAFETY

Polymetal regrettably reports the loss of our colleague during the second quarter 2015 at the Goltsovoye underground mine, Dukat hub. On May 3, a drift miner was fatally injured when he was replacing a drill bit.

Polymetal attaches great importance to its workers' health and safety. In response to this event, the Company has launched in-depth external audit of safety management systems at all underground operations within the Group.