Polymetal eyes investments in junior gold miners

Miner Polymetal International increased its gold equivalent reserves 15% in 2018 and said it may invest in junior exploration companies as well as its own near-term and greenfield projects.

The Russia- and Kazakhstan-focused FTSE 250 group completed 350km of drilling last year, upping its total mineral resources 44% to 26.3m ounces of measured, indicated and inferred gold equivalent, with proved and probable ore reserves up 15% to 24moz.

Within the total, gold reserves were increased 21% to 22.3moz on broadly flat grades of 3.8 grammes per tonne, while silver slipped 15% to 135moz. Copper reserves fell 40% to 49,100 tonnes and zinc by 79% to 18,100 tonnes.

Across the company the average reserve grade was little moved at 0.05 grammes per tonne, while the average for mineral resources improved 8% to 5.1g/t.

The company continued to use conservative price assumptions of $1,200/oz for gold and lowered the silver price from $16/oz to $15/oz.

Developments at the Mayskoye mine in Chukotka and the completion of a revised estimate at Nezhda in Yakutia were the main the drivers of these upgrades, which had previously been flagged to the market, along with the new Prognoz project in Yakutia and additions at the flagship Kyzyl project in Kazakhstan.

Looking forward to 2019 the company said it will "continue to invest in both near-mine and green-field exploration projects", implementing new exploration techniques such as airborne geophysics and 2-D seismics.

“The company is also evaluating the benefits of investing in junior explorers through strategic cooperation agreements,” it added.

Analyst Yuen Low at Shore Capital said the pleasing aspect of the upgrades was that they were made with a flat gold price and lower silver prices, "demonstrating these are strong results from an impressively large 350km of drilling in 2018".

"Replacing or adding reserves is a key element for maintaining a premium valuation in precious metal companies in our view so we think today’s results are a clear positive," he said, adding that the results also highlight the depth of the project pipeline should enable the company to continue to deliver high return ounce growth for the group through the precious metal cycle, supporting strong returns.