Polymetal upbeat on initial ore estimates for Nezhda

Polymetal International reported the initial ore reserve estimate for its Nezhda gold property on Monday, in accordance with the JORC Code, confirming that open-pit ore reserves were estimated at 15.5 Mt of ore with an average gold equivalent grade of 4.0 grams per tonne for 2.0 Moz of gold equivalent contained.

The FTSE 250 company said additional mineral resources were estimated at 55.9 Mt of ore with an average gold equivalent grade of 5.0 grams per tonne for 8.9 Moz of gold equivalent contained.

It said the current reserve estimate assumed 11 years of open-pit mining from ore zone 1.

Ore would be processed by a conventional concentrator, the board explained, with further off-site downstream processing or sale of concentrate to third parties.

Polymetal said it expects average annual production of 150 Koz of payable gold in concentrate with all-in sustaining cash costs in the range of between $650 and $710 per ounce of gold equivalent, and total cash costs in the range of $590 to $640 per ounce of gold equivalent.

It said Nezhda was expected to benefit from low capital intensity with “robust” project economics, adding that total capital expenditures were estimated at $249m including pre-stripping costs.

The project's internal rate of return wais expected to be 20% with a net present value of $132m, using a 10% discount rate, $1,200/oz gold price, $16/oz silver price and an RUB-USD exchange rate of 60.

That estimate was only based on the current reserve estimate, Polymetal noted.

It confirmed the production start date was currently projected during the first half of 2022, subject to a positive investment and development decision in the fourth quarter of 2018.

The board noted that such a date would come after the successful ramp-up of Kyzyl and consolidation of 100% ownership in the Nezhda property.

Polymetal said it was now focused on further exploration drilling for the conversion of resources into higher categories, and the preparation of a feasibility study by the end of 2018.

“I am pleased that the initial ore reserve estimate for Nezhda reaffirms its economic viability and justifies Polymetal's approach to developing the asset,” said group CEO Vitaly Nesis.

“With low capital intensity and significant low-cost production, Nezhda retains significant optionality which we will work hard on to incorporate in the development plan before our final investment decision.”