Polyus Gold releases its preliminary operating results for the 1H 2010, announces the approval of the Natalka mine construction by the State Expertise Committee of Russia, as well as the successful launch of the Blagodatnoye mine.

OJSC Polyus Gold (RTS, MICEX and LSE – PLZL) today releases its operating results for the first six months of 2010.

In the first six months of 2010 the Group produced 15.6 tonnes (503 k oz) of gold, compared to 14.9 tonnes (477 k oz) in the same period of the previous year.[1] The 5 % growth of production volumes resulted from enhanced capacities of the Titimukhta project launched in 2009, precommissioning at the Blagodatnoye mine and acquisition of operating assets in Kazakhstan in August 2009.

The volume of total rock moved throughout the Polyus Group in the first half of 2010 amounted to 27.3 million cubic meters, compared to 23.3 million cubic meters in the same period of last year.

In the reporting period the Polyus Group mined 11.5 million tonnes of ore, compared to 7.3 million tonnes mined in the first half of 2009. Increased volumes of ore mining were due to the launch of the Titimukhta, pre-commissioning at Blagodatnoye, enhanced ore mining at the Olimpiada mine, and acquisition of the Kazakshtan mines. 

The volume of ore processing during the first six months of 2010 was 9.1 million tonnes as compared to 6.6 million tonnes in the same period of last year. Significant growth of ore processing was related primarily to commencement of operations at the Blagodatnoye mine in a precommissioning mode.

In the first half of 2010 the Polyus Group sold 16.3 tonnes (524 k oz) of gold, compared to 14.9 tonnes (477 k oz) in the first half of 2009.[2] According to preliminary estimates, the Group’s revenue from gold sales in the reporting period amounted to USD 604 million (unaudited), compared to USD 442 million (unaudited) in the same period of the previous year. The 37% growth in revenue resulted from higher realized gold price and increased sales volumes. Weighted-average gold selling price in the first half of 2010 is estimated at USD 1154 per troy ounce compared to USD 926 per ounce in the first half of 2009.[3]

In the reporting period total volume of exploratory drilling amounted to 101.57 thousand meters compared to 71.68 thousand meters in the same period of the previous year. This included 71.12 thousand meters of drilling at the deposits located in the Russian Federation, which is approximately at the level of the first half of 2009. The increase in drilling volumes during the reporting period was mainly due to exploration works carried out in the Republic of Kazakhstan.

Approval of the Natalka mine construction

On August 4, 2010 the Federal State Expertise Committee of Russia (GlavGosExpertiza) issued the positive opinion on the project documentation and engineering survey results for the construction of the Natalka mine.

In June 2010, international audit of the project documentation by SRK Consulting also started.

‘The approval of the Natalka mine construction project is an important step which allows the company to start large-scale construction works and well as begin contracting mining equipment of prolonged manufacturing cycle, to make sure the mining at Natalka begins in 2013’, – stated Polyus CEO Evgueni Ivanov.

The launch of the Blagodatnoye mine

In July 2010 the Polyus Group successfully completed one of the largest projects within the long-term development strategy: the Blagodatnoye mine in the Krasnoyarsk region was commissioned. Construction of the mine took slightly more than 2.5 years. The construction team, as well as the equipment previously engaged in construction of Mill-3 of the Olimpiada mine, were involved in the Blagodatnoye project.    

The designed mill capacity is 6 mtpa. The average gold output is expected at 12.8 tonnes (412 k oz) at designed recovery of 88.6%. The mine is expected to reach its designed capacity in 2011. Total capital expenditures for the project were USD 450 million. In the first half of 2010 main construction and assembling works at the pit and the mill were completed and a 24-MW power plant was launched. In 2010 the Group plans to finalize construction of warehouses, garage-repair shop, diversion facilities and tailing dam in line with the schedule and within the approved budget.

During the precommissioning operations in the first half of 2010 2,302 thousand tonnes of ore were mined and 2,250 thousand tonnes were processed. The volume of refined gold output in the reporting period amounted to 80 k oz.

Blagodatnoye gold deposit is located in the Severo-Eniseysk district of the Krasnoyarsk region 25 km to the north of the Olimpiada mine. Due to proximity of the deposit to the Olimpiada mine the Company has a unique opportunity to use available social and repair infrastructure. Proved and probable reserves (P&P) according to JORC standards equal 9.9 mln oz (306.7 tonnes), the average gold grade is 2.27 g/t.

Commencement of HL production at Akzhal  

In the first half of 2010 exploration works were implemented at the Akzhal deposit in Eastern Kazakhstan. Oxidized ore pit quarrying began, construction of pit roads was underway.

In April 2010 a 0.3-mtpa pilot heap leaching facility was launched to model the technology of oxidized ore processing. The HL facility produces gold-bearing sorbent which is further processed at an in-house plant in Ust-Kamenogorsk (maximum processing capacity up to 5 tonnes of 160 k oz of Dore gold per annum) to produce Dore gold. In April – June 2010 gold production from the ore of the Akzhal deposit amounted to 2.4 k oz.  

Polyus Group’s operating results for the first half of 2010