Polymetal buys rest of Nezhda, outlines production plans

29th Nov 2018 07:35

(Sharecast News) - Following the receipt of all necessary Russian regulatory approvals, Polymetal International announced the completion of the acquisition of the remaining 82.3% stake in Nezhda from entities owned by Ivan Kulakov on Thursday.The FTSE 250 company said that was paving the way for the start of construction activities in the first quarter of 2019.It said the acquisition comprised two separate transactions, with 7% acquired for $8m in cash as part of the shareholder agreement announced on 17 July last year, and 75.3% acquired for $144m, of which $10m was payable in cash and $134m by 13,486,579 newly issued Polymetal shares, representing 2.9% of its increased share capital.The total consideration paid for the acquisition of a 100% stake in Nezhda was $185m, which translated into a consideration of $42 per gold equivalent ounce of reserves or $15 per gold equivalent ounce of mineral resources, inclusive of ore reserves.Polymetal said the gross assets of Nezhda were $95m, with a reported pre-tax loss of $5.3m attributed to the assets in 2017.The company had announced the results of the feasibility study for Nezhda, along with an updated reserve and resource estimate, on 12 November, reporting a project net present value of $302m at a gold price of $1,200 per ounce, a 10% discount rate, and a 29% internal rate of return.Gold equivalent mineral resources, inclusive of ore reserves, totalled 12.4 Moz with an average gold equivalent grade of 4.5 g/t.Ore reserves comprised 38 Mt at an average grade of 3.6 g/t gold equivalent for 4.4 Moz of gold equivalent contained. Nezhda would have 25 years of production from 2021 to 2045, Polymetal claimed, which would include 19 years of conventional open-pit mining starting in 2019, followed by 17 years of underground mining from 2029.Total cash costs for the open pit were estimated in the range of $620-670 per ounce of gold equivalent, and all-in sustaining cash costs (AISC) in the range of $700-750 per ounce of gold equivalent.Life of mine total cash costs were expected in the range of $700-750 per ounce of gold equivalent, with an AISC in the range of $800-850 per ounce of gold equivalent.Construction would begin in the first quarter of 2019, with first production expected in the fourth quarter of 2021 and a full ramp-up by the second quarter of 2022.Initial capital expenditures were estimated at $234m."This transaction enables us to start mining at Nezhda immediately and begin construction in March 2019," said Polymetal's group chief executive officer Vitaly Nesis."We expect to deliver first production in 2021 with a full-ramp up in 2022."