OREANDA-NEWS. June 23, 2008. JSC “Polymetal” (LSE, MICEX, RTS: PMTL) (“Polymetal” or the “Company”) is pleased to announce the results of a Feasibility Study for Albazino gold project located in the Khabarovsk Territory in the Far East of Russia. The Feasibility Study was prepared by Polymetal Engineering, the Company’s 100% subsidiary. Aspects of the Study were audited by Snowden Mining Industry Consultants Inc. (“Snowden”).

HIGHLIGHTS
• The Feasibility Study demonstrates that Albazino gold project is technically feasible and can be economically developed as an open-pit operation with a 1.5Mtpa conventional flotation plant and a pressure oxidation (“POX”) facility
• Probable Reserves are 2.1 million ounces (approximately 62 tonnes) of gold contained within 15.1 million tonnes at an average grade of 4.3 grams per tonne (estimated using gold price of US\\$600/oz and a cut-off grade of 1.25g/t)
• Annual gold production during 10.5 years of mine life will range from 16Koz (0.5 t) to 255Koz (7.9 t)
• The total pre-production capital cost is estimated at US\\$219 million (VAT excluded) to be spent during 2008-2010. Average total cash costs are estimated at US\\$370/oz of gold
• Following completion of permitting procedures, construction works are scheduled to be launched in 2008 and completed in 2010
• Polymetal reiterates its target to receive first gold pour in late 2010 and reach full mining and processing capacity by the end of 2011
“We are satisfied with the results of the Feasibility Study and its audit by Snowden demonstrating viability of our ambitious growth plans,” said Vitaly Nesis, CEO of Polymetal. “Albazino is the highest-grade new open-pit gold project in Russia and is number-one priority for Polymetal’s development pipeline.”

GEOGRAPHY
Albazino is located in Polina Osipenko district of the Khabarovsk Territory, in a remote area covered with taiga forest. Infrastructure is limited. The relief of the project area is moderate to steep, with 15° to 35° slopes and altitudes ranging from 350 to 770 meters above sea level. The nearest settlement, Kherpuchi, is located 108 kilometers east from the project area and is connected with Albazino by a year-round road. The second closest settlement, Oglongi, is located 8 kilometers from Kherpuchi on the bank of Amgun River, connecting Oglongi with the ports of Nikolaevsk-on-Amur (approximately 170 km) and Amursk (approximately 570 km).

GEOLOGY AND RESOURCES
Gold mineralization at Albazino is of the low-sulphide, gold-pyrite-arsenopyrite type and is associated with dacite dykes that crosscut Jurassic sandstones. The dykes strike northwest and dip moderately at 30° to 50° to the northeast. Mineralization is not confined to the dykes and may extend up to 20 meters into the host sandstone wallrock.
Gold was first discovered in the area in 1955 during prospecting activities; exploration work on site commenced in 1990 and was suspended in 2002. During this period, 9,350 meters of trenching and 17,056 meters of core drilling have been completed. Polymetal purchased the project from the Far East Resources Company in July 2006 for US\\$7 million. During Q4 2006 — Q1 2008, Polymetal completed additional 24,138 meters of drilling.

The other input parameters used by Polymetal Engineering for pit optimization are the following: base mining cost — US\\$1/tonne, processing cost — US\\$30.9/tonne, gold recovery — 82%, discount rate — 8%.
The Anfisa open pit (providing more than 95% of total Ore Reserves) has been designed with a single haulage ramp and will be mined in four pushbacks with a minimum mining width of 41 meters. The ultimate pit depth will reach approximately 210 meters. Pit slope angles vary between 41° and 50° and the waste dumps have been designed with slope angles of 21° and 26°. The mining production schedule has a vertical mining rate limit of 40 vertical meters per annum. The strip ratio will average 6.2 t/t (excluding pre-stripping).
A truck and shovel mining will be conducted by conventional hydraulic equipment produced by reputable international manufacturers. The choice of the mining fleet has been characterized by Snowden as appropriate.

METALLURGY AND PROCESSING
Albazino ore is refractory, with the majority of gold intimately associated with arsenopyrite and pyrite in microscopic and sub-microscopic form. As such, it is not amenable to recovery by simple cyanidation. Polymetal considered the recognized processes available for treating refractory ores, such as autoclaving, roasting, and bio-oxidation, which would liberate the gold and render it recoverable by conventional cyanidation, and selected autoclaving as the preferred process option.

Polymetal has made a decision to process the ore in Albazino at the mine site to produce a flotation concentrate. The flotation concentrate will be filtered and dried, and then shipped by road and barge to Amursk where the POX and gold recovery section will be constructed. Road transportation will be year-round, but the barging operation will be restricted to a six month window when the river is ice-free.
The run of mine ore will be fed to the primary jaw crusher and reduced to -250 mm. The crushed ore will be fed to a split stockpile, each side of which feeds a grind float circuit. Both grind float circuits are identical, each comprising a 1,150 kW semi-autogenous grind (SAG) mill, an 800 kW primary ball mill and primary flotation section, followed by a 550 kW secondary grinding and secondary flotation section.
Flotation tailings storage facility will be of valley-fill type with the impoundment dam reaching the maximum height of 30 meters.

The POX circuit comprises the following steps: re-pulping the incoming concentrate; pre-acidification and pre-oxidation of the concentrate slurry using recycled acidic liquors from the counter current wash circuit; thickening of the pre-acidified feed and pre-heat with an indirect heat exchange system; oxidizing the slurry in a five compartment autoclave with a two hour residence time; counter current washing of the autoclave discharge slurry with a four to one wash ratio. The acid liquors from the wash circuit are partially recycled to pre-acidify the incoming concentrate feed and partially sent to a neutralization circuit before being recycled to the counter current decantation wash thickeners.
Neutralized slurry will report to conventional CIL circuit followed by carbon desorption, electrowinning, and Dore smelting. CIL tailings will be treated by INCO process to destroy cyanide, filtered and dry-stacked in a storage facility.

The bench scale autoclaving test work, recently carried out at SGS Lakefield in Canada, has achieved CIL gold leach recoveries from oxidized concentrate as high as 96%. An extended pilot plant run achieved a cyanide leach gold recovery of 95% by CIL treatment of the POX discharge.

INFRASTRUCTURE
Albazino on-site infrastructure will include diesel-powered generators with a total installed capacity of 12.8Mw, fuel depot of 5,000 cubic meters, man-camp, and maintenance facilities. In addition, 15,000 cubic meters fuel depot at Oglongi river port will be built. The road from Kherpuchi to Albazino will also be upgraded as part of the project.

Amursk was selected as a POX facility site due to availability of stable and highly qualified labor force, excellent transport infrastructure including railroad, motorways, and a river port, and grid power (installed capacity of the local coal and gas power plant is 260Mw only half of which is used during the peak hours). Polymetal has already secured land plots in Amursk for concentrate overload warehouse and POX facility and signed long-term land lease agreement with Amursk municipality.

PROJECT ECONOMICS
The total pre-production capital cost is estimated at US\\$219 million (VAT excluded) including 11% contingency.

Sensitivity analysis was performed on gold price, recovery, operation costs, and capital expenditures and confirmed the project viability over the whole sensitivity range.

SUSTAINABLE DEVELOPMENT
The independent and accredited Russian environmental consultancies to Polymetal undertook a comprehensive assessment of the socio-environmental impact of the Albazino and Amursk operations along with the gold concentrate shipping options to comply with the Russian and International environmental regulations and best industry standards.

Public hearings for Albazino development and the Amursk POX plant construction held in 2007 demonstrated strong support for the projects in local communities. The social partnership agreements supporting a number of important social projects were entered into between Polymetal and Polina Osipenko and Amursk municipalities in 2007.

During the project life approximately 850 permanent direct jobs will be created for local residents supported by much higher number of indirect jobs in the construction, energy, transportation, and service industries resulting in increased local corporate and personal taxes.

TIMELINE
The project’s progress was reviewed by the Company’s Board of directors on June 16, 2008.
The documents necessary for putting statutory mineral reserves on the state balance are being prepared. Statutory reserve confirmation, which is necessary for the project’s approval by the state, is expected to be issued by the State Reserve Commission (‘GKZ’) in the Q4 2008. All permitting procedures should be completed by Q1 2009.

UPSIDE POTENTIAL
Polymetal is continuing its exploration effort on site targeting to increase Albazino resource base to at least 3Moz (93 tonnes) of gold by the end of 2008. It is planned to drill more than 30,000 meters in 2008, of which 9,257 meters have already been drilled during the first quarter mostly for infill drilling aimed to transfer a substantial portion of resource from ‘Indicated’ to ‘Measured’ category for reporting in accordance with the JORC Code (2004).
Apart from Anfisa and Olga, there are four more ore zones identified within the license area; drilling at three of which is expected to commence in the second half of 2008. Polymetal is planning to release the next update on Albazino resource in December 2008.

Polymetal views the Amursk POX facility as a potential processing hub for refractory concentrates from across the Far East of Russia hosting a number of refractory gold deposits which are not being developed due to the absence of viable processing technology.
Detailed design of both Albazino concentrator and Amursk POX facility is being performed with a view to be able to double processing capacity.
“Albazino/Amursk project is capitalizing not only on the known high-grade gold reserve, but also on tremendous exploration potential of the deposit and long-term need for refractory processing facilities in the Russian Far East,” said Vitaly Nesis, CEO of Polymetal.
Polymetal will provide regular updates on the project’s progress.