OREANDA-NEWS. On April 23, 2009 JSC “Polymetal” (LSE, MICEX, RTS: PMTL) (“Polymetal” or the “Company”), announced its production results for the quarter ended March 31, 2009, reported the press-centre of Polymetal.

Gold and silver sales increased more than production growth due to Company’s aggressive efforts to manage its inventory to generate cash flows. Revenues grew by 3% realized prices for both gold and silver declined compared with Q1 2008

Acquisition of Goltsovoye, a high-grade silver deposit in the Magadan region, was completed in January 2009. All permits for Goltsovoye development have been obtained, and underground development and access road upgrade are expected to start in Q2 2009

JORC-Compliant resource estimate for Birkachan and Oroch was released in February 2009 and Sopka Kvartsevaya acquisition was announced in April 2009. The Company believes these events strengthen the investment case for Kubaka mill as the regional processing hub

Albazino-Amursk project is on track to be commissioned on time. Polymetal plans to release results of the updated Feasibility Study along with JORC-Compliant reserve update audited by Snowden Mining Industry Consultants in June 2009

Changes in Management demonstrate Polymetal’s commitment to promoting young energetic professionals from within the Company as part of its long-term strategy

The Company reiterates its 2009 production target of 280-300 Koz of gold and 17-18 Moz of silver

“This is yet another solid quarter demonstrating Polymetal’s ability to deliver solid operating performance from its existing mines,” said Vitaly Nesis, CEO of Polymetal. “As operating assets run smoothly, we are focusing on delivering the growth projects and pursuing M&A opportunities, the trend which underlies the recent senior management changes.”

OPERATING MINES
Dukat
Both gold and silver production at Dukat remained effectively unchanged compared to Q1 2008.

29% decline in waste mined occurred as open pits are being phased out (according to the mine plan, open pit mining at Dukat is expected to cease in 2011). Underground development and mining grew by 15% and 14% respectively due to the Company’s effort to increase productivity of the underground mine to 900Ktpa (Polymetal commissioned underground railway haulage system in Q3 2008).

Expansion of the processing plant is nearing mechanical completion with commissioning expected to start in Q3 2009. Open-pit mining at Nachalnoye-2 (one of the targets at the Dukat Flanks) is planned to commence in Q3 2009 (at a rate of 150Ktpa).  Underground mining at Goltsovoye (the high-grade silver deposit located 84 kilometers from the plant and acquired in Q1 2009) is expected to start in 2010 (at a rate of 150-170Ktpa).  However, the Company’s ability to ramp-up to full 1.5Mtpa processing capacity in 2009-2010 depends on future silver prices.

Lunnoye
In Q1 2009, underground mine at Lunnoye successfully reached design capacity of 150Ktpa; underground development increased 41% Q-on-Q in line with the mine plan.

Grades slightly declined mostly due to mine sequencing at Arylakh, a satellite mine.  Recoveries improved as Lunnoye underground ore appeared to have superior metallurgy.

Khakanja
Waste mining ramped up and ore mining was temporarily reduced as mining was concentrated on pre-stripping at the third pit which is expected to generate first ore in the first half of 2010. Currently, ore is mined from the first pit at Khakanja and from Yurievskoye (Khakanja satellite), although difficult winter-road conditions deferred transportation and processing of higher-grade Yurievskoye ore to Q2 2009.

Khakanja ore metallurgy, changing with depth, lead to slight drop in gold recoveries and significant improvement in silver recoveries.

Voro
A 36% increase in CIP plant throughput drove a 27% increase in gold production as the expansion project was successfully commissioned with full design capacity expected to be achieved in May 2009.

South Voro pit is nearing production with the expected improvement in heap leach grades to materialize in Q3 2009.

Design and permitting at Degtyarskoye (a gold deposit acquired in 2008 from Russian Copper Company) are under way; first ore is expected to be shipped to Voro in Q4 2009.

DEVELOPMENT PROJECTS
Albazino-Amursk
Polymetal is currently working on the update of the Feasibility Study of the project; results, together with an updated reserve statement, audited by Snowden Mining Industry Consultants, are expected to be released in June 2009.

Both Albazino mine and flotation concentrator design is complete; all equipment is contracted with mining fleet to be delivered on site in June.  Waste mining is expected to start in July 2009.
Amursk POX plant basic engineering performed by SNC Lavalin is complete; oxygen plant was contracted in Q1 2009 while the remaining equipment is expected to be contracted by July.

The Company completed deforestation on all construction sites, earthworks are 30% complete, and active construction of concentrator and tailings storage facility is planned to commence in May, when navigation on Amur and Amgun rivers opens.

Kubaka
In February 2009, Polymetal released first JORC-compliant resource estimates at Birkachan and Oroch, totaling 1.6Moz of gold resource. The Company is actively preparing for the large-scale dump leach testing at Birkachan with stacking expected to commence in June 2009.

In April 2009, Polymetal announced acquisition of Sopka Kvartsevaya and Dalniy gold-silver deposits, located approximately 180 kilometers from the Kubaka processing plant. This acquisition, which is expected to close in 2009, demonstrates the Company’s commitment to its strategy of creating regional processing hubs. Specifically, the Kubaka plant is expected to be supplied with high-grade ores from Birkachan and Oroch as well as Sopka and Dalniy ores. The Company is currently preparing development plan for these assets and expects to release results of the Feasibility Study along with JORC-compliant reserve statement in Q1 2010.

MANAGEMENT CHANGES
In response to a significant growth in portfolio of development projects and in anticipation of further potential acquisitions, Polymetal’s management team was strengthened in the following way:

Igor Venatovsky, 62 stepped down as the COO and assumed the position of advisor to the CEO. Mr. Venatovsky is one of Polymetal’s founders and was instrumental in building the Company over the last 10 years. In his new position he will be responsible for coordination of the Company’s interactions with regulatory and oversight bodies as well as for efficient technical knowledge management within the Company.

Vitaly Savchenko, 38 was appointed to the position of Chief Operating Officer (COO) with primary responsibility for Polymetal’s operating mines. Mr. Savchenko graduated from Frunze Polytechnic Institute (Kyrgyzstan). He joined Polymetal in 2003 as Senior Mining Engineer and served as VP, Production Planning since 2005.

Roman Shestakov, 32 was appointed to the newly created position of Executive Vice President (EVP), Project Development and Construction. He will be responsible primarily for Albazino-Amursk and Kubaka projects as well as for any new additions to the development portfolio. Roman joined Polymetal as mining engineer after graduating from the St. Petersburg State Mining Institute in 2002. He subsequently worked as mining manager at Khakanja and VP, Production at Voro.

Pavel Danilin, 32 was appointed EVP, Strategic Development. His area of responsibility includes corporate finance, investor relations, strategic planning,  M&A, and integration of new acquisitions. Pavel joined Polymetal in 2002 as Head of Corporate Finance and returned to the Company after completing an MBA at UC Berkeley in 2007.

These management changes represent a part of Polymetal’s consistent long-term strategy of replacing ageing senior management with competent young professionals from within the Company.