OREANDA-NEWS. On July 28, 2009 JSC "Polymetal" (LSE, MICEX, RTS: PMTL) ("Polymetal" or the "Company") announced its production results for the quarter and six months ended June 30, 2009, reported the press-centre of Polymetal.

Quarterly gold production decreased 11% compared to Q2 2008 due to lower grades at Dukat and Khakanja. The Company expects a meaningful improvement in Q3 2008 due to higher heap leach grades at Voro and increased throughput at Dukat processing plant

Silver output increased 2% compared to Q2 2008 due to higher head grades at Lunnoye and Khakanja. Further increases in production in the second half of the year are expected due to commissioning of the expanded Dukat processing plant

Voro mill expansion project successfully completed, with the CIP plant now operating at its full design capacity of 950Ktpa

Albazino-Amursk project construction continues on schedule. Updated Feasibility Study and the JORC-Compliant reserve update audited by Snowden Mining Industry Consultants was released in July 2009

Mayskoye acquisition was announced in April 2009. Polymetal believes this transaction validates the investment case for Amursk POX facility as the processing hub for refractory gold concentrates from across the Far East of Russia

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

"We are satisfied with another solid quarter in terms of operating performance," said Vitaly Nesis, CEO of Polymetal. "With the Voro mill expansion completed and Dukat mill expansion nearing commissioning we believe production in the second half of the year will allow us to meet our targets."

OPERATING MINES
Underground mining volumes continued to increase, as the ramp-up towards 900Ktpa underground operation remains on track. Total ore mined underground increased 24% from Q2 2008. Underground ore is characterized by lower gold and higher silver grades.

Expansion of the processing plant is nearing mechanical completion with commissioning expected to start in Q3 2009. Mill throughput is expected to be 1,200 Kt in 2009, with design throughput of 1,500Ktpa to be achieved in 2010. Construction activities in the Q2 necessitated some reduction in mill throughput as new piping and ducting were installed.

Closing of the Goltsovoye silver deposit transaction from Ovoca Gold Plc was announced in January 2009. Polymetal is currently undertaking underground development works and access road upgrade at the site. An internal feasibility study is being prepared by Polymetal Engineering with expected completion in Q1 2010. The start of the mining operations is on track for Q2 2010, with the Goltsovoye ore to be used to supply the Dukat processing plant.

Production has increased significantly compared to Q2 2008 (22% for gold and 35% for silver) due to higher mill throughput volume as well as mining of the satellite Arylakh ore body, characterized by higher silver grades. This is expected to continue into H2 2009.

In line with the mining plan, head grades were down due to lower gold grades at depth at the Khakanja pit 1. High-grade Yurievskoye ore continues to be stockpiled with the processing expected to start in Q1 2010 after the winter road becomes operational.

Higher silver recoveries are due to changing nature of Khakanja ore at depth. Silver production is expected to continue increasing as more ore is mined from deep levels of the pit.

Waste stripping has continued at pit 3, where ore mining is expected to start towards the end of Q4 2009.

Following the completion of the Voro CIP plant expansion, full design capacity has been reached in May 2009. This has resulted in a 38% increase in primary ore throughput in Q2 2008. Primary head grades were down as lower-grade stockpiles were used during the commissioning and ramp-up. Lower recoveries also can be traced to start-up procedures.

Increase in oxide ore grades (up 22% from previous year) is expected to continue as mining in the higher grade South Voro pit has commenced.

Design work at the Degtyarskoye deposit acquired in August 2008 has been completed, with mining scheduled to start in September 2009.

DEVELOPMENT PROJECTS
Albazino/Amursk
In early July 2009, Polymetal announced the results of a Feasibility Study update and audit completed by Snowden Mining Industry Consultants ("Snowden"). The audit showed the mine plan and schedule are achievable and consistent with the information provided in all areas of the study.

Exploration is continuing on site with the purpose to further expand its resource base. Several exploration targets have been identified in the immediate region of the two main ore zones, Anfisa and Olga, which themselves are not fully defined by drilling. It is planned to drill more than 26,000 meters in 2009 (with approximately 14,000 meters already drilled in H1 2009). The drilling in H2 is to concentrate on the Olga zone, with drilling at depth as well as at the extensions of the orebody.

The construction work is now in full swing. Earthworks are 80% complete. Laying of the foundation for the Albazino processing plant is set to start in Q3 2009. Stage I of the mining camp is expected to be completed in Q3 2009. Waste stripping for the open pit is expected to start in September.

Basic design of the Amursk POX facility has been completed by SNC Lavalin with the autoclave and oxygen plant placed on order. Polymetal has previously stated it view of the Amursk POX facility as a potential processing hub for refractory concentrates from across the Far East of Russia. Recent announcement of Mayskoye gold deposit acquisition validates this view. Mayskoye is a refractory gold deposit with resources of over 7 million ounces. More announcements on the development plans at Mayskoye will be made following the expected regulatory approval of the transaction in Q4 2009.

Omolon Regional Hub
Omolon processing hub consists of the Kubaka processing plant, Birkachan, Oroch, Sopka Kvartsevaya and Dalny deposits, all acquired during the last two years. Polymetal intends to process all the high grade ores from these deposits at the Kubaka plant, thus saving money on stand-alone plants construction and substantially improving overall project economics. Numerous highly prospective epithermal Au-Ag ore occurrences in the North-East Magadan region present Polymetal with more potential ore sources for the hub.

Extensive exploration program for the Oroch deposit is to begin in August 2009. Substantial exploration potential exists at the deposit with several known ore zones which have so far not been explored in detail.

Additionally, Polymetal is currently undertaking bulk-scale testing of the low-grade Birkachan ore. The results of the test are expected in November 2009 and will be included in an internal JORC-compliant reserve report and detailed development plan for all the assets that make up the Omolon Regional Hub. Polymetal expects to release the report in Q1 2010.