Polymetal announced an increase in the ore reserves

Andrey KozhokaruOctober 12, 2017

Following geological studies, Polymetal announced an increase in the ore reserves at the Komar deposit.

On October 11, Polymetal announced an increase in the ore reserves at the Komar deposit located in Kazakhstan. As a result of geological studies, at 1st June 2017 total ore reserves equaled 24m tons, which correspond to the 60% increase. Gold reserves increased by 535k ounces reaching 1.4m ounces with a constant grade at 1.8 g/t. The given increase in the reserves allows extending the life of the Varvara hub mine until 2032 (2029 previously).

The Company plans to transport and process around 2m tons of Komar ore annually at the Varvara processing plant. For 9m2017 the Varvara plant processed 1.4m tons of ore from Komar. Railroad transportation costs for Komar ore is relatively low at around $4.5 per ton. Transportation and subsequent processing of ore at the Varvara plant is more economically sound than building processing plant at Komar. According to the Company’s plan, Komar ore will replace low-grade ore from the Varvara deposit, which will increase the production and lower the costs of the whole Varvara hub.

Our opinion:

An increase in the reserves is the local positive factor of the Komar mine. For 1H2017 share of the Varvara hub in total volume of Polymetal’s production approximated slightly less than 10%. According to our assessment, current improvement in margins and operating indicators of the Varvara hub does not render significant impact on the financial and production results of the whole Company. We keep our Buy recommendation and 12M TP of GBp931 per share unchanged.