Russia’s No. 2 gold miner, and world No. 5 silver miner, Polymetal, has announced that its big new precious metals mine – Kyzyl in north-eastern Kazakhstan – poured its first gold on June 25th a month ahead of schedule. What is more, start-up has been achieved under budget. Polymetal is London Stock Exchange quoted (ticker POLY).
As we noted when writing about the Russian miner a month or so ago, Kyzyl is a key element in the company’s long term production growth strategy and now that it appears to have started up successfully Polymetal can concentrate on the next major project in its production pipeline – the Nezhda mine.
According to Polymetal, Nezhda is Russia’s fourth largest gold property based in the Republic of Sakha (Yakutia) with a resource inventory of 55.9 million tonnes of mineralised material containing 8.9 million ounces of gold equivalent with an average grade of 5.0 g/tonne gold equivalent based on the latest resource estimate.
Currently, the Company envisions the construction of an open-pit mine at Nezhda and a conventional on-site concentrator followed by concentrate processing at the Amursk POX or 3rd-party off-take. This ensures low capital intensity for the project, making it an excellent fit for Polymetal’s core capabilities. Total capital costs for Nezhda are estimated at US$249 million, including $15 million capitalised pre-stripping costs, with approximately $30 million to be invested in 2018 into project design, permitting and exploration.
Polymetal currently has been operating eight producing mines – six in Russia and one each in Kazakhstan and Armenia and has other projects in the pipeline as well as Kyzyl. However it has a policy of only managing two new projects at any given time and the current concentration, now that Kyzyl is in production, will be on de-bottlenecking its state-of-the-art pressure oxidation (POX) facility at Amursk in Russia’s Far East, and can now take the decision to progress Nezhda. Then in the prospective pipeline it has a second POX line which could be installed at Amursk, but won’t take the decision on that until the current POX debottlenecking programme is also seen to be successfully implemented – due to be in early 2019.
At Kyzyl Polymetal has achieved the start-up of the concentrator one quarter ahead of the original schedule that had been announced in 2014, and one month earlier compared with the January 2018 updated plan. Project Capex is expected to be approximately 3% below the original US$325 million budget, inclusive of 62 million tonnes of pre-stripping.
Mining activities at Kyzyl have already reached full design capacity with 315,000 tonnes of ore stockpiled ahead of start-up. The grade control programme demonstrated robust reconciliation with the reserve model with both ore grade and gold contained tracking slightly above plan. Kyzyl is, in today’s terms, a high grade operation with a reserve grade of over 7g/tonne gold. First concentrate deliveries to off-takers are scheduled for the end of July with shipments to the Amursk POX facility expected to commence in September.
The Kyzyl concentrator will now be entering a 3-month ramp-up period, after which it is expected to reach nameplate capacity of 150,000 tonne/month mand recoveries of 86% by October 2018. This year Polymetal plans to produce 80,000 ounces (around 2.5 tonnes) of payable gold at Kyzyl, ramping up production to 280,000 ounces (8.7 tonnes) in 2019 and nameplate capacity of 330,000 ounces (10 tonnes plus) thereafter at a very low AISC of approximately US$ 500-550/ounce.
At Kyzyl, the JORC compliant gold reserve is estimated at 7.3 million ounces at 7.7 g/t of gold. This would support a life-of-mine of 10 years for the open pit followed by further 14 years of underground mining. Additional JORC-compliant gold resources comprise 3.1 million ounces at 6.8 g/t indicating strong potential to further extend operations.
“Polymetal is delighted and proud to successfully complete the largest development project in the company’s history ahead of time and below budget”, said Vitaly Nesis, Group CEO of Polymetal who we interviewed back in April (see: Polymetal CEO, Vitaly Nesis, very bullish on silver) “Significant cash flow and net income contributions from Kyzyl should start in Q4 2018.”
Russia is the world’s third largest producer of gold after China and Australia but is expanding output and aiming for the No. 2 spot. Kazakhstan is currently the world’s 15th largest gold miner and Kyzyl’s output could help move it up a couple of slots by the end of the decade. Its central bank currently buys most of the gold produced by the country’s mines as it aggressively builds its gold reserve.