OREANDA-NEWS. JSC “Polymetal” (LSE, MICEX, RTS: PMTL) announces that it has entered into a Memorandum of Understanding with Kinam Magadan Gold Corporation (“Kinam”), a wholly-owned subsidiary of Kinross Gold Corporation, under which Polymetal has agreed to purchase all of the shares held by Kinam (representing a 98.1% interest) in OAO Omolon Gold Mining Company (“Omolon”) for a purchase price of US$15 million, plus a variable royalty on future production from the Kubaka gold mine (“Kubaka”) properties, subject to certain terms and conditions.

Omolon’s assets include full mine infrastructure, a processing plant, and 4 mining licenses in the surrounding area. Kubaka produced 90.8 tons of gold between 1997 and 2005 when it was put on care and maintenance.

According to the company's press service, Polymetal’s strategic rationale for the proposed transaction is as follows:

• Expanding its presence in the east of the Magadan region where significant logistical and human resources synergies can be realized between Kubaka and   Dukat/Lunnoye;

• Acquiring a property with a 850 Ktpa processing plant which can be brought on stream very quickly;

• Increasing the exploration ground holdings in the highly prospective and under-explored region.

The goals the Company sets for Kubaka are:
 
• Expanding the exploration ground holdings and identifying priority targets for detailed exploration in 2008;

• Producing JORC-compliant resource for 1-2 targets in 2009;

• Preparing feasibility study completed with JORC-compliant reserve calculation in 2010;

• Re-starting the mine in 2011 with a run production's rate of 150-250 Koz per year;

The proposed transaction is subject to FAS approval.

“We are very excited at the opportunity to strengthen our position in Magadan and become owners of a world-class asset,” said Vitaly Nesis, CEO of Polymetal. “We expect the revival of Kubaka will be able to generate additional gold production for Polymetal faster and at a fraction of the capital cost that can be expected at a green-field operation.”