OREANDA-NEWS. On January 28, 2007 JSC “Polymetal” (LSE, MICEX, RTS: PMTL) (“Polymetal” or the “Company”), announced its production results for the quarter and the full year ended December 31, 2007, reported the press-centre of Polymetal.

HIGHLIGHTS
Annual gold production declined 5% to 242Koz, silver production declined 8% to 15,9Moz due to planned decrease in grades, partially compensated by increase in annual throughput by 8% and improved recoveries. The production results are in line with guidance first provided in April 2007 (230-250Koz of gold and 16-18Moz of silver) and narrowed down in October 2007 (240-245Koz of gold and 16-16.5Moz of silver)

Sales amounted to 235Koz of gold and 16Moz of silver (1,4Moz of which were bought on the market to be delivered under the hedging agreements), 2007 EBITDA is expected at approximately US$85 million

Due to elimination of hedge position, Polymetal is now fully exposed to price upside in both gold and silver. 2007 deliveries under the hedging agreements amounted to 13,9Moz of silver (0,6Moz of which will be recorded as sales in 2008 since this metal was delivered to London in December 2007 but accepted at JP Morgan’s vault on January 2, 2008) and negatively impacted 2007 EBITDA by US$70-75million

In 2007, Polymetal completed three JORC-compliant resource audits: at Galka, Nachalnoye-2, and Albazino, continued to deliver timely implementation of its three mid-term growth projects: Dukat expansion, Voro Expansion, and Albazino, and agreed to purchase Kubaka, an exciting project in Magadan, one of the Company’s key regions. The Kubaka transaction was closed on January 25, 2008

In 2008, Polymetal targets to produce 250-270 Koz of gold and 17-18 Moz of silver, achieve mine EBITDA margin of 50%, and provide further reserve and resource growth, mostly in the regions where it currently operates

“2007 marked the low point for our company in terms of both production levels and financial results,” said Vitaly Nesis, CEO of Polymetal. “However, our strong and realistic pipeline of growth projects as well as recently achieved hedge-free status should ensure our profits and cash flows increase significantly in 2008 and thereafter.”

OPERATING MINES
Dukat
The Company reports its production results on the basis of metal Dore or precipitate shipped to refineries, and FY 2007 numbers do not include 0,6Moz of silver increase in the gold room not shipped to refineries as at December 31, 2007, which explains a reported decline in Q4 2007 silver production in spite of improved throughput and grades.

In Q4 2007, silver grades in processed ore increased significantly to 538 g/t and approached the average reserve level of 543 g/t. Given higher silver prices on the market, Polymetal currently reviews its cut-off grade policy and may opt for processing higher tonnages with lower grades after the first stage of mill expansion is complete (expected in Q2 2008) and without waiting for start of mining at the Dukat Flanks.

Dukat expansion project is progressing on schedule and expected to be commissioned in Q4 2008.

Lunnoye
In Q4 2007, the bulk of feed for Lunnoye processing plant came from Arylakh (Lunnoye satellite), which explains higher silver and lower gold grades in the processed ore. As the Company is continuing to mine high silver grade ore at Arylakh, this situation will persist through the end of 2008.

In 2007, Lunnoye processing plant delivered a record annual throughput of 286Ktons of ore, an 1% increase to 2006.

As underground meters at Lunnoye increase consistently (87% Q-on-Q and 196% Y-on-Y), underground mine development is on track to have first stopes in production in Q3 2008.

Khakanja
At Khakanja, grades started to pick up in Q4 2007 compared to previous quarters as first ore from the second pit was mined. Further improvement in grades is expected throughout 2008.
In 2007, recoveries of gold increased to 94% from 92% in 2006 due to continuous effort on plant automation as well as filtration circuit and reagent optimization.

Yurievskoye (Khakanja satellite) mine construction and pre-stripping was completed in Q4 2007, first ore was mined and processed in January 2008.

Voro
At Voro, CIP plant expansion project goes on as planned. SAG mill is delivered on site and will be commissioned in Q1 2008; all other equipment was contracted in 2007.

Throughout the year, comprehensive grade control program helped to improve grades of primary ore mined and processed (by 7% to 6,3 g/t from 5,9 g/t in 2006) in spite of significant throughput increase (by 16% from 413 Kt in 2006 to 478 Kt) as CIP plant continued to ramp up.

DEVELOPMENT PROJECTS
Albazino
In December 2007, Polymetal secured land plots in Amursk for concentrate overload warehouse and POX plant and signed long-term land lease agreement with Amursk municipality. In the same month, JORC-compliant resource audit was successfully completed confirming 2,2Moz of gold resource at 5,3 g/t.

Polymetal targets to produce feasibility study and reserve calculation in 1H 2008, increase Albazino resource base to 3Moz of gold by the end of 2008, begin construction of Albazino concentrator and Amursk POX plant in 2009, and generate first gold in Q4 2010.