OREANDA-NEWS. April 28, 2008. JSC “Polymetal” (LSE, MICEX, RTS: PMTL) (“Polymetal” or the “Company”), announced its production results for the quarter ended March 31, 2008, reported the press-centre of Polymetal.

Growth in gold (8% to 60Koz) and silver (32% to 4,7Moz) production was achieved compared to Q1 2007 due to improving gold grades at Khakanja and increased tonnages at Voro, Dukat, and Lunnoye

Both gold and silver sales lagged production since refineries did not release bullion in the first three decades of January because of scheduled metal accounting procedures. Production and sales are expected to level out throughout the year.

Sharp increase in silver sales occurred as annual export license for this metal (whereas all gold is sold domestically, part of Polymetal’s silver production is shipped to London for sale) was issued by the state earlier than in the previous year. Because of that, as well as elimination of hedge position and overall precious metals price environment, revenues nearly doubled compared to Q1 2007.
 
Acquisition of a 100% stake in Kubaka, an exciting property in the Magadan region, was completed in Q1 2008.

The Company reiterates its 2008 production target of 250-270 Koz of gold and 17-18 Moz of silver as well as mine EBITDA margin target of at least 50%.
 
“We are satisfied with production growth achieved in the first quarter,” said Vitaly Nesis, CEO of Polymetal. “Our company is well positioned to capitalize on unprecedented strength in precious metals prices as our growth strategy will continue to yield results both this year and in the medium term.”

Silver production grew by 41% to 3.5Moz due to elimination of excessive inventory in the gold room (Polymetal reports its production results on the basis of metal Dore or precipitate shipped to refineries) and processing higher volumes of lower-grade ore, which became possible as a result of decreasing cut-off grade in response to higher silver price.

As processing plant expansion is progressing on schedule, the Company is concentrating its effort on increasing productivity of the underground mine to 900Ktpa, which explains both a 30% increase in meters of underground development and a 12% increase in tons mined underground Q-on-Q. A 27% increase in waste mined is attributable to providing access to ore zones 13 and 14, located on the east flank of the deposit, in accordance with the mine plan.

A 22% growth in quarterly throughput is a function of processing plant automation and flash flotation section reaching its design capacity.

Throughout 2008 the Company plans to further increase processing tonnages of ore with silver grades below reserve average (of 543g/t) which, given the currently favorable precious metals prices, is expected to result in better economics.

On the expansion side, SAG mill was successfully tested and is expected to be fully integrated to the production circuit in May. Foundation for the ball mill should be finished in June; mounting of the mill will start immediately with the expected completion in Q3 2008. Other equipment (flotation machines, screens, filter presses) will arrive on site and be commissioned throughout the year.