OREANDA-NEWS. September 28, 2010. JSC “Polymetal” (LSE, MICEX, RTS: PMTL) (“Polymetal” or the “Company”) announces that it has entered into a Memorandum of Understanding with Doland Business Limited under which it has agreed to acquire OOO “Rudnik Avlayakan” and OOO “Kirankan” for a consideration of 3.5 million of the Company’s ordinary shares (the “Transaction”). The two legal entites have in aggregate USD5 million of debt; therefore, the enterprise value of the Transaction, based on сlosing price of Polymetal Global Depositary Receipts (“GDRs”) on LSE on Friday, September 17, 2010 (which was USD14.70 per GDR), is approximately USD56 million, reported the press-centre of Polymetal.

The companies to be acquired hold mining licenses for Avlayakan and Kirankan gold and silver deposits as well as exploration licenses for Avlayakan-Kirankan watershed and Maymakan-Kundumi watershed properties (collectively the “AK project”), all located in the Khabarovsk Territory in the Far East of Russia. The four licenses cover the total area of 323 square kilometers.

Avlayakan and Kirankan deposits are situated in close proximity to each other and are linked by a 110-kilometer all-year road to Kiran, a port on the Sea of Okhotsk, located approximately 630 kilometers southwest from Okhotsk, the access port for the Company’s Khakanja mine.

Avlayakan and Kirankan were discovered in late 1970s. 36,687 meters of diamond drilling and 86 thousand cubic meters of trenching have been completed at both properties in 1992-2010. Mineralization at both deposits is mostly of gold-quartz low-sulphidation type with average ore body width varying between 3 and 15 meters. Extensive area and consistency of alteration as well as multiple points of mineralization indicate that the AK project has significant exploration potential.

The results of the metallurgical test program conducted by Irgiredmet (Irkutsk) in relation to Avlayakan indicate that the ore is free-milling with cyanidation recoveries of 98% for gold and 80% for silver.

As part of the due diligence process, Polymetal modeled two out of the four known Avlayakan’s ore zones in accordance with the JORC Code (2004) standards. At a cut-off grade of 7 g/t of gold, the reserves of these zones were estimated to contain 281 Koz of gold equivalent at an average grade of 17 g/t in 0.5 Mt of ore.

The Company believes that mining at Avlayakan can be started in Q1 2011 using equipment from Yurievskoye with high-grade ore (18.5 g/t gold) to be transported to and processed at Khakanja starting from Q4 2011, initially at a rate of 30-50 Ktpa.

Polymetal’s strategic rationale for the proposed Transaction is as follows:

to provide high-grade feed for the Khakanja mill to stabilize gold production at this asset and extend its life-of-mine;

to consolidate land positions around Khakanja leveraging existing presence in the region with a potential to turn the processing plant into Okhotsk regional processing hub; and

to ensure maximum exposure to exploration upside with a potential of a world-class discovery.

“The AK project fits perfectly with Polymetal’s strategy of strengthening our presence in the regions where the Company has producing mines and established infrastructure,” said Vitaly Nesis, CEO of Polymetal.

“I believe we are paying a good price for well-defined high-grade open-pittable resource base with tremendous upside potential, including a fair chance to discover a multi-million ounce deposit able to sustain a stand-alone operation.”