OREANDA-NEWS. July 19, 2012. JSC "Polymetal" (MICEX-RTS: PMTL) (together with its subsidiaries and holding companies - the "Group") announces that the Russian Supreme Arbitration Court made a final ruling on the tax dispute of the Group, and supported the tax authorities, requiring the Group to pay RUB 696 million (approx. USD22 million) in additional taxes (including fines and accrued interest) (further referred to as the "disputed amount"), reported the press-centre of Polymetal.   

On July 10, 2012, the Supreme Arbitration Court (SAC) made a final ruling on the tax dispute between CJSC Magadan Silver, a subsidiary of the Group, and tax authorities in relation to the sale of silver by the Group in 2007 pursuant to certain sale contracts with ABN AMRO Bank (originally entered into with Standard Bank of London). The tax authorities claimed that the Group lowered its tax base by selling silver at 30-45% below the market price. The Group argued that the silver sales to ABN AMRO were part of a US\\$105 million loan agreement signed in December 2004, which included export sales at the then current market price. The decision of the SAC supports the tax authorities requiring the Group to pay the disputed amount, and this ruling is not subject to appeal.

The nature and details of the tax dispute and the history of the litigation since the completion of the field tax audit in 2009 and up to 28 October 2011 were disclosed by the Group in its Prospectus related to its Initial Public Offering of shares on the London Stock Exchange, with subsequent disclosure provided in the Annual Report of the Group for the year ended 31 December 2011. The Group also disclosed the uncertainties surrounding the litigation and the relevant tax law, including a possibility of not being able to ultimately defeat the claim.

In 2011, based on success in defending the case in lower level courts and an assessment of the Group's tax position, the Board of Directors of Polymetal International plc, the Group's parent entity, concluded that the payment of the amounts claimed by the tax authorities was not probable, and accordingly no provision had been created in the financial statements as at 31 December 2011.

The disputed amount (RUB 696 million), and the additional accrued interest charged for the period from the initial tax authorities decision to the actual payment date (approx. RUB 187 million), representing a total of approx. RUB 883 million (USD 27 million) will be reflected as an expense in the financial statements for the six months ended 30 June 2012 and are due to be paid in accordance with the applicable Russian legislation.