OREANDA-NEWS. June 02, 2014. Polymetal International plc (LSE, MOEX: POLY; ADR: AUCOY) (“Polymetal”, the “Company”) is pleased to announce that it has entered into binding agreements with Sumeru Gold B.V. and Sumeru LLP (together referred to as “Sumeru”) for the acquisition of Altynalmas Gold Ltd (“AAG”), the holding company for the Kyzyl gold project (the “Acquisition”).

The Kyzyl gold project (the “Kyzyl Project”) comprises the Bakyrchik and Bolshevik gold deposits and is located in north-eastern Kazakhstan.

HIGHLIGHTS

The Board of Directors of Polymetal believes that the Kyzyl Project represents an excellent opportunity to expand the Company’s existing reserve base with the addition of high grade gold deposits in Kazakhstan characterised with a long expected mine life and significant exploration upside.

In particular:

Expansion of existing reserves and mine life: The Acquisition will increase Polymetal’s gold equivalent reserves by approximately 50% with a single large high-grade property containing 6.7 Moz gold at 7.5 g/t (JORC), and a life of mine of 20 years based on reserves at Bakyrchik;

Exploration upside: The Kyzyl Project offers further substantial potential of additions to existing reserves, through resource-to-reserve conversion at Bakyrchik from additional Inferred Resources of 2.9 Moz gold at 6.6 g/t and mineralisation not closed at depth, and the exploration of the mineralised potential at adjacent properties which are covered by the Bakyrchik and Bolshevik exploration licences;

Access to infrastructure: The Bakyrchik and Bolshevik gold deposits are located within a traditional mining region with good infrastructure including easy access to power and rail;

Potential optimisation of mining methods: A substantial part of the Kyzyl Project is potentially amenable to conversion from underground mining to conventional open-pit mining;

Processing technology: The Acquisition leverages Polymetal’s core competencies in pressure oxidation processing and refractory gold concentrate trading; and

Core jurisdiction: The Kyzyl Project will strengthen Polymetal’s position in Kazakhstan, a country in which it has successfully operated since 2009.

OVERVIEW OF THE TERMS OF THE ACQUISITION
Polymetal has conditionally agreed to purchase the entire issued share capital of AAG from Sumeru, together with Shareholder Debt (as defined below) owed by AAG to Sumeru. The consideration for the acquisition of AAG and related Shareholder Debt comprises:

an initial consideration of

(i) USD318.5 million in cash; and

(ii) the issue of new Polymetal shares with an aggregate value of USD 300 million, as determined in the binding agreements (the “Consideration Shares”);

deferred additional cash consideration up to an agreed cap up to a maximum of USD 500 million, contingent on certain conditions being met and dependent on the relative dynamics of the gold price and the price of Polymetal’s shares over up to the next seven (7) years. The additional consideration is intended to compensate Sumeru for any negative difference between the market performance of the Consideration Shares and the gold price in the seven-year period following completion of the acquisition. Further details on the terms of the deferred consideration are set out below.

Sumeru has agreed not to dispose of any interest in any of the Consideration Shares during the one-year period commencing on the Completion Date (the “Lock-up Period”) subject to customary terms and exclusions.

Sumeru is entitled to a put option giving it a right to require Polymetal to acquire the Consideration Shares by notice to Polymetal during the one month period immediately following the end of the Lock-up Period (subject to adjustment in certain circumstances) at a price per Consideration Share equal to the Initial Share Price (as defined below).

No representative from Sumeru will be appointed to Polymetal’s board of directors as a result of the acquisition of the Consideration Shares or under the terms of the Agreements.

Polymetal expects to fund the cash element of the initial consideration from its available undrawn facilities currently totalling USD 1.3 billion. Polymetal expects to finance the projected capital expenditure with project finance debt and cash flows generated from its existing operations.

The acquisition of AAG is conditional upon receipt of the required regulatory approvals and fulfilment of other conditions. The acquisition of AAG constitutes a Class 1 transaction under the UK Listing Rules and is therefore also conditional upon the approval of Polymetal shareholders. A circular containing further details of the Acquisition together with a notice convening a General Meeting seeking such approval will be sent to Polymetal shareholders in due course.

Assuming all conditions are satisfied or waived, the Acquisition is expected to complete in Q4 2014.

Polymetal envisages the following development timeline for the Kyzyl Project:

Revised feasibility study with updated reserve estimate: Q4 2015;

Start of construction: Q1 2016; and

First production: 2018, to be confirmed upon completion of the feasibility study.

Further details on the terms of the Acquisition are set out below.

Commenting on the Acquisition, Vitaly Nesis, CEO of Polymetal said:

"The Kyzyl Project fully meets our definition of a suitable acquisition opportunity: a large, high-grade asset with a clear path to production and cash flow generation leveraging Polymetal’s core strengths in selective mining and refractory ore processing. We believe it is an excellent chance to deploy our skills in a long-term project that can generate substantial value for our shareholders”.