Nezhda

Key facts


Location	North-east Yakutia, Russia
Ownership	100%
Ore Reserves (JORC)	5.9 Moz GE at 3.7 g/t average grade
Mineral Resources (JORC)	8.1 Moz GE at 5.1 g/t average grade
Mining	Open-pit +underground
Processing	Flotation/Gravity concentration + off-take/ Amursk POX
Annual production	155-180 GE Koz
Production start date	Q4 2021
Life of mine	2045

Overview

Nezhda is Russia’s fourth largest gold property based in the Republic of Sakha (Yakutia). Mineral Resources (inclusive of Ore Reserves) comprise of 8.1 Moz of gold equivalent («GE») with an average GE grade of 5.1 g/t. The estimate of Proved and Probable Ore Reserves contains 4.4 Moz of GE (an average grade of 3.6 g/t GE).

The Company envisions the construction of an open-pit mine and a conventional on-site concentrator followed by concentrate processing at the Amursk POX or 3rd-party off-take. This ensures low capital intensity for the project, making it an excellent fit for Polymetal’s core capabilities.

Total capital costs for Nezhda in 2019-2021 are estimated at US$ 234 million, which will be funded out of free cash flow.

2019 project update

All main and auxiliary equipment contracted
Statutory design documentation submitted for approval to the Main Department of State Expertise
Construction and installation works at the concentrator, crusher and cake storage proceed according to plan
Mining activities proceed on schedule — interpit roads construction at pits 1 and 2 completed
Camp and storages construction completed
Upgrade of the road from the Kolyma federal highway to the mine site completed

Have a look at кey project milestones.

Location History Geology and Mineralisation Reserves and Resources Operations Project development timeline

Nezhda is the fourth largest gold deposit in Russia, located in northeast Yakutia in the Tompon municipal district, approximately 480 km east from the city of Yakutsk (population of 350,000). The property is remote with access by an all-season unpaved road and no grid connection. The nearest federal highway is 110 km away from the deposit by all-year unpaved road. The highway provides direct access to the Khandyga river port (170 km) and the Nizhniy Bestiakh railway spur (540 km). The climate is characterized by long severe winters and short hot summers. The relief is moderately mountainous with relative altitudes above valley floors not exceeding 600 m.

The Nezhda gold deposit was discovered in 1951 during the Allakh-Yunskaya geological exploration expedition. From 1959, the deposit was subject to several exploration and evaluation initiatives resulting in newly identified ore zones. In 1975, a 180 Kt per annum underground mine and concentrator was commissioned at Nezhda with over 2 Mt of ore mined and processed before the operation was placed on care and maintenance in 2005. Polyus acquired the asset in 2006, subsequently undertaking an extensive exploration program and completing several technical studies.

Polymetal first entered into the joint venture for the property in 2015, acquiring a 15.3% stake in the South-Verkhoyansk Mining Company («SVMC») which owns the mining and exploration license for the property. In July 2017, the company has agreed to increase its stake to 24.7% with a call option to buy out the remaining 75.3% in 2018, subject to certain conditions. In 2018, after the Board approved the start of project construction, Polymetal consolidated 100% interest in Nezhda.

The deposit is composed of large mineralised zones, representing areas of intense brecciation comprised of crushed and sheared, hydrothermally altered, sedimentary rocks that have been variably enriched in quartz. The Nezhda mineralisation is double refractory due to the encapsulation of fine gold particles within sulphide minerals and significant presence of preg-robbing carbonaceous material.

The Nezhda Ore Reserve estimate is reported in accordance with the JORC Code (2012) as at 1 January 2020.

The estimate has been updated with 217 additional drill holes (39 km) and is based on data from a total 64,708 m of diamond drilling completed by Polymetal between 2015 and 2018 in addition to the 339,392 m of drilling completed by previous owners. Two hundred and ninety-four mineralised intersections were identified based on fire assay results.

Mineral Resources for the open pit were estimated up to a depth of 250 m from the surface, with the underground portion estimated up to a depth of 440 m from the surface.

The largest mineralised structure is ore zone 1 («OZ 1») which has a strike length of 4,900 m and a vertical extent of over 1,800 m and comprises approximately 70% of currently estimated GE resources at Nezhda. For OZ 1, top cutting at 80 g/t gold was applied to reduce outlier grade influence on local estimation. Another first-priority mining area is Ore Zone (OZ) 56.

Nezhda Ore Reserves estimate as at 1 January 2020

Ore Reserves	Tonnage	Grade			Content
	Mt	Au, g/t	Ag, g/t	GE, g/t	Au, Moz	Ag, Moz	GE, Moz
Open-pit	10.4	3.5	22.0	3.8	1.2	7.2	1.3
Underground	1.4	4.5	9.0	4.6	0.2	0.4	0.2
Total Proved	11.7	3.6	20.0	3.9	1.4	7.6	1.5

Open-pit	17.8	3.2	13.0	3.3	1.8	7.5	1.9
Underground	8.5	3.8	13.0	3.9	1.0	3.5	1.1
Total Probable	26.3	3.4	13.0	3.5	2.9	11.0	3.0

Open-pit	28.1	3.3	16.0	3.5	3.0	14.7	3.1
Underground	9.9	3.9	12.0	4.0	1.2	3.9	1.3
Total Proved + Probable	38.0	3.4	15.0	3.6	4.2	18.6	4.4

Notes: Ore Reserves were estimated as at 01.04.2018 with the following assumptions: Au=US$ 1,200/oz, Ag = US$ 16/oz, COG for the open-pit GE =1.2 g/t, for the underground GE = 2.8 g/t. Ore Reserves are reported in accordance with JORC Code (2012). Discrepancies in calculations are due to rounding. GE — Gold equivalent was calculated using conversion factor 95 for silver (kAg). Conversion factor for silver to gold equivalent was calculated using the following formula: kAg= ((Au Price/31.1035 — (Au Price/31.1035-Au Refinery cost) *(Taxes Au) /100 — (Au Refinery cost Au)) *(Au Recovery) / ((Ag Price/31.1035 — (Ag Price/31.1035-Ag Refinery cost) *(Taxes Ag) /100 — (Ag Refinery cost)) *(Ag Recovery)) where, Taxes — mining taxes; Recovery — complete recovery from ore to refined metal. Gold equivalent (g/t) was calculated using the following formula: GE = CAu + CAg / kAg where, CAu — in-situ gold grade, g/t, CAg — in-situ silver grade, g/t.

Nezhda Additional Mineral Resources as at 1 April 2018

Additional Mineral Resources	Tonnage	Grade			Content
	Mt	Au, g/t	Ag, g/t	GE, g/t	Au, Moz	Ag, Moz	GE, Moz
Measured
Underground	0.2	4.0	9.0	4.1	0.0	0.1	0.0
Total Measured	0.2	4.0	9.0	4.1	0.0	0.1	0.0

Indicated
Underground	2.8	3.7	16.0	3.9	0.3	1.4	0.3
Total Indicated	2.8	3.7	16.0	3.9	0.3	1.4	0.3

Measured + Indicated
Underground	3.0	3.7	15.0	3.9	0.4	1.5	0.4
Total Measured+Indicated	3.0	3.7	15.0	3.9	0.4	1.5	0.4

Inferred
Open-pit	2.3	2.2	8.0	2.3	0.2	0.6	0.2
Underground	44.1	5.2	9.0	5.3	7.4	13.1	7.5
Total Inferred	46.4	5.1	9.0	5.2	7.6	13.7	7.7

Measured + Indicated + Inferred
Open-pit	2.3	2.2	8.0	2.3	0.2	0.6	0.2
Underground	47.1	5.1	10.0	5.2	7.7	14.6	7.9
Total Measured + Indicated + Inferred	49.4	5.0	10.0	5.1	7.9	15.1	8.1

Notes: Measured and Indicated Mineral Resources are additional to Ore Reserves. Inferred Mineral Resources are by definition always additional to Ore Reserves. Cut-off grades of 1.2 g/t and 2.8 g/t gold equivalent (GE) for the open pit and underground mining methods, respectively. Due to the effects of rounding, the sum of individual values will not necessarily equal the total. All Mineral Resources that were converted to Ore Reserves were excluded from the statement. GE — Gold equivalent was calculated using conversion factor 95 for silver (kAg).

The updated mine plan envisages five open pits (four at OZ 1 and a separate pit at OZ 56) that will be mined over 19 years via conventional drill-and-blast and truck-shovel methods, with a subsequent gradual switch to underground mining that will last for 17 years. The total expected mine life currently stands at 27 years, and can potentially be increased by another 10 years, following additional exploration to improve the confidence of the remaining Mineral Resources.

The projected open-pit mining volumes are currently set at up to 2.2 Mtpa of ore with an average stripping ratio of 9 (excluding pre-strip).

The underground mine will utilise long-hole stoping with partially consolidated backfill, a method currently used to good effect by Polymetal at the Albazino underground mine.

The concentrator with a capacity of 1.8 Mtpa incorporates crushing, two-stage grinding, gravity and flotation, concentration. Concentrates are thickened, filtered, dried and bagged for off-site processing. Tails are thickened, filtered, and dry stacked in a fully lined tailings storage facility. Gold recovery to concentrate is anticipated at 85% with a mass pull ratio of 4.8%. An average concentrate grade of 61 g/t is expected.

Flotation concentrates will be sold to third party off-takers while gravity concentrate will be processed at the existing Amursk POX facility. The current feasibility study does not include any consideration of the potential second line at the Amursk POX that would be capable of processing flotation concentrate in-house.

Q1 2019 Start of construction (done)
Q3 2019 First ore mined (done)
Q4 2019 Plant framework construction and winterization completed
Q1 2020 Start of equipment installation
Q3 2020 Construction and commissioning of power plant completed
Q2 2021 Mechanical completion
Q3 2021 Start of commissioning activities
Q4 2021 End of commissioning activities and first production
Q2 2022 Full ramp-up