Polymetal is pleased to announce successful production results for 2005

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These results allow the company to maintain its positions as a market leader among Russian gold and world silver producers.

According to 2005 results, ore mining rose by 1.2% to 2,706 th. tons compared to 2004. The ratio of ore mined by open-pit compared to underground mining in 2005 was relatively unchanged from 2004 figures (83%). The volume of ore mined by underground mining increased by 17.9%; open-pit mining showed a drop of 1.6% compared with 2004. During 2006, Polymetal expects a growth in the share and volume of underground mining (at present the company has underground mining only at the Dukat deposit).

The volume of ore processed in the reported period increased by 17.9% to 2,525 th. tons. The positive dynamics were due to an increase in production capacity at the Dukat plant, reaching full capacity at the Khakanjinskoye plant and putting into operation Vorontsovskoye"s stage II.

Based on the results of 2005, Polymetal"s gold production[1]rose 15% (compared to 2004) to 243 th. oz. Silver production increased to 18,937 th. oz. (a 10% increase compared to 2004).

The growth of gold production was due to increased production at the Khakanjinskoye deposit ( Khabarovsk region). The positive dynamics for silver production for the year ended 12/31/2005 was primarily due to increased production capacity at the Dukat deposit (Magadan region).

 * summary figures for all sites

Commenting on today"s announcement, Vitaly Nesis, Polymetal CEO, said: "We consider the increased production results demonstrated by the company in 2005 as undoubted successes. These positive results will allow us to strengthen our position on the world precious metal market. We still have great growth potential at our existing deposits. And at the same time we have ambitious plans to create a second generation of mining assets.

[1]metal shipment from the plants to the refineries

Dukat

During 2005, Polymetal fulfilled the plant"s modernization program allowing production capacity to increase to 850,000 tpa of ore. Polymetal started to design, construct (preliminary stages) and purchase equipment for stage II of the plant that will allow the company to increase processing capacity to 1 mln. tpa of ore. The planned increase in the share of underground mining compared to open-pit mining in 2005 at the Dukat deposit resulted in an overall drop in open-pit mining for Polymetal.

The company started an active geological survey program to provide the plant with additional ore. Polymetal plans to establish a new specialized exploration company to conduct geological studies of near and far flanks at the deposit and new areas in the region.

Lunnoye

Polymetal is completing design work related to a feasibility study to mine Lunnoye"s reserves using underground mining (currently only open-pit mining is being carried out. The company plans to start underground mining in 2007). Within the reported period, the company started design work targeted at developing the new Arylakh deposit which will be explored beginning in 2006 (ore processing from this deposit will be conducted at the plant of the Lunnoye deposit). At present, the company completed a design of transport infrastructure. The first stripping and mining works are planned for the IV quarter of 2006.

Vorontsovskoe

Because of the growth in mining (up to 900,000 tpa of ore were mined in 2005), drilling and blasting were increased and new transport and drilling equipment were purchased. In the next year, the company plans to mine 1 mln. tpa of ore. Polymetal is conducting an active exploration program to provide the plant with additional reserves. At the end of 2005, the company won auctions for licenses for the Galkinskaya and Katasminskaya fields in the region.

Khakandjinskoye

In the reported period, the company reached its project capacity of 500,000 tpa of ore. Polymetal completed reconstructing technological schemes aimed at boosting production capacity to 600,000 tpa of ore. The company finished exploration work at pit #2 and #3 of the Khakanjinskoye deposit (at present mining is carried out only at pit#1) and started geological surveying of the flanks and deep levels of the deposit. Polymetal started design work of the mining facility and infrastructure at the new satellite deposit Yurievskoye.

2005 Key Achivements

• April - US$ 105 mln. syndicated long-term trade finance loan (arranger - Standard Bank London, Hypo und-Vereinsbank, Societe Generale) awarded "Deal of the Year" by Trade Finance magazine;
• July - completed production risks insurance facility as part of risk management program (insurance brokers AON and Marsh);
• July - reached full processing capacity at the Khakanjinskoye plant (500,000 tpa of ore);

• October - Polymetal Engineering signed an agreement to fulfill the optimization of the development of the Lomonosov diamond deposit.
• November - Polymetal Engineering completed designing ore-processing facilities for the Mikhailovsky Mining-and-Processing Complex;
• November - ICT Group completed a deal to sell 100% shares of Polymetal to the Nafta Moskva Group;

• December - completed an international audit of ore reserves and mineral resources based on JORC Code.

• December - Polymetal acquired licenses for geological exploration and mining at the gold areas Khakarinskaya (Khabarovsk Region), Galkinskaya and Katasminskaya ( Sverdlovsk region);
• December - Polymetal completed its first export delivery of silver to Japan.

source: Investor Relations Department 

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