A truck tows a large item of plant equipment to the site of Polyus Gold’s Natalka project in Russia’s Far East. The
company has decided to extend the project’s original development schedule because of weak current gold prices and the
possibility of further price erosion.

The Natalka project is located about 400 km inland from the port of Magadan and is based on one of the world’s largest undeveloped gold deposits. Proven and probable gold reserves stand at 31.6 million oz, and measured, indicated and inferred gold resources stand at 59.7 million oz.

In its initial stage of production, Natalka will have processing capacity for 10 million metric tons per year (mt/y) of ore and will produce 500,000 oz/y of gold. Plans are in place for staged expansion to mill throughput of 40 million mt/y and gold production of 1.5 million oz/y.

Polyus Gold’s announcement regarding re-sequencing of the project stated that, “Although it is operationally possible to commence gold production at the Natalka mine as previously planned, Polyus Gold deems it prudent to postpone its commissioning given the recent substantial decline in the gold price and the possibility of further weakness. The decision to extend the construction schedule will enable Polyus Gold to better balance the capital requirements of Natalka with the need to maintain a sound balance sheet and robust funding position in the current uncertain macro environment.”

Polyus will use the extended project development time to identify additional cost and operational efficiencies, including optimization of capital and operating expenditures, improvements to the project design, and the potential implementation of photo-metric separation technology (optical sorting) as a way to preenrich the ore.

Polyus expects to finalize a detailed plan of improvements to the project by the middle of 2014. In the meantime, construction work on-site will continue at a slower pace than previously planned. Mining works, which began in 2013 in accordance with the license terms, will also continue.

Polyus Gold’s interim CEO Pavel Grachev said, “Polyus Gold remains fully committed to bringing Natalka on stream. Once in operation, it will be Russia’s largest gold mine. The gold mining sector has to adapt to a tough business environment. In light of these challenges, we will advance the project in a prudent manner so as to be efit from an extended construction schedule and seize every opportunity to improve the project’s economics to ensure maximum returns to all our stakeholders, including shareholders, authorities and local communities.”