Polymetal to acquire up to 50pc of Prognoz silver deposit

Polymetal International announced on Thursday that it has entered into an agreement with Polar Silver Resources, under which it will participate in the development of the Prognoz silver deposit in Yakutia, Russia.

The FTSE 250 company said the arrangement will allow it to acquire up to a 50% indirect interest in Prognoz.

It described Prognoz as the largest undeveloped primary silver deposit in Russia, with JORC-compliant indicated and inferred resources - estimated by Micon in 2009 - of 292 Moz at 586 g/t silver.

LLC Prognoz Silver is the Russian legal entity that holds the mining and exploration licence for the deposit which covers an area of 56 km2.

Under the agreement, Polymetal will acquire a 5% indirect interest in Prognoz for $3m in cash through the purchase of 10% of Polar's share capital.

Polar currently indirectly holds a 50% interest in Prognoz, with the remaining 50% owned by a group of private investors.

“Polymetal will have an obligation to undertake 25 km of diamond drilling, and complete a technical study resulting in an externally audited JORC-compliant reserves estimate for the property before 31 March 2019,” the company’s board explained in a statement.

“Total capital expenditures required to perform the drilling and complete the technical study are expected at $10m per annum during FY 2017-2019.”

Upon completion of the technical study and the reserve estimate, but no later than on 31 March 2020, Polymetal will have an option to increase its effective share in Prognoz to 50%.

“The consideration for the remaining 45% stake will be determined at the time of the option exercise.

“It will depend, among other things, on spot silver prices and the size of estimated reserves,” the board said.

Should Polymetal decide not to exercise the option, the agreement will terminate with no further amounts to be paid or received by the parties.