Polyus Delays Russia’s Biggest Gold Project Following Review

Polyus Gold International Ltd., Russia’s largest gold producer, said it won’t start its largest development project next year after a preliminary review suggested resources are smaller than originally estimated.

The findings point to a 15 percent to 20 percent cut in resources at the Natalka deposit, with reserves 55 percent to 65 percent lower, Polyus said in a statement today. The company plans to review its options after application of the more stringent JORC Code changed the interpretation of findings from a 2011 model that relied on Soviet-era underground samples dating as far back as 1945, it said.

Natalka, in the Magadan region of the country’s Far East, was considered to be Russia’s biggest gold deposit and the company last year estimated the mine would require investment of $1.8 billion. In 2013, Polyus delayed the start of the mine with an initial annual capacity of 5 million ounces to 2015 because of volatile bullion prices.

The company last year assessed interest among potential Chinese partners in buying a minority stake in Natalka, people familiar with the matter said in July. Onsite works will be significantly slowed down until a development decision has been taken, said Polyus, while the consultants’ full report is expected to be completed in January.

Output Forecast

The preliminary findings suggest that in the 2011 model the channel sampling information comprising about 60 percent of the resource database and derived from Soviet-era samples had significant location errors and poor quality control support, which resulted in a positive bias, Polyus said.

The new data suggest Natalka’s measured, indicated and inferred resources are expected to total 48 million ounces to 50 million ounces of gold compared with 59.7 million ounces in the previous estimate, Polyus said. Proven and probable reserves are projected at 11 million ounces to 14 million ounces, down from

31.6 million ounces.

Polyus said in a separate statement that it was increasing its 2014 gold-output forecast by 5 percent to a range of 1.68 million ounces to 1.72 million ounces.

Polyus’ shares fell 0.7 percent to 188 pence at 10:58 a.m. in London.

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