CORRECTED-UPDATE 1-Polymetal may double capacity of Albazino gold project

Mon Dec 3, 2012 8:46am EST

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(Corrects to read "resources" instead of "reserves" in bullet points and text)

* Albazino resources doubled to 5.7 mln ounces

* Polymetal's total resources up by third since start of 2012

* Albazino capacity may be doubled for $150 mln - analyst

* Shares of Polymetal up 0.94 pct, FTSE 100 up 0.31 pct

MOSCOW, Dec 3 (Reuters) - Russian precious metals miner Polymetal said it would decide next year whether to double production capacity at its Albazino gold project in Russia's far east after doubling its estimate of mineral resources there.

"Exploration results at Albazino highlight the tremendous potential of this asset and pave the way for the expansion decision to be taken in the second half of 2013," Vitaly Nesis, Polymetal chief executive, said in a statement on Monday.

The company, controlled by Russian businessmen Alexander Nesis and Alexander Mamut along with Czech private equity investor PPF, is considering increasing its capacity to 3 million tonnes of ore per year, company spokesman Andrey Abashin said, adding that its capital expenditure had not yet been determined.

Polymetal has already invested $270 million in the project and would need another about $150 million to double the concentrator capacity, analyst Sergey Donskoy at Societe Generale said, citing previous management comments.

The company has increased its estimate of mineral resources at Albazino to 5.7 million ounces of gold in five ore zones and expects to determine a development plan after completing a study in the second quarter.

Including Albazino, Polymetal has increased its total resources estimate by 30 percent to 18 million ounces of gold equivalent since the start of the year.

Albazino, its second greenfield mine after Khakanja in Russia's Far East, is located approximately 440 kilometers from the Amursk POX hub. The deposit comprises an open-pit mine and on-site flotation concentrator of 1.5 million tonnes of ore per year, which is running at full capacity.

Shares in the company were up 0.94 percent at 10.72 pounds by 1134 GMT, compared with a gain of 0.31 percent in the FTSE 100 index, which it joined last year.

Polymetal is expected to produce 1.2 million troy ounces of gold equivalent in 2013, including 760,000-800,000 troy ounces of gold and 23-24 million ounces of silver.

Gold equivalent is a measure of gold and other metals expressed in units of gold. (Reporting by Andrey Kuzmin and Polina Devitt; Editing by Jane Baird)

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