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. Last Updated: 07/27/2016

Polymetal to Buy Kubaka for $15M

Polymetal has agreed to pay $15 million plus royalties to buy the Kubaka gold project in the Far East from Canada's Kinross Gold, the company's chief executive said Friday.

Vitaly Nesis said the Kubaka mine, though depleted, retained a processing plant and infrastructure that could easily be restarted should Polymetal develop any of the mining licenses included in the transaction.

"We're paying a very attractive price for something that could be brought on stream relatively fast, and there's terrific exploration potential," Nesis said. The Kubaka project in Magadan region, where Polymetal has its largest mine, began commercial production in 1997 and ceased mining operations in 2005. The project includes several mining and exploration licenses.

Toronto-based Kinross, the world's eighth-largest gold miner, said in a regulatory statement that it would receive a variable royalty on future production at Kubaka in addition to the $15 million sale price.

Kinross said its wholly owned subsidiary, Kinam Magadan Gold, had entered into a memorandum of understanding to sell all its shares in Omolon Gold Mining -- representing a 98.1 percent interest in the Kubaka project owner -- to Polymetal.

"Kubaka made a significant contribution to Kinross over the years and has given us invaluable experience in Russia for more than a decade, which has served us well as we proceed with the development of our Kupol project," Kinross CEO Tye Burt said.

Polymetal produced 256,000 ounces of gold in 2006, or 4.8 percent of the national total. It plans to boost output to 400,000 ounces by 2010.