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. Last Updated: 07/27/2016

Polymetal to Limit Purchases to CIS

Gold and silver producer Polymetal will limit acquisitions to Russia, Kazakhstan, Ukraine and Mongolia, as it seeks to bolster its finances, CEO Vitaly Nesis said Wednesday.

The company is pursuing an "opportunistic acquisition strategy" alongside "organic growth," though deals will be "only in the former Soviet Union," Nesis said. Polymetal is focusing on Ukrainian exploration companies, he said.

Shares of St. Petersburg-based Polymetal have dropped 2.6 percent since the company sold stock Feb. 8, raising a less-than-planned $604.5 million. The miner is considering ways to expand and improve its finances after hedging as much as two-thirds of this year's silver sales at $7.80 per ounce, almost half Wednesday's market price for the metal.

"We have to prove to the market that we are as good as we are," Nesis said.

The company would do well to consider small Kazakh-based miners such as European Minerals, Hambledon Mining, Alhambra Resources or Celtic Resources Holding, said Vladimir Katunin, analyst with Aton Capital.

"Polymetal can easily afford acquisitions of $100 million and less, which is all you need if it's an exploration project," said Alexander Pukhayev, analyst with Deutsche Bank in Moscow.

Polymetal expects to benefit as a scarcity of high-quality silver deposits worldwide helps boosts prices for the metal, Nesis said.

Silver demand is likely to grow 5 percent annually in the next few years, driven mainly by use in disinfectant, medical products, ship paint and washing powder, Nesis said.

"The biggest sales growth is in high-end, high-tech, and we're also seeing a pickup in demand from jewelry," he said.