Polyus - half-completed drilling at giant gold deposit shows rosy prospects

By Polina Devitt

MOSCOW (Reuters) - Polyus, Russia's largest gold producer, has completed half of its drilling programme at the giant Sukhoi Log gold deposit in eastern Siberia and it is showing "promising results", its Chief Executive Pavel Grachev said.

Grachev also told Reuters in an interview the company aimed at a full ramp-up of production at its new Natalka gold deposit in Russia's far east in December or in early 2019.

Polyus bought the rights to develop Sukhoi Log from the Russian state last year. It is one of the world's largest untapped gold deposits and contains about one fifth of Russia's reserves.

The two-year drilling process will provide a basis for updating the model for the Sukhoi Log deposit and its reserves, Grachev said, adding Polyus was on track to decide in 2021 the sources for financing construction of the processing facility.

"This will be one of the best understood greenfield projects around the globe," Grachev said, adding that the drilling so far had delivered "promising results".

"Sukhoi Log remains the main driver of our growth starting from 2025."

According to a scoping study, a processing facility able to treat 30 million tonnes of Sukhoi Log's ore a year will cost between $2 billion (1.6 billion pounds) to $2.5 billion to construct.

Average annual production at Sukhoi Log, which means 'dry gully' in English, is estimated at 1.6 million troy ounces.

Polyus has said it expects its 2018 total production at the upper end of forecast range of 2.375-2.425 million troy ounces with capital expenditures of $850 million.

Grachev confirmed that total production in 2019 was expected to grow to 2.8 million ounces after the ramp-up of the Natalka deposit. The company's 2019 capex will be in the range of $650-700 million.

The gold miner had said previously it could consider increasing its free float to 25-30 percent from 16 percent, in the mid- to long term, and remains committed to this plan, though there are no plans to do it now.

"As of today, current market conditions are not supportive (for a share sale)," Grachev said. "I hope these windows of opportunities will be available (in future)."

Polyus, controlled by Said Kerimov, son of Russian tycoon Suleiman Kerimov, has not been targeted by U.S. sanctions against Moscow. However, Washington included Suleiman Kerimov with some other Russian businessmen on its sanctions list in April.

(Reporting by Polina Devitt; Editing by Gareth Jones)