Solidcore runs from Polymetal's Russian past

By Rhod Mackenzie

Polymetal International, following the change of its registration to Kazakhstan and the sale of Russian assets, is striving to distance itself from the legacy associated with its previously sanctioned assets in Russia. This has involved a change of name to Solidcore Resources and an update to the growth strategy.
However, the Russian footprint continues to present challenges in attracting investors and funding to build a local autoclave that would help the company finally sever the umbilical cord from its toxic past.

NEW NAME, OLD PROBLEMS
The change of name to Solidcore Resources is not a new chapter, but a completely new path. “The new name will allow the company to distance itself from our past,” says Chief Executive Officer Vitaly Nesis. “It will also allow us to get rid of all associations with the sanctioned Russian Polymetal.”

Mr. Nesis stated that the company continues to encounter challenges in establishing new banking relationships due to its association with the Russian Polymetal. He made this observation during the Investor Day.

PLANS AND OPPORTUNITIES
The company's asset portfolio now includes Kyzyl (Abay region) and Varvara hub (Kostanay region). The company is currently able to maintain production of approximately 500,000 ounces (15.5 tons) of metals in gold equivalent over the next five years. However, there is no demand for such activity. The company is focused on growth and at a good pace despite the fact that the service life of the key assets – Kyzyl and Varvarinsky – is still more than 20 years. Nesis emphasised this point.

Thus, by 2029, Solidcore intends to double gold equivalent metal production to 1 million ounces, as well as double its recoverable metal reserves to approximately 25 million ounces.

At the same time, according to Nesis, organic growth will not allow the company to significantly increase production and comply with the new strategy.
There are few growth opportunities on existing assets. Further exploration of our brownfield projects is unlikely to yield significant results. "We have a substantial portfolio of Greenfield projects for exploration work, and we are now in the process of intensifying our geological exploration program to add significant volumes of new resources," Nesis stated.

Additionally, he stated, "We are currently engaged in active discussions with several juniors and anticipate concluding several joint venture agreements before the end of the year."

Regarding geography, the head of Solidcore identified the eastern and central parts of Kazakhstan as promising areas for searching for potentially high-quality projects. Furthermore, the potential for developing excess processing capacity represents another promising opportunity for growth.

"Due to the depletion of the deposits on which processing plants were built back in Soviet times, enrichment capacities are becoming available to supply them with raw materials through tolling," Nesis noted.

He believes that Solidcore has a unique opportunity to avoid building its own facilities for processing ore from new, independently discovered small deposits with relatively high grades, and to bring them into operation quickly.
Mergers and acquisitions (M&A) represent another avenue for the company's growth. However, in the current environment of high metal prices, most assets are overvalued. The head of Solidcore has promised to make the most informed decisions when conducting transactions.

Mr. Nesis was keen to point out that the current global market conditions are not conducive to acquisitions. The current market conditions are resulting in record prices for gold and copper, as well as high prices for a number of other metals, which are raising asset valuations.

For the time being, the development strategy entails the acquisition of non-operating but already explored projects. The geological risks have been reduced, and the resource base has already been assessed. "It is also important to have further exploration potential," he added.

The company's primary focus remains on Central Asia, as well as Saudi Arabia and Oman. "We do not intend to travel around the world in search of opportunities," Nesis emphasized. “We are looking at Tajikistan, where we have conducted in-depth analysis of a number of potential opportunities,” he added without providing further details.

A TASTE OF POLYMETAL
In light of the company's desire for rapid growth, the board of directors and management have decided to expand the portfolio to include not only precious metals and copper, but also other non-ferrous metals such as zinc, lead, tin and tungsten.

"We must adopt a more omnivorous approach to achieve rapid expansion of the company," Nesis emphasised.
The Irtysh MMC (Ertis POX) represents a significant investment for Solidcore Resources, both in terms of production and future image. However, the cost of this project is considerable, estimated at over $1 billion.

The company's financial director has stated that no Western bank in Kazakhstan is able to finance such costs independently.

"We will require a significant amount of capital to achieve our vision, while also addressing our outstanding debt obligations," Nesis stated.

The construction of a similar plant in Sovetskaya Harbor was originally planned, but the imposition of sanctions led to a change in strategy. The launch of the autoclave in Kazakhstan is scheduled for the first half of 2028. This has become the primary reason for the cancellation of dividends that were previously promised to be paid after the sale of assets in Russia.

Concurrently, the company is in a robust financial position following the divestiture of assets, with a cash balance exceeding its debt obligations. The total debt is $460 million, while the balance sheet as of 1 May was $695 million. In 2024 and 2025, Solidcore will be required to repay $135 million and $179 million, respectively.

The Irtysh MMC will enable the company to become independent and fully vertically integrated. When processing ore only from Kyzyl, approximately 45% of the capacity will be free.

"This represents an excellent business opportunity, given that the cost of concentrates from Kazakhstan deposits, which could potentially be processed at our mining and metallurgical complex, exceeds half a billion dollars," notes Nesis. "Given the growing environmental restrictions in China and the impossibility of supplies to Russia, Ertis POX will be in the right place at the right time."

Ertis POX will process approximately 300,000 tons of gold concentrate annually, with an estimated production of 15 tons of gold per year.
In 2023, the company reduced production at its assets in Kazakhstan by 10% to 486 thousand ounces (15.116 tons) of gold equivalent. The company's plan for 2024 is to produce 475 thousand ounces of gold equivalent at a TCC of 900-1000 dollars per ounce and all-in costs (AISC) of 1250-1350 dollars per ounce.

Polymetal Int has been registered in Kazakhstan since August 2023. In March, the company announced the sale of 100% of the shares of its Russian subsidiary, Polymetal JSC, to Mangazeya Plus (a structure of the Mangazeya group of entrepreneur Sergei Yanchukov), for $3.69 billion, including external and intragroup debt.