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En Ru
2,160 koz of gold
produced in 2017 (2016: 1,968 koz)
364 $/oz
Total cash cost per ounce sold
621 $/oz
All-in sustaining cash cost
Ore processed, kt
26,445 2016
28,663 2017
Adj. EBITDA $ mln
1,536 2016
1,702 2017
5 5 operating assets: 4 hard-rock mines and alluvial operations
2,721 $ mln
Total Revenue in 2017
Lost time injury frequency rate (LTIFR) per 200k hours worked in 2017 (2016: 0.13)
Case study

Polyus has initiated a Material Risk Review (MRR) process to review and refine our understanding of the key Sustainable development risks and opportunities associated with our Alluvial Operations. The MRR will be carried out in accordance with the standards and good practice guidance of the International Council for Mining and Metals (ICMM).

Overview of the Alluvial Operations

In 2004, Polyus acquired a controlling stake in the Lenzoloto alluvial operations in the Bodaibinsky District, Irkutsk Region, Russia. The alluvial operations date from the mid-19th century, following first discovery of alluvial deposits in the area by prospectors. Lenzoloto was established as a state-owned entity in 1921, and following a government auction in 2004 Polyus acquired a controlling stake in the business and set up the Alluvials Business Unit incorporating the Lenzoloto business, and associated subsidiaries.

The Business Unit currently employs around 2,300 individuals and holds approximately 102 licenses, extending over an area of 125km. More than 60 of the licensed areas are currently being explored, developed or operated. In 2014, the alluvial operations accounted for approximately 11% of Polyus’ refined gold production (190 koz), making them the third largest producer in the Group’s portfolio (surpassed only by Olimpiada and Blagodatnoye mines). Since acquiring the alluvial operations, the Group has operated in accordance with all relevant mining license conditions and Russian legislative requirements.

The Alluvials Business Unit mines gold from riverbed gravels and flood-plain terraces using quarrying and dredging techniques, followed by gravity separation, with the waste materials being subject to re-vegetation & progressive reclamation. No chemical agents are used in the process.

Sustainability Context

Polyus recognizes that the mining of the alluvials presents a range of complex sustainability challenges. This is in the context of a long history of small-scale alluvial mining in the region pre-2004 that has created a legacy of community, environmental and safety challenges that require careful consideration and management going forward. The Group has embarked on a number of studies & assessments, often commissioning internationally recognized independent experts, to gain a clearer understanding of the nature of these risks and opportunities so as to ensure they are appropriately managed in the future.

Socio-Economic Context and Key Social Risks

The Bodaibinsky District is a remote area, with a declining population. Over two decades many young people and skilled workers left the area in search of employment and economic opportunities elsewhere. Agricultural activities are limited, due to the widespread lack of quality soil; regular interventions from the State in infrastructure and social services were typically required during Soviet Union times, to maintain support of the mining operations.

Local communities within Alluvial Business Unit’s area of influence comprise approximately 13 small settlements (often < 200 — 100 people per settlement). These settlements developed in tandem with the historic mining activities, often with very limited local infrastructure, and livelihoods that are currently almost entirely dependent on continued alluvial mining.

We are working with the local government to foster community development through targeted investment in key infrastructure, hiring of staff from local communities where possible, and ongoing efforts to make life in the District more appealing. In addition to providing the primary source of employment and livelihood opportunities, we have worked in partnership with local authorities to develop a social and economic partnership agreement setting out the Group’s commitment to community investment in the region, which has included investments in the local road network, power supply, medical services and social infrastructure. These social & community investments have targeted key areas of risk and opportunity, as identified in consultation with local authorities and the affected communities. The stability and improvements that Polyus has achieved in this regard has stimulated further investment by the State, and the continued activities of the Group, in partnership with local authorities, are considered crucial to the ongoing survival and prosperity of affected communities.

Safety Context

From a safety perspective, Polyus is committed to become a zero fatality company — however despite our best efforts, we had three work-related fatalities in 2013 and two in 2014 in our Alluvials operation, which we find totally unacceptable; the improvement of our safety performance at Alluvials is of upmost priority for 2015 and beyond. Prior to being acquired by Polyus, Lenzoloto’s safety performance record was recognised to be better than many other alluvial mining operations in the Irkutsk Region. The Business Unit has an existing Industrial Safety Management System, which complied with Russian legal requirements, with defined roles and responsibilities, identification of H&S risks, investigation of incidents and clear action plans to address deviations from good practice.

However, the Group has had concerns regarding the efficiency of the existing system and introduced new standards for alluvial operations in the region, as part of a concerted effort to improve the existing H&S performance and culture of the operations to align with Group requirements for a transition to international good practice. Health and Safety standards have been introduced to ensure transparent reporting and root cause analysis of accidents, incidents and other key performance indicators.

Over the last number of years, the Group has worked to strengthen the existing governance structure with the introduction of new staff, risk managers and senior leaders. The existing reporting structures have improved to align with Global Reporting Initiative reporting requirements and ensure pertinent information is shared within the Group.

Moreover, we have reviewed and improved the existing risk management framework and supporting processes, to ensure greater awareness of H&S risks and required control measures. Polyus is now working in partnership with DuPont consultants to further strengthen the existing safety management systems to ensure it is aligned with international good practice, introduce a targeted safety culture transformation programme, as example, developing clear and specific ‘cardinal safety rules’ for each operations.

Environment Context

The area is generally considered to be of low environmental value, having been significantly degraded over the past 150 years as a result of the legacy issues described above. There are no protected areas in close proximity to the Group’s working areas.

From an environmental perspective, the key challenge relates to water management & protection. Polyus has implemented a number of controls with respect to water management, including carefully designed settlement ponds, properly designed diversion channels, the implementation of erosion controls and the management of reclamation of abundant operations.

Moreover, there is an established water quality monitoring programme where samples are analysed at the Group’s environmental laboratory in Bodaibo, District capital. The regulatory authorities carry out their own independent water quality monitoring. No regulatory compliances issues have been highlighted to date, and there is a positive working relationship with the regulatory authorities.

Our Commitment Going Forward

Polyus has reviewed the business & sustainability case for maintaining the alluvial operations, and has considered a number of scenarios in this respect. We recognize that not only do we need to undertake our own activities in the right way, we also need to make our own contribution to addressing the issues caused by the long history of mining in the area.

We will continue to actively manage the range of sustainability risks and opportunities in terms of our socio-economic impacts, our safety record and our environmental performance. This cannot be successfully achieved without significant commitment and resourcing, and we recognize that it will take time to reach the high standards that we have set ourselves in this respect. With that purpose in mind, we initiated a Material Risk Review process to review and refine our understanding of the key risks and opportunities associated with our Alluvial Operations. A Preliminary Scoping Report for this MRR is available here. As noted in the Scoping Report, the MRR will be carried out in accordance with the standards and good practice guidance of the International Council for Mining and Metals (ICMM). The MMR process will help the Group ensure we are taking every action necessary to ensure social stability and continued development in the region, while achieving the desired improvements in safety and environmental performance.