Download 2004 Annual Report - Polymetal

At the Dukat and Lunnoye depos−its − the key silver production fa−cilities of the company − total cashcosts fell to $1.77/oz. Ag, a 23%decrease compared to 2003results. At the same time, aver−age global cash costs for silverincreased by 11% and reached$2.36/oz. The impressive resultsat Dukat and Lunnoye can be at−tributed to technological innova−tions that optimized the produc−tion process and lowered metallosses during production. Basedon results from the reported pe−riod, Polymetal’s silver productionfacilities were among the mostprofitable primary silver mines inthe world.The company sees further possi−bilities to lower production costs,for example, by optimizing techno−logical processes (through mini−mizing the use of reagents) andby decreasing metal lost duringprocessing and shipping.Capital expendituresIn 2004, Polymetal continued toinvest in developing its productionplants. The total value of property,plants and equipment was $256.7million, a 25.7% increase com−pared to 2003. The period from2003 to 2004 can be character−ized as a period of active invest−ment in construction. The valueof buildings and additional struc−tures grew 2.2 times due to thelaunch of new production plants.The number of facilities underconstruction declined as differentprojects were launched.Property, plants and equipment valuemln. $USIn 2003, the Khakanjinskoye de−posit was launched and the Dukatdeposit reached its project ca−pacity. In 2004, the Dukat depositincreased its production capacity.Polymetal continued financing theCapital Expendituresfacilitiesfinal stages of construction atthe Khakanjinskoye deposit. How−ever, the greatest percentage ofcapital expenditures was devotedto the construction and launch ofStage II at the Vorontsovskoyedeposit. 2004 capital expendi−tures were $29.6 million (a 37%decrease compared to 2003 fig−ures) − a result of the companypassing the peak of expenditures.mln. $USLunnoyeDukatKhakanjinskoye(Stage I)Vorontsovskoye(Stage II)Capital expenditures19