Dukat

In IIQ 2006, the Company continued disassembling operations and purchasing equipment for stage II of the plant. Putting stage II into operation will increase the plant’s processing capacity to 1 mln. tpa. A contractor started initial construction work for the 3rd tailing dump. During the reported period, the Company was in the completion phase of constructing the 4 km. concentration horizon for electric trolley haulage at the underground site. This will allow ore to be transported to the pretreatment complex without trucking and will decrease costs. The overthrow system for tipping carts was designed and produced specially for Polymetal by a Russian producer.

Lunnoye

In the first half of 2006, the Company successfully completed SAG-mill modernization and installed an Australian Weir Warman rubber-metal line that will up production capacity and cut costs. In IIQ 2006, Polymetal started developing underground experimental works. The Company plans to construct 200 meter stripping adits in IIIQ 2006.

Polymetal plans to start up the first stripping and mining works at the Arlyakh satellite deposit in the IV quarter of 2006. According to JORC Code audits, ore reserves at Arylakh are estimated at 23 mln. oz. of silver and 41 th. oz. of gold and additional mineral resources – 13 mln. oz. of silver and 23 th. oz. of gold.

In IIQ of this year, a contractor continued constructing the road to Arylakh and expanding the working camp.

Khakanjinskoye

To help boost production capacity to 600 th. tpa, the Company started up the tailings filtration unit using Italian Diema filters. This will decrease negative environmental effects and reduce the consumption of chemical reagents.

Polymetal approved the change of the mining equipment plan and started the initial works to start up mining operations at the pit #2 in the beginning of 2007.

Vorontsovskoye

To increase recovery rates using heap leaching, Polymetal launched a project to reexcavate old-year heaps by dragline.

The Company put into operation ammonia saltpeter storage for preparing explosives.