Polymetal continued active exploration activities to replace reserves at producing mines and to expand the company’s reserves and resources by studying new promising areas in various regions.

The Company decided, during the reported period, to increase 2006 exploration expenditures to $US 11.0 mln. (compared to $US 8.0 mln. in 2005).

Magadan Region

In IIQ 2006, a newly established specialized exploration subsidiary completed surveying Lunnoye’s north-west flank.

The Company started a program to survey Dukat’s near and far flanks. Polymetal plans to receive exploration licenses for other gold and silver fields in the region in the current year.

Khabarovsk Region

In the reported period, Polymetal continued geological survey of Kkakanjinskoye’s deep levels. In June, Polymetal received a license for gold and silver geological survey at the Arkinskiy ore field.

Sverdlovsk Region

The Company started preliminary exploration (subsurface geochemical search) at the newly licensed Katasminskiy filed.

Krasnoyarsk Territory

Polymetal announced State approval for the discovery of the new Anenskiy gold deposit. As of December 31st, 2005, the State approved reserves were 1,168 th. tons of ore and 9,992 kg. (321 th.oz.) of gold with an average head grade of 8.5 g./t. for gold and 20 g./t. for silver.

As of now, Polymetal considers that the deposit has not been well studied. The Company believes that the deposit’s future scale could be increased to 32 tons (1 mln.oz.) of gold. The total resource potential of the licensed area is estimated at 60 tons (2 mln.oz.) of gold.

Chita Region

In IIQ 2006, Polymetal started exploration works, including geochemical search, trenching and routing at the licensed Aprelkovsko-Peshkovskiy ore knot (APU).

Highlights

• January – Published JORC Code audit of Polymetal’s ore reserves and mineral resources;

• January - 2005 year-end results – gold production increased 15% to 243 th. oz., silver production up 10% to 18,937 th. oz.;

• February - Created specialized exploration subsidiaries in the Sverdlovsk and Magadan regions;

• February - Export delivery of silver to the LBMA to assist the Kolyma refinery in obtaining the LBMA “Good Delivery” certificate;

• March - Signed an agreement with the Omsukchan region (Magadan region) local administration for social-economic cooperation in the sum of 20 mln. rubles annually for four years;

• March – Paid coupon yield on the last (6th) coupon and retired ruble-denominated three year maturity bonds.

• May – Created a new brand book and corporate logo;

• June - Signed two comprehensive insurance agreements totaling $US 160 mln. for Dukat and Lunnoye;

• June - Received a license for geological survey of gold and silver at the Arkinskiy ore field;

• June – Discovered new gold and silver deposit, Anenskiy, in the Krasnoyarsk Territory