On December 8th, during an official state visit to Russia by Mongolian President Nambaryn Enkhbayar, the General Director of Mongolrostsvetmet and Polymetal signed constituent documents for the joint venture to develop the Asgat deposit in Mongolia. The joint venture documents have been approved by the Boards of directors of Mongolrostsvetmet and Polymetal.

The signed documents create a 50/50 joint venture between the two parties (Polymetal and Mongolrostsvetmet). The parties agreed that the joint venture will be registered by the end of 2006.

Asgat — a polymetallic silver deposit — is located in the northwest of Mongolia near the Russian border (and the Russian Republics of Altai and Tyva). The deposit is located approximately 180 km. from Ulgiy, the regional center of the Nogonnurskiy region. Asgat was first discovered in 1976 by Soviet geologists. And from 1981-1991, search and exploration work, technological ore research and resource and reserve estimations were completed at the site. As registered by the Mongolian Ministry of Energy and Mining on March 7, 1996, the reserves of the deposit are 3,006 tons of silver equivalent with an average head grade of 369 g/t of silver equivalent and the mineral resources at the licensed area are 4,970 tons of silver equivalent with an average head grade of 297 g/t of silver equivalent. Asgat’s exploration and production licenses are valid until 2064.

Based on the agreement, Polymetal agrees to provide full financing and operational management for Asgat’s development. Equal partnership within the JV (between Polymetal and Mongolrostsvetmet) will allow the project to benefit from each of the company’s competitive advantages. Polymetal will contribute its geological exploration technology and engineering know-how and will also provide qualified personnel to start up the project. At the same time, Mongolrostsvetmet will offer its Mongolian material-technical base, infrastructure and productioncapacities.

Commenting on the announcement, Vitaly Nesis, Polymetal CEO said: Cooperation between Polymetal and Mongolrostsvetmet offers both companies unique development opportunities. We are highly pleased by the fact that we have been selected as a strategic partner for this large inter-governmental project.