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HEMSCOTT NEWS ALERT - PETROPAVLOVSK PLC



Petropavlovsk PLC - 2011 Half Year Trading Update
RNS Number : 7770K
Petropavlovsk PLC
21 July 2011
 



21 July 2011

2011 Half Year Trading Update

 

Petropavlovsk PLC ("Petropavlovsk", the "Company" or, together with its subsidiaries excluding IRC Limited ("IRC"), the "Group") today issues its Trading Update for the period from 1 January 2011 to 30 June 2011 ("the Period") in advance of its half year results, which are expected to be published on 25 August 2011.

 

HIGHLIGHTS

Total attributable gold production for H1 2011

 


Attributable production1


Q2 2011

Q2 2010

Variance

H1 ended

30 June 2011

H1 ended

30 June 2010

Variance


000oz

000oz

%

000oz

000oz

%

Pioneer

80.0

54.1

48

116.6

89.9

30

Pokrovskiy

24.0

29.6

(19)

41.9

59.4

(29)

Malomir

17.3

-

n/a

37.9

-

n/a

Alluvial operations2

22.4

7.4

202

22.7

7.4

207

Joint ventures and other investments3

-

9.6

n/a

-

9.6

n/a

TOTAL

143.7

100.7

43

219.1

166.3

32

 

Operations and production

§ Total attributable gold production for the first half of the year was 219,100oz, c.32% higher than during the same period in 2010 (166,300oz) and marginally ahead of the Groups estimate for the first six months of 2011.

Production in the second half of the year is expected to be higher than in the first half, due to a greater contribution from the Groups seasonal heap-leach and alluvial operations;

§ Total material moved at Pioneer during H1 2011, was c.84% higher than during the comparative period in 2010 (14,177,000m3 vs.

7,707,000m3).

Advanced stripping will allow access to ore scheduled for processing in H2 2011; and

§ The Group reiterates its announced production target of 600,000oz for the year.

 

Gold sales and costs

§ During the first half of the year, the Group sold 266,000oz of gold at an average realised gold sales price of US$1,455, a c.71% increase in the quantity of gold sold compared with the first six months of 2010 (155,000oz at an average realised gold sales price of US$1,154/oz);

§ Gold sold in H1 was c.47,000oz greater than H1 2011 production due to gold in circuit from 2010 becoming available for sale; and

§ Operating costs were in line with the Groups estimates, which have been under pressure from industry wide inflation and the appreciation of the Rouble against the US$, the Groups functional reporting currency.

 

Project development: Malomir and Albyn

§ In mid-July 2011, the second crushing and grinding line at Malomir was commissioned ahead of schedule and is currently being ramped up; and

§ Construction work on the Groups fourth gold mine, Albyn, remains on track for launch in Q4 2011, as previously announced.

 

Financial position excluding IRC

§ In addition to the 2010 year end cash-in-hand of US$96 million, the Group has entered into new committed banking facilities totalling US$340 million.

Accordingly the Group is fully funded for its capital expenditure programmes.

 

POX processing hub

§ As announced on 21 June 2011, following a period of extensive research and testing, the Group has completed an internal feasibility study for the construction of a pressure oxidation processing plant to be located at the Pokrovskiy mine ("POX hub"), to process flotation concentrate from Malomir and Pioneer;  

§ Work on the foundations for the plant at Pokrovskiy and construction of the flotation stage at Pioneer and Malomir is in progress; and

§ The contract for construction and installation of the flotation plant at Malomir was signed with Outotec (Finland) Oy ("Outotec") in June with a contract price of €24.6 million.

 

Exploration

 

Pioneer

§ A new, previously unknown, high-grade mineralised zone with intersections of up to 17.0g/t on 20m thickness has been delineated at NE Bakhmut.

The high grade ore column contains both non-refractory and refractory mineralisation and remains open in a down dip direction;

§ A new mineralised zone, Zvezdochka, has been discovered and explored north-west of the Bakhmut zone.

It is parallel to the high grade Andreevskaya and NE Bakhmut ore bodies and contains both non-refractory and refractory mineralisation at shallow depth from the surface.

 

Albyn and the surrounding areas

§ A new zone of alteration similar to the Albyn zone has been intersected by two trenches in the Kharginskaya area; and

§ Exploration at the new Elginskoye licence area has identified wide shallow dipping zones of alteration with the first intersection of 33m thickness at an average grade of 1.23g/t.

 

Malomir

§ New non-refractory mineralisation has been identified to the north-east of the Quartzitovoye open pit;

§ Exploration at the previously identified Kanavinskaya zone has identified non-refractory resources which will become a source of additional ore for the existing RIP plant at Malomir.

The zone remains open in a down dip direction; and

§ Exploration at Zone 26, north of the Malomir deposit, has identified an addition to Malomirs refractory ore reserves and mineral resources.

The zone remains open in a down dip direction.

 

Other exploration areas

§ Geochemical work at the Osezhinskaya licence has identified extensive gold, copper and molybdenum anomalies.

The Groups geologists are evaluating the possibility of discovering a copper-molybdenum-porphyry deposit. 

 

JORC Reserves and Resources estimates

§ A new JORC-based Reserves and Resource estimate, including results of H1 2011 exploration work, is being prepared for release on 25 August 2011, together with the Groups interim results.

 

IRC Limited ("IRC")

§ On 12 July 2011, IRC issued its Trading Update which noted the following points:

-     Total production increased by 142% compared to the previous six-month period;

-     All 2011 production targets are on track to be achieved;

-     The consolidated average realised price achieved in the first half of 2011 was c.US$147/t.

Pricing is attained at a formula related to spot, and is agreed on a monthly basis;

-     Construction works at K&S are ongoing; and

-     IRC is undertaking an optimisation study for the K&S project to review the potential to increase throughput.

The study was initiated following the JORC reserve increases announced in February 2011.

IRC expects to publish the study with its interim results due on 23 August 2011.

 

Commenting on the announcement, Peter Hambro, Chairman, said:

"The strong first half and the fact that that the second half of the year is on schedule means that we remain on track to achieve the 600,000oz production target announced at the start of 2011.

 

Commissioning the second mill at Malomir and the likelihood of our fourth hard-rock gold mine, Albyn, coming on-stream this year demonstrates that both the skill and commitment of our construction teams match that of the production side of the business, which has produced these excellent results.

 

We have also continued the planning and development of the POX hub at Pokrovskiy, which is due to be commissioned in 2013.

This is an exciting new project for the Group which, I believe, will propel us into a new phase of growth and development, helping to unlock the considerable refractory ore resources in our portfolio and in Russia in general.

 

On the exploration side, we have had a number of successes which have the potential to improve our production scenarios and development plans in the coming years.

We are currently evaluating these exploration results and intend to report our findings later in the year."

 

 

________________________

1.        Total attributable gold production, as stated throughout this document, is comprised of 100% of production from the Group’s subsidiaries and, where applicable, the relevant share of production from joint ventures and other investments.

Figures for the comparative period are restated accordingly.

The Group has held a c.1.1% interest in Rusoro Mining Ltd since March 2009; no attributable ounces are included in the Group figures.

The Company’s direct and indirect interest in JSC Pokrovskiy Rudnik (the holder of the Group’s Pokrovskiy and Pioneer interests) is 98.61%.

Cumulative gold production, as stated throughout this document, consists of gold physically recovered and gold in circuit.

Accordingly, gold produced in the year consists of gold recovered during the period and adjusted for the movement in gold still in circuit.
 
2.        Production from alluvial operations for H1 2011 includes production from the assets previously held by the Omchak Joint Venture, which was a 50/50 joint venture prior to the acquisition of 32.5% and 7.5% of the issued capital of the Omchak Joint Venture from OAO Susumanzoloto and OAO Shkolnoye respectively in H2 2010. Production from these assets is now 100% attributable to the Group.
3.        Production from joint ventures and other investments includes production from the Omchak Joint Venture prior to its acquisition in H2 2010.

Following the termination of the Odolgo Joint Venture in 2011, the Group no longer operates any joint ventures.

 

CONFERENCE CALL

 

There will be a conference call today to discuss this announcement at 10:00am (BST).

 

Details to access the conference call are as follows:

 

The dial-in number in the UK will be:                                                  0800 694 0257

The dial-in number is Russia will be:                                                  8108 002 097 2044

The dial-in number in the USA will be:                                                1866 966 9439

Elsewhere, the dial-in number will be:                                                +44 1452 555 566

 

The Conference ID in all cases will be:                                              84813714

 

ENQUIRIES

 

Petropavlovsk PLC

  Alya Samokhvalova 

  Rachel Tuft

 

 

 +44 (0) 20 7201 8900 

 

 

Merlin

  David Simonson

  Ian Middleton

 

 

 +44 (0)20 7726 8400

 

 

OPERATIONS AND PRODUCTION

 

PIONEER

During H1 2011, Pioneer produced 116,600oz of gold, an increase of c.30% on the amount produced during the same period in 2010.

This includes production from the seasonal heap-leach facility at Pioneer, which commenced work in April 2011, contributing 2,300oz of gold.

 

In Q2 2011, production totalled 80,000oz, an increase of c.48% compared with the same period in 2010 (54,100oz).

The increase was due to enlarged plant capacity and improved mining and plant efficiencies.

These improvements follow a set of measures implemented at the mine during January 2011.

 

Delivery of the final additions to the mining fleet at Pioneer at the beginning of 2011 resulted in a c.84% increase in the volume of total material moved (14,177,000m3 vs.

7,707,000m3) and a c.63% increase in the volume of ore mined (2,781,000t vs.

1,706,000t) during the first half of the year, compared with the same period in 2010.

 

Total material moved includes pre-stripping in accordance with the mining schedule for the second half of the year.

At present, the mine is operating in line its stripping work plan and the Groups management is confident in achieving Pioneers 2011 production target of c.323,500oz.

 

Pioneer: Mining      

 

Units

Q2 2011

Q2 2010

H1 ended 30 June 2011

H1 ended 30 June 2010

Total Material Moved

m3 000

8,226

4,879

14,177

7,707

Ore Mined

t 000

1,869

864

2,781

1,706

Grade

g/t

1.7

2.1

1.7

2.1

Gold

oz 000

101.7

57.6

147.9

117.4

 

Pioneer: Processing

 

Units

Q2 2011

Q2 2010

H1 ended 30 June 2011

H1 ended 30 June 2010

Resin-in-Pulp Plant

 

 

 

 

 

Total milled

t 000

1,229

1,011

2,364

1,661

Average grade

g/t

2.3

2.0

1.8

2.0

Gold content

oz 000

92.4

64.2

136.5

107.2

Recovery rate

%

84.0

84.3

83.7

83.8

Gold Recovered

oz 000

77.7

54.1

114.3

89.9

Heap leach operations

 

 

 

 




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