21 April 2011
Production Update for Q1 2011 and Interim Management Statement
Petropavlovsk PLC (?Petropavlovsk?, ?POG?, ?the Company?, or, together with its subsidiaries, ?the Group?) today issues its Interim Management Statement for the period from 1 January 2011 to date.
HIGHLIGHTS
Total attributable gold production for Q1 2011
|
|
Q1 2011 |
Q1 2010 |
Variance |
|
Gold Produced (?000 oz) |
|
|
|
|
Pioneer* |
36.6 |
35.8 |
2% |
|
Pokrovskiy |
17.9 |
29.8 |
(40%)** |
|
Malomir |
20.6 |
- |
n/a |
|
Tokur |
0.3 |
- |
n/a |
|
Total* |
75.4 |
65.6 |
15% |
|
Gold Sold (?000 oz) |
124.1***1 |
68.0 |
83% |
Gold sales and costs
? Total gold sold during the first quarter was 124,100oz*** (versus 68,000oz in 2010) at an average gold sales price of US$1,389/oz (versus US$1,093/oz in 2010), representing an 83% increase in gold sold at a 27% higher average sales price;
? During the first quarter, Group total cash costs were lower than estimated.
Financial position
? The Group has additional new committed bank facilities totalling US$170 million. Otherwise, the financial position of the Company as at 20 April 2011 has not materially changed from that reported at 31 December 2010.
Development
? Construction work on the second milling facility at Malomir is on schedule, with estimated commissioning currently expected in Q3 2011;
? The Group?s fourth major gold mine, Albyn, remains on schedule for commissioning in Q4 2011;
? The contracts for the first stage of the pressure oxidation processing facility are expected to be entered into by the end of April 2011.
Exploration
? A new high grade ore column, 200m in strike length, has been identified at the NE Bakhmut ore body at Pioneer with initial intersections of 9m thickness at 23.4g/t Au and 31.5m thickness at 17.0g/t Au. The column is open in the east direction and at depth;
? A new mineralised zone, with average grades of 1-2g/t Au, has also been discovered in the eastern part of NE Bakhmut;
? Exploration at Pioneer is ongoing and an updated resource statement is expected to be released together with the Company?s interim results;
? Exploration at Pokrovka-2 identified additional ore at 1-3 g/t of gold. A resource estimate for this area and the Pokrovka-4 deposit is currently being compiled. This is also expected to be released with the Company?s interim results;
? Exploration continues at the Kanavnaya zone at Malomir with several steep ore bodies identified;
? At all three sites (Pioneer, Pokrovskiy and Malomir), the resource base is expected to increase due to discovery of additional non-refractory material;
? A preliminary resource model for the Burinda deposit (in the Amur Region) has identified a potential mineral resource of 300,000oz of gold with grades of 1.5-2.5 g/t.
Performance to 15 April 2011
- Performance Pioneer, Pokrovskiy and Malomir during the first half of April has been strong with the Pokrovskiy mine exceeding internal production estimates by 47%, Pioneer by 14%, while Malomir production was in line with the Group?s internal estimates.
2011 estimated production
? The Group?s estimated base case scenario for attributable gold production in 2011 remains unchanged at 600,000oz;
? In accordance with the Group?s policy of not including possible production from assets which are at the commissioning stage, this figure excludes any production from Albyn (due to be commissioned in Q4 this year) and from the second processing facility at Malomir (currently expected to be commissioned in Q3 2011). These assets are expected to be commissioned and ramped up as scheduled;
? The estimated production scenario of 600,000oz envisages that production will be weighted towards the second half of the year. This is due to the scheduled increase in attributable alluvial production, together with the seasonal heap-leach operations.
Dividend
? On 30 March 2011, the Board of Directors resolved to recommend a final dividend of ?0.07 per share which is expected to result in an aggregate payment of ?13.2 million. Subject to shareholder approval at the Annual General Meeting on 19 May 2011, it is proposed that the final dividend will be paid on 28 July 2011 to shareholders on the register as at close of business on 1 July 2011.
IRC Limited
? IRC reported a 52% increase in production from Kuranakh since Q4 2010 with 177,000 tonnes of iron ore concentrate produced and 7,400 tonnes of ilmenite concentrate produced;
? Iron ore concentrate production is currently on target to achieve 2011 production estimates; sales are ongoing;
? Trial shipments of ilmenite concentrate were undertaken to a number of regional and international customers;
? Annual results for 2010 published on 28 February 2011 reported revenue enlarged to US$25.8 million, up 212% from 2009, and a threefold increase in JORC-accredited reserves for IRC since September 2010;
? K&S remains on track for commissioning in 2013 with design and surveying work for the principal contractor, the China National Electric Engineering Company Limited (CNEEC), completed;
? On 20 April 2011, the share price for IRC Limited closed at an all-time high of US$2.24, giving IRC Limited a market capitalisation of US$966 million.
Commenting on the announcement, Peter Hambro, Chairman, said:
?I am pleased to report that the results for the first quarter of this year show that we are on track to achieve our production target with our cash costs being under tight control.?
ENQUIRIES
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Petropavlovsk PLC
Alya Samokhvalova
Rachel Tuft
|
+44 (0) 20 7201 8900
|
|
Merlin
David Simonson
Fiona Crosswell |
+44 (0) 20 7726 8400 |
|
|
|
OPERATIONS AND PRODUCTION
Pioneer
In Q1 2011, the Pioneer mill treated 75% more material compared with the same period in 2010. Average recovery rates for the plant during the period were 83.1%, higher than the Group?s internal estimate.
An increase in production of 2% compared to Q1 2010 was achieved despite a 16% decrease in grades, following the successful expansion of the mine in 2010. It is expected that the grades processed through the mill will now increase towards the second half of the year.
Mining work undertaken during Q1 was on schedule with a total of c.5.9mln m3 of material moved, an increase of 110% compared to the same period in 2010. With the full mining fleet now on site, the Group?s management is confident that the schedule of stripping works is achievable.
A six-month programme of optimisation of mining works focused on increasing efficiency and improving cash cost control has been implemented at Pioneer since the beginning of the year, the benefits of which are expected to be felt in the second half of the year.
The heap-leaching facility at Pioneer will also contribute to production during the second half of the year due to the seasonal nature of this operation.
The Group?s 2011 production estimate for Pioneer remains unchanged at c.323,500oz.
Pioneer Mining and Processing Operations
|
Pioneer Mining Operations |
|
|
Units |
Q1 2011 |
Q1 2010 |
Variance, % |
|
Total Material Moved |
m3 ?000 |
5,951 |
2,828 |
110 |
|
Ore Mined |
t ?000 |
912 |
842 |
8 |
|
Grade |
g/t |
1.6 |
2.2 |
(27) |
|
Gold |
oz ?000 |
46.2 |
59.8 |
(23) |
|
Pioneer Processing Operations |
|
|
Units |
Q1 2011 |
Q1 2010 |
Variance,% |
|
Resin in Pulp Plant |
|
|
|
|
|
Total milled |
t ?000 |
1,135 |
650 |
75 |
|
Average grade |
g/t |
1.2 |
2.1 |
(43) |
|
Gold content |
oz ?000 |
44.1 |
43.0 |
3 |
|
Recovery rate |
% |
83.1 |
83.3 |
- |
|
Gold Recovered |
oz ?000 |
36.6 |
35.8 |
2 |
Pokrovskiy
The Pokrovskiy mine started the year successfully, slightly ahead of the Group?s production estimates due to higher than anticipated grades mined during the period.
In Q1 2011, the ore was mined both from the bottom of the main pit and the Pokrovka-2 pit. A total of 1.6mln m3 of material was moved, slightly higher than the Group?s estimate.
A contribution from the heap-leaching facility at Pokrovskiy is expected during the second half of the year due to the seasonal nature of this operation.
The Group?s 2011 production estimate for Pokrovskiy remains unchanged at c.96,200oz.
Pokrovskiy Mining and Processing Operations
|
Pokrovskiy Mining Operations |
|
|
Units |
Q1 2011 |
Q1 2010 |
Variance,% |
|
Total Material Moved |
m? ?000 |
1,622 |
1,226 |
32 |
|
Ore mined |
t ?000 |
415 |
404 |
3 |
|
Average grade |
g/t |
1.7 |
2.3 |
(26) |
|
Gold content |
oz ?000 |
22.4 |
30.0 |
(25) |
|
Pokrovskiy Processing Operations |
|
|
Units |
Q1 2011 |
Q1 2010 |
Variance,% |
|
Resin in Pulp Plant |
|
|
|
|
|
Total milled |
t ?000 |
435 |
445 |
(2) |
|
Average grade |
g/t |
1.5 |
2.5 |
(40) |
|
Gold content |
oz ?000 |
21 |
35.2 |
(40) |
|
Recovery rate |
% |
83.8 |
84.8 |
(1) |
|
Gold recovered |
oz ?000 |
17.9 |
29.8 |
(40) |
Malomir
Production from Malomir during the first quarter was slightly ahead of the Group?s estimate due to a higher than scheduled recovery rate of 87.4%.
The Group?s 2011 production estimate for Malomir remains unchanged at c.93,300oz.
|
Malomir Mining Operations |
|
|
Units |
Q1 2011 |
Q1 2010 |
Variance |
|
Total Material Moved |
m3 ?000 |
1,586 |
- |
n/a |
|
Ore Mined |
t ?000 |
383 |
- |
n/a |
|
Grade |
g/t |
3.1 |
- |
n/a |
|
Gold |
oz ?000 |
38.2 |
- |
n/a |
|
Malomir Processing Operations |
|
|
Units |
Q1 2011 |
Q1 2010 |
Variance |
|
Resin in Pulp Plant |
|
|
|
|
|
Total milled |
t ?000 |
172 |
- |
n/a |
|
Average grade |
g/t |
4.3 |
- |
n/a |
|
Gold content |
oz ?000 |
733 |
- |
n/a |
|
Recovery rate |
% |
87.4 |
- |
n/a |
|
Gold Recovered |
oz ?000 |
20.6 |
- |
n/a |
Tokur
Testing operations at Tokur have continued as planned, yielding 322oz of gold. The Group is continuing to work on the development plans for this deposit.
EXPLORATION AND DEVELOPMENT
Malomir
Construction work on the second processing line at Malomir is on schedule, with estimated commissioning expected to be in Q3 2011, as scheduled.
The first thickener and the jaw crusher have now been installed. The installation of SAG and ball mills is currently being completed and work on the second tailings dam and storage buildings for fuel and explosives is ongoing..
Albyn
The construction of a resin-in-pulp plant at Albyn is continuing. The first production facility remains on-schedule for commissioning in Q4 2011. Construction of all internal infrastructure, including employee accommodation, the 110kV power line, the internal haul roads and the fuel storage facility, has been completed. Construction work on the foundations for all the main buildings and equipment is ongoing.
Potential sale of Omchak
On 18 February 2011, Petropavlovsk entered into a non-binding Heads of Agreement (?HoA?) with Meridian Minerals Limited (?Meridian?) relating to the potential sale by the Group of a 75% interest in Omchak (the ?Sale?). The alluvial assets, currently owned by Omchak and its subsidiaries, are not intended to form part of the Sale and it is anticipated that these assets will be transferred to the Group prior to the Sale. Therefore, the potential Sale would only relate to the above-mentioned non-producing hard rock assets. It is the intention of the parties that, subject to satisfaction of all of the conditions specified in the HoA, the definitive transaction documents for the Sale, including a sale and purchase agreement and a shareholders' agreement, will be entered into on or before 11 May 2011. The anticipated consideration for the Sale is US$40 million, which is intended to be payable by Meridian to the Group within 60 days after the date of entry into the definitive transaction documents for the Sale.
IRC LIMITED
IRC Limited issued its trading update on 12 April 2011 and reported a 52% increase in production since Q4 2010. In addition, on 7 March 2011, IRC announced a threefold increase in JORC reserve estimates. Project highlights include:
Kuranakh
? Iron ore concentrate production is on target to achieve 2011 production estimates; sales are ongoing;
? 177,000 tonnes of iron ore concentrate and 7,400 tonnes of ilmenite concentrate have been produced;
? Trial shipments of ilmenite concentrate were undertaken to a number of regional and international customers.
K&S
? K&S remains on track for commissioning in 2013;
? All design and surveying work for the principal contractor for K&S, the China National Electric Engineering Company Limited (?CNEEC?), has been completed;
? New employee facilities were completed, including a new canteen with capacity for 300 workers.
Annual results for 2010 published by IRC Limited on 28 February 2011 reported revenue enlarged to US$25.8m, up 212% from 2009, and a threefold increase in JORC-accredited reserves for IRC since September 2010.
On 20 April 2011, the share price for IRC Limited closed at an all-time high of US$2.24, giving IRC a market capitalisation of US$966 million.
Forward-looking statements
This release may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this release and include, but are not limited to, statements regarding the Group's intentions, beliefs or current expectations concerning, among other things, the Group's results of operations, financial position, liquidity, prospects, growth, strategies and expectations of the industry.
By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Forward-looking statements are not guarantees of future performance and the development of the markets and the industry in which the Group operates may differ materially from those described in, or suggested by, any forward-looking statements contained in this release. In addition, even if the development of the markets and the industry in which the Group operates are consistent with the forward-looking statements contained in this release, those developments may not be indicative of developments in subsequent periods. A number of factors could cause developments to differ materially from those expressed or implied by the forward-looking statements including, without limitation, general economic and business conditions, industry trends, competition, commodity prices, changes in law or regulation, currency fluctuations (including the US dollar and Rouble), the Group's ability to recover its reserves or develop new reserves, changes in its business strategy, political and economic uncertainty. Save as required by the Listing and Disclosure and Transparency Rules, the Company is under no obligation to update the information contained in this release.
Past performance cannot be relied on as a guide to future performance.
1*Total attributable gold production, as stated throughout this document, is comprised of 100% of production from the Group's subsidiaries and 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%. In the first quarter of 2011, there was no production from Omchak, alluvial and heap-leach operations. 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 the circuit.
**The decline is due to decrease in grades processed as previously scheduled and announced
***Of which 38,300oz was sold on 2 April 2011.
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