14 June 2012

Petropavlovsk Announces Updated Market Guidance for 2012

Petropavlovsk PLC ("Petropavlovsk" or the "Company", or, together with its subsidiaries, the "Group") is pleased to announce an update for the period from 1 January 2012 to date (the "Period"),  to coincide with a visit by analysts and investors to the Company's main production sites in the Far East of Russia starting on 16 June 2012.

Highlights:

n  Production target increased to 700,000oz

n  Cost expectations reduced

n  New processing lines commissioned ahead of schedule

n  29% increase in gold production, 15% increase in the average realised gold sales price and a 12% increase in total gold sold during the first five months of 2012 vs. first five months of 2011

n  Positive preliminary exploration results around existing assets

Commissioning of two new processing lines ahead of schedule

n  At Pioneer, the Group successfully commissioned its fourth processing line, which has a capacity of 1.8Mtpa - 2.0Mtpa, on 4 June 2012;

n  The second 1.8Mtpa - 2.0Mtpa processing line at Albyn was successfully commissioned on 10 June 2012;

n  Both new processing lines were commissioned ahead of the scheduled Q3 start-up date and are expected to ramp up to full capacity by July 2012; and

n  The new processing lines are expected to increase plant capacity at Pioneer by approximately 40% to 6.4Mtpa - 6.6Mtpa and double plant capacity at Albyn to 3.6Mtpa - 4.0Mtpa.

Operational update

n  The Group's flagship Pioneer mine delivered an outstanding performance during the first five months of 2012, confidently exceeding the proportion of its annual production target attributable to the first five months of the year;

n  Pioneer's strong performance was due to better recoveries and higher grades than budgeted due to the inclusion of the high-grade areas discovered in 2011 into the 2012 mine plan;

n  Production from the Malomir and Pokrovskiy mines during the first five months of the year was marginally ahead of plan;

n  The first processing line at the Albyn mine, commissioned in November 2011, ramped up to its full design capacity of 1.8Mtpa - 2.0Mtpa. The Group anticipates that the recent commissioning, ahead of schedule, of the second 1.8Mtpa - 2.0Mtpa processing line should enable Albyn to achieve its 2012 full year production target;

n  The Company intends to issue its Trading Update for the period from 1 January 2012 to 30 June 2012 on 25 July 2012, which will include a full Q2 and H1 2012 production breakdown.

2012 production target increased to 700,000oz

n  Due to the successful progress made at all hard-rock mines during the Period, the Group is increasing its full year production target by 20,000oz to 700,000oz.

Costs

n  The increased capacity at Pioneer and Albyn is expected to have a positive effect on unit costs during the year;

n  Management is continuing its cost cutting programme, rolling out the efficiency measures successfully implemented at Pioneer during 2011 at its other mines;

n  The recent weakness of the Russian Rouble against the US Dollar has positively affected the cash cost of production;  

n  As a result, the Group does not currently expect an increase in 2012 cash costs for its hard-rock mines by more than 15-20%   compared to 2011, revised from previous guidance of a 30-45% increase. In 2011, Group total cash costs for hard-rock deposits was US$586/oz and the Group-wide total costs for all assets including alluvial operations was US$662/oz.

Capital expenditure

n  The Company is constantly reviewing its capital expenditure requirements for its gold projects. Although there is a possibility of some variation between projects, the Company's total capital expenditure budget for 2012 remains unchanged.

Average realised gold sales price and new financial measures

n  The Group's average realised gold sales price for the first five months of the year was US$1,652/oz, 15% higher than the price achieved for the first five months of 2011 (US$1,438/oz);

n  Total gold sold during the first five months of 2012 was 227,300oz, 12% higher than total gold sold during the first five months of 2011 (203,300oz);

Exploration update

n  The Group has continued to focus on exploration adjacent to its existing mines. Work is on-going to reflect these results in the Group JORC-compliant Reserves and Resources statement, which the Company intends to publish together with the Group's half-year results on 23 August 2012. Highlights from the Group's exploration programme during the Period, which will be discussed at the Group's forthcoming site visit, include:

n  Albyn:  Further encouraging results were received from Elginskoye, a licence area situated 15km from Albyn and acquired by the Group in 2010. A potentially mineralised zone has now been traced by geochemical survey and trenches over a strike extending 28km. Within this zone, in addition to the mineralisation previously reported by the Group in Q1 2012, high-grade mineralisation has also now been identified, with intersections of up to 6m at 12g/t Au. Grades ranging between 30-51g/t Au were identified in selected samples. A further high-grade intersection, with grades of 5.1-5.9g/t Au and an apparent thickness of 4-22m, was discovered in a trench 1km to the north-west of the first high-grade area;

n  Pioneer: As a result of detailed exploration of the north-east extensions of the NE Bakhmut zone, Group geologists are preliminarily estimating the presence of an additional c.200koz of non-refractory gold, at an average grade of 2g/t;

n  Pokrovskiy: A preliminary estimate has indicated the presence of a high-grade, non-refractory mineralised zone at Zheltunak, a satellite deposit at Pokrovskiy.  The zone has an average grade of 20g/t Au and intersections include a drill hole with 132g/t Au at 3.7m.  

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.