Operational
and POX update
Group on track to
deliver its 2011 production target
Detailed plans for
pressure oxidation ("POX") facility at Pokrovskiy
outlined
21 June 2011
Petropavlovsk PLC
("Petropavlovsk", "the Company" or, together with its
subsidiaries, "the Group") is pleased to announce an operational
update and give further details on the pressure oxidation processing facility
("POX hub") at the Pokrovskiy mine.
HIGHLIGHTS
POX Hub and future
development plans
The internal feasibility study for the POX hub,
including the pressure oxidation plant ("POX plant") at Pokrovskiy and the flotation plants at Malomir
and Pioneer, has been finalised;
The POX plant will be developed in two stages -
the first four vessels for processing concentrate from Malomir
is planned for Q1 2013 and additional two vessels for Pioneer concentrate will
be commissioned in Q3 2013;
Final capacity of the Pokrovskiy
POX plant has been defined as c. 600kt of concentrate per annum;
The study indicates POX operating cash costs
similar to current levels for Pioneer and Malomir;
Contracts for the delivery of key long-lead
time equipment, including the first four of six 60m3 autoclaves,
have been signed with Outotec (Finland) Oy ("Outotec");
The Group is budgeting to spend a total of
US$181 million on the POX hub for the years 2011 to 2015.
Operational Update
The Group remains on-track to deliver its 2011
production target of 600,000oz of gold;
During April and May 2011, combined total gold
production from Pokrovskiy, Pioneer and Malomir amounted to 83,500oz and production for the first
five months totalled 158,900oz, ahead of the Group's
forecast and 33% higher than the comparable period in 2010. Production in H2
2011 is scheduled to be higher than H1 2011 due to the contribution from
alluvial operation and heap-leach operations and higher head grades at Pokrovskiy and Pioneer plants;
The volume of stripping works undertaken to
access ore planned for processing in H2 2012 is on schedule;
Grades are above forecast at Pokrovskiy and Pioneer although they are marginally lower
at Malomir;
A more detailed breakdown of the Group's
production during the first half of the year will be provided in the Company's
Trading Update, which is scheduled to be released on 21 July 2011.
Gold sales and
costs
Total gold sold for the first five months of
2011 was 197,700oz (versus 120,600oz for the same period in 2010), an increase
of 64%. The strong gold price for the year to date, less the
associated increase in royalty payments, more than makes up for industry-wide
inflationary pressures and foreign exchange effects on operating costs.
Funding
Since the start of the year, the Company
(excluding IRC) has entered into new loan agreements totalling
US$270 million. This is in addition to the cash in hand of US$96 million and
the undrawn facilities in place of US$70 million at 31 December 2010. This
means that all capital programmes are fully funded.
Project
development
The commissioning of the second resin-in-pulp
("RIP") plant at Malomir is ahead of schedule
and expected in the first half of Q3 2011;
Construction work at Albyn,
the Group's fourth hard-rock gold mine, is on schedule ahead of expected
commissioning in Q4 2011.
Long-term
production forecast
The Group is currently in the process of re-evaluating
its long-term production forecasts for 2012-2015, considering recent positive
exploration results. Further details will be provided together with the Group's
2011 half-year results, scheduled for publication on 25 August 2011. To summarise:
Pioneer
Drilling in the NE Bakhmut
area has confirmed further north-east extensions to the ore body. An estimated
96,000oz of gold in high-grade mineralisation
suitable for the existing RIP plant at Pioneer has been defined;
The additional tonnage of the oxidised material may increase production output from
Pioneer in 2012/13 and may extend the life of the RIP plant beyond 2014;
Albyn
The Group is incorporating the latest drilling
results into an updated ore reserve estimate and will consider bringing forward
the commissioning of the second 2.0Mtpa RIP plant at Albyn;
Malomir
On-going exploration has located further
non-refractory resources. The Group is currently updating its ore reserve
estimate and mine plan in order to reflect these findings;
Pokrovskiy
Encouraging exploration results from the Pokrovka 2 and Pokrovka 4
deposits, located in close proximity to the existing Pokrovskiy
RIP plant, have indicated that these deposits may further extend the mine life.
Commenting on the
announcement, Peter Hambro, Chairman of Petropavlovsk
PLC, said:
"We decided
to hold a technical seminar on the pressure oxidation of refractory ores and to
explain the effect of this technology on the future of the Group to allow the
market to understand fully the opportunities associated with this
technology. At the same time we thought it worthwhile updating our
shareholders with the progress of our gold mining activities. A full half-year
trading statement will be made, as planned on 21 July 2011 and will incorporate
an update on our subsidiary, IRC Limited.
The creation of a
pressure oxidation hub at Pokrovskiy will propel the
Group into a new and exciting phase of development and give Petropavlovsk a
strong competitive advantage in this highly prospective field. Russia has a
significant reserves and resources base, which primarily consists of deposits
containing refractory ore. We see our future Pokrovskiy
hub, located in close proximity to excellent infrastructure, as the key to unlocking
the value in a number of dormant, inexpensive assets requiring this technology.
As the birth place
of our business, Pokrovskiy was a natural choice for
the proposed POX hub. We already have a large workforce employed at Pokrovskiy and established infrastructure, including haul
roads, milling and smelting facilities and a plentiful power supply. Situated
just 14km by road from the nearest station on the Trans-Siberian railway, we
will be able efficiently to transport flotation concentrate to the site, not
just from the Amur region but, looking ahead into the future, also from other
regions in the Russian Far East. We believe that when built, the sheer scale of
the hub means that it will be the largest operating in Russia.
I am confident
that we have the expertise to deliver this project on schedule. Our research
and development centres, led by first-class experts
in this field, have been conducting extensive research into processing various
types of refractory ore for the past five years. In 2009, we commissioned a
pilot test plant and added autoclave facilities in 2010 to create the first
facility of its kind in Russia. This allows us to test recoveries under
similar conditions to that of real production. This extensive research has also
led us to design a facility which will allow us to process a variety of types
of refractory ore.
Our
strategic partner, Outotec, is a leading and
established global provider of process solutions, technologies and services for
the mining and metallurgical industries. Outotec's
strong market position and leadership in technology is based on knowledge and
experience derived from the operations of two major mining and metals
companies, the Outokumpu Group and Lurgi Metallurgie GmbH (formerly Metallgesellschaft AG). It is a pleasure to work with Outotec on this project.
Looking into the
immediate future, I am delighted to report that our second mill at Malomir is ahead of schedule and is expected to be
commissioned in the first half of Q3 2011. This is an impressive feat in itself
but when combined with our work towards the commissioning of Albyn, scheduled for Q4 2011, it is further testimony to
the professionalism of our in-house expertise.
During the
presentation, which is available on the website (www.petropavlovsk.net) we set
out the basic parameters of the gold Company's cash flow and I am pleased to
note that, based on these forecasts there is no need for additional funding for
the company to complete its ambitious capital expenditure plans.
Finally, I am very
pleased to report that mining and processing works at Pokrovskiy,
Pioneer and Malomir have continued to perform well,
meaning that we remain on-track to produce 600,000oz of gold this year, the
base-case production scenario that we gave to the market at the start of the
year."
Background
Proposed POX plant
The key parameters
of the Group's feasibility study for the POX hub, including the pressure
oxidation POX plant at Pokrovskiy and the flotation
plants at Malomir and Pioneer, have been finalised. The design of the POX plant at Pokrovskiy and the flotation plants at Malomir
and Pioneer has been completed by Outotec in
conjunction with PHM Engineering Ltd, a wholly-owned subsidiary of the Group,
and is based on extensive testing and research undertaken by the Group's
subsidiaries Gidrometallurgiya and Irgiredmet, and at the Group's pilot test plant in Blagoveschensk. This research has indicated combined gold
recoveries of between c.80% and 84%.
Pokrovskiy
The
design allows for the installation of six 60m3
pressure oxidation autoclaves at the Pokrovskiy
mine, with four planned for the processing of flotation concentrate from Malomir and two for
the processing of flotation concentrate from
Pioneer. The plant will be developed in two stages: the commissioning of the first
four vessels for the processing of flotation concentrate from Malomir is planned for Q1 2013 and the commissioning of the
additional two vessels for the processing of flotation concentrate from Pioneer
is planned for Q3 2013. Metallurgical tests have confirmed that both
concentrates may be blended and processed together.
The total final
capacity of the POX plant will be c.600kt of concentrate per annum of which
330Ktpa is expected to be used to process concentrate from Malomir
and 240Ktpa to process concentrate from Pioneer. The remaining capacity may be
used to accept concentrate from third parties for toll treatment.
The contract for
the delivery of key autoclave equipment for the POX plant including the first
four 60m3 autoclaves has been signed with Outotec
with a contract price of c. 30 million (to be paid in 2011 and 2012). In addition, the
Group has signed a non-binding five year strategic co-operation agreement with Outotec to provide engineering consulting services in
Russia, CIS and other countries. Further contracts for equipment are being
negotiated and are expected to be signed in Q3 2011.
A contract for the
design and equipment of the oxygen plant has been signed with LLC Premium
Engineering, a subsidiary of Red Mountain Energy Corporation, for a contract
price of c. 22 million.
Malomir
The flotation
plant at Malomir is planned to be constructed in
three stages with a total design capacity of 6.0Mtpa.
The first
flotation line at Malomir is on-track to be
commissioned in the middle of 2012 and will have a design capacity of 2.0Mtpa.
Work on this first line has already begun. The first stage will utilise the grinding section of the existing RIP plant at Malomir and its supporting infrastructure, allowing
substantial capital cost savings. The second stage envisages an additional
2.0Mtpa flotation line, to be commissioned in Q4 2012. Work on this line will
begin in Q3 2011. A further 2.0Mtpa line is expected to be commissioned in Q3
2013.
The contract for
construction and installation of the flotation plant at Malomir
has been signed with Outotec, with a contract price
of 24 million.
Pioneer
The transition to
processing refractory ore at Pioneer is also envisaged to occur in three
stages, also taking the final design capacity to 6.0Mtpa.
The first
flotation line is planned to be commissioned in Q2 2013 and will have a design
capacity of 2.0Mtpa. Work on this line will begin in Q1 2012. The second stage
envisages the addition of a further processing line of a similar design, also
with a capacity of 2.0Mtpa. It is planned that work on this stage will commence
in Q3 2012 and commissioning is anticipated for Q4 2013. Work on the final
flotation line is currently planned to start in Q1 2013 with commissioning
expected for Q1 2014. However, exploration work at Pioneer continues to find
further material suitable for direct cyanide leaching at the existing RIP
plant. It is therefore likely that a part of the RIP plant will remain in use
beyond 2014 before it is finally converted to produce flotation concentrate,
postponing the commissioning of the third stage.
Capital
Expenditure
The Group is
budgeting to spend a total of US$181 million on the POX hub. Of this
US$181 million, US$77 million is budgeted for 2011, US$101 million will be
spent in 2012 and US$3 million will be spent in 2013.
Workshop
Petropavlovsk PLC
is holding a workshop on its planned methods for the processing of refractory
material today at 09:15 (BST). Speakers will include members of the Group's
senior management and representatives from one of the Group's research and
development centres, PHM Engineering and Outotec.
A
live webcast of the workshop will be available in English and in Russian on the
Company's website www.petropavlovsk.net.
The
webcast will be followed by a dial-in question and answer session. Participants
without access to the internet may also dial in to listen to the workshop. To access this facility, please dial +44(0) 208 817 9301.
When prompted, please enter the confirmation number 5099935 for English or 5099946 for Russian.
A playback of the
webcast and the question and answer session will be available to view later today
on www.petropavlovsk.net. Transcripts will be available on request.
A PDF of the
presentation will also be available on www.petropavlovsk.net.
Enquiries:
Petropavlovsk PLC
Alya Samokhvalova
Rachel Tuft
|
+44 (0) 20 7201 8900
|
Merlin
David Simonson
Fiona Crosswell
|
+44 (0) 20 7726 8400
|
Forward-looking statements
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