Peter Hambro Mining PLC
26 July 2004
Peter Hambro Mining Plc
26 July 2004
• Peter Hambro Mining Plc ("PHM" or the "Group") attributable production of
72,541 oz of gold for the first half-year of 2004 is 52% up on the same
period in 2003
• The Group is on track to meet its 204,000 oz per annum production target for
2004. Seasonal factors are expected to lead to an increase in production in
the second half of the year
• Pokrovskiy Mine production at 60,000 oz of gold for the half year is 26% up
on the first half of 2003
• Omchak Joint Venture production of 25,081 oz of gold (50% of which is
attributable to the Group) for this period is ahead of expectations. On the
basis of past experience a higher level of production can be expected in the
second half of the year because of the seasonal character of alluvial
• The opening of the Pioneer pit, which involved pre-stripping and additional
sampling, has supported the Group's confidence in a high-grade deposit. This
is proposed to be mined on a trial basis from September 2004 and the
previously indicated average grade of 14 g/t is considered achievable. High
grades, including visible gold, were encountered in the vicinity of the
planned starter pit
• Operating costs per ounce in the first half of 2004 at Pokrovskiy were reduced
substantially, compared to the previous year, due to a full production rate
being achieved from the Resin-in-Pulp (RIP) plant
• The Group raised £40m (before expenses) in equity funding for, among other
purposes, the further development of the PHM's existing and newly acquired
assets. Further discussion on development financing is underway with a number
of Russian and International Banks
Updates by Project
In the first half-year of 2004, Pokrovskiy Rudnik has continued to improve on
the success achieved in 2003, both in production and profitability; 60,000 oz
of gold were recovered compared to 47,700 oz during the same period in 2003.
A major success of the half year was the increase in gold production by 26% and
substantial reduction in operating costs in comparison to the first half-year
of 2003. This was achieved due to the stable operation of the Resin-in-Pulp gold
extraction plant, with an achieved throughput rate of 1 million tonnes per year
and implementation of the Micromine computer model of the deposit. The use of
this model contributed greatly to optimisation of the extraction of mineral
resources, and resultant reduction in operating costs and increase in
profitability. A more comprehensive analysis of operating costs will be
included in the Group's September results.
Volumes moved in the year were increased, reflecting the improved efficiency of
the earthmoving fleet. The development of the pit, carried out according to the
mine plan, required waste pre-stripping which meant that less ore was moved.
However, the amount of high grade ore mined was increased, as was the use of
stockpiles, and this more than made up for the planned lower tonnage from the
pit. As a result of an increase in volumes moved, tonnes treated, and a slight
reduction in head grade, a significant improvement in the amount of gold
produced was achieved.
OAO Pokrovskiy Units 2004 2003 Var %
Rudnik 1H 1H
Total Material m3 '000 2,034 1,950 4%
Ore mined t '000 438 451 (3%)
Average grade g/t 3.5 3.1 13%
Gold content oz '000 49.6 44.7 11%
Including t '000 304 253 20%
Average grade g/t 4.2 4.2 0%
Gold content oz '000 41.4 34.4 20%
Ore from Pit t '000 304 234 30%
Grade g/t 4.2 4.3 (2%)
Ore from Stockpile t '000 202 128 58%
Grade g/t 2.8 3.3 (15%)
Total milled t '000 506 362 40%
Grade g/t 3.7 3.9 (5%)
Gold Produced oz '000 53.9 41.5 30%
Ore Stacked t '000 309 351 (12%)
Grade g/t 1.8 2.1 (14%)
Gold Produced oz '000 6.2 6.1 2%
------------------ ------- ------ -------- ---------
Total Recovered oz '000 60.0 47.7 26%
Gold - Pokrovskiy ------- ------ -------- ---------
In the half-year 506,000 tonnes were processed through the RIP plant, compared
with 362,000 in the first half of 2003, showing a 40% increase and in line with
design capacity. The average grade which was put through the mill was 3.7 g/t,
the result of mixing 4.2 g/t material from the pit and lower grade ore of 2.8
g/t from stockpiles. RIP plant production in the reporting period corresponded
with the planned production parameters, and, during the whole of the first 6
months of 2004, which included the ramp up period, met its improved design
production rate of 1 million tonnes of ore per year. This rate is now being
Pokrovskiy Rudnik is on target with its plans to commission the new grinding
circuit in the plant in October 2004, with a designed annual capacity of 0.5
million tonnes of ore, thus increasing overall plant capacity to 1.5 million.
Furthermore it is planned to mill 100,000 tonnes of high grade ore from Pioneer
starting in September.
In the first half of 2004 the Pokrovskiy Rudnik altered the design of the heaps,
changing to double stacking in order to increase the recovery rates during the
heap leach process. The success of this is confirmed by actual production
results in the first half-year of 2004 when 6,200 oz of gold were produced. This
demonstrates the superior recoveries which make up for the lower tonnage
stacked at a lower grade. Double ore stacking also allows increased volumes.
During 2004 it is planned to heap leach an additional 100,000 tonnes of ore (an
increase of 20%).
Historically the Pokrovskiy Rudnik's production during the first half of the
year has been lower than in the second half due to the lower temperatures. Low
temperatures decrease heap leach production and have a small impact on
production through the mill.
Pokrovskiy Rudnik gold production 2004 vs 2003 monthly
Month Oz produced Oz produced
January 6,466 7,398
February 6,530 6,855
March 4,967 9,661
April 5,890 9,005
May 9,861 11,243
June 13,217 15,863
Exploration and development
During the first half of 2004 further exploration works were undertaken on the
Pokrovskiy deposit and its flanks. 3 drill holes were drilled at the western
flanks of the deposit defining thick (up to 25 metres) mineralised zones. These
zones are similar in their geological structure to the mineralisation at
Exploration and development
The intention to make an early decision on development of the Pioneer project is
reinforced by new geological findings resulting from the extensive exploration
works on the deposit during the first part of the year.
This work was mainly concentrated on Apophysis No1 and the Promezhutochnaya ore
zone, which are both located within the area of the future starter pit.
Apophysis No1 was followed north-east for a distance of 320 metres by
intersecting drill-holes. A zone of altered ore with a thickness of 15 metres
was defined. Assay results are awaited.
At the junction area of Apophysis No1 and Bakhmut zone, a 150m x 120m excavation
has been dug, trenched every 4m and sampled every metre within the trenches to
give a sampling level suitable for production. Based on the results of the 10%
of assays already received, the surface outcrop of Apophysis No1 was defined in
The geological structure of the joint part of Apophysis No1 and Bakhmut zone is
a stockwork. In the central part of this stockwork, which will be exploited by
the test pit, the content of gold in some samples reaches 200-350 g/t and
averages 14.1 g/t for a thickness of 46 metres. The stockwork containing high
grades has been intersected at depth by three new drill holes showing average
grades of 19.86 g/t for a thickness of 30.5 meters at a depth of 30-60 meters.
Previous drill holes show the mineralisation continues to a depth of 150 metres.
It is still open at depth. PHM intends to start test mining in this area from
September as a preliminary step towards taking a decision to begin production.
Knowledge gained from the start of trial mining has enabled a better
understanding of the nature of high grade ore at Pioneer, which is represented
by thin (3 - 15 mm) quartz - limonite veins, containing high grade gold. As a
result of this the PHM needs to add to its sampling method on the deposit
because the present method of sampling could cause understatements in the
assessment of the PHM's reserves/resources base if thinner veins were missed.
The findings have confirmed the PHM's expectations about the substantial
potential of Pioneer.
The Group's Annual Report shows that the Pioneer deposit was thought to host
2.2 million ounces of C reserves and 1.0 million ounces of P1 and 7.0 million
ounces of P2 and P3 resources as of the 31 December 2003. Further reserve and
resource estimates will accompany the full half year results announcement.
Typographic error in Annual Report
The Peter Hambro Mining plc 2003 Annual Report contains a misprint in the
Reserves and Resources Table for the Pioneer Deposit (Page 12). The Apophysis
Number 1 ore tonnage for 2004 is understated by a factor of 10 whilst the sum
of gold contained is correct. The Apophysis 1 section of the table should read
Status at 25.02.03 Status at 01.01.04
Category Ore Gold Ore Gold
(t'000) (oz'000) (t'000) (oz'000)
Apophysis 1 C2 278 634 1,540 425
P1 - - 1,590 338
It should be noted that the high-grade area identified in 2003 has now been
shown to be surrounded by a far larger low grade area.
In March 2004 PHM announced the successful acquisition in an open auction of the
combined exploration and mining licence over the Chagoyansk gold property in the
Amur region, Far East of Russia. The Group's Chief Geologist has expressed the
belief that the geological environment at Chagoyansk is similar to the "Carlin
Trend" Group of deposits in Nevada, USA. PHM also announced the signing of Heads
of Agreement covering a joint venture agreement in respect of Chagoyansk with
Rio Tinto, one of the world's largest mining companies. During the subsequent
months the Group has been working on the finalisation of all the paperwork and
has been making preliminary arrangements to start surveying work on the deposit.
Detailed agreements for the operation of the joint venture with Rio Tinto are
being progressed whilst specific planning for exploration work is underway.
Production from the 50%-owned Omchak JV is ahead of target for the year. In the
first half of 2004 the JV produced 25,081 oz of gold, of which 50% is
attributable to Peter Hambro Mining. The JV entities produced 12% more than in
the corresponding period last year (22,356 oz in the first half year 2003).
Berelekh, one of the JV's entities, is an alluvial gold producer which generates
most of its income in the second half of the year because of the seasonal
character of alluvial production. The Group expects Omchak production in the
second half of the year to be significantly higher than in the first half 2004.
Furthermore the effect on Peter Hambro Mining's attributable production will be
greater as in 2003 PHM only accounted for the share of production from August at
the inception of the JV.
Other exploration work
Further exploration works were carried out across all the other projects of the
Group, focusing more on regional exploration and target generation, than
definition. 354 km of geological exploration traverses were made and 320 km were
tested by lithogeochemical sampling on 100x20 m grids. A geophysical survey has
been undertaken on 115 km of trenches and 92,900 m(3) of mechanical excavation
of trenches have been done. 6,744 metres of drill holes were drilled.
Approximately $1.6 million was spent on these works.
A fuller statement of Exploration Results will accompany the Group's Half Year
Results to be released at the end of September.
On the 17th June 2004 Peter Hambro Mining announced that it has signed a
memorandum of understanding to acquire the company that holds the licence for
the Ametistovoye Deposit in Kamchatka located in the Russian Far East, with
Russian C1 & C2 reserves of approximately 1.7 million ounces of gold and over
5 million ounces of silver. PHM is undertaking due diligence on the deposit.
In May 2003 the Group successfully completed an equity fundraising of £40m
(before expenses). These funds are being used for (among other purposes)
financing of the Group's projects.
PHM is in discussion with several financial institutions for project finance
for a number of different Group projects.
Commenting on today's announcement, Peter Hambro, Executive Chairman of Peter
Hambro Mining Plc said:
"I am pleased to report that, at the end of the first half of the year, it seems
that we are well on track to meet our 2004 production target of 204,000 oz and
that significant progress has been made in further development of all our
We are very enthusiastic about our new findings on Pioneer, where knowledge
gained from opening the trial pit and further exploration confirms our original
optimism, and we are looking forward to production decisions to be made at
Pioneer and Pokrovskiy Rudnik which we believe will put us in a strong position
to meet our 5-year production target of 1million ounces of gold per year.
It is further reassuring to see that other major international mining companies
have begun to take note of Russia's potential with recent investments and I
welcome them warmly to the Russian gold industry."
A conference call to discuss today's trading update will be hosted by Peter
Hambro Mining PLC at 11.15 (UK time) today, Monday 26th July. The Dial-in number
is +44 (0) 12964 80100 and the pass code is C817716. Replay will be available
for seven days after the call has finished on +44 0129 6618700 with access code
Alya Samokhvalova, Director of External Communications
Peter Hambro Mining +44 (0) 20 7201 8900
Tom Randell/ David Simonson
Merlin +44 (0) 20 7653 6620
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