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Peter Hambro Mining (POG)

  Print      Mail a friend       Annual reports

Monday 26 July, 2004

Peter Hambro Mining

Trading Statement

Peter Hambro Mining PLC
26 July 2004


                             Peter Hambro Mining Plc

                                 Trading Update

26 July 2004

Highlights

• 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 
  production
• 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
                        
Pokrovskiy Mine
                        
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.

Mining operations

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     
                        
                      Mining
                      Total Material      m3 '000    2,034    1,950        4%
                      Moved
                      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%
                      high-grade ore
                      Average grade         g/t        4.2      4.2         0%
                      Gold content        oz '000     41.4     34.4        20%

                      Plant
                      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%

                      Heap Leach
                      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   -------   ------ -------- ---------
                      ------------------
                       
RIP Plant
                        
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 
exceeded.
                        
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.
                        
Heap Leach
                      
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

                                                    2003                 2004
                                                  ------               ------
                       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
                       July                       17,275
                       August                     17,439
                       September                  13,053
                       October                    10,732
                       November                    7,710
                       December                    8,054
                                              ----------         ------------
                                                 121,194               60,025
                                              ==========         ============

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 
Pokrovskiy Rudnik.

Pioneer Deposit
                        
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 
this area.
                        
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 
as follows:

                                   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.
                                   
Chagoyansk
                        
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.
                                    
Omchak JV
                        
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.
                                   
Ametistovoye Deposit
                        
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.
                                   
Corporate Activities
                        
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 
projects.
                        
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 
394905.
                        
Enquiries:
                        
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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