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Peter Hambro Mining (POG)

  Print      Mail a friend       Annual reports

Wednesday 22 September, 2004

Peter Hambro Mining

Interim Results

Peter Hambro Mining PLC
22 September 2004

                            Peter Hambro Mining plc
                Interim report for the period ended 30 june 2004

On its 10th Anniversary Peter Hambro Mining plc is pleased to present the
results of a successful half year's activity.

Highlights                   6 months to 6 months to Variance for 12 months to
                               30/6/2004   30/6/2003       period   31/12/2003
-------------------           ----------   ---------    ---------   ----------
Rudnik gold
production                     60,025 Oz   47,700 Oz        +25.8%  120,641 Oz
------------------            ----------  ----------    ---------   ----------
Other attributable gold        14,307 Oz        0 Oz           --    28,148 Oz
production                    ----------  ----------    ---------   ----------
production                     74,332 Oz   47,700 Oz        +55.8%  148,789 Oz
------------------            ----------  ----------    ---------   ----------
Rudnik Cash
Costs (Gold
(US$/oz)                          US$130      US$140        -7.1%       US$105
Rudnik average
gold price
(US$/oz)                          US$394      US$346        +13.9%      US$361
------------------            ----------  ----------    ---------  -----------
Figures in US$'000 unless    6 months to 6 months to Variance for 12 months to
otherwise stated               30/6/2004   30/6/2003       period   31/12/2003
------------------            ----------  ----------   ---------- ------------
Group and
share of joint
ventures                          28,182      17,554        +60.5%      54,260
-------------------------       --------    --------     --------     --------
profit                             5,316       4,169        +27.5%      13,795
-------------------------       --------    --------     --------     --------
Pre tax profit                     4,427       2,895        +52.9%      16,257
-------------------------       --------    --------     --------     --------
retained for
the period                         3,214       2,656        +21.0%      10,383
-------------------------       --------    --------     --------     --------
Net cash
inflow from
activities                         4,136       2,189        +88.9%      11,785
-------------------------       --------    --------     --------     --------
Earnings per
share, US$                          0.05        0.05            -         0.18
-------------------------       --------    --------     --------     --------
earnings per
share, US$                          0.05        0.05            -         0.17
-------------------------       --------    --------     --------     --------
average number
of shares
('000) during
the period                        65,159      53,420        +22.0%      58,768
-------------------------       --------    --------     --------     --------
Net Assets (at
close of
period)                          188,558     108,529        +73.7%     116,366
---------------------           --------    --------     --------     --------
(at close of
period)                           35,192     (17,869)      +196.9%     (18,475)
---------------------             --------    --------     --------     --------

Note: In 2003 the second half year's production was 53% higher than the first
half due to the winter period.


During the first six months of 2004 in comparison to the same period of 2003:

• Group attributable gold production increased by 56% to 74,332 ounces;
• Gold Institute Cash Costs at Pokrovskiy reduced by 7% to US$130/oz;
• The Group achieved an average of US$394/oz on gold sales,
  increase of 14%. PHM as a policy does not hedge gold production;
• Pokrovskiy post-tax profit increased by 78% to US$6.43 million;
• Group Profit for the period increased by 21% to US$3.21 million; and
• Group net cash of US$35.19 million compared to net debt of US$18.48 million
  at the 2003 year end.

Furthermore the Group achieved the following during the

• Expansion programme at Pokrovskiy plant nearing completion.Throughput 
  is expected to be increased by 50% to 1.5m tonnes per year with full
  commissioning in October;
• Micromine system up and running at Pokrovskiy, providing both an optimisation
  of mine planning and operational control on a daily basis. This contributes to a reduction
  of mining costs;
• Pokrovskiy deposit geologic model has been audited and confirmed by a
  qualified person under JORC code;
• Planned mining of high grade ore of Pioneer's Apophysis No1 commenced in September
  and is being processed at the Pokrovskiy mill; and
• Independent report on Tokur and surrounding deposits conducted by the
  State Geological Agency (Dalgeophysica)confirms the Groups original estimate on
  the significant potential of the deposit(about 1 million ounces in B and C
  Russian reserve categories, c.2.9 m oz of P1 Russian resource categories and 
  24.1 m oz in P2 and P3 Russian resource categories).

Chairman's statement

The Group celebrates its first decade of commercial life with excellent half year results 
particularly from Pokrovskiy.56% higher production, 7% lower costs and a 14% improvement in 
the gold priceis the combination of which every gold producer dreams. Add the Group's
exploration success at Pioneer and Pokrovskiy and the potential at Tokur,now confirmed
by Dalgeophysica, and at the other deposits and the picture
of a fully rounded mining company with both production and exploration is
It is particularly gratifying that we have achieved a cost reduction by 7% when
our energy prices in Russia have increased by approximately 25% in the same

What Pavel Maslovsky and his team in Russia have achieved is truly magnificent.
On behalf of all shareholders, I thank all those involved enormously.
Personally, I am also very grateful, on behalf of the Company, to the other
shareholders themselves, who have supported PHM in its endeavours during its
first ten years.

The audit work done by Micromine confirms the Pokrovskiy deposit ore model and I
look forward to the JORC code reserves and resources that will be derived from
the final report.

In every corner, the world daily becomes a more frightening place and
uncertainty, both physical and financial, dogs the lives of all of us. In such a
climate, gold, which relies on no one's promise, becomes a more and more
attractive investment medium. I believe that demand for physical gold and its
price in most currencies are likely to rise to reflect this.

As the Group starts the last quarter of its 2004 financial year, I am happy to
say that I find it in a very strong situation. It is profitable, has cash in the
bank and has reserves and resources that are growing and becoming better
defined. The gold price looks buoyant and the Group has a large number of new
projects to work on.

In specific terms, I am enthusiastic about the imminent 50% increase in
production capacity as the extension of the Pokrovskiy mill comes on stream in
October. In addition, trial mining of high grade ore from the Pioneer deposit
has started and this is already being treated in the Pokrovskiy plant.
Pokrovskiy Rudnik is actively planning for a further large increase in its
production capacity to handle the newly identified ore in the surrounding area.
The Group is also developing plans for the longer-term treatment of Pioneer's
ore and work to connect the electricity supply and substation is well underway.

It will take time and investment to bring these plans for the next phase to
fruition but, in the meantime, we believe that the 204,000 ounce production
forecast for 2004 will be achieved.

Peter Hambro

Pokrovskiy Operations Report

In the first half-year 2004, 60,025 oz gold were recovered compared to 47,700 oz
during the same period in 2003 with the cash cost per ounce at Pokrovskiy
reduced by 7% to US$ 130 per ounce - a major reason being an increase in gold
recovery by 21%. The principal achievements in the first half-year 2004 were
stable operation of the gold extraction plant, and optimisation of mine planning
and management, with the use of a Micromine geological model of the deposit.

Production for the first half of 2004 is to budget and on schedule to meet the
Group's forecast for the year.

OAO Pokrovskiy Rudnik        Units       2004 1H       2003 1H        Var %
-------------------        -------      -------       -------      ---------
-------------------        -------      --------      --------     ---------
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 Gold       oz '000          60.0          47.7            26%
-------------------        -------       -------       -------     ---------

Volumes of ore 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 proportionately 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 of ore moved, tonnes treated, and a slight reduction in head grade,
a significant improvement in the amount of gold produced was achieved.

OAO Pokrovskiy Rudnik        Units       2004 1H        2003 1H        Var %

Total Material Moved         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 high-grade ore      t '000            304            253          20%
- Average grade                  g/t            4.2            4.2           0%
- Gold content               oz '000           41.4           34.4          20%

Resin in Pulp Plant
In the half-year 506,000 tonnes were processed through the Resin in Pulp ("RIP") plant, 
compared with 362,000 in the first half of 2003, showing a 40% increase 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.

Commissioning of the third circuit at the RIP plant is expected to be completed
in the beginning of October, ahead of schedule. Full commissioning of the plant
is expected to take place during October resulting in a 50% increase in
throughput capacity to 1.5 million tonnes per annum.

An internal scoping study on a further series of increases to plant capacity at
Pokrovskiy is currently underway. The Group has a 1 million ounce per annum
production target from Pokrovskiy and Pioneer by the end of 2009. Significant
increases in production capacity at Pokrovskiy are planned to take advantage of
the recently discovered reserves and resources in close proximity to the
existing mill.

Heap Leach Operations
In the first half of 2004 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 the
remainder of 2004 it is planned to heap leach an additional 100,000 tonnes of
ore (an increase of 20%).

As part of the heap-leach optimisation process during the first half of 2004
Pokrovskiy Rudnik also commenced the construction of the third heap-leach pad.
This will allow an increase of c.67% of heap leach capacity together with a
flexibility to allow ongoing planned maintenance of the heaps during the year.

Although gold produced from heap-leach operations slightly increased in
comparison with the first 6 months of 2003 the contribution of the heap-leach to
overall production decreased as a result of the substantial increase in
production through the mill. An anticipated increased level of heap leach
production in the second half of the year due to the optimisation undertaken and
seasonal effects is expected to increase overall production levels.

GIS Operating Cost Analysis
As reported in the Company's 2003 Annual Report, the Group now reports and
breaks down its operating costs according to the internationally recognised Gold
Institute Standard.
                                   2004 1H      2003 1H                    2003
                                 Figures reported in US$ per oz of gold produced
Direct mining expenses               100.7          96.2                  80.3
Third-party smelting, refining
and transportation costs               5.8           3.6                   3.7
By-product credits                    (0.4)         (0.4)                 (0.3)
Other                                 24.2          40.4                  20.8

Cash Operating Costs                 130.3         139.8       -7%       104.5
---------------------            ---------     ---------    ------    --------

Royalties                             23.3          19.0                  22.1
Production taxes                       7.0          10.6                   5.0

Total Cash Costs                     160.6         169.4       -5%       131.6
---------------------            ---------     ---------    ------    --------

Non-cash movement in stock             7.9           9.6                   7.6
Depreciation/Amortisation             38.6          42.6                  35.8

Total Production Costs               207.1         221.6       -7%       175.0
---------------------            ---------     ---------    ------    --------

It should be noted that the 67% reduction in other costs resulted mainly from
economies of scale with the Group's increased production rate. The largest area
affected is in general administration where costs as a proportion of production
have decreased significantly. Direct mining costs were adversely affected by an
increase in fuel and electricity prices in Russia of approximately 25% in the
period. Accordingly the overall cost reduction of 7% is a great achievement.

Introduction of the Micromine planning system is in process.  Previously management's
reserves and resources model of Pokrovskiy deposit has been audited and confirmed by
Dmitry Pertel, Chief Geologist of Micromine, a qualified person under JORC code.  
Micromine expects that a full JORC code report will be available shortly.

Laboratory Analysis
Significant work has been undertaken by the Group to improve laboratory
capacity, previously a major bottle neck on Group exploration programmes. A new
facility is under construction at Pokrovskiy which should increase capacity by
250%. Sampling capacity is expected to increase from 4,000 assays a month to 10,000 assays a month.
Work should be completed in January and will cover the needs
of the geological teams at both Pioneer and Pokrovskiy.

In addition a new facility has been built near Blagoveshensk. This facility is
expected to be in operation in December 2004 and will fulfil the exploration
needs of the rest of the Group's gold portfolio. The designed capacity of this
laboratory is 30,000 samples a year. Additional capability will be installed to
fulfil geochemical analyses over 150,000 samples per year on 45 chemical

The Group is also modernising an existing analytical unit supporting exploration
works for Tokur and the surrounding group of deposits. A new set of modern
equipment is being installed which will provide capacity to analyse 30,000
samples a year.

Omchak JV Operations Report

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 of 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 due to the seasonal character
of alluvial production. During the half year period Berelekh upgraded its fleet
of loaders at total cost of US$2.1 million. These new vehicles should enable the
Berelekh to increase its gold production in the second half of the year.

The Group expects Omchak production in the second half of the year to be significantly
higher than in the first half 2004, as like PHM it is affected by climate.  Furthermore
the effect on Peter Hambro Mining's attributable production will be more significant due
to the previous year only accounting for the last four months, since inception of the JV.

Exploration & Development

This year in the Pioneer area 48 inclined exploration holes have been drilled
with a total length of 7,630m. 18 of these are short (30.6 - 100m)
exploitation-planning holes within the boundary of the planned open-pit on
Apophysis 1 and the Promezhutochnaya zone. This allowed, as a result, a
drillhole grid 40-20m x 20m within the pits. 2,251m of shallow 'mapping' holes
have been drilled during exploration. Deep drilling was concentrated on tracing
extension of Apophysis No.1 to the north-east, and an ore shoot / stockwork to
the west. On the Promezhutochnaya zone, the estimation grid was infilled to 80 x
20m. As a result of this drilling, visible gold (grade in samples will be >100g/t)
has been identified here and it has been hypothesised that a second ore shoot
exists at the Pioneer ore occurrence, and this is currently being exploited.

As forecast, trial mining of high grades from Apophysis No. 1 commenced in July
and the first ore was delivered to the Pokrovskiy plant in September 2004.

The mining of the high grade Apophysis No 1 has commenced ahead of schedule, and
the first ore was treated through the Pokrovskiy plant in September. Exploration
at Pioneer has continued to identify generally higher grade Apophyses, which has
increased the Group's geological team's confidence in the grade and reserve
potential. Apophyses in the Bakhmut zone and a new Apophyses, in the
Promezhutochnaya zone have been traced at surface for several hundred metres,
with strong mineralisation, although assay results are still awaited. Such
discoveries support the Company's belief that a go-ahead decision on the
development of a large stand alone operation at Pioneer can be made in the near

The starter pit for the ore being treated through Pokrovskiy mill shows that the
intersection zone between the main orebody and the Apophysis 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 200-350g/t and averages 14.1g/t for a
horizontal thickness of 46 metres. The consistency of the stockwork has been
proved with 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 at least 150 metres, and it is still open
to depth. The high grade ore is contained in thin (3 - 15 mm) quartz - limonite

Geology of the deposit at Pioneer has demonstrated that the present method of
sampling being used could cause understatements in the assessment of the
resources base since using this method thinner veins could have been missed.
PHM's Annual Report for 2003 showed that the Pioneer deposit was thought to host 2.2
million ounces of "off balance" C Russian reserve category and 1.0 million
ounces of P1 and 7.0 million ounces of P2 and P3 Russian resources categories as
of 31 December 2003.

Flanks of the Pokrovskiy deposit.
Estimation drilling has been carried out on a 80m x 20m grid on the western
flank of Pokrovka 1, 80-160m west of Pit No.1. An extension of thick and
intensively silicified rock, similar to the Pokrovskoye deposit, has been
established. Assays from 900 samples are not yet available.

Tokur and the North East Deposits
The Group commissioned an independent report on the reserves and resources
estimated by the Group Chief Geologist at Tokur and the surrounding deposits of
Voroshilovskoye and the Malomir Surround. Dalgeophysica, the State Geological
Agency, and also the Group's independent contractor for the analysis of reserves
and resources at both Pioneer and in the Rio Tinto JV at Chagoyansk, have
supported that the estimates made by PHM were correct in both their quantum and
quality. A summary of this report will be made available on the Tokur page of
the Group's website.

Over the reporting period the Group concentrated on investigating the
mineralised zone of the Glavniy fault. First and foremost, the central part of
the fault was studied, in the region of the Tokur deposit. This section of the
ore zone has been explored with trenches on 40m intervals and deep drillholes on
20-40m intervals. According to the available isolated assays, gold grades in the
zone range from 1.2 to 18 g/t. Visually the enriched zone seems to extend 350m

Similar work has also been done on the western flank of the mineralised zone of
Glavniy fault in the region of the Innokentyevskoye deposit. Here, exploration
holes intersected a zone of silicified rock (up to 10.2-15m thick) visually
similar to the central Tokur area.
Furthermore, the Nalednaya zone has been traced to depth from drillholes on a
320-160m x 80m grid. A silicified/sulphide mineralised zone has been followed to
a depth of 100m.

Out of 1,500 samples collected this year only 41 have so far been assayed.
Exploration mapping work has continued and as a result of this work, a number of
prospective ore-bearing structures have been identified, but still need to be
confirmed by trenching.

Detailed exploration mapping has been completed on the north-east flank of
Malomir, on the extension of the Diagonalnaya zone. A wide (up to 500m) long
(2.5km) zone of geophysical anomaly has been established here. The Company's
geologists interpret this as a continuation of the Diagonalnaya ore zone
represented by a gently dipping mineralised crush zone in which about 80% of the
Malomir deposit reserves are concentrated. Work is continuing on the south-west

Exploration work is being completed (trenching, drilling) within the limits of
previously worked areas of ore zones Maiskaya, Oktyabrskaya, Voroshilovskaya. As
a result of field work carried out, areas of the previously worked rich ore
zones have been identified. Possible thickness would be not more than 5-7m, and
lateral extent 50-100m.  From a few assays (42 received out of 5000), the gold
grade is up to 17-20g/t.  In the area of high gold grades we have laid out an
infill drilling grid 40m x 40m which should allow (in 2005) us rapidly to
estimate an increase in reserves for TKZ (Territory Commission on Reserves) and
obtain an extended licence.

Other projects
During the half year 2004 exploration licences were obtained for three other
gold deposits in Amur region at very early stages of development: Sopka
Izvestkovaya, Gar II and Adamikha. Geological materials for these areas have
been collected. Planning for preparation of the project documentation is under

Rudnoye JV with OAO Soloviovskiy Mine.
The Group formed a 50/50 "Rudnoye" JV in August 2003 with OAO Soloviovskiy Mine,
with the main focus being the acquisition of hard rock exploration and
development assets within the JV partner's own established infrastructure
associated with its alluvial gold production operations. The JV was successful
in acquiring the Odolgo and Bryanta deposits, and it is now fast tracking these
towards small scale production.

Exploration work at Odolgo indicates that most of the gold in the deposit is
less than 1mm in grain size, and suggests that previous exploration work could
have underestimated final grades by as much as 1.5 to 2 times.

About 75% of an initial 76mm diameter drill programme has been completed and
around 1500 assays are still awaited. However, gold mineralisation has now been
verified as being associated with thin veinlets of amethyst quartz, at a density
of around 1%.

At Bryanta, an initial phase of mapping has been completed. Gold grades in grab
samples taken from occurences of argillaceous cretaceous volcanics have been
determined up to 1.5g/t

Novogodnee Manteau
When acquired in April 2004 the deposit had estimated C2 reserves of
approximately 418,000 ounces at an average grade of 14 g/t, P1 resources of
approximately 1.1 million ounces and P2 resources of approximately 2.0 million
ounces. However the Group is re-evaluating geological and geophysical data on
the deposit and the surrounding 42 km(2) licence area, since there are
indications that the original estimates may have under-estimated the reserves
and resources. This is because the deposit, in the light of recently acquired
information, seems to be amenable to open-pit, rather than underground mining
and thus the 7 g/t cut-off grade maybe too severe. In addition a number of
geochemical and geophysical anomalies have been identified. One of them,
Zapadnaya, is of particular interest; drilling and trenching here has started
and mineralization is identified. The Group expects to make further information
on Novogodnee Manteau available as soon as the data is better understood and is
currently considering the best way to take this project forward.

In June 2004 Peter Hambro Mining Plc signed a memorandum of understanding to
acquire the company that holds the licence for the Ametistovoye deposit in
Kamchatka. As part of its due diligence process, the Group has acquired
exploration and other data on the project from Eurasia Mining PLC, a company
which abandoned its option to develop the project. This material is being
evaluated by the Group's technical team.

Chagoyansk JV with Rio Tinto
We expect to conclude negotiations on the detailed terms of the joint venture
covering Rio Tinto's proposed formal ownership of a stake in the asset. Airborne
surveying of the asset has been commissioned from Dalgeophysica and is expected
to commence in early October. Further analysis of previously recorded data on
the asset and satellite photos have generated promising results.

Financial Analysis & Shareholders Funds

Reserve Bonus Scheme
The Company and the holders of the Reserve Bonus Units have agreed in principle
(subject to clarification of the Russian and UK tax consequences for both the
holders and the Company) to substitute the previously agreed RBS settlement
arrangements by a revenue based royalty.  If implemented this proposal creates
significant cash-flow savings for the Company.

Under the terms of the proposal the proposed 1.5% royalty on future revenue is
replacing the holders' current entitlement to US$5/oz per reserve ounce when
these are defined.  A revenue royalty is subject to the risks surrounding the
translation of reserve ounces to production.  These include:-

•Actual recoveries of gold that are less than the forecast gold reserves
•Time value discount, since royalty payments are made from production
 revenue, sometimes years after reserves are discovered, whereas the original
 scheme called for up-front payments before production commenced.

Accordingly, under the newly proposed arrangements, the holders of the scheme
will be agreeing to take on an increased project risk as well agreeing to
receive any prospective payments at a later date.

The Committee of Independent Directors is reviewing implementation of such a
scheme with advice from the Company's advisors and will make a recommendation as
soon as possible.  Once received, approval of the recommendation will be sought
from shareholders at the earliest opportunity.

During the period, the Group placed 10,000,000 ordinary shares at a price of
£4.00 per share, raising approximately US$71 m (before expenses).

Operating Currency
The Group's operating costs are predominately Rouble denominated but debt and
revenue is largely United States Dollar and gold price denominated. During the
first three months of the year the Rouble continued appreciating against the
Dollar. The picture reversed in April 2004 when the Dollar gained significantly
during the first three weeks of April and then stabilised at an average of RUR29
per US$1. Exchange rates moved from RUR29.45 per US$1 at 31 December 2003 to RUR
29.03 at the end of the first 6 months. As a rule the Group holds cash and debt
in US dollars

Treasury & Financial Analysis
Professional and banking fees associated with recent corporate activities
account for some US$1.5 million of expenses this half year and a temporary
exchange translation loss for the Company of US$381,000 has also reduced the
profit. The exchange loss of approximetely US$376,000 in the books of PHM plc
was a result of revaluation of some GBP16.8 million into US Dollar equivalent at
the exchange rate prevailing at 30 June 2004 but was reversed shortly after the
end of the accounting period when most of the sterling balances were converted
into US Dollars at a very favourable exchange rate.

The net cash position of the Group improved significantly, net debt of US$18.5
million at 31 December 2003 reversed to net cash of US$35.2 million as at 30
June 2004.

A new fleet of bulldozers and Belaz heavy vehicles increased our finance lease
liability by US$2.9 million in the first six months of the year. More finance
leasing activities are expected in the second half of the year as a result of
the planned production expansion.

Conference Call

A conference call to discuss the announcement will be hosted by Peter Hambro,
Chairman of Peter Hambro Mining PLC, at 12.00 noon (UK time), Wednesday 22nd
September. The Dial-in number will be +44 (0) 2089963950 and the pass code
895572#.  Replay will be available for seven days after the call has finished on 
+44 (0) 129 6618700 with access code 572908.


Alya Samokhvalova, Director of External Communications 
Peter Hambro Mining                                         +44 (0) 20 7201 8900

Tom Randell/ David Simonson
Merlin                                                      +44 (0) 20 7653 6620

Registered number: 4343841

Independent Review Report to Peter Hambro Mining Plc

We have been instructed by the company to review the financial information of
Peter Hambro Mining plc for the period ended 30 June 2004 set out on pages 12 to
21 and we have read the other information contained in the interim report and
considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.

Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the AIM
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.

Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board. A review consists principally of making
enquiries of group management and applying analytical procedures to the
financial information and underlying financial data and based thereon, assessing
whether the accounting policies and presentation have been consistently applied
unless otherwise disclosed. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with Auditing
Standards and therefore provides a lower level of assurance than an audit.
Accordingly we do not express an audit opinion on the financial information.

Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information of Peter Hambro Mining plc as
presented for the six months ended 30 June 2004.

St. Paul's House,                    MOORE STEPHENS
Warwick Lane,                        Registered Auditor
London EC4M 7BP                      Chartered Accountants

21 September 2004


Summarised Consolidated Profit and Loss Account for the period ended 30 June 2004
(expressed in US $'000s)

                              Six months to   Six months to            Year to
                              30 June 2004     30 June 2003   31 December 2003
                                      $'000           $'000              $'000

Turnover: group and
share of joint ventures              28,182          17,554             54,260

Less: share of joint
ventures' turnover                   (5,015)              -            (10,605)
                                   ----------      ----------        -----------
Group turnover            2          23,167          17,554             43,655

Operating profit                      5,316           4,169             13,795

Profit on disposals of
discontinued operations                   -               -                930

Share of operating
profit of joint ventures                 928               -              3,690

Amortisation of
goodwill in joint ventures              (389)              -               (391)

Interest payable and
similar charges           4          (2,009)         (1,678)            (2,536)

Other income                            581             404                769
                                   ----------      ----------        -----------

Profit on ordinary activities before

Group                                 4,131           2,895             13,082
Joint ventures                          296               -              3,175
                                   ----------      ----------        -----------
                                      4,427           2,895             16,257

Taxation on profit on
ordinary activities       5            (931)           (156)            (5,270)
                                   ----------      ----------        -----------

Profit on ordinary
activities after
Group                                 3,580           2,739              8,738
Joint ventures                          (84)              -              2,249
                                   ----------      ----------        -----------
                                      3,496           2,739             10,987

Minority interests                     (282)            (83)              (604)
                                   ----------      ----------        -----------

Profit retained for
the period                             3,214           2,656             10,383
                                   ==========      ==========        ===========

Earnings per ordinary
share                    14          $0.049          $0.050             $0.177
Diluted earnings per     
share                    14          $0.046          $0.047             $0.167

There are no recognised gains or losses other than those included in the profit
and loss account.

The accompanying notes are an integral part of this profit and loss account.


Summarised Consolidated Balance Sheet as at 30 June 2004
(expressed in US $'000s)

                                               30 June   31 December   30 June
                                                  2004       $'000        2003
                                                 $'000                   $'000
Fixed Assets
Intangible assets                                           
Mineral properties                              75,260      71,173      79,055
Capitalised exploration and
development expenditure                          4,747       2,159       2,816
Tangible assets
Property, plant and equipment                   45,137      39,163      35,712

Investments                              6          36           2       4,395
Investments in joint ventures:
Goodwill                                         2,559       2,969           -
Share of gross assets                           17,749      14,445           -
Share of gross liabilities                     (11,172)     (8,135)          -
                                              --------    --------    --------
                                               134,316     121,776     121,978

Current Assets

Stock and work in progress                      12,096      11,355       9,823
Debtors                                         19,504      16,235      16,296
Cash at bank and in hand                        52,544      14,827      27,484
                                              --------    --------    --------
                                                84,144      42,417      53,603
Creditors, amounts falling due
within one year                          7     (21,613)    (42,144)    (46,498)
                                              --------    --------    --------

Net Current Assets/(Liabilities)                62,531         273       7,105
                                              --------    --------    --------

Total Assets less Current
Liabilities                                    196,847     122,049     129,083

Creditors, amounts falling due after
more than one year                       8      (6,845)     (4,179)    (20,437)
Provision for liabilities and
charges                                         (1,444)     (1,504)       (117)
                                              --------    --------    --------
Net Assets                                     188,558     116,366     108,529
                                              ========    ========    ========

Capital and Reserves
Share capital                            9       1,193       1,010       1,010
Share premium                            9     153,932      85,252      85,252
Merger reserve                                   8,755       8,755       8,755
Contingent reserve on acquisition                6,304       6,304       6,304
Share incentive reserve                             40          40          40
Profit and loss account                         17,486      14,272       6,545
                                              --------    --------    --------
Equity shareholders' funds              10     187,710     115,633     107,906
Minority interests                                 848         733         623
                                              --------    --------    --------
                                               188,558     116,366     108,529
                                              ========    ========    ========

The accompanying notes are an integral part of this balance sheet.
These financial statements were approved by the Directors on 21 September 2004

P.C.P. Hambro                                                   P.A. Maslovskiy


Summarised Consolidated Statement of Cash Flows for the period ended 30 June 2004
(expressed in US $'000s)

                   Note    Six months to     Six months to             Year to
                            30 June 2004     30 June 2003      31 December 2003
                                 $ '000s          $ '000s               $ '000s
                            ------------      ----------             ----------

Net cash inflow
from operating                
activities           11           4,136               2,189               11,785

Net cash outflow
from returns on
investments and
servicing of finance            (1,976)             (2,055)              (3,699)

Taxation Paid                     (380)             (1,239)              (3,264)

and Financial investment        (7,118)            (11,921)             (14,001)

Acquisitions and
Disposals                       (6,986)             (5,821)              (9,468)
                               -------             ------               -------

Cash Outflow
before Financing               (12,324)            (18,847)             (18,647)

Cash(inflow)/outflow from
in debt and lease 
financing          12, 13       (18,827)             19,284                6,427

Net receipt from
issuing shares                   68,868              25,659               25,659
                                 -------              ------             -------
Increase in cash
at bank and in hand              37,717              26,096               13,439
                                  =======            ======              =======


Summarised Consolidated Financial Statements for the period ended 30 June 2004


1.       Principal Accounting Policies

The Company was incorporated on 20 December 2001, under the name Excelsior
Corporation plc as part of a planned reorganisation of an existing group headed
by Peter Hambro Mining Limited. Subsequent to the formation of the Company,
Peter Hambro Mining Limited was renamed Eponymousco Ltd ('Eponymousco') and the
Company was renamed Peter Hambro Mining PLC. On 17 April 2002, the Company
acquired the whole of the share capital of Eponymousco and on 29 April 2002
obtained admission to the London Alternative Investment Market ('AIM'). These
events are considered to be a reorganisation of a continuing business.

a)       Basis of preparation
The interim financial statements have been prepared in accordance with the
accounting policies set out in the group's financial statements for the year
ended 31 December 2003. The interim financial statements are unaudited but have
been reviewed by the auditors and their report is set out on page 1. The interim
financial statements do not comprise statutory accounts within the meaning of
Section 240 of the Companies Act 1985. The comparative figures for the year
ended 31 December 2003 are derived from the statutory accounts filed with the
Registrar of Companies. The auditors' report on the statutory accounts was
unqualified and did not contain a statement under Section 237 of the Companies
Act 1985.

b)       Principles of consolidation
The Company has two 100% subsidiaries: Eponymousco and Peter Hambro Mining
(Cyprus) Ltd (formerly Plastor Trading Limited). Plastor Trading Limited was
acquired in June 2003. Peter Hambro Mining (Cyprus) Ltd acts as a holding
company for 100% of the share capital of OOO Tokurskiy Rudnik. The Company also
has one joint venture: ZAO Omchak (50%), a joint venture incorporated in Russia
and a 50% subsidiary Victoria Resources Ltd, a company set up as part of the
joint venture arrangement with Rio Tinto. The results and balances of Victoria
Resources Ltd were excluded from consolidation on the grounds that they are not
material to the Group.

Eponymousco has one subsidiary, OAO Pokrovskiy Rudnik formerly JSC Pokrovskiy
("Pokrovskiy Rudnik"), a company incorporated in Russia. At 30 June 2004
Eponymousco owned 53.11% of Pokrovskiy Rudnik and a further 44.6% of the share
capital is held by the Company.

Pokrovskiy Rudnik has one Russian incorporated subsidiary, OAO Yamalzoloto
("Yamalzoloto") which holds the Novogodnee Manteau licence. Yamalzoloto (90%)
was acquired in April 2004. Pokrovskiy Rudnik also has one joint venture: ZAO
Rudnoye (50%), a joint venture incorporated in Russia.

The results and balances of the subsidiary undertakings, except for Victoria
Resources Ltd, have been consolidated in these financial statements. Joint
venture undertakings have been consolidated using the gross equity method.

2.       Turnover

All proceeds are receivable in the ordinary course of business and are recorded
exclusive of Value Added Tax.

It should be noted that emergence from winter temperatures in Eastern Russia
during the first part of the year causes lower heap leach production than in the
second half of the year. However dependence on the heap leaching operations was
reduced following the commissioning of the new plant in September 2002 which
allows year-round production.

Summarised Consolidated Financial Statements for the period ended 30 June 2004

Notes (continued)

3.       Reserve Bonus Scheme

The holders of the Reserve Bonus Units have, once again, re-evaluated the effect
of the scheme on the affairs of the Group and its shareholders. In light of
this, subject to clarification of the Russian and UK tax consequences for both
the holders and the company, the holders have indicated a willingness to
exchange their US$5 per reserve ounce units for a 1.5% production based payment.
The Committee of Independent Directors has received a recommendation from the
Group's Nomad, Canaccord (Europe) that implementation of such a scheme would be
in the Group's interest. The Committee of Independent Directors is reviewing
implementation of such a scheme with advice from the company's advisors and will
make a recommendation as soon as possible. Once received, approval of the
recommendation will be sought from shareholders at the earliest opportunity.

4.       Interest Payable and Similar Charges

                                                 30 June 2004     30 June 2003
                                                        $'000            $'000

Finance lease charge                                      309              143
Bank loan interest                                      1,961            1,672
Other loan interest                                        48              276
Share of joint ventures' interest payable and
similar charges                                           243                -
                                                       --------         --------

                                                        2,561            2,091
Less finance cost capitalised                            (552)            (413)
                                                       --------         --------
                                                        2,009            1,678
                                                       --------         --------

5.       Taxation

The Company does not anticipate a corporation tax charge for the period as all
profits arise in its subsidiary Pokrovskiy Rudnik and the Company itself has
suffered losses. The Russian profit tax charge for Pokrovskiy Rudnik for the
period ended 30 June 2004, based on the tax rate 24% was US$653,000 (2003 -
US$156,000). The rest of the tax charge relates to the deferred tax.

Summarised Consolidated Financial Statements for the period ended 30 June 2004

Notes (continued)

6.       Investments

                                   30 June 2004               31 December 2003
                                          $'000                          $'000

Other investments                            36                              2
                                         --------                      ---------

                                             36                              2
                                         --------                      ---------

The Company and the Group have the following material subsidiaries and other
significant investments, which were consolidated in these financial statements.

Principal          Country of      Principal       Principal       Effective
subsidiary         incorporation   Activity        Country of      proportion of
undertakings and                                    Operation       shares held
joint ventures                                             
---------------    -----------    ----------       -----------     ------------

Eponymouso Ltd     United Kingdom  Holding Company  United Kingdom         100%

Peter Hambro
(Cyprus) Ltd              Cyprus   Holding Company        Cyprus           100%

Rudnik                    Russia   Gold production        Russia          97.7%

Joint venture
Omchak                    Russia   Gold production        Russia            50%

Joint venture
Rudnoye                   Russia   Gold production        Russia            49%

Rudnik                    Russia   Gold production        Russia           100%

Yamalzoloto               Russia   Gold production        Russia            88%

In April 2004 Pokrovskiy Rudnik acquired 90% of the share capital of OAO
Yamalzoloto for a consideration of US$5.3m. Yamalzoloto has been consolidated in
these financial statements.

Summarised Consolidated Financial Statements for the period ended 30 June 2004

Notes (continued)

7.       Creditors, amounts falling due within one year

                                          30 June 2004        31 December 2003
                                                 $'000                   $'000
Trade creditors                                  2,629                   2,180
Tax liability                                      593                     349
Finance lease liabilities
falling due within one year                      1,753                   1,112
Note payable                                         -                   8,000
Short term loans                                 5,086                  11,795
Short term element of long term
loans                                            7,000                  11,500
Due to former shareholders of
subsidiary                                       1,449                   1,428
Due to Omchak joint venture                          -                   3,817
Other creditors                                  3,103                   1,963
                                              --------               ---------
                                                21,613                  42,144
                                              --------               ---------

8.       Creditors, amounts falling due after more than one year

                                       30 June 2004           31 December 2003
                                              $'000                      $'000

Due to former shareholders of
subsidiary                                    3,332                      3,284
Long term borrowing                           1,568                          -
Finance lease liabilities
falling due after one year                    1,945                        895
                                           --------                  ---------
                                              6,845                      4,179
                                           --------                  ---------


Summarised Consolidated Financial Statements for the period ended 30 June 2004

Notes (continued)

9.       Share Capital

Ordinary shares                                   30 June 2004       31 December 2003
                                                         $'000                  $'000
Allotted, called up and fully
At the beginning of the period                           1,010                    751
Issued in exchange for 100%
holding in Peter Hambro Mining
(Cyprus) Ltd                                                 -                    101
Other new issues                                           183                    158
                                                        --------              ---------
At the end of the period                                 1,193                  1,010
                                                        --------              ---------

Number of shares (par value £0.01)                      No'000                 No'000

Authorised                                             100,000                100,000
                                                        --------              ---------

Issued at the beginning of the
period                                                  63,999                 47,985
Issued in exchange of 100%
holding in Peter Hambro Mining (Cyprus) Ltd                  -                  6,000
Other new issues                                        10,000                 10,014
                                                        --------              ---------
At the end of the period                                73,999                 63,999
                                                        --------              ---------

During the period 10,000,000 shares in the Company were issued for consideration
of £4.00 per share. As a result of these transactions a share premium of
US$68.7m after commissions and share issue costs of US$4.5m was created.

10.    Equity shareholders' funds

                                     30 June 2004             31 December 2003
                                            $'000                        $'000

Opening balance                          115,633                        48,071
Issue of share capital                    68,863                        50,875
Issue of contingent shares                     -                         6,304
Profit for the period                      3,214                        10,383
                                        --------                     ---------
                                         187,710                       115,633
                                        --------                     ---------

The availability of the Group's reserves for distribution will be determined, to
the extent that they include reserves held in the Russian subsidiary and joint
venture undertakings, by applicable legislation in Russia and in accordance with
their statutory financial statements, which are prepared in accordance with
Russian accounting regulations. These differ significantly from UK GAAP. The
distributable reserves may therefore differ significantly from the figure shown


Summarised Consolidated Financial Statements for the period ended 30 June 2004

Notes (continued)

11.    Net Cash inflow from Operating Activities

                                                30 June 2004      30 June 2003
                                                       $'000             $'000
Cash received from customers                          23,167            17,554
Cash paid to suppliers and employees                 (14,108)          (11,845)
Other proceeds                                            53               291
Other expenses                                        (4,976)           (3,811)
                                                   ---------         ---------
Net cash inflow from operating activities              4,136             2,189
                                                   ---------         ---------

12.    Reconciliation of Net Cash Flow to Movement in Net Debt

                                                                  30 June 2004

Increase in cash at bank and in hand                                    37,717
Cash outflow from decrease in debt and lease financing                  18,827
Change in net debt resulting from cash flow                             56,544

New finance lease                                                       (2,862)
Exchange difference                                                        (15)
Movement in net debt in the period                                      53,667
Net debt at 1 January                                                  (18,475)
Net debt at 30 June                                                     35,192

The amount of cash outflow from decrease in debt and lease financing is net of
the Loan from HVB of US$15 million which was drawn down in two tranches in March
and May 2004 and fully repaid in June 2004.

13.    Analysis of Net Debt

               At   Cash Flow   Other non-cash changes    Exchange movement          At
        1 Jan. 04                                                            30 Jun. 04
            $'000       $'000                    $'000               $'000        $'000
Cash in
and at     
Bank        14,827      37,717                        -                   -       52,544

year       (31,295)     19,240                        -                 (31)     (12,086)

year             -      (1,584)                       -                  16       (1,568)

leases      (2,007)      1,171                    (2,862)                  -       (3,698)
            --------    --------                ---------            --------     --------

Total     (18,475)     56,544                    (2,862)                (15)       35,192
           --------    --------                ---------            --------     --------


Summarised Consolidated Financial Statements for the period ended 30 June 2004

Notes (continued)

14.    Earnings per ordinary share

                              Six months to   Six months to            Year to
                               30 June 2004    30 June 2003   31 December 2003
                                      $'000           $'000              $'000

Profit for the period US$'000         3,214           2,656             10,383
Weighted average number of
ordinary shares                  65,158,815      53,420,218         58,767,529

Earnings per ordinary share        US$0.049        US$0.050           US$0.177
                                  ---------       ---------          ---------
Weighted average number of
ordinary shares                  65,158,815      53,420,218         58,767,529

C shares                          2,759,368       2,759,368          2,759,368

Contingent shares                 1,500,000          91,667            803,571
                                  ---------       ---------          ---------
Weighted average number of
diluted shares                   69,418,183      56,271,253         62,330,468
                                  ---------       ---------          ---------
Diluted earnings per share         US$0.046        US$0.047           US$0.167
                                  ---------       ---------          ---------

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