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Peter Hambro Mining (POG)

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Thursday 27 January, 2005

Peter Hambro Mining

Trading Statement

Peter Hambro Mining PLC
27 January 2005



27th January 2005

                             2004 Trading Statement

Peter Hambro Mining PLC ("PHM" or "the Group") issues this statement as an
unaudited update on 2004 trading and in advance of its full year results
announcement expected in April 2005.

Highlights for 2004

   •Attributable gold production increased by 41% to c.209,000 ounces
   •Successful commissioning of 50% increase in milling capacity at
    Pokrovskiy Rudnik in October 2004
   •Average realised sales price of US$402/oz during 2004 was 11% higher than
    2003
   •New relationship with the International Finance Corporation with proposed
    development funding
   •Generation of JORC standard reserves and resources of Pokrovskiy pit
    shell demonstrating reliability of Russian system of classification
   •Exploration results at the newly acquired Yamalzoloto indicate increased
    gold resources and potential for other metals such as iron and cobalt
   •Continuing exploration at the Pioneer deposit encountered promising
    grades in two new areas.

Production

Attributable total gold production for 2004 increased by 41% to c.209,000 ounces
(2003 production: c.149,000 ounces). The increase represents a 3% improvement on
the Group's forecast for the year, released April 2004. As previously, the Group
expects to provide 2005 annual production forecast at the time of the full year
preliminary results.

Ore processing at Pokrovskiy produced c.154,000 ounces, a 27% increase over 2003
levels. This was facilitated by:
-         Pokrovskiy's new process circuit, which enlarges the through-put
          capacity by 50% to 1.5 million tonnes per annum, was commissioned as 
          planned in October 2004.
-         New mining equipment (including ten Belaz 45 tonnes capacity dump
          trucks and two Komatsu-Demag hydraulic excavators with bucket 
          capacities of 10 and 5.7 cubic metres respectively) allowed 
          optimisation of mining operations.
-         Implementation of a double-stacking technology in heap leach
          operations increased the recovery rates in this process from 45% in 
          2003 to up to 60% in 2004.
-         Use of a Micromine computer geological model for operational planning
          of mining works, which increased efficiency of the deposit development.

Omchak Joint Venture (Magadan Region) production was c.88,500 ounces (2003:
56,295) of which PHM's attributable share was c.57,000 ounces. PHM's interest in
Omchak increased from 50% to 65% with effect from April 2004, in accordance with
the original joint venture agreement.

The Rudnoye Joint Venture, Amur Region, generated its first contribution to
Group attributable production. The first gold was produced and Pokrovskiy
Rudnik's 50% share was 722 ounces. The deposit is one of two assets in the joint
venture and initial production comes from small scale alluvial mining at site.

PHM Schedule                            Units               2004          2003
Pokrovskiy deposit
    Total material moved               '000 m3             4,540         3,831
        Including advanced             '000 m3             1,028             -
        stripping
    Ore mined                        '000 tonnes           1,045         1,053
        Grade                            g/t                 3.4           3.5
        Gold                           '000 oz             113.7         116.9
    Including rich ore               '000 tonnes             608           656
        Grade                            g/t                 4.5           4.5
        Gold                           '000 oz              88.5          95.4
Pioneer deposit
    Total material moved *             '000 m3               228             -
    Ore mined                          '000 m3                43             -
        Grade                            g/t                 7.6             -
        Gold                           '000 oz              10.4             -

* Pioneer Bulk Sample
The processing of Pioneer ore was undertaken as part of a trial mining exercise
within the pre-feasibility study of the Pioneer deposit. The study has shown
there was a significant content of visible, large gold particles in the ore and,
during processing at the Pokrovskiy mill, these were found to congregate and
remain in the grinding process rather than flow with the invisible particles to
the leach tanks. This anomaly has made the gold recovery slower than expected
but, importantly, no additional gold has gone to the tailings dam. Accordingly
the gold in the process circuit, for which PHM does not take an accounting
credit, was unusually high at the year end. It is anticipated that this
gold-in-circuit will be recovered in 2005.
In light of the above, initial results from the trial mining show that, when a
decision is taken on the full process plant, it may be prudent to incorporate a
gravity separation circuit to gain the coarser fraction of the gold at the start
of the process. Gravity separation is a well proven and low cost method of
extracting gold from ore which should allow an overall recovery process with a
similar rate to that at Pokrovskiy.
The initial results from processing led the Group to reduce the size of the bulk
sample from 100,000 tonnes.

PHM Processing Schedule                Units                  2004        2003
Resin In Pulp plant

   Ore from Pokrovskiy pit          '000 tonnes                673         661
     Grade                              g/t                    4.2         4.4
     Gold                              000 oz                 90.6        93.1

   Ore from stockpiles              '000 tonnes                454         202
     Grade                              g/t                    3.1         3.6
     Gold                             '000 oz                 45.5        23.4

   Pioneer (bulk sample *)          '000 tonnes                 38           -
     Grade                              g/t                    8.4           -
     Gold                             '000 oz                 10.1           -

   Total milled                     '000 tonnes              1,165         863
     Grade                              g/t                    3.9         4.2
     Gold                             '000 oz                146.2       116.6
     Recovery                            %                    90.7        90.9
     Gold recovered                   '000 oz                132.7       106.0

Heap leach

   Ore stacked                      '000 tonnes                620         503
     Grade                              g/t                    1.8         2.1
     Gold                             '000 oz                 35.3        34.1
     Recovery                            %                    60.0        44.8
     Gold recovered                   '000 oz                 21.3        15.3

TOTAL
     Total gold recovered             '000 oz                153.9       121.2


Exploration & Development

Prefeasibility Studies at Pokrovskiy & Pioneer
Throughout the year the Group has been working on the pre-feasibility scoping
studies for the development of Pioneer and the associated development plans for
the flanks of the Pokrovskiy deposit. These have included preliminary works on
geology, hydro-geology, engineering and the like. It is expected that the
processing on Micromine of assay results to be received from the new laboratory
will allow a strategic decision to be made in mid-2005 on the way in which the
Pioneer deposit and the Pokrovskiy flanks will be mined and the resulting ore
processed. The Group intends to publish the results of this analysis in the
second half of 2005.

Laboratory Capacity
Due to limited laboratory capacity in the past and the priority given to
processing samples from production geology, on average only 20% of the Group's
exploration samples have been assayed. To deal with this backlog new operational
laboratories have been built at Pokrovskiy and Tokur and the processing of
samples has commenced at the new central exploration laboratory at
Blagoveshensk. Together these give the Group one of the largest and most modern
fire assay facilities in Russia and are enabling a steady reduction in the
backlog of work.

Reserves & Resources
As usual, a full update on the Group's reserves and resources is intended to be
published at the same time as its Annual Report and Accounts in May 2005.

PHM Summary Schedule of Exploration Work
--------------------------------------------------------------------------------
                   --------   --------    ---------      ---------      -------
Site              Trenching   Drilling      Samples    Exploration        Money                
---------          --------   --------    generated      Mapping *        Spent      
                                          ---------      ---------      -------
                        m3         m3                          km2      000 US$ 
                                                                             **
                   --------   --------    ---------      ---------      -------
                                       
                   --------   --------    ---------      ---------      -------
Pokrovskiy
Flanks                 n/a      9,873        7,000                       1,391
---------          --------   --------    ---------      ---------      -------
Pioneer             39,847     10,742       15,760                       2,760
---------          --------   --------    ---------      ---------      -------
Other deposits      55,968     10,799       20,683          210          3,699
---------          --------   --------    ---------      ---------      -------
                                       
                   --------   --------    ---------      ---------      -------
Total               95,815     31,414       43,443          210          7,850
---------          --------   --------    ---------      ---------      -------

* At scales of 1:10000-1:25000 for Pokrovskiy & 1:10000-1:50000 for Rudnoye
** Including money spent to date

Pioneer Deposit
The Group's exploration team continued to assess the reserve and resource
potential at Pioneer. The full results of the work will be detailed in the 2004
Annual Report. The two highlights are listed below:
-         It was found that the junction region of the Bakhmut and Apophysis 1
          zones forms an isometric stock-work ore body in the form of an ore 
          shoot which dips to the south-west. The maximum size of the ore body 
          is 50m 40m. Assays of core and trench samples show the gold grade 
          varying between 0.4g/t and 512.6g/t, with an average grade 9.85g/t 
          over a thickness of 27m. Ore occurrences continue to a depth of 240m 
          and the zone is open at that depth.
-         The presence of an ore shoot in Promezhutochnaya zone was confirmed.
          Drill hole no.404 intersected two ore intervals, the first with 
          thickness 7m and grades up to 11.4 g/t, and the second with thickness 
          15m, and grades 5-8 g/t.

Yamalzoloto
This project, which was referred to previously as Novogodnee Manteau (acquired
April 2004), is located in the Yamal district, inside the Arctic Circle, some 2
hours flying time form Moscow. Yamal hosts a major portion of Russian natural
gas reserves and has more highly developed infrastructure more highly developed
than some of the other areas of Russia. Exploration expenditure on this project
has been approximately US$4.5million, covering some 16,000m of drill holes,
10,000 m3 of trenching and 13,000m of lithogeochemistry as well as associated
test work.
The results of this work, which include: the discovery of possible additional
resources and new ore bodies in the licence area; potential move to open pit
mining; and commercial quantities of other metals such as cobalt and iron ore,
are very encouraging.
The Group has commissioned a report on Yamalzoloto from SRK, UK based mining
consultants, receipt of this is expected within a month.

Chagoyansk
The Group expenditure for the year on this project, related to which it has a
memorandum of understanding with Rio Tinto, was approximately US$100,000. Part
of this expenditure financed an airborne geo-magnetic survey which identified
anomalies that concur with those previously indicated in the publicly available
historic data (the historic data shows 2.7g/t for 35m and 6.0g/t for 45m).
Potassium and thorium anomalies clearly indicate zones of mineralisation.

2005 Exploration Budget
The Group has set an initial exploration budget for 2005 of US$20m.

Corporate affairs

International Finance Corporation
As previously announced, agreement was reached with International Finance
Corporation, the commercial arm of the World Bank, to conditionally subscribe
for US$15 million of new equity and a similar value of warrants.

Ametistovoye
The Group announced its decision to relinquish its option to acquire the
Ametistovoye deposit in Kamchatka because its due diligence evaluation of the
deposit's economic potential, when compared to other projects in the Group's
portfolio, did not show it to warrant expenditure of the purchase price and
capital expenditure required.

Financial Position
In line with the Group's intention to raise project finance to help fund the
development of both Pokrovskiy and Pioneer, the Group has continued to reduce
levels of debt. Where possible the Group has paid down debt, the remaining debt
being residual minimal working capital facilities, resulting in a net positive
cash position at the year end.

Sales Prices
Prices achieved on gold sales during the year have been higher than in recent
years. The unaudited average sales price realised during 2004 was US$402/oz
(2003 - US$363/oz). The Rouble gold price started the year at R12,134 per ounce,
traded as high as R17,783, as low as R10,943 and ended the year at R12,003.

Chairman's comments

Commenting on the above, Peter Hambro, Executive Chairman, said:
"Unaudited production results show that the Group has done substantially better
than last year and even a little better than forecast. Once again the Pokrovskiy
Rudnik team is to be congratulated both on its successful mining and processing
efforts and the accuracy of its predictions.
The Group is well served by its exploration portfolio and, as usual, a full
report on this will be made in the spring, at the time it publishes its Annual
Report. However the highlights of exploration at Pioneer, Chagoyansk and
Yamalzoloto are noteworthy and thus included in this statement and put in
context our decision to relinquish the option on Ametistevoye.
2005 will be an enormously important one for the Group, as we take the strategic
decisions on the future of Pokrovskiy and Pioneer and commence the full
feasibility studies. I look forward to working with the project lenders that
have expressed interest in financing the substantial capital expenditures that
these decisions will call for."

                                    - Ends -

Enquiries:

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

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



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