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Peter Hambro Mining (POG)

  Print      Mail a friend       Annual reports

Thursday 22 September, 2005

Peter Hambro Mining

Interim Results

Peter Hambro Mining PLC
22 September 2005

                            PETER HAMBRO MINING PLC
                                Interim Results

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
                                30/6/2005   30/6/2004       period   31/12/2004
Rudnik gold
production, oz                    84,600      60,025          +41%     154,000
gold production, oz               17,578      14,307          +23%      55,000
gold production, oz              102,178      74,332          +37%     209,000
Rudnik Cash
Operating Cost
(GIS US$/oz)                      US$149      US$130          +14%      US$107
Rudnik average
gold price
(US$/oz)                          US$422      US$394           +7%      US$405

Figures in US$'000 unless      6 months to 6 months to Variance for 12 months to
otherwise stated               30/6/2005   30/6/2004       period   31/12/2004
Group and
share of joint
ventures                          42,311      28,182          +50%      85,502
profit                             8,022       5,316          +51%      22,703
Pre tax profit                     8,082       4,427          +83%      24,304
retained for
the period                         5,894       3,214          +83%      15,318
Net cash
inflow from
activities                         6,968       4,136          +68%      20,532
Earnings per
share, US$                         0.079       0.049          +61%        0.22
earnings per
share, US$                         0.075       0.046          +63%        0.21
average number
of shares
('000) during
the period                        74,618      65,159          +15%      69,615
Net Assets (at
close of
period)                          222,945     188,558          +18%     202,264
Net Cash (at
close of
period)                           13,377      35,192         -62%       13,271


Results for the first six months of 2005 (the "Period") for Peter Hambro Mining
plc ("PHM" or "the Group") compared to the equivalent period of 2004:

   • Attributable gold production increased by 37% to 102,178 ounces;
   • Gold Institute Standard Cash Operating Costs at Pokrovskiy have
     increased in line with the inflation and rouble appreciation, US$149/oz
     (6 months of 2004 - US$130/oz);
   • Average realised gold sales price was US$422/oz (6 months of
     2004 - US$394/oz) with immediate beneficial impact;
   • Profit retained up by 83% to US$5.9m (6 months of 2004 - US$3.21m);
   • Net cash of US$13.4m before the effect of the August 2005 US$140m fundraising;
   • Exploration and development spending during thePeriod on budget at US$16.0m
     up from the figure for 2004 of US$10.3m reflecting the increased E&D activity
     throughout the Group;
   • Interim resin-in-pulp plant ("RIP") expansion programme to 2.2m tpa on schedule.

Chairman's statement

On reading this report, even though it is only a snapshot of the Group's results 
for the first half of its financial year, you will, I am sure, join me
in congratulating all involved in the Group's operations, as it reports another
period of delivery on all targets. I am very pleased to report that
production for the first half of 2005 was on budget and on schedule to meet the
Group's production forecast of 271,000 oz of gold for the year.
The results of successful increase in Pokrovskiy's processing capacity to 1.5
million tonnes of ore per year show up fully in these figures for the first time
and the recently announced plans for interim expansion to 2.2m tpa is intended
to result in a tripling of capacity between 2002 and 2006. An increase in
production has offset to some extent increased costs and has enabled us to
minimise the increase in the unit cost per ounce. However, inflation,
particularly in energy costs, will make it hard for us to do this again until
the new production capacity at Pokrovskiy comes on stream. It should be
remembered, though, that costs are always higher in the first half.

Gold production at Pokrovskiy continues to be highly profitable and I am glad
that we have begun the implementation of this interim expansion as a first step
towards the million ounce target. This was accompanied by the US$140m
fundraising and the proceeds of this issue give greater certainty that our
target is achievable. I look forward to the remainder of the year with

Peter Hambro. Executive Chairman

Pokrovskiy Operations Report

In the Period, 84,600oz of gold were recovered compared to 60,025oz during the
same period of 2004 with direct mining expenses at Pokrovskiy kept generally in
line with the level in the compared period. The principal achievement during the
Period was the implementation of stable operations of the gold extraction plant
at the new increased capacity of 1.5m tpa.

Pokrovskiy Rudnik Processing Operations
                                                  6 months to 30 June
                                  Units       2005          2004         Var %
Resin in Pulp Plant
Ore from pit                     t '000      409.5           304           +35%
Average grade                       g/t        4.9           4.2           +17%
Ore from stockpile               t '000        281           202           +39%
Average grade                       g/t        2.4           2.8          -14%
Total milled                     t '000        691           506           +37%
Average grade                       g/t        3.9           3.7            +5%
Gold content                    oz '000       86.5          59.6           +45%
Recovery rate                         %       92.2          90.3            +2%
Gold recovered                  oz '000       79.8          53.9           +48%
Heap Leach
Ore stacked                      t '000      341.0         309.0           +10%
Average grade                       g/t        1.4           1.8          -22%
Gold content                    oz '000       16.0          17.7          -10%
Recovery rate                         %       30.7%           35%         -12%
Gold recovered                  oz '000        4.8           6.2          -23%
Gold recovered                  oz '000       84.6          60.1           +41%



The use of MicroMine to manage operational grade control, together with over one
million tonnes of advanced stripping carried out in 2004, allowed to mine high
quality ore and reduced dilution. During the Period, the Group commenced
preparations for the expansion of the mining works to fulfil the one million
ounce production target which includes the renewal, maintenance and expansion of
its mining fleet. Overall, the gold content in the material delivered from the
pit increased by 61%.

Pokrovskiy Rudnik Mining Operations
                                                       6 months to 30 June
                                           Units      2005      2004     Var %
Total material moved                     m3 '000     2,755     2,034       +35%
Ore mined                                 t '000       652       438       +49%
Average grade                                g/t       3.7       3.5        +6%
Gold content                             oz '000      77.0      49.6       +55%
Including high grade ore                  t '000       424       304       +39%
Average grade                                g/t       4.9       4.2       +17%
Gold content                             oz '000      66.6      41.4       +61%

Resin in Pulp Plant

The plant capacity was increased by 50% in late 2004. During the Period 691,000t
were processed through the plant, compared with 506,000t in the first half of
2004, representing a 37% increase year-on-year. The increased capacity from 1m
tpa to 1.5m tpa at the mill has allowed the Group to carry out essential
maintenance on the circuits which optimises operations and will increase the
life expectancy of the mill liners and allows production at full capacity on an
ongoing basis.

Plans for further expansion work to take the Plant capacity to 2.2m tpa has been
announced and the work has already started. The Group announced that it has
plans to further increase the capacity of the mills with expected completion of
works in the third quarter of 2006. The expansion project will encompass the
construction of a further SAG mill and the increase in capacity of the resin
circuits. It is expected that the existing mill building will have sufficient
space to house the extra machinery and hence costs are expected to be only
c.US$5m in total. This is an interim expansion toward the larger growth of
operations to fulfil Pokrovskiy and the Pokrovskiy flanks' contribution towards
the one million ounce target. Analysis on the larger expansion possibilities is
ongoing and will be announced on completion of the current expansion project.

Heap Leach Operations

Double stacking introduced to the heap leach process over the last year resulted
in significant increases in recovery rates which allows the treatment of ore
previously considered to be non-economical. A by-product of this is that there
may be possible increases in the reserve base of the deposit to incorporate the
lower grade that it is now possible to treat economically. During the Period,
the Pokrovskiy heap-leach processed 1.4g/t material as opposed to 1.8g/t in the
same period of 2004. The 30.7% (down from 35%) recovery for the Period reflects
the late start to the heap leach season due to weather conditions.

Double stacking also allowed the Group to carry out the heap leach maintenance
schedule in a more optimal way without disrupting the production process. Once
the maintenance work is completed in 2006 the capacity of the heap leach should
be increased to 1m tpa.

Gold Institute Standard ("GIS") Operating Cost Analysis

The Group reports and breaks down Pokrovskiy Rudnik's operating costs according
to the internationally recognised GIS following industry's best practices.

The GIS cost analysis for the period is as follows:

                              6m to           6m to    Variance          12m to 
                            30/6/05         30/6/04                    31/12/04
Pokrovskiy Rudnik
All figures reported in US$ per oz of gold produced

Direct mining
expenses                       97.8           100.7         -3%           73.0
Third-party smelting,
refining and
transportation costs            4.3             5.8        -26%            6.1
credits                        (0.3)          (0.4)                       (0.2)
Other                            47            24.2         94%           28.0

Cash Operating
Costs                         148.8           130.3         14%          106.9

Royalties                      25.2            23.3          8%           22.7
Production taxes                7.1             7.0          1%            5.1

Total Cash Costs              181.1           160.6         13%          134.7

Non-cash movement
in stock                       15.1             7.9         91%           12.4
Depreciation/Amortisation      47.7            38.6         24%           37.2

Total Production
Costs                         243.9           207.1         18%          184.3

Direct mining expenses during the Period have increased as a result of the
global environment of increasing input costs but on a per ounce basis this
increase is offset by the increase in ounces produced. Globally the costs of
many of the raw materials required to operate a mine have increased, ranging
from energy to reagents. Part of these costs occur in the non-cash movement in
stock line of the GIS table, as the cost of mining is not brought to account
until the gold is produced, and will be reflected in future costs.

Significant increase in other expenses was a result of greater insurance cover
taken out by Pokrovskiy Rudnik. Depreciation and Amortisation expenses changed
in line with the increase of production assets caused by the plant and mine
fleet expansion.

Although the increase in total ounces produced partly offsets the increased
prices of raw materials, it is also partly due to the large number of cost
control and reduction measures put in place at Pokrovskiy that costs are not
affected as adversely as one might expect. One of such measures was the
implementation of the MicroMine mine planning software which has decreased ore
dilution and increased efficiency. The introduction of a computer monitoring
system using satellites and global positioning system hardware has also resulted
in a decrease in fuel consumption and an increase in stockpiling efficiencies.

The Group will continue to use cost controls and logistics improvement measures
in order to tackle rising raw materials and energy prices in the current
environment of high raw materials inflation.

Omchak Joint Venture

Production from the currently 65%-owned Omchak Joint Venture ("Omchak JV") is
ahead of target for the year. During the Period Omchak JV produced 26,177oz
(25,081oz in the first half year 2004). The production attributable to PHM of
17,015oz increased 36% compared to the same period of 2004 due to the increases
in Omchak JV venture production and the increase of the Company's Group's stake
in Omchak JV. The seasonal operations of the majority of Omchak JV's assets
shifts the main production towards the second part of the year. As disclosed in
the 2004 annual report, dependent on the dividend payment by the asset holding
entities, the production attributable to PHM may be reduced by 20-30,000 ounces
for the year if Omchak's assets deliver an enhanced dividend cashflow to the
Group. Due to the fact that an increase in dividend cashflow is expected to
occur in the second half of 2005, PHM's share in Omchak JV is expected to be
adjusted at year end.

The management team of Omchak JV aims to increase their reserve base through new
acquisitions and expansions to new regions. In May 2005, Omchak JV announced its
success in the auction of the combined exploration and extraction licence for
Verkhne-Alliinskiy gold property in the Chita Region of Russia. The licence is
estimated to contain gold reserves and resources of 76,000oz and 593,000oz in
Russian categories C1 and C2 respectively and silver reserves and resources of
138,000oz and 752,000oz in Russian categories C1 and C2 respectively.

In the Amur Region Omchak JV's subsidiary OOO "Noviye Tekhnologii" started
preparatory works for the commencement of production on five licence areas
acquired during 2004. Works during the Period were concentrated mainly on
preparation of the machinery for the production season and approval of mining
plans. Mining works commenced in May 2005 and included stripping and preparation
of machinery for washing of gold bearing sands.

Exploration and Development Report

Pokrovskiy Flanks

Further exploration works were undertaken on Pokrovskiy deposit and its flanks
in order to confirm the geochemical gold anomalies identified by a geochemical
modelling study undertaken by Vladivostok consultancy firm Ecocentre. Work at
the Pokrovskiy flanks, contiguous to the existing Pokrovskiy pit shell, focused
on extending strike from the existing mine along fault extensions, and
confirming mineralisation at previously identified gold anomalies.

Pioneer Deposit

On 20 July 2005 the Company Group released an announcement that the recent trial
mining exercise and the availability of the Group's three new laboratories for
assay work has allowed an update of reserves and resources at Pioneer. Pioneer's
overall resources have been updated and also partly recalculated using
Australian JORC classification. According to the Russian classification system
the relevant zones of the Pioneer deposit contain a total of C2 1.9 million
ounces and P1/P2 1.9 million ounces. As was undertaken at Pokrovskiy during
2004, we have implemented the MicroMine mine planning software at Pioneer.
By-products of using MicroMine are the independent audit of the deposit by the
MicroMine team and a JORC resource estimate. It has been found that the total
JORC estimate for Pioneer is 2.2 million ounces which is 14% higher than that
under the Russian classification system. The results of the work have confirmed
PHM's confidence in the amenability of the deposit to a large scale gold mining
and processing operation and hence work has commenced on the basic
infrastructure requirements of such operation.

For more detailed information please refer to PHM's press release dated 20 July
2005 "Pioneer Reserves & Resources Update and Feasibility Study Progress

Amur North East Belt


In February 2005 the Group announced that it was successful in the auction for
the combined exploration and extraction licence over the Malomir gold deposit in
the North East of the Amur Region, Far East Russia. This acquisition was another
step in the Group's long-term strategy of combining several gold properties in
the North East area of Amur Region to help to benefit from operational
synergies. The Group already held licences for two areas adjacent to the deposit
which it had explored for two years. The Diagonal Zone, at the centre of the
Malomir licence area, was extensively explored by Soviet geologists. Since the
Group's registration of the licence for the deposit in May 2005 a construction
of a man camp for employees and relevant infrastructure has commenced to aid
exploration and the development work. PHM has initiated an extensive programme
of confirmation and other drilling to form the basis of a pre-feasibility study.
2,500 metres of drilling and 55,000 cubic metres of trenching have been
completed to date, with all the samples being analysed at the Group's laboratory
in Tokur village. The Group is planning to significantly increase the number of
drilling rigs working on the project in order to complete confirmatory
exploration works on the deposit as soon as possible. Works on the
infrastructure of the deposit are at an advanced stage with a telephone and
internet connection to be established shortly, as well as an all-year road
connecting Malomir, with the main road to be completed by April 2006.


Trenching and drilling has been carried out in the Glavniy fault zone and on the
flanks of the Tokur deposit with 980.5m of core drilling and 2,831.9m3 of
trenching accomplished. The results of this work are expected later this year.


As planned, detailed exploration continued in the area with 8,896m3 of
trenching. The results of the geochemical exploration, trenches and drill holes
have now been received by the Group and are being processed. The geophysical and
geochemical results identify two prospective ore structures. Within the two
newly identified structures, gold grades reaching 8.8 - 11.3g/t have been
indicated from grab sampling. Trenching has already intersected the indicated
orebody with visible gold noted at the surface.


Following an acquisition of 90% of YamalZoloto in April 2004 the Group
commissioned a full scope exploration programme on the PHM license area where
nine prospective mineralization zones were identified by an independent
hydro-geochemical survey. The study covers the whole licensed area and the
results were acquired by YamalZoloto as the basis for planning future
exploration works. The main focus of works has been on two areas most explored
by previous exploration works, Novogodnee Monto and Petropavlovskoye deposits.
The Group expects to finalise the pre-feasibility study on these two deposits by
early 2006. The study will be prepared by the leading Russian consulting
institution ZNIGRI.  The metallurgical tests carried out by this institution
were almost completed during the Period.

In addition to the established gold reserves and resources included in the
pre-feasibility study calculations the deposit is estimated to contain 6.2
million tonnes of iron ore at 40%, including 4.9 million tonnes located within
the boundaries of gold mineralisation.

The Group is in advanced negotiations to subscribe for shares in Yamal Mining,
the State-owned company that owns the balance of YamalZoloto. It is anticipated
that completion of this acquisition will be announced in early October.
The Group will also carry on exploration works on other prospective areas.


Field work is ongoing and trench sample assay results are already being
received. Two samples gave gold grades of 1.94g/t (on 1m width) and 0.45g/t (on
0.3m interval). Further trenches were dug for confirmation of the
aero-geophysical survey which identified potassium anomalies and the data from
the works done by previous explorers which indicated a high gold-bearing

A drilling programme commenced on the areas identified through aero-geophysical
survey. 6 of 10 planned drill holes have been drilled with results expected
later in the year.

Chemical Laboratory
After commissioning in January 2005, PHM's complex of chemical laboratories has
been working at full capacity and operates as planned. The complex consists of
the chemical Laboratory at Pokrovskiy, serving Pokrovskiy, Pokrovskiy Flanks,
Pioneer and Odolgo; the chemical Laboratory at Tokur, serving Tokur, Malomir,
Voroshilovskoye; , and the chemical Laboratory in Blagoveschensk, serving
Chagoyansk for assay samples and all other deposits for geochemical analysis.
Total capacity of the laboratory complex is 22,000 samples per month.

The central Group laboratory in Blagoveschensk also has the responsibility of
monitoring all the other Group laboratories. The Blagoveschensk laboratory has
also implemented an X-Ray spectrum method for the analysis of polymetals. The
construction of a new laboratory in Labitnangi (YamalZoloto) was also commenced
in the Period with a planned capacity of 5,000 samples a month (assay analysis)
and 3,000 samples a month (geochemical analysis).

The implementation of the new laboratory complex facilities, which are some of
the biggest and best equipped in Russia, increased the Group's ability to carry
out high quality exploration works and thorough control of the current
production activities. Currently 100% of PHM's samples are analysed in-house and
with an execution time of one month. All Groups' laboratories are certified by
the state and independent state control of analyses is maintained on regular
basis according to Russian regulations.

Gold Price/Treasury

The Group's average realised gold price for the Period was US$422/oz, up 7%
against US$394/oz achieved in the first six months of 2004. The Rouble
strengthened against the Dollar by one percent during the Period and was
RUR28.67/US$ at 30 June 2005 (RUR29.03/US$ - 30/6/04). The Group has a policy of
no long term gold forward sales or hedging.

A fundraising to obtain US$140m through a Convertible bond issue was completed
in August 2005. It should provide the greater part of PHM's expected external
finance requirements to reach the 2009 one million ounce production target. This
fundraising is expected to significantly increase the Group's interest expense
charges in the second half of 2005.

Conference Call

A conference call to discuss the announcement will be hosted by Jay Hambro,
Director, Business Development and Philip Leatham, Financial Director, Peter
Hambro Mining plc, on Thursday, 22 September 2005 at 14:00 UK time.

Details to access the conference call are as follows:
The Dial-in number in the UK will be: 0845 245 3471 and internationally will be
+44 (0) 1452 542 300.

Replay will be available after the call has finished for seven days on 0845 245
5205 in the UK and on +44 (0) 1452 55 0000 internationally with the access code
in both cases 9297786.


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

Mariana Adams
Investor Relations, Peter Hambro Mining plc

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

                            PETER HAMBRO MINING plc
                        FOR THE PERIOD ENDED 30 JUNE 2005
                           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 2005 set out on pages 12 to
23 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 London Stock Exchange 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 for use in the United Kingdom. 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 United Kingdom 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 2005.

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

21 September 2005

                            PETER HAMBRO MINING plc
                Summarised Consolidated Profit and Loss Account
                       for the period ended 30 June 2005

                            (expressed in US $'000s)

                       Note   Six months to    Six months to           Year to
                               30 June 2005     30 June 2004  31 December 2004
                                      $'000           $'000              $'000

Turnover: group and
share of joint ventures              42,311          28,182             85,502
Less: share of joint
ventures' turnover                   (6,034)         (5,015)           (23,394)
                                   ----------      ----------        -----------
Group turnover            2          36,277          23,167             62,108

Operating profit                      8,022           5,316             22,703

Share of operating
profit of joint ventures              1,040             928              4,829
Amortisation of
goodwill in joint ventures             (514)           (389)              (954)
Interest payable and
similar charges           4            (932)         (2,009)            (3,661)

Other income                            466             581              1,387
                                   ----------      ----------        -----------

Profit on ordinary
activities before
Group                                 7,795           4,131             20,916
Joint ventures                          287             296              3,388
                                   ----------      ----------        -----------
                                      8,082           4,427             24,304

Taxation on profit on
ordinary activities       5          (2,147)           (931)            (8,253)
                                   ----------      ----------        -----------

Profit on ordinary
activities after taxation

Group                                 6,470           3,580             13,801
Joint ventures                         (535)            (84)             2,250
                                   ----------      ----------        -----------
                                      5,935           3,496             16,051

Minority interests                      (41)           (282)              (733)
                                   ----------      ----------        -----------

Profit retained for
the period                            5,894           3,214             15,318
                                   ==========      ==========        ===========

Earnings per ordinary
share                    15          $0.079          $0.049              $0.22
Diluted earnings per     
share                    15          $0.075          $0.046              $0.21

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.

                             PETER HAMBRO MINING plc
            Summarised Consolidated Balance Sheet as at 30 June 2005

                            (expressed in US $'000s)

                                  Note    30 June        31 December   30 June
                                             2005               2004      2004
                                            $'000              $'000     $'000
Fixed Assets
Intangible assets
Goodwill                                   (2,953)            (2,776)        -
Mineral properties                         79,675             80,653    75,260
Capitalised exploration and
development expenditure                    15,961             10,251     4,747
Deferred stripping costs                    2,032              1,597         -
Tangible assets
Property, plant and equipment              66,332             60,579    45,137

Investments                          6        561              1,399        36
Investments in joint ventures:
Goodwill                                    2,428              2,821     2,559
Share of gross assets                      25,607             21,366    17,749
Share of gross liabilities                (14,622)           (10,188)  (11,172)
Loans                                           -              3,400     1,600
                                         --------           --------  --------
                                          175,021            169,102   135,916
Current Assets
Stock and work in progress                 21,398             15,697    12,096
Debtors                              7     22,808             17,784    17,904
Cash at bank and in hand                   24,865             25,854    52,544
                                        ---------           --------  --------
                                           69,071             59,335    82,544
Creditors, amounts falling due
within one year                      8    (14,453)           (15,607)  (21,613)
                                         ----------          --------  -------

Net Current Assets                         54,618             43,728    60,931
                                         ----------          --------  -------

Total Assets less Current
Liabilities                               229,639            212,830   196,847

Creditors, amounts falling due
after more than one year             9     (3,911)            (8,384)   (6,845)

Provision for liabilities and
charges                                    (2,783)            (2,182)   (1,444)
                                          ---------          --------  --------
Net Assets                                222,945            202,264   188,558
                                         ==========          ========  ========


                             PETER HAMBRO MINING plc
      Summarised Consolidated Balance Sheet (continued) as at 30 June 2005

                            (expressed in US $'000s)

                                  Note    30 June   31 December 2004   30 June
                                             2005              $'000      2004
                                            $'000                        $'000
Capital and Reserves
Share capital                       10      1,220              1,193     1,193
Share premium                       10    168,946            154,252   153,932
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                    35,486             29,590    17,486
                                         ----------          --------  --------
Equity shareholders' funds          11    220,751            200,134   187,710
Minority interests                          2,194              2,130       848
                                         ----------          --------  --------
                                          222,945            202,264   188,558
                                         ==========          ========  ========

The accompanying notes are an integral part of this balance sheet.

These financial statements were approved by the Directors on 21 September 2005

P.C.P. Hambro

                            PETER HAMBRO MINING plc
                Summarised Consolidated Statement of Cash Flows
                        for the period ended 30 June 2005

                            (expressed in US $'000s)

                   Note      Six months to    Six months to             Year to
                             30 June 2005     30 June 2004     31 December 2004

                                 $ '000s          $ '000s              $ '000s
                                -----------       ----------          ----------

Net cash inflow
from operating
activities           12         6,968               4,136                20,532

Net cash outflow
from returns on
investments and
servicing of
finance                        (4,427)             (1,976)               (3,297)

Taxation Paid                  (1,604)               (380)               (4,223)

Expenditure and
investment                    (15,852)             (7,118)              (31,921)

Acquisitions and
Disposals                         143              (6,986)              (13,387)
                                -------            ------                -------

Cash Outflow
before Financing              (14,772)            (12,324)              (32,296)

Cash (inflow)
(increase) in
debt and lease
financing        13, 14          (940)            (18,827)              (25,862)
Net receipt from
issuing shares                 14,723              68,868                69,185
                                -------            ------                -------
in cash at                   
bank and in hand                 (989)              37,717                11,027
                                =======            =======               =======

                            PETER HAMBRO MINING plc
                  Summarised Consolidated Financial Statements
                       for the period ended 30 June 2005


1. Principal Accounting Policies

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 2004. 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 2004 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) Basis of consolidation
The financial statements consist of Peter Hambro Mining plc (the Company) and
its respective subsidiary undertakings (the Group). On the acquisition of a
business, including an interest in a subsidiary undertaking, fair values are
attributed to the Group's share of net separable assets. Where the cost of
acquisition exceeds the fair values attributable to such net assets the
difference is treated as purchased goodwill and capitalised in the balance sheet
in the year of acquisition.

c) Comparative figures
Certain comparative figures have been restated to be consistent with the current
period's presentation.

2.       Turnover

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

3. Reserve Bonus Scheme

As reported in the 2004 Annual Report & Accounts, the holders of the Reserve
Bonus Units have reassessed 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
indicated a willingness to implement a revised scheme that would be of the most
benefit to them and the Group's shareholders. The Committee of Independent
Directors has received a re-evaluation of reserves and resources at Pioneer from
MicroMine in June/July 2005 and is reviewing the implementation of such a
scheme, amongst a number of other options, with advice from the Company's
advisors and independent consultants as necessary and will make a recommendation
in due course. Once received, approval of the recommendation will be sought from
shareholders at the earliest opportunity.

4. Interest Payable and Similar Charges

                                      30 June 2005                  30 June 2004
                                             $'000                         $'000

Finance lease charge                            53                           309
Bank loan interest                             564                         1,961
Other loan interest                             93                            48
Share of joint ventures' interest
payable and similar charges                    239                           243
                                         ---------                    ----------

                                               949                         2,561
Less finance cost capitalised                 (17)                         (552)
                                         ---------                    ----------

                                              932                         2,009
                                         ---------                    ----------

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 2005, based on the tax rate 24% was US$698,000 (2004 -
US$653,000). The rest of the tax charge relates to the deferred tax.

6. Investments

                                             30 June 2005     31 December 2004
                                                    $'000                $'000

Investments - other                                    36                   36
Shares in subsidiaries and joint ventures             525                1,363
                                                   --------            ---------

                                                      561                1,399
                                                   --------            ---------

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

Principal subsidiary       Country of          Principal     Principal country    Effective proportion
 and joint venture        incorporation        activity        of operation         of shares held

Eponymousco Ltd           United Kingdom     Holding Company    United Kingdom            100%

Victoria Resources Ltd    United Kingdom     Holding Company    United Kingdom            100%

Peter Hambro Mining 
(Cyprus) Ltd              Cyprus              Holding Company    Cyprus                   100%
Management Company
PHM *                     Russia             Holding Company    Russia                    100%

Olga                      Russia             Gold exploration   Russia                    100%        
                                             and production     

Pokrovskiy Rudnik         Russia             Gold exploration   Russia                    97.7%
                                             and production
Joint Venture Omchak      Russia             Gold exploration   Russia                    65%
                                             and production
Tokurskiy Rudnik          Russia             Gold exploration   Russia                    100%
                                             and production
GRK Victoria              Russia             Gold exploration   Russia                    100%
                                             and production
Koboldo                   Russia             Gold exploration   Russia                    91.7%
                                             and production

Held indirectly via Pokrovskiy Rudnik

Yamalzoloto               Russia             Gold exploration   Russia                    88%       
                                             and production
NPFG Regis                Russia             Gold exploration   Russia                    51%
                                             and production
Joint Venture Rudnoye     Russia             Gold exploration   Russia                    49%
                                             and production
Kapstroy                  Russia             Construction       Russia                    97.7%

In June 2005 Tokurskiy Rudnik acquired 91.66% of OAO Koboldo for a consideration
of US$288,000. Koboldo has been consolidated in these financial statements.

In February 2005 Pokrovskiy Rudnik set up a wholly owned construction company
Kapstroy. Kapstroy is intended to carry on construction activities for the Group
as well as for third parties. Kapstroy has been consolidated in these financial

* Management Company PHM has been consolidated in these financial statements as
its activities began in 2005 (2004 - no consolidation on the grounds of no

7.       Debtors

                                          30 June 2005        31 December 2004
                                                 $'000                   $'000

Prepayments                                      8,586                   4,655
Tax prepaid                                         77                       -
VAT recoverable                                  8,863                   7,325
Other debtors                                    3,344                   2,538
Due from Rudnoye joint ventures                  1,120                     822
Loans issued                                       818                   2,444
                                                --------               ---------

                                                22,808                  17,784
                                                --------               ---------

8. Creditors, amounts falling due within one year

                                               30 June 2005   31 December 2004
                                                     $'000               $'000

Trade creditors                                      2,233               1,968
Tax liability                                            -               1,418
Finance lease liabilities falling due within
one year                                               434                 652
Short term loans                                     3,921               4,137
Short term element of long term loans                3,222               2,895
Due to former shareholders of subsidiary               308               1,516
Due to MC PHM                                            -                 432
Other creditors                                      4,335               2,589
                                                    --------           ---------

                                                    14,453              15,607
                                                    --------           ---------

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

                                             30 June 2005     31 December 2004
                                                    $'000                $'000

Due to former shareholders of subsidiary                -                3,486
Long term borrowing                                 3,861                4,655
Finance lease liabilities falling due after
one year                                               50                  243
                                                   --------            ---------

                                                    3,911                8,384
                                                   --------            ---------

10.    Share Capital

Ordinary shares                                      30 June         31 December
                                                        2005                2004
                                                       $'000               $'000
Allotted, called up and fully paid:
At the beginning of the period                        1,193                1,010
Other new issues                                         27                  183
                                                     --------          ---------
At the end of the period                              1,220                1,193
                                                     --------          ---------

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

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

Issued at the beginning of the
period                                               73,999               63,999
Other new issues                                      1,449               10,000
                                                    --------           ---------
At the end of the period                             75,448               73,999
                                                   --------            ---------
On 14 April 2005 the Company issued 1,448,545 ordinary shares at a price of
£5.50 per share pursuant to an Equity Subscription Agreement with the
International Finance Corporation (the IFC). As a result of this transaction a
share premium of US$14.7m after commissions and share issue costs of US$203,000
was created.
The IFC was also granted an option to subscribe for an additional 1,448,545
shares in the Company. The option exercise price is at a 25% premium to £5.50
per share (subject to an anti-dilution adjustment). Unless exercised earlier,
the option will lapse on 4 April 2013.

11. Equity shareholders' funds

                                     30 June 2005              31 December 2004
                                          $'000                         $'000

Opening balance                         200,134                       115,633
Issue of share capital                   14,723                        69,183
Issue of contingent shares                    -                             -
Profit for the period                     5,894                        15,318
                                        --------                     ---------

                                        220,751                       200,134
                                        --------                     ---------

The availability of the Group's reserves for distribution will be determined, to
the extent that they include reserves held in the Russian subsidiaries 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

12. Net Cash inflow from Operating Activities

                                                30 June 2005      30 June 2004
                                                       $'000             $'000
Cash received from customers                          36,366            23,167
Cash paid to suppliers and employees                 (21,446)          (14,108)
Other proceeds                                            34                53
Other expenses                                        (7,986)           (4,976)
                                                     ---------         ---------
Net cash inflow from operating activities              6,968             4,136
                                                     ---------         ---------

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

                                                                  30 June 2005

Decrease in cash at bank and in hand                                      (989)
Cash inflow from increase in debt and lease financing                      940
Change in net debt resulting from cash flow                                (49)

Exchange difference                                                        155
Movement in net debt in the period                                         106
Net debt at 1 January                                                   13,271
Net debt at 30 June                                                     13,377

14.    Analysis of Net Debt

               At 1 January 05   Cash Flow   Exchange movement   At 30 June 05
                         $'000       $'000               $'000           $'000
                      ----------    --------            --------      ----------

Cash in hand
and at the
bank                    25,854        (989)                  -          24,865
Debt due
within one
year                    (4,138)         62                 155          (3,921)
                      ----------    --------            --------      ----------
Net Cash pre
leasing /
sales & lease
back                    21,716        (927)                155          20,944
                      ----------    --------            --------      ----------
Finance leases
/ sales &
lease back              (8,445)        878                   -          (7,567)
                      ----------    --------            --------      ----------

Net Cash inc.
leasing                 13,271         (49)                155          13,377
                      ----------    --------            --------      ----------

15.    Earnings per ordinary share

                              Six months to   Six months to            Year to
                              30 June 2005     30 June 2004   31 December 2004
                                      $'000           $'000              $'000
Profit for the period US$'000         5,894           3,214             15,318
Weighted average number of
ordinary shares                  74,618,249      65,158,815         69,615,032
Earnings per ordinary share        US$0.079        US$0.049            US$0.22
                                    ---------       ---------          ---------
Weighted average number of
ordinary shares                  74,618,249      65,158,815         69,615,032
C shares                          2,759,368       2,759,368          2,759,368
Contingent shares                 1,500,000       1,500,000          1,500,000
                                    ---------       ---------          ---------
Weighted average number of
diluted shares                   78,877,617      69,418,183         73,874,400
                                    ---------       ---------          ---------
Diluted earnings per share         US$0.075        US$0.046            US$0.21
                                    ---------       ---------          ---------

16.    Post balance sheet events

In August 2005 the Group issued US$140 million of Convertible Bonds due in 2010
(the "Bonds"). The Bonds carry a coupon rate of 7.125% payable semi-annually in
arrears and can be converted into fully paid 1p ordinary shares of the Company.
If not converted or previously redeemed the Bonds will be redeemed at par on or
about 11 August 2010.

On 19 July 2005 the holders of 2,759,368 "C" shares in Eponymousco paid up
£1.01, being the uncalled amount and, in accordance with the terms of their
agreement with the Company, exchanged their "C" shares for fully paid shares in
the Company.

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