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Peter Hambro Mining (POG)

  Print      Mail a friend       Annual reports

Monday 22 January, 2007

Peter Hambro Mining

Trading Statement

Peter Hambro Mining PLC
22 January 2007

22nd January 2007

                             2006 Trading Statement

Peter Hambro Mining plc ("PHM" or "the Group") issues this statement as an
unaudited update on 2006 trading and in advance of its full year results

Trading Up-date Highlights for 2006

   •Total attributable gold production increased by 5% to c.261,000 ounces
   •Pokrovskiy Rudnik gold production increased by c.11%
   •Gold recovery rates remained stable, even when treating primary ores,
    thanks to technological improvements
   •Average realised gold sales price of US$586/oz during 2006 was 33% higher
    than in 2005
   •Acquisition of Open Joint Sock Company "Irgiredmet" in Irkutsk - the
    laboratory research and scientific consulting company - strengthens the
    Group's technical expertise

Attributable gold production,
oz'000*                           2006         2005           Var %       2004            
Amur Region
     Pokrovskiy                  206.3        185.7         +11.1%       153.8
     Amur NE Assets               10.5          4.2        +150.0%           -
     Rudnoye JV                    8.1          7.8          +3.8%           -
Omchak JV
     Magadan assets               33.4         49.6         -32.7%        55.4
     Amur Assets                   2.5          2.0         +25.0%           -
                        TOTAL    260.8        249.3            +5%       209.3

* Total attributable gold production is comprised of the Group's subsidiaries,
share of production in joint ventures and other investments

Chairman's comments

Commenting on the above, Peter Hambro, Executive Chairman, said:

"A 5% increase in the Group's attributable gold production has, I am pleased to
say, once again exceeded our expectations.

Our Amur Region mines, which are directly operated by the Group and make up
c.86% of the attributable production, increased their gold output by 14%.
However production results from the joint-venture operations (which account for
only 14% of the Group's production) were less successful. In particular the
underground operations at Nelkoba in the Omchak JV were less productive than
last year as the production moved to deeper levels.

I am pleased to note that the questions on our mining licences which arose in
December 2006 are now resolved.

The outlook for 2007 is once again encouraging, as the gold price continues to
move in our favour and our production grows. As usual we will be reporting in
detail to shareholders on the technical progress on our growth targets in
February and our 2007 production forecast at the time of Annual Report release
in May."


Pokrovskiy & Pioneer

PHM Mining Schedule
                                       Units                  2006        2005
Pokrovskiy deposit
    Total material moved               '000 m3               5,385       5,248
    Including advanced stripping       '000 m3               1,657       1,180
    Ore mined                          '000 tonnes           1,904       1,393
    Grade                              g/t                     3.0         3.6
    Gold                               '000 oz               184.5       159.8
    Including rich ore                 '000 tonnes           1,379         899
    Grade                              g/t                     3.8         4.7
    Gold                               '000 oz               168.0       135.7
Pioneer deposit
    Total material moved               '000 m3                 912         836
    Ore mined                          '000 tonnes             168         133
    Grade                              g/t                     3.4         3.5
    Gold                               '000 oz                18.3        15.0

PHM Processing Schedule
                                       Units                  2006        2005
Resin In Pulp plant           
    Ore from Pokrovskiy pit           '000 tonnes            1,404         899
              Grade                    g/t                     3.8         4.7
              Gold                    '000 oz                  172         136
    Ore from stockpiles               '000 tonnes              248         444
              Grade                    g/t                     3.4         2.8
              Gold                    '000 oz                 27.4        39.4
    Pioneer (bulk sample)             '000 tonnes               46          53
              Grade                    g/t                     6.7         5.7
              Gold                    '000 oz                  9.8         9.7
    Total milled                      '000 tonnes            1,698       1,397
              Grade                    g/t                     3.8         4.1
              Gold                    '000 oz                209.0       184.9
              Recovery                  %                     90.7%       91.5%
              Gold recovered          '000 oz                  190         169
Heap leach
    Ore stacked                       '000 tonnes              750         714
              Grade                    g/t                     0.9         1.5
              Gold                    '000 oz                   23          38
              Recovery                  %                     73.1%       48.9%
              Gold recovered          '000 oz                 17.0        16.5
Total gold recovered **                                      206.3       185.7
** Certain comparative numbers have been rounded up.

Pokrovskiy Rudnik

Pokrovskiy enjoyed another successful year, producing 206,300 ounces of gold; an
11% increase over the 185,700 oz produced in 2005.


Planning and management of mining works, using the MicroMine geological computer
model of the deposit, allowed for a higher quality of reserves definition and
optimisation of direct mining expenses.

Renewal of the mining and transportation fleet was carried out in 2006 when, in
addition to the equipment acquired in 2004-2005, five new 45 tonne capacity
Belaz dump trucks and three Caterpillar Cat-330 excavators were purchased which
ensured consistency of the mining works and conformity to the mining plan.

The increase in gold prices and consequent reduction in the chosen cut-off grade
also enabled an increase of the projected depth of the current Pokrovskiy pit.
This will allow for an increase in high grade reserves at the Pokrovskiy deposit
by c.200,000oz of gold in 2007.

RIP processing

Expansion work on the RIP plant carried out from 2004-6 allowed for systematic
growth in processing volumes of lower grade ore which led to an overall increase
in gold production at the RIP plant. At the end of 2006 the plant achieved
annual capacity of 2.2 mln tonnes of ore.

This productivity increase was accomplished through the expansion of the
resin-in-pulp circuit and the optimisation of the grinding circuits and
classifiers. In particular, an adjustment in technology was introduced whereby
the volume of resin was increased and cyanidation of the gold bearing ore
started at the SAG mill. This allowed for an increase in the total resin surface
area and leaching time, and, despite the processing of primary ore, the recovery
rates remained at approximately the same level as the previous year (90.7%
compare to 91.5% in 2005).

Modernisation of desorbtion columns allowed for higher quality cleaning of the
resin and restoration of its original properties.

Separation of the flows of pregnant solutions and the installation of additional
electrowinning cells optimised gold recoveries and increased the recovery
percentage of silver.

Heap leach processing

Increase in capacity at the plant and increase in gold prices allowed Pokrovskiy
to treat lower grade material in the heap leaching process which previously
would not have been considered economically profitable for processing.

Successful results of the innovations introduced in 2005 (heap leach pads were
stacked and treated by cyanide solution in the autumn for leaching the following
year) accounted for an increase of leaching time and hence improved gold

Pioneer Deposit

Mining works were carried out at Pioneer in 2006 in order to conclude geological
exploration work and process improvement and to prepare the deposit for
production, which is due to be launched in the second half of 2007. Mining works
carried out at the Bakhmut and Promezhutochnaya areas of the deposit in 2006
allowed for large bulk samples of primary ore to be collected for technological
testing. Total volume of mining works carried out at the deposit in 2006
amounted to 912,000 m3.

Also a 46,000 tonne bulk sample of oxidised Pioneer ore was processed at the
Pokrovskiy plant in 2006 with an average grade of 6.7 g/t and a recovery rate of
c.86%. These results confirmed the viability of the technological scheme
developed for the oxidised ore of the Pioneer deposit.

In 2006 works on an engineering survey at Pioneer were continued in preparation
for a final decision regarding the construction sites for the heap leach, the
crushing and grinding complex, the technological point for gold extraction,
infrastructure etc.

The power transmission line (between Pokrovka and Pioneer) came into operation
and the first stage of the Pioneer substation was completed (4 MW capacity).
Construction and assembly work is being carried out at the sorption-cyanidation

Omchak Joint Venture

During 2006, CJSC Omchak ("Omchak") produced gold through its subsidiary
companies in two Russian regions - the Magadan and the Amur regions. It also
carried out geological exploration works at the recently acquired deposits
located in Chita region of Russia: Verhkne-Allinsky and Bukhtinskaiy &
Kulinskaiy deposits.

The total attributable production of gold was 35,900oz and was achieved by the
exploitation of the Shkolnoye deposit (CJSC Nelkobazoloto, Magadan region) and
more than 25 smaller deposits. The overall production of 'Omchak' in 2006 from
the operations of 'Berelekh' at alluvial deposits in the Magadan Region and
'Nelkobazoloto' at the Shkolnoe mine decreased by 23%. The main reason for 13%
'Berelekh''s decrease in production in 2006 was a decline in the average grade
of gold in sands (from 0.45 g/m3 in 2005 to 0.37 g/m3 in 2006).

Nelkobazoloto is entering the final stage of production at the Shkolnoe mine
where development and exploration are simultaneously establishing the reserves
of the lower horizons of the deposit. Due to the narrowness of the ore bodies in
this underground operation the economic viability is decreasing. In order to
compensate for the fall in production, in 2006 'Omchak' received a subsoil use
licence and commenced pilot production of alluvial gold in adjacent regions to
the Magadan Region, in the Republic of Sakha (Yakutia). Test works showed that
the gold content in gold bearing sands here is 0.77-0.78 g/m(3). It has been
established that it is feasible to continue the production and exploration of
alluvial gold on the territory of the Sakha Republic(Yakutia), bringing the
volume of production to 3,000 - 4,000oz in 2007. Work is being commenced in
order to prepare applications to receive new projects in this region.

Verhkne-Allinsky Deposit, Chita Oblast

The deposit was acquired by JV in June 2005. Exploration works carried out in
2006 resulted in 51 core holes with an overall volume of 4,745.5m drilled at the
deposit. 500 core samples were taken and analysed. As a result of these works
the "Zhila 2" ore body was identified and followed to a depth of 150m. The
established intersections of the ore body have the following parameters:
horizontal thickness - 0.4m with 12.6 g/t of gold, horizontal thickness - 0.4m
containing 8.6 g/t of gold, horizontal thickness - 0.7m containing 9.5 g/t.

Bukhtinskaya & Kulinskaya Deposits

The deposits were acquired at the beginning of 2006 and during the year works
were focused on geological exploration plans creation in order to conduct
exploration and evaluation surveys. A geochemical survey of the deposit was

Amur alluvial production

The Group operates a number of alluvial enterprises which exploit placer mines
using dredging machinery and washing technology. These operations are usually
carried out at the sites of the Group's operational and exploration activities
which allows for additional profits for the company without major investment in
infrastructure or detailed exploration works. In 2006 assets contributing to the
Group's production in Amur region were:

   •OAO "ZDP Koboldo" and ZAO "Amur-Dore" which together produced aggregated
    10,500oz of gold. These two subsidiaries extract gold from alluvial deposits
    in the North East of the Amur Region in close proximity to the Tokur and
    Malomir deposits.
   •OAO "Solovievskiy Mine", OOO "Nagima" and Rudnoye Joint Venture,
    operating not far from Pokrovskiy Rudnik, produced c.8,000oz of gold.

Rudnoye Joint Venture

In May 2006 exploration was mainly finished at the Odolgo deposit, where the
Group plans the construction of a small scale processing operation. A modular
plant with gravitational beneficiation technology and methods of concentrate
processing using intensive cyanidation is being constructed. First production of
gold at the deposit is scheduled from the second half of 2007 at an approximate
yearly rate of 10,000 - 15,000oz of gold.

Exploration & Development

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.

PHM Summary Schedule of Exploration Work

Site                Exploration   Trenches          Drilling           Samples
                        mapping                                      generated
                           km2          m3      total length 
                                                        in m
Pokrovskiy Rudnik*          -            -            44,128            27,227
Flanks of Pokrovskiy
deposit                     -       30,634            23,113            18,475
Pioneer                    16      166,404            36,470            46,357
Malomir                    20      403,613            44,157            73,515
Other**                    27      479,555            40,544            40,274
Yamalzoloto                15       73,449            50,494             5,082
Buryatia                   13        1,564                 -               162
Total:                     91    1,155,219           238,906           211,092

* At Pokrovskiy Rudnik (Pokrovskiy and Pioneer deposits) operational exploration
is being carried out by early production.

** Raslomniy, Voroshilovskiy, Izvestkovaya Sopka, Zheltunakskiy, Odolginskiy,
Bryantinskiy, Adamikha, Gar II, Albinskiy, Uspenskiy, Sagurskiy, Osipkanskiy,
Kera, Chelogor, B.Karaurak

Assay Laboratories

   •Blagoveshchensk laboratory - mineralogical (petrographic and
    mineralogical assaying of minerals) and semi-quantative spectrum ore
    analysis departments are being developed at this laboratory. Blagoveshensk
    laboratory is also a methodological centre providing recommendations and
    maintaining control of the entire Group's laboratory facilities.

   •Pokrovoka laboratory - with the launch in April 2006 of the automated
    sample preparation complex - Hamersley (New Zealand), the laboratory
    capacity increased from 10,000 to 12,000 samples a month. The laboratory
    services the Pokrovka, Pokrovskiy flanks, Pioneer and Odolgo operations.

   •Tokur laboratory - in 2006 the productivity of this laboratory has
    increase from 3,000 samples a month to 6,000 samples a month to serve the
    intensive work carried out on the Malomir deposit. The laboratory also
    performs analytical work for Tokur, Malomir and Voroshilovskoye geological
    exploration programmes.

   •Labitnangi chemical laboratory - with 3,000 samples/month productivity
    for assay sampling and 5,000 samples/month for semi-quantative spectrum
    analysis ore analysis provides support for geological exploration works at
    Yamalzoloto operations.

100% of sample analysis from all Group's deposits is carried out at the Group's
own laboratories. Results are received within one month from taking the sample
at the geological exploration site.

A provision has been made for bringing the Amur Region laboratories to a
productivity of 300,000 samples a year in 2007 for assay samples. A construction
of a new spectrum analysis laboratory for 300,000 samples a year has been
commissioned at the end of 2006.

OOO "NPGF Regis"

In 2006 the Group continued development of its own geological exploration
company OOO "NPGF Regis". With the use of modern drilling apparatus, excavation
equipment and qualified specialists the Company was able to achieve the
following in 2006:

   •Deep drilling (core and percussion) - 64,170 m
   •Shallow (structure) drilling - 32,988 m
   •Trenching - 908,225 m3
   •Geophysics - 96.3 km2

NPGF Regis has a fully qualified staff of geologists and mining surveyors,
modern geological-surveying equipment using GPS systems and its own group of
geologists who are specialists in computer modeling. All of the work to develop
geological exploration is carried out with the intention of providing a high
standard of work, but at the same time minimising expenses.

Engineering design

During 2006 the Group put together a team of highly qualified specialists of 400
people (ZAO "PHM Engineering" and OJSC "Irgiredmet").

Design and research and development work in 2006 was focused on: expansion and
reconstruction of the RIP plant, design of spectral department of central
analytical laboratory, design project for development of deep horizons of the
Main ore body of Pokrovskiy deposit, development of technology and process
procedure for treatment of primary ores of Pokrovskiy deposit, feasibility
evaluation of the investments in a development of gold deposit Pioneer, and
pilot tests of technology for oxidised ore of gold deposit Pioneer.

The engineering design department also maintained a technical supervision of
construction works maintained by the construction department of the Group.

Main Construction

Almost all construction works at the Group's properties in 2006 were carried out
by OOO "Kapstroi" - the Group's 100% owned construction company. The Company
employs 700 workers and in 2006 it accomplished work for 584.5 mln roubles net
of VAT at the following projects of the Group: Pokrovskiy Rudnik, Malomir,
Pioneer, OAO "ZDP Koboldo", OOO "Odolgo".

Corporate affairs

Effective from 14th July 2006, Dr Pavel Maslovsky, Deputy Chairman of PHM, also
took on the role of Chief Operating Officer, reflecting his increasing role in
the day to day management of the operations and the construction and development
of future operations. The Deputy Finance Director, Mr. Andrey Maruta, became
Finance Director. Mr. Philip Leatham, who had been the non-executive Finance
Director, remains on the board as a non-executive director. Mr. Alexei Maslovsky
, Treasurer of PHM, also took on the role of Business Development Director from
Mr. Jay Hambro. Jay Hambro gave up his executive duties with PHM in order to
become Chief Executive of Aricom plc but remained a non-executive director.

In October 2006 the Group acquired an 80% equity holding in OJSC "Irgiredmet"
for a cash consideration of US$40m, one of Russia's best known laboratory
research and scientific consulting companies based in Irkutsk. The Company
provides a range of services in the testing, development and optimisation of
gold, precious metal and diamond projects. This acquisition provides PHM with
additional laboratory capacity, intellectual capital and experience, the ability
to optimise existing mining operations and a project pipeline for the future
which will help a successful completion of the Group's ambitious targets. .

The Group's average realised gold price at Pokrovskiy for 2006 was US$586/oz, up
33% against that achieved in 2005.  The Rouble strengthened against the Dollar
by c.9% during the period and was RUR26.33/US$ at 31 December 2006 (RUR28.78/US$
- 31/12/05).  The Group has a policy of no long term gold forward sales or

                                    - Ends -


Alya Samokhvalova / Marianna Adams
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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