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Peter Hambro Mining (POG)

  Print      Mail a friend       Annual reports

Monday 21 April, 2008

Peter Hambro Mining

Preliminary Results

Peter Hambro Mining PLC
21 April 2008



21 April 2008

                   Unaudited Preliminary results for the year
                             ended 31 December 2007


Peter Hambro Mining PLC ("PHM" or the "Company" or, together with its
subsidiaries, the "Group") announces its unaudited preliminary results for the
year ended 31 December 2007.

Financial Highlights:

US$ '000                               2007        2006    Change
---------------------------------    ---------- --------- ---------
Group Revenue                         226,397    157,807      44%
*Operating Profit                      81,435     50,915      60%
Profit for the Year                    39,625     32,373      22%
Earnings per Ordinary Share (US$)       0.476      0.398      20%
Equity attributable to PHM            336,906    298,239      13%

Operating Highlights                   2007        2006    Change
---------------------------------    ---------- --------- ---------
**Total Attributable Gold               297.3      261.3      14%
Production ('000 oz)                                                            
Pokrovskiy GIS Total Cash Costs         193.0      174.8      10%
(US$/oz)
Pokrovskiy GIS Total Production         258.2      236.8       9%
Cost (US$/oz)

* Operating profit as stated before fair value change in derivatives and
share of joint ventures' operations

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

Highlights:

Operations and Development

• Total attributable gold production of c.297,000 oz for the year, up by
  c.14% versus 261,000 oz in 2006 and by c. 5% on the 2007 forecast of 283,000 oz;

• Pokrovskiy production, up 15% and remains the Group's primary focus as
  the stable producer of cash-flow and as a solid base for the Group's expansion;

• Pokrovskiy GIS Total Production Costs increased by a modest 9% in
  dollar terms, despite a 7% rouble appreciation, 13% increase in electricity
  prices, up to 20% increase in labour costs and  up to 20% increase in prices for
  reagents and consumables, due to efficient cost control at the mine;

• Technological improvements across all areas of Pokrovskiy's operations
  allowed for c.91% recovery rates from the resin-in-pulp ("RIP") plant in spite
  of it processing more  difficult material;

• Upgrade of the mining fleet at the Pokrovskiy operations and the
  completion of a comprehensive programme of advanced stripping works, contributed
  to mining costs in 2007 staying in line with the previous year despite working
  at deeper horizons of the deposit;

• Pioneer's first stage production facilities, which were commissioned in
  September 2007, have proved the viability of the new technology. The second
  stage of development of the Pioneer plant, which introduces an all-year-round
  operation is currently on schedule;

• As a result of intensive exploration works and acquisitions the Group's
  Russian category B+C1 reserves have increased by 20%, category C2 reserves by
  26% and category P1 resources by 6%.


Exploration

• Exploration of the Malomir deposit in 2007 extended the evaluated zone
  from 400m to 1km along strike, the estimated reserves and resources have been
  increased to c.2.2mln oz of C2 reserves (c.47% up from c.1.5mln oz in 2006) and
  c.1.2mln oz of P1 resources (164% up from 0.5mln oz in 2006), an overall
  increase of 77% in C2+P1 reserves and resources. Total Malomir area estimated
  resources/reserves (C2+P1) have increased from c.2.9 to c.4.3mln oz;

• In the newly acquired (February 2007) Taldan deposit an estimated
  240,000 oz of gold P1 category resources have already been identified, ahead of
  the intensive exploration efforts which have started and are expected to expand
  and upgrade the resource base. Gold and silver grades found so far are up to 17g/t 
  of gold and up to 160g/t of silver, with an average gold grade of 7.5g/t;

• The newly acquired (February 2007) Kirovskoye deposit is estimated, on
  the basis of work done to date, to include a C2+P1 reserves and resources of
  over 0.5mln oz at an average grade of 7.8g/t, and P2 resources estimated at
  1.6mln oz at an average grade of 2g/t;

• At Aprelskoye, 2007 trench exploration has intersected and confirmed
  several of the mineralised structures indicated by geochemical and geophysical
  anomalies, and surface samples of mineralised material have yielded gold grades
  up to 50g/t;

• At Albyn, the evaluated zone has been extended from 1km to over 3km
  along strike, and the estimated reserves and resources increased from 0.6mln oz
  to 1.6mln oz (up 166%);

• Through further detailed exploration works reserves and resources in
  the Andreevskaya zone of the Pioneer deposit were expanded.


Financials

• The Group's average realised gold sales price of US$668/oz during 2007
  was 14% higher than the US$586/oz achieved in 2006;

• The Board is today proposing a maiden final dividend of 7.5 pence per
  share (net), which will be subject to shareholder approval at the Annual General
  Meeting ("AGM") to be held on 25 June 2008;

• US$180mln of financing obtained through the issue of Gold Equivalent
  Exchangeable Bonds.


  Corporate development

• The Group expects total attributable production for 2008 to be between
  350,000 oz and 400,000 oz;

• The Group confirms its plans to seek to obtain a full listing on the
  Main Market of the London Stock Exchange by the end of 2008.


Chairman's Statement: -

          "2007 has been another successful year of steady progress towards our
growth targets, with a 14% increase in attributable gold production to c.297,000
oz, a 60% increase in adjusted operating profit to US$81.4mln, significant
exploration progress and the commissioning of Pioneer's first stage production
facilities on time and on budget.

          This year the Group broke new ground in the financial world by the
successful issue of US$180mln of gold exchangeable bonds ("Bonds") at a time
when the debt markets were, to all intents and purposes, closed to new business.
By issuing this type of bond the Group achieved a cash interest saving,
estimated at 4.5% (c.US$8.1mln) per annum for 5 years, by embedding gold
exchangeability in the Bonds (effectively granting a US$1,000/oz "call option").
In 2007, only part of this saving was realised because the Bonds were issued
late in the year.

          It should also be noted that the accounting treatment of the embedded
derivatives under International Financial Reporting Standards ("IFRS") requires
the change in the value of these embedded derivatives to be reported as a
non-cash item in the Income Statement. In 2007, the change in value between the
date of issue of the Bonds and 31 December 2007 amounted to c.US$12mln.  Unless
properly understood, this charge could, at first glance, unfairly appear to
distort the annual post-tax profitability of the Group. It is important to note
that the fair value of the implied derivative is marked to market during its
life and the non-cash charge will expire when the Bonds mature or are exchanged.
A more detailed explanation can be found at the end of this press release.

          It has always been my strong belief that the principal reason for
investing in mining companies is to share in their profitability.  Almost 14
years after we founded the Group, it gives me huge pleasure that the Board is
today proposing a maiden final dividend of 7.5 pence per share (net), which will
be subject to shareholder approval at the AGM on 25 June 2008.  This final
dividend is expected to be paid on 1st August 2008 to shareholders on the
register as at 20 June 2008.

          Subject to the Group's results, the Board would expect to pay interim
and final dividends of approximately equal amounts, with the interim dividend
being paid in October and the final dividend in July/ August of the following
year.  The Board considers that the proposed dividend level is appropriately
covered and is consistent with the Company's development spending.

          While our financial performance has benefited from the continued
improvement in the gold price, I am more pleased by our team's success in
managing our operating cost base, which saw a relatively modest 9% increase in
dollar terms despite substantial pressure from energy, labour and materials
prices.  Our GIS cash costs at US$193/oz and GIS total costs at US$258.2/oz
continue to be amongst the lowest in our industry.

          We saw an impressive 15% increase in production from Pokrovskiy, and
stockpiling for the new facility at Pioneer is on track to start year round
production at the end of this month. I am pleased to report that our exploration
teams have made good progress in expanding the Group's portfolio enabling a 25%
increase in reserves to 10.6mln oz under the Russian classification system.

          In addition the report which the Group commissioned from consultants,
Wardell Armstrong International, has gone a long way to demonstrate the
viability of the Russian system of reserve and resource reporting and was well
received by the Analyst Workshop at the time of its publication in February
2008.

          Looking forward to the remainder of 2008, I expect attributable gold
production for the year to increase to between 350,000 to 400,000 oz in line
with our growth plans.  In addition our 2008 objective of gaining admission of
the Company's shares to trading on the Main Board of the London Stock Exchange
remains on track.

          As ever, the outstanding quality and commitment of our management and
employees lies behind the progress of the Group in 2007, and gives me every
confidence in our ability to achieve our targets in the year to come."


Enquiries:

Alya Samokhvalova or Rachel Tuft                     +44 (0) 207 201 8900
Peter Hambro Mining Plc                               www.peterhambro.com                  
                                                                                                                    
Tom Randell or Anastasia Ivanova                     +44 (0) 207 653 6620
Merlin

Patrick Magee                                        +44 (0) 207 155 4525
JP Morgan Cazenove

Robert Finlay                                        +44 (0) 207 050 6500
Canaccord Adams


In these preliminary results we present financial items such as "cash operating
costs", "total cash costs" and "total production costs" that have been
determined using industry standards as per the Gold Institute and are not
measures under International Financial Reporting Standards ("IFRS"). An investor
should not consider these items in isolation or as alternatives to any measure
of financial performance presented in accordance with IFRS either in this
document or in any document incorporated by reference herein.

While the Gold Institute has provided definitions for the calculation of "cash
operating costs", "total cash costs" and "total production costs", the
definitions of certain non-IFRS  financial measures included herein may vary
significantly from those of other gold mining companies, and by themselves do
not necessarily provide a basis for comparison with other gold mining companies.
However, we believe that total cash costs and total production costs in total by
mine and per ounce by mine are useful indicators to investors and management of
a mine's performance because they provide a very useful indication of a mine's
profitability, efficiency and cash flows. They also show the trend in costs as
the mine matures over time and on a consistent basis. These costs can also be
used as a benchmark of performance to allow for comparison against other mines
of other gold mining companies.


Consolidated Income Statement
for the year ended 31 December 2007

(expressed in US $'000s)

-----------------------------                              --------    ---------
                                                             2007         2006
                                                          US$'000      US$'000
-----------------------------                              --------    ---------

Group Revenue                                             226,397      157,807

Net operating expenses                                   (144,962)    (106,892)
-----------------------------                              --------    ---------
                                                           81,435       50,915

Fair value change on derivatives                          (12,100)           -

Share of results of joint ventures                         (1,821)        (173)
-----------------------------                              --------    ---------

Operating profit                                           67,514       50,742

Financial income                                            3,776        6,137
Financial expenses                                        (16,105)     (11,764)
-----------------------------                              --------    ---------

Profit before taxation                                     55,185       45,115

Taxation                                                  (15,560)     (12,742)
-----------------------------                              --------    ---------

Profit for the year                                        39,625       32,373

Attributable to:
- equity holders of the Company                            38,667       31,986
- minority interest                                           958          387

Earnings per ordinary share (basic and diluted)            $0.476       $0.398





Consolidated Balance Sheet
At 31 December 2007

(expressed in US $'000s)
-----------------------------                           --------       ---------
                                                          2007            2006
                                                       US$'000         US$'000
-----------------------------                           --------       ---------
Assets
Non-current assets                                     469,004         360,349
Goodwill                                                15,818          13,396
Other intangible assets                                170,782         155,266
Property, plant and equipment                          257,801         165,930
Investments in joint ventures                            8,635          10,534
Other investments                                          960           1,022
Inventories                                             11,620          14,201
Deferred tax assets                                      3,388               -
-----------------------------                           --------       ---------

Current Assets                                         284,271         145,585
Inventories                                             40,468          21,859
Trade and other receivables                             65,361          47,323
Securities held for trading                                  -          13,937
Cash and cash equivalents                              178,442          62,466
-----------------------------                           --------       ---------

Total Assets                                           753,275         505,934
-----------------------------                           --------       ---------

Liabilities
Current liabilities                                    (66,405)        (38,829)
Trade and other payables                               (33,382)        (30,661)
Current tax liabilities                                 (1,888)           (973)
Borrowings                                             (31,135)         (7,195)
-----------------------------                           --------       ---------

Net Current Assets                                     217,866         106,756
-----------------------------                           --------       ---------

Total Assets less Current Liabilities                  686,870         467,105
-----------------------------                           --------       ---------

Non-current liabilities                               (344,014)       (157,051)
Borrowings                                            (292,100)       (134,740)
Derivative financial instruments                       (30,634)              -
Deferred tax liabilities                               (19,677)        (21,744)
Provisions                                              (1,603)           (567)
-----------------------------                           --------       ---------
Net Assets                                             342,856         310,054
-----------------------------                           --------       ---------

Equity
Share capital                                            1,311           1,311
Share premium                                           35,082          35,082
Other reserves                                         176,722         176,722
Equity reserve on bonds                                  1,583           1,583
Retained earnings                                      122,208          83,541
----------------------------                            --------       ---------
Equity attributable to PHM shareholders                336,906         298,239
----------------------------                            --------       ---------
Minority interests                                       5,950          11,815
Total equity                                           342,856         310,054
----------------------------                            --------       ---------





Consolidated Cash Flow
for the year ended 31 December 2007

(expressed in US $'000s)

-------------------------                                  ---------  ----------
                                                              2007        2006
                                                           US$'000     US$'000
-------------------------                                  ---------  ----------
Cash flows from operating activities
Cash generated from operations                              62,933      47,607
Interest received                                            3,963       7,209
Interest paid                                              (11,113)    (10,935)
Income tax paid                                            (15,675)     (9,416)
-------------------------                                  ---------  ----------
Net cash from operating activities                          40,108      34,465

Cash flows from investing activities
Acquisitions of subsidiaries and joint ventures net of           -     (38,613)
cash acquired
Acquisition of minority interests                           (9,257)          -
Acquisition of assets                                           34           -
Purchase of property, plant and equipment and intangible   (76,314)    (31,152)
assets
Proceeds on disposal of property, plant and equipment        1,558         758
Exploration and evaluation expenditure                     (48,426)    (36,747)
Securities held for trading                                 14,353     (13,845)
Payments to Reserve Bonus Scheme holders                         -     (15,000)
Proceeds from sale of investments available-for-sale             -       4,000
Acquisition of other investments                                 -        (537)
-------------------------                                  ---------  ----------
Net cash used in investing activities                     (118,052)   (131,136)

Cash flows from financing activities
Net proceeds from issue of ordinary share capital                -      17,822
Repayments of borrowings                                   (66,435)    (27,651)
Proceeds received from borrowings                          257,217      22,029
Capital element of finance leases                                -        (243)
Dividends paid to minority interests                           (26)          -
-------------------------                                  ---------  ----------
Net cash from financing activities                         190,756      11,957

Net increase/(decrease) in cash and cash equivalents in    112,812     (84,714)
the year
Effect of exchange rates on cash and cash equivalents        3,164       2,646
Cash and cash equivalents at beginning of year              62,466     144,534
-------------------------                                  ---------  ----------
Cash and cash equivalents at end of year                   178,442      62,466
-------------------------                                  ---------  ----------






Production

------------------------                        -------     -------     --------
Total attributable gold production, oz'000*      2007        2006         Var %
------------------------                        -------     -------     --------
Amur Region
           ---------------------                -------     -------     --------
           Pokrovskiy                          237.10       206.8           15
           ---------------------                -------     -------     --------
           Amur NE Assets                        16.5        10.5           57
           ---------------------                -------     -------     --------
           Rudnoye JV                            9.20         8.1           14
     ----- ---------------------                -------     -------     --------
Omchak JV
------------------------                        -------     -------     --------
            Magadan assets                        31.2       33.4          (7)
           ---------------------                -------     -------     --------
           Amur Assets                            3.3         2.5           32
     ----- ---------------------                -------     -------     --------
TOTAL                                           297.3       261.3           14
           ------------------------             -------     -------     --------

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


Pokrovskiy

In 2007 gold production was 237,091 oz, an increase of 15% compared to 2006.


Mining

       In 2007 mining operations increased 16%, moving c.4.6mln m3 of
material yielding c.2.2mln tonnes of ore.  Although working at deeper levels of
the Pokrovskiy pit, mining costs increased by only 4%. Cost control was
principally achieved by upgrading and expanding the mining fleet.  For example,
in the second half of 2007 an EKG-5 excavator with 5m3 loading capacity and
three new 45-tonne capacity BelAZ trucks were commissioned, thus increasing the
volume of waste stripping and a new Atlas Copco DML drill rig, with a higher
operating rate and larger drilling diameter, were brought into operation. The
programme envisages a further addition to the mining fleet in the first quarter
of 2008 when three further 45-tonne BelAZ trucks are expected to be brought into
operation.

        Precise and timely execution of the mining plan using the Micromine
geological computer model of the deposit also aided cost control.

        Advance stripping undertaken during 2006 allowed for mining work
optimisation in 2007 when the pit floor was reduced by 25m. Pre-stripping of
overburden in order to prepare reserves and maintain ore quality was continued
in 2007.

        During 2007, exploration works around the Pokrovskiy pit confirmed
50,000 oz of additional C1 gold reserves on the margins of the Pokrovskiy pit at
an average gold grade of 5.2g/t.  This reserve is comprised of oxidised material
which improves the quality of the blended mix in the intermediate stockpile.
Exploration works at the edges of the pit are continuing. 2008 exploration is
also focusing on bringing 200,000 oz of C2 into C1 reserves category.

        The significant increase in gold prices allowed for the
re-calculation of the economic depth of the Pokrovskiy pit to a depth greater
than in the original mine design.  The new pit is expected to provide the mine
with high quality ore up to 2013.


RIP plant


         Another area of optimisation was in further expansion of the
intermediate (mill feed) stockpiles introduced by the Pokrovskiy Mine team for
the first time in 2006. These stockpiles were designed to optimise ore blending
for the RIP once primary ore started to be produced by the pit.  In order to
have a uniform quality of material through the mill, both from a grade and
technological point of view, different types of ore from the pit are mixed in an
intermediate stockpile. In 2007, the capacity of intermediate stockpiles was
increased to 200,000 tonnes.

         In 2007, the plant processed 1.7mln tonnes of ore which comprised a
mixture of oxidised and primary material.  Although processing mixed material
was more challenging from a technological point of view a c.91% recovery rate
was achieved. This was possible thanks to long term planning for the transition
to a different type of material and improvements introduced by the team in order
to sustain previous levels of recoveries.  In addition to ore preparation in
intermediate stockpiles, these improvements included optimisation of pulp
particle size, cyanidation time, quantity of sorbent and transition speed.

         Enhanced thickener speed and concentration and use of cyanide,
allowed a high level of gold extraction to be maintained despite the
introduction of primary ore from the deposit.  This was further supported by the
installation of a centrifugal concentrator in front of one of the milling lines
for removal of sulphides from the process that are resistant to cyanidation. The
sulphides are processed in special units for intensive cyanidation with strict
supervision of all technological parameters. The second and third mill circuit
will be equipped in the same way during the first half-year 2008.


Heap-leach


          An increase in RIP processing capacity, coupled with the gold price
increase, has allowed processing of lower grade ore through the heap leach
process, and the optimisation of the heap leach process carried out in previous
years allowed for high gold recovery rates, even though processing low grade
material. Recovery rates of 68.5% were achieved through the heap leach process
in 2007, processing material at an average gold grade of 0.8g/t.



PHM Schedule of mining operations
                                          Units               2007          2006
Pokrovskiy deposit
    Total material moved                 '000 m(3)           4,621         5,385
        Including advanced               '000 m(3)           1,206         1,657
        stripping
    Ore mined                          '000 tonnes           2,207         1,904
        Grade                              g/t                 3.5           3.0
        Gold                             '000 oz             250.6         184.5

Pioneer deposit
    Total material moved                 '000 m(3)           1,704           912
    Ore mined                          '000 tonnes             191           168
        Grade                              g/t                 3.8           3.4
        Gold                             '000 oz              23.1          18.3




*PHM Processing Schedule
                                               Units             2007     2006
Resin In Pulp plant

    Ore from Pokrovskiy pit                 '000 tonnes         1,604    1,379
         Grade                                  g/t               4.3      4.7
         Gold                                 '000 oz             222      136

    Ore from stockpiles                     '000 tonnes            95      248
         Grade                                  g/t               3.7      2.8
         Gold                                 '000 oz            11.4     39.4

    Pioneer (bulk sample)                   '000 tonnes            23       46
         Grade                                  g/t              16.6      5.7
         Gold                                 '000 oz            12.5      9.7

    Total milled                            '000 tonnes         1,723    1,698
         Grade                                  g/t               4.4      4.1
         Gold                                 '000 oz           246.0    184.9
         Recovery                                %              90.6%    91.5%
         Gold recovered                       '000 oz           222.8    169.2

Heap leach

    Ore stacked                             '000 tonnes           784      750
         Grade                                  g/t               0.8      0.9
         Gold                                 '000 oz              21       23
         Recovery                                %              68.5%    73.1%
         Gold recovered                       '000 oz            14.3     16.8

Total gold recovered                          '000 oz           237.1    206.8

*Certain comparative numbers have been rounded up



Operating Costs 2007

     Pokrovskiy Rudnik - Operating Cost Analysis (US$/oz)
     ------------------------------------------
                                             2007     2006      Var %   1H 2007
                     ---------------------  -------  -------   --------   -------
     Gold Institute Standard
     ------------------------------------------
     Direct Mining & Processing Expenses    107.4    103.0          4%     71.3
     ---------------------                  -------  -------   --------   -------
     Refinery & Transportation Cost           6.8      7.0         (3%)     6.3
     ---------------------                  -------  -------   --------   -------
     By-product Credits                      (2.3)    (4.0)       (43%)       -
     ---------------------                  -------  -------   --------   -------
     Other                                   30.9     27.8         11%     38.2
     ---------------------                  -------  -------   --------   -------
     Cash Operating Cost                    142.8    133.8          7%    115.8
     ---------------------                  -------  -------   --------   -------
                     ---------------------  -------  -------   --------   -------
     Royalties                               39.9     35.3         13%     42.8
     ---------------------                  -------  -------   --------   -------
     Production Taxes                        10.3      5.7         81%      9.3
     ---------------------                  -------  -------   --------   -------
     Total Cash cost                        193.0    174.8         10%    167.8
     ---------------------                  -------  -------   --------   -------
                     ---------------------  -------  -------   --------   -------
     Non-cash Movement in Stock              23.2     15.8         47%     30.0
     ---------------------                  -------  -------   --------   -------
     Depreciation/Amortisation               42.0     46.1         (9%)    52.0
     ---------------------                  -------  -------   --------   -------
     Total Production Cost                  258.2    236.8          9%    249.9
     ---------------------                  -------  -------   --------   -------

         At Pokrovskiy GIS Total Production Cost in 2007 increased by just
9% to US$258/oz and this marginal increase was achieved despite a dollar to
rouble depreciation of 7% and general Russian inflation of c.12%, in particular
a 13% increase in electricity prices and an up to 20% increase in prices for
various chemical reagents and consumables.

        The stable and low operating costs at the Pokrovskiy mine are the
result of a series of long term cost cutting programmes implemented at the mine
in 2005, the effect of which was first fully reflected in the 2006
results. Expansion of fuel storage facilities during 2007 enabled the Group to
decrease the unit cost of diesel by 4% in comparison with the year 2006. An
increase in the number of ounces produced also improved the unit cost figure.

        Royalties are in direct correlation with the gold price. Refining
costs were fixed at the beginning of 2007 and were marginally down on a per
ounce basis.

        Depreciation and amortisation expenses have not increased
significantly between the two years and decreased on a per ounce basis due to
higher gold production numbers.

        Non-cash movement reflects the cost of mining incurred in previous
periods but accounted for in 2007 when the actual gold was produced.

        The structure of direct mining and processing costs has not
changed significantly compared to the previous year and is represented in the
table below:

                                                              2007        2006

Mining                                                          55%         51%
       Labour                                                   29%         28%

       Raw materials                                            42%         37%

       Energy                                                   29%         35%

RIP plant                                                       39%         41%
       Labour                                                   19%         17%

       Raw materials                                            56%         57%

       Energy                                                   25%         26%

Heap Leach                                                       6%          8%
       Labour                                                   38%         33%

       Raw materials                                            52%         58%

       Energy                                                   10%          9%




Omchak Joint Venture

Omchak Schedule of mining operations                          2007        2006

Nelkobazoloto - Shkolnoye Deposit
Ore mined                                  '000 tonnes        52.6        32.8
Ore processed                              '000 tonnes        46.7        29.6
Ounces produced                                '000 oz        10.2         8.7


Berelekh
Waste rock stripped                            '000 m(3)     9,511       8,651
Sands processed                                '000 m(3)     4,197       4,161
Ounces produced                                '000 oz        52.2        50.0


Noviye Tekhnologii and Zeyazoloto
Waste rock stripped                            '000 m(3)     381,4       432.9
Sands processed                                '000 m(3)     269.9       229.9
Ounces produced                                '000 oz         3.5         3.7


Uduma
Waste rock stripped                            '000 m(3)     131.5           -
Sands processed                                '000 m(3)      86.9        38.3
Ounces produced                                '000 oz         3.2         1.1


Susumanzoloto, temporary holding               '000 oz           -         8.3


Total gold production                                         69.1        71.8

PHM attributable (2007 - 50%)                                 34.5        35.9



        Omchak operated four separate units in the Magadan Region, Amur 
Region and Yakutia Region, and produced c.69,000 oz of gold, a marginal decrease
of c.4% on 2006 levels. More than 85% was produced from alluvial placers
and new alluvial deposits were brought into production to replace depleting
assets.
        Exploration works were focused on replacing exhausted assets and
the commissioning of new deposits. In the Chita region, Omchak holds three
licences: Verkhne-Aliinskoye gold deposit, Bukhtinskaya area, and Kulinskoye ore
field. Currently Omchak is actively exploring on all three, there is no
production as yet.
        
Russian Reserve Category C1 + C2 reserves at the Verkhne-Aliinskiy 
deposit were established at c.1.4mln tonnes of ore with average grades of 13.5g/t 
indicating c.615,000 oz of gold.  It is planned to submit these reserves for 
approval by GKZ in the third quarter of 2008.


Other Amur Region production


        In addition to development of its main projects and maintenance of a
large scale programme of exploration activities in the Amur Region, the Group
also operates a number of smaller scale enterprises and joint ventures in the
region, benefiting from synergies possible with its existing operations. These
include a number of alluvial operations and joint ventures with other producers
working in the area.  Alluvial enterprises which exploit placer mine deposits
using dredging machinery and washing technology include those operated by OAO
ZDP Koboldo and ZAO Amur Dore which together mined 16,500 oz of gold in 2007
(compared to 10,500 oz in 2006).  In 2007, these companies also started
exploration and production of two new placer deposits.  The Group's plan is to
produce c.16,400 oz of gold which would be attributable to the Group in 2008
through these two operators. Another operating placer mining company, OOO Elga
which was set up by the Group near the end of 2007 is planning to produce
c.3,500 oz gold in 2008.

        In 2007, OOO Odolgo, which is part of a joint venture between
Solovyevskiy Priisk and the Group, commissioned a modular gravity processing
plant, intending intensive cyanidation of the resulting concentrate. A unit for
intensive cyanide processing of gold concentrates was installed at the
Pokrovskoye RIP plant in 2007 at which the concentrate from the Odolgo mill was
processed.

        In 2007, OOO Odolgo also won the auction for the Solovyevskaya
exploration area in the Amur region. In the first half of 2007, a geological
exploration project document was prepared and agreed, and geological exploration
work at this site was commenced in August 2007.


Pioneer Mine

        During 2007 at Pioneer, efforts were concentrated on preparing the
deposit for commissioning in September 2007, which took place according to
schedule. Mining works were carried out in order to complete geological
exploration works and to prepare the deposit for operations.

        In previous years an open pit had been constructed on the Bakhmut
zone. Additionally in 2007 work was started on four more open pits, one in the
Promezhutochnaya zone, two in the Yuzhnaya zone, and one in the Andreevskaya
zone. As a result of the mining work at Pioneer in 2007, 1.1mln tonnes of ore
were stacked to be processed through the mill in 2008.

        Mining works were carried out according to a mining plan which
included advanced stripping and preparation mining works.  Mining works were
carried out by a mining fleet which included two EKG5 electrical excavators and
3 Cat 330 diesel excavators, 8 Belaz trucks with a capacity of 30 tonnes and six
Cat and Volvo in-pit trucks with a capacity of 38 tonnes each, six 32-tonne
Volvo trucks, and three Cat D9R bulldozers. Waste rock was used as a
construction material for building the main and subsidiary roads at Pioneer in
order to minimise capital expenditure.

        In September 2007, a new RIP plant was completed at Pioneer
comprising crushing units, grinding mills, sorption and desorption units, a heap
leach pad, and tailings storage. The new plant was commissioned on 24 September
2007. With the commissioning of the Pioneer mill, batches of ore from the pits
on the main ore zone (Bakhmut, Promezhutochnaya, and Yuzhnaya) were processed
through the mill in order to calibrate the circuit for optimal gold recovery.
The new technology of differential separation process between sands and slimes
was tested and proved successful.

        The coarse gold in the Andreevskaya ore did not allow for its
treatment through the Pioneer grinding circuit as it was not yet equipped with
ball mills; as a result this ore was sent to the mill at Pokrovka for bulk
tonnage metallurgical sampling. Over the winter period the balance of the
Andreevskaya ore was stockpiled at Pioneer pending ball mill installation in the
spring of 2008 as the first stage of the plant was constructed for the summer
cycle only. Towards the end of November 2007, all works on heat insulation of
the buildings for the grinding mills and sorption units were finished. This
allowed construction of the foundation for a ball mill in December 2007 which
was installed during February-March 2008.


Further development


         The continuous expansion of the Pioneer plant envisaged by the
Group's plan of development for the mine provides for the building of
infrastructure, such as the mining camp, a garage for maintenance and parking of
mining equipment and roads.  In December 2007 construction of a second
processing line in the RIP plant was commenced.  Work started on initial
preparation for the crushing, grinding, and sorption buildings. Contracts for
delivery in 2008 of a SAG mill 7.5x2.5 and ball mill 4.0x6.0 manufactured in
China have been signed, and most of the construction steel for the second RIP
line has been purchased. In the first quarter of 2008 a contract for the supply
of 13 large Cat777F trucks of 90 tonnes capacity for waste stripping and trucks
of 45-55 tonnes capacity for ore transport was concluded. Further it is planned
to sign a contract for delivery of one EKG-5 excavator and two excavators of
10m3 capacity. At present the Group is carrying out a closed-tender process for
the supply of this mining equipment. From December 2007, construction of a
second 35kV electricity transmission line was started, to provide a supply for
the second RIP processing line. It is planned to bring the second Pioneer RIP
line into production by December 2008.


Exploration

The table below shows the reserves and resources estimates under the Russian 
classification system:


Peter Hambro Mining Group Reserves & Resources Summary
As at 1-1-08

                     Category           Ore             Gold Content
                                     '000 t           kg     oz'000      As at
                                                                        1-1-07
Reserves               B+C1          44,303       68,201      2,193      1,826
                        C2          157,529      261,351      8,402      6,654
                       TOTAL        201,832      329,552     10,595      8,480

Resources               P1          115,190      287,329      9,238      8,697
                       P2+P3      1,635,415    2,911,587     93,608     91,005
                       TOTAL      1,750,605    3,198,916    102,845     99,702
Reserves &             TOTAL      1,952,437    3,528,468    113,440    108,182
Resources


        The Group reports its reserves and resources according to the
Russian Reserves and Resources classification system which was approved by the
State Committee on Reserves ("GKZ") in 1965 (as amended in 1981 and 2008) since
this is its functional reporting system ("The Russian System"). The Russian
System is based principally on the degree of geological knowledge and the
technical ability to extract a mineral reserve. Although economic considerations
form a part of the justification for A, B, C1, and C2 category reserves, the
system does not take into account the economic viability of extraction in the
same way as JORC, 43-101 or other internationally recognised mineral reserves
classification codes. Licence holders must register A, B, C1, and C2 category
reserves with GKZ to be able to extract them (depending upon the structural
complexity class of the deposit. Gold deposits are usually in complexity class 3
or 4 which require categories C1 and/or C2 only; categories A and B are rarely
if ever recorded for such deposits). Part of the Group's C1 and C2 reserves are
unregistered. Failure to register does not per se impose any sanctions on any
Group company. Once registered, reserves are included in the Russian national
mineral inventory, the State Balance. If marginal or only potentially economic,
or currently unviable for technical reasons, they may alternatively be recorded
as 'out of balance' reserves.  It should be noted that of the P Category
resources, P1 is supported by drilling whereas this is not necessarily the case
for P2 and P3, which are based on management estimates.

        It should be noted that there is no equivalent of P2 and P3 categories 
in JORC or other international reporting systems.

        In 2007, Wardell Armstrong International were contracted to
review the Group's reserves and resources, and in particular to report on those
resources for which Joint Ore Reserves Committee ("JORC") estimates could be
quoted. In particular, they examined those deposits for which geological ore
body models had been created (using the Micromine software) by Moscow-based
consultants Micromine. As a result of this exercise, the Group published JORC
resource estimates for Pokrovskiy, for the main ore zone at Pioneer, and for the
central part of the Diagonal ore zone at Malomir. The Russian figures in the
table above are inclusive of the ore bodies for which JORC estimates were
quoted.

        It is anticipated that JORC classification reserves and resources
for Pioneer and Malomir will be updated during this year in the course of
preparation of the Company for a full listing on the Main Market of the London
Stock Exchange by the end of 2008.

        In 2007, the Group undertook exploration works on more than 20
projects in the Amur, Magadan, Chita, Yamal Regions and Buryatia Republic. Three
new licence areas were acquired through various auctions and tenders. About US$
130mln was spent by the Group on exploration and development in 2007. The
exploration and development budget for 2008 is c.US$254mln.


The table below sets out the amount of exploration work completed in 2007:

                                                     2007                2006
Trenching(m3)                                     872,545             908,225
Core drilling(m)                                   83,154              64,170
Shallow drilling(m)                                58,493              32,988


        In 2007, there was an intensive exploration programme on Pioneer,
Malomir, and Petropavlovskoye (Yamal) in particular.

        The result of this increased exploration effort is a substantial
improvement in confidence in resource and reserve estimates, which lends
confidence to the Group's planning for production from these deposits.


Pokrovskiy and flanks

        In 2007, exploration works were carried out on the margins of the
existing pit and at satellite sites of the Pokrovskiy deposit. In 2007, c.40,000
oz of additional C2 reserves within the open pit mine area, and c.55,000 oz of
C1 reserves outside the pit boundaries, were identified. On the flanks of the
Pokrovskiy deposit, exploration continued with the purpose of extending the
Pokrovskiy Rudnik mine life and providing Pokrovskiy mill with high quality ore
until 2012.

        At the Pokrovka-2 site located approximately 1.5km from the
Pokrovskiy RIP plant, an intensive programme of drilling and trenching has
finally elucidated the complex geological structures and has shown that apart
from the gold in fanglomerates, within a zone around a basement ridge structure,
there are a number of ore bodies within the basement, geologically and
mineralogically similar to the main Pokrovskoye ore types. Of particular
importance are the unconsolidated fanglomerate deposits which, although in
whole-rock terms of low grade, can easily be upgraded by washing to produce ore
similar in quality to that from the main Pokrovskiy mine. Metallurgical test
work and hydrogeological studies are in progress, and the site is being prepared
for approval of reserves in 2009.

        The Bazovaya ore zone, at the eastern side of the original
Pokrovskiy exploration licence area, has now been explored in more detail and
its structure is understood. It is in the form of a shallow inverted saucer,
and, lying entirely within the oxidised zone, would be amenable to simple
open-pit extraction and heap leaching.

        Exploration continues on the 100km2 of Sergeevskaya licence area
which surrounds Pokrovskiy Mine. The first promising results were acquired at
the Velikiye Luzhki and Anatolyevskaya areas to the south of Pokrovskiy Mine,
Proletarskaya area to the west, and Zheltunak to the east. Although still at an
early stage, mineralised zones have been confirmed in the first three of these
areas, and more detailed exploration is planned for 2008.

Pioneer

         At Pioneer, the principal efforts in 2007 were concerned with
delineating the Andreevskaya ore zone and understanding its structure. This
allowed the identification of at least three ore shoots with high grades of
gold, as well as silver, and the discovery of an ore body geometrically similar
to Apophysis 1 at the junction of Andreevskaya zone with a newly discovered zone
named Prikontaktovaya. It appears that the Prikontaktovaya zone itself, trending
NE-SW, may extend SW for up to 5km to link with the Babayevskaya ore zone -
which has a similar trend and was discovered in 2007 during geological site
investigations for the new processing plant.

        The pre-stripped area at Andreevskaya has now been developed into
an open-pit mine currently just 10m in depth for pilot-scale production.

        At the Bakhmut ore zone infill drilling on a grid 40 x 40-60m
identified a second ore shoot which was predicted previously in the area of the
existing engineers' camp. Continuation of the ore zone as far as the left bank
of the river Ulunga has been confirmed by drilling, and it is likely to continue
further eastwards.

Malomir

        With detailed exploration (trenching and deep core drilling), the
evaluated section of the main Malomir deposit has now been extended laterally to
a length of 1km, and to a depth of 200m. The ore zone has been traced as far as
the Malomir river valley in the north-east and is continuous with the
mineralisation on the Ozhidaemoye deposit to the north of the river.

        Metallurgical tests indicate that Malomir primary and mixed ore
will produce 80% recovery by flotation alone, or 85% with flotation plus gravity
separation, and there can be further improvement on recovery from the primary
sulphide-bearing ores, by use of autoclave oxidation.

        Published JORC resource estimates are based on modelling carried
out in 2007. The models are currently being revised to reflect the large amount
of recent exploration and resulting substantial increase in resources. Mine
planning is at an advanced stage, with associated work (such as metallurgical
tests, hydrogeological, and geotechnical investigations) nearly completed.
Continued exploration is in progress to locate suitable water supplies for the
Malomir mill, as well as locally source building stone.

        Exploration on the Ozhidaemoye deposit has allowed the delineation
of six ore zones above the Diagnoal fault structure, which are geologically very
similar to the main Malomir deposit. Detailed exploration will continue in 2008
to delineate resources in preparation for mine planning.

        The Quartzite deposit, lying to the west of Ozhidaemoye, has been
explored by both trenching and drilling, and an area has been pre-stripped in
order to assess the morphology and continuity of the ore zones. It was found
that the structure of the ore zones is more complex than expected, and more
detailed exploration (on a closer grid) will be needed in order to obtain
reliable identification and delineation of ore zones. There are about six ore
bodies of thicknesses varying up to 26m. Metallurgical studies on bulk samples
of oxide and primary ore are not yet completed, but the ore appears similar in
character to the main Malomir deposit. Reductions in cutoff grades allowed by
current and anticipated gold prices may allow simplification and considerable
enlargement of ore body outlines, and possible development of a pit for early
heap leach treatment of a large tonnage of oxide ore.

        With intensive exploration on the Malomir deposit in 2007,
extending the evaluated zone from 400m to 1km along strike, the estimated
reserves and resources have been increased to 2.193mln oz category C2 reserves
(up from 1.469mln oz as at 01.01.07) and 1.242mln oz category P1 resources (up
from 0.469mln oz as at 01.01.07), an overall increase of 77% in category C2+P1
reserves and resources. Total Malomir area estimated resources/reserves (C2+P1)
have increased from 2.88mln to 4.33mln oz as at 01.01.08.


Albyn

        Acquired in 2005, this 40km2 licence area, 40km south-east of
Tokur, includes the Albyn ore zone, with a traced length of 6,400m, located
500-1,000m south of the known and the previously worked Kharga (Kharginskoye)
deposit.
        The Albyn ore zone is an extensive east-west trending thick
(50-120m) mineralised metasomatic zone, controlled by a gently dipping thrust
fault. Exploration undertaken in 2007 includes trenching and drilling over a
strike length of 4.5km, in the zone of mineralised albitites, now explored as
far as the eastern boundary of the licence area.

        Gold is present in these rocks, sometimes as coarse visible grains
up to 2mm in size. Gold grade in the ore bodies ranges from 0.6 to 38.9g/t, with
an average of about 2.5g/t. The average thicknesses of the three main ore bodies
are 2.7m, 5.4m and 5.5m, but varying from 0.8m to 17.9m. The deposit is open
down-dip and along strike in both directions. An estimate of resources so far,
over the explored area within the licence area boundary, at category P1
resources, is 1.6m oz of gold, for open-pit working to 150m depth. This excludes
the Kharginskoye deposit veins, which can also be re-evaluated for potential
open-pit exploitation by a number of separate smaller pits, with one or more
veins per pit.

       Intensive exploration in 2007 has extended the evaluated zone
from 1km to over 3km along strike, and increased the estimated reserves and
resources from 0.6mln oz to 1.6mln oz. The intention in 2008 is to complete
exploration on the main albitite zones upgrading the resource categories in
order to finalise a mining plan. Three metallurgical samples have been taken and
are currently being tested by Irgiredmet.


Other Amur region projects


       Exploration is actively proceeding on many other licence areas
in the Amur region. In particular, the Kirovskoye and Taldanskoye areas (to the
west of Pokrovskiy) are both already yielding very promising results from
trenching and drilling, to confirming old data and to checking areas of
geochemical anomalies.

       Taldan, according to existing data, contains estimated 240,000
oz of gold P1 category resources, already identified, in the Burinda epithermal
deposit, before exploration efforts have started to expand and upgrade the
resource base. Gold grades at Burinda found so far are up to 17g/t and silver up
to 160g/t.

       On the basis of preliminary work done, it is estimated that
Kirovskoye includes a Russian C2+P1 reserves and resources of over 0.5mln oz,
with, additionally, P2 resources estimated at 1.6mln oz. Future work is aimed at
actively expanding this resource base as well as upgrading the resource
categories.

       At Aprelskoye, exploration is at a very early stage but already
in 2007 trench exploration has intersected and confirmed several of the
mineralised structures indicated by geochemical and geophysical anomalies, and
surface samples of mineralised material have yielded gold grades up to 50g/t.


YAMAL


Novogodnee Monto and Petropavlovskoye


       In 2007, exploration works on the Novogodnee Monto deposit which
contains two main types of mineralisation, gold-magnetite and gold-quartz, were
finalised and the Regional Committee for Natural Resources (TKZ-Yamalnedra)
approved the feasibility study for the Novogodnee Monto mine. Active development
for an open pit mine is now under way. Metallurgical studies have shown that
most of the gold in the magnetite ore is present in a free state and can be
recovered by cyanide leaching. The recommended processing route consists of
initial crushing/grinding followed by wet magnetic separation, and extraction of
separate gold concentrates from both magnetic (by flotation/cyanidation) and
non-magnetic (by gravity/flotation/cyanidation) fractions.

       The unmineralised host rocks of the deposit have suitable
mechanical properties for use as building materials (aggregate, ballast, etc.).
The ability to sell much of this 'waste' from the deposit to meet a large and
growing local demand (the Yamal peninsula is a major centre of natural gas
development, and there are many construction projects), makes a substantial
contribution to the economics of the Novogodnee Monto project.

        The Petropavlovskoye deposit is located 1km to the west of
Novogodnee Monto. Intensive exploration (drilling, trenching, and pre-stripping)
in 2006 and 2007 has delineated the main ore zone, and there is now a good
3-dimensional model of the ore body. Gold occurs in quartz veins and stockworks
cutting beresitic metasomatites. Exploration continues in 2008 with the
investigation of high-grade gold-bearing quartz veins around the margins of the
stockwork. Bulk samples have been taken for metallurgical testing. As at
Novogodnee Monto, there is potential to sell much of the unmineralised 'waste'
rock as building material (15m tonnes estimated, at category C2, within the
designed pit outline).

        In 2008, intensive work is scheduled to continue on
Petropavlovskoye, with expected approval of resource/reserves estimates already
submitted, and preparation of a detailed mine design as part of a feasibility
study which is expected to be completed by the end of 2008.


Toupugol-Khanmeishorskaya area


        In the north-western area of the licence, drilling has proved a
north-south metasomatic mineralised zone resembling the Petropavlovskoye
deposit, as well as gold-bearing magnetite/sulphide lenses up to 200m long and
several metres thick - similar to the Novogodnee Monto ore. Detailed exploration
continues in these areas to delineate the deposits as potential further sources
of ore for Novogodnee Monto and Petropavlovskoye mill feed.


Ozernoye


        Drilling in 2007 has confirmed three steeply dipping ore bodies
within the pyroxenite layered complex, with PGM+Au grades in the range 0.5 to
1.5g/t as well as associated base metal sulphides. Metallurgical samples are
currently being studied at the group's research centre Irgiredmet, to assess the
practicability and economics of processing this material.


2008 Production Forecast & Outlook


        PHM currently estimates that attributable gold production in
2008 will be 350,000 oz to 400,000 oz.  Because of the effect of weather
conditions on the large heap-leach activities at Pioneer it has been decided to
provide a range rather than a single target for 2008 production.


        Assuming all goes well however, the lowest target of 350,000 oz
would be a 24% increase on 2007 and it is estimated that it would be made up of
c.225,500 oz from Pokrovskiy and c.72,000 oz Pioneer, 42,000 oz from Omchak and
the remaining ounces from the Group's interests in other Amur region assets. Any
appreciation in the US dollar value of the rouble, the Group's operating
currency, and inflationary pressures on raw material costs may well cause an
upward pressure on operating costs.


Corporate

        The Group's average realised gold price for 2007 was US$668/oz,
up 14% against that achieved in 2006. The rouble strengthened against the dollar
by c.7% during the period and was RUR24.55/US$ at 31 December 2007 
(RUR26.33/US$ - 31/12/06). The Group has a policy of no long term gold forward 
sales or hedging.

        The Board is today proposing a maiden final dividend of 7.5 pence per 
share (net), which will be subject to shareholder approval at the AGM on 
25 June 2008.

        This final dividend is expected to be paid on 1st August 2008
to shareholders on the register as at 20 June 2008.  Subject to the Group's
results, the Board would expect to pay interim and final dividends
of approximately equal amounts, with the interim dividend being paid in October
and the final dividend in July / August of the following year. The Board
considers that the currently proposed dividend level is appropriately covered
and is consistent with the Company's development spending.

During 2007 the Group successfully converted to IFRS accounting.

Convertible Bonds

         On 19 October 2007 the Group raised US$180mln by issuing 5 year
Bonds that are exchangeable into the cash equivalent of in aggregate 180,000
Troy oz anytime from October 2009.

         Details of the issue of the Bonds are contained in the press
release dated 17 October 2007 and the Fiscal Agency Agreement dated 19 October
2007.  The Bonds were issued at par by the Company's wholly-owned subsidiary
Peter Hambro Group Finance Limited ("PHM Finance") and are guaranteed by the
Company. Gross proceeds of the Bonds' issue were US$180mln. The Bonds carry a
coupon of 7% per annum payable semi-annually in arrears and are exchangeable at
the option of the holders into the cash equivalent at the time of the exchange
of (in aggregate) up to 180,000 Troy oz of gold at any time from the second
anniversary of the settlement of the bonds up until 20 days prior to the
maturity of the Bonds.

         PHM Finance has the option to call the Bonds at par plus
accrued interest after the fourth anniversary of the settlement provided that
the London afternoon gold price fixing reaches a level of US$1,500 per Troy oz,
with holders retaining the right to convert within the call period up to the
fifteenth day before the date fixed by the call for redemption. If not exchanged
or previously redeemed the Bonds will be redeemed at par on 19 October 2012.

IFRS accounting treatment of the embedded derivatives within the Agreement (the
gold call option and the purchased cap on the gold price)

         The IFRS accounting standards, which were adopted by the Group
prior to its intention to move to a Main Board listing, required the Group, at
the time the Bonds were issued, to recognise the fair value of the Options (as
defined below).

         Within the Bond terms, two implied derivatives exist: the
option for the Bondholders to exchange their Bonds into the cash equivalent at
the time of the exchange of (in aggregate) up to 180,000 Troy oz of gold at any
time from the second anniversary of the issue date up until 20 days prior to the
maturity of the Bonds (the "Written Option"); and the cap, whereby PHM Finance
has the option to call the Bonds at par plus accrued interest after the fourth
anniversary of issue provided that the London afternoon gold price fixing
reaches a level of US$1,500 per Troy oz, with investors retaining the right to
convert within the call period up to the fifteenth day before the date fixed by
the call for redemption (the "Cap").

        Since the Written Option and Cap (together the "Options") are
part of the same contract they can legally be and will be settled net as part of
the one contract. At each balance sheet date the Group needs to mark to market
and thus determine the fair value of the embedded derivatives, and a non-cash
charge for any movement goes to the income statement.

        At time of the issue of the Bonds, the Options valuation was
independently recognised as a c.US$19.6mln reduction in Group liabilities, since
the Group had notionally sold and bought the options. IFRS accounting provides
for the c.US$19.6mln reduction in Group liabilities to expire over the life of
the Options.

        It should be noted that this is an accounting item which does not
currently affect the cash flows of the Group. The Group is required to recognise
the fair value of the Options in the Group's accounts, and restate that value at
each balance sheet date, but the Group is not subject to margin calls nor is it
currently required to make any cash payments.

        Were the Group to have issued conventional debt on the same terms
but without the gold exchangeability option it would be paying an estimated
coupon of c. 11.5% as opposed to 7% with the current bonds.

        At the Group's 31 December 2007 balance sheet date, the increase
in the gold price and the gold price volatility caused the negative fair value
adjustment to the Group's income statement to increase to c. US$12m and
subsequent increases brought this negative adjustment to the order of US$32m in
March 2008. Neither of the adjustments has current cash implications for the
Group.

        The fair value adjustment simply represents an estimate, based on
current market conditions, of the change in the value of the bondholders' option
to exchange the bonds for cash, from September 2009, on the terms set out above.
If the option were to be exercised, the fair value adjustment would be reversed,
and replaced with the actual difference between US$1,000 and the spot price at
the date of conversion. Any such difference would represent an allowable cost to
the Group at that time.


Economic implications


        The inclusion of the Options in the Bond's structure will save the
Group approximately c.US$41mln in real cash interest costs over the 5 year life
of the Bonds, based on an annual cash coupon saving of 4.5%.

        If the Written Option is exercised, selling the underlying 180,000
oz of gold at US$1,000/oz, rather than at the US$700/oz price prevailing at the
time of the issue, would add approximately US$54mln real cash to the Group's
sales proceeds. In the event that the gold price remains above US$1,000/oz when
any Bonds are redeemed the Group will forego an opportunity cost of US$180,000
for every US$1.00 of price increase over US$1,000 per Troy oz as a result of
including the implied derivatives in the Bonds. However it will gain a similar
amount in 2008 and twice as much in 2009 as production increases.

        This method of funding has been extraordinarily favourable to the
Group, enabling it to raise money without issuing equity and to do so during the
so called "credit crunch" when the market for conventional funding has almost
completely dried up.


Annual Report & Accounts

The Company intends to publish and distribute its Annual Report and Accounts for
the year ended 31 December 2007 on 19 May 2008.

This report will contain a more detailed analysis of the work undertaken by the
Group during the period, notes to the accounts and a breakdown, by deposit, of
the Group's reserves and resources and production.

The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 December 2006 but is derived from
those accounts prepared under International Financial Reporting Standards
("IFRS").  The results for the year ended 31 December 2007 are unaudited and
will be approved by the directors on 19 May 2008. Statutory accounts for the
year ended 31 December 2006 have been delivered to the Registrar of Companies,
and those for the year ended 31 December 2007 will be delivered following
approval of the Accounts by the Board of Directors and at the Company's Annual
General Meeting.  The auditors have reported on the financial statements for the
year ended 31 December 2006; the report was unqualified and did not contain
statements under section 489(2) or (3) of the Companies Act 2006.

The resources and reserves estimates have been reviewed by Dr. Stephen Henley,
who is an independent geological advisor to the board of directors of Peter
Hambro Mining Plc. Dr. Henley is qualified to act in the capacity of a Competent
Person for the purposes of this statement of reserves and resources.

Dr. Stephen Henley holds a PhD in Geology (University of Nottingham, 1970). He
is a Fellow of the Geological Society, a Fellow of the Institution of Materials,
Minerals and Mining, and a Chartered Engineer. He is also a Charter Member of
the International Association for Mathematical Geology. He has been employed in
exploration, mining, academic, and geological consultancy posts since 1970 and
has participated in Competent Person studies on a variety of different minerals
and types of deposit, including gold, polymetallic, and chromite projects.

Dr. Henley is currently chairman of PERC (the Pan-European Reserves and
Resources Reporting Committee, European equivalent of the Australasian JORC),
and convenor and secretary of a CRIRSCO working group on harmonisation of
Russian and international reserve reporting systems.

Dr. Henley owns no direct or, to the best of his knowledge, indirect interests
in the shares or securities of Peter Hambro Mining Plc or of any of its
associated or subsidiary companies and does not expect to receive direct or
indirect interest in any of the Company's projects or in the shares and
securities of the Company.

The Board of Directors commissions a semi-annual independent review of the
exploration and development work of the Group and the Group's reserve and
resource estimates.  The Summary of this review has been compiled by Dr. Stephen
Henley and reviews all current exploration works being conducted by the Group.

Peter Hambro Mining Plc will publish an Executive Summary of this review today
on the Group's website.

Please visit our website: www.peterhambro.com where you will be able to download
the summary from a link on the home page.


Conference Call

There will be a conference call today to discuss the announcement at 14:00
(London time).

Details to access the conference call are as follows:

The dial-in number in the UK will be: 0844 493 3800 and internationally will be:
+44 (0) 1452 555 566 with the conference ID in both cases: 43708353.

Replay will be available after the call has finished for seven days on: 0800
9531533/ 0845 245 5205 in the UK and on +44 (0) 1452 55 00 00 internationally
with the access code in both cases: 43708353#










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