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Peter Hambro Mining (POG)

  Print      Mail a friend       Annual reports

Monday 20 April, 2009

Peter Hambro Mining

Final Results

RNS Number : 8005Q
Peter Hambro Mining PLC
20 April 2009
 





20 April 2009


Unaudited Preliminary Results for the year
ended 31 December 2008



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 2008 (the "Period").



Financial Summary (US$ '000)

2008  

2007

Change

Group Revenue

381,688

226,397

69%

Underlying EBITDA*

136,387

89,356

53%

Operating Profit**

87,111

81,435

7%

Earnings per Ordinary Share (US$)

0.271

0.476

(43%)

Equity attributable to PHM Shareholders

335,914

336,906

(0.3%)





Operating Highlights

2008     

2007

Change

***Total Attributable Gold Production ('000 oz) 

393.6

289.7

36%

Pokrovskiy GIS Total Cash Costs (US$/oz) 

248.8

193.0

29%

 Pokrovskiy GIS Total Production Cost (US$/oz)  

322.7

258.2

25%


   

*Underlying EBITDA is earnings before fair value changes in derivatives, financial income, financial expenses, taxation, depreciation and amortisation.


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

***Total attributable gold production, as stated throughout this document, is comprised of 100% of production from the Group's subsidiaries and the relevant share of production from joint ventures. The Company's direct and indirect interest in Pokrovskiy Rudnik (and any interest held by Pokrovskiy Rudnik) is 98.61%.

Attributable gold production for the year ended 31 December 2007 has been restated to exclude production from investments which the Group previously included in the attributable production of Rudnoye JV.


Highlights:


Financials


  • The Group reports underlying EBITDA for the year ended 31 December 2008 of US$136 millionan increase of 53% compared to the previous year. Operating profit increased by 7% to US$87 million over the same period;
  • In 2008, the Group's average realised gold sales price of US$845/oz was 27% higher than the US$668/oz achieved in 2007; 
  • The Group's underlying profit from gold mining operations for the year ended 31 December 2008 increased by 60% to c.US$145 million, compared with c.US$91 million for the year ended 31 December 2007;
  • Reported earnings per share of US$0.271 for the year to 31 December 2008 decreased 43% compared to earnings per share of US$0.476 in 2007 due to a c.US$45 million increase in non-cash items and a c.US$53 million increase in other costs; 


  • The increase in non-cash items comprised a c.US$32 million increase in foreign exchange losses, c.US$6 million increase in the loss on the fair value change in derivative financial instruments, and a c. US$7 million higher depreciation charge; 
  • The increases in other costs are mainly due to higher staff costs for the Group, resulting in an additional cost of c.US$27m in 2008 (due to a 31% increase in wages and salaries as a result of wage inflation and expansion) and c.US$18 million of additional financing costs primarily due to the issue of US$180m Gold Exchangeable Bonds in October 2007 and increased cost and level of bank financing. Royalties paid by the Group increased by c.US$8m due to the higher gold price and the higher number of ounces sold, and also contributed to the increase in other costs. 



Operations and Development

  • The Group's total attributable gold production of 393,600oz for 2008 increased by 36% compared to 2007, being at the upper end of the Group's 2008 production target of 350,000 - 400,000oz; 
  • Pokrovskiy production increased by 13%; the mine remains a stable producer of cash-flow and a solid base for the Group's expansion; 

  • Pokrovskiy GIS total production costs increased by c.25%, due principally to higher wage, energy and materials costs. Pokrovskiy Mine's GIS total cash costs of US$249/oz are, nevertheless, still almost half the industry average of US$458/oz (according to Raw Materials Group data);

  • Gold production from the Pioneer mine commenced in April 2008 yielding 72,900oz by the end of the year, just ahead of the Group's 2008 target of 72,000oz; 

  • The Pioneer mine is currently operating in line with the Group's internal plan. The Group is on schedule  for the construction of the second line of the Pioneer plant, with the second line to commence production in the second half of 2009;

  • Gold production from the Group's alluvial operations increased by 38% compared to 2007 totaling 22,700oz, exceeding the Group's 2008 production target of 19,550oz;


  • Attributable gold production from the Group's joint ventures in 2008 was 30,800oz, a 15% decrease on 2007;


  • As a result of intensive exploration works and acquisitions the Group's Russian category total reserves B+C1+C2 have increased by c.11%.



Summary table of Peter Hambro Mining's Reserves and Resources**** as of 01.01.2009


 

Ore 

 Gold

Gold 

 

01/01/2009

01/01/2009

01/01/2008

 

('000t)

('000oz)

('000oz)

Group summary

 

 

 

B+C1

42,257

1,926

2,193

C2

170,807

9,635

8,193

Total Reserves

213,064

11,561

10,386

P1 resources

105,792

7,537

9,102

Total Reserves and P1 Resources

318,856

19,098

19,488



****Excluding Omchak Joint Venture but including 50% attributable to Rudnoye JV; also excluding the precious metals (PGM+Au) resource at the Ozernoye deposit at Yamal region which is now restated as 719,000 oz palladium-equivalent


01/01/2008 figures have been restated to exclude the Voroshilorskoye licence area, on which exploration was terminated in 2008The table above is a summary of the Group's estimates of reserves and resources as at 1 January 2009. The Group reports its reserves and resource estimates according to the Russian Reserves and Resources Classification System and also, in respect of most developed assets, in compliance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code, 2004), this data is available on the Company's website www.peterhambro.com. The basis of reporting reserves and resources is described in the Appendix to these Preliminary Results. The reserves and resources estimates quoted in these Preliminary Results are updated figures reflecting both production during 2008 and new exploration data. Some of the figures have been approved under the audit procedures of the Russian State Commission on Reserves (GKZ) and included in the State Balance. All of the estimates have been checked in detail and are approved by N. Vlasov, the Group's chief geologist, whose qualifications and experience exceed those expected of a Competent Person internationally. They have also been reviewed independently by Dr Stephen Henley, an independent geological advisor to the Board of Directors of PHM.



Exploration


  • Pokrovskiy and Flanks - Promising new discovery of gold mineralized zone in the Zheltunak area, associated with a flat-lying thrust over a 5 km length. Exploration has traced the mineralisation along this thrust plane and an active search is now underway to find the primary source ore bodyThe grades which have been found appear to indicate an ore body of some significance in this area;


  • Pioneer - Most current exploration effort is concentrated on the Andreevskaya zone, and the pilot-scale open-pit is being rapidly developed. Further drilling and trenching at this zone indicates the likelihood of further ore columns and show bonanza grades, in places up to 3,500 g/t in individual samples. Ore is being blended with stockpiled run-of-mine ore from the other zones for feed to the Pioneer mill. Production blast-hole sampling and ore processing show contained gold running at up to 30% above exploration-stage reserve estimates. New high grade ore columns have been discovered on the Bakhmut zone to the east of the Ulunga river, and to both the east and west of the central high-grade zone at Andreevskaya, and with indications of further ore columns; 


  • Malomir - The Malomir main ore deposit exploration and evaluation is on track and on target, with strike length of 1,500m now fully explored. There was a new discovery of a north-south trending ore body made in the Quartzitovoye deposit (north of the Malomir main deposit) with high-grade non-refractory ore. Metallurgical tests show this ore can be easily processed and could yield substantial early production by direct cyanidation, thereby postponing the capital intensive autoclave oxidation investment needed for the treatment of refractory ore from the main ore body. From pre-stripping and trenching as well as infill drilling, the structure and mineralisation of the Quartzitovoye deposit are now fairly well understood, and exploration continues for further similar high-grade zones;


  • Albyn - Exploration continues to prove the scale of this deposit. The coarse visible gold here has caused some difficulties in reliable estimation of the resources and reserves, but metallurgical testing shows that this ore is easily processed, and, the Group believes, could be quickly brought into production;


Osipkan - The licence area just a few kilometres to the south of Tokur, is considered by the Company's geologists to be a continuation of the Tokur mineralisation with very similar geologya tectonic zone has been discovered here, with thickness of 300 to 350 metres, and lateral extent 2.7km. Gold grades vary from 0.9 to 8.82g/t. According to the characteristics found here, the Company's geologists expect the discovery of a major gold deposit; 


  • Solovevskiy Area (part of the 50% Rudnoye Joint Venture) - Active exploration around the previously worked Kirovskoye quartz-vein gold deposit has provided evidence of extensive gold-bearing stock-works in the area of the mine as well as in several satellite areas, with substantial open-pit mining potential. Resource estimates (C2+P1 categories) have more than doubled during the year from 264,000 oz to 556,000 oz of attributable gold;


  • Sagur-Semerotakskaya - A new exploration licence area has been acquired to the south of Tokur. It is a known hard-rock gold area with a deposit previously exploited by underground mining, containing an established gold resource which is potentially suitable for open-pit exploitation; 


  • Buryatia - Exploration has continued in the Talikit block of the Talikitskaya licence area, with shallow drilling along trenches. Four parallel gold-bearing stockwork zones were discovered in these drill holes, with grades so far found in the region of 3g/t;


  • Aprelskay - Very good gold grades were established at this area which is 15km west of Pioneer where as a result of 2008 exploration work series of south-east-north-west mineralised zones have been intersected in trenches;


  • Taldan - the Burinda epithermal gold vein system in the east of this area has been explored by drilling and the main vein has been traced continuously for 2.7 km at thicknesses of 1 to 20m. 



Currency movements


  • The Russian rouble weakened against the US dollar by 20% during 2008 and was RUB29.38/US$ as at 31 December 2008 (RUB24.55/US$ at 31 December 2007). Most of the Group's borrowings are US dollar-denominated whereas remaining net monetary assets are mostly stated in Roubles. Therefore the movement between these two currencies had a negative effect on the Group's results for the year. Exchange differences included in the Group results amounted to a loss of c.US$25m (2007 -gain c.US$6m);
  • However, the devaluation had a beneficial effect on the Group's operating costs in dollar terms.


  Corporate developments 2009


  • On 6 February 2009, the Independent Board Committees of the Company and Aricom plc ("Aricom") announced that they had reached agreement on the terms of a recommended all share offer to be made by the Company for the entire issued and to be issued share capital of Aricom (the "Merger"). The offer is to be implemented by means of a scheme of arrangement ("Scheme"), subject to the satisfaction or waiver of the conditions of the Scheme and to the approval of the High Court and of both Aricom's and the Company's shareholders. Following receipt of the approval by both the Company's and Aricom's shareholders on 25 March and 31 March 2009 respectively, and Russian FAS (anti-monopoly committee) approval on 8 April 2009, the Court hearing to sanction the Scheme is expected to take place on 21 April 2009 and the effective date of the Scheme and completion date of the Merger is expected to be 22 April 2009.


  • On 6 March 2009, the Company subscribed for 6,166,666 (CAD c.3.7 million) new shares in Rusoro Mining Limited ("Rusoro") as part of an equity placing by Rusoro. As a result PHM has a c.1.1% stake in the share capital of Rusoro as enlarged by the placing. This subscription follows an investment made in June 2008 when the Company led a syndicate of investors who extended a US$ 80 million secured exchangeable loan to Rusoro. Rusoro is an advanced junior gold producer, which has announced that it produced over 100,000oz of gold in 2008 and that it intends to have two additional mines in production by the beginning of 2010. 


Inclusion in the FTSE Gold Mines Index of the world's leading gold miners:

  • In December 2008, the Group was included in the prestigious FTSE Gold Mines Index, which comprises the top 18 gold-focused mining companies.


Chairman's Statement: -


Against the back drop of the global financial and economic downturn, 2008 was nevertheless a year of progress for the Group, thanks to strong operational performance and, to some extent, the higher price of gold.


A revenue increase in 2008 of 69% to c.US$382m resulting from a production increase of gold shows the strength of the Group's economic success and supports the likelihood of achieving next the next financial year's target production growth.


Production growth alone is not our real goal, however. What is important is the growth in profitable ounces, and control of our costs is critical for this. We achieved a record underlying EBITDA for the year at c.US$136m, 53% up in comparison with the c.US$89m achieved in 2007. These results were achieved despite high producer price inflation in Russia and a strong Rouble for almost three quarters of 2008.  Our cost control measures, the benefits of Rouble devaluation and lower energy costs towards the end of the year however worked in our favour and our margins were good.


The excellent gold production and the improved realised gold prices which the Company enjoyed this year are not, however, reflected in bottom line earnings. This was principally due to a c.US$45m increase in non-cash items and a c.US$53m increase in other costs.  Whilst the non-cash items comprised mostly foreign exchange losses, higher depreciation and fair value adjustment of derivatives, the increase in other costs was fully anticipated by the Company due to a full year's interest charge on the Gold Exchangeable Bonds and higher costs associated with other borrowings. Also an increase in costs is typical for a company which launches such a sizeable and significant project as the Pioneer mine. This inevitably led to an increase in production costs including mechanical and other overheads incurred by the Company, such increased costs having been spread over only approximately two quarters' production, during the start-up phase of the Pioneer mine's operations.

However we look forward to full year results from Pioneer's production in 2009 when we expect to obtain the full benefit of operations at this excellent asset. 


The Pokrovskiy deposit continues to play an important part in the Company's production profile, as shown in our results, and, for the first time, the potential of Pioneer is apparent as revenues from the first stage of its production facility have come on stream. The high grade material mined from Andreevskaya has exceeded the expectations of our consultants and I am pleased to report that the Pioneer second stage is expected to be fully operational in 2009 and that work on the third stage is advancing.  Construction of the new processing lines at Pioneer will help to deal with high-volume, low-grade material in future production.


Pokrovskiy's flanks are well positioned to meet the demand for mill feed from the Pokrovskiy mill beyond the 2012 deadline for its open pit. At Malomir, the recent discovery of non-refractory ore enables us to change the immediate processing plan so as to delay the capital expenditure on the more complex recovery process while receiving early cash flow from the Quartzitovoye ore body; a good example of us maximising profitable ounces of production. The other exploration results that are summarised in the report, and derived from Albyn, Tokur and nine other deposits, are the foundation for the confidence that your Board has in the Group's future. There can be few gold producers that have such a broad range of growth prospects close to their producing assets. The strength of our operational and management teams is the framework that is built on these solid footings.


Recently we took steps to reinforce the capital base of the Company. This was done first by a US$105m capital raising and by the proposed merger with Aricom plc. These two actions, together with the repurchase of US$87m nominal of the Company's Gold Exchangeable Bonds, will leave the Company with strong cash-producing assets and a stronger balance sheet.  Nonetheless, the need to conserve cash in these difficult times means that the Board does not recommend the payment of a final dividend for the financial year ended 2008. In line with this, Pavel Maslovskiy and I have accepted a 50% reduction in our bonus levels.


I believe that the Group is as well placed as it has ever been both to weather economic storms and to take advantage of the vital position that gold, its principal product, plays in times of uncertainty. 


The demographic potential of China to consume raw materials at an advanced rate remains and in the event that stability returns Peter Hambro Mining and Aricom, assuming the merger is completed, can together begin to capitalise on the possibilities that exist in Aricom's significant iron ore assets, and we continue to evaluate opportunities to finance these assets. Additionally, having the iron ore assets inside the economically strong enlarged Peter Hambro Mining is an attractive long-term development in particular for Chinese consumers.


The global economic uncertainty has driven demand for physical gold and this has propelled the price of gold in most markets. And this seems set to continue. Against this backdrop, our success in bringing new production on-stream and in finding additional gold makes the Company's prospects good for this year. 


Peter Hambro, Executive Chairman








Consolidated Income Statement

For the year ended 31 December 2008




Note

2008

2007


US$'000

US$'000





Group revenue 


381,688

226,397





Net operating expenses


(294,577)

(144,962)



87,111

81,435





Fair value change on derivatives


(18,307)

(12,100)





Share of results of joint ventures 


(1,261)

(1,821)





Operating profit


67,543

67,514





Financial income


7,709

3,776

Financial expenses

3

(34,864)

(16,105)





Profit before taxation


40,388

55,185





Taxation 

4

(17,643)

(15,560)





Profit for the period


22,745

39,625





Attributable to:




- equity holders of the Company


22,002

38,667

- minority interests


743

958





Earnings per ordinary share (basic and diluted)


US$0.271

US$0.476 



















Consolidated Balance Sheet

At 31 December 2008



Note

2008

2007


US$'000

US$'000

Assets




Non-current assets


655,581

474,348

Goodwill


21,675

15,818

Intangible assets

5

225,446

170,782

Property, plant and equipment

6

342,261

257,801

Interests in joint ventures


7,427

8,635

Other investments


972

960

Inventories


19,078

11,620

Trade and other receivables


19,790

5,344

Derivative financial instruments

9

1,875

-

Deferred tax assets


17,057

3,388





Current assets 


183,551

278,927

Inventories


72,332

40,468

Trade and other receivables


84,775

60,017

Cash and cash equivalents

7

26,444

178,442

 



 

Total assets 


839,132

753,275





Liabilities




Current liabilities


(306,202)

(66,405)

Trade and other payables


(42,142)

(33,382)

Current tax liabilities


(638)

(1,888)

Borrowings

8

(220,946)

(31,135)

Derivative financial instruments

9

(42,476)

-





Net current (liabilities)/ assets


(122,651) 

212,522





Total assets less current liabilities


532,930

686,870





Non-current liabilities


(190,604)

(344,014)

Borrowings 

8

(152,778)

(292,100)

Derivative financial instruments

9

-

(30,634)

Deferred tax liabilities


(32,580)

(19,677)

Provision for close down and restoration costs


(5,246)

(1,603)

Net assets


342,326

342,856





Equity




Share capital


1,311

1,311

Share premium


35,082

35,082

Other reserves


153,728

176,722

Equity reserve on bonds


1,583

1,583

Retained earnings 


144,210

122,208

Equity attributable to the Company's shareholders


335,914

336,906

Minority interests 


6,412

5,950

Total equity


342,326

342,856






Consolidated Cash Flow Statement

For the year ended 31 December 2008





2008

2007

US$'000

US$'000

Cash flows from operating activities



Cash generated from operations

60,144

62,933

Interest received

5,751

3,963

Interest paid

(28,471)

(11,113)

Income tax paid

(14,871)

(15,675)

Net cash from operating activities

22,553

40,108




Cash flows from investing activities



Acquisitions of subsidiaries net of cash acquired

(6,032)

-

Acquisition of minority interests

-

(9,257)

Acquisition/(proceeds from disposal) of assets

(11)

34

Purchase of property, plant and equipment and intangible assets

(103,071)

(76,314)

Proceeds from disposal of property, plant and equipment

2,428

1,558

Exploration and evaluation expenditure

(58,309)

(48,426)

Proceeds from securities held for trading

-

14,353

Amounts loaned to other parties

(34,909)

(5,194)

Repayment of amounts loaned to other parties

6,670

447

Net cash used in investing activities

(193,234)

(122,799)




Cash flows from financing activities



Repayments of borrowings 

(253,810)

(66,601)

Proceeds received from borrowings 

299,047

262,411

Capital element of finance leases

-

(281)

Dividends paid to company's shareholders

(22,994)

-

Dividends paid to minority interests 

-

(26)

Net cash from financing activities

22,243

195,503




Net (decrease)/increase  in cash and cash equivalents in the year

(148,438)

112,812

Effect of exchange rates on cash and cash equivalents

(3,560)

3,164

Cash and cash equivalents at beginning of period

178,442

62,466

Cash and cash equivalents at end of the year

26,444

178,442
















Consolidated Statement of Changes in Equity





Share

Capital

Share premium

Other distributable reserves

Equity reserve on bonds

Retained earnings

Total attributable to equity holders of the Company

Minority interests

Total Equity


US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000










Balance at 1 January 2007

1,311

35,082

176,722

1,583

83,541

298,239

11,815

310,054

Recognised income

and expenses

-

-

-

-

38,667

38,667

958

39,625

Additional acquisition 

of subsidiary undertakings

-

-

-

-

-

-

(6,823)

(6,823)

Balance at 

31 December 2007

1,311

35,082

176,722

1,583

122,208

336,906

5,950

342,856

Recognised income

and expenses

-

-

-

-

22,002

22,002

743

22,745

Additional acquisition of subsidiary undertakings

-

-

-

-

-

-

(281)

(281)

Dividends 

-

-

(22,994)

-

-

(22,994)

-

(22,994)

Balance at 

31 December 2008

1,311

35,082

153,728


1,583

144,210

335,914

6,412

342,326













  Notes to the preliminary financial statements


Note 1.        Basis of preparation


Peter Hambro Mining plc (the "Company") is a company incorporated in the United Kingdom under the Companies Act 1985. The address of the registered office is 11 Grosvenor PlaceLondon SW1X 7HH. The consolidated preliminary financial statements ("the financial information" comprise the financial statements of the company and its subsidiaries and are prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union.


The financial information does not constitute the Company's statutory accounts for the years ended 31 December 2007 or 2008 but is derived from those accounts prepared under International Financial Reporting Standards ("IFRS"). The preliminary results for the year ended 31 December 2008 are unaudited and will be approved by the directors on 20 April 2009. 


Statutory accounts for the year ended 31 December 2007 have been delivered to the Registrar of Companies, and those for the year ended 31 December 2008 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 2007; the report was unqualified and did not contain statements under section 489(2) or (3) of the Companies Act 2006.



Note 2.        Foreign currency rates


The rates of exchange used to translate balances from other currencies into US Dollars were as follows (currency per US dollar):



31 December 2008

31 December 2007

GB Pounds Sterling

0.69

0.50

Russian Rouble

29.38

24.55



Note 3.        Financial expenses



2008

2007


US$'000

US$'000

Interest expense:



- Bank borrowings

5,462

1,134

- Exchangeable bonds 

16,606

3,286

- Convertible bonds

10,994

10,993

Bank charges 

1,562

567

Unwinding of discount on environmental obligation

236

72

Commission and interest in respect of sale and lease back transaction

4

53

 

34,864

16,105


  

Notes to the preliminary financial statements (continued)


Note 4.        Taxation



2008

2007


US$'000

US$'000

Current tax



UK corporation tax (28.5% for the year ended 31 December 2008 (2007: 30%)

(917)

1,354

Russia corporation tax (24%)

19,974 

19,661


19,057

21,015

Deferred tax



Reversal and origination of temporary differences

(1,414)

(5,455)

Total tax charge

17,643

15,560


The charge for the year can be reconciled to the profit per the income 

statement as follows:



2008

2007


US$'000

US$'000

Profit before tax

40,388

55,185




Tax at the UK corporation tax rate of 28.5% for the year ended 31 December 2008 (2007: 30%)

11,510

16,555

Effect of different tax rate of subsidiaries operating in other jurisdictions 

(4,517)

(3,334)

Effect of different tax rate for UK deferred tax balances (28%) 

-

(242)

Effect of different tax rate for deferred tax balances of subsidiaries operating in Russia

(6,306)

-

Expenses not deductible for tax purposes 

3,772

1,190

Share of results in joint ventures

481

435

Adjustments in respect of prior years

740

-

Foreign exchange movements in respect of deductible temporary differences

11,963

956

Tax expense for the period

17,643

15,560


  Notes to the preliminary financial statements (continued)


Note 5.        Intangible assets 



Malomir

Albyn

Tokur

Yamal deposits

Others* 

Total


US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

Cost







At 1 January 2008

25,483

3,385

58,437

48,641

34,836

170,782

Additions

15,825

7,005

435

14,661

20,512

58,438

Impairment for the year

-

-

-

-

(3,240)

(3,240)

Transfer to mine

development costs

-

-

-

-

(205)

(205)

Reallocation

-

-

2,677

-

(2,677)

-

Disposals

-

-

-

(329)

-

At 31 December 2008

41,308

10,390

61,549

62,973

49,226

225,446


* Amounts included above in the "Others" category of intangible assets represent amounts capitalised in respect of a number of projects in the Amur and Buryatia regions.


Note 6.        Property, plant and equipment



Mine development costs

Mining assets

Non-mining assets

Capital construction in progress

  Total

 2008

 

US$'000

US$'000

US$'000

US$'000

US$'000

Cost






At 1 January 2008

66,281

152,039

80,221

13,046

311,587

Transfers from intangible assets

-

205

-

-

Transfers from capital

construction in progress

-

14,778

9,423

(24,201)

-

Transfer from mine development costs

(73,209)

73,209

-

-

-

Assets acquired through business combinations

-

2,927

1,536

154

4,617

Additions

20,708

34,505

16,357

35,577

107,147

Disposals

-

(3,213)

(2,866)

(247)

(6,326)

Reallocation

(12,596)

(16,314)

16,314

12,596

-

At 31 December 2008

1,184

258,136

120,985

36,925

417,230







Depreciation and impairment






At 1 January 2008

-

42,401

11,385

-

53,786

Charge for the period

-

13,474

9,755

-

23,229

Disposals

-

(1,324)

(722)

-

(2,046)

Reallocations

-

(98)

98

-

-

 At 31 December 2008

-

54,453

20,516

-

74,969







Net book value 






At 1 January 2008

66,281

109,638

68,836

13,046

257,801

At 31 December 2008

1,184

203,683

100,469

36,925

342,261


Notes to the preliminary financial statements (continued)


Note 7.        Cash and cash equivalents


Cash and cash equivalents comprise cash in hand, deposits held on call with banks and highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.



2008

2007


US$'000

US$'000

Cash at bank and in hand

22,792

85,707

Short term bank deposits

3,652

41,243

Promissory notes and other liquid investments

-

51,492

 

26,444

178,442


Note 8.        Borrowings



2008

2007


US$'000

US$'000

Borrowings at amortised cost



Convertible bonds

140,663

139,637

Exchangeable bonds

162,863

158,863

Bank loans

60,198

24,700

Other loans 

10,000

-

Finance lease liability

-

35

 

373,724

323,235




Amount due for settlement within 12 months

220,946

31,135

Amount due for settlement after 12 months

152,778

292,100

 

373,724

323,235


  Notes to the preliminary financial statements (continued)


Note 9.        Derivative financial instruments



2008

2007


US$'000

US$'000

Derivative financial assets - Rusoro Embedded Derivative 



Fair value of the Rusoro Embedded Derivative at inception

6,560

-

Fair value change

(5,128)

-

Fair value at 31 December

1,432

-




Derivative financial assets - Rusoro Call Option



Fair value of the Call Option at inception

1,780

-

Fair value change

(1,337)

-

Fair value at 31 December

443

-




Total derivative financial assets at 31 December 

1,875

-




Derivative financial liabilities - Exchangeable Bonds Embedded Derivatives



Fair value of Gold Exchangeable Bonds Embedded Derivatives at inception (October 2007) and the beginning of the year

(30,634)

(18,534)

Fair value change

(10,766)

(12,100)

Fair value at 31 December

(41,400)

(30,634)




Derivative financial liabilities - Foreign Currency Forward Contract



Fair value of the foreign currency forward contract at inception

-

-

Fair value change

(1,076)

-

Fair value at 31 December

(1,076)

-




Total derivative financial liabilities at 31 December

(42,476)

(30,634)



Note 10    Dividends



2008

2007


US$'000

US$'000

Amounts recognised as distributions to equity holders in the year:




Final dividend for the year ended 31 December 2007 of 7.5 pence per share

12,166

-

Interim dividend for the year ended 31 December 2008 of 7.5 pence per share

10,828

-


22,994

-


US dollar equivalent of dividend payment has been arrived at by translating sterling amounts paid into US dollars at the date of payment. 

  Notes to the preliminary financial statements (continued)


Note 11.    Subsequent events


On 5 February 2009, the Company issued 16 million new ordinary shares at a price of 450 pence per share, raising gross proceeds of US$105 million (approximately, US$99.6 million net of expenses), which have been subsequently admitted to trading on the AIM Market of the London Stock Exchange plc.


In February 2009, the Group purchased a total of US$87 million nominal of its 7% Gold Exchangeable Bonds due 2012 at an average price of US$95.00 plus accrued interest from a number of investors.


On 6 February 2009, the Independent Board Committees of the Company and Aricom plc ("Aricom") announced that they had reached agreement on the terms of a recommended all share offer to be made by the Company for the entire issued and to be issued share capital of Aricom (the "Merger"). 


The Merger provides for the acquisition of Aricom shares to be effected by way of a court sanctioned scheme of arrangement under Part 26 of the Companies Act 1985 involving a capital reduction of Aricom under section 135 of the Companies Act 1985 (the 'Scheme'). The purpose of the Scheme is to enable the Company to acquire the entire issued and to be issued ordinary share capital of Aricom.


Under the terms of the Merger, Aricom Shareholders will receive one fully paid New Peter Hambro Mining Share in exchange for 16 fully paid Aricom Shares. 


Following the issue of new Ordinary shares completed earlier and completion of the Merger, existing Company's Shareholders will hold 56.8% of the Enlarged Group calculated on an undiluted basis and Aricom Shareholders will hold 43.2% of the Enlarged Group calculated on an undiluted basis.


The Merger is scheduled to be completed on 22 April 2009. Subject to satisfying eligibility criteria, Peter Hambro Mining intends to make an application to obtain a primary listing on the Official List of the London Stock Exchange which is scheduled to take place on 22 April 2009.



Statement of directors' responsibilities in respect of the financial information


We confirm that to the best of our knowledge:


a)    The financial information, prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union, give a true and fair view of the assets, liabilities and financial position of the group; and


b)    The Highlights summary and Chairman's Statement include a fair review of the development and performance of the business and the position of the group, together with a description of principal risk and uncertainties.



On behalf of the board


P Hambro - Director

  

Annual Report and Accounts 2008


The Company will publish on 22 April 2009 its Annual Report and Accounts for the year ended 31 December 2008 on its corporate website www.peterhambro.com and intends to distribute copies to shareholders in due course.


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 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 on the Group's website on 22 April 2009.  


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 (20 April 2009) at 14:00 (GMT) to discuss this announcement. 

Details to access the conference call are as follows: 

The Dial-in number is +44 (0) 1452 555 566 and the conference ID is 95838876


  • UK Free Call Dial In: 0800 694 0257

  • USA Free Call: 1866 966 9439 

  • Russia Free Call: 8108 002 097 2044.


Replay will be available after the call has finished for seven days on: 

To access the recording dial 01452 55 00 00 and enter 95838876

 



Enquiries:


Alya Samokhvalova / Rachel Tuft

Peter Hambro Mining Plc


+44 (0) 207 201 8900



Tom Randell / Maria Suleymanova

Merlin

  +44 (0) 207 653 6620



Patrick Magee 

J.P. Morgan Cazenove


+44 (0) 207 155 4525 

Robert Finlay  

Canaccord Adams                                                             

   +44 (0) 207 050 6500 




The basis of reporting reserves and resources

The Group reports its reserves and resources in this Annual Report according to the Russian Reserves and Resources Classification System ("The Russian System"), as this is the reporting system under which it is legally required to operate in the Russian Federation. The Russian System was approved by the State Committee on Reserves (GKZ) in 1965 (and amended in 1981 and 2008).

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 the Joint Ore Reserves Committee ("JORC") Code (2004).

Licence holders must register A, B, C1 or C2 category reserves with GKZ in order to mine a deposit. A reserve category is dependent on the structural complexity of the deposit. Gold deposits are usually Class 3 or Class 4 in complexity, 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 reserves with GKZ does not impose any sanctions on any Group company per se. 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.

The reserves and resources estimates quoted in this annual report are updated figures reflecting both production during 2008 and new exploration data. Some of the figures have been approved under the audit procedures of the Russian State Commission on Reserves (GKZ) and included in the State Balance, and in no case has GKZ requested modification of the company's estimates. All of the estimates have been checked in detail and are approved by Dr N.G. Vlasov, the Group's chief geologist, whose qualifications and experience exceed those expected of a Competent Person internationally. They have also been reviewed independently by Dr Stephen Henley, and furthermore the resource estimates for Pokrovskiy, Pioneer, and Malomir in particular have also been reviewed recently by Wardell Armstrong International.

Dr. Stephen Henley 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 Annual Report. He 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 vice-chairman of the Pan-European Reserves and Resources Reporting Committee ("PERC") represents PERC as a member of the Committee for Mineral Reserves International Reporting ("CRIRSCO"), and is convenor and secretary of the CRIRSCO GKZ working group on the harmonisation of the Russian and international reserve reporting systems.

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

Use of Financial Measures not Recognised under IFRS In this report the Group presents financial items such as "cash operating cost", "total cash cost" and "total production cost" that have been determined using industry standards as per the Gold Institute and are not measures under 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 cost", "total cash cost" and "total production cost", 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, the Group believes that total cash cost and total production cost 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.

This release has 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. 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 is Vice-chairman of the Pan-European Reserves & Resources Reporting Committee (PERC) and Secretary of the CRIRSCO-GKZ working group on harmonisation of Russian and international mineral reserves reporting systems. He has been employed in exploration, mining, academic and geological consultancy posts since 1970 and has participated in Competent Person studies on a wide variety of different minerals and types of deposit.


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.


Dealing disclosure requirements

Under the provisions of Rule 8.3 of the Code, if any person is, or becomes, "interested" (directly or indirectly) in, one per cent or more of any class of "relevant securities" of Aricom plc (Aricom) or the Company, all "dealings" in any "relevant securities" of that company (including by means of an option in respect of, or a derivative referenced to, any such "relevant securities") must be publicly disclosed by not later than 3.30pm (London time) on the London business day following the date of the relevant transaction. This requirement will continue until the date on which the recommended offer for the entire issued share capital of Aricom by the Company becomes, or is declared, unconditional as to acceptances or lapses or is otherwise withdrawn or on which the "offer period" otherwise ends. If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire an "interest" in "relevant securities" of Aricom or the Company, they will be deemed to be a single person for the purpose of Rule 8.3 of the Code.

Under the provisions of Rule 8.1 of the Code, all "dealings" in relevant securities" of Aricom or the Company by the Company or Aricom, or by any of their respective "associates" must also be disclosed by no later than 12.00 noon (London time) on the London business day following the date of the relevant transaction. A disclosure table, giving details of the companies in whose "relevant securities" "dealings" should be disclosed, and the number of such securities in issue, can be found on the Takeover Panel's website at www.takeoverpanel.org.uk

"Interests in securities" arise, in summary, when a person has long economic exposure, whether conditional or absolute, to changes in the price of securities. In particular, a person will be treated as having an "interest" by virtue of the ownership or control of securities, or by virtue of any option in respect of, or derivative referenced to, securities. Terms in quotation marks are defined in the Code, which can also be found on the Panel's website. If you are in any doubt as to whether or not you are required to disclose a dealing under Rule 8, please consult the Panel's website at www.thetakeoverpanel.org.uk or contact the Panel on telephone number +44(0)20 7638 0129; fax number +44(0)20 7236 7013. 



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