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Petropavlovsk Plc (POG)

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Thursday 21 January, 2010

Petropavlovsk Plc

2009 Full Year and Fourth Qua

RNS Number : 8906F
Petropavlovsk PLC
20 January 2010
 



2009 Full Year & Fourth Quarter Trading Update 

Petropavlovsk PLC ("Petropavlovsk" or the "Company") today issues its 2009 full year and fourth quarter trading statement as an update and in advance of its Annual Results for the year ended 2009 which are expected to be issued on 25 March 2010.    

Highlights        

Gold production report for Fourth Quarter 2009


Attributable Production*


Q4 2009

Q4 2008

Year ended

 31 Dec 2009

Year ended 31 Dec 2008


oz 

oz

oz

oz

Amur region

Pokrovskiy deposit**

41,100

45,200

190,100

189,500

Pioneer deposit**

81,600

73,200

234,100

150,500

Alluvials (including Tokur)

6,200

4,000

24,400

22,700

Joint ventures





Odolgo (50%) and Solovevsky Rudnik (13%)

3,800

2,700

11,400

10,800

Omchak (50%)***

800

1,700

26,800

28,100

TOTAL

133,500

126,800

486,800

401,600



Production update:

  • The Group's total attributable gold production for the full year ended 31 December 2009 increased by 21% compared to 2008 to 486,800ozwhich is in the upper half of the Group's 2009 original production target of 460,000 - 510,000oz;

  • Pokrovskiy and Pioneer mines' combined full year production increased by 25% to 424,200oz compared to 2008; 

  • The Group's joint ventures and alluvial operations contributed a further 62,600oz in 2009 (compared to 61,600oz during 2008) in line with the Group's forecast; 

Costs and average realised gold sales price

  • Cash operating costs for full year 2009 were in line with the Group's forecast; 

  • During 2009 the Russian Rouble rapidly depreciated in the first quarter reaching c.RUR36/US$ then gradually began appreciating during the remaining nine months of the year and ended the year at RUR30.24/US$, only 3% lower in dollar terms than the exchange rate at 31 December 2008;

  • The Group's average realised gold sales price of US$975/oz during 2009 was 15% higher than the average price of US$845/oz achieved in 2008;

Resumption of dividends

  • In light of the excellent preliminary trading results the Board has declared an interim dividend of £0.07 per share payable on 30 March 2010 to shareholders on the register on 26 February 2010.  No final dividend will be paid but in future years the Board expects to pay both interim and final dividends;

Project development

  • The expected commissioning of Pioneer's third milling line has been advanced to the first half of 2010 from the second. This line will provide additional capacity of 135,000 tonnes of ore per month;

  • The Malomir project is scheduled for commissioning in the second half of 2010;

  • The infrastructure programme at Albyn has commenced. Production is currently scheduled to begin at the end of 2011;

2010 plans and forecast production

  • The Group's attributable production for 2010 is currently expected to be between 670,000oz and 760,000oz;

  • An independent mineral consultant, AuVerdi Capital, has been working with the Group to set up an internal JORC reporting system to report fully JORC compliant reserves and resources. It is expected that the first results of this process will be included in the Group's Annual Results which are due to be published on 25 March 2010.


Commenting on the announcement, Peter Hambro, Chairman, said:

"I am pleased that we have delivered a sound 21% increase in gold production in 2009 and that costs are in line with our forecasts. This has enabled the Board to resume dividend payments. 


Pioneer's progress has been a great credit to our phased expansion strategy and we can look forward to an even stronger performance in 2010. The commitment shown at both Pokrovskiy and Pioneer to work together to effectively deal with a potential sidewall movement at Pokrovksiy's main pit showed evidence of the strength of our teamwork throughout the Group. 


In an environment of further strong gold prices, our ongoing project development continues in 2010 with an accelerated capital expenditure commitment to ensure that Pioneer's still growing contribution and the first production from Malomir will deliver another double digit percentage production increase.


I am also pleased to release our production target for 2010 which anticipates a significant increase in the Group's gold output. Production in 2010 is likely to increase as the year progresses due to the significant volume of stripping scheduled at Pioneer in the first quarter which will produce high grade material for the mill and also the new production capacity coming on stream during the year."




* 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 and other investments. Figures for the comparative period are restated accordingly. The Group has held c.1.1% interest in Rusoro Mining Ltd since March 2009; no attributable ounces are included in the Group figures. The Company's direct and indirect interest in Pokrovskiy Rudnik is 98.61%.


**During 2009, some of the ore from Pioneer deposit was processed through Pokrovskiy mill, yielding production of 9,500oz. Pioneer gold processed through Pokrovskiy mill is included in the Pioneer deposit figures. Figures for the comparative period are restated accordingly.


*** The Group has entered into a conditional contract for the disposal of the majority of its interest in Omchak. At this stage there is no certainty that this disposal will take place and the numbers and forecasts in this document do not reflect any reduction in this interest.



There will be a conference call today to discuss the announcement at 09:00 (London time).


Details to access the conference call are as follows:


The Dial-in number in the UK will be: 0800 694 0257

The Dial-in number in Russia will be: 8108 002 097 2044

The Dial-in number in the USA will be: 1866 966 9439


Elsewhere, the Dial-in number will be: 0044 1452 555 566


The Conference ID in all cases will be: 52072489



Enquiries:


Petropavlovsk PLC

Alya Samokhvalova 

Charles Gordon

Rachel Tuft



 +44 (0) 20 7201 8900  



Merlin

David Simonson

Tom Randell 



 +44 (0) 20 7726 8400 




Production 

Pokrovskiy mine


The Pokrovskiy mine exceeded its 2009 production target by 13% (199,600oz versus the Group's forecast of 177,000oz)and operated successfully throughout 2009 with the plant processing 1,782,000 tonnes of ore (an increase of 5% versus 2008) and heap leach operations yielding impressive 67% recovery rates.


The increase in production compared to the original plan was achieved despite the mining plan being reschedulein Q4 to accommodate significant remedial work necessary to manage potential sidewall failure in the main pit. 


The mine's management continually monitors the ground conditions around the pit to provide early warning of any geotechnical problems as well as monitoring ground water conditions. 

This system indicated potential sidewall stability issues at the main Pokrovskiy pit and allowed the management to address the situation before it became a major concern.  To that end, around 600,000 cubic metres of stripping at Pokrovskiy was undertaken in a short period of time with the help of the Pioneer mining fleet.  A large portion of scheduled stripping at Pokrovskiy was thus delayed and resulted in a shortfall of about 350,000 tonnes of planned ore production from the main pit However, the resulting mine plan rescheduling saw some mining being diverted to the flanks of the main deposit with the result that the shortfall of ore produced by the main pit was compensated by the ore from the Pokrovka-2 pit - the nearest flank to the main deposit. In the second half of 2009, 232,000 tonnes of ore from this source at an average grade of 3 g/t (22,000oz) were processed through the Pokrovskiy plant. 


The advanced stripping mentioned above was part of the 2010 and 2011 mining schedule and therefore the associated cost will still be a constituent of the overall costs of production for the Pokrovskiy deposit when the ore from these areas will be processed.


Pokrovskiy mining and processing operations

Pokrovskiy mining operations



Units

Q4 2009

Q4 2008

Year ended 31 Dec 2009

Year ended

31 Dec 2008

Total material moved

 '000 

1,336

1,308

5,445 

5,594 

Ore mined 

'000

279

498

1,879 

2,105 

Average grade

g/t

2.6

2.4

2.

3.

Gold content

oz '000

24

39

161

203

Pokrovskiy processing operations



Units

Q4 2009

Q4 2008

Year ended 31 Dec 2009

Year ended

31 Dec 2008

Resin in Pulp Plant






Ore from pit

'000

467

333

1,295 

1,293 

Average grade

g/t

2.9

3.9

3.

4.

Ore from stockpile

'000

-

37

452 

223 

Average grade

g/t

-

5.7

3.4

3.8

Pioneer ore 

'000

-

58

35 

180 

Average grade

g/t

-

12.7

10.

15.

Total milled

'000

467

428

1,782 

1,696 

Average grade

g/t

2.9

5.2

3.

5.

Gold content

oz '000

43

72

218

291

Recovery rate

%

84.3

88.5

84.6

87.0

Gold recovered

oz '000

36.4

64.0

184.

253.

Heap Leach






Ore stacked

'000

94

4

770 

785 

Average grade

g/t

1.0

0.8

0.

0.

Gold content

oz '000

3

-

22 

21 

Recovery rate

%

-

-

67.3

65.0

Gold recovered

oz '000

4.7

2.3

15.

13.

Total






Gold recovered

oz '000

41.1

66.3

199.6

267.1

including






Pokrovskiy

oz '000

41.1

45.2

190.1

189.5

Pioneer

oz '000

-

21.1

9.5

77.6



Pioneer mine

The Pioneer mine produced 224,600oz of gold in 2009, an increase of 208% versus 2008 mainly due to the successful commissioning and ramp-up of the second milling processing line in September 2009. This extra production facility, with a design capacity of 125,000 tonnes of ore per month (without heap leach operations)was constructed on schedule and on budget. The actual capacity of the new line achieved after the ramp-up period has exceeded the design capacity by approximately 8(to 135,000 tonnes of ore a month) offsetting initial start-up problems (e.g the replacement of the SAG mill lining after around 40 days of commissioning).


As mentioned above, normal mining operations at Pioneer in the fourth quarter were affected by the diversion of part of the mining fleet to the Pokrovskiy deposit. The result of this exercise was a reduction of overburden moved, resulting in a shortfall of 100,000 tonnes of rich ore mined at an average grade of 10g/t. This resulted in a shortfall of 25,000oz in Pioneer's overall production compared to the Company's previous forecast.


Overall the plant operated efficiently during 2009, achieving the designed annual recovery rates of 90%. 

 

Pioneer mining and processing operations

Pioneer mining operations      
 
Units
Q4 2009
Q4 2008
Year ended 31 Dec 2009
Year ended
31 Dec 2008
Total material moved
m3 ‘000
2,936
966
9,056
2,973
Ore mined
t ‘000
473
125
1,286
399
Grade
g/t
5.5
15.7
6.2
12.5
Gold
oz ‘000
84
63
255
160
Pioneer processing operations
 
Units
Q4 2009
Q4 2008
Year ended 31 Dec 2009
Year ended
31 Dec 2008
Resin in Pulp Plant
 
 
 
 
 
Ore from pit****
t ‘000
499
70
951
434
Average grade
g/t
5.5
18.8
7.8
6.1
Ore from stockpile****
t ‘000
74
94
134
94
Average grade
g/t
1.4
4.3
2.4
4.3
Total milled
t ‘000
573
164
1,085
528
Average grade
g/t
5.0
10.5
7.2
5.8
Gold content
oz ‘000
92
56
250
99
Recovery rate
%
89.5
94.0
90.0
74.1
Gold recovered
oz ‘000
81.6
52.1
224.6
72.9

****In the H1 2009 Trading Update, ore from pit should be read as ore from stockpile and ore from stockpile should be read as ore from pit.



Alluvial production and joint ventures 

The Company's joint ventures and alluvial operations contributed a further 62,600oz in 2009 (compared to 61,600oz in 2008) in line with the Group's forecast. 



Development

Malomir

The Group made excellent construction and development progress at Malomir in 2009. The construction of the main infrastructure including roads, power lines, substations, warehouses, workshops, accommodation and storage facilities is now complete and all machinery (cranes, bulldozers, excavators etc) for construction and for the first stage of the mining operation has now been delivered to the siteSite preparation for the plant and tailings dam has been completed and construction of the plant's crushing and grinding blocks has commenced


During December 2009, the first mining works (stripping) commenced at Malomir's  Quarzitovoye deposit which is scheduled for first production in August 2010. All remaining equipment has been ordered and should be delivered by March 2010The metallurgical testing of Malomir's refractory ore has been completed with the results confirming the technical feasibility of treating the ore.


Albyn

During 2009, exploration has continued and a technological study, including testing of 25 tonne samples at the Blagoveshensk testing plant, was completedDesign work commenced in the second half of the year and construction of the main infrastructure including power linesthe substationaccommodation camp and the main deposit roads is planned for 2010. It is also intended to sign contracts for the supply of all the main mining machinery and equipment for the plant and to acquire the main construction materials for the mine in 2010.


Iron ore projects

Construction at the Group's Kuranakh project has continued to progress and at the end of December c.90% of the iron concentrate circuit and c.65% of the ilmenite circuit were complete.  The new plant is expected to be producing concentrate in the first quarter of 2010 and to reach full capacity in the second half of 2010.  


As previously stated, the development of the K&S and Garinskoye projects is dependent on obtaining appropriate funding.  Discussions have continued throughout 2009 with a number of potential Chinese project partners and lenders.  A number of relationships have progressed significantly such that the Group has agreed an indicative loan term sheet and signed key Cooperation Agreement. Management continues to develop these relationships and to consider available funding proposals. The Group continues to advance the preliminary works on the planning and development of these assets with good progress on initial infrastructure.


Group production target

The Group's attributable production for 2010 is currently expected to be between 670,000oz and 760,000oz. There have been some variations in the individual constituent elements compared to the previous forecast which relate to: a review of Pioneer's production schedule in the light of the acceleration of the third milling line's commissioning; a redesign of Malomir based on a de-risked approach with a smaller initial mill for initial 2010 production, to be supplemented by additional milling capacity thereafter; and a conservative production target at Pokrovskiy due to rescheduled mining operations.


Capital expenditure

The capital expenditure for the Group's gold projectsexcluding exploration, for 2010 is budgeted at c.US$200m, the main constituents of which are accelerated capital expenditure at the Malomir and Albyn projects.


Financial position

The Group had an unaudited net debt position at the year end of c.US$24m versus US$389m at the end of 2008. The Group's unaudited cash position at the year end was US $76m versus audited US $26m at the end of 2008.


Dividend

In light of the excellent preliminary trading results the Board has declared an interim dividend of £0.07 per share payable on 30 March 2010 to shareholders on the register on 26 February 2010.  No final dividend will be paid but in future years the Board expects to pay both interim and final dividends.


Any shareholder who is an individual resident (for tax purposes) in the UK will be liable to income tax on the amount of the dividend.  Higher rate taxpayers will be liable to income tax at 32.5% and other individual taxpayers at 10%.  A tax credit equal to 10% of the gross dividend (also equal to one ninth of the cash dividend received) should be available to set off against a shareholder's total income tax liability on the dividend.  The effect of the tax credit is that a basic rate taxpayer will have no further tax to pay and a higher rate taxpayer will have to account for additional tax equal to 22.5% of the gross dividend (which also equals 25% of the cash dividend received). A shareholder who is not liable to tax on the dividend will not be entitled to claim payment of the tax credit in respect of the dividend.



Forward-looking statements

This release may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this release and include, but are not limited to, statements regarding the Group's intentions, beliefs or current expectations concerning, among other things, the Group's results of operations, financial position, liquidity, prospects, growth, strategies and expectations of the industry.  

By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Forward-looking statements are not guarantees of future performance and the development of the markets and the industry in which the Group operates may differ materially from those described in, or suggested by, any forward-looking statements contained in this release. In addition, even if the development of the markets and the industry in which the Group operates are consistent with the forward-looking statements contained in this release, those developments may not be indicative of developments in subsequent periods. A number of factors could cause developments to differ materially from those expressed or implied by the forward-looking statements including, without limitation, general economic and business conditions, industry trends, competition, commodity prices, changes in law or regulation, currency fluctuations (including the US dollar and Rouble), the Group's ability to recover its reserves or develop new reserves, changes in its business strategy, political and economic uncertainty.  Save as required by the Listing and Disclosure and Transparency Rules, the Company is under no obligation to update the information contained in this release.


Past performance cannot be relied on as a guide to future performance.



This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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