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Petropavlovsk Plc (POG)

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Thursday 06 May, 2010

Petropavlovsk Plc

1st Quarter Results

RNS Number : 4208L
Petropavlovsk PLC
06 May 2010
 



   06 May 2010

 

Production Update for Q1 2010 and Interim Management Statement

 

Petropavlovsk PLC ("POG", "the Company" or "the Group") today issues its Interim Management Statement for the period from 1 January 2010 to date.

Highlights

 

Gold Production Report for Q1 2010

 

Gold Produced ('000 oz)*

Q1 2010

Q1 2009

Q1 2010 vs

Q1 2009

Pioneer deposit**

35.8

63.8

(44%)

Pokrovskiy deposit

29.8

40.8

(27%)

Total**

65.6

104.6

(37%)

*Figures for Q1 2009 have been restated due to the change in reporting policies of the Group

**In Q1 2009 9,400oz of the gold produced from Pioneer was processed through the Pokrovskiy mill. Pioneer gold processed at Pokrovskiy is included in the Pioneer deposit figures.

***Total attributable gold production, in the above table and elsewhere in this document, is comprised of 100% of production from the Company's subsidiaries. The Company's direct and indirect interest in Pokrovskiy Rudnik, and any interest held by Pokrovskiy Rudnik, is 98.61%.

 

Production update

·     Pioneer produced 35,800oz during Q1 2010, in line with the Company's mining schedule, as the planned pre-stripping work necessary for the Andreevskaya pit expansion was carried out.  With the successful recent commissioning of Pioneer's third processing line, the mine plan provides for declining grades of Pioneer's mill-feed (approximate fourfold reduction in the full year 2010 versus H1 2009) being compensated by the increasing overall capacity of the Pioneer plant (approximate sixfold increase in the full year 2010  versus H1 2009);

·     Pokrovskiy produced 29,800oz of gold, in line with the mining schedule;

·     For the full year, the Company remains on track to achieve its 2010 production target of 670,000oz - 760,000oz driven by the successful commissioning at Pioneer and by the expected commencement of production at  Malomir in H2 2010.

 

Development and Exploration

·     Pioneer's third processing line was successfully commissioned in April, providing additional capacity of 200,000t of ore per month and increasing total throughput at the Pioneer mills to 455,000t of ore per month;

·     Malomir is on track to commence production in H2 2010 with annual ore capacity expected to be 700,000t and total 2010 production to be between 68,000 - 100,000 oz;  

·     Good progress with exploration work has been made at Albyn, as well as commencement of the construction of infrastructure and signing of contracts for ongoing delivery of the major mine equipment;

·     Preparation for the commissioning of seasonal production from the Company's alluvial operations, including those mined by its joint ventures, is on schedule;

·     The Kuranakh titanomagnetite project is in the commissioning stage;

·     The optimised and staged development plan for the iron ore development projects at K&S and Garinskoye has been finalised together with appropriate funding and construction plans which have been agreed with Chinese parties.

 

Corporate update

·     On 21 January 2010, the Company announced that the Board had declared an interim dividend of £0.07 per share which was subsequently paid on 30 March 2010;

·     On 22 January 2010, the Company announced the successful placement of its  US$330 million of unsecured convertible bonds due 2015 ("Bonds");

·     On 4 February 2010, the Company announced that, in connection with the offering of the Bonds, the over-allotment option had been exercised in full by J.P.Morgan Cazenove in respect of US$50 million in aggregate principal amount of Bonds. Including the exercise of the overallotment option, the final offering size was US$380 million;

·     On 12 February 2010 the Company was pleased to welcome Dr. Graham Birch to its Board of Directors as a Non-Executive Director;

·     On 19 February 2010, the Company announced the publication by its wholly-owned subsidiary, Petropavlovsk 2010 Limited, of an offering circular constituting listing particulars in connection with the issue of the Bonds.  The Bonds were issued on 18 February 2010 and admitted to the Official List of the UK Listing Authority and to trading on the Professional Securities Market of the London Stock Exchange on 19 February 2010;

·     On 23 March 2010, the Company announced that it had agreed a term-sheet with Industrial and Commercial Bank of China ("ICBC") for the funding of  the development of Stage 1 of its Kimkano-Sutarskiy ("K&S") iron ore mining operation in Russia's Far East. The amount to be lent would constitute 85% of the total amount of the expected cost of the EPC contract (currently estimated at c.US$400m and with an upper limit of US$500m to include contingency expenditure).  The Company also announced that Aricom Limited and LLC KS GOK (both wholly-owned subsidiaries of the Company) had together entered into a Co-operation Framework Agreement with China National Electric Equipment Corporation ("CNEEC") and ICBC for the implementation of the K&S and Garinskoye projects.

·     Save for the effects of the above transactions, the financial position of the Company at the end of April was not materially changed from that reported at 31 December 2009.

 

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

"The first quarter gold production figures are in line with our mining plan for 2010, as notified to shareholders, and reflect a transitional period in the mines' development.

 

With the successful recent commissioning of Pioneer's third processing line we expect that the gradually declining grades of Pioneer's mill-feed will be compensated by the increasing overall capacity of the Pioneer plant. The planned Stage 4 expansion will take this even further and any additional high grade material that is encountered will be a bonus.

 

During this period, we also carried out remedial works at Pokrovskiy and the expansion work on Pioneer's Andreevskaya pit and, as a result of this, expect continuous high grade material to be produced by this pit throughout the rest of the year.

 

In addition, with the planned commissioning of the Malomir mine (on track for H2 2010), we remain confident that we are on schedule for our production target for the year.

 

The quarter has also seen significant progress in the iron ore business with a term sheet being agreed for up to US$500m of financing for Stage 1 of the K&S assets and a Cooperation Framework Agreement for the implementation of the K&S and Garinskoye projects having been entered into."

 

 

Enquiries:

 

Petropavlovsk PLC

Alya Samokhvalova 

Charles Gordon

Rachel Tuft

 

 

 +44 (0) 20 7201 8900 

 

 

Merlin

David Simonson

Tom Randell 

Fiona Crosswell

 

 +44 (0) 20 7726 8400 



 

  

 

Pokrovskiy Mine

According to the mining plan, all mining operations were concentrated on the upper levels of the pit in order to reduce the pressure of the rock mass in the area of movement. As a result, ore was not mined from the main pit ore body and the process plant was fed from the Ozernoye ore body (Pokrovka 1) and existing stockpiles with the result that the average grade of ore in Q1 2010 was lower than in the same period last year. This is not expected to affect the annual production plan as all the work associated with pre-stripping the southern wall is almost completed and mining work is scheduled to return to the main pit ore body.

Pokrovskiy Mining and Processing Operations

Pokrovskiy Mining Operations

 

Units

Q1 2010

Q1 2009

Variance

Total Material Moved

m³ '000

1,226

1,244

(1%)

Ore mined

t '000

404

477

(15%)

Average grade

g/t

 

2.3

 

2.3

 

-

Gold content

oz '000

30.0

35.4

(15%)

Pokrovskiy Processing Operations

 

Units

Q1 2010

Q1 2009

Variance

Resin in Pulp Plant

 

 

 

 

Total milled

t '000

445

427

4%

Average grade

g/t

2.5

4.1

(39%)

Gold content

oz '000

35.2

55.7

(37%)

Recovery rate

%

84.8

86.6

(2%)

Gold recovered

oz '000

29.8

48.2

(38%)

Heap Leach

 



 

Gold recovered

oz '000

0.0

2.0

n/a

Total

 

 


 

Gold recovered

oz '000

29.8

50.2

(40%)

including

 

 


 

Pokrovskiy

oz '000

29.8

40.8

(27%)

Pioneer

oz '000

0.0

9.4

n/a

 

Pioneer mine

In line with the Company's mining schedule, the Pioneer mine produced 35,800oz during Q1 2010, a 44% decrease versus Q1 2009 due to planned pre-stripping work necessary for the Andreevskaya and NE Bakhmut pits expansion and the resulting lower processed grades.

 

The third milling line at Pioneer was successfully commissioned on 21 April 2010 and comprises a 7.5m SAG mill and two 4x6m ball mills with capacity set to reach 200,000t of ore per month or 2.4Mt per annum. This will take total Pioneer processing capacity to 455,000t per month or 5.5Mt per annum which is an approximate sixfold increase versus H1 2009 (when the second/third milling lines were not operational) and will offset the approximate fourfold reduction in grade for the full year 2010 versus H1 2009. Production at the mine is scheduled to reach 375,000 - 420,000oz gold in 2010 and the completion of the third milling line in addition to the planned move to higher grade material at Andreevskaya in Q2 supports the achievement of this target.

 

The recovery rate was 83.3% compared to the planned 90.0% as a result of the inclusion of lower grade ores from Andreevskaya (grades of 1.7 - 1.9 g/t) which are more difficult to process than higher grade ores. Going forward, this will be compensated by the processing of higher grade ores from Andreevskaya with an average grade of 8 - 15 g/t and recovery rates of 93 - 94%.

 

The introduction of the lower grade ore bodies into the mining schedule has however had a beneficial effect on mining costs due to stripping ratios falling from 9:1 (t/t) to 2.4:1 (t/t).

 

A fourth milling line is to be commissioned at Pioneer in 2011, containing an additional 7.5m SAG mill, which will increase the capacity of the mill to 7.2Mt per annum.

 

Pioneer Mining and Processing Operations

 

Pioneer Mining Operations      

 

Units

Q1 2010

Q1 2009

Variance

Total Material Moved

m3 '000

2,828

1,326

113%

Ore Mined

t '000

842

133

533%

Grade

g/t

2.2

15.8

(86%)

Gold

oz '000

59.8

67.6

(12%)

Pioneer Processing Operations

 

Units

Q1 2010

Q1 2009

Variance

Resin in Pulp Plant

 

 

 

 

Total milled

t '000

650

 158

311%

Average grade

g/t

2.1

11.5

(82%)

Gold content

oz '000

43

58.2

 

(26%)

 

Recovery rate

%

83.3

93.5

(11%)

Gold Recovered

oz '000

35.8

54.4

(34%)

 

 

Development

 

Malomir

Good progress continues to be made at the mine site with construction work in the quarter concentrated on the crushing and grinding buildings, the absorption building and foundations for the administration building and laboratory. The majority of the construction and assembly work is ahead of schedule and land is being cleared for the construction of the first of three planned tailings dams. In addition, pre stripping continues at the Quarzitovoye pit.

 

Albyn

The construction of the main infrastructure including power lines and roads has commenced and contracts for ongoing delivery of the major mine equipment are being finalised.

Kuranakh

Construction continued at the processing plant which is expected to be producing both titanomagnetite and ilmenite during May. At the Saikta open pit, mining continued and as of 31 March, 112 000t of ore were stockpiled at the crushing and screening plant. During March, the crushing and screening plant was run for trial purposes with 4,130t of ore being processed and 2,610t of pre-concentrate produced.

 

 

 

 

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.

 


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