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Petropavlovsk Plc (POG)

  Print      Mail a friend       Annual reports

Thursday 23 February, 2012

Petropavlovsk Plc

Reserves and Resources Update

RNS Number : 9464X
Petropavlovsk PLC
23 February 2012
 



FURTHER UPLIFT IN GOLD ORE RESERVES AND MINERAL RESOURCES

23 February 2012

Petropavlovsk PLC ("the Company" or, together with its subsidiaries, "the Group") is pleased to announce a summary of its updated gold Ore Reserves and Mineral Resources estimated as at 01 January 2012 in accordance with the guidlines of Joint Ore Reserves Committee of the Australian Institute of Mining and Metallurgy, Australian Institute of Geosciences and Minerals Council of Australia ("JORC Code (2004)").  This update was prepared by in-house experts in conjunction with Wardell Armstrong International ("WAI") as part of the Group's reporting procedure. The estimates were prepared following an extensive exploration programme, metallurgical tests and other technical work completed by the Group during 2011.

HIGHLIGHTS

·         11% increase (after the depletion of c.0.65Moz during 2011) in Proven and Probable Ore Reserves, from c.9.1Moz at an average grade of 1.17g/t Au to c.10.2Moz at an average grade of 1.13g/t Au;
·         6% increase in total Mineral Resources from c.23.1Moz to c.24.6Moz, of which:
        -     c.14.4Moz are Measured and Indicated Resources
        -   c.10.2Moz are Inferred Resources
·         The increase in the Group’s Ore Reserves and Mineral Resources was achieved despite the depletion of c.0.65Moz of reserves from mining activities;
·         Ore Reserves for the Group’s main producing assets were estimated using a gold price of US$1,000/oz, as per the previous estimate for 1 January 2011. Reserves for Albyn and Visokoe were estimated using a gold price of US$1,200/oz;
·         The average gold grade remains in line with the previous year, despite the mining of high-grade material during 2011, due to the continued success of the exploration programmes at Pioneer and Albyn (located in the Amur region), Petropavlovskoye (located in Yamal) and Visokoe (located in the Krasnoyarsk region);
·         An increase from c.3.6Moz to c.5.1Moz in the Group’s non-refractory Proven and Probable Ore Reserves, which are suitable for low-cost resin-in-pulp (“RIP”) and heap-leach recovery,  allows for the acceleration of expansions in RIP production at Pioneer, Malomir and Albyn and brings the development of the Visokoe deposit in Krasnoyarsk closer to production;
·         New additions to the Group’s JORC-compliant Ore Reserve estimates are attributable to successful exploration at Pioneer, Albyn, Malomir and Pokrovskiy (at the Pokrovka-2 and Zheltunak deposits); 
·         Exploration results from Pioneer, Malomir and Albyn have identified new zones of both non-refractory and refractory mineralisation, the results of which have so far only partly been reflected in the Group’s Resource estimate;
·         Exploration at Elginskoye, a large, 325km2 area approximately 15km west of the Albyn processing plant, yielded positive results with initial intersections indicating the presence of a significant target comparable in size to the Albyn deposit.  
 

Commenting on the announcement, Sergey Ermolenko, Chief Executive Officer, said:

"I am very pleased to announce yet another increase in our Group's reserves and resources following a successful exploration programme carried out by our team of geologists during last year; and that this was achieved despite the depletion of c.0.65Moz through production in 2011. A significant amount of these was added to existing operating sites, prolonging the life of these operations and improving their overall profitability.

This increase confirms the potential for the Group to grow organically through its exploration programme which has been an on-going part of the Petropavlovsk success story. For a number of years, our team has been able to replenish and increase our reserves and resources base in spite of our year-on-year production increases, which each year has reached new levels. As previously announced in January, the strength of our exploration results allowed us to bring forward the commissioning of our second 1.8Mtpa RIP processing line at Albyn from 2014 to Q3 2012 and the commissioning of a fourth 2.0Mtpa processing line at Pioneer to Q3 2012.

Our geological team remains excited about the indications they have been receiving from the on-going exploration of areas surrounding our Pioneer and Albyn deposits and we look forward to updating the market in due course with our progress."

ANNUAL REVIEW OF ORE RESERVES AND MINERAL RESOURCES

Updated estimates have been prepared by the Group's technical experts in conjunction with external specialists. The Ore Reserve statement was independently audited by mining consultants from WAI. A summary of the Group's gold Ore Reserves and Mineral Resources in accordance with the guidelines of the JORC Code (2004) is shown below:

Ore Reserve as of 01/01/2012

(in accordance with JORC Code (2004))

Category

Tonnage

(kt)

Grade

(g/t Au)

Gold

(Moz)

Total Ore Reserves

Proven

40,808

1.29

1.69

Probable

241,139

1.10

8.56

Total (P+P)

281,947

1.13

10.25

Non-Refractory Ore Reserves

Proven

17,911

0.86

0.78

Probable

111,948

1.34

4.36

Total (P+P)

129,857

1.23

5.13

Refractory Ore Reserves

Proven

22,896

1.31

0.91

Probable

129,192

1.03

4.21

Total (P+P)

152,088

1.05

5.12

Note: Figures may not add up due to rounding

As with the 2011 estimate, the above reserve statement was derived using a long-term gold price assumption of US$1,000$/oz applied for all assets, with the exception of Albyn and Visokoe where a gold price of US$1,200$/oz was used.  The two different gold price assumptions are as at the date of the last overall feasibility assessment for each project. Operating costs at Albyn and Visokoe were re-evaluated in Q4 2011, whilst technical and economical parameters for the other assets remained unchanged from those at the time of the last annual review.

Mineral Resources (as of 01.01.2012)

(in accordance with the JORC Code (2004))

Category

 

Tonnage

(kt)

Grade

(g/t Au)

Contained Metal

(Moz)

Total Mineral Resources

Measured

67,489

1.22

2.64

Indicated

342,796

1.06

11.73

Measured+Indicated

410,285

1.09

14.37

Inferred

380,865

0.83

10.22

Non-refractory Mineral Resources

Measured

37,781

1.30

1.58

Indicated

148,645

1.27

6.05

Measured+Indicated

186,426

1.27

7.63

Inferred

121,247

1.10

4.27

Refractory Mineral Resources

Measured

29,708

1.11

1.06

Indicated

194,151

0.91

5.69

Measured+Indicated

223,859

0.94

6.75

Inferred

259,618

0.71

5.95

Note: Mineral Resources are reported inclusive of Ore Reserves. Figures may not add up due to rounding

In addition to the Ore Reserves and Mineral Resources estimated in accordance with JORC Code (2004), the Group also holds significant alluvial gold reserves and resources classified following the Russian Classification System. A summary of the alluvial resources and reserves is presented below:

Alluvial Reserves (as of 01/01/2012)

(in accordance with the Russian Classification System)

Category

Volume

(000m3)

Grade

(g/m3 Au)

Contained Metal

(Moz)

B

1,443

0.23

0.01

C1

45,017

0.36

0.52

Sub-total (B+C1)

46,460

0.35

0.53

C2

3,277

0.32

0.03

Total (B+C1+C2)

49,737

0.35

0.56

 

Alluvial Resources (as of 01/01/2012)

(in accordance with the Russian Classification System)

Category

Volume

(000m3)

Grade

(g/m3 Au)

Contained Metal

(Moz)

B

5,798

0.11

0.02

C1

71,645

0.32

0.74

Sub-total (B+C1)

77,443

0.31

0.76

C2

9,299

0.88

0.26

Total (B+C1+C2)

86,742

0.37

1.02

Notes:                                              

(1) Alluvial resources are reported inclusive of alluvial ore reserves;

(2) Ore reserves include only On-Balance material (defined as per the Russian Classification System) for open-cut and dredge extraction. Resources include the ore reserves, Off-Balance material (defined as per the Russian Classification System) for open-pit and dredge extraction as well as On-Balance and Off-Balance material considered for potential underground mining;

(3) As per the Russian Classification System, ore reserves are reported at in-situ grade and tonnage, however it has been demonstrated that the material remains economically viable after application of the reasonably assumed or estimated modifying factors such as mining dilution and recovery.



 

ASSET-BY-ASSET ORE RESERVES DETAILS

 

Summary of Ore Reserve by Asset (as of 01/01/2012)

((in accordance with JORC Code (2004))



Non Refractory

Refractory

Total


Category

Tonnage

(kt)

Grade

(g/t Au)

Gold

(Moz)

Tonnage

(kt)

Grade

(g/t Au)

Gold

(Moz)

Tonnage

(kt)

Grade

(g/t Au)

Gold

(Moz)

Pokrovskiy

(Amur)

Proven

6,967

1.14

0.25




6,967

1.14

0.25

Probable

21,131

0.72

0.49




21,131

0.72

0.49

Total (P+P)

28,097

0.82

0.74




28,097

0.82

0.74

Pioneer

(Amur)

Proven

4,281

0.05

0.22

13,469

1.19

0.52

15,571

0.52

0.26

Probable

21,058

0.04

0.75

28,717

1.02

0.94

51,954

1.30

2.17

Total (P+P)

25,339

1.19

0.97

42,186

1.07

1.45

67,525

1.12

2.42

Malomir

(Amur)

Proven

613

1.54

0.03

9,427

1.31

0.40

10,040

1.32

0.43

Probable

4,962

1.49

0.24

100,475

1.01

3.27

105,437

1.04

3.51

Total (P+P)

5,575

1.50

0.27

109,902

1.04

3.66

115,477

1.06

3.94

Albyn

(Amur)

Proven

1,059

1.89

0.06




1,059

1.89

0.06

Probable

20,836

1.93

1.30




20,836

1.93

1.30

Total (P+P)

21,895

1.94

1.36




21,895

1.94

1.36

Visokoe

(Krasnoyarsk)

Proven

-

-

-




0

0.00

0.00

Probable

33,802

1.13

1.22




33,802

1.13

1,223

Total (P+P)

33,802

1.13

1.22




33,802

1.13

1,223

Tokur

(Amur)

Proven

2,028

1.47

0.10




2,028

1.47

0.10

Probable

2,195

1.44

0.10




2,195

1.44

0.10

Total (P+P)

4,223

1.45

0.20




4,223

1.45

0.20

Petropavlovskoye

(Yamal)

Proven

2,962

1.12

0.11




2,962

1.12

0.11

Probable

7,993

1.03

0.26




7,993

1.03

0.26

Total (P+P)

10,956

1.05

0.37




10,956

1.05

0.37

Notes: 

(1) All Group Ore Reserves are for open pit extraction and are reported within economical pit shells;

(2) Reserve cut off grade for the reporting varies from 0.3 to 0.55g/t depending on the ore processing method;

(3) New additions to the Group's JORC-compliant Ore Reserve estimates are attributable to successful exploration at Pioneer, Albyn, Malomir and Pokrovskiy (at the Pokrovka-2 and Zheltunak deposits);

(4) Figures may not add up due to rounding.

 

Pioneer

A further fourth high-grade pay shoot (in addition to the three higher grade pay shoots identified in 2010) was explored at the NE Bakhmut ore zone and additional reserves were identified. The cyanide leach tests on this additional ore body are still on-going, with the amount of non-refractory material likely to increase as a result.   

A more detailed metallurgical assessment of the first three pay shoots at NE Bakhmut proved the presence of more non-refractory, high-grade resources and reserves, which had previously been reported as refractory. Two new zones of refractory mineralisation, Nikolaevskaya and Zone No. 5, were also incorporated in the Ore Reserve estimate. 

Malomir

Additional drilling at the Quartzitovoye ore body largely offset the depletion of high-grade material. The new additions provide the plant with non-refractory ore for two years (2012-2013), extending the original schedule of production by an additional year. At Malomir Central, Group specialists completed cyanide leach tests which established an oxide cap over the main refractory ore body.

Albyn

Group specialists completed an update of the resource model, open pit design and operating cost estimates using the latest drilling results, resulting in a substantial increase in JORC Proven and Probable Ore Reserves from 1.1Moz to c.1.4 Moz. This increase supported the acceleration of the expansion of Albyn's processing plant, bringing forward the resulting production increase by two years and improving cash flow from operations. The second processing line, which will increase the milling capacity at Albyn from 1.8Mtpa to 3.6Mtpa of ore, is scheduled to be commissioned in Q3 2012.

Pokrovskiy

Exploration continued at the Pokrovka-2 and Zheltunak areas. As a result, additional Inferred Resources were converted into the Indicated category and subsequently included in the Ore Reserve statement, off-setting depletion of the project reserves through 2011 production.

Visokoe

In the Krasnoyarsk region, the Group continued to develop Visokoe, a non-refractory deposit, towards production, evaluating 1.2Moz of gold to Probable JORC-compliant Ore Reserves. 

Visokoe is situated on Yenisei Ridge, which is the one of the most significant gold-bearing provinces in Russia.  The deposit is a bulk ore body, suitable for low-cost open-pit mining with a low strip ratio.  Mineralisation is non-refractory and amenable for low cost gravity separation and also for direct cyanidation. The Group is evaluating two alternative scenarios for the development of Visokoe: ore will be processed either through RIP milling or heap leaching.  These plans will be finalised during 2012 when the Group intends to publish an updated statement including Proven as well as Probable Ore Reserves. 

 

  

 

 

ASSET-BY-ASSET MINERAL RESOURCES DETAILS

 

Summary of Mineral Resources by Asset

(in accordance with JORC Code (2004))


Category

Non-Refractory

Refractory

Total

Tonnage

    (kt)

Grade

(g/t Au)

Gold

(Moz)

Tonnage

(kt)

Grade

(g/t Au)

   Metal

(Moz)

Tonnage

(kt)

Grade

(g/t Au)

     Metal

(Moz)

Pokrovskiy

(Amur)

Measured

10,642

1.02

0.35




10,642

1.02

0.35

Indicated

33,502

0.74

0.80




33,502

0.74

0.80

Measured + Indicated

44,144

0.81

1.14




44,144

0.81

1.14

Inferred

26,217

0.66

0.56




26,217

0.56

Taldan

(Amur)

Measured

-

-

-







Indicated

-

-

-







Measured + Indicated

-

-

-







Inferred

6,900

1.52

0.34




6,900

1.52

0.34

Pioneer

(Amur)

Measured

3,649

1.90

0.22

19,764

1.03

0.66

23,413

1.17

0.88

Indicated

12,528

1.51

0.61

57,542

0.89

1.64

70,069

1.00

2.25

Measured + Indicated

16,177

1.60

0.83

77,306

0.92

2.30

93,482

1.04

3.13

Inferred

5,194

0.83

0.14

48,004

0.64

0.98

53,198

0.66

1.12

Malomir

(Amur)

Measured

668

1.46

0.03

9,944

1.26

0.40

10,612

1.28

0.44

Indicated

9,296

1.21

0.36

136,610

0.92

4.05

145,906

0.94

4.41

Measured + Indicated

9,964

1.23

0.39

146,554

0.94

4.45

156,518

0.96

4.85

Inferred

19,881

0.83

0.53

200,470

0.69

4.43

220,351

0.70

4.96

Albyn

(Amur)

Measured

1,135

1.99

0.07




1,135

1.99

0.07

Indicated

24,940

2.03

1.63




24,940

2.03

1.70

Measured + Indicated

26,075

2.03

1.70




26,075

2.03

1.70

Inferred

9,070

1.86

0.54




9,070

1.86

0.54

Tokur

(Amur)

Measured

11,952

1.30

0.50




11,952

1.30

0.50

Indicated

16,096

1.06

0.55




16,096

1.06

0.55

Measured + Indicated

28,048

1.16

1.05




28,048

1.16

1.05

Inferred

10,706

1.09

0.38




10,706

1.09

0.38

Visokoe

(Krasnoyarsk)

Measured

5,620

1.37

0.25




5,620

1.37

0.25

Indicated

38,500

1.18

1.47




38,500

1.18

1.47

Measured + Indicated

44,120

1.21

1.71




44,120

1.21

1.71

Inferred

24,200

1.00

0.78




24,200

1.00

0.78

Olenka

(Krasnoyarsk)

Measured







-


-

Indicated







-


-

Measured + Indicated







-


-

Inferred




11,144

1.51

0.54

11,144

1.51

0.54

Petropavlovskoye

& Monto (Yamal)

Measured

3,959

1.03

0.13




3,959

1.03

0.13

Indicated

12,623

0.97

0.40




12,623

0.97

0.40

Measured + Indicated

16,582

0.99

0.53




16,582

0.99

0.53

Inferred

16,704

1.00

0.54




16,704

1.00

0.54

Verhne-Aliinskoe

Measured

156

5.26

0.03




156

5.26

0.03

Indicated

1,160

6.50

0.24




1,160

6.50

0.24

Measured + Indicated

1,316

6.35

0.27




1,316

6.35

0.27

Inferred

2,375

6.19

0.47




2,375

6.19

0.47

Notes: 

(1) Mineral Resources include Ore Reserves;

(2) The cut-off grade varies from 0.3 to 2.0g/t depending on the type of mineralisation and the proposed mining and processing method.


EXPLORATION

During 2011, the Group received very encouraging exploration results from the Pioneer, Malomir and Albyn projects in the Amur region as well as from Visokoe in the Krasnoyarsk region and Petropavlovskoye in the Yamal region.

Two new zones of mineralisation were discovered at Pioneer, a discovery which is only partly reflected in the updated JORC-compliant Ore Reserve statement, as their full resource and reserve potential has yet to be defined through further drilling. The new reserves are of a grade which is higher than the Group's average reserve grade and are largely of non-refractory nature.

At Malomir, drilling at the periphery of the Quartzitovoye, Malomir Central and Ozhidaemoye deposits identified several further zones of both non-refractory and refractory mineralisation. These new findings were also only partly reflected in the Mineral Resource statement, as the interpretation of the results is still on-going. The Group's geologists expect further additions to the reserves and resources base of this project from the 2012 exploration programme.

Further drilling at Albyn led to significant improvements in the project's resource position, increasing total resources from c.1.84Moz to 2.24Moz and also improving confidence in the estimate, bringing Measured and Indicated resources from 1.24Moz to 1.7Moz.

In 2011, the Group started an early-stage exploration programme at Elginskoye, which is a large area (325km2) approximately 15km west of the Albyn processing plant, considered to be highly prospective by the Group's geologists. Work completed to date includes geochemical surveys and geological mapping as well as trenching and drilling at the Grozovoye and Elginskoye prospects, the two better explored targets within the area. At Grozovoye, a shallow-dipping mineralised zone with an exposed width of up to 100m was identified and sampled. Significant trench and drill intersections include: 39m at 1.25g/t Au (trench K-430-1), 11.9m at 1.18g/t Au (drill hole C-430-32) and 1m at 17.8g/t Au (trench K-414-1). Another shallow-dipping mineralised zone with an estimated thickness of 100-150m was discovered at the Elginskoye prospect. The trench intersections received to date include: 44.3m at 1.45g/t, 18.5m at 1.42g/t, 27m at 2.44g/t and 2.3m at 4.23g/t. The drill hole intersections include: 17m at 2.01g/t and 9.8m at 1.36g/t. Exploration at Elginskoye remains at an early stage with further targets to be tested in 2012. These include a large (approximately 10km long) geochemical anomaly identified as a result of work conducted in 2011. The Group's geologists are expecting this area to become a significant addition to the main reserves and resources base at Albyn.

In the Krasnoyarsk region, the Group continued exploration at Visokoe, a significant non-refractory deposit. Drilling completed here during 2011 resulted both in a notable upgrade in the size of the total Mineral Resources and firmed up the level of confidence in their estimate.  Prospecting at the Troeusovskaya area (a 995km2 licence area located approximately 60km south of Visokoe) identified several significant gold-arsenic anomalies up to 7km long that may suggest the presence of Olympiada-style mineralisation. Olympiada, which belongs to Polyus Gold, is a world-class gold deposit situated approximately 70km east of Troeusovskaya. Significant intersections obtained from Troeusovskaya include 2.2m at 4.8g/t and 10m at 1.9g/t, with individual grade samples of up to 8g/t Au. The most significant anomaly was identified towards the end of 2011 and has yet to be tested.

At Yamal, where the Group has been continuing to develop the Petropavlovskoye and Novogodnee Monto deposits, drilling identified further gold mineralisation north and south of the proposed Petropavlovskoye open pit. The mineralisation is currently classified as a JORC Inferred resource. The Mineral Resources at Novogodnee Monto were modelled and estimated in accordance with the JORC Code, adding 261koz of gold (c. 6,200kt of ore at 1.32g/t Au) classified in the Inferred category.  As both Petropavlovskoye and Novogodnee Monto will be developed as a single mining operation, the Novogodnee Monto Mineral Resources are combined with those at Petropavlovskoye.  

Further drilling and re-interpretation of the Verkhne-Aliinskoe deposit in the Chita region allowed a classification of the Measured and an increase in the Indicated Mineral Resources of the project. The Group is continuing technical work to upgrade Mineral Resources at Verkhne-Aliinskoe into JORC-compliant Ore Reserves.

ENQUIRIES

Petropavlovsk PLC

Dr. Alya Samokhvalova 

Rachel Tuft

 

 

 +44 (0) 20 7201 8900 

 

 

Merlin

David Simonson

Ian Middleton

 

 +44 (0) 20 7726 8400 

 

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

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 Russian 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.

Basis of reporting reserves and resources

Mineral Resource and Ore Reserve estimates for the Group's hard rock deposits are reported in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves as prepared by the Joint Ore Reserves Committee of the Australian Institute of Mining and Metallurgy, Australian Institute of Geosciences and Minerals Council of Australia ("JORC Code (2004)").

The basis for reporting reserves and resources for the Group's alluvial deposits is in accordance with the Russian Classification System, approved by the State Committee on Reserves ("GKZ") in 1965 (amended in 1981 and 2008).

The Russian Classification 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 manner as the JORC Code (2004), or other internationally recognised mineral reserves classification codes. The Russian Classification System also classifies reserves as "on-balance" if they are economically viable at the time of the estimate and "off-balance" if the economic viability is yet to be demonstrated. Licence holders must register A, B, C1, and C2 category reserves with the GKZ to be able to extract them (depending upon the structural complexity class of the deposit. Gold deposits are usually in complexity class 2, 3 or 4 which require categories C1 and/or C2 only; categories A and B are rarely recorded for such deposits).

The content of this announcement have been approved for release by Dr. P. Newall, BSc, PhD, CEng, FIMMM, of Wardell Armstrong International. Dr. P. Newall has consented to the inclusion of the material in the form and context in which it appears.

 


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