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Petropavlovsk Plc (POG)

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Thursday 12 April, 2012

Petropavlovsk Plc

Interim Management Statement

RNS Number : 1735B
Petropavlovsk PLC
12 April 2012
 



12 April 2012

 

Production Update for Q1 2012 and Interim Management Statement

 

Petropavlovsk PLC ("Petropavlovsk", "the Company", or, together with its subsidiaries, "the Group"), today issues its Interim Management Statement for the period from 1 January 2012 to 31 March 2012, in accordance with the UK Listing Authority's Disclosure and Transparency Rules.  

 

HIGHLIGHTS

 

Q1 2012 total attributable gold production, sales and total cash costs ("TCC")

 

Gold Produced ('000oz)

Q1 2012

Q1 2011

Variance

  Pioneer

65.6

36.6

79%

  Pokrovskiy

14.7

17.9

(18%)

  Malomir

32.6

20.6

58%

  Albyn

7.9

-

n/a

  Other

-

0.3

n/a

Total produced

120.8

75.4

60%

Gold Sold ('000oz)




  Pioneer

74.9

72.3

4%

  Pokrovskiy

15.0

28.0

(46%)

  Malomir

31.8

23.5

35%

  Albyn

8.0

-

n/a

  Other

0.2

0.4

(50%)

Total sold(1)

129.9

124.2

5%

Gold Sales Price (US$/oz)


 

 

Avg. realised gold sales price

$1,690

$1,389

22%

Estimated TCC (US$/oz )


 

 

  Pioneer

508

677

(25%)

  Pokrovskiy

952

611

56%

  Malomir

601

522

15%

Hard-rock weighted average TCC(2)

587

633

(7%)

 

(1) Including accrual of 22,617oz produced and delivered by the Pioneer, Pokrovskiy, Malomir and Albyn mines to the refinery at the end of March but only sold at the beginning of April (Q1 2011: 38,305oz).

 

(2) Albyn, which was in its ramp up stage, is excluded from calculation of the weighted average TCC figure.

 

 

 

 

Gold production, sales and costs

·     Attributable gold production in Q1 2012 amounted to 120,800oz, up 60% on Q1 2011. The increase was due to a strong performance and higher grades at Pioneer, the Group's flagship mine, and increased capacity at Malomir;

·     Gold sales during Q1 2012 totalled 129,900oz,up 5% on Q1 2011

·     The average realised gold sales price was US$1,690/oz, up 22% on Q1 2011;

·     Estimated TCC at hard rock mines (excluding Albyn) were US$587/oz, down 7% on Q1 2011.

 

Financial position

·     Since 1 January 2012, the Group's operating and financial performance has continued to be strong;

·     On 22 March 2012, the Group signed a new US$200 million six year borrowing facility with a Russian bank. Otherwise, there is no material change in the financial position of the Company;

·     Capital expenditure is budgeted to reduce significantly to US$354 million in 2012, leaving ample headroom within the Group's financing facilities.

 

Development

·     Construction of the fourth processing line at Pioneer is progressing well and it is expected that the line will be commissioned in H2 2012;

·     At Malomir, the expansion of the sorption circuit was completed during Q1 2012, increasing processing capacity to 150,000 tonnes per month;

·     At Albyn, commissioning and ramp up of both the mine and processing plant continued during the quarter and it is expected that the mine will process ore at full production capacity from April 2012;

·     Continued progress is being made with development of the Group's pressure oxidation ("POX") project, as outlined in the Group's Annual Results release, dated 28 March 2012;

·     Contribution from heap-leach and alluvial facilities is expected to resume in Q2 2012 due to the seasonal nature of these operations.

 

Exploration

·     Further positive exploration results have been obtained from the Alkagan-Adamovskaya area at Pioneer. Best intersections received to date include 21.6m at 7.3 g/t and 5.9m at 19.7g/t of gold (thickness is apparent), indicating the presence of a new and previously undiscovered high grade pay shoot. Exploration is ongoing and new results will be incorporated into the Group's next reserves and resources statement;  

·     Two new and previously unknown zones of mineralisation were also discovered at Pioneer, to the South East of the Nikolaevskaya zone and North of the Bakhmut zone. Exploration is at an early stage with further results expected later in the year;

·     At Albyn, exploration drilling within the Elginskoye licence area confirmed the presence of substantial gold mineralisation.

 

Outlook

·     The Group remains on track to achieve its target of 680,000oz of attributable gold production in 2012. This target does not include the effect of planned expansion at Albyn and Pioneer;  

·     It is expected that Group production will, as per usual, be weighted towards the second half of the year, due to additional output from alluvial and heap leach operations.

 

Dividend

·     On 27 March 2012, the Directors recommended a final dividend of £0.07 per Ordinary Share;

·     Subject to shareholder approval at the Annual General Meeting, to be held on 31 May 2012, the dividend will be paid on 26 July 2012 to shareholders on the register as at close of business on 29 June 2012.

 

IRC Limited

Petropavlovsk is an indirect 65.6% shareholder in IRC. IRC is a producer and developer of industrial commodities, with operations in the Far East of Russia and North Eastern China. IRC is listed on the Stock Exchange of Hong Kong Limited.

Today IRC issued its Q1 2012 Trading Update, which can be found on the IRC website, www.ircgroup.com.hk. Highlights include:

 

·     Increased sales and efficiency improvements at Kuranakh;

·     FY 2012 production targets reaffirmed;

·     Garinskoye scoping study suggests a low cost and fast build 30 million tonne DSO (Direct Shipment Ore) operation; study allows IRC to consider launching an intermediate operation in advance of a full scale mine;

·     Acquisition of the remaining 51% of the ilmenite deposit, Bolshoi Seym, from its joint venture partner, LLC Uralmining, and also of a 50% + 1 share stake of a molybdenum exploration project in the Amur region.

 

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

 

"The first quarter of the year is always challenging for us because of the low winter temperatures that we experience and so it is particularly satisfying to be able to report a sixth consecutive quarter in which we have beaten our production target.

 

Our team was especially proud of the performance of Pioneer and Malomir, with both assets increasing their quarter-on-quarter production this year.

 

I am also delighted to see that our colleagues from Outotec and our own engineers are making good progress with our POX project. 

 

Now that we have passed our peak capital expenditure on existing projects and the POX plant, with the recently announced finance facility from a Russian bank in place, we are confident that our planned production ramp-up can be achieved comfortably within our existing capital resources.

 

Our team is working hard on cost control measures, the results of which were demonstrated by a 7% quarter-on-quarter decrease in Q1 2012 cash costs, achieved in spite of a strong rouble during the period.

 

We are confident that we will be able to deliver again on all our targets for the year and the team is working hard in order to exceed them.

 

It is also a pleasure to see that IRC is making good progress. Its ilmenite production could not have come on stream at a better time from a demand point of view and the potential for it to bring Garinskoye on stream for a small capital expenditure is most encouraging."

 

ENQUIRIES

 

Petropavlovsk PLC

Alya Samokhvalova 

Rachel Tuft

 

 

 +44 (0) 20 7201 8900 

 

 

Merlin

David Simonson

Ian Middleton

 

 +44 (0) 20 7726 8400 



 

OPERATIONS AND PRODUCTION

During Q1 2012, the Group achieved a 60% increase in production, coupled with a 22% increase in the gold sales price and a 7% fall in total hard rock cash costs (excluding the ramp-up at Albyn).

 

Pioneer

Pioneer has had a very strong quarter, producing 65,600oz and is on track to put its fourth line into production in Q3 2012. Total material moved has increased by almost 53% quarter-on-quarter, following the expansion of the mining fleet and optimisation of mining works carried out during the previous year.

 

 Pioneer Mining and Processing Operations

 

Pioneer Mining Operations      

 

Units

Q1 2012

Q1 2011

Variance, %

Total Material Moved

m3 '000

9,114

5,951

53%

Ore Mined                  

t '000

1,024

912

12%

Average grade

g/t

1.5

1.6

 (6%)

Gold content

oz '000

50.1

46.2

8%

Pioneer Processing Operations

 

Units

Q1 2012

Q1 2011

Variance,%

Resin in Pulp Plant

 

 

 

 

Total milled

t '000

1,116

1,135

 (2%)

Average grade

g/t

2.1

1.2

75%

Gold content

oz '000

75.4

44.1

71%

Recovery rate

%

87.1

83.1

5%

Gold Recovered

oz '000

65.6

36.6

79%

 

Pokrovskiy

At 14,700oz, Q1 2012 production at the Pokrovskiy mine was in line with the mining plan. 

Production came from Pokrovka-2, whilst the main pit which is being expanded to access high grade ore under the south wall. It is expected that this higher grade material will be available for mining in Q4 2012, thus increasing quarterly output from the mine by the end of the year.

Although grades processed through the mill in Q1 2012 were lower than those during the same period in 2011, an improvement in overall recoveries was achieved at the plant due to better metallurgical properties of the ore at satellite deposits.

 

Pokrovskiy Mining and Processing Operations

 

Pokrovskiy Mining Operations

 

Units

Q1 2012

Q1 2011

Variance,%

Total Material Moved

m³ '000

1,413

1,622

 (13%)

Ore mined

t '000

189.5

415

 (54%)

Average grade

g/t

1.3

1.7

 (24%)

Gold content

oz '000

8.1

22.4

 (64%)

Pokrovskiy Processing Operations

 

Units

Q1 2012

Q1 2011

Variance,%

Resin in Pulp Plant

 

 

 

 

Total milled

t '000

428

435

 (2%)

Average grade

g/t

1.2

1.5

 (20%)

Gold content

oz '000

16.7

21

 (20%)

Recovery rate

%

87.7

83.8

5%

Gold recovered

oz '000

14.7

17.9

 (18%)

 

Malomir

Malomir continued to produce gold from non-refractory ore and achieved a 58% increase in quarter-on-quarter gold production of 32,600oz. The increase was due to the addition of a milling line, which was successfully completed during 2011 and also expansion of the sorption circuit carried out in Q1 2012. The expansion of the sorption circuit increased processing capacity to 150,000/tpm. The volume of mining works at the mine more than doubled, with the amount of ore treated through the plant up 147% during the period. This benefited both production output and costs of production per tonne. Non-refractory ore was mined both from the bottom of the Quartzitovoye pit and from the oxidised zone above the refractory ore body in the Central pit. The construction of the flotation plant is on schedule for completion in Q4 2012.

Malomir Mining and Processing Operations

 

Malomir Mining Operations    

 

Units

Q1 2012

Q1 2011

Variance

Total Material Moved

m3 '000

3,221

1,586

103%

Ore Mined

t '000

541

383

41%

Average grade

g/t

2.6

3.1

 (16%)

Gold content

oz '000

45.9

38.2

20%

Malomir Processing Operations

 

Units

Q1 2012

Q1 2011

Variance

Resin in Pulp Plant

 

 

 

 

Total milled

t '000

424

172

147%

Average grade

g/t

3.3

4.3

 (23%)

Gold content

oz '000

44.9

23.6

90%

Recovery rate

%

72.6

87.4

 (17%)

Gold Recovered

oz '000

32.6

20.6

58%

 

 

Albyn

During Q1 2012, Albyn was successfully ramped up to full capacity. From April 2012, it is expected that the first milling line will process 150,000/tpm of ore per month. The second processing line of the plant is expected to be commissioned ahead of schedule in Q3 2012.

Infrastructure at the mine is now fully in place; the incoming 110kv power line was completed in March 2012, replacing temporary reliance on expensive diesel generators.

Three new 15m3 excavators were delivered to the site in Q1 2012.

 

Albyn Mining Operations    

 

Units

Q1 2012

Q1 2011

Variance

Total Material Moved

m3 '000

1,365

-

n/a

Ore Mined

t '000

217

-

n/a

Average grade

g/t

1.7

-

n/a

Gold content

oz '000

12.2

-

n/a

Albyn Processing Operations

 

Units

Q1 2012

Q1 2011

Variance

Resin in Pulp Plant

 

 

 

 

Total milled

t '000

201

-

n/a

Average grade

g/t

1.4

-

n/a

Gold content

oz '000

8.9

-

n/a

Recovery rate

%

88.7

-

n/a

Gold Recovered

oz '000

7.9

-

n/a

 

Exploration

Pioneer

During Q1 2012, further positive exploration results have been obtained from the Alkagan-Adamovskaya area, a licence area surrounding Pioneer. The focus has been on the extension of the new mineralised zone, No.5. This zone was discovered in 2011 and is located South-East of the NE Bakhmut high-grade zone. Best intersections to date include 21.6m at 7.3 g/t and  5.9m at 19.7g/t (thickness is apparent). These high grade intersections represent a pay shoot with a strike length of 150m and true thickness of 3m - 10m with expected average grades of 4 and 6 g/t Au. Exploration continues with c.40% of the assays still pending and the mineralised zone is open in a southern direction. It is expected that zone No.5 holds resources of both non-refractory (including high grade) as well as refractory material and the Group is undertaking metallurgical tests to estimate tonnage for RIP and POX processing.

Two new, previously unknown, zones of mineralisation were also discovered South-East of Nikolaevskaya and North of the Bakhmut zones near the Alkagan stream. Assay results from these new discoveries to date indicate grades of 1.1 - 1.7 g/t Au with apparent thickness of 7m to 29m. Exploration is at an early stage with further results expected later in 2012.

Albyn

Exploration drilling at Elginskoye continues to demonstrate positive results, confirming the presence of significant gold mineralisation at Elginskoye and Grozovoye ore occurrences. Exploration results at the Elginskoye gold occurrence, which was drilled on a 150m x 80m grid, identified two shallow dipping zones 5m to 25m thick with a strike length of at least 950m. Structural interpretation and computer modelling completed by Group specialists resulted in estimates of c.180,000oz of Inferred gold resources (c.5.1Mt @ 1.1 g/t Au) at a 0.4 g/t Au cut-off grade. Mineralisation is open both along strike and down dip directions which makes the Group`s geologists believe that further significant resources are yet to be discovered and included into the mineral resource statement. It is expected that future in-fill drilling will allow better definition of the higher grade areas of mineralisation and when completed may result in overall improvement to the average grade of the resource.

Both zones dipping parallel to the relief can be mined by a shallow open pit with a low strip ratio. A similar zone of mineralisation was intersected in six drill holes at the Grozovoye gold occurrence approximately 2km north of the Elginskoye zone. This zone is yet to be modelled and incorporated into the mineral resource estimate. Full scale exploration will continue in 2012 with results to be evaluated and incorporated into the Group's next reserves and resources statement. Further geochemical survey work indicated gold bearing structures in this area spreading for 3km - 7km West.

 

IRC

Today IRC released its Trading Update for Q1 2012. IRC's Q1 production numbers are on track to meet full year guidance and construction and development is progressing well. 

At the Kuranakh mine, production of iron ore for the quarter was 29% higher compared to the first quarter 2011 and ilmenite production volume was 2.5 times higher. 

Construction advanced at K&S. Notable developments during the quarter included the completion of the bridge structure over the Trans-Siberian Railway which will directly connect K&S to customers in Russia and China. CNEEC, the processing plant contractors, are now arriving at the site to commence full scale works.

Significant progress has also been made in advancing other assets in the portfolio with a scoping study for Garinskoye suggesting the opportunity for a 2.4 million tonne per annum DSO style operation and the acquisition of the remaining shares in Bolshoi Seym resulting in full ownership and the opportunity to develop a 200,000 tonne a year ilmenite operation.

IRC also announced the acquisition of the remaining 51% of the ilmenite deposit at Bolshoi Seym from its joint venture partner LLC Uralmining, and also of a 50% + 1 share stake of a Molybdenum exploration project in the Amur region.

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.

 


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