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Peter Hambro Mining (POG)

  Print      Mail a friend       Annual reports

Monday 22 September, 2003

Peter Hambro Mining

Interim Results

Peter Hambro Mining PLC
22 September 2003

Monday 22 September 2003

                            Peter Hambro Mining PLC

             Interim Results for the Six Months ended 30 June 2003

Peter Hambro Mining PLC ("PHM" or "The Company"), today announces interim
results for the six months ended 30 June 2003.


   •Production from the Pokrovskiy deposit more than doubled. 47.7 thousand
    ounces produced, compared with 23.6 thousand ounces in the first half 2002.

   •Turnover: US$16.7 million, compared with US$7.0 million in 2002.

   •Profit after tax: US$2.65 million, compared with US$1.1 million in 2002.

   •Cash costs for the new mill now improved to anticipated levels.

   •Identification of new high-grade area, Molodeznoye, close to the pit at
    Pokrovskiy. Grades range between 22.5g/t and 53.3 g/t.

   •Continuation of high grade results from further exploration at Pioneer
    and confirmation of six new ore bodies. Preparation of production plan for
    early 2004 mining at Apophysis 1.

   •Position as leading gold producer in the Amur region further strengthened
    by acquisition of Tokur, the winning of two new exploration licences and the
    formation of the new "Rudnoe" Joint Venture

   •Potential opportunities in the Magadan region through Omchak joint
    venture with Susumanzoloto.

Commenting, Peter Hambro, Chairman, Peter Hambro Mining, said:

"The increase in both production and profitability that we have seen in the
first half of the year is encouraging and puts us in a good position for the
historically stronger second half of the year. Exploration during the period
under the review has also been very positive, most specifically with the
discovery of new high grades at Pokrovskiy that can be mined next year and six
new ore bodies at Pioneer. We are also preparing a production plan for early
2004 mining at Apophysis 1, the high grade area at Pioneer. We have consolidated
our position as the leading gold producer in the Amur region and are expanding
our exploration potential there. We continue to look at opportunities in the
Magadan region, through our Omchak Joint Venture, which itself has enjoyed a
good alluvial production season. I look forward to the rest of the financial
year with confidence."


Peter Hambro                                           020 7393 0102
Peter Hambro Mining

David Simonson / Nicola Davidson                       020 7606 1244
Merlin Financial

                            Peter Hambro Mining plc

                Interim Report for the period ended 30 June 2003


                                                Six months to    Six months to
                                                 30 June 2003     30 June 2002
                                                    (US$'000)        (US$'000)
Gold Produced (thousand ounces)                         47.7             23.6
Gross turnover                                        16,713            7,022
Total cash flow from operating activities              2,034             (831)
Net profit after tax & minorities                      2,656            1,132
Earnings per share                                  US$0.050         US$0.044
                                             at 30 June 2003   at 31 Dec 2002
Net assets                                           108,529           48,611


• Gold production increased to 47.7 thousand ounces compared with 23.6 thousand
ounces in the same period last year, a rise of 102%

• Mining and processing are both operating at budget capacity and are expected
to meet forecasts



• Identification at Molodeznoye of a continued high grade area (22.5g/t for 9.8
metres and 53.3g/t for 6.8 metres) adjacent to existing pit. These grades
suggest that the high grade ore processed in the early years of production at
Pokrovskiy can be continued in 2004.


• Continuation of high grade results from exploration at Bahmut and Apophysis 1
(grades of 17.5g/t for 35 metres and 7.4g/t for 5.9 metres)

• Preparation of a production plan for 2004 mining at Apophysis 1

• Confirmation of six new large ore bodies on the flanks of Pioneer, including
'Geophysiskaya' with a 1,000 metres strike


• Acquisition completed at a total forecast of US$4.50/ounce of resources

• Start of Tokur evaluation at Razlomnii and the eastern flank

• Exploration continues as planned


• Voroshilovskoe deposit and the area surrounding the Malomir deposit with P
  category resources of more than 3 million ounces


• Omchak joint venture with Susumanzoloto

• New Rudnoe exploration joint venture in Amur Region


• Secondary offering of shares raising c.US$25.8 million

• Refinancing Sberbank debt

• New Independent Director - Mr. Peter Hill-Wood.

Peter Hambro Mining PLC on the web

Information about Peter Hambro Mining Plc is available on the Group's website at

Many of the company's publications may be downloaded in their entirety including
the Group's 2003 Half Year Results.

Chairman's Statement

London 22 September 2003

It gives me pleasure to report to you on the first six months of your company's
financial year and to attach an operations and exploration report for the

With gold production of over 47 thousand ounces, compared to 23.6 thousand for
the comparable cold period last year, these six months have begun to show the
production capability of the new plant. The increase in profitability it has
generated in what has normally been the lower of our half-years is very welcome.
The Pokrovskiy Rudnik team deserve congratulations on this.

Costs in the early months were disappointing - largely because of the teething
problems on the new plant - but I am pleased to note these have declined
significantly as the period progressed. July and August saw further reductions.

Exploration has proceeded well, in spite of very heavy rains, and both the newly
identified high grade area at Pokrovskiy and the early mining plans for Pioneer
are significant for our mining plans in 2004.

It is also good to see the Group's earlier geophysical forecasted resources
being confirmed by drilling and trenching exploration.  Six new large ore
bodies, including the 1,000 metre "Geophysiskaya", have been identified and our
Chief Geologist considers that confirmation of these on the flanks of the
Pioneer deposit is the most important result of the exploration. A full up-date
of the Reserves and Resources will be made available with the year end results.

Acquisition of the Tokur deposit has been completed, subject to performance
retentions, and exploration work is planned both on the deposit itself and on
its eastern flank.

Winning the tenders for explorations licenses for the Malomir surround and the
Voroshilovskoye deposit presents us with useful growth potential for the
company's resource base.

Although the principal purpose of the Omchak joint venture with Susumanzoloto -
the acquisition of Matrosov - was not successful, the strategic alliance with
this Magadan group holds great promise. It has also proved to be a good model
for the new Rudnoe joint venture which will help us to consolidate our position
in the Amur Region.

Our venture into titanium pigment production is showing promise and your board
is actively pursuing ways for shareholders to acquire a direct interest in this

Our ADR programme has enabled us to attract new shareholders from North America
and the refinancing of our Sberbank debt lowers the Groups financing costs on
the debt.

I welcome Peter Hill-Wood to the board and look forward to receiving the benefit
of his counsel.

Pokrovskiy Rudnik is now operating at its planned capacity both from a mining
and processing point of view, I look forward to the rest of the financial year
with confidence.

Peter Hambro
Executive Chairman

Operation Report
Six months to 30 June 2003

Pokrovskiy Rudnik operates on the basis of an annual mining plan that, once
settled by the company, is ratified the Russian Mining Authorities. Mining
operations for the half year to 30 June 2003 have conformed to this.

The salient statistics for the period are as follows: -

Production figures for JSCP

Mining                            Units   6 months to     6 months to          Change
                                         30 June 2003    30 June 2002     (Yr-on-Yr %)
Total material moved  cubic metres '000         1,950           1,636             119%           
Ore mined                   tonnes '000           451             645              70%
Grade                               g/t           3.1             4.4              70%
Gold content                    oz '000          44.7            90.2              50%
Including economic ore            000 t           253             370              68%
Grade                               g/t           4.2             5.7              74%
Gold content                    oz '000          34.4            67.9              51%

The Glavnoe, Zeiskoe and Novoe deposits now all form part of the main pit. The
merging of Pokrovskiy's three main ore bodies into a single pit will increase
production in the future but has resulted in an increased stripping ratio for
the period. Accordingly, during the period, some gold production has been
derived from the stockpile of ore previously treated on the heap-leach. It is
expected that improved pit design should aid production and enable more thorough

The Pokrovskiy mining team has already successfully achieved the more exact
levels of grade-control required for processing ore for both the new
Resin-In-Pulp plant and the Heap-Leach operations. Inspections of stockpiles
(heap-leach tails and sub economic ore from previous years) further improved
grade control from the stockpiled ore and subsequently provided more efficient
processing and blending of the inspected ores. The operations were also the
subject of a production optimisation study.

Significant work on mine excavation, transportation fleets and pit design has
allowed a 15% increase in in-pit production versus the same period last year.


Resin-in-Pulp plant

The start-up period of the Resin-in-Pulp plant ("RIP") encountered some teething
problems. The key issue related to the depletion rate of the SAG mill liners
which was somewhat higher than planned. Time spent on replacement of the liner
sets led to a longer than expected idle time for the mill circuit and reduced
the plant productivity.

For the 1st half of the 2003 the RIP mill mechanical availability rate was
around 88% vs. the 95% forecast for the period. However, since May 15 2003, the
RIP plant has operated at almost full capacity rates, milling 2,700 tonnes per
day, and is currently operating according to design specifications. During June
2003 the plant averaged 2,697 tonnes per day with the rate of mill mechanical
availability at 99%.

The key production statistics for gold at Pokrovskiy Rudnik were as follows:-

Production figures for JSCP

                                   6 months to     6 months to          Change
Plant                    Units    30 June 2003    30 June 2002    (Yr-on-Yr %)

Milling                  t/day           2,397           2,011*            119%
Ore from the pit         000 t             234                             n/a
  Grade                    g/t             4.3                             n/a
  Gold content           oz '000          32.5                             n/a
Ore from the             000 t             128                             n/a
 Grade                      g/t            3.3                             n/a
 Gold content           oz '000           13.5                             n/a
Total processed          000 t             362                             n/a
  Grade                    g/t             3.9                             n/a
  Gold content          z '000            45.9                             n/a
  Recovery                   %             90%                             n/a
Gold recovered         oz '000            41.5                             n/a

* For the period October to December 2002

Heap-Leach operations

Processed daily                   t/day         3,859         3,750        103%
Ore to the heap                   000 t           351           341        103%
  Grade                             g/t           2.1           5.8         36%
  Gold content                  oz '000          23.4          64.0         37%
  Recovery                            %            26%           37%        71%
Gold recovered                  oz '000           6.1          23.6         26%

Total gold recovered            oz '000          47.7          23.6        202%

For the half year 362,000 tonnes were processed in the RIP plant with an average
grade of 3.9 g/t and 40.2 k ounces of gold recovered, with a recovery rate of
90.4%. Average processing by the plant was 2,397 tonnes per day, a 20% increase
on production for the fourth quarter of 2002 (the mill poured its first gold in
September 2002).

Current commissioning of the preliminary crushing unit and complementary
thickener (C-50) should allow a further increase in ore processing productivity
of 10%.


Heap-Leaching is a proven technology that has been successfully used at
Pokrovskiy for a number of years. However, in the future the bulk of production
from the Pokrovskiy mine will be treated at the new plant and only low grade
material will be treated on the existing leach pads. Production for the six
months to 30th June 2003 was as planned and at capacity.

The significant difference in heap-leach processing during the period has been
the substitution of Merrill-Crowe recovery by resin adsorption (the process used
in the new RIP plant). Gold-loaded resin is sent to the desorption circuit of
the RIP plant for resin stripping and gold recovery. This new technical approach
has improved the quality of gold extraction from the heap-leach solutions and
furthermore allowed sidelining of the Merrill-Crowe Plant for possible use at

Operating Costs

Historically, the cold weather in the early months of the year has caused higher
production costs for the first half year, compared to those for the full year,
because of increased infrastructure, fuel and blasting costs. In 2003 initial
teething problems at the new mill and the construction and optimisation of the
pit further increased monthly production costs in the first half of the period.
However these have decreased in the second half, as the mill settled down, and
this facility should reduce seasonality over the longer term.

Production figures for JSCP

              Jan -03    Feb - 03    Mar - 03    Apr - 03    May - 03    Jun - 03

Cash Cost         234         235         235         215         169         130

Production        286         294         299         297         254         169
cost (US$/oz)

Production      6,466       6,530       4,967       5,890       9,861      13,937

The table shows that costs per ounce increased as production fell but that, now
the mill is working at full capacity, costs are tending downwards. July's
preliminary results showed a further decrease in costs and increase in
production. Cash costs for the period were US$189/oz and total costs US$249/oz.

Exploration and Development Report


In-Pit exploration

In -pit exploration work for grade control is conducted via trenching, grab
sample selection and blast hole sampling.

The volume of samples processed for the period was:

Trench sampling           2,882 linear metres with 1,441 samples selected and analysed;
Grab sampling             660 samples selected and analysed;
Blast hole sampling       1,232 samples selected and analysed.

In addition, 330 grab samples from heap-leach tails were selected and analysed.

Out of pit exploration works

During the first half of 2003 exploration work concentrated on and in the
vicinity of the "Molodezhnoe" ore body. Molodezhnoe forms part of the 2004 mine
plan but is not part of current reserves. Exploration drilling via columnar
drill holes tightened up the drilled area to a grid of 20 by 20 metres.

Total data collected during the six month period:

103 holes drilled with cumulative length of 4,017.7 linear metres;
3,510.8 linear metres were sampled with 2,279 samples selected from which 1,912
samples have been tested.

The encouraging results of this work, together with further drilling being
undertaken currently, are expected to result in an increase in the Pokrovskiy
reserve base.

Exploration at Molodezhnoe suggests that the high grade material mined in the
early years at Pokrovskiy and produced the cash flow to finance development
continues in the newly defined area and that this could be included in the 2004
mine plan. The projected increase in reserves and resources relates to the
definition of the strike of the delineated ore body in the south and eastern
directions at a distance of 100 metres. It was found that the southern grades
from the drill data vary between 1.1 g/t with the thickness of 20 metres to 22.5
g/t with the thickness of 9.8 metres, whilst to the east grades of up to 50.3 g/
t with a thickness of 6.8 metres have been determined. Exploration work in this
area is continuing through the second half of the 2003 to delineate the
mineralised zone and recalculate increased reserves.

In addition, work is planned during October through to December on the eastern
extension of the Ozernoe ore body. Results from this work are expected to be
available in time for the year end report.


In March 2003 the Group received independent confirmation from the State
geological consultancy company Dalgeophysica, of the Group Chief Geologist's
revised estimation of 9.4 million ounces of category C and P reserves and
resources at Pioneer. This figure includes Russian Category C2 reserves 1.78
million ounces of which 656 thousand ounces are estimated to be at a grade of
14g/t at Apophysis 1.

Results of exploration work at Pioneer during the period can be summarised as


• The continued presence of the ultra high grade ore has been confirmed, with
sampled grades as high as 114.5 g/t.

• Based on the data received from the two drill holes No.203 and No.204, as well
as from the previous two (Nos .47 and 59), an ore body was defined into an
independent apophysis in a north-eastern direction from Bahmut.

• The new apophysis has a horizontal thickness of 5.9 to 35 metres with the
grades on the section of 7.4 to 17.5 g/t accordingly, using a cut off grade for
ore body definition of .6 g/t.

• A grid of 40-60 x 40-80 metres was constructed in order to allow mining of a
200 metre section in 2004.

Apophysis 1

• Stripping of Apophysis 1 with trenches every 80 metres and drilling on an 80 x
80 metre grid. This work confirmed the north-eastern direction of Apophysis 1.
On the profile of the drill holes No. 203 and 204 an ore body was stripped open
to the surface. Drill holes No. 202 (at a 120 metres depth) and drill hole No.
206 (at 220 metres depth) have uncovered primary ore in the same zone. It is
expected that ore from this area will be mined in 2004.

Confirmation of forecasts for Uznaya zone

• Trench sampling proved consistent mineralisation (Trenches 319-104).

• Two drill holes (numbers 147 & 148) drilled at an interval of 80 metres
intersected the ore body. Hole 147 shows 2 intersections with results varying
from 1.4g/t for 20.2 metres and 1.7g/t for 86.1 metres. No. 147 contained grades
as high as 19.6g/t. Assay results for Hole 148 have not yet been received but
there is visible mineralisation.

Exploration on Flanks of Pioneer

In Nicolai Vlasov, the Chief Geologist's opinion, the most important result of
the exploration at Pioneer has been the confirmation of six new ore bodies on
the flank of the deposit. This was achieved by shallow 4 metres drilling and 100
metres trenches. These include:

• Apophysis No.3. Samples from these exploration works are not yet processed
because analysis was concentrated on Apophysis No.1. However, the physical
manifestations of mineralized zone are visually significant.

• the "Geophysiskaya" ore body which strikes to the north east for approximately
1,000 metres. Only 25% of samples from here have been analysed so far and grades
vary from 1.2 to 1.4 g/t.

• Five others, identified by shallow drill holes along the high power
electricity line on the right of Vostochnii creek. This line has already crossed
all of the forecasted ore bodies which are Kulisnaya 1, Kulisnaya 2, Zvezdochka,
Listvenichnaya and Berezovaya. Kulisnaya 1 is determined by one drill hole - It
is pyritised sandstone and mineralised in veins. Kulisnaya 2 is open with 3
drill holes amongst sandstones with a width of 60 metres. There are
quartz-sulphide thin veins amongst the rock. The Listvenichnaya ore body is
intersected by 7 drill holes at intervals of 140 metres. This is a zone of
streak mineralisation and intensive limonitisation on the contact of diorites
and granite-porphyrites. 200 metres lower down the hill, there are artisinal
works on alluvial gold in the Vostochnii Creek. 140 metres to the west of the
line of holes, is a zone of intensive limonitisation with sericite-quartz
massive metasomatites with a thickness of pyrite (the Zvezdochka ore zone). The
width of the outflow of this zone is 120 metres and it is opened by 6 drill


For some time now there has been a strong move to consolidate the gold mining
business in Russia both by western and domestic companies and the company has
taken an active part in this process. Acquisition of the Tokur deposit was a
part of this process. Tokur is an important gold mining asset in the Amur
Region, where the Company's subsidiary Pokrovskiy Rudnik is a major producer,
and the acquisition fits well with Company's programme of non-organic growth.
The acquisition was completed in June.

The Tokur Deposit is located some 450 kms from the Pokrovskiy mine and is served
by road and rail connections. Independent resource estimates for the deposit
indicate reserves and resources of 8.1 million ounces.

Tokur has a developed infrastructure, including roads, electricity, housing and
an airport. Furthermore, there is also an experienced labour force.

We have identified two areas of focus for exploration and development work:

• During the second half of 2003, confirmation trenching and drilling is planned
for the eastern flank of the deposit's Main Fault. An exploration plan has been
prepared for the Razlomnii zone of the Tokur deposit. Appropriate materials have
been sent to the Ministry of Natural Resources of Russian Federation for the
geological and ecological examination.

• In March the Group won the tender and received a license to conduct
exploration on the flanks of the Tokur deposit. An exploration plan has been
compiled and field work, including geophysical and geochemical analysis, on the
eastern flank started in August.


In March the Group won the tender and received licenses to conduct exploration
at the Voroshilovskoe deposit and the area surrounding the Malomir deposit,
located in the north-east of the Amur region.

At this time exploration work-plans are being compiled. Furthermore, the Group
hopes that State financing will cover part of the cost of this work.

Malomir surround

• This ore field is located in Selemdgin district of Amur region. It is
connected by a highway level road with the nearest BAM railroad station 
(Fevralsk 110 km) and to another railway station on TransSiberian Railroad 
(240 km). There is an existing infrastructure, with a substantial labour force 
and high power electricity lines. The main ore bodies of the deposit are 
situated in a zone named "Diagonal" - with 94% of the total resources of the 
deposit are located in this zone.

The Diagonal zone has been explored by drilling to a depth of 400 metres. Assay
results have shown gold content in parts up to 70 g/t.

• To date the Group has gained the license for the area surrounding Malomir. The
Malomire deposit itself is reported to have a total of 5.3 million ounces of
reserves and resources

Voroshilovskoye deposit

• This ore field is located in the same region but some 30 km from Malomir. Vein
thicknesses vary from 0.03 metres to 0.5 metres with a length of 40-400 metres. 
Gold content tested varies from 0.2 to 1,092.0 g/t.

Statement of reserves & resources of new deposits

Area                                   Category         Gold content
                                       (C or P)        (kg)  ('000oz)
Voroshilovskoye                              P1    100,000      3,110


As discussed in the Group's 2002 Annual Report, MicroMine has been installed at
site. Block modelling of the Pokrovskiy deposit was completed on the new
computer system at the end of July 2003. This model is currently being analysed
and input data corrected to the newest results. The system is at present being
used for a degree of monthly mine-planning and is planned for full-scale use for
mine-planning and control of all mine works at the beginning of 2004. The 2004
Open-Pit Mine Plan is to be produced via MicroMine software. Since May 2003,
MicroMine software is also being used to analyse exploration data from Pioneer.


Establishment of the Omchak joint venture

In July 2003 Peter Hambro Mining Plc completed a deal with OAO Susumanzoloto and
OAO Shkolnoe to establish the ZAO Omchak joint venture. Omchak, 50% held by
Peter Hambro Mining, owns part of the Shkolnoe and Berelekh gold mining
companies - located in the Magadan region in the far north east of the Russian

Peter Hambro Mining's 50% partner in and operator of Omchak is Mr. Vladimir
Khristov. Mr Khristov is a well known gold miner in the Magadan Region. Mr
Khristov's group companies have guaranteed a minimum dividend flow to the joint
venture for the next 5 years of US$7.2 million. Peter Hambro Mining contributed
US$7.2 million in cash following receipt of an independent valuation from Micon
and NBL Gold.

Establishment of the Rudnoe joint venture

In August the Group entered into a joint venture with the OAO Soloviovskiy Mine.
Soloviovskiy Mine has been operating for 135 years, making it the oldest
operating mine in the Amur Region. Since 1994 the mine has been an open joint
stock company owned 58% by private individuals. The mine is a series of alluvial
operations, currently from 4 license areas. Since inception the mine has
produced 140 tonnes of gold (4.3 million ounces) from the deposit and has
current reserves of 20 tonnes.

Peter Hambro Mining's subsidiary JSC Pokrovskiy Rudnik and OAO Soloviovskiy Mine
each invested a nominal RUR2 million (c.US$65,000) into the joint venture
vehicle for their 50% holdings.

The primary aims of the joint venture are exploration and the acquisition of
exploration licences and mining works in the region of the Soloviovskiy mine
where the company has an existing and substantial infrastructure. The joint
venture reinforces Peter Hambro Mining's position as being the dominant gold
producer in the region through a formalised relationship with the region's
second largest producer (Peter Hambro Mining being the largest).

Corporate Activities


In July 2003 Peter Hambro Mining Plc launched a sponsored American Depositary
Receipt programme through the Bank of New York, the largest depositary of ADRs
in the US financial markets.

The aim was to make Company's shares as accessible as possible to international
investors, particularly in North America. Additionally it provides an investment
vehicle for international funds that suffer restrictions with investing in AIM
stocks, but can acquire American Depositary Receipts. Following the launch the
Company undertook a short investor road show in New York which was well

Capital requirements

Debt refinance

During the first part of the year the Group refinanced its long term borrowing
facilities at a significantly reduced rate. To provide construction finance for
the Company's operations in 2001 a US$15 million loan facility was drawn down
from Sberbank, with an annual interest rate of c.22%. In 2003 the facility was
refinanced with US$16 million drawn down from Moscow International Bank at an
annual interest rate of 8%.

Equity placing

The company executed two substantial equity market transactions during the

• In March 2003, the Company placed a total of 9,596,919 new ordinary shares
UK£1.75 per share raising approximately UK£16.8 million before expenses. The two
primary purposes of this raising were to fund the cash portion of the Tokur
acquisition consideration and to fund the Group's portion of the Omchak joint

• In June the Company issued 6 million shares to the vendors of the Tokur
deposit. Canaccord, the Company's nominated advisor and broker, simultaneously
placed these shares in the market on behalf of the vendor.

Corporate governance

The Company appointed Peter Hill-Wood as a new Non-Executive Director
immediately following the Annual General Meeting on June 12 2003. Mr Hill-Wood,
aged 67, is an advisor to Top Technology Ventures Ltd. in Russia and is Chairman
of Arsenal Football Club PLC. He was formerly a Vice Chairman of Hambros Bank
and Chairman of its Investment Division.

Titanium Division

The Group's titanium assets continue to make significant progress. Ferrostaal,
the supplier of the bankable feasibility study, is currently in the final stage
of negotiations with a potential supplier of sulphuric acid technology for the
production of titanium dioxide pigment. The first stage of the feasibility study
is expected at the end of 2003.

At the end of the 2002, the Group created a company in Moscow, Chemalt, trading
in titanium dioxide pigment. The purpose of the company is to further develop
access the domestic market for the product. It is likely that Chemalt would act
as selling agent for any titanium production of the Group. Chemalt currently
trade in the order of 150 tonnes per month of titanium dioxide from the Ukraine.
Projected turnover for the next year is c.500 tonnes per month.

Chemalt has also investigated the market for other products that may or may not
constitute part of future production. Placing the company as a supply agent for
a variety of the raw materials required for production of paper, paint, varnish,
plastics and rubber increases its market power and attraction to customers.
Titanium dioxide and the by-products (mainly Iron Oxide) of its production are
used as colouring agents in these industries.

It remains the Company's view that the interests of the Company's shareholders
are best served by the titanium operations operating under a separate company
and steps are being taken to ensure that this can be achieved while allowing
shareholders to retain their interest in a tax efficient way.

Report of the Independent Accountants to the shareholders of Peter Hambro Mining

We have been instructed by the company to review the financial information of
Peter Hambro Mining plc for the period ended 30 June 2003 set out on pages 11 to
20 and we have read the other information contained in the Interim Report and
considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.

Directors' responsibilities

The Interim Report, including the financial information contained therein, is
the responsibility of, and has been approved by the Directors. The Accounting
Standards Board's Statement on Interim Reports requires that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.

Review work performed

We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board. A review consists principally of making
enquiries of group management and applying analytical procedures to the
financial information and underlying financial data and based thereon, assessing
whether the accounting policies and presentation have been consistently applied
unless otherwise disclosed. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with Auditing
Standards and therefore provides a lower level of assurance than an audit.
Accordingly we do not express an audit opinion on the financial information.

Review conclusion

On the basis of our review we are not aware of any material modifications that
should be made to the financial information of Peter Hambro Mining plc as
presented for the six months ended 30 June 2003.

St. Paul's House,                                                MOORE STEPHENS
Warwick Lane, London                                         Registered Auditor
EC4P 4BN                                                  Chartered Accountants

19 September 2003

Summarised Consolidated Profit and Loss Account
For the period ended 30 June 2003
(expressed in US$'000's)
                                           Six months    Six months      Year to
                                           to 30 June    to 30 June  31 December
                                                 2003          2002        2002
                                   Note         $'000         $'000       $'000
                                 -------      --------      --------    --------

Sales of gold                                  16,713         7,022      22,774
Sales of titanium dioxide products                841             -           -

Turnover                              2        17,554         7,022      22,774

Operating profit                                4,169         3,591      10,462

Interest payable and similar charges  4        (1,678)       (1,517)     (1,640)

Other income net of expenditure                   404           240         613

Profit on ordinary activities                   2,895         2,314       9,435
before Taxation

Taxation on profit on ordinary        5          (156)           (7)       (639)

Profit on ordinary activities                   2,739         2,307        8,796
after taxation

Minority interests                   13           (83)       (1,175)     (3,692)
Profit retained for the period                  2,656         1,132       5,104

Earnings per ordinary share                    $0.050        $0.044      $0.159
Diluted earnings per share                     $0.047        $0.043      $0.150

The turnover for the period has been generated by the company's subsidiaries OAO
Pokrovskiy Rudnik and OOO ChemAlt (2002 - OAO Pokrovskiy Rudnik only).
Pokrovskiy Rudnik generated US$5.5 million of operating profit (2002 - US$3.8
million) for the group.

There are no recognised gains or losses other than those included in the profit
and loss account.

The accompanying notes are an integral part of this profit and loss account.

Summarised Consolidated Balance Sheet
As at 30 June 2003
(expressed in US$'000's)
                                      Note    30 June    31December    30 June
                                                 2003          2002       2002
                                                $'000         $'000      $'000
Fixed Assets

Intangible assets
  Goodwill                               6          -        17,790     (3,714)
  Other intangible assets                6     79,055         3,743      3,907
Tangible assets
  Property, plant and equipment       6, 7     29,308        37,735     34,854
  Capitalised exploration and                   2,816         1,156      1,737
  development expenditure
  Assets under construction and          8      6,404         8,261      5,200
  equipment to be installed
                                                4,395           637        637
                                              121,978        69,322     42,621
Current Assets
Stock and work in progress               9      9,823         7,501      3,119
Debtors                                        16,296         4,868      4,770
Cash at bank and in hand                       27,484         1,388      2,245
                                               53,603        13,757     10,134
Creditors, amounts falling due          10    (49,802)      (25,769)   (15,641)
within one year
Net Current Assets/(Liabilities)                3,801       (12,012)    (5,507)

Creditors, amounts falling due after    11    (17,250)       (8,699)   (12,316)
more than one year

Net Assets                                    108,529        48,611     24,798

Capital and Reserves
Share capital                           12      1,010           751        433
Share premium                           12     85,252        34,636     13,079
Merger reserve                                  8,755         8,755          -
Contingent reserve on acquisition       12      6,304             -          -
Share incentive reserve                            40            40         40
Profit and loss account                         6,545         3,889        (83)

Equity shareholders' funds                    107,906        48,071     13,469
Minority interests                      13        623           540     11,329
                                              108,529        48,611     24,798

The accompanying notes are an integral part of this balance sheet.

These financial statements were approved by the Directors on 19 September 2003

P.C.P. Hambro                              P.A. Maslovskiy

Summarised Consolidated Statement of Cash Flow
For the period ended 30 June 2003
(expressed in US$'000's)

                             Note   Six months     Six months          Year to
                                    to 30 June     to 30 June      31 December                                  
                                          2003           2002             2002
                                        $'000s         $'000s           $'000s

Net cash inflow/(outflow)      14        2,034            (831)          6,890
 from operating activities
Net cash outflow from returns           (2,055)         (1,206)         (1,155)
 on investments and servicing
 of finance
Taxation Paid                           (1,239)             (7)             (7)
Capital Expenditure                    (17,742)         (6,656)        (13,514)
 and Financial investment
Cash Outflow before use of             (19,002)         (8,700)         (7,786)
 Liquid Resources and Financing
Net movement in debt       15, 16       19,284           5,985           5,144
Share capital issued                    25,814           3,599           2,669
Increase in cash at                     26,096             884              27
 bank and in hand

Notes to the Summarised Consolidated Financial Statements
for the period ended 30 June 2003

1. Principal Accounting Policies

The Company was incorporated on 20 December 2001 under the name Excelsior
Corporation plc as part of a planned reorganisation of an existing group headed
by Peter Hambro Mining Limited. Subsequent to the formation of the Company,
Peter Hambro Mining Limited was renamed Eponymousco Ltd ("Eponymousco") and the
Company was renamed Peter Hambro Mining plc. On 17 April 2002 the Company
acquired the whole of the share capital of Eponymousco and obtained admission to
the London Alternative Investment Market ("AIM").

These events are considered to be a reorganisation of a continuing business.
Consequently, the comparative figures of these financial statements have been
prepared so as to include the results of the Company and Eponymousco using the
accounting polices adopted by Eponymousco in its financial statements for the
year to 31 December 2001.

a) Principles of consolidation

The Company has two 100% subsidiaries: Eponymousco and Peter Hambro Mining
(Cyprus) Ltd (formerly Plastor Ltd). Plastor Ltd was acquired on 12 June 2003.
The results and balances of Eponymousco have been consolidated in these
financial statements. Peter Hambro Mining (Cyprus) Ltd acts as a holding company
for 100% of the share

Eponymousco has one subsidiary, OAO Pokrovskiy Rudnik formerly JSC Pokrovskiy
("Pokrovskiy Rudnik"), a company incorporated in Russia. At 31 December 2002
Eponymousco owned 53.11% of Pokrovskiy Rudnik. The group acquired a further 2%
of Pokrovskiy Rudnik on 19 April 2002, an additional 19.89% of Pokrovskiy Rudnik
was acquired on 23 July 2002 and a further 22.68% on 19 December 2002 bringing
the group's total holding to 97.68%. Pokrovskiy Rudnik has been consolidated
in these financial statements.

Pokrovskiy Rudnik has two subsidiaries: OOO Olekminskiy Rudnik ("Olekminskiy
Rudnik") (51%), a company incorporated in Russia, which has been consolidated in
these accounts, and OOO ChemAlt ("ChemAlt") (100%), a company incorporated in
Russia, which has been consolidated in these accounts. Olekminskiy Rudnik is
involved in exploring for titanium deposits and ChemAlt is involved in research
to collect and analyse market data relating to titanium dioxide and titanium
dioxide based products as a preparatory step for the Olekminskiy Project.

The results and balances of ChemAlt were excluded from consolidation in the
previous period on the grounds that they were not material to the group. ChemAlt
has been consolidated in the current period on the basis that current results
and balances are material.

2. Turnover

All proceeds are receivable in the ordinary course of business and are recorded
exclusive of Value Added Tax.

It should be noted that emergence from winter temperatures in Eastern Russia
during the first part of the year causes lower heap-leach production than in the
second half of the year. However dependence on the heap-leaching operations was
reduced following the commissioning of the new plant in September 2002 which
allows year-round production.

3. Directors and Employees

                                          30 June 2003           30 June 2002
                                                 $'000                  $'000

Directors' emoluments                              474                    265

Staff costs during the period were as follows:

                                          30 June 2003           30 June 2002
                                                 $'000                  $'000

Wages and salaries                               1,928                  1,368
Social security costs                              611                    318
                                              ---------              ---------
                                                 2,539                  1,686

The average number of employees (excluding Directors) of the group during the
period was 860 (2002 - 1,218). The Company had five employees (2002 - four).

The emoluments of the highest paid Director for the period were US$174,198 (2002
- US$71,000).

During the year 2002 Pokrovskiy Rudnik established a Reserve Bonus Scheme for
senior executives of that company. Under this scheme participants will be
awarded freely transferable "scheme units" at the end of each year from 2002 to
2012. These will be awarded at the rate of US$5 (in aggregate) for each ounce of
gold added to the designated reserves for the reserve bonus scheme. Payments may
be made in cash or may be applied to subscribe for new Ordinary Shares in the
Company at the prevailing market price. On 25 February 2003 Pokrovskiy Rudnik
received independent confirmation, from Dalgeophysica, of the Group Chief
Geologist's revised estimation that the C2 component of the reserves and
resources is now 1.78 million ounces. This event triggered a liability in
respect of the above scheme to certain senior executives. The total amount of
the liability is estimated to be US$8.9 million and is included under non
current creditors (Note 11).

4. Interest Payable and Similar Charges

                                             30 June 2003         30 June 2002
                                                    $'000                $'000
Finance lease charge                                  143                   38
Bank loan interest                                  1,259                1,467
Other loan interest                                   276                   12
                                                  ---------            ---------
                                                    1,678                1,517
                                                  ---------            ---------

5. Taxation

The Company does not anticipate a corporation tax charge for the period as all
profits arise in its subsidiary Pokrovskiy Rudnik and the Company itself has
suffered losses. Pokrovskiy Rudnik was the beneficiary of a tax concession that
exempted it from Russian profit tax for the year ended 31 December 2001. This
concession came to an end during 2002. The Russian profit tax charge for
Pokrovskiy Rudnik for the period ended 30 June 2003, based on the tax rate 24%
was US$155,916 (2002 - US$6,653).

6. Other intangible assets

                                                                  30 June 2003
At 1 January 2003                                                        6,554
Value of Goodwill reclassified to the cost of the licence of JSCP       17,790
Value of certain tangible assets reclassified to the cost of the        
licence of JSCP                                                         12,138
Additions as a result of acquisition of a subsidiary                    37,396
Addition as a result of Reserve Bonus Scheme                             8,900

At 30 June 2003                                                         82,778

At 1 January 2003                                                        2,811
Charge for the period                                                      912

At 30 June 2003                                                          3,723

Net book value
At 31 December 2002                                                      3,743
At 30 June 2003                                                         79,055

During the period the Directors carried out a review of the carrying value of
tangible assets, intangible assets and goodwill as at 1 January 2003. As a
result of this review the Directors decided that the combined carrying value of
these assets was reasonable but that an alternative classification would be more
appropriate. Since the value of goodwill is entirely attributable to Pokrovskiy
Rudnik's license and the difference between the market values of certain
tangible assets and their book values can also be attributed to ownership of the
license, the carrying value of the license has been restated upwards with a
corresponding reduction in goodwill and fixed assets.

7. Property, Plant and Equipment

In view of the increase in reserves and resources, particularly in respect of
the Pioneer deposit, the anticipated life of mining operations has been extended
substantially. Accordingly it was considered appropriate to reassess the
remaining economic life of certain buildings, constructions and equipment assets
and this has been extended from 10 to 20 years. The effect of this is a
reduction in the depreciation charge of US$0.4 million for 6 months 2003.

8. Investments

                                    30 June 2003        31 December 2002
                                           $'000                   $'000

OOO ChemAlt                                    -                       8
Baikal Bank                                  659                     629
Kolima Bank                                3,736                       -
                                       ----------             -----------
                                           4,395                     637

The Company and the Group have the following material subsidiaries and other
significant investments, which were consolidated in these financial statements.

Principal                                                   Principal         Effective
subsidiary           Country of            Principal       Country of     proportion of
undertakings      incorporation             Activity        Operation       shares held
------------      -------------            ---------        ----------     -------------
Eponymouso Ltd   United Kingdom      Holding Company    United Kingdom              100%
Peter Hambro                 
 Mining (Cyprus) Ltd     Cyprus      Holding Company            Cyprus              100%
Pokrovskiy Rudnik        Russia      Gold production            Russia             97.7%
Olekminskiy Rudnik       Russia  Titanium production            Russia               50%
ChemAlt                  Russia     Titanium trading            Russia             97.7%
Tokurskiy Rudnik         Russia      Gold production            Russia              100%

In May 2003 Pokrovskiy Rudnik acquired 75.73% of the share capital of Kolima
Bank. Kolima Bank is a commercial Bank registered in Russia and operating in
Magadan and Chukotka regions. It has been agreed that Pokrovskiy Rudnik will
resell this holding to ExpoBank in 2004. The Bank was acquired for the purpose
of cementing the strategic alliance with Susuman Zoloto, and gaining access to
investment opportunities in gold production in the region. Kolima Bank has not
been consolidated in these financial statements on the grounds that control will
be temporary.

The Group's holding in Baikal Bank was subsequently sold to ExpoBank in July
2003 for its original cost.

9. Stock and work in progress

                                            30 June 2003      31 December 2002
                                                   $'000                 $'000

Stores and spares                                  2,144                 1,258
Work in progress                                   5,564                 5,815
Bullion in process                                 1,890                   420
Bullion in stock                                     225                     8
                                               -----------          ------------
                                                   9,823                 7,501
                                               -----------          ------------

10. Creditors, amounts falling due within one year

                                                        30 June    31 December
                                                           2003           2002
                                                          $'000          $'000
Trade creditors                                           5,751          1,404
Tax liability                                                 -            639
Finance lease liabilities                                   917            997
Note payable                                              8,000              -
Short term loans                                         19,086         12,380
Short term element of long term loans                     9,000          3,474
Dividend payable to minority interest                     4,574          4,500
Other creditors including taxation and social    
security payable                                          2,474          2,375
                                                        --------       --------
                                                         49,802         25,769
                                                        --------       --------

11. Creditors, amounts falling due after more than one year

                                                    30 June        31 December
                                                       2003               2002
                                                      $'000              $'000

Finance lease liabilities                               685              1,121
Long term borrowing                                   7,665              7,578
Due in respect of Reserve Bonus Scheme                8,900                  -
                                                    --------           --------
                                                     17,250              8,699
                                                    --------           --------

12. Share Capital

                                                        30 June    31 December
                                                           2003           2002
Ordinary shares                                           $'000          $'000
Allotted, called up and fully paid:
At the beginning of the period                              751              -
Issued in exchange of Eponymousco shares                      -            391
Issued in exchange for 100% holding in Peter Hambro     
Mining (Cyprus) Ltd                                         101              -

Other new issues                                            158            360

At the end of the period                                  1,010            751

Number of shares (par value £0.01)                       No'000         No'000

Authorised                                              100,000        100,000

Issued at the beginning of the period                    47,985              -
Issued in exchange of Eponymousco shares                      -         24,697
Issued in exchange of 100% holding in Peter Hambro      
Mining (Cyprus) Ltd                                       6,000              -
Other new issues                                         10,014         23,288
                                                        --------      ---------
At the end of the period                                 63,999         47,985
                                                        --------      ---------

During the period 6,000,000 shares in the Company were issued in exchange for
the total issued share capital of Peter Hambro Mining (Cyprus) Ltd. A contingent
issue of 1,500,000 shares in respect of the acquisition of Peter Hambro Mining
(Cyprus) Ltd was accounted as a separate contingent reserve on acquisition.

An additional 417,080 ordinary shares were issued for consideration of £1.30 per
share and a further 9,596,919 ordinary shares were issued for consideration of
£1.75 per share. As a result of these transactions a share premium of US$50.6
million after commission of US$1.6 million was created.

13. Minority Interests
                                                        30 June    31 December
                                                           2003           2002
                                                          $'000          $'000

At the beginning of the period                              540         10,623
Minority interest eliminated on acquisition of
additional equity in subsidiary undertakings                  -         (9,275)
Dividends payable                                             -         (4,500)
Minority interest in net profit of subsidiary                
undertakings                                                 83          3,692
                                                       ---------      ---------
At the end of the period                                    623            540
                                                       ---------      ---------

All minority interests are equity interests.

14. Net Cash Inflow/(Outflow) from Operating Activities

                                                  30 June 2003    30 June 2002
                                                         $'000           $'000
Cash received from customers                            17,554           7,022
Cash paid to suppliers and employees                   (11,845)         (4,868)
Other proceeds                                             291             238
Other expenses                                          (3,966)         (3,223)
                                                      ---------       ---------
Net cash inflow/(outflow) from operating                 
activities                                               2,034            (831)
                                                      ---------       ---------

15. Reconciliation of Net Cash Flow to Movement in Net Debt

                                                                  30 June 2003
Increase in cash at bank and in hand                                    26,096
Cash (inflow) from (increase) in debt and lease financing              (19,284)

Change in net debt resulting from cash flow                              6,812
Exchange difference                                                       (519)

Movement in net debt in the period                                       6,293
Net debt at 1 January                                                  (24,162)

Net debt at 30 June                                                    (17,869)

16. Analysis of Net Debt

                        At                                     Exchange           At
                 1 Jan. 03    Repaid   Drawdown   Cash Flow    movement   30 Jun. 03

Cash in hand and     
at the Bank          1,388         -          -      26,096           -       27,484
Debt due within    
one year           (15,854)   22,103    (42,095)          -        (240)     (36,086)
Debt due after      
one year            (7,578)    7,192     (7,000)          -        (279)      (7,665)
Finance leases      (2,118)      516          -           -           -       (1,602)
                    -------   ------     -------     -------     -------      -------
Total              (24,162)   29,811    (49,095)     26,096        (519)     (17,869)
                    -------   ------     -------     -------     -------      -------

The group held US$3.6 million of Promissory Notes at 30 June 2003. These were
acquired for cash management purposes but are included within debtors in the
Balance Sheet.

17. Post Balance Sheet Events

In July 2003, the company signed an agreement with the Russian companies,
Susumanzoloto and Shkolnoe to set up a joint venture gold mining company in the
Magadan region of Russia.

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