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Peter Hambro Mining (POG)

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Wednesday 20 July, 2005

Peter Hambro Mining

Reserves and Resources Update

Peter Hambro Mining PLC
20 July 2005

20 July 2005

   Pioneer Reserves & Resources Update and Feasibility Study Progress Report

Peter Hambro Mining Plc ("PHM" or the "Group") issues this update on exploration
and development for the Group's Pioneer project in the Amur Region, Far East
Russia. Work to date has resulted in:

• a reclassification of the Russian resources to JORC; and
• a materially different understanding of the deposit due to newly discovered 
  high grade ore columns.

JORC reclassification

PHM is pleased to announce that the recent trial mining exercise and the
availability of the Group's three new laboratories for assay work has allowed an
update of reserves and resources at Pioneer. As reported previously, the Group's
estimations for the reserves and resources at Pioneer were formed on the basis
of preliminary exploration results. The results of more conclusive data, in the
form of an extensive drilling programme, were delayed by the Group's lack of
laboratory capacity and hence ability to assay the drill samples. With the
Group's three new laboratories, this backlog of assays has now been almost
entirely cleared and consequently the reserves and resources at Pioneer are

Pioneer's overall resources have been updated and also partly recalculated using
the Australian JORC code. According to the Russian classification system the
relevant zones of the Pioneer deposit contain a total of C2 1.9 million ounces
and P1/P2 1.9 million ounces. As was undertaken at Pokrovskiy during 2004, we
have implemented the MicroMine mine planning software at Pioneer. By-products of
using MicroMine are the independent audit of the deposit by the MicroMine team
and a JORC resource estimate. It has been found that the total JORC estimate for
Pioneer is 2.2 million ounces which closely correlates with that under the
Russian classification system, and in fact the JORC estimate of resources is 14%

The table shows that the work undertaken by the Group to reclassify reserves and
resources into JORC has been successful. Under the JORC system there is a total
of 2.2m ounces in the resource category versus 1.9 million under the Russian C2
classification. Ahead of the completion of a feasibility study on the deposit
JORC does not qualify any of these resources as reserves but no further
geological work would be required to do so and, using the economical conditions
at Pokrovskiy, c.70% of the JORC resources appear as reserves.

Summary Comparison of Reserve & Resource estimates of the zones of the Pioneer

                                   With cutoff grade 0.6g/t   
at 1-1-2004                        Ore                 Contained Metal
                                   tonnes '000             kg          oz '000
                                   -----------         -------------------------
Total (C2+P1+P2)                        82,703            119,911        3,849
Total  C2                               31,763             59,835        1,921
                                   -----------         ----------    -----------
                       With cutoff grade 0.6g/t       With cutoff grade 0.8g/t 
                       ----------------------------   --------------------------
at 25-4-2005           Ore          Contained Metal   Ore       Contained Metal
                       tonnes         kg      oz      tonnes      kg        oz 
                       '000                  '000     '000                 '000
                       -------     -------   ------   -------    ------   ------
Total (JORC+P1+P2)     72,366      107,456   3,450     36,276    88,029   2,826
Total (JORC)           63,915       68,156   2,188     28,737    49,353   1,584
                       -------     -------   -------

Resource Growth & High Grade Ore Columns

The results of the Pioneer exploration and development programme all support the
estimations made by the Group in the past. PHM's understanding of the deposit is
now more definitive but materially differs from that announced previously. The
understanding is now that the deposit consists of a series of orezones lying
along two fault zones with high grade ore columns at intersections and branches.
The average grade of each zone ranges from 1.0g/t to 2.0g/t but benefits from
pockets of very high grade ore in the columns. Two of the very high grade ore
columns have so far been comprehensively explored; five more are predicted
within the four ore zones; and based on current results the Group believes that
there is the potential for many more.

The high grade columns have materially changed the estimations and the Group's
understanding of the deposit. In drilling an orebody it would be normal to
discount particularly high grade assay results in the belief they are 'blips'
which would distort resource estimations. The trial mining exercise at Pioneer
on two such ore columns has shown that the high grade results are not mere blips
but material high grade pockets which significantly increase the grade of
mineable gold. The two columns that have been opened to date have been found to
be c.35-50m wide with 62% of samples having a grade greater than 10g/t.

The table below shows the substantial increase in high grade resources and
grade. The size of the overall resource has increased only marginally from 309
tonnes of contained gold to 317 tonnes whilst the grade has remained constant at
1.6g/t. The high grade content has increased from 29 tonnes at 3g/t to 134
tonnes at 5.1g/t - an increase in high grade gold of 365% whilst grade increases
by 73%.

Pioneer Ore Zones estimated at
-----------      --------------          --------------         --------------
                   At 1/01/2004             At 1/7/2005            At 1/7/2005
                 --------------          --------------         --------------
                cut off grade 0.6       cut off grade 0.6     cut off grade 0.8
              Contained     Grade     Contained     Grade   Contained     Grade 
              gold          (g/t)     gold          (g/t)   gold          (g/t)
              (Mill Oz)               (Mill Oz)             (Mill Oz)
----------       --------------          --------------         --------------
Apophysis 1       3.85      1.45           3.45     1.48        2.83       2.43
High Grade
therein           0.92      2.94           1.25     4.60        1.22       5.10
----------       ---------------         ---------------        ---------------
Other ores
zones             6.08      1.42           6.75     1.68          -         -
High Grade
therein            -          -            3.04     5.40          -         -
----------       ---------------         ---------------        ---------------
Total             9.93      1.61          10.20     1.61          -         -
                 ---------------         ---------------        ---------------
Total high grade  0.92      2.94           4.29     5.10          -         -
                 ---------------         ---------------        ---------------

The results of the work have confirmed PHM's confidence in the amenability of
the deposit to a large scale gold mining and processing operation and hence work
has commenced on the basic infrastructure requirements of such operation.

Attached to this release is a summary of the report on this subject made to the
Board of PHM by N.G. Vlasov, the Group's Chief Geologist.

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

"Today's report is a technical confirmation of our original beliefs in the
likelihood of Pioneer to become a world class asset. Pioneer is due to play a
key part in the Group's development strategy and particularly in fulfilling our
2009 one million ounce production target. I am very pleased that all the work to
date at Pioneer has confirmed the Group's original estimations of reserves and
resources and that we are making such good progress in exploring the deposit. As
at Pokrovskiy last year, the independently prepared JORC resource estimates have
confirmed the Group's previous estimates which used the Russian classification

Further to our increased understanding of the deposit, it is gratifying to have
been able to identify the existence of key high grade pockets of ore which are
open at depth and seem to reoccur at regular intervals in the deposit."


Alya Samokhvalova   
Investor Relations, Peter Hambro Mining               +44 (0) 20 7201 8900

David Simonson / Tom Randell 
Merlin                                                +44 (0) 20 7653 6620

The following is an executive summary of the report to the Board of Directors of
PHM, by the Group Chief Geologist, N.G. Vlasov.

Exploration Work Undertaken

For the period 2001-2005 the following work has been carried out on the Pioneer

-         core drilling 28,500m
-         geotechnical drilling 3,300m
-         shallow mapping holes 7,400m
             o  Total drilling 39,200m
-         Trenching 1,994,000 m3
-         Samples taken 36,458

The total expenditure on this work as of 1 June 2005 is RuR148m roubles

Results of Exploration - Reserves & Resources Update


Almost all of the outstanding assays from 2004 have now been completed. A small
number of assays were not completed by the modelling cutoff date of 25 April
2005 and have not been used in the reserves figures. The ore shoot on the
Promezhutochnaya zone is the principal reserve figure affected by this. The
effect of adding this is expected to be an increase in average grade for the
Promezhutochnaya zone.

Computer Models

Two computer models have been generated:

(1) a conventional ore deposit model, in MicroMine, which has been used to
generate JORC resource figures. MicroMine has independently audited this model
and approved the resultant JORC resource figures; and

(2) a 3D geochemical model, created by the independent consulting group
Ecotsentr (from Vladivostok) using all available assay data. A similar
independent model was carried out by Ecotsentr in the surrounding area to
Pokrovskiy approximately two years ago. Subsequent exploration work at Pokrovsky
has so far confirmed the usefulness of the geochemical model with exploration
work corroborating many of the forecasts made.

Ore shoots

From a combination of the 3D geochemical model and structural reasoning, it has
been predicted that at intervals of approximately half a kilometre there are
rich high grade ore-shoots along the Bakhmut, Promezhutochnaya, Tsentralnaya and
Yuzhnaya zones. These rich ore shoots have been found to have grades ranging
between 5g/t and upwards of 20g/t - with 62% of all samples assayed to date
being over 10g/t.

The ore shoots occur at the junctions of the 'main' ore zones with apophyses (or
subsidiary, branching ore-zones), places where gold mineralising solutions have
been trapped by the geological structures.

   •The first ore shoot to be intensively studied is at the junction of
    Bakhmut zone and Apophysis 1. This is now being test-mined with an open pit
    that was commenced in the winter of 2004. The ore shoot is about 40m across,
    oval in plan (surface area c.1500m2), and more than 200m deep. Drilling to
    date, at 200m depth, has not reached the bottom of the high grade zone.
    Average grades are in the region of 20g/t.

   •A second ore shoot currently being explored is near the north-east end of
    Promezhutochnaya zone.

   •There are believed to be a further five such ore shoots on the Bakhmut,
    Promezhutochnaya, and Yuzhnaya zones. There is physical exploration evidence
    for a number of these, whilst others are predicted as a result of the
    geochemical modelling programme. None have been explored in any detail to
    date and hence are not recorded in the reserve category. The geochemical
    model and other exploration evidence, as well as interpretation of the
    structural geology, all suggest that many similar ore shoots will be found
    on other ore zones in the Pioneer property.

Zonational structure of the deposit

The Promezhutochnaya zone is down-faulted by comparison with Bakhmut - this
means that the same ore horizons are found at deeper levels. High silver grades
have been found here - the Group's interpretation is that these correspond to a
position near the top of the zone of mineralisation (which has been eroded away
in the Bakhmut zone). The Tsentralnaya zone is downfaulted even more, which
means that the highest gold grades there are likely to be found at depth. At
surface this zone has the most intensive arsenic/antimony/silver anomaly which
can be intepreted as a dispersion halo above the main ore levels. Then further
to the south, the Yuzhnaya zone is at a similar erosional level to
Promezhutochnaya zone.

Ore shoots - ore types

The ore within the Bakhmut/Apophysis 1 ore shoot is different in character from
ore in the main ore zones - it includes a significant proportion of coarse,
visible gold. The presence of coarse gold means that the grades are
significantly under-estimated by conventional sampling and assay methods. Bulk
sampling and complex assay processes including gravity separation are needed -
as discovered in the testing PHM undertook during 2004. The bulk sample testing
undertaken to date has shown a recovered grade 30% higher than from the
corresponding conventional samples. This means that it is probable that the
reported reserve estimates within the ore shoots are highly conservative -
possibly to the quantum of a greater than 30% uplift.

Pioneer flanks

Preliminary exploration results on ore zones on the Pioneer 'flanks' (mostly to
the west of the main line of ore zones) show gold grades and anomalies that
justify a further detailed exploration programme in the area. There are samples
identifying particularly high grades of both gold and silver.

Oxide zone

This is developed and intersected by drilling to varying depths across the
Pioneer deposit; 20-25m at Promezhutochnaya, 40-70m at Bakhmut and 70-100m at
Yuzhnaya, and deepest of all (to 220m) at the bend in the Yuzhnaya zone. There
are localised enrichments of gold in the oxide zone, and coarse visible gold has
been seen throughout the oxidised zone.


Studies have shown that for both oxide and primary ore, gravity/flotation or
cyanidation both give recoveries that would be suitable for a large mining/
processing operation as originally perceived by the Group - with the addition of
a gravity separation system at the front of the mill, recovery of the coarse
high grade material is manageable and cost-effective. To date tests show
recoveries as follows: 98% on high grade material; 92% on oxide material; and
85% on non-oxide material.


The zones which have been evaluated to the level of C1 and C2 reserves are
Yuzhnaya and Bakhmut and associated apophyses; Promezhutochnaya has been
evaluated almost to C1 standard (simply awaiting the return of final assay data
for completion). 9 further ore zones have been partially evaluated, through
drill holes and trenches; 9 others are not yet explored. On the newly discovered
ore shoots, there is to date insufficient work to give separate reserve

Reserves and resources for Yuzhnaya, Bakhmut, and Promezhutochnaya are
summarised in the table below. This shows the figures for 1 Jan 2004, as
reported by the Group then, computed per Russian classifications, and updated
figures for 25 April 2005, reported on the JORC standard and independently
audited by MicroMine Consultants Pty Ltd. It should be noted that the figures
are analogous but with an overall increase in resources in terms of both
contained gold and ore tonnage. This is similar to the results of the same study
when carried out on the Pokrovskiy pitshell. Reported average grades remain
similar, though at the same 0.6g/t cutoff the JORC resource grades are lower due
to block modelling indicating a higher total ore tonnage (though apparent high
tonnage/low grade is a common artefact of the kriging method which tends to
smoothe the data).

It is important to note that the high grades of the ore shoots are masked by
dilution from the 'common' lower grade ore of the three main ore zones in which
they feature.

An apparent reduction in resources of Bakhmut plus Apophysis 1 (to those
previously reported by PHM in the 2003 and 2004 Annual Reports) results from
reinterpretation of the geology, resulting from detailed exploration (the test
pit and additional drilling): Apophysis 1 was found to split into three separate
zones (with Apophyses 8 and 9).

Total estimated contained gold for the three zones has increased from 59,835 kg
in 2004 (Russian C2 category) to 68,156 kg in 2005 (JORC measured plus indicated

Comparison of Reserve & Resource estimates of the zones of the Pioneer deposit
                                 With cutoff grade 0.6g/t
at 1-1-2004                      ---------------------------------------------
                                 Ore                       Contained Metal
             classification      tonnes '000                kg        oz '000
            ---------------      -----------               -------------------
Yuzhnaya              C2              13,600               19,150         615
                     P1+P2            36,300               39,950       1,282
---------------------------      -----------               -------     --------
Promezhutochnaya      C2               8,400               11,949         384
                     P1+P2             4,100                5,835         187
---------------------------      -----------               -------     --------

Bakhmut+Apophysis 1   C2               9,763               28,736         922
                      P1              10,540               14,291         459
---------------------------      -----------               -------     --------
Total (C2+P1+P2)                      82,703              119,911       3,849
Total C2                              31,763               59,835       1,921
                       With cutoff grade 0.6g/t       With cutoff grade 0.8g/t 
                       ---------------------------    --------------------------
                       Ore         Contained Metal    Ore        Contained Metal
at 25-4-2005           tonnes         kg      oz      tonnes      kg        oz 
                       '000                  '000     '000                 '000
-------------------    -------     ------   ------    -------    ------   ------
JORC resources         35,274      31,985    1,027    12,790     20,208     649
P1+P2                   6,131      26,700      857     5,523     26,284     844
-------------------    -------     ------   ------    -------    ------   ------
JORC resources         12,032      13,939      447     7,984     11,146     358
P1                      1,160       6,300      202     1,008      6,196     199
-------------------    -------     ------   ------    -------    ------   ------
JORC resources         16,609      22,232      714     7,963     17,999     578
P1+P2                   1,160       6,300      202     1,008      6,196     199
-------------------    -------     ------   ------    -------    ------   ------

Total (JORC+P1+P2)     72,366     107,456    3,450    36,276     88,029   2,826
Total (JORC)           63,915      68,156    2,188    28,737     49,353   1,584
-------------------    -------     ------   ------    -------    ------   ------

Pioneer Resources per JORC at 0.6g/t - By Category & By Ore Type
                        Ore       Average                   Percent of   Percent 
                        tonnage    grade    Gold    Gold       JORC         by
                        tonnes    Au g/t     kg    oz '000   material   ore type
                        -------   -------  ------- -------   --------  ---------
Total for deposit       63,907    1.07     68,217    2,193       100%      100%
including by ore type:
           oxide        14,074    1.09     15,279      491                  22%
           primary      49,832    1.06     52,937    1,702                  78%
                        -------   -------  -------  ------   --------   --------
including by JORC category
                        -------   -------  -------  ------   --------   --------
     Measured resource  18,899    1.24     23,375      752        34%
                        -------   -------  -------  ------   --------   --------
including by ore type
            oxide        6,796    1.26      8,541      275                  36%
            primary     12,103    1.23     14,834      477                  64%
                        -------   -------  -------  ------   --------   --------
     Indicated resource 22,475    1.03     23,243      747        34%
                        -------   -------  -------  ------   --------   --------
including by ore type
             oxide       4,181    0.91      3,825      123                  19%
             primary    18,295    1.06     19,418      624                  81%
                        -------   -------  -------  ------   --------   --------
     Inferred           22,533    0.96     21,599      694        32%
                        -------   -------  -------  ------   --------   --------
including by ore type
             oxide       3,098    0.94      2,913       94                  14%
             primary    19,435    0.96     18,685      601                  86%
                        -------   -------  -------  ------   --------   --------
    Measured +Indicated 41,374    1.13     46,618    1,499        68%
                        -------   -------  -------  ------   --------   --------
including by ore type:
             oxide      10,977    1.13     12,366      398                  27%
             primary    30,397    1.13     34,252    1,101                  73%
                        -------   -------  -------  ------   --------   --------

Source: MicroMine

Flanks of the Pioneer Deposit

In 2004, a large number of samples were collected from drill holes and trenches,
and a laboratory backlog prevented any statement on the other ore zones. Most of
these assays have now been completed. Although there is not enough density of
data for a full evaluation of the other ore zones, there is supporting
information from the Ecotsentr geochemical model leading to updated 'prognostic
resource' figures. Total P1+P2 resource for these ore zones is now 125 million
tonnes of ore with 206 tonnes (6.6m oz) contained gold (an overall average grade
of 1.66 g/t). This is increased from 180 tonnes (5.8m oz) of contained gold
estimated from much less data in 2004. There is also a small high-grade C2
resource in the Zapadnaya ore zone of 319,000 tonnes of ore at 5.6 g/t, and in
Apophysis 3 of 295,000 tonnes at 7.1 g/t. The main zones for which new data have
been received are Apophysis 3, Zvezdochka, Zapadnaya, Geofizicheskaya,
Andreevskaya, Listvennichnaya, Vostochnaya, and Berezovaya.

Estimation of Pioneer deposit and its flanks at 25-4-2005

-------- -------- ------------------- -----------  ------------------ ----------
Name of  Classifi- Reserve&Resource   no. of high  Reserve&Resource   Basis of 
OreZone   cation       Estimate       grade ore    Estimate for high  geologocal 
                                      columns      grade ore column   estimate
-------- -------- ------------------- -----------  ------------------ ----------
                  Ore      Metal                   Ore        Metal
                 tonnes  contained                tonnes    contained    
                 '000   kg'000 oz'000              '000   kg'000 oz'000
----------- ---  -------------------- -----------  ------------------ ----------
            C2    295    2.1    67.5                        From small amount of
                                                              trenches and drill 
Apophysis 3 P1    144    1.0    32.1                                   
            P2  4,995    5.0   160.7                                    
            P2  2,320   12.6   405.1    2          2,320   12.6   405.1     from 
----------- ---  -------------------- -----------  ------------------ ----------  
Apophysis 2 P2  3,800    3.8   122.2                                Not explored
            P2  2,320   12.6   405.1    2          2,320   12.6   405.1     from 
----------- ---  -------------------- -----------  ------------------ ----------
Listven-    P2  7,620    7.6   244.3                         Intersected in one                 
nichnaya                                                                  trench
----------- ---  -------------------- -----------  ------------------ ----------
            P1  1,349    2.8    90.0                           Intersected in 3
Berezovaya  P2  4,827    4.8   154.3
            P2  1,160    6.3   202.5    1          1,160    6.3   202.5     from 

----------- ---  -------------------- -----------  ------------------ ----------
Sosnovaya   P2 23,040   23.0   739.4                               Not explored
----------- ---  -------------------- -----------  ------------------ ----------
            P1  4,600    4.6   147.9                Intersected in 3 drill holes
Andreev-    P2  5,380    5.4   173.6                Intersected in 3 drill holes
skaya                                                                   Forecast                 
            P2  2,320   12.6   405.1    2          2,320   12.6   405.1     from 
----------- ---  -------------------- -----------  ------------------ ----------
Apophysis 4 P2  5,180    5.2   167.2                                Not explored
----------- ---  -------------------- -----------  ------------------ ----------
Geofizi-    P1    815    1.2    38.6                                 From a few 
cheskaya                                                      trenches and drill                               
            P2 12,500   12.5   401.9   
----------- ---  -------------------- -----------  ------------------ ----------
Bakhmut     P2  7,190    7.2   231.5                                Not explored   
zone continuation                                                                                  
----------- ---  -------------------- -----------  ------------------ ----------
Zvezdochka  P2 12,160   12.2   392.2                                 From a few 
                                                               previous trenches                                
            P2  4,640   25.2   810.2    4           4,640   25.2   810.2     
----------- ---  -------------------- -----------  ------------------ ----------
            C2    319   1.8    57.9                          From a few trenches 
                                                                       and drill 
Zapadnaya   P1    319   1.8    57.9                                    
            P2    766   0.8    25.7                                    
            P2  2,320  12.6   405.1    2           2,320   12.6    405.1    from 
----------- ---  -------------------- -----------  ------------------ ---------- 
Vostochnaya P2 13,300  13.3   427.6                                Not explored
1, Kulis-                                                               Forecast            
naya 2,     P2  2,320  12.6   405.1    2          2,320   12.6   405.1     from 
Apophyses 5,7)                                                           geochem 
----------- ---  -------------------- -----------  ------------------ ----------
TOTAL         125,999 210.6 6,770.6              17,400   94.5  3,038.1
----------- ---  -------------------- -----------  ------------------ ----------

Infrastructure Update

In advance of a full investment decision on the ultimate size of the plant it is
possible to provide the basic infrastructure requirements of a project. To date
the mining engineering team have been working on a number of key areas:


Road requirements include both connecting roads to and from the deposit as well
as those within the mining area. Pioneer, as with Pokrovskiy, benefits from its
proximity to the national transport network in the form of the main Zeya-Tigda
highway. We have constructed a 4km length of road, with a width of 8m, from the
Zeya-Tigda highway to the Pioneer deposit, the total volume of material moved in
construction was 30,800m3. The mine roads and other roads were essentially
completed in 2005 with the total volume of material moved 132,100m3. As a cost
saving and as good environmental practice, waste rock from the Pioneer trial
mining operation area constituted 16,500m3 of the material requirements for road

Workers' accommodation at Pioneer

Within the area of the deposit we have constructed two workers villages - one
for 60 men for personnel involved in geological exploration, the other for 100
men for personnel involved in the mining works. Both villages have living
accommodation, food preparation and eating facilities, and administrative


Zavodskaya-Pioneer high-voltage 35kV power line

It is expected that Pioneer will utilise national grid power in the same way as
operations at Pokrovskiy. A major cost saving for the construction at Pioneer
will be access to the substation at Pokrovskiy. A power line has been
constructed connecting the new unit ORU 35kV substation "Zavodskaya" at
Pokrovsky mine, and the end point is the portal of the substation 35/10/6 kV at
Pioneer. The total length of the line is 34km, with five changes of direction.
The ground under the foundations is clays, silts, and sands. Distance between
pylons is 160 and 260m. The line is single-circuit, and the construction of
pylons metallic (5 angle-anchors) and reinforced concrete (166, free-standing),
make of cable - AS 70/11.

PS 35/6 kV Pioneer-Pokrovsky mine, two-transformer, 35/6 kV, 2*2500 kVA

Sub-station 35/6 kV is at the end point of VL 35kV "Substation
Zavodskaya-Pioneer" and is for power supply to the Pioneer property. Power for
the property will be supplied through VL 6kV PS 35/6 "Pioneer mine", stationary
type, 2km long, and beyond that through temporary lines. As of 1 June 2005 it is
partially built - the foundations, portals, and earthing are complete. A 35/6kV
(2500kVA) transformer, an initial 35kV unit using a S-35 oil switch, is ready
for installation, as well as an 8-way distributor unit.

Pioneer mine high-voltage 6kV power line PS 35/6

The starting point of the VL is substation 35/6 kV "Pioneer - Pokrovskiy mine",
the end point is the last pylon at the southern flank of the deposit. Total
length of line - 2km. The ground under the foundations is clays, silts, and
sands. Distance between pylons is 60m. The line is two-circuit, construction of
pylons is reinforced concrete, make of cable AS-50.


The hydrogeological study at Pioneer has been initiated and the water supply
drillhole No.4-L (Pioneer) - to a depth 100 m - completed for pumping tests.

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