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Peter Hambro Mining (POG)

  Print      Mail a friend       Annual reports

Monday 23 April, 2007

Peter Hambro Mining

Final Results

Peter Hambro Mining PLC
23 April 2007

23 of April 2007

                        Preliminary results for the year
                             ended 31 December 2006

Peter Hambro Mining PLC ("PHM" or, together with its subsidiaries, the "Group")
announces its preliminary results for the year ended 31 December 2006.

Financial Highlights:

US$ '000                                             2006       2005    change
--------------------------                       ----------  --------- --------
Turnover (inc. Share of Joint Ventures)           177,034    114,579        55%
Operating Profit                                   49,249     17,490       182%
Retained Profit for the Year                       30,556     13,255       131%
Earnings per Ordinary Share (US$)                    0.38       0.17       124%
Shareholders' Funds                               302,449    239,925        26%
Net Cash Pre Leasing / Sale & Lease Back          (75,274)    10,440      -821%

Operating Highlights                                 2006       2005    change
--------------------------                       ----------  --------- --------
*Total Attributable Gold Production (oz)          261,000    249,000         5%
Pokrovskiy GIS Cash Operating Costs (US$/oz)        133.7      125.4         7%
Pokrovskiy GIS Total Production Cost (US$/oz)       238.5      229.7         4%

*Production from Pokrovskiy was revised upwards by 500oz in comparison with the
numbers published in our Trading Statement dated 22 of January 2007. This
revision was the result of new data received since the Trading Statement.

Operational Highlights:


   •Pokrovskiy production increased by 11% and remained the Group's primary
    focus as the stable producer of cash-flow and as a solid base for the
    Group's expansion.
   •Pokrovskiy GIS Total Production Costs increased by 4% against a 14%
    increase in diesel fuel prices, an 8% increase in electricity prices and up
    to 9% increase in prices for reagents and consumables.
   •Control over unit costs at Pokrovskiy was assisted by the increase in the
    Pokrovskiy plant's capacity and technological innovations made to the
    cyanidation circuit, as well as improved recovery rates from heap leach


   •A decision was taken to create a stand alone resin in pulp plant and heap
    leach processing facilities at Pioneer instead of trucking ore to
    Pokrovskiy. First production from Pioneer is expected at the end of 2007 and
    the modular expansion of the processing plant has a planned production level
    of 400,000oz/yr.
   •Capital costs are expected to be in the order of US$87 million for the
    first phase of the development which is planned to process oxidised ore and
    between 2010 and 2013, when primary ore treatment starts, it is estimated
    that an additional US$53 million will be spent. Cash costs per tonne are
    expected to be similar to those at Pokrovskiy.
   •Continued exploration success at new areas of Pioneer. An example of this
    is the Andreevskaya ore body which, along with more than 20 high-grade
    areas, had been predicted by the Group's geotechnical studies. So far
    Andreevskaya has an average grade of 32.8g/t for 450 metres in length, 6
    metres in width and to a depth of 90 metres and is open in all directions.
    Confirmation of the existence of additional high grade ore was instrumental
    in the decision to modify the original production plan.


   •Exploration at Malomir exceeded quantitative expectations and has
    resulted in a requirement for a more extensive exploration programme. A
    detailed feasibility study for Malomir, on a similar basis to that produced
    for Pioneer, is being developed and is intended to be released before the
    end of 2007.


   •The economic study to define production reserves at Novogodnee Monto has
    been confirmed by the Russian State Commission on Reserves (GKZ) and, with
    the Petropavlovskoye exploration programme near completion, a project to
    develop both mines simultaneously is under way.


   •It is planned that Irgiredmet, the Irkutsk based research and scientific
    consulting company, c.98% of which has now been acquired by PHM, intends to
    increase in-house technical capability to keep pace with the growing demands
    of exploration and development efforts.


   •Following Rosprirodnadzor's request to inspect certain of PHM's licences,
    the inspections have now taken place and no material breaches of licence
    terms were identified.

2007 production forecast

   •The Group expects total attributable production for 2007 to be

Chairman's Statement: -

"Once again I am pleased to confirm that the year under review has been yet
another one of steady development progress for the Group and I am happy to be
reporting a 182% increase in operating profit. Planned growth in existing
projects, success in cost control, favourable movements in exchange rates and an
improved gold sales price have been the principal contributory factors to this

"I believe that Peter Hambro Mining is continuing to make good progress on its
development projects with the first of these, Pioneer, expected to commence
production in 2007. In addition to the reserves previously identified at
Pioneer, the project is expected to process the recently discovered Andreevskaya
high grade ore which is an exciting supplement to its world class assets.

"The success of the Group in more than doubling retained profit and reaching
significant development milestones this year is testament to the outstanding
work of our management and operational team."

Alya Samokhvalova or Marianna Adams                       +44 (0) 207 201 8900
Peter Hambro Mining Plc                          

Tom Randell or Maria Suleymanova                          +44 (0) 207 653 6620

Patrick Magee                                             +44 (0) 207 155 4525
JP Morgan Cazenove

Robert Finlay                                             +44 (0) 207 050 6500
Canaccord Adams                                                          

In these preliminary results we present financial items such as "cash operating
costs", "total cash costs" and "total production costs" that have been
determined using industry standards as per the Gold Institute and are not
measures under generally accepted accounting principles in the United Kingdom
("UK GAAP"). An investor should not consider these items in isolation or as
alternatives to any measure of financial performance presented in accordance
with UK GAAP either in this document or in any document incorporated by
reference herein.

While the Gold Institute has provided definitions for the calculation of "cash
operating costs", "total cash costs" and "total production costs", the
definitions of certain non-GAAP financial measures included herein may vary
significantly from those of other gold mining companies, and by themselves do
not necessarily provide a basis for comparison with other gold mining companies.
However, we believe that total cash costs and total production costs in total by
mine and per ounce by mine are useful indicators to investors and management of
a mine's performance because they provide a very useful indication of a mine's
profitability, efficiency and cash flows. They also show the trend in costs as
the mine matures over time and on a consistent basis. These costs can also be
used as a benchmark of performance to allow for comparison against other mines
of other gold mining companies.

Consolidated Profit and Loss Account
for the year ended 31 December 2006
(expressed in US $'000s)
                                                         2006          2005
                                                        $'000         $'000
Turnover: Group and share of joint ventures           177,034       114,579
Less: share of joint ventures' turnover               (19,227)      (23,330)
Group turnover                                        157,807        91,249
Net operating expenses                               (108,558)      (73,759)
Operating profit                                       49,249        17,490
Profit on disposals of interest in businesses               -         3,822
Loss on disposals of interest in joint venture              -          (413)
Share of operating profit in joint ventures             1,591         2,324
Amortisation of goodwill in joint ventures             (1,111)      ( 1,046)
Profit on ordinary activities before 
interest and other income                              49,729        22,177
Interest payable and similar charges                  (12,333)       (5,953)
Interest receivable and other income                    7,696         3,807
Profit on ordinary activities before taxation                  
Group                                                  44,938        19,194
Joint ventures                                            154           837
                                                       45,092        20,031
Taxation on profit on ordinary activities             (13,735)       (6,032)
Profit on ordinary activities after taxation                  
Group                                                  31,699        13,985
Joint ventures                                           (342)           14
                                                       31,357        13,999
Minority interests                  
Group                                                    (419)         (527)
Joint ventures                                           (382)         (217)
Profit retained for the year                           30,556        13,255
Earnings per ordinary share                             $0.38         $0.17
Diluted earnings per ordinary share                     $0.38         $0.17

Consolidated Balance Sheet
for the year ended 31 December 2006
(expressed in US $'000s)
                                                         2006         2005
                                                        $'000        $'000
Fixed assets                  
Intangible assets                  
    Goodwill                                            5,439         (176)
    Other intangible assets                           115,845      102,231
    Capitalised exploration and development 
    expenditure                                        67,375       30,555
Tangible assets                  
    Property, plant and equipment                     137,197       74,959
Investments                                             1,022          448
Investments in joint ventures:                  
    Goodwill                                              665        1,467
    Share of gross assets                              21,611       17,313
    Share of gross liabilities                        (12,398)      (8,171)

                                                      336,756      218,626
Current assets                  
Stock and work in progress                             34,122       23,521
Debtors                                                47,323       31,273
Securities held for trading                             3,937            -
Cash at bank and in hand                               62,466      144,534

                                                      157,848      199,328
Creditors, amounts falling due within one year        (38,829)     (18,909)
Net current assets                                    119,019      180,419
Total assets less current liabilities                 455,775      399,045
Creditors, amounts falling due after one year                  
Long-term borrowings                                        -       (2,250)
Guaranteed Convertible Bonds                         (134,740)    (133,920)
                                                     (134,740)    (136,170)
Provisions                                             (4,746)     (18,426)
Net assets                                            316,289      244,449
Capital and reserves                  
Equity shareholders' funds                            302,449      239,925
Minority interest                                      13,840        4,524
                                                      316,289      244,449

Consolidated Statement of Cash Flow
for the year ended 31 December 2006
(expressed in US $'000s)

                                                        2006          2005
                                                       $'000         $'000
Net cash inflow from 
  operating activities                                50,249        15,719

Returns on investments 
  and servicing of finance                  
Interest received                                      7,209         1,971
Interest paid                                        (10,922)       (1,292)
Interest element of finance leases                       (13)          (81)
Dividends paid to minority shareholders                    -        (4,901)
Net cash outflow from returns on investments and 
  servicing of finance                                (3,726)       (4,303)
Taxation paid                                         (9,416)       (3,401)
Capital expenditure 
  and financial investment                  
Purchase of tangible assets                          (31,155)      (20,919)
Expenditure on research/development and mineral 
  properties                                         (37,392)      (19,610)
Reimbursement of research/development and 
  mineral properties                                     645             -
Other investments                                      3,463          (422)
Proceeds on disposal of tangible assets                  761            86
Loans granted                                         (3,774)       (4,011)
Loans repayments                                         667        18,055
Net cash outflow on capital expenditure 
 and financial investment                            (66,785)      (26,821)
Acquisitions and disposals                  
Purchase of subsidiary undertakings                  (41,690)      (11,652)
Cash acquired with subsidiaries                        3,107           814
Proceeds from sales of subsidiary undertakings             4             -
Payments to RBS holders                              (15,000)            -
Net cash outflow on acquisitions and disposals       (53,579)      (10,838)
Cash outflow before use of liquid resources and 
 financing                                           (83,257)      (29,644)
Management of liquid resources                  
Purchase of securities held for trading              (21,871)            -
Proceeds from sale of securities held for trading      8,026             -
Net cash outflow from use of liquid resources        (13,845)            -
Capital element of finance leases                       (243)         (652)
Receipts from borrowings                              25,803       162,673
Repayments of amounts borrowed                       (28,348)      (35,034)
Net receipts from issuing shares                      17,822        21,337
Net cash inflow from financing activities             15,034       148,324
(Decrease)/increase in cash at bank and in hand      (82,068)      118,680


------------------------                     -------      -------       --------
Total attributable gold production,
oz'000*                                       2006         2005            Var %
                                             -------      -------       --------
Amur Region
          ---------------------              -------      -------       --------
          Pokrovskiy                         206.8        185.7          +11.4%
          ---------------------              -------      -------       --------
          Amur NE Assets                      10.5          4.2         +150.0%
          ---------------------              -------      -------       --------
          Rudnoye JV                           8.1          7.8           +3.8%
          ---------------------              -------      -------       --------
Omchak JV
          ---------------------              -------      -------       --------
          Magadan assets                      33.4         49.6          -32.7%
          ---------------------              -------      -------       --------
          Amur Assets                          2.5          2.0          +25.0%
          ---------------------              -------      -------       --------
TOTAL                                         261.3        249.3             +5%
                                             -------      -------       --------

* Total attributable gold production is comprised of the Group's subsidiaries,
share of production in joint ventures and other investments


   •2006 mining operations moved c.5.4 million m3 of material yielding c.1.9
    million tonnes of ore, a 37% increase compared to 2005. This was achieved
    through further expansion of the mining fleet (five new 45t capacity Belaz
    dump trucks and 3 Cat-330 Caterpillar excavators were purchased) and
    conformity to the mining plan.
   • During 2006 the two main pits of the deposit were merged and exploration
    works around the Pokrovskiy pit confirmed potential for expansion to the
    east and at greater depth.
   • The anticipated reduction in the cut-off grade due to the increased gold
    price is expected to enable an increase of the projected depth of the
    current Pokrovskiy pit and re-definition of Pokrovskiy reserves resulting in
    a c.200,000oz increase.
   • The next stage of the resin in pulp plant's expansion was successfully 
    accomplished on time and on budget which brought the plant's annual capacity 
    to 1.9 million tonnes of ore. This was an increase of almost 27% on 2005 and 
    ensured an increase of the gold produced despite a 7% decrease in the average 
    grade of ore delivered to the mill.
   • The recovery process was modified in order to maintain stable recovery rates 
    for the mixed ore types being mined. The significant changes were an increase 
    in resin volume and commencement of cyanidation ore in the SAG mill which 
    increased the total resin surface area and leaching time. As a result the     
    recovery rate was approximately the same as the previous year (90.8% 
    compared to 91.5% in 2005) although part of the material treated was primary 
   • Separation of the flows of pregnant solutions and the installation of 
    additional electro-winning cells optimised gold recoveries and doubled the 
    recovery of silver, increasing annual silver production by 350%.
   • Recovery rates from the heap leach process increased by 50% and this made 
    treatment of lower grade material economic. This was achieved by stacking 
    and treating the heap leach pads before the winter period and leaving them 
    for further leaching when thawed.
   • A third, high-speed thickener is currently being installed to cope with the 
    slower thickening of primary ore and this is expected to be commissioned in 

PHM Schedule of mining operations
                                           Units              2006          2005
Pokrovskiy deposit
    Total material moved                 '000 m(3)           5,385         5,248
        Including advanced stripping     '000 m(3)           1,657         1,180
    Ore mined                           '000 tonnes          1,904         1,393
        Grade                               g/t                3.0           3.6
        Gold                              '000 oz            184.5         159.8
    Including rich ore                  '000 tonnes          1,379           899
        Grade                               g/t                3.8           4.7
        Gold                              '000 oz            168.0         135.7
Pioneer deposit
    Total material moved                 '000 m(3)             912           836
    Ore mined                           '000 tonnes            168           133
        Grade                               g/t                3.4           3.5
        Gold                              '000 oz             18.3          15.0

*PHM Processing Schedule
                                                     Units       2006     2005
Resin In Pulp plant

   Ore from Pokrovskiy pit                        '000 tonnes   1,379      899
         Grade                                        g/t         3.8      4.7
         Gold                                       '000 oz       168      136

   Ore from the transfer stockpiles (at the RIP)  '000 tonnes      25        -
         Grade                                        g/t         4.6        -
         Gold                                       '000 oz         4        -

   Ore from stockpiles                            '000 tonnes     248      444
         Grade                                        g/t         3.4      2.8
         Gold                                       '000 oz      27.4     39.4

   Pioneer (bulk sample)                          '000 tonnes      46       53
         Grade                                        g/t         6.7      5.7
         Gold                                       '000 oz       9.8      9.7

   Total milled                                   '000 tonnes   1,698    1,397
         Grade                                        g/t         3.8      4.1
         Gold                                       '000 oz     209.2    184.9
         Recovery                                      %         90.8%    91.5%
         Gold recovered                             '000 oz       190      169

Heap leach

   Ore stacked                                    '000 tonnes     750      714
         Grade                                        g/t         0.9      1.5
         Gold                                       '000 oz        23       38
         Recovery                                      %         73.1%    48.9%
         Gold recovered                             '000 oz      16.8     16.5

**Total gold recovered                              '000 oz     206.8    185.7

*Presentation of PHM Processing Schedule differs from that in the Trading Update
dated 22 January 2007
**Certain comparative numbers have been rounded up

Operating Costs 2006

Pokrovskiy Rudnik - Operating Cost Analysis (US$/oz)
                                          2006      2005         Var % 1H 2006
Gold Institute Standard
Direct Mining & Processing Expenses      102.9      95.0           8%     92.9
Refinery & Transportation Cost             7.0       4.5          56%      6.4
By-product Credits                        (4.0)     (0.9)        344%     (0.5)
Other                                     27.8      26.8           4%     36.4
Cash Operating Cost                      133.7     125.4           7%    135.2

Royalties                                 35.3      27.1          30%     36.8
Production Taxes                           5.7       6.2          -8%      7.7
Total Cash cost                          174.7     158.7          10%    179.7

Non-cash Movement in Stock                15.8      28.6         -45%     22.9
Depreciation/Amortization                 48.0      42.4          13%     52.4
Total Production Cost                    238.5     229.7           4%    255.0

Pokrovskiy's GIS Total Production Cost in 2006 increased by just 4% to US$239/oz
and this small increase was achieved despite a 14% increase in diesel fuel
prices, an 8% increase in electricity prices and up to 9% increase in prices for
various chemical reagents and consumables.

The stable and low operating costs at the Pokrovskiy mine are the result of a
series of long term cost cutting programmes implemented at the mine in 2005, the
effect of which was first fully reflected in the 2006 results.  An increase in
the number of ounces produced also improved the unit cost figure.

Royalties and refining costs are in direct correlation with the gold price hence
the 30% and 56% increases in these costs in 2006 in comparison with the same
period in the previous year.

Depreciation and amortisation expenses have changed in line with the increase of
production assets caused by the plant and mine fleet expansion.

Non-cash movement reflects the cost of mining incurred in the previous periods
but accounted for in 2006 when the actual gold was produced.

Omchak Joint Venture

Omchak Schedule of mining operations                          2006        2005

Nelkobazoloto - Shkolnoye Deposit
Ore mined                                    '000 tonnes      32.8        54.7
Ore processed                                '000 tonnes      29.6        54.2
Ounces produced                                  '000 oz       8.7        18.7

Waste rock stripped                            '000 m(3)     8,651       8,724
Sands processed                                '000 m(3)     4,161       3,957
Ounces produced                                  '000 oz      50.0        57.2

Noviye Tekhnologii and Zeyazoloto
Waste rock stripped                            '000 m(3)     432.9       381.2
Sands processed                                '000 m(3)     229.9       224.4
Ounces produced                                  '000 oz       3.7         3.1

Waste rock stripped                            '000 m(3)         -           -
Sands processed                                '000 m(3)      38.3           -
Ounces produced                                  '000 oz       1.1           -

Susumanzoloto, temporary holding                 '000 oz       8.3           -

Total gold production                                         71.8        79.0

PHM attributable (2006 - 50%)                                 35.9        51.4

In 2006 Omchak carried out gold exploration and production in four different
regions of Russia: Magadan, Chita, Amur and the Sakha republic (Yakutia).
Alluvial gold was mined in 2006 using open-pit techniques, and hard-rock gold by
underground mining. The total attributable production of Omchak in 2006 was
35,900oz (compared to 51,400oz in 2005) of gold predominantly from two assets in
the Magadan Region: ZAO "Nelkobazoloto" and OAO "Berelekh". In 2006 ZAO
"Nelkobazoloto" moved to deeper levels which has involved additional costs and
has resulted in a decrease in production. 32,800t of ore were extracted, 29,600t
were processed at the plant and c.9,000oz of gold were recovered. Underground
exploration was carried out to delineate reserves and resources to enable
production of c.13,000oz in 2007.

Alongside its production activities, Omchak was also involved in the acquisition
of licences for the right to explore and produce alluvial gold at deposits
located close to PHM's main operational and development sites in the Amur
Region. New licence areas acquired in this process have confirmed reserves that
are expected to yield a planned annual production of alluvial gold in the Amur
region of an additional c.10,000oz gold per year starting in 2007 and continuing
for some five years.

OAO "Berelekh" carried out alluvial gold extraction in the Magadan region in
2006 on 37 licence areas, totaling more than 1,500km2. It is estimated that
Berelekh has reserves for open-pit mining for over six years. In addition, each
year Berelekh carries out exploration at the same time as extraction, which is
expected to lead to a growth in reserves each year of between 38,000 and

A small portion of production has also come from the new assets located in the
Amur region and acquired only in the middle of 2005: OOO "Zeyazoloto" and OOO
"Noviye Tekhnologii". Direct alluvial gold extraction has taken place on three
deposits, with total gold recovered of 3,745oz. Geological exploration work
during the year covered three licence areas, with 1,309m of drilling to confirm
and increase reserves.

Omchak is a holder of series of exploration licences in the Chita region, Amur
Region and Republic of Sakha (Yakutia). Geological exploration work was carried
out at those properties in 2006 in order to sustain Omchak's level of production
and for further conversion of resources into mineable reserves. This work will
be continued in 2007.

Omchak Costs

Unit costs at Omchak have risen sharply during 2006. Part of this rise was a
result of the 50% decrease in gold output from Nelkobazoloto as detailed above -
increasing unit costs as fixed costs remain constant. Berelekh also suffered a
reduction in gold production though not to the same extent as Nelkobazoloto.

Total cash costs for Omchak in 2006 were US$483/oz (2005 - US$360/oz) a 34%
rise. Although somewhat disappointing, the effect on the Group's profit for the
year is not material.

The Omchak management team expect that the time invested at Nelkobazoloto in
2006 accessing the lower horizons could increase gold production by 50% in 2007
versus 2006.

Other Amur Region production

In addition to its exploration activities the Group operates a number of
alluvial enterprises which exploit placer mine using dredging machinery and
washing technology. These operations are usually carried out at the sites of the
Group's operational and exploration activities which allows for additional
profits for the Group without major investment in infrastructure or detailed
exploration works and further increases the Group's understanding of the local
geology. In 2006, three companies contributed to the Group's production in the
Amur region. Two of them - OAO "ZDP Koboldo" and ZAO "Amur-Dore" extract gold
from alluvial deposits in the North East of the Amur Region in close proximity
to the Tokur and Malomir deposits.

Pioneer Development

2006 was a crucial year for the development of the Group's most advanced
project, Pioneer.  According to the schedule a wide range of exploration,
engineering and design works were carried out at the deposit in order to
commission first production at Pioneer in the second half of 2007.

The following points highlight the success in 2006:

   •Officials from the Russian State Commission on Reserves (GKZ) surveyed
    works conducted at the deposit in summer 2006 ahead of the submission of
    documentation to GKZ for reserves and resources approval.  The commission
    noted the high quality of work carried out by the Group and agreed with the
    geological interpretation of the deposit's mineralisation, as well as the
    work programme needed to bring the deposit into production.
   •A broad metallurgical assessment of the deposit was carried out. 410
    samples were collected for Phase Analysis. Bulk samples of oxide and primary
    ore have been obtained for the development of the metallurgical processing
   •A positive economic mine plan was developed that provides for the
    construction of a stand alone processing operation at Pioneer.
   •The definitive plan calls for heap-leaching with a modularly expanded
    resin in pulp plant capable of modular expansion, eventually capable of
    processing 5.2mt of ore per annum.  Following such expansion the heap leach
    operation will have a processing capacity of 2.9mt per annum.  The modular
    expansion programme, a method used successfully at Pokrovskiy, allows for an
    optimisation of the overall project capital expenditure without interruption
    to production.
   •Separate treatment of different types of ore is expected to cut operating
    costs and allow for higher recovery rates.
   •Design planning for the heap-leach pads and process buildings has been
    completed, and contracts for equipment signed. The electricity supply has
    been commissioned, with the power line to Pioneer from Pokrovskiy completed
    and the 4MW first stage substation operational. Pre-stripping of 392,000 m3
    has been completed.
   •The Pioneer heap-leach facility is scheduled to start operation in 2007
    and the resin in pulp plant in 2008.


The table below shows the reserves and resources estimates under the Russian
classification system:

Peter Hambro Mining Group Reserves & Resources Summary
As at 1-1-07
                      -------          --------        -----------------
                      Category              Ore           Gold Content
                      -------          --------     --------   -------   -------
                                         '000 t           kg    oz'000     As at
-------------           -------        --------     --------   -------   -------
Reserves                  B+C1           31,623       56,794     1,826     1,980
                           C2           117,870      206,985     6,655     7,053
                        -------        --------     --------   -------   -------
                          TOTAL         149,493      263,779     8,480     9,033
-------------           -------        --------     --------   -------   -------
Resources                  P1           136,961      270,515     8,697     9,693
                         P2+P3        1,928,952    2,830,629    91,005    83,547
                         TOTAL        2,065,913    3,101,144    99,702    93,240
------------            -------        --------     --------   -------   -------
Reserves & Resources    TOTAL         2,215,406    3,364,923   108,182   102,273
------------            -------        --------     --------   -------   -------

The Group reports its reserves and resources according to the system defined by
the GKZ since this is its functional reporting system ("The Russian System").
All Reserves and Resources in Category C1 and C2 are calculated according to the
norms prescribed by the Russian System but this does not imply that all of such
reserves have necessarily been submitted to GKZ for inclusion in the State
Balance. It should be noted that of the P Category resources, P1 is supported by
drilling whereas this is not necessarily the case for P2 and P3, which are based
on management estimates.

In 2006, the Group spent US$38 million on exploration and development. The
exploration and development budget for 2007 is US$100 million.

The table below sets out the amount of exploration work completed in 2006:

                                                      2006                2005
Trenching, (m3)                                  2,033,000             493,000
Core drilling, (m)                                 286,000              88,000
Shallow drilling, (m)                               59,000              58,000

In 2006 there was an intensive exploration programme on Pioneer, Malomir, and
Petropavlovskoye (Yamal) in particular.

The result of this increased exploration effort is a substantial improvement in
confidence in resource and reserve estimates. Although this is not reflected
directly in increased headline reserve/resource figures, it lends confidence to
the Croup's planning for production from these deposits.


   •17,450m of core drilling, and 5,600m of shallow 'mapping' holes was
    completed on the Pokrovskiy deposit and the flanks, and 30,600m3 of
    exploration trenching was completed on the flanks. Emphasis has been placed
    on detailed exploration of the fanglomerate deposit and the three newly
    discovered underlying hard-rock ore bodies in the Pokrovka-II area, and on
    new exploration of 'outer flanks' areas covered by the Zheltunak licence.
   •A re-definition of Pokrovskiy reserves, and the design of corresponding
    pit expansion, have been started to reflect the much higher gold prices of
    today. This pit expansion will also take into account additional reserves
    and resources discovered recently and will include both lateral push backs
    and a deepening of the ultimate pit from 140m to 200m.
   •In the Pokrovka-II area, exploration work continues on the unconsolidated
    fanglomerates and on the underlying ore zones in the crystalline basement.
    Exploration within the past six months (trenching, deep drilling) in both
    eastern and western trough areas has established that the geology of the
    fanglomerates is not simple. Because of complexity of the geological
    structure (variable thickness and intercalation of sands and lignite beds)
    the previously accepted drillhole spacing is considered inadequate for
    definition of a Russian category C2 reserve: accordingly the categories have
    been redefined. This does imply a need for a more closely spaced exploration
    grid to provide the necessary definition. The resource remains open to the
    west, south, and east. Metallurgical studies have now established that these
    ores are easy to beneficiate, and through heap leaching it is believed
    possible to extract up to 77.4% of the gold from this ore.
   •In 2006 work started in 4 new areas of the Pokrovskiy Flanks located 4 to
    17 km from the Pokrovskiy deposit. The most promising results were achieved
    at the Velikiye Luzhki area where gold has also been discovered in
    Cretaceous diorites above the thrust.

Plan for 2007
   •It is planned to delineate the fanglomerate resource in detail, and at
    the same time exploration of the underlying hard-rock ore zones will be
   •Exploration will continue on ore zones discovered elsewhere in the inner
    flanks. In the 'outer flanks' areas, exploration will be continued in all
   •At Velikiye Luzhki drilling is planned in 2007 - a series of vertical
    holes to intersect the mineralised zone and allow the upgrading of the
    already established Russian P1 resource to the Russian C2 reserve category.


   •166,400m(3) of trenching, 30,750m of deep drilling and 5,700m of shallow
    'mapping' holes was completed in 2006 at Bachmut, Promezutochnaya and
    Yuznaya ore zones. As a result the full scope of works required by GKZ
    standards in order to confirm reserves and resources to start mining has
    been accomplished.
   •At each of the Bachmut, Promezutochnaya and Yuznaya ore zones, previously
    predicted high grade ore columns were confirmed by several intersections.
   •On the advice of its geological and mining teams, the Group has decided
    not to delineate further for reserve definition purposes the identified high
    grade areas (with the exception of Andreevskaya), preferring to finalise the
    detailed evaluation of this material in the mining plan in due course.
    Accordingly it is possible that the mining results may be better than the
    base case predictions. This decision was taken in order to save money on
    further delineation of what have already been established as mineable
   •The Andreevskaya ore zone, intersected by drill holes for the first time
    in 2006, has already been traced for 2km. This zone has highly variable gold
    grades between 0.9g/t and 368.4g/t along the evaluated section. Maximum
    grades (up to 1,225g/t) have been found in the central area of the explored
    part of the zone and it is possible that they are related to an ore column,
    which had been predicted in that location.
   •Drilling and trenching works on 450 metres in length of the ore zone show
    an average grade of 32g/t to a depth of 90 metres over a 6 metres width,
    giving Russian Category C2 and P1 contained gold of 550,000 ounces.
    Significant silver grades are also present, with some samples greater than
   •The drilling programme at ore bodies predicted previously by geotechnical
    data has been continued.

Plan for 2007
   •Preparations for the early start of full-scale mining are scheduled to
   •The Pioneer heap-leach facility is due to start operation in 2007.
   •Detailed exploration of all ore zones is scheduled to continue, with
    concentration on the evaluation of Andreevskaya and proving extensions of
    this zone to both east and west.
   •Further drilling of zones predicted by structural model and satellite
    imagery data.


   •Three separate deposits have now been identified at Malomir.
   •Exploration trenching (344,400m3) and core drilling (35,500m)
    concentrated on detailed delineation of reserves on the Malomir deposits.
   •In the central high-grade area of the Malomir deposits itself,
    pre-stripping of an area 220m x 300m was carried out in order to confirm
    continuity of the ore structures.
   •The exploration camp, which was constructed in 2005, has been expanded,
    and permanent all-year mine access to the main regional road is complete.
   •A study of metallurgical and hydrogeological properties of the Malomir
    deposit has started. A total of 391 samples were taken for phase analysis. 6
    bulk samples (from 139kg to 2,080kg) were taken from different ore types and
    different parts of the deposit. Preliminary data suggests that, for more
    than 90% of the ore, gravitation-flotation is the optimum processing route,
    with 85.6% recovery.

Plan for 2007
   •It is planned to carry out exploration of the three ore deposits (with
    associated GKZ approvals) consecutively.
   •An additional 5,000m of drilling and 5,000m length of trenching are to be
    completed on the central Malomir deposit and on the flanks.

   •It is planned to complete exploration on the main Malomir deposit in 2007
    and start preparation of documentation to submit to GKZ for reserves and
    resources approval. This will include infill drilling in order to meet the
    GKZ requirements to establish reserves to start mining operations.
   •The hydrogeological, metallurgical, and geotechnical studies and
    topographic survey are also expected to be completed as well as exploration
    for nearby sources of building materials.

   •Exploration will continue on both Quartzite and Ozhidaemoye zones; also
    two bulk samples of 300kg each will be collected in 2007 from the Quartzite
    zone, for metallurgical study.


   •The economic study to define production reserves at Novogodnee Monto has
    been confirmed by GKZ and, with the Petropavlovskoye exploration programme
    near completion, a project to develop both mines simultaneously is under
   •Drilling in 2006 on the Petropavlovskoye deposit and
    Toupugol-Khanmeishorskaya flanks included 40,500m deep drill holes, plus
    11,700m3 of trenching within the licence area.
   •A wide shallow pit to expose the ore body and confirm the continuity and
    style of mineralisation (including E-W quartz 'ladder' veins across the N-S
    trend of the ore body, with visible high grade gold) was made.
   •On other exploration assets in the region, the Group carried out a total
    of 50,000m core drilling and 73,000m3 of trenching in 2006.
   •The Ozernoye area appears to have the greatest potential. It consists of
    a layered ultrabasic body (Bushveld-style) containing 3 reefs up to 20m
    thick of disseminated sulphide/magnetite ores with polymetallic (PGM-gold-Cu
    /Ni/Co/Fe) mineralisation. These have been partially explored and initially
    evaluated to Russian category P1 in less than 1km of the outcrop length.
    Grades found so far include around 1.7g/t total precious metals and around
    1% total base metals (excluding iron).

Plan for 2007
   •On the Petropavlovskoye deposit, a programme of transverse drilling will
    intersect the steeply dipping quartz veins in order to provide sufficient
    data to include these in the resource model.
   •More intensive exploration of the Ozernoye polymetallic prospect is
    scheduled to be undertaken in 2007, across the whole area of the ultrabasic
    outcrop. On other exploration areas, as identified above, drilling and
    trench exploration will continue in 2007.

2007 Production Forecast & Outlook

   •PHM currently estimates that attributable production in 2007 will be
    283,000oz. This is an 8% increase on 2006 and is made up of 220,000oz from
    Pokrovskiy and Pioneer, 35,000oz from Omchak and the remaining ounces from
    the Group's interests in other Amur region assets.
   •Because the Group's 2007 production is not expected to increase by much
    more than 10% compared to the previous year, unit cost reductions will have
    a smaller effect this year. In addition an appreciation in the US dollar
    value of the Rouble, the Group's operating currency, and inflationary
    pressures on raw material costs may well cause an upward pressure on
    operating costs.
   •It is anticipated that JORC classification Reserves and Resources as for
    Pioneer will be published at the same time as the Group's Annual Report and
    for other deposits in due course.
   •The Group will adopt IFRS from 1 January 2007 and the conversion process
    is proceeding as planned.

Annual Report & Accounts

The Group intends to publish and distribute the Company's Annual Report and
Accounts for the year ended 31 December 2006 on 16 May 2007.

This report will contain a more detailed analysis of the work undertaken by the
Group during the period, notes to the accounts and a breakdown, by deposit, of
the Group's Reserves and Resources and production.

The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 December 2006 or 2005 but is derived
from those accounts. Statutory accounts for the year ended 31 December 2005 have
been delivered to the Registrar of Companies, and those for the year ended 31
December 2006 will be delivered following the Company's Annual General Meeting.
The auditors have reported on those accounts; their reports were unqualified and
did not contain statements under section 237(2) or (3) of the Companies Act

The resources and reserves estimates have been reviewed by Dr. Stephen Henley,
who is an independent geological advisor to the board of directors of Peter
Hambro Mining Plc. Dr. Henley is qualified to act in the capacity of a Competent
Person for the purposes of this statement of reserves and resources.

Dr. Stephen Henley holds a PhD in Geology (University of Nottingham, 1970). He
is a Fellow of the Geological Society, a Fellow of the Institution of Materials,
Minerals and Mining, and a Chartered Engineer. He is also a Charter Member of
the International Association for Mathematical Geology. He has been employed in
exploration, mining, academic, and geological consultancy posts since 1970 and
has participated in Competent Person studies on a variety of different minerals
and types of deposit, including gold, polymetallic, and chromite projects.

Dr. Henley is currently chairman of PERC (the Pan-European Reserves and
Resources Reporting Committee, European equivalent of the Australasian JORC),
and convenor and secretary of a CRIRSCO working group on harmonisation of
Russian and international reserve reporting systems.

He owns no direct or, to the best of his knowledge, indirect interests in the
shares or securities of Peter Hambro Mining Plc or of any of its associated or
subsidiary companies and does not expect to receive direct or indirect interest
in any of the Company's projects or in the shares and securities of the Company.

The Board of Directors commissions a semi-annual independent review of the
exploration and development work of the Group and the Group's reserve and
resource estimates. The Summary of this review has been compiled by Dr. Stephen
Henley and reviews all current exploration works being conducted by the Group.

Peter Hambro Mining Plc will publish an Executive Summary of this review today
on the Group's website.

Please visit our website: where you will be able to download
the Summary from a link on the home page.

Conference Call

There will be a conference call today to discuss the announcement at 14:00
(London time).

Details to access the conference call are as follows:

The Dial-in number in the UK will be: 0845 245 3471 and internationally will be:
+44 (0) 1452 542 300 with the conference ID in both cases: 5431634.

Replay will be available after the call has finished for seven days on: 0800 953
1533 / 0845 245 5205 in the UK and on +44 (0) 1452 55 00 00 internationally with
the access code in both cases: 5431634#

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