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HEMSCOTT NEWS ALERT - PETROPAVLOVSK PLC



Petropavlovsk PLC - Full Year and Q4 Trading Update
RNS Number : 1986W
Petropavlovsk PLC
26 January 2012
 



26 January 2012

 

2011 Full Year & Fourth Quarter Trading Update

 

Petropavlovsk PLC ("Petropavlovsk" or the "Company" or, together with its subsidiaries, the "Group") today issues its 2011 full year and fourth quarter trading statement as an update and in advance of its Annual Results for the year ended 31 December 2011, which are expected to be issued on 28 March 2012.

 

Highlights

 

Total Attributable Gold Production1


Q4 2011

Q4 2010

Variance

Year ended 31 December 2011

Year ended 31 December 2010

Variance

oz

oz

%

oz

oz

%

Pioneer

124,800

98,500

27%

359,100

230,900

56%

Malomir

28,400

33,000

(14)%

88,500

36,400

143%

Pokrovskiy

21,700

54,600

(60)%

91,800

144,900

(37)%

Albyn

1,100

-

n/a

1,100

-

n/a

Alluvial operations, joint ventures and other investments2

6,900

16,100

(57)%

89,600

94,600

(5)%

TOTAL

182,900

202,200

(10)%

630,100

506,800

24%

1See end of document for definition of attributable production.

2Following the termination of the Odolgo Joint Venture in Q2 2011, the Group no longer operates any gold joint ventures; the reference to joint ventures refers to 2010 figures only.

Production from the assets previously held by the Omchak Joint Venture was 50% attributable to the Group in H1 2010 and, following its acquisition by the Group in July 2010, 100% attributable in H2 2010 and FY 2011.

Operations and Gold Production

The Groups total attributable gold production for 2011 amounted to 630,100oz, exceeding the Groups full year production target of 600,000oz and a 24% increase compared to 2010;

Production at the Groups flagship mine, Pioneer, yielded 359,100oz representing a 56% increase from 2010 following effective improvements to mining operations;

Following successful commissioning in November 2011, the plant at Albyn has been ramping up steadily as planned and produced its first gold in December 2011;

Pokrovskiy, Malomir and the alluvial operations performed broadly in line with managements expectations.

 

 

Gold Sales and Costs

Total gold sold during 2011 was 676,000oz, a 51% increase compared to 2010.

The strong sales figures reflect the high amount of gold sold at the start of the year as a result of the Groups high production levels in Q4 2010;

The average realised gold sales price was US$1,617/oz in 2011, 29% higher than the average price of US$1,253/oz achieved for 2010;

In Q4 2011, the average realised gold price was US$1,693/oz, a 23% increase compared to US$1,381/oz for the same period in 2010;

Total cash costs for hard-rock deposit production during H2 2011 were slightly lower than in H1 2011 (US$/659oz) due to the efficiencies implemented since the beginning of 2011 coming into effect and higher grades at the Pioneer mine;

Total cash costs for the Group (including cash costs for the alluvial assets) for H2 2011 were marginally higher than H1 2011, due to a substantially higher proportion of alluvial production.

 

Development

Work on the development of the pressure oxidation ("POX") hub at the Pokrovskiy mine and the flotation lines at Malomir and Pioneer remains on schedule;

A decision was taken to bring forward commissioning of the second 1.8Mtpa resin-in-pulp ("RIP") processing line at Albyn to Q3 2012 from its previously planned commissioning date in 2014 due to the increased reserves and resources at the deposit;

A decision was taken to bring forward the commissioning of a fourth 2.0Mtpa processing line at Pioneer to Q3 2012 from its previously planned commissioning date in 2014 due to the increased reserves and resources of non-refractory material at the deposit;

The Group has sufficient cash and undrawn facilities to meet all of its development plans.

 

Reserves and Resources

The Group intends to publish an updated reserves and resources statement on 23 February 2012.

 

Corporate Update

In December 2011, following his appointment as Senator and Member of the Federation Council of Russia, Dr Pavel Maslovskiy relinquished his role as CEO, in line with Russian legislation, and was replaced by Mr Sergey Ermolenko.

Mr Ermolenko, a shareholder in the Company, was one of the members of the Groups founding management team and was previously employed as General Director of Management Company Petropavlovsk;

In order to retain Senator Maslovskiys knowledge and experience, the Board conferred on him the title of Honorary President.

In this capacity, which is not remunerated, Senator Maslovskiy is able to advise the new CEO and also attend, but not vote at, meetings of the Board;

Mr Martin Smith, previously Technical Director, was appointed Deputy CEO to Mr Ermolenko.

 

2012 Production Guidance 

The Groups 2012 target is 680,000oz, an increase of 11% compared to 2011 and a compound annual growth rate of 26% since the Group first listed in 2002.

In line with the Groups conservative approach to forecasting, this target excludes the scheduled expansions at Pioneer and Albyn. 

 

IRC Limited ("IRC")

On 12 January 2012, the Groups 65.6% owned subsidiary, IRC, announced its 2011 Q4 Trading Update.

Highlights included:

Production targets were exceeded at the Kuranakh mine with the production of the millionth tonne of iron-ore concentrate;

K&S project construction and operations are on track;

The Industrial and Commercial Bank of China ("ICBC") project finance facility drawdown commenced ensuring K&S funding; and

Steady year-end cash balances.

 

Commenting on the announcement, Sergey Ermolenko, CEO, said:

 

"2011 was a successful year for the Group.

We produced 630,100oz, beating our previous record by 24% and exceeding the guidance we gave at the start of the year.

 

Our production success was achieved, in part, thanks to the improved performance of our flagship mine at Pioneer, where management was able to resolve the problems and difficulties experienced in 2010, bringing the mine to world-class standards of efficiency in its operation and production.

During the year, the stripping backlog at Pioneer was cleared.

The enhanced production capability is an important achievement for the future as exploration works at Pioneer continued to delineate new reserves and resources, thereby extending the potential mine life.

The resultant enhanced capacity at the mine will stand us in good stead for the future, particularly as exploration works at Pioneer have continued to delineate new reserves and resources, thereby extending the potential mine life.

 

Additionally, increases to the reserve and resource base of Pioneers oxidised material in 2011 enabled us to review our development plans for the mine.

On the back of this, we decided to bring forward to H2 2012 the commissioning of Pioneers fourth milling circuit, which is expected to increase the processing capacity of the Pioneer mine to 7.2Mtpa.

Furthermore, additions to the reserves and resources base at Albyn have enabled us to accelerate the commissioning of our second 1.8Mtpa RIP line from the previously planned 2014 to Q3 2012.

 

During the year, the Groups construction team was also successful with its two big development projects: Malomir mines expansion and the commissioning of our fourth hard-rock gold mine at Albyn were both completed on target. I am pleased to report that the second mill at Malomir continued to perform well during the last quarter of the year and I am delighted that we were able to produce our first gold at Albyn in December.

These projects presented many logistical and climatic challenges and I am proud of the way in which the operational teams were able to overcome them.
.

 

At the corporate level, some changes have been made to the management structure following Pavel Maslovskiys election as a Senator.

Although we will all miss working with Pavel on a day-to-day basis, I am delighted that he has agreed to accept the role as Honorary President of the Board, which will ensure that we will be able to retain his experience and expertise as the Group continues to move forward.

It is a great honour that his achievements in the Russian Far East have been publicly recognised.

 

2012 is poised to be another milestone year in the development of the Group.

It will see the commissioning of the previously mentioned additional RIP circuit at Albyn and the fourth circuit at Pioneer as well as the flotation plant at Malomir.

I am confident in our ability to develop our POX hub at Pokrovskiy in line with the targets we have set ourselves.

I look forward to updating shareholders on the development of this exciting new growth phase in the Groups history later on in the year.

 

We expect all the main inflationary pressures which were prevalent during 2011 to continue into 2012.

Together with the scheduled decline of grades at all our mines, they are expected to result in some further increases to the Groups costs of production.

The Groups management will continue to focus on our cost control programme which was successfully implemented during 2011.

 

It should be remembered, though, that growth in production can only come as the result of substantial investment and shareholders should recognise that we have decided to advance the capital expenditure so as to take advantage of the strong gold price.

I am pleased to say that we have sufficient resources to cover the cost of our investments.

 

Our investment in IRC continues to show promise.

On its first anniversary since listing, IRC delivered a major milestone with the first million tonnes of iron ore production from the Kuranakh Mine.  It is also pleasing to note the development progress at the K&S Project, which recently secured long-term funding through to completion from a large Chinese bank.  Iron ore and ilmenite prices in particular are strong, boding well for IRC as production continues to ramp-up."

 

Commenting on the announcement, Pavel Maslovskiy, Honorary President, said:

 

"I am very pleased to note that during a short period of time our team has managed to accomplish a remarkable turnaround at almost every level of our operations, transforming the Group into a world-class, multi-mine business with very good prospects, experienced management, strong technology and a pipeline of exciting projects. As I take up my role as Senator, I can be confident that the Group is in a good shape.

 

This is especially important for me at a time when, due to my Senatorial duties, I will have a less intense involvement in the Groups day-to-day activities.

While this situation exists, I am leaving the management to my long-term colleague and friend Sergey Ermolenko, with whom I have been working since the inception of this Group.

I am also confident in the younger generation of top management who have grown up together with the Group and acquired an enormous amount of experience in the process of its active development and expansion.

 

It is important to emphasise that this is the team who have been responsible for the impressive organic growth of the business over a short period of time and against a background of economic instability, strong inflationary pressures and a shortage of prospective projects in the gold mining industry worldwide. I am confident that the Group is in good hands.

 

Our focus on new technologies and investment in the latest scientific developments should provide the Group with a strong competitive advantage in the current challenging environment.

 

I am also extremely excited about the geological prospects of the Group. The synergies of working in one of Russias most prospective gold mining regions, supported by a highly qualified team of local geologists, using the latest cutting-edge technology, will assist in the continued growth of our reserves and resources base and increasing our confidence in future discoveries. It is due to the continued success of our exploration programme at Albyn and Pioneer that we have decided to accelerate the commissioning of additional RIP lines at these mines from 2014 to Q3 2012.

 

I firmly believe that the hard work of the team to date has laid a solid foundation for the Groups long term future as an industry leader and I am grateful to the shareholders for their support through the years."

 

Conference Call Details

 

There will be a conference call today to discuss the announcement at 09.30 (GMT).* 

To access the call, please dial:

 

+ 7 499 270 0354 if calling from Russia;

+ 1 631 638 5256 if calling from the US;

+ 44 (0)20 7075 6551 if calling from the UK or elsewhere.

 

Please then give the participant pin code 881746# to be transferred to the call.

 

* The conference call may include information relating to the shares and convertible bonds

 

ENQUIRIES

 

Petropavlovsk PLC

Alya Samokhvalova 

Rachel Tuft

 

 +44 (0) 20 7201 8900 

 

Merlin

David Simonson 

Ian Middleton

 

   +44 (0)20 7726 8400

 

 

GROUP OPERATIONS REPORT

 

Pioneer

 

Pioneers overall performance in 2011 was strong, with the mine producing 359,100oz of gold, a 56% increase on 2010.

This increase reflects a set of measures implemented during 2011 to improve on-site efficiencies, the mining and processing of higher grades during Q3 2011, as planned, and the full contribution of the third RIP processing line, which was commissioned in April 2010.

 

During 2011, 31,615,000m3 of material was moved, which represents an increase of 61% on the total material moved during 2010 (19,600,000m3), reflecting the contribution made by the delivery of the final additions to the mining fleet at the beginning of 2011 and changes to the organisation of on-site mining works which were implemented following a comprehensive review at the beginning of 2011.

Due to the volume of stripping work conducted during 2011, the backlog of stripping at the end of 2010 was cleared.

 

In line with the Groups mine plan, Pioneer produced 124,800oz in Q4 2011.

 

Pioneer mining operations


Units

Q4 2011

Q4 2010

Year ended 31 December 2011

Year ended

31 December 2010

Total material moved

m3 000

8,988

6,263






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