20th Oct 2015 07:20
LONDON (Alliance News) - Petropavlovsk PLC Tuesday said gold production and sales were both substantially down in the first nine months of 2015 as all four of its mines reported falls in production.
The Russian gold miner produced 114,500 ounces of gold in the third quarter of 2015, substantially down from the 150,100 ounces produced a year earlier.
For the first nine months of 2015, production has fallen to 354,700 ounces of gold from the 456,500 ounces produced in the first nine months of 2014.
Gold sales in the first nine months of 2015 has followed suit, dropping to 343,500 ounces of gold from 460,900 ounces a year earlier. Gold prices averaged USD1,198 per ounce in that period, getting a slight boost from its hedging programme but in the third quarter prices only averaged USD1,153 per ounce.
In the first half of 2015, the company averaged a gold price of USD1.221 per ounce, showing prices have fallen further in 2015.
Gold was trading at just over USD1,174 per ounce on Tuesday morning.
To put that gold price into perspective, Petropavlovsk has a target to bring its cash cost down to around USD600 per ounce for the full year, with its all-in-sustaining cash cost expected to be around 15% higher than that figure. Back in August, it said it was aiming to achieve around a USD500 per ounce gross margin for the full year.
Petropavlovsk's four "core" mines are in the Amur region of Russia. Pioneer is its largest mine, contributing over 40% of the group's entire production which sits alongside Pokrovskiy, its oldest producing mine, its newest mine Albyn, and the Malomir mine.
In the first nine months of 2015, production from Pioneer was down to 147,300 ounces of gold from 183,200 ounces whilst production from Albyn has fallen to 116,800 ounces compared to 141,500 ounces last year.
Production from Malomir in the first nine months of 2015 has also fallen to 45,900 ounces from 59,800 ounces whilst production from Pokrovskiy has dropped to 44,700 ounces from 47,200 ounces.
In the third quarter, Pokrovskiy and Malomir experienced very small rises in production compared to a year earlier whilst production was significantly down year-on-year from its two largest mines.
Petropavlovsk said it has identified the potential to begin underground mining operations at its flagship Pioneer mine and said it is in "budgeting discussions" and holding talks with contractors to carry out a detailed mine design whilst further underground exploration continues at the site.
Importantly, the company said it has identified a high grade area at Andreevskaya, part of the Pioneer mine, which has "grades in the hundreds of grammes per tonne" region. However, the ore is so high grade it needs to alter the processing plant to ensure the high grade material is fully utilised.
In October, the average head grade at the Pioneer plant rose substantially to 2.0 to 3.0 grammes per tonne from only 1.1 gramme per tonne. Petropavlovsk said it plans to recover 150,000 ounces of gold from that high grade area before the end of 2015, but said total production for the year will depend on "processing speed and recovery".
Petropavlovsk has also been focused on reducing its net debt. At the end of September, net debt stood at USD675.0 million, compared to USD696.1 million at the end of July and USD930.0 million at the end of December 2014.
The company reiterated its plan to have net debt below USD600.0 million before the end of 2015, suggesting it plans to reduce its debt by a minimum of USD75.0 million in the fourth quarter of 2015.
Capital expenditure for the full year is expected to come in at around USD35.0 million.
Petropavlovsk shares were down 0.3% to 6.20 pence per share on Tuesday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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