31st Mar 2006 07:02
Peter Hambro Mining PLC31 March 2006 31st March 2006 Peter Hambro Mining Plc 2005 Trading Update Further to the production update provided in January 2006 and in advance of theGroup's preliminary results announcement due to be released in April 2006, PeterHambro Mining plc ("PHM" or the "Group") is today issuing an unaudited tradingupdate for 2005. Business and operating cost update PHM is in a period of substantial expansion and the business remains on track toachieve the 2009 "Million Ounce" target. PHM's estimate of the economic valueof the Group's operations remains substantially unchanged to that set out in theJanuary 2006 announcement. In relation to that announcement, PHM presented unitcost estimates for the Pokrovskiy Flanks, Pioneer and Malomir deposits based onactual costs experienced in the first eleven months of 2005 - these estimatesremain unchanged. However as is common throughout the extractive industry globally, material andinput costs at Pokrovskiy mine and for our Omchak joint venture have experiencedupwards pressure from external factors. For Pokrovskiy, fuel, energy and plantconsumables prices have increased by 36%, 26% and 30% respectively. The inflationary pressures that the Group continues to experience will have tobe balanced against the Rouble price of gold and economies of scale. Thebalance of these factors will determine the long-term profitability of theGroup's assets. In this connection it should be noted that: the Rouble price ofgold has risen by c.38% since 1 January 2005. The Group is activelyimplementing cost optimisation programmes and would hope to benefit fromeconomies of scale with the amount of material to be moved in 2009 expected tobe six times that moved in 2005. As a result of tight internal cost control, the preliminary estimate of the 2005Gold Institute Standard ("GIS") Cash Operating Cost for Pokrovskiy is c.US$125/oz. - a rise of c.17% compared to 2004. The cash cost estimate is c.16% belowour previously reported cash operating cost per ounce for the first six monthsof 2005. Omchak suffered particularly from a rise in input costs since it is partly analluvial operator with c.40% of its costs are fuel and energy related. It alsoexperienced significant foreign exchange translation losses. Omchak'spreliminary GIS total cash costs are expected to have increased by c.17% toc.US$360/oz for 2005. Accounting and financial update In previous years, the majority of costs incurred in delivering our expansionprogrammes have been capitalised by the Group. In 2005, given that large scaletrial mining has commenced at Pioneer, certain costs will, however, be chargedagainst 2005 earnings as follows: • US$2.5m increase in payroll expenses relating to staffing and training for expansion projects (164 personnel active within Pokrovskiy but working toward Pioneer, Malomir and the Pokrovskiy flanks development); • US$2.3m cost of Pioneer trial mining (including c.US$1m of depreciation of Pioneer assets); and • US$0.5m cost of repair work to equipment utilised at Pioneer. In addition, the debt service costs of the US$140m convertible bond, amountingto c.US$4.2m, have had a negative impact on the Group's profit for 2005. On the basis of current estimates the combined effect of the factors describedin this announcement is expected to lead to the reported net profit of the Groupfor 2005 being c.15% below that of 2004. It is intended that the Group'spreliminary results will be published on Monday April 24th 2006. Commenting on the announcement, Peter Hambro, Executive Chairman, said: "The Pokrovskiy mine is reported to be Russia's lowest cost gold producing majormine. 2005 has seen the commencement of PHM's large expansion programme leadingour million ounce gold production in 2009. Until 2005 the Group's unitoperating costs had remained relatively constant for the past 3 years, asinflationary pressures were matched by cost optimisation programmes andeconomies of scale. However our preparation for further expansion, combined with significant inputcost increases for all key raw materials, have impacted the earnings of anotherwise excellent year in which gross sales rose by c.33%. Cost control and asset optimisation remain key priorities and unit costs in thefuture will benefit as production levels increase towards our million ouncetarget." Enquiries: Alya Samokhvalova or Marianna Adams +44 (0) 207 201 8900Peter Hambro Mining www.peterhambro.com Tom Randell or Maria Suleymanova +44 (0) 207 653 6620Merlin This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
POG.L