24th Jan 2008 07:01
Peter Hambro Mining PLC24 January 2008 24th January 2008 2007 Trading Statement Peter Hambro Mining plc ("PHM" or "the Group") issues this statement as an un-audited update on 2007 trading and in advance of its full year results announcement. Highlights • Production up by c.14% o Total attributable gold production of c.297,000 ounces for the year, up by c.14% on the 2006 number and by c. 5% on the 2007 forecast; o Gold production at the Group's Pokrovskiy operations increased by c.15% over 2006 figure; o Unit costs at Pokrovskiy were in line with the Group's internal forecast for the year; o Technological advances meant that, in spite of starting to process more difficult primary ore, gold recovery rates, at c.90%, were substantially unchanged from the previous year; o Pioneer's first stage production facility commissioned in September 2007 on time and on budget; o Contribution from the Group's new alluvial assets, up c.57%, continues to grow though still small in relation to the total Group production. • Sales price up by 14% o The Group's average realised gold sales price of US$668/oz during 2007 was 14% higher than US$586/oz in 2006. • US$180 million finance obtained o Issue of US$180 million of Gold Equivalent Exchangeable Bonds due 2012 with a coupon of 7% per annum payable semi-annually in arrear to accelerate and expand the development of its Malomir deposit and its Yamal assets, the modular enlargement of its processing facilities at Pioneer and to fund the exploration and development of a number of other assets within the Group's portfolio. • Increased Reserves and Resources audited o International mining consultant, Wardell Armstrong International ("WAI") concluded in its 2007 Technical Audit of the Group's mining and mining related assets that PHM's total mineral resources, inclusive of those resources evaluated in accordance with the Russian classification scheme, are 363Mt of ore at an average grade of 1.6g/t Au, containing 19 million ounces of gold. This consists of: (1) measured plus indicated JORC resource of 125Mt of ore at an average grade of 1.13g/t Au, containing 4.6 million ounces of gold, (2) inferred JORC resource of 90Mt of ore at an average grade of 1.42g/t Au, containing 4.1 million ounces of gold, and (3) reserves and resources reported in Russian categories P1 or better, 148 Mt of ore at an average grade of 2.11g/t, containing 10 million ounces of gold; o WAI audit supports the resource figures published in the PHM 2006 annual report; o PHM will hold an Analysts' Workshop to review WAI's Audit and PHM's production plan in February 2008. • Forecast Production o 2008 forecast attributable production of between 350,000 and 400,000 oz; o The PHM Board has reviewed the Group's previously announced medium-term production profile in which it expected the Group to be producing at the rate of 1 million attributable ounces per year in 2009/10. The Board now believes that total attributable production in 2010 should be in the order of 900,000oz and more than 1 million oz in 2011. Attributable gold production, '000 oz* 2007 2006 Var % 2005 Amur RegionPokrovskiy/Pioneer 237.10 206.8 15 185.7Amur NE Assets 16.50 10.5 57 4.2Rudnoye JV 9.20 8.1 14 7.8 Omchak JVMagadan assets 31.2 33.4 (7) 49.6Amur Assets 3.3 2.5 32 2TOTAL 297.3 261.3 14 249.3 \* Total attributable gold production is comprised of the Group's subsidiaries' share of production in joint ventures and other investments. Chairman's comments Commenting on the Trading Statement, Peter Hambro, Executive Chairman, said: "Once again the Group has increased its production and beaten its forecast forthe year, which, with the rising gold price, has been a great year for allun-hedged gold mining companies. "The improvements in gold recovery that our production team have made - as aresult of which we have obtained substantially the same amount of gold from theprimary ores (which are more difficult to process) as we did from the oxidizedmaterial - are typical of the way our Russian specialists continue to get thebest out of our assets. I am also glad to note that the newly acquired, smallalluvial projects are beginning to contribute (Amur North-East assets increasedtheir production by 57%). "The Technical Audit of reserves and resources completed by Wardell Armstrongsoundly underpins the Group's Reserve and Resource statement and the plannedAnalyst Workshop on the Group's production profile that is scheduled for 8thFebruary 2008 is intended to help the market's understanding of our future. "In my view the prospects for 2008 - with increasing production, tight costcontrols and a high gold price - are good. "In the turbulent financial markets in which we live today it is clear to theBoard that investors want to see a cash return on their investment in PeterHambro Mining as well as capital appreciation. Accordingly the prospect ofmoving to the payment of regular dividends has been carefully considered. TheBoard agreed to consider implementation of a formal dividend policy once thefull results of the 2007 financial year are declared. "The Board has kept under review the advisability of moving the trading of theGroup's shares from AIM to the Main Board of the London Stock Exchange and hasreceived external advice on this matter from JP Morgan Cazenove and CanaccordAdams. The Board has decided that it is in the Group's and its shareholders'interests to put in train the process for making such a change and, providedthat the relevant requirements can be met, it is anticipated that the Group willseek admission of its shares to the Official List and to trading on the MainBoard as soon as possible." Production Pokrovskiy MinePokrovskiy Mining Schedule------------------------------------ -------------- -------Units 2007 2006------------------- -------------- -------Pokrovskiy deposit -------- ------- -------Total material moved '000 m3 4,621 5,385 -------- ------- -------Including advanced stripping '000 m3 1,206 1,657 -------- ------- -------Ore mined '000 tonnes 2,207 1,904 -------- ------- -------Grade g/t 3.5 3.0 -------- ------- -------Gold '000 oz 250.6 184.5------------------- -------- ------- ------- Pokrovskiy Processing ScheduleUnits 2007 2006 Resin In Pulp plantPokrovskiy Rudnik ore '000 tonnes 1,700 1,652Grade g/t 4.3 3.8Gold '000 oz 233.4 199Pioneer ore '000 tonnes 23 46Grade g/t 16.6 6.7Gold '000 oz 12.5 9.8Total milled '000 tonnes 1,723 1,698Grade g/t 4.4 3.8Gold '000 oz 246.0 209.0Recovery % 90.6% 90.8%Gold recovered '000 oz 223 190 Heap leachOre stacked '000 tonnes 784 750Grade g/t 0.8 0.9Gold '000 oz 21 23Recovery % 68.5% 73%Gold recovered '000 oz 14.1 16.8Total gold recovered ** '000 oz 237.1 206.3 ** Certain comparative numbers have been rounded up. Pokrovskiy Operations Pokrovskiy enjoyed another successful year, while undergoing transition to thetreatment of non-oxidised ores coming from deeper levels of the pit. Highergrades, together with long-term planning and continuous optimisation of theprocess circuit, achieved a 15% increase in gold produced at Pokrovskiy in 2007,compared to the same period in 2006. The 237,000 oz of gold produced in 2007exceeded the budgeted figures by 8%. Mining The higher price of gold led to the recalculation of the economic depth of theopen-pit at Pokrovskiy compared to the depths used in the mining plan. Thisallowed an increase in the estimated reserves of the Pokrovskiy deposit whichwould provide the RIP plant with sufficient material to maintain its currentthroughput until the end of 2012. The new Atlas Copco DML drill-rig was put into operation. The rig has a higherproduction output and larger drilling diameter which has allowed for a decreasein the overall ore-mass extraction costs, despite the increase in the portion ofore mass extracted using blasting works. Advanced stripping works were carried out according to the mining plan, usingthe MicroMine geological computer model of the deposit. Renewal of the mining and transportation fleet was carried out in 2007, inaddition to the equipment acquired in 2004-2006. The fleet was expanded throughthe commissioning of an EKG-5 digger with a bucket capacity of 5m3 and theacquisition of three new 45 tonne Belaz mine trucks. These allowed the amount ofadvanced stripping at deeper levels to increase. A further three Belaz miningtrucks are expected to be delivered in the first quarter of 2008. Resin-in-Pulp (RIP) processing Expansion of the blending stockpile, to a capacity of c.200,000 tonnes, enabledoptimisation of the mixing ratio of the mill feed, both in terms of processingquality and average grade. The optimised mill feed and a number of other adjustments to the milling andrecovery process helped keep recovery rates at c.90%, in spite of the inclusionof more difficult primary ore. These changes included grind size, leach time,and the concentration and the consumption of cyanide. Heap leach processing The increased capacity of the RIP plant and the higher price of gold allowedlower grade ore to be economically processed on the heap leach pads without anincrease in the amount of mining works undertaken. Recovery rates remained inline with the previous year at c.69%. Pioneer Operations Pioneer mining and processing operations commenced. In addition to the Bakhmut open pit, which was originally used for bulk samplingand metallurgical test work, mining operations were expanded by the excavationof a further 4 open pits: two in the Yuzhnaya zone, one in the Promezhutochnayazone, and one in the Andreevskaya zone. In preparation for the start of processing in 2008, 1.1 million tonnes of orewere extracted using an earthmoving fleet comprised of 2 EKG5 electric shovels,3 Caterpillar 330 diesel shovels, 3 Caterpillar D9 bulldozers and a truck fleetof 19 haultrucks (Volvo, Caterpillar and Belaz) with capacity of between 30 and38t. Waste material excavated from the pits was used in the construction ofhaulroads. Pioneer Mining Schedule Units 2007 2006Total material moved '000 m3 1,704 912Ore mined '000 tonnes 191 168Grade g/t 3.8 3.4Gold contained '000 oz 23.1 18.3 Pioneer Plant During the first phase, the summer version of the plant was commissioned onschedule on 24 September 2007. This comprises a primary crushing unit, a SAGmill, 2 spiral classifiers, a cyanide leaching circuit, a heap leach pad and atailings dam. The main focus of the operation of the plant post commissioningwas the development of the new separation technology for the different fractionsof the milled ore - silt-based and crystallised sand. The technology was provedto be feasible and the main parameters of the process were established. During the commissioning phase, bulk samples of both high and low grade ore weresuccessfully treated at the Pokrovskiy facilities. As planned, the Pioneer plant requires the addition of a ball mill to theprocess circuit in order to process frozen ore during winter. Accordingly thePioneer plant was taken off-line in November for the addition of the ball mill,and is expected to be operational in its year-round state from March 2008. Future construction work In December, together with work on the addition of the ball mill for the firstcircuit, work commenced on the construction of a full second processing line atPioneer. Agreements have been signed for the planned larger 7.5m x 2.5m SAGmill and a 4.0m x 6.0m ball mill, sourced from the Peoples Republic of China, aswell as for the bulk of the steel requirements. The second line is expected tobe commissioned in December 2008. Planned additions to the mining fleet, primarily to address the waste strippingrequirements at Pioneer, are underway and contracts are expected to be finalisedin first quarter of 2008 for the purchase of an additional EKG5 electric shovel,two 10m3 excavators, and large 90t capacity haultrucks. The ore fleet is also tobe expanded by the addition of larger 45-55t capacity haultrucks. Construction of infrastructure continues as planned, including the workers'camp, earthmoving equipment garages and access and haul roads, as well as theinstallation of a second 35kVA power line from Pokrovskiy to supply the Pioneersecond circuit. Omchak Joint Venture The Joint Venture operated four separate units in: Magadan Region, Amur Regionand Yakutia Region and produced 68,940 oz of gold, a marginal decrease of c.4%on 2006 levels. More than 85% was produced from alluvial placers and newalluvial deposits were brought into production to replace depleting assets. Exploration works were focused on replacing exhausted assets and thecommissioning of new deposits. This included completion of the necessarygeological and engineering works for the Verchne-Aliinskiy deposit in ChitaRegion. Russian Reserve Category £1 + £2 reserves and resources at thisdeposit were established at c.1.4 million tonnes of ore with average grades of13.5 g/t indicating c.615,000oz of gold. It is planned to submit these reservesand resources for approval by GKZ in the third quarter of 2008. Amur alluvial production The Group operates a number of alluvial enterprises which exploit placer minesusing dredging machinery and washing technology during the summer months. Theseoperations are usually carried out at the sites of the Group's operational andexploration activities which allow for additional profits for the companywithout major investment in infrastructure or detailed exploration works. In 2007 c.16, 500 oz of gold was produced by OAO ZDP Koboldo and ZAO Amur Dore,the Group's alluvial gold enterprises, which is 57% more than in 2006. During 2007, two new alluvial deposits were explored and commissioned. Amur Region Joint-ventures The Rudnoye Joint Venture, including the holding in Priisk Solovevskiy, produced9,200oz of gold which is 14% more than in 2006. In May 2007 a modular plant with gravitational technology for the extraction andprocessing of concentrate using the intensive cyanidation method was put intooperation at the Odolgo site. After commissioning and start-up, the plantworked at a stable rate producing gold concentrate which was treated through thePokrovskiy RIP plant. Also in 2007 the Rudnoye Joint-Venture actively exploredthe newly acquired Solovevskiy ore field. Corporate affairs In September 2007 the Group announced the appointment of Mr Mikhail Shelkov,Director General of LLC "OboronImpex" as the Deputy Chairman of ManagementCompany Peter Hambro Mining ("MC PHM"). This appointment was made to helpstrengthen the Group's position in the metallurgical sector in Russia. In October 2007 the Group issued US$180 million of Gold Equivalent ExchangeableBonds due 2012 (the "Bonds"). The Bonds carry a coupon of 7% per annum payablesemi-annually in arrear and are exchangeable at the option of the holders intothe cash equivalent at the time of the exchange of (in aggregate) 180,000 Troyounces of gold. The issue of the Bonds provided the Group with finance toaccelerate and expand its exploration and development plans. JPMorgan CazenoveLtd. acted as the sole book-runner of the offering. The Group's average realised gold price for 2007 was US$668/oz, up 14% againstthat achieved in 2006. The Rouble strengthened against the Dollar by c.7% duringthe period and was RUR24.55/US$ at 31 December 2007 (RUR26.33/US$ - 31/12/06).The Group has a policy of no long term gold forward sales or hedging. In December 2007 the Group announced the results of the Technical Audit of theCompany mining and mining related assets, which it commissioned from WAI. Thereport concluded that the Group's total Mineral Resources, reviewed by WAI,inclusive of those resources evaluated in accordance with the Russian classifiedscheme are 363Mt at an average grade of 1.6g/t Au, containing 19 million ouncesof gold. WAI audit supported the resource figures published in the PHM 2006annual report. The Board has kept under review the advisability of moving the trading of theGroup's shares from AIM to the Main Board of the London Stock Exchange and hasreceived external advice on this matter from JP Morgan Cazenove and CanaccordAdams. The Board has decided that it is in the Group's and its shareholders'interests to start the process and, provided that the relevant requirements canbe met, it is anticipated that the Group will seek admission of its shares tothe Official List and to trading on the Main Board as soon as possible. - Ends - Enquiries:Peter Hambro Mining Plc +44 (0) 20 7201 8900Alya Samokhvalova / Rachel Tuft JPMorgan Cazenove +44 (0) 20 7155 2828Ian Hannam / Patrick Magee Merlin +44 (0) 20 7653 6620David Simonson / Tom Randell / Anastasia Ivanova This release has been reviewed by Dr. Stephen Henley, who is an independentgeological 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 thepurposes of this statement. Dr. Stephen Henley holds a PhD in Geology (University of Nottingham, 1970). Heis 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 ofthe International Association for Mathematical Geology. He has been employed inexploration, mining, academic and geological consultancy posts since 1970 andhas participated in Competent Person studies on a variety of different mineralsand types of deposit, including gold, polymetallic and chromite projects. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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