21st Jan 2010 07:00
2009 Full Year & Fourth Quarter Trading Update
Petropavlovsk PLC ("Petropavlovsk" or the "Company") today issues its 2009 full year and fourth quarter trading statement as an update and in advance of its Annual Results for the year ended 2009 which are expected to be issued on 25 March 2010.
Highlights
Gold production report for Fourth Quarter 2009
|
Attributable Production* |
||||
|
Q4 2009 |
Q4 2008 |
Year ended 31 Dec 2009 |
Year ended 31 Dec 2008 |
|
|
oz |
oz |
oz |
oz |
|
|
Amur region Pokrovskiy deposit** |
41,100 |
45,200 |
190,100 |
189,500 |
|
Pioneer deposit** |
81,600 |
73,200 |
234,100 |
150,500 |
|
Alluvials (including Tokur) |
6,200 |
4,000 |
24,400 |
22,700 |
|
Joint ventures |
||||
|
Odolgo (50%) and Solovevsky Rudnik (13%) |
3,800 |
2,700 |
11,400 |
10,800 |
|
Omchak (50%)*** |
800 |
1,700 |
26,800 |
28,100 |
|
TOTAL |
133,500 |
126,800 |
486,800 |
401,600 |
Production update:
The Group's total attributable gold production for the full year ended 31 December 2009 increased by 21% compared to 2008 to 486,800oz, which is in the upper half of the Group's 2009 original production target of 460,000 - 510,000oz;
Pokrovskiy and Pioneer mines' combined full year production increased by 25% to 424,200oz compared to 2008;
The Group's joint ventures and alluvial operations contributed a further 62,600oz in 2009 (compared to 61,600oz during 2008) in line with the Group's forecast;
Costs and average realised gold sales price
Cash operating costs for full year 2009 were in line with the Group's forecast;
During 2009 the Russian Rouble rapidly depreciated in the first quarter reaching c.RUR36/US$ then gradually began appreciating during the remaining nine months of the year and ended the year at RUR30.24/US$, only 3% lower in dollar terms than the exchange rate at 31 December 2008;
The Group's average realised gold sales price of US$975/oz during 2009 was 15% higher than the average price of US$845/oz achieved in 2008;
Resumption of dividends
In light of the excellent preliminary trading results the Board has declared an interim dividend of £0.07 per share payable on 30 March 2010 to shareholders on the register on 26 February 2010. No final dividend will be paid but in future years the Board expects to pay both interim and final dividends;
Project development
The expected commissioning of Pioneer's third milling line has been advanced to the first half of 2010 from the second. This line will provide additional capacity of 135,000 tonnes of ore per month;
The Malomir project is scheduled for commissioning in the second half of 2010;
The infrastructure programme at Albyn has commenced. Production is currently scheduled to begin at the end of 2011;
2010 plans and forecast production
The Group's attributable production for 2010 is currently expected to be between 670,000oz and 760,000oz;
An independent mineral consultant, AuVerdi Capital, has been working with the Group to set up an internal JORC reporting system to report fully JORC compliant reserves and resources. It is expected that the first results of this process will be included in the Group's Annual Results which are due to be published on 25 March 2010.
Commenting on the announcement, Peter Hambro, Chairman, said:
"I am pleased that we have delivered a sound 21% increase in gold production in 2009 and that costs are in line with our forecasts. This has enabled the Board to resume dividend payments.
Pioneer's progress has been a great credit to our phased expansion strategy and we can look forward to an even stronger performance in 2010. The commitment shown at both Pokrovskiy and Pioneer to work together to effectively deal with a potential sidewall movement at Pokrovksiy's main pit showed evidence of the strength of our teamwork throughout the Group.
In an environment of further strong gold prices, our ongoing project development continues in 2010 with an accelerated capital expenditure commitment to ensure that Pioneer's still growing contribution and the first production from Malomir will deliver another double digit percentage production increase.
I am also pleased to release our production target for 2010 which anticipates a significant increase in the Group's gold output. Production in 2010 is likely to increase as the year progresses due to the significant volume of stripping scheduled at Pioneer in the first quarter which will produce high grade material for the mill and also the new production capacity coming on stream during the year."
* Total attributable gold production, as stated throughout this document, is comprised of 100% of production from the Group's subsidiaries and the relevant share of production from joint ventures and other investments. Figures for the comparative period are restated accordingly. The Group has held c.1.1% interest in Rusoro Mining Ltd since March 2009; no attributable ounces are included in the Group figures. The Company's direct and indirect interest in Pokrovskiy Rudnik is 98.61%.
**During 2009, some of the ore from Pioneer deposit was processed through Pokrovskiy mill, yielding production of 9,500oz. Pioneer gold processed through Pokrovskiy mill is included in the Pioneer deposit figures. Figures for the comparative period are restated accordingly.
*** The Group has entered into a conditional contract for the disposal of the majority of its interest in Omchak. At this stage there is no certainty that this disposal will take place and the numbers and forecasts in this document do not reflect any reduction in this interest.
There will be a conference call today to discuss the announcement at 09:00 (London time).
Details to access the conference call are as follows:
The Dial-in number in the UK will be: 0800 694 0257
The Dial-in number in Russia will be: 8108 002 097 2044
The Dial-in number in the USA will be: 1866 966 9439
Elsewhere, the Dial-in number will be: 0044 1452 555 566
The Conference ID in all cases will be: 52072489
Enquiries:
|
Petropavlovsk PLC Alya Samokhvalova Charles Gordon Rachel Tuft |
+44 (0) 20 7201 8900 |
|
Merlin David Simonson Tom Randell |
+44 (0) 20 7726 8400 |
Production
Pokrovskiy mine
The Pokrovskiy mine exceeded its 2009 production target by 13% (199,600oz versus the Group's forecast of 177,000oz), and operated successfully throughout 2009 with the plant processing 1,782,000 tonnes of ore (an increase of 5% versus 2008) and heap leach operations yielding impressive 67% recovery rates.
The increase in production compared to the original plan was achieved despite the mining plan being rescheduled in Q4 to accommodate significant remedial work necessary to manage a potential sidewall failure in the main pit.
The mine's management continually monitors the ground conditions around the pit to provide early warning of any geotechnical problems as well as monitoring ground water conditions.
This system indicated potential sidewall stability issues at the main Pokrovskiy pit and allowed the management to address the situation before it became a major concern. To that end, around 600,000 cubic metres of stripping at Pokrovskiy was undertaken in a short period of time with the help of the Pioneer mining fleet. A large portion of scheduled stripping at Pokrovskiy was thus delayed and resulted in a shortfall of about 350,000 tonnes of planned ore production from the main pit. However, the resulting mine plan rescheduling saw some mining being diverted to the flanks of the main deposit with the result that the shortfall of ore produced by the main pit was compensated by the ore from the Pokrovka-2 pit - the nearest flank to the main deposit. In the second half of 2009, 232,000 tonnes of ore from this source at an average grade of 3 g/t (22,000oz) were processed through the Pokrovskiy plant.
The advanced stripping mentioned above was part of the 2010 and 2011 mining schedule and therefore the associated cost will still be a constituent of the overall costs of production for the Pokrovskiy deposit when the ore from these areas will be processed.
Pokrovskiy mining and processing operations
|
Pokrovskiy mining operations |
|||||
|
Units |
Q4 2009 |
Q4 2008 |
Year ended 31 Dec 2009 |
Year ended 31 Dec 2008 |
|
|
Total material moved |
m³ '000 |
1,336 |
1,308 |
5,445 |
5,594 |
|
Ore mined |
t '000 |
279 |
498 |
1,879 |
2,105 |
|
Average grade |
g/t |
2.6 |
2.4 |
2.7 |
3.0 |
|
Gold content |
oz '000 |
24 |
39 |
161 |
203 |
|
Pokrovskiy processing operations |
|||||
|
Units |
Q4 2009 |
Q4 2008 |
Year ended 31 Dec 2009 |
Year ended 31 Dec 2008 |
|
|
Resin in Pulp Plant |
|||||
|
Ore from pit |
t '000 |
467 |
333 |
1,295 |
1,293 |
|
Average grade |
g/t |
2.9 |
3.9 |
3.7 |
4.2 |
|
Ore from stockpile |
t '000 |
- |
37 |
452 |
223 |
|
Average grade |
g/t |
- |
5.7 |
3.4 |
3.8 |
|
Pioneer ore |
t '000 |
- |
58 |
35 |
180 |
|
Average grade |
g/t |
- |
12.7 |
10.0 |
15.4 |
|
Total milled |
t '000 |
467 |
428 |
1,782 |
1,696 |
|
Average grade |
g/t |
2.9 |
5.2 |
3.8 |
5.3 |
|
Gold content |
oz '000 |
43 |
72 |
218 |
291 |
|
Recovery rate |
% |
84.3 |
88.5 |
84.6 |
87.0 |
|
Gold recovered |
oz '000 |
36.4 |
64.0 |
184.6 |
253.4 |
|
Heap Leach |
|||||
|
Ore stacked |
t '000 |
94 |
4 |
770 |
785 |
|
Average grade |
g/t |
1.0 |
0.8 |
0.9 |
0.8 |
|
Gold content |
oz '000 |
3 |
- |
22 |
21 |
|
Recovery rate |
% |
- |
- |
67.3 |
65.0 |
|
Gold recovered |
oz '000 |
4.7 |
2.3 |
15.0 |
13.7 |
|
Total |
|||||
|
Gold recovered |
oz '000 |
41.1 |
66.3 |
199.6 |
267.1 |
|
including |
|||||
|
Pokrovskiy |
oz '000 |
41.1 |
45.2 |
190.1 |
189.5 |
|
Pioneer |
oz '000 |
- |
21.1 |
9.5 |
77.6 |
Pioneer mine
The Pioneer mine produced 224,600oz of gold in 2009, an increase of 208% versus 2008 mainly due to the successful commissioning and ramp-up of the second milling processing line in September 2009. This extra production facility, with a design capacity of 125,000 tonnes of ore per month (without heap leach operations), was constructed on schedule and on budget. The actual capacity of the new line achieved after the ramp-up period has exceeded the design capacity by approximately 8% (to 135,000 tonnes of ore a month) offsetting initial start-up problems (e.g the replacement of the SAG mill lining after around 40 days of commissioning).
As mentioned above, normal mining operations at Pioneer in the fourth quarter were affected by the diversion of part of the mining fleet to the Pokrovskiy deposit. The result of this exercise was a reduction of overburden moved, resulting in a shortfall of 100,000 tonnes of rich ore mined at an average grade of 10g/t. This resulted in a shortfall of 25,000oz in Pioneer's overall production compared to the Company's previous forecast.
Overall the plant operated efficiently during 2009, achieving the designed annual recovery rates of 90%.
Pioneer mining and processing operations
|
Pioneer mining operations
|
||||||
|
|
Units
|
Q4 2009
|
Q4 2008
|
Year ended 31 Dec 2009
|
Year ended
31 Dec 2008
|
|
|
Total material moved
|
m3 ‘000
|
2,936
|
966
|
9,056
|
2,973
|
|
|
Ore mined
|
t ‘000
|
473
|
125
|
1,286
|
399
|
|
|
Grade
|
g/t
|
5.5
|
15.7
|
6.2
|
12.5
|
|
|
Gold
|
oz ‘000
|
84
|
63
|
255
|
160
|
|
|
Pioneer processing operations
|
||||||
|
|
Units
|
Q4 2009
|
Q4 2008
|
Year ended 31 Dec 2009
|
Year ended
31 Dec 2008
|
|
|
Resin in Pulp Plant
|
|
|
|
|
|
|
|
Ore from pit****
|
t ‘000
|
499
|
70
|
951
|
434
|
|
|
Average grade
|
g/t
|
5.5
|
18.8
|
7.8
|
6.1
|
|
|
Ore from stockpile****
|
t ‘000
|
74
|
94
|
134
|
94
|
|
|
Average grade
|
g/t
|
1.4
|
4.3
|
2.4
|
4.3
|
|
|
Total milled
|
t ‘000
|
573
|
164
|
1,085
|
528
|
|
|
Average grade
|
g/t
|
5.0
|
10.5
|
7.2
|
5.8
|
|
|
Gold content
|
oz ‘000
|
92
|
56
|
250
|
99
|
|
|
Recovery rate
|
%
|
89.5
|
94.0
|
90.0
|
74.1
|
|
|
Gold recovered
|
oz ‘000
|
81.6
|
52.1
|
224.6
|
72.9
|
|
****In the H1 2009 Trading Update, ore from pit should be read as ore from stockpile and ore from stockpile should be read as ore from pit.
Alluvial production and joint ventures
The Company's joint ventures and alluvial operations contributed a further 62,600oz in 2009 (compared to 61,600oz in 2008) in line with the Group's forecast.
Development
Malomir
The Group made excellent construction and development progress at Malomir in 2009. The construction of the main infrastructure including roads, power lines, substations, warehouses, workshops, accommodation and storage facilities is now complete and all machinery (cranes, bulldozers, excavators etc) for construction and for the first stage of the mining operation has now been delivered to the site. Site preparation for the plant and tailings dam has been completed and construction of the plant's crushing and grinding blocks has commenced.
During December 2009, the first mining works (stripping) commenced at Malomir's Quarzitovoye deposit which is scheduled for first production in August 2010. All remaining equipment has been ordered and should be delivered by March 2010. The metallurgical testing of Malomir's refractory ore has been completed with the results confirming the technical feasibility of treating the ore.
Albyn
During 2009, exploration has continued and a technological study, including testing of 25 tonne samples at the Blagoveshensk testing plant, was completed. Design work commenced in the second half of the year and construction of the main infrastructure including power lines, the substation, accommodation camp and the main deposit roads is planned for 2010. It is also intended to sign contracts for the supply of all the main mining machinery and equipment for the plant and to acquire the main construction materials for the mine in 2010.
Iron ore projects
Construction at the Group's Kuranakh project has continued to progress and at the end of December c.90% of the iron concentrate circuit and c.65% of the ilmenite circuit were complete. The new plant is expected to be producing concentrate in the first quarter of 2010 and to reach full capacity in the second half of 2010.
As previously stated, the development of the K&S and Garinskoye projects is dependent on obtaining appropriate funding. Discussions have continued throughout 2009 with a number of potential Chinese project partners and lenders. A number of relationships have progressed significantly such that the Group has agreed an indicative loan term sheet and signed a key Cooperation Agreement. Management continues to develop these relationships and to consider available funding proposals. The Group continues to advance the preliminary works on the planning and development of these assets with good progress on initial infrastructure.
Group production target
The Group's attributable production for 2010 is currently expected to be between 670,000oz and 760,000oz. There have been some variations in the individual constituent elements compared to the previous forecast which relate to: a review of Pioneer's production schedule in the light of the acceleration of the third milling line's commissioning; a redesign of Malomir based on a de-risked approach with a smaller initial mill for initial 2010 production, to be supplemented by additional milling capacity thereafter; and a conservative production target at Pokrovskiy due to rescheduled mining operations.
Capital expenditure
The capital expenditure for the Group's gold projects, excluding exploration, for 2010 is budgeted at c.US$200m, the main constituents of which are accelerated capital expenditure at the Malomir and Albyn projects.
Financial position
The Group had an unaudited net debt position at the year end of c.US$24m versus US$389m at the end of 2008. The Group's unaudited cash position at the year end was US $76m versus audited US $26m at the end of 2008.
Dividend
In light of the excellent preliminary trading results the Board has declared an interim dividend of £0.07 per share payable on 30 March 2010 to shareholders on the register on 26 February 2010. No final dividend will be paid but in future years the Board expects to pay both interim and final dividends.
Any shareholder who is an individual resident (for tax purposes) in the UK will be liable to income tax on the amount of the dividend. Higher rate taxpayers will be liable to income tax at 32.5% and other individual taxpayers at 10%. A tax credit equal to 10% of the gross dividend (also equal to one ninth of the cash dividend received) should be available to set off against a shareholder's total income tax liability on the dividend. The effect of the tax credit is that a basic rate taxpayer will have no further tax to pay and a higher rate taxpayer will have to account for additional tax equal to 22.5% of the gross dividend (which also equals 25% of the cash dividend received). A shareholder who is not liable to tax on the dividend will not be entitled to claim payment of the tax credit in respect of the dividend.
Forward-looking statements
This release may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this release and include, but are not limited to, statements regarding the Group's intentions, beliefs or current expectations concerning, among other things, the Group's results of operations, financial position, liquidity, prospects, growth, strategies and expectations of the industry.
By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Forward-looking statements are not guarantees of future performance and the development of the markets and the industry in which the Group operates may differ materially from those described in, or suggested by, any forward-looking statements contained in this release. In addition, even if the development of the markets and the industry in which the Group operates are consistent with the forward-looking statements contained in this release, those developments may not be indicative of developments in subsequent periods. A number of factors could cause developments to differ materially from those expressed or implied by the forward-looking statements including, without limitation, general economic and business conditions, industry trends, competition, commodity prices, changes in law or regulation, currency fluctuations (including the US dollar and Rouble), the Group's ability to recover its reserves or develop new reserves, changes in its business strategy, political and economic uncertainty. Save as required by the Listing and Disclosure and Transparency Rules, the Company is under no obligation to update the information contained in this release.
Past performance cannot be relied on as a guide to future performance.
Related Shares:
POG.L