Conditional Sale of Non-Core Assets

20 April 2015

Petropavlovsk PLC

Conditional Sale of Non-Core Assets

Petropavlovsk PLC ("the Company" or, together with its subsidiaries, "the Group") announces that its subsidiary, Peter Hambro Mining (Cyprus) Limited ("PHM Cyprus"), has yesterday entered into a conditional Share Purchase Agreement ("SPA") relating to the sale of its 95.7% interest in Joint-stock company gold-mining company Koboldo ("Koboldo"), a company which runs operations to extract alluvial gold. The total cash consideration for the transaction is RUB 942 million (c.US 18.7 million[1]) plus reimbursement of VAT for the fourth quarter 2014, payable within prescribed timeframes from the date of entering into the SPA.

Gold production from the assets held by Koboldo is solely from alluvial operations located in the Amur region in the Russian Far East. Due to Koboldo's relatively high costs and low gold production output, which in 2014 was only c.5% of total Group's production, Koboldo assets are considered as "non-core". The sale of Koboldo will not affect the Group's ability to achieve its 2015 production target of 680,000-700,000oz of gold.

The successful disposal of Koboldo will allow Petropavlovsk to further decrease its net debt position and reduce non-core holdings. Our focus remains the development of the Group's highly-prospective, hard-rock mines in the Amur Region.

Details of the transaction

On 24 November 2014, the Group announced that PHM Cyprus had entered into a SPA relating to the sale of Koboldo to Rosszoloto LLC however, due to the non-fulfilment of certain conditions precedent, the sale was not finalised at the time. Subsequently, the Group was approached by another buyer, Global-Polymetall LLC ("the Purchaser"), with whom PHM Cyprus entered into a conditional SPA relating to the sale of its 95.7% interest in Koboldo ("the Transaction").

The Transaction is to be implemented in accordance with the terms of the SPA and is conditional upon, amongst other things, the approval of the Federal Antimonopoly Service of the Russian Federation.

The total consideration for the transaction will comprise RUB 942 million plus reimbursement of VAT for the fourth quarter 2014, when such reimbursement is made by the tax authorities of the Russian Federation.

Effect of the Transaction on the Group

As at 31 December 2014, Koboldo's operations were classified as an asset held for sale and adjusted to their fair value. This is expected to result in the inclusion of a non cash write-down of approximately $12 million in Group's consolidated financial statements for the year ended 31 December 2014 which are currently under audit. The actual result on disposal may vary depending on the results of Koboldo for the period up to the date of completion of the Transaction, the official exchange rate of RUB to US$ at the dates of payment of relevant parts of consideration by the Purchaser and consideration in respect of VAT repayments.

The Transaction is not expected to make a significant impact on the Group's future profitability due to the relatively high cash-cost base of Koboldo's operations. The sale of Koboldo will not affect the Group's ability to achieve its 2015 production target of 680,000-700,000oz of gold. Koboldo is not a party to the Group's outstanding hedging arrangements.

As of 1 January 2015, the Group held c.542,000oz of alluvial Mineral Resources and c.397,000oz of alluvial Mineral Reserves estimated in accordance with the Russian Code for the Public Reporting of Exploration Results, Mineral Resources and Mineral Reserves (the NAEN Code). Upon completion of the Transaction, the Group will not hold material alluvial mineral resources and mineral reserves. As the Group reports its alluvial mineral resources and mineral reserves in accordance with the NAEN Code, its JORC-compliant Ore Reserves and Mineral Resources will be unaffected by completion of the Transaction.

About Koboldo

Koboldo holds licences to mine alluvial gold in the Amur region, Russian Far East. Its total 2014 annual production was 29,100oz, representing approximately 5% of the Group's total attributable gold production for 2014.

Koboldo does not hold any licences to mine hard-rock deposits, either in the Amur Region, or elsewhere.

As at 30 June 2014, Koboldo had gross assets of c.US$43.6 million and profit before tax for the year ended 31 December 2013 was c.US$0.2 million[2].

The individuals who are deemed key to the operations of Koboldo are the General Director and Chief Accountant (currently Mr Andrey Tarasov and Ms Tatyana Korol respectively).

About LLC "Global-Polymetall"

LLC Global-Polymetall is a company registered and existing in accordance with the laws of the Russian Federation with the Company Registration Number 5077746305038. It is involved in investment in the extractive industry and is owned by Mr. E. Yanakov.

For the avoidance of doubt, it is not affiliated with Polymetal International Plc.

Commenting, Chairman, Peter Hambro said:

"The Board's decision to dispose of Koboldo, an entity which operates relatively high-cost alluvial operations, is in line with its strategy of net debt reduction and a focus on the development of our four, highly prospective hard-rock gold mines. The sale of Koboldo will not affect our ability to achieve our production target of 680,000-700,000oz of gold for the year."

Enquiries

Petropavlovsk PLC

Alya Samokhvalova, Group Head of External Communications,

11 Grosvenor Place, London, SW1X 7HH

T: +44 (0) 20 7201 8900 | E: [email protected]

Maitland

Media Contact

Neil Bennett, Chief Executive Officer

Orion House, 5 Upper St Martin's Lane, London WC2H 9EA

T: +44 (0) 20 7379 5151 | E: [email protected]

 [1] Note 1: Converted at the official exchange rate of RUB 50.5033 : US 1 set by the Central Bank of the Russian Federation on 16 April 2015, being the latest practicable date prior to the date of this announcement

[2] As extracted without material adjustment from the consolidation schedules that underlie the audited consolidated financial statements of the Company for the financial year ended December 2013 and the unaudited consolidated interim financial statements of the Company for the six months ended 30 June 2014. The Group's financial statements for the year ended 31 December 2014, which are currently under audit, are expected to be published on 29 April 2015.