23rd Apr 2007 07:02
Peter Hambro Mining PLC23 April 2007 23 of April 2007 Preliminary results for the year ended 31 December 2006 Peter Hambro Mining PLC ("PHM" or, together with its subsidiaries, the "Group")announces its preliminary results for the year ended 31 December 2006. Financial Highlights: US$ '000 2006 2005 change-------------------------- ---------- --------- --------Turnover (inc. Share of Joint Ventures) 177,034 114,579 55%Operating Profit 49,249 17,490 182%Retained Profit for the Year 30,556 13,255 131%Earnings per Ordinary Share (US$) 0.38 0.17 124%Shareholders' Funds 302,449 239,925 26%Net Cash Pre Leasing / Sale & Lease Back (75,274) 10,440 -821% Operating Highlights 2006 2005 change-------------------------- ---------- --------- --------\* Total Attributable Gold Production (oz) 261,000 249,000 5%Pokrovskiy GIS Cash Operating Costs (US$/oz) 133.7 125.4 7%Pokrovskiy GIS Total Production Cost (US$/oz) 238.5 229.7 4% *Production from Pokrovskiy was revised upwards by 500oz in comparison with thenumbers published in our Trading Statement dated 22 of January 2007. Thisrevision was the result of new data received since the Trading Statement. Operational Highlights: Pokrovskiy •Pokrovskiy production increased by 11% and remained the Group's primary focus as the stable producer of cash-flow and as a solid base for the Group's expansion. •Pokrovskiy GIS Total Production Costs increased by 4% against a 14% increase in diesel fuel prices, an 8% increase in electricity prices and up to 9% increase in prices for reagents and consumables. •Control over unit costs at Pokrovskiy was assisted by the increase in the Pokrovskiy plant's capacity and technological innovations made to the cyanidation circuit, as well as improved recovery rates from heap leach operations. Pioneer •A decision was taken to create a stand alone resin in pulp plant and heap leach processing facilities at Pioneer instead of trucking ore to Pokrovskiy. First production from Pioneer is expected at the end of 2007 and the modular expansion of the processing plant has a planned production level of 400,000oz/yr. •Capital costs are expected to be in the order of US$87 million for the first phase of the development which is planned to process oxidised ore and between 2010 and 2013, when primary ore treatment starts, it is estimated that an additional US$53 million will be spent. Cash costs per tonne are expected to be similar to those at Pokrovskiy. •Continued exploration success at new areas of Pioneer. An example of this is the Andreevskaya ore body which, along with more than 20 high-grade areas, had been predicted by the Group's geotechnical studies. So far Andreevskaya has an average grade of 32.8g/t for 450 metres in length, 6 metres in width and to a depth of 90 metres and is open in all directions. Confirmation of the existence of additional high grade ore was instrumental in the decision to modify the original production plan. Malomir •Exploration at Malomir exceeded quantitative expectations and has resulted in a requirement for a more extensive exploration programme. A detailed feasibility study for Malomir, on a similar basis to that produced for Pioneer, is being developed and is intended to be released before the end of 2007. Yamal •The economic study to define production reserves at Novogodnee Monto has been confirmed by the Russian State Commission on Reserves (GKZ) and, with the Petropavlovskoye exploration programme near completion, a project to develop both mines simultaneously is under way. Irgiredmet •It is planned that Irgiredmet, the Irkutsk based research and scientific consulting company, c.98% of which has now been acquired by PHM, intends to increase in-house technical capability to keep pace with the growing demands of exploration and development efforts. Rosprirodnadzor •Following Rosprirodnadzor's request to inspect certain of PHM's licences, the inspections have now taken place and no material breaches of licence terms were identified. 2007 production forecast •The Group expects total attributable production for 2007 to be c.283,000oz. Chairman's Statement: - "Once again I am pleased to confirm that the year under review has been yetanother one of steady development progress for the Group and I am happy to bereporting a 182% increase in operating profit. Planned growth in existingprojects, success in cost control, favourable movements in exchange rates and animproved gold sales price have been the principal contributory factors to thisincrease. "I believe that Peter Hambro Mining is continuing to make good progress on itsdevelopment projects with the first of these, Pioneer, expected to commenceproduction in 2007. In addition to the reserves previously identified atPioneer, the project is expected to process the recently discovered Andreevskayahigh grade ore which is an exciting supplement to its world class assets. "The success of the Group in more than doubling retained profit and reachingsignificant development milestones this year is testament to the outstandingwork of our management and operational team." Enquiries:Alya Samokhvalova or Marianna Adams +44 (0) 207 201 8900Peter Hambro Mining Plc www.peterhambro.com Tom Randell or Maria Suleymanova +44 (0) 207 653 6620Merlin Patrick Magee +44 (0) 207 155 4525JP Morgan Cazenove Robert Finlay +44 (0) 207 050 6500Canaccord Adams In these preliminary results we present financial items such as "cash operatingcosts", "total cash costs" and "total production costs" that have beendetermined using industry standards as per the Gold Institute and are notmeasures under generally accepted accounting principles in the United Kingdom("UK GAAP"). An investor should not consider these items in isolation or asalternatives to any measure of financial performance presented in accordancewith UK GAAP either in this document or in any document incorporated byreference herein. While the Gold Institute has provided definitions for the calculation of "cashoperating costs", "total cash costs" and "total production costs", thedefinitions of certain non-GAAP financial measures included herein may varysignificantly from those of other gold mining companies, and by themselves donot necessarily provide a basis for comparison with other gold mining companies.However, we believe that total cash costs and total production costs in total bymine and per ounce by mine are useful indicators to investors and management ofa mine's performance because they provide a very useful indication of a mine'sprofitability, efficiency and cash flows. They also show the trend in costs asthe mine matures over time and on a consistent basis. These costs can also beused as a benchmark of performance to allow for comparison against other minesof other gold mining companies. Consolidated Profit and Loss Accountfor the year ended 31 December 2006(expressed in US $'000s) 2006 2005 $'000 $'000Turnover: Group and share of joint ventures 177,034 114,579Less: share of joint ventures' turnover (19,227) (23,330)Group turnover 157,807 91,249Net operating expenses (108,558) (73,759) Operating profit 49,249 17,490 Profit on disposals of interest in businesses - 3,822Loss on disposals of interest in joint venture - (413) Share of operating profit in joint ventures 1,591 2,324Amortisation of goodwill in joint ventures (1,111) ( 1,046) Profit on ordinary activities before interest and other income 49,729 22,177 Interest payable and similar charges (12,333) (5,953) Interest receivable and other income 7,696 3,807 Profit on ordinary activities before taxation Group 44,938 19,194Joint ventures 154 837 45,092 20,031 Taxation on profit on ordinary activities (13,735) (6,032) Profit on ordinary activities after taxation Group 31,699 13,985Joint ventures (342) 14 31,357 13,999 Minority interests Group (419) (527)Joint ventures (382) (217) Profit retained for the year 30,556 13,255 Earnings per ordinary share $0.38 $0.17Diluted earnings per ordinary share $0.38 $0.17 Consolidated Balance Sheetfor the year ended 31 December 2006(expressed in US $'000s) 2006 2005 $'000 $'000Fixed assets Intangible assets Goodwill 5,439 (176) Other intangible assets 115,845 102,231 Capitalised exploration and development expenditure 67,375 30,555Tangible assets Property, plant and equipment 137,197 74,959 Investments 1,022 448Investments in joint ventures: Goodwill 665 1,467 Share of gross assets 21,611 17,313 Share of gross liabilities (12,398) (8,171) 336,756 218,626Current assets Stock and work in progress 34,122 23,521Debtors 47,323 31,273Securities held for trading 3,937 -Cash at bank and in hand 62,466 144,534 157,848 199,328 Creditors, amounts falling due within one year (38,829) (18,909) Net current assets 119,019 180,419 Total assets less current liabilities 455,775 399,045 Creditors, amounts falling due after one year Long-term borrowings - (2,250)Guaranteed Convertible Bonds (134,740) (133,920) (134,740) (136,170) Provisions (4,746) (18,426) Net assets 316,289 244,449 Capital and reserves Equity shareholders' funds 302,449 239,925 Minority interest 13,840 4,524 316,289 244,449 Consolidated Statement of Cash Flowfor the year ended 31 December 2006(expressed in US $'000s) 2006 2005 $'000 $'000 Net cash inflow from operating activities 50,249 15,719 Returns on investments and servicing of finance Interest received 7,209 1,971Interest paid (10,922) (1,292)Interest element of finance leases (13) (81)Dividends paid to minority shareholders - (4,901) Net cash outflow from returns on investments and servicing of finance (3,726) (4,303) Taxation paid (9,416) (3,401) Capital expenditure and financial investment Purchase of tangible assets (31,155) (20,919)Expenditure on research/development and mineral properties (37,392) (19,610)Reimbursement of research/development and mineral properties 645 -Other investments 3,463 (422)Proceeds on disposal of tangible assets 761 86Loans granted (3,774) (4,011)Loans repayments 667 18,055 Net cash outflow on capital expenditure and financial investment (66,785) (26,821) Acquisitions and disposals Purchase of subsidiary undertakings (41,690) (11,652)Cash acquired with subsidiaries 3,107 814Proceeds from sales of subsidiary undertakings 4 -Payments to RBS holders (15,000) - Net cash outflow on acquisitions and disposals (53,579) (10,838) Cash outflow before use of liquid resources and financing (83,257) (29,644) Management of liquid resources Purchase of securities held for trading (21,871) -Proceeds from sale of securities held for trading 8,026 - Net cash outflow from use of liquid resources (13,845) - Financing Capital element of finance leases (243) (652)Receipts from borrowings 25,803 162,673Repayments of amounts borrowed (28,348) (35,034)Net receipts from issuing shares 17,822 21,337 Net cash inflow from financing activities 15,034 148,324 (Decrease)/increase in cash at bank and in hand (82,068) 118,680 Production ------------------------ ------- ------- --------Total attributable gold production,oz'000* 2006 2005 Var % ------- ------- --------Amur Region --------------------- ------- ------- -------- Pokrovskiy 206.8 185.7 +11.4% --------------------- ------- ------- -------- Amur NE Assets 10.5 4.2 +150.0% --------------------- ------- ------- -------- Rudnoye JV 8.1 7.8 +3.8% --------------------- ------- ------- --------Omchak JV --------------------- ------- ------- -------- Magadan assets 33.4 49.6 -32.7% --------------------- ------- ------- -------- Amur Assets 2.5 2.0 +25.0% --------------------- ------- ------- --------TOTAL 261.3 249.3 +5% ------- ------- -------- * Total attributable gold production is comprised of the Group's subsidiaries,share of production in joint ventures and other investments Pokrovskiy €2006 mining operations moved c.5.4 million m3 of material yielding c.1.9 million tonnes of ore, a 37% increase compared to 2005. This was achieved through further expansion of the mining fleet (five new 45t capacity Belaz dump trucks and 3 Cat-330 Caterpillar excavators were purchased) and conformity to the mining plan. • During 2006 the two main pits of the deposit were merged and exploration works around the Pokrovskiy pit confirmed potential for expansion to the east and at greater depth. • The anticipated reduction in the cut-off grade due to the increased gold price is expected to enable an increase of the projected depth of the current Pokrovskiy pit and re-definition of Pokrovskiy reserves resulting in a c.200,000oz increase. • The next stage of the resin in pulp plant's expansion was successfully accomplished on time and on budget which brought the plant's annual capacity to 1.9 million tonnes of ore. This was an increase of almost 27% on 2005 and ensured an increase of the gold produced despite a 7% decrease in the average grade of ore delivered to the mill. • The recovery process was modified in order to maintain stable recovery rates for the mixed ore types being mined. The significant changes were an increase in resin volume and commencement of cyanidation ore in the SAG mill which increased the total resin surface area and leaching time. As a result the recovery rate was approximately the same as the previous year (90.8% compared to 91.5% in 2005) although part of the material treated was primary ore. • Separation of the flows of pregnant solutions and the installation of additional electro-winning cells optimised gold recoveries and doubled the recovery of silver, increasing annual silver production by 350%. • Recovery rates from the heap leach process increased by 50% and this made treatment of lower grade material economic. This was achieved by stacking and treating the heap leach pads before the winter period and leaving them for further leaching when thawed. • A third, high-speed thickener is currently being installed to cope with the slower thickening of primary ore and this is expected to be commissioned in 2007. PHM Schedule of mining operations Units 2006 2005Pokrovskiy deposit Total material moved '000 m(3) 5,385 5,248 Including advanced stripping '000 m(3) 1,657 1,180 Ore mined '000 tonnes 1,904 1,393 Grade g/t 3.0 3.6 Gold '000 oz 184.5 159.8 Including rich ore '000 tonnes 1,379 899 Grade g/t 3.8 4.7 Gold '000 oz 168.0 135.7Pioneer deposit Total material moved '000 m(3) 912 836 Ore mined '000 tonnes 168 133 Grade g/t 3.4 3.5 Gold '000 oz 18.3 15.0 *PHM Processing Schedule Units 2006 2005Resin In Pulp plant Ore from Pokrovskiy pit '000 tonnes 1,379 899 Grade g/t 3.8 4.7 Gold '000 oz 168 136 Ore from the transfer stockpiles (at the RIP) '000 tonnes 25 - Grade g/t 4.6 - Gold '000 oz 4 - Ore from stockpiles '000 tonnes 248 444 Grade g/t 3.4 2.8 Gold '000 oz 27.4 39.4 Pioneer (bulk sample) '000 tonnes 46 53 Grade g/t 6.7 5.7 Gold '000 oz 9.8 9.7 Total milled '000 tonnes 1,698 1,397 Grade g/t 3.8 4.1 Gold '000 oz 209.2 184.9 Recovery % 90.8% 91.5% Gold recovered '000 oz 190 169 Heap leach Ore stacked '000 tonnes 750 714 Grade g/t 0.9 1.5 Gold '000 oz 23 38 Recovery % 73.1% 48.9% Gold recovered '000 oz 16.8 16.5 *\* Total gold recovered '000 oz 206.8 185.7 *Presentation of PHM Processing Schedule differs from that in the Trading Updatedated 22 January 2007**Certain comparative numbers have been rounded up Operating Costs 2006 Pokrovskiy Rudnik - Operating Cost Analysis (US$/oz) 2006 2005 Var % 1H 2006Gold Institute StandardDirect Mining & Processing Expenses 102.9 95.0 8% 92.9Refinery & Transportation Cost 7.0 4.5 56% 6.4By-product Credits (4.0) (0.9) 344% (0.5)Other 27.8 26.8 4% 36.4Cash Operating Cost 133.7 125.4 7% 135.2 Royalties 35.3 27.1 30% 36.8Production Taxes 5.7 6.2 -8% 7.7Total Cash cost 174.7 158.7 10% 179.7 Non-cash Movement in Stock 15.8 28.6 -45% 22.9Depreciation/Amortization 48.0 42.4 13% 52.4Total Production Cost 238.5 229.7 4% 255.0 Pokrovskiy's GIS Total Production Cost in 2006 increased by just 4% to US$239/ozand this small increase was achieved despite a 14% increase in diesel fuelprices, an 8% increase in electricity prices and up to 9% increase in prices forvarious chemical reagents and consumables. The stable and low operating costs at the Pokrovskiy mine are the result of aseries of long term cost cutting programmes implemented at the mine in 2005, theeffect of which was first fully reflected in the 2006 results. An increase inthe number of ounces produced also improved the unit cost figure. Royalties and refining costs are in direct correlation with the gold price hencethe 30% and 56% increases in these costs in 2006 in comparison with the sameperiod in the previous year. Depreciation and amortisation expenses have changed in line with the increase ofproduction assets caused by the plant and mine fleet expansion. Non-cash movement reflects the cost of mining incurred in the previous periodsbut accounted for in 2006 when the actual gold was produced. Omchak Joint Venture Omchak Schedule of mining operations 2006 2005 Nelkobazoloto - Shkolnoye DepositOre mined '000 tonnes 32.8 54.7Ore processed '000 tonnes 29.6 54.2Ounces produced '000 oz 8.7 18.7 BerelekhWaste rock stripped '000 m(3) 8,651 8,724Sands processed '000 m(3) 4,161 3,957Ounces produced '000 oz 50.0 57.2 Noviye Tekhnologii and ZeyazolotoWaste rock stripped '000 m(3) 432.9 381.2Sands processed '000 m(3) 229.9 224.4Ounces produced '000 oz 3.7 3.1 UdumaWaste rock stripped '000 m(3) - -Sands processed '000 m(3) 38.3 -Ounces produced '000 oz 1.1 - Susumanzoloto, temporary holding '000 oz 8.3 - Total gold production 71.8 79.0 PHM attributable (2006 - 50%) 35.9 51.4 In 2006 Omchak carried out gold exploration and production in four differentregions of Russia: Magadan, Chita, Amur and the Sakha republic (Yakutia).Alluvial gold was mined in 2006 using open-pit techniques, and hard-rock gold byunderground mining. The total attributable production of Omchak in 2006 was35,900oz (compared to 51,400oz in 2005) of gold predominantly from two assets inthe Magadan Region: ZAO "Nelkobazoloto" and OAO "Berelekh". In 2006 ZAO"Nelkobazoloto" moved to deeper levels which has involved additional costs andhas resulted in a decrease in production. 32,800t of ore were extracted, 29,600twere processed at the plant and c.9,000oz of gold were recovered. Undergroundexploration was carried out to delineate reserves and resources to enableproduction of c.13,000oz in 2007. Alongside its production activities, Omchak was also involved in the acquisitionof licences for the right to explore and produce alluvial gold at depositslocated close to PHM's main operational and development sites in the AmurRegion. New licence areas acquired in this process have confirmed reserves thatare expected to yield a planned annual production of alluvial gold in the Amurregion of an additional c.10,000oz gold per year starting in 2007 and continuingfor some five years. OAO "Berelekh" carried out alluvial gold extraction in the Magadan region in2006 on 37 licence areas, totaling more than 1,500km2. It is estimated thatBerelekh has reserves for open-pit mining for over six years. In addition, eachyear Berelekh carries out exploration at the same time as extraction, which isexpected to lead to a growth in reserves each year of between 38,000 and48,000oz. A small portion of production has also come from the new assets located in theAmur region and acquired only in the middle of 2005: OOO "Zeyazoloto" and OOO"Noviye Tekhnologii". Direct alluvial gold extraction has taken place on threedeposits, with total gold recovered of 3,745oz. Geological exploration workduring the year covered three licence areas, with 1,309m of drilling to confirmand increase reserves. Omchak is a holder of series of exploration licences in the Chita region, AmurRegion and Republic of Sakha (Yakutia). Geological exploration work was carriedout at those properties in 2006 in order to sustain Omchak's level of productionand for further conversion of resources into mineable reserves. This work willbe continued in 2007. Omchak Costs Unit costs at Omchak have risen sharply during 2006. Part of this rise was aresult of the 50% decrease in gold output from Nelkobazoloto as detailed above -increasing unit costs as fixed costs remain constant. Berelekh also suffered areduction in gold production though not to the same extent as Nelkobazoloto. Total cash costs for Omchak in 2006 were US$483/oz (2005 - US$360/oz) a 34%rise. Although somewhat disappointing, the effect on the Group's profit for theyear is not material. The Omchak management team expect that the time invested at Nelkobazoloto in2006 accessing the lower horizons could increase gold production by 50% in 2007versus 2006. Other Amur Region production In addition to its exploration activities the Group operates a number ofalluvial enterprises which exploit placer mine using dredging machinery andwashing technology. These operations are usually carried out at the sites of theGroup's operational and exploration activities which allows for additionalprofits for the Group without major investment in infrastructure or detailedexploration works and further increases the Group's understanding of the localgeology. In 2006, three companies contributed to the Group's production in theAmur region. Two of them - OAO "ZDP Koboldo" and ZAO "Amur-Dore" extract goldfrom alluvial deposits in the North East of the Amur Region in close proximityto the Tokur and Malomir deposits. Pioneer Development 2006 was a crucial year for the development of the Group's most advancedproject, Pioneer. According to the schedule a wide range of exploration,engineering and design works were carried out at the deposit in order tocommission first production at Pioneer in the second half of 2007. The following points highlight the success in 2006: •Officials from the Russian State Commission on Reserves (GKZ) surveyed works conducted at the deposit in summer 2006 ahead of the submission of documentation to GKZ for reserves and resources approval. The commission noted the high quality of work carried out by the Group and agreed with the geological interpretation of the deposit's mineralisation, as well as the work programme needed to bring the deposit into production. •A broad metallurgical assessment of the deposit was carried out. 410 samples were collected for Phase Analysis. Bulk samples of oxide and primary ore have been obtained for the development of the metallurgical processing regime. •A positive economic mine plan was developed that provides for the construction of a stand alone processing operation at Pioneer. •The definitive plan calls for heap-leaching with a modularly expanded resin in pulp plant capable of modular expansion, eventually capable of processing 5.2mt of ore per annum. Following such expansion the heap leach operation will have a processing capacity of 2.9mt per annum. The modular expansion programme, a method used successfully at Pokrovskiy, allows for an optimisation of the overall project capital expenditure without interruption to production. •Separate treatment of different types of ore is expected to cut operating costs and allow for higher recovery rates. •Design planning for the heap-leach pads and process buildings has been completed, and contracts for equipment signed. The electricity supply has been commissioned, with the power line to Pioneer from Pokrovskiy completed and the 4MW first stage substation operational. Pre-stripping of 392,000 m3 has been completed. •The Pioneer heap-leach facility is scheduled to start operation in 2007 and the resin in pulp plant in 2008. Exploration The table below shows the reserves and resources estimates under the Russianclassification system: Peter Hambro Mining Group Reserves & Resources SummaryAs at 1-1-07 ------- -------- ----------------- Category Ore Gold Content ------- -------- -------- ------- ------- '000 t kg oz'000 As at 1-1-06------------- ------- -------- -------- ------- -------Reserves B+C1 31,623 56,794 1,826 1,980 C2 117,870 206,985 6,655 7,053 ------- -------- -------- ------- ------- TOTAL 149,493 263,779 8,480 9,033------------- ------- -------- -------- ------- -------Resources P1 136,961 270,515 8,697 9,693 P2+P3 1,928,952 2,830,629 91,005 83,547 TOTAL 2,065,913 3,101,144 99,702 93,240------------ ------- -------- -------- ------- -------Reserves & Resources TOTAL 2,215,406 3,364,923 108,182 102,273------------ ------- -------- -------- ------- ------- The Group reports its reserves and resources according to the system defined bythe GKZ since this is its functional reporting system ("The Russian System").All Reserves and Resources in Category C1 and C2 are calculated according to thenorms prescribed by the Russian System but this does not imply that all of suchreserves have necessarily been submitted to GKZ for inclusion in the StateBalance. It should be noted that of the P Category resources, P1 is supported bydrilling whereas this is not necessarily the case for P2 and P3, which are basedon management estimates. In 2006, the Group spent US$38 million on exploration and development. Theexploration and development budget for 2007 is US$100 million. The table below sets out the amount of exploration work completed in 2006: 2006 2005Trenching, (m3) 2,033,000 493,000Core drilling, (m) 286,000 88,000Shallow drilling, (m) 59,000 58,000 In 2006 there was an intensive exploration programme on Pioneer, Malomir, andPetropavlovskoye (Yamal) in particular. The result of this increased exploration effort is a substantial improvement inconfidence in resource and reserve estimates. Although this is not reflecteddirectly in increased headline reserve/resource figures, it lends confidence tothe Croup's planning for production from these deposits. POKROVSKIY AND FLANKS €17,450m of core drilling, and 5,600m of shallow 'mapping' holes was completed on the Pokrovskiy deposit and the flanks, and 30,600m3 of exploration trenching was completed on the flanks. Emphasis has been placed on detailed exploration of the fanglomerate deposit and the three newly discovered underlying hard-rock ore bodies in the Pokrovka-II area, and on new exploration of 'outer flanks' areas covered by the Zheltunak licence. •A re-definition of Pokrovskiy reserves, and the design of corresponding pit expansion, have been started to reflect the much higher gold prices of today. This pit expansion will also take into account additional reserves and resources discovered recently and will include both lateral push backs and a deepening of the ultimate pit from 140m to 200m. •In the Pokrovka-II area, exploration work continues on the unconsolidated fanglomerates and on the underlying ore zones in the crystalline basement. Exploration within the past six months (trenching, deep drilling) in both eastern and western trough areas has established that the geology of the fanglomerates is not simple. Because of complexity of the geological structure (variable thickness and intercalation of sands and lignite beds) the previously accepted drillhole spacing is considered inadequate for definition of a Russian category C2 reserve: accordingly the categories have been redefined. This does imply a need for a more closely spaced exploration grid to provide the necessary definition. The resource remains open to the west, south, and east. Metallurgical studies have now established that these ores are easy to beneficiate, and through heap leaching it is believed possible to extract up to 77.4% of the gold from this ore. •In 2006 work started in 4 new areas of the Pokrovskiy Flanks located 4 to 17 km from the Pokrovskiy deposit. The most promising results were achieved at the Velikiye Luzhki area where gold has also been discovered in Cretaceous diorites above the thrust. Plan for 2007 •It is planned to delineate the fanglomerate resource in detail, and at the same time exploration of the underlying hard-rock ore zones will be continued. •Exploration will continue on ore zones discovered elsewhere in the inner flanks. In the 'outer flanks' areas, exploration will be continued in all areas. •At Velikiye Luzhki drilling is planned in 2007 - a series of vertical holes to intersect the mineralised zone and allow the upgrading of the already established Russian P1 resource to the Russian C2 reserve category. PIONEER €166,400m(3) of trenching, 30,750m of deep drilling and 5,700m of shallow 'mapping' holes was completed in 2006 at Bachmut, Promezutochnaya and Yuznaya ore zones. As a result the full scope of works required by GKZ standards in order to confirm reserves and resources to start mining has been accomplished. •At each of the Bachmut, Promezutochnaya and Yuznaya ore zones, previously predicted high grade ore columns were confirmed by several intersections. •On the advice of its geological and mining teams, the Group has decided not to delineate further for reserve definition purposes the identified high grade areas (with the exception of Andreevskaya), preferring to finalise the detailed evaluation of this material in the mining plan in due course. Accordingly it is possible that the mining results may be better than the base case predictions. This decision was taken in order to save money on further delineation of what have already been established as mineable reserves. •The Andreevskaya ore zone, intersected by drill holes for the first time in 2006, has already been traced for 2km. This zone has highly variable gold grades between 0.9g/t and 368.4g/t along the evaluated section. Maximum grades (up to 1,225g/t) have been found in the central area of the explored part of the zone and it is possible that they are related to an ore column, which had been predicted in that location. •Drilling and trenching works on 450 metres in length of the ore zone show an average grade of 32g/t to a depth of 90 metres over a 6 metres width, giving Russian Category C2 and P1 contained gold of 550,000 ounces. Significant silver grades are also present, with some samples greater than 1,000g/t. •The drilling programme at ore bodies predicted previously by geotechnical data has been continued. Plan for 2007 •Preparations for the early start of full-scale mining are scheduled to continue. •The Pioneer heap-leach facility is due to start operation in 2007. •Detailed exploration of all ore zones is scheduled to continue, with concentration on the evaluation of Andreevskaya and proving extensions of this zone to both east and west. •Further drilling of zones predicted by structural model and satellite imagery data. MALOMIR •Three separate deposits have now been identified at Malomir. •Exploration trenching (344,400m3) and core drilling (35,500m) concentrated on detailed delineation of reserves on the Malomir deposits. •In the central high-grade area of the Malomir deposits itself, pre-stripping of an area 220m x 300m was carried out in order to confirm continuity of the ore structures. •The exploration camp, which was constructed in 2005, has been expanded, and permanent all-year mine access to the main regional road is complete. •A study of metallurgical and hydrogeological properties of the Malomir deposit has started. A total of 391 samples were taken for phase analysis. 6 bulk samples (from 139kg to 2,080kg) were taken from different ore types and different parts of the deposit. Preliminary data suggests that, for more than 90% of the ore, gravitation-flotation is the optimum processing route, with 85.6% recovery. Plan for 2007 •It is planned to carry out exploration of the three ore deposits (with associated GKZ approvals) consecutively. •An additional 5,000m of drilling and 5,000m length of trenching are to be completed on the central Malomir deposit and on the flanks. •It is planned to complete exploration on the main Malomir deposit in 2007 and start preparation of documentation to submit to GKZ for reserves and resources approval. This will include infill drilling in order to meet the GKZ requirements to establish reserves to start mining operations. •The hydrogeological, metallurgical, and geotechnical studies and topographic survey are also expected to be completed as well as exploration for nearby sources of building materials. •Exploration will continue on both Quartzite and Ozhidaemoye zones; also two bulk samples of 300kg each will be collected in 2007 from the Quartzite zone, for metallurgical study. YAMAL •The economic study to define production reserves at Novogodnee Monto has been confirmed by GKZ and, with the Petropavlovskoye exploration programme near completion, a project to develop both mines simultaneously is under way. •Drilling in 2006 on the Petropavlovskoye deposit and Toupugol-Khanmeishorskaya flanks included 40,500m deep drill holes, plus 11,700m3 of trenching within the licence area. •A wide shallow pit to expose the ore body and confirm the continuity and style of mineralisation (including E-W quartz 'ladder' veins across the N-S trend of the ore body, with visible high grade gold) was made. •On other exploration assets in the region, the Group carried out a total of 50,000m core drilling and 73,000m3 of trenching in 2006. •The Ozernoye area appears to have the greatest potential. It consists of a layered ultrabasic body (Bushveld-style) containing 3 reefs up to 20m thick of disseminated sulphide/magnetite ores with polymetallic (PGM-gold-Cu /Ni/Co/Fe) mineralisation. These have been partially explored and initially evaluated to Russian category P1 in less than 1km of the outcrop length. Grades found so far include around 1.7g/t total precious metals and around 1% total base metals (excluding iron). Plan for 2007 •On the Petropavlovskoye deposit, a programme of transverse drilling will intersect the steeply dipping quartz veins in order to provide sufficient data to include these in the resource model. •More intensive exploration of the Ozernoye polymetallic prospect is scheduled to be undertaken in 2007, across the whole area of the ultrabasic outcrop. On other exploration areas, as identified above, drilling and trench exploration will continue in 2007. 2007 Production Forecast & Outlook •PHM currently estimates that attributable production in 2007 will be 283,000oz. This is an 8% increase on 2006 and is made up of 220,000oz from Pokrovskiy and Pioneer, 35,000oz from Omchak and the remaining ounces from the Group's interests in other Amur region assets. •Because the Group's 2007 production is not expected to increase by much more than 10% compared to the previous year, unit cost reductions will have a smaller effect this year. In addition an appreciation in the US dollar value of the Rouble, the Group's operating currency, and inflationary pressures on raw material costs may well cause an upward pressure on operating costs. •It is anticipated that JORC classification Reserves and Resources as for Pioneer will be published at the same time as the Group's Annual Report and for other deposits in due course. •The Group will adopt IFRS from 1 January 2007 and the conversion process is proceeding as planned. Annual Report & Accounts The Group intends to publish and distribute the Company's Annual Report andAccounts for the year ended 31 December 2006 on 16 May 2007. This report will contain a more detailed analysis of the work undertaken by theGroup during the period, notes to the accounts and a breakdown, by deposit, ofthe Group's Reserves and Resources and production. The financial information set out above does not constitute the Company'sstatutory accounts for the years ended 31 December 2006 or 2005 but is derivedfrom those accounts. Statutory accounts for the year ended 31 December 2005 havebeen delivered to the Registrar of Companies, and those for the year ended 31December 2006 will be delivered following the Company's Annual General Meeting.The auditors have reported on those accounts; their reports were unqualified anddid not contain statements under section 237(2) or (3) of the Companies Act1985. The resources and reserves estimates have been reviewed by Dr. Stephen Henley,who is an independent geological advisor to the board of directors of PeterHambro Mining Plc. Dr. Henley is qualified to act in the capacity of a CompetentPerson for the purposes of this statement of reserves and resources. 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. Dr. Henley is currently chairman of PERC (the Pan-European Reserves andResources Reporting Committee, European equivalent of the Australasian JORC),and convenor and secretary of a CRIRSCO working group on harmonisation ofRussian and international reserve reporting systems. He owns no direct or, to the best of his knowledge, indirect interests in theshares or securities of Peter Hambro Mining Plc or of any of its associated orsubsidiary companies and does not expect to receive direct or indirect interestin any of the Company's projects or in the shares and securities of the Company. The Board of Directors commissions a semi-annual independent review of theexploration and development work of the Group and the Group's reserve andresource estimates. The Summary of this review has been compiled by Dr. StephenHenley and reviews all current exploration works being conducted by the Group. Peter Hambro Mining Plc will publish an Executive Summary of this review todayon the Group's website. Please visit our website: www.peterhambro.com where you will be able to downloadthe Summary from a link on the home page. Conference Call There will be a conference call today to discuss the announcement at 14:00(London time). Details to access the conference call are as follows: The Dial-in number in the UK will be: 0845 245 3471 and internationally will be:+44 (0) 1452 542 300 with the conference ID in both cases: 5431634. Replay will be available after the call has finished for seven days on: 0800 9531533 / 0845 245 5205 in the UK and on +44 (0) 1452 55 00 00 internationally withthe access code in both cases: 5431634# This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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