11th Feb 2008 07:01
Peter Hambro Mining PLC11 February 2008 11 February 2008 Future production forecasts and project economics Peter Hambro Mining PLC (the "Company") announces further details on itsproduction forecasts and projected economics to be included in the Analysts'Workshop that it will conduct today. These forecasts are based on internal expectations but are supported by theTechnical Report by Wardell Armstrong International ("WAI") that dealsspecifically with the Company's production schedules. The full WAI TechnicalReport can be found on the Company's website at www.peterhambro.com. Highlights: • WAI has examined the operating and capital cost structure as projected by the Company for each of the principal assets and is satisfied that these budgets are appropriate and of the right order to allow proper development of each asset. • The Company expects that in 2010 its total attributable gold production, which includes its share from Joint Ventures, will be in the order of 900,000oz and that it will exceed 1 million oz in 2011. • Based on exploration experience since 1994, the Company believes that the probability of maintaining exploration success sufficient to support such a production level beyond 2011 is high. This belief is particularly supported by the fact that for certain assets that are not covered in the WAI report, such as Albyn, the Company has advanced production plans, as will be covered in the Workshop presentation. These plans anticipate additional production of c.100,000oz in 2010 and 150,000oz in 2011. • The WAI Technical Report, which covers the Company's current fully evaluated assets, but excludes attributable production from Joint Ventures, forecasts production at the rate of c.835,000oz of gold per year in 2010 and c.755,000oz in 2011. • The principal differences between the Company's production forecasts and those of WAI are: o The Company's forecasts for Pokrovskiy are based upon improved recovery rates from primary ores achieved from recent changes to its processing facility. o The Company expects to maintain higher grades in 2010 and 2011 than those forecast by WAI. The Company's views are supported by exploration success since the completion of the WAI Report. o The Company's forecasts include its share of production from joint ventures and from assets not included in the WAI forecasts. • The Company believes that its assumptions are appropriate, given recent technological improvements in its recovery process and its knowledge of its resource base. In support of the Company's view, the WAI's report states that: o Opportunities exist to increase the reserve base, and thus the production schedule, over and above the numbers stated in the WAI's Report. o The Pioneer resource is significant in size and highly prospective for the discovery of additional ore columns and other zones of mineralisation. Summary of production forecasts For each project a comprehensive business planning, geological and engineeringanalysis has been undertaken in order to estimate the expected productionprofile. The Company's and WAI's estimates for the Group's attributableproduction including attributable production from Joint Ventures are reflectedin the table below: Ounces 2008 2009 2010 2011 Pokrovskiy PHM 225,434 209,389 209,389 209,389 WAI 224,502 209,389 198,392 128,714 Pioneer PHM 72,026 281,582 372,752 370,109 WAI 72,026 281,576 303,408 279,968 Malomir PHM - 92,283 261,029 329,582 WAI - 92,283 261,029 263,666 Yamal PHM - 16,624 36,141 46,109 WAI - 16,624 36,141 46,109 Placers PHM 19,550 28,939 36,174 36,174 WAI 19,550 28,939 36,174 36,174 JV's PHM 41,801 41,801 41,801 41,801 WAI - - - - PHM Total 358,810 670,617 957,286 1,033,164 WAI Total 316,077 628,810 835,145 754,630 It should be noted that the comparison only covers assets included in the WAIreport and the Joint Ventures and not Albyn, Tokur and other Group assets. Explanation of the differences. The principal differences between the Company's internal production schedule andthat of WAI are as follows: Pokrovskiy Rudnik Recovery rates The WAI model uses 86% recovery rates through the RIP plant taking into accountthe fact that the Company is moving into deeper levels in the Pokrovskiy pit andwill start processing primary ore through the mill from 2008; as opposed to amixture of oxidized and primary ore in the previous years. During the lastseveral years the Company has carried out test metallurgical works on primarymaterial in order to improve the technological process and thus the recoveryrate at the plant. The result of these works suggested that the Company shoulduse 91% recovery rates in its projections. In addition, during the 4th quarterof 2007, one of the milling circuits was converted to include a newgravitational stage. This enabled extraction of the most refractory materialwhich is then treated by intensive cyanidation. As a result, in December andJanuary, 91% recovery rates were achieved while processing a composition of orecontaining 60% of primary material. It is planned to introduce a gravitationalstage into the other two circuits at the plant during the first half of 2008 toexpand this capability as the pit deepens. Additionally PHM took into account resources containing oxidized material at theborders of the existing pit, which are under constant detailed exploration. Forexample, in 2007 50,000oz at 5.2g/t of such resources were converted by theGroup into reserve category C1. This work is ongoing. Grades (reserves of high grade ore) In its projections WAI reduced the head grades through the mill from c.4.0g/t in2008 to 2.4g/t in 2011. This is due to the fact that, using JORC methodology,some high grade resources of the deposit at the deeper levels of Pokrovskiy pitare not included by the WAI production model. However, PHM's Micromine model,calculated using a gold price of $750/oz, provides for sufficient high grade C2material to sustain head grades of 3.8g/t until 2012. Moreover drilling at thedeeper levels of Pokrovskiy ore body showed that high grade mineralization iscontinuous even deeper to horizon 80 below sea level. Pioneer Grades The Company's forecast uses 10% higher average grades at Pioneer than WAI'sforecast because WAI does not account for the uplift in the average grades to berealised from high grade ore columns. Recent bulk sample reconciliation fromBakhmut (Apophasis 1) show that exploration drilling understated gold grades by10-15%. As an example, the reserve model forecast 8.39g/t whereas 9.32g/t wasmined. These columns are presently not explored on a drill spacing close enoughto convert resources in these areas into reserves. The Company's experience ofprocessing gold from ore columns of Bakhmut and Promezutochnaya zones duringmetallurgical tests showed average uplift of 15% to the grades calculated purelyby exploration work. Reserves of rich ore at Andreevskaya WAI's model does not recognize the P1 resources from this extremely high gradearea whereas they are included in the Company's model. The Company's rationalefor this is its long term experience of working at the deposit and the highquality of the exploration work. Historically at this deposit the Group has hada very high coefficient of translating P1 resources into C1 and C2 reserves.For example, after the September 2007 data cut off for the WAI report, 350,000ozof gold was converted from P1 into C2 categories. This was not included in theWAI report. Similar works are ongoing. Malomir At Malomir, WAI also excluded high grade P1 resources from its model. However,as a result of ongoing geological exploration works at Malomir part of the P1resources - 250,000oz which were not included in WAI model - has been convertedinto C1 and C2 reserves. Currently there are still at least another 10 millionP1 tonnes of ore at Malomir at surface with average grades 3.0g/t, varyingbetween 1g/t and 15 g/t at ore intersections, potentially available forconversion. Summary of WAI Report Based on the existing production and exploration data, WAI reviewed theCompany's asset exploitation schedule to determine the suitability of itsprojections. WAI is of the opinion that PHM can expect to produce in the rangeof 629k oz and 835k oz of gold per year, for the three years 2009 to 2011. Thisdetermination is based on the current operational methodology and the currentestimated mineralisation grade and morphology. WAI considers the Pioneer resource to be significant in size and highlyprospective for the discovery of additional ore columns and other zones ofmineralisation within the planned pit outlines as well as peripheral to the mainzones already defined. WAI also believes that opportunities do exist to increasethe reserve base and thus production schedule over and above the numbers statedin the report. The production projections by the Company take into account partof the additional higher grade ore columns' potential which was not taken intoaccount in the WAI projections. Initial indications are that continued exploration around the Pokrovskiy minemay delineate further reserves, but this has not been considered by WAI at thistime as part of their production schedule. In addition to the principal assetsof Pokrovsky, Pioneer, Malomir and Yamal, WAI reviewed some other projectsbelonging to the Group that are at various stages of assessment and developmentfrom grass-roots targets, to active placer gold producers and more advanceddrilling projects. Earlier development of other assets such as Albyn and Tokurmay, in addition to the further prospective reserves described above, provide inthe longer term additional sustainable production. None of these were taken intoaccount in either the PHM or the WAI production schedules. Highlights of specific deposits as stated in WAI Report Pokrovskiy Rudnik and Pokrovskiy Flanks • Current production rate at Pokrovskiy will continue until 2012. • Post 2012 production will move to a series of smaller deposits termed Pokrovskiy Flanks. • Capital expenditure requirements at Pokrovskiy are relatively low with USD$4.0M committed to geological exploration over the next 2 years and USD$18M budgeted for capital replacement of the mining fleet plus lifting of the tailings dam in 2012. • Average total operating costs will remain relatively flat at the level of c.US$12/t. Pioneer • Projected production from Pioneer in 2008 is at a rate of 872kt of ore, rising to 6.1Mt by 2010. • The average grade is expected to be 3.2g/t Au at the start of the mining life but will decrease to 1.7g/t Au by 2011. • Estimated mining costs at Pioneer are expected to be considerably lower than at Pokrovskiy due to reduced blending and re-handling of the ore and larger trucks and excavators used for waste mining. • The overall total operating cost estimated for Pioneer is c.US$9/t. It is estimated that costs during the first 4 years of operation will average US$7 /t. • Total capital expenditure requirements for the Pioneer mine are estimated to be in the region of US$160M, with US$116M to be spent within the next 4 years. . Malomir • Production is planned to commence in late 2009 at a rate of 1.0Mt of ore per year increasing to 3.0Mt in 2010 and to 6.0Mt by 2012. • Production is estimated to continue until 2020 by which time an estimated 60Mt of ore will have been mined, yielding 2.2Moz of gold metal at an average grade of 1.45g/t Au. • Operating costs for Malomir have been estimated at an average total operating cost of US$13/t. • Total capital expenditure requirements for the project are estimated to be in the region of US$110M, Yamal • Two combined gold and iron ore projects Petropavlovskoye and Novogodnee Monto are under development. • Additional to the primary products, waste rock is planned to be sold as aggregate for the fast expanding oil industry and railroads in the region which will generate significant extra revenues for the projects. • Ore mining is planned to commence in 2009 producing 607ktpa at 1.12g/t Au with full capacity, of an expected 1,500ktpa, being reached in 2010/11. • In addition, the ore will average 41% Fe with a supplementary 3.5Mtpa of waste also to be sold as aggregate. • Total capital expenditure requirements for the project are estimated to be the region of US$192M. Placer Deposits in Amur • It is planned to increase current annual placer deposits production of 16,000oz of gold to 36,170oz of gold per year by 2010 • The average total operating costs are estimated to be in the order of US$2.8 per tonne of ore. • The Company plans to invest US$20M in placer deposits over the next 3 to 4 years Assets not covered in the WAI/Company production schedules Albyn • The Albyn licence was acquired in 2005 and covers 40km2. • It is located 40km to the south-east of the Tokur licence areas and has been actively explored since 2006. • Three ore zones have been identified with grades between 0.6-38.9g/t, an average grade of 2.5g/t and an average thickness between 2.7m, 5.4m and 5.5m. • Two types of gold mineralisation: in metasomatic and tectonic zones. • A tectonic zone has been traced over a strike length of 4.5km from trenches spaced 80-320m apart. • A 2,600m section was certified by 117 drill holes down to 324m depth, in grids of 600-100 x 80-40m. • Ore zones are open in all directions. • An extensive upper ore body overlaps two lower lying ones. Chairman's comments Peter Hambro, Executive Chairman of Peter Hambro Mining plc, commented: "Our objective in holding a workshop for analysts who cover the Company is togive them a chance to look in detail at the forecasts we are making, to questionthe assumptions and to enable them to understand the reconciliation betweenthese and the independent report by WAI. We hope that by doing this ourinvestors will gain a clearer picture of what it is that the Company owns andthus of its future production possibilities. With all mining companies the state of their geological knowledge changes oftenand it is particularly gratifying that the changes we are experiencing arehighly positive. This is particularly true at Pioneer and we have encouragingresults too from the existing Pokrovskiy mine. At the newly acquired Albyndeposit the initial exploration results are also very positive. Armed with thisknowledge and our 13 years of experience on the ground, our geologists andeconomic forecasters are confident in the production forecasts that we areconfirming today. In light of this it is reassuring to have the confirmation of WAI of ourexisting resources and that these are both significant in size and highlyprospective for the discovery of additional ore columns and other zones ofmineralization. The Company's objective remains to match a steeply rising production profilewith an increasing effort to prove up our resource base; but above all toproduce profitable ounces of gold. I have every confidence in the ability of our team to deliver what we havepromised." Peter Hambro Analysts' Workshop The Company will be holding today an Analysts' Workshop to discuss itsproduction schedules in the light of WAI's technical report. The workshop willbegin at 11:00 and will be held at the Company's office. A web cast will beavailable on the Company website www.peterhambro.com. In attendance will bemembers of Peter Hambro Mining Plc Board of Directors, members of ManagementCompany Peter Hambro Mining and a Director from WAI. The full year results of the Group are expected to be published on 21st of April2008. The full year results will incorporate the impact of mark-to-marketvaluation of the derivative embedded into the Group's exchangeable gold bonds. Enquiries: Peter Hambro Mining Plc +44 (0) 20 7201 8900Alya Samokhvalova / Rachel Tuft JPMorgan Cazenove +44 (0) 20 7155 2828 Ian Hannam / Patrick MageeMerlin +44 (0) 20 7653 6620David Simonson / Tom Randell / Anastasia Ivanova Disclosure The contents of this announcement have been approved for release by Dr. P.Newall, BSc, PhD, CEng, FIMMM, of Wardell Armstrong International. Dr. P. Newallhas consented to the inclusion of the material in the form and context in whichit appears. 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. - Ends - This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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