Half-year Report

12 September 2017

Petropavlovsk PLC

Half Year Report for the Period Ended 30 June 2017

Petropavlovsk PLC ("Petropavlovsk" or the "Company" or, together with its subsidiaries, the "Group") today issues its Half Year Report for the period from 1 January 2017 to 30 June 2017 ("H1 2017" or the "Period").

Chairman's Comments

Ian Ashby, Independent Non-Executive Chairman, comments:

"This is a strong set of half year results that demonstrates the Company is making good progress with its ambitious development plans whilst achieving solid operational results and maintaining continued financial discipline.

During H1, management remained focused on optimising production plans to ensure the most efficient use of our existing asset base, whilst maximising profitability. This strategy, together with the continued excellent work of our experienced operational team, has contributed to a 91% increase in operating profit for H1 compared with the same period in 2016 - US$65 million from US$34 million.

A more than twofold increase in net cash from operating activities to US$74.6 million gives us further confidence to proceed with our capital expenditure program to ensure the timely delivery of our development projects. The recent gold price environment has assisted with cash generation and helped to de-risk the delivery of our key development assets. Our management team constantly monitors the gold price and maintains the Group's hedging positon to ensure levels of cash generation that meet development budget needs, as a downturn in the gold price could stress the company's liquidity position.

We achieved Total Cash Costs (TCC¨) of US$675/oz, slightly up from US$663/oz in H1 2016 but within our original forecast range for 2017 of US$600 - 700/oz. Costs for the year are now expected to be c.US$700/oz at current exchange rates, at the upper end of original guidance. The increases in the Company's All-in-Sustaining Costs ("AISC"u) to US$965/oz and All-in Costs ("AIC"u) to US$1,044/oz primarily reflect sustaining capital expenditure relating to underground developments and tailing dam expansion, exploration, stripping and greater central administration expenses. AIC was also affected by capital expenditure in relation to the POX project.

Both development projects progressed well during the period. The delay with the underground development of Malomir caused by the late mobilization of equipment by the mining subcontractors was partially offset by the steady work of our team. The wide range in our full year production forecast reflects our conservative approach to the commissioning of scalable production from underground mining. We are currently on schedule for first production from POX to begin in Q4 2018.

We continue to look for ways to de-risk our development plans, including focusing on securing free cash from the operating business and improving the Company's capital structure. Additionally, we are assessing the best way to realise value for IRC.

The non-executive directors, myself included, are still relatively new to their roles within the Company following the recent changes to the Board at the June AGM. As such, we continue to develop and deepen our understanding of the business, its substantial potential and the work we must do to realise the best returns for all stakeholders. However, I have been impressed by what I have seen and heard so far, particularly during a recent visit with Vladislav Egorov, Non-Executive Director, to the Group's operations in the Amur region. We visited all the operational sites including the underground developments and the POX construction. Additionally, we visited key support facilities and the regional office in Blagoveschensk, where we met with employees to discuss the business. I was very impressed with the level of diligence and enthusiasm that our people apply in executing the Company's strategy.

Mr Sergey Ermolenko, the Acting CEO of the Group who previously held this position from December 2011 to November 2014, has been instrumental in guiding our operations since his appointment on 18 July 2017. The

Board is confident that Mr Ermolenko is well positioned to manage the Company during the transition to new leadership. In the meantime, the Board has engaged an agency to facilitate the search for a permanent CEO candidate, and we will update the market on further progress in due course."

¨Throughout this document, when discussing the Group's financial performance, reference is made to a number of financial measures, known as Alternative Performance Measures (APM), which are not defined or calculated in accordance with IFRS. Please refer to Section "The Use and Application of APMs" of this report for further information on APMs, their definition, how they are calculated and their relevance to Petropavlovsk.

Financial Highlights

■ 20% increase in Group Revenue to US$304 million (compared to US$254million in 2016) due to 19% increase in production and 5% increase in average realised gold price

■ Profit for the period increased by 166% at US$24.5 million (compared to US$9.2 million in 2016) benefited from higher revenues and only a modest increase in costs

■ 91% increase in Operating Profit to US$65 million (H1 2016: US$34 million)

■ 30% increase in EBITDA¨ to US$114 million (H1 2016: US$88 million)

■ 150% increase in Net Cash from Operating Activitiesu to US$74.6 million

■ 5% increase in average realised gold priceu of US$1,255/oz (H1 2016: US$1,194/oz) somewhat benefited from US$2.8 million contribution from cash flow hedge

■ Total Cash Costsu increased by only 2% from H1 2016:

- TCCu US$675/oz within the original forecast range for the full year of US$600 - 700/oz (H1 2016: US$663/oz)

- AISCu up 27% to US$965/oz (H1 2016: US$762/oz) primarily reflecting sustaining capital expenditure relating to underground developments and tailing dam expansion, exploration, stripping and greater central administration expenses

- AICu up 37% to US$1,044/oz (H1 2016: US$761/oz), reflecting the increase in AISCu and capital expenditureu in relation to the POX Hub

■ 5% reduction in Net Debtu to US$570 million (FY 2016: US$599 million)

■ Capital expenditureu of US$41.8 million includes US$10.9 million of exploration spend and US$31 million of development capex, u the majority of which related to the POX and underground projects, expansion of tailing dams and ongoing exploration (H1 2016: US$11.9 million)

The Group continues to adopt the going concern position, however, under a layered stress scenario, the Group would be required to take mitigating actions in order to avoid any liquidity or covenant compliance issues.

H1 Production Highlights

■ 19% yoy increase in H1 total gold production - c.232,400oz (H1 2016: 195,600oz)

Note: from the beginning of 2017, the Company moved to using gold poured as the definition for production. Comparable 2016 gold production numbers are adjusted accordingly.

FY 2017 Outlook

■ Production forecast for full year of c.420,000 - 460,000oz reconfirmed

■ TCCu guidance for full year 2017 at c.US$700/oz, at upper end of original guidance (US$600 - 700/oz)

■ Forward contracts to sell an aggregate of 500Koz of gold over a period from July 2017 to December 2019 at an average price of US$1,252/oz were outstanding as at 30 June 2017

■ Year-end Net Debtu is expected to decrease to c.US$560 million, assuming an average gold price of US$1,265/oz for the remainder of the year

Development Update

■ POX construction progressing well - on time and on budget for commissioning in Q4 2018

■ Malomir flotation plant (Stage 1) being prepared for production of flotation concentrate in H1 2018

■ After delays at Malomir in the beginning of the year, underground development at both Pioneer and Malomir mines is moving ahead for full scale high grade ore production by the end of 2017

Exploration Update

■ Two new zones of non-refractory mineralisation suitable for open pit mining discovered at Pioneer:

▪ High grade pay shoot at NE Bakhmut - 2 proven to a depth of 140m below the pit floor and remains open; the best deep intersection (19.6m @ 10.90g/t) indicates strong exploration upside

▪ New non-refractory satellite deposit Katrin (near Pioneer) confirmed offering immediate production upside

■ New continuation of Unglichikan deposit identified; the discovery confirms strong exploration potential near the Albyn mine

■ Exploration at Ulgen, an early stage exploration target c.30km southwest from the Albyn plant, suggests there are many similarities with the 2.8Moz Elginskoye deposit

■ New high grade pay shoot discovered at Quartzitovoye, Malomir, with preparations under way to mine it from underground

IRC Update

IRC Ltd. is a producer and developer of industrial commodities with its shares quoted on the Hong Kong Stock Exchange (Stock Code 1029). IRC released its interim results for the six months ended 30 June 2017 on 31 August 2017. The results are available to view on the IRC website at http://www.ircgroup.com.hk.

Key highlights from this report are as follows:

■ K&S is operating at c.50% capacity as at June and ramp-up continues for near full capacity at the year end

■ Threefold revenue increase to US$51.2 million (30 June 2016: US$16.1 million)

■ K&S generated EBITDAu of US$14 million

■ Production and sales volumes of iron ore concentrate more than tripled

- Production volume up 271% to 697,431 tonnes (30 June 2016: 188,111 tonnes)

- Sales volume up 218% to 698,632 tonnes (30 June 2016: 219,352 tonnes)

■ Net operating gain of US$2.3 million (30 June 2016: loss of US$11.4 million)

■ Loss for the period reduced to US$9.7 million (30 June 2016: loss of US$9.9 million)

■ ICBC agreed to restructure loan repayment schedule, including full principal repayment holiday in 2017

CEO Comments

Commenting on the announcement, Sergey Ermolenko, Acting Chief Executive Officer, said:

Operationally, the Company had a positive first half of the year with a 19% year on year increase in total gold production for the period of c.232,400oz, compared to 195,600oz in H1 2016. As indicated in the H1 Update on 18 July 2017, these results were to plan and are the outcome of operational efficiencies and a strong performance in all operational areas across our mines.

The production results are especially encouraging given that the first half of the year is usually weaker than the second half for Petropavlovsk, due to the scheduling of heap leach operations and extensive stripping works in the first half of the year. The decision to introduce underground operations for the mining of high grade material will allow us to plan our mining operations in a smoother manner.

In line with this success, we reiterate our full year forecast for gold production of c.420,000 - 460,000oz, reflecting mainly our conservative approach to planned underground developments.

At the beginning of the year, a dedicated resin treatment facility was established to cost effectively improve the processing efficiency of resin at the Group's Resin in Pulp plants. The implementation of these upgrades has been successful as measured by the positive contribution towards gold production throughout the first half of the year. Following these improvements, the Company moved to using gold poured as the definition for production, bringing production reported in line with production sold and thereby reducing the impact of GIC.  In our results, comparable 2016 gold production numbers are adjusted accordingly.

Regarding the POX hub, the oxygen plant and other key construction works are progressing well and in places nearing completion as scheduled for 2017, with some outstanding construction at an early stage. More than 80% of the project equipment is on site, including all critical and long lead items. The four 15m x 4m autoclaves are installed and lined with acid resistant lining. All core supporting structures are complete, including the oxygen, autoclave and filtration plants. An independent technical consultancy is monitoring our progress and considers that a one year time frame to complete remaining work is achievable.

We are targeting commissioning of the Malomir flotation plant (Stage 1) in Q4 2017 with flotation concentrate production in H1 2018. This is to be followed by oxygen plant commissioning in Q2 2018 and POX Hub commissioning in Q4 2018; the ramp up to commercial production is due to occur throughout 2019.

Underground developments progressed well during the period, advancing 1,446.1m at Pioneer, and 696.9m at Malomir despite delays with contractor mobilisation. We expect scalable production from underground operations by the end of the year.

Following a 1.55Moz increase in JORC non-refractory reserves in 2016, reinforcing our belief in the strong exploration potential of our existing assets, exploration work during 2017 continued to deliver positive results, including the discovery of a new non-refractory deposit Katrin, near Pioneer, and a new high grade pay shoot discovered in May at Quartzitovoye, Malomir. We are preparing to start production from both these new discoveries in the near future.

I am committed to driving operational stability during the transition to new management in my tenure as acting CEO. I will be focusing particularly on the successful implementation of our POX hub and underground development projects, underpinned by smooth and stable work at our producing mines, generating substantial cash flows for further developments. I am very happy to be supported by our team of specialists, whose commitment was clearly demonstrated during the recent Board visit to the mines."

Conference Call

There will be a presentation and conference call with management today at 09.00am and there will be an opportunity for callers to ask questions. The presentation itself will be available via the Petropavlovsk website, http://www.petropavlovsk.net.

Please use the following numbers to dial in to the call, quoting the word 'Petropavlovsk' to the operator:

From the UK 020 3059 8125 or toll free 0800 368 0649

All other locations +4420 3059 8125

Enquiries

For more information, please visit www.petropavlovsk.net and www.ircgroup.com.hk or contact:

Petropavlovsk PLC

Alya Samokhvalova

Grace Hanratty

+44 (0) 20 7201 8900

[email protected]

Maitland

Neil Bennett

James Isola

+44 (0) 20 7379 5151

[email protected]

About Petropavlovsk

Petropavlovsk is one of Russia's leading gold mining companies. As at 30 June 2017, the Company had produced approximately 6.5Moz of gold.

At this time, Petropavlovsk is in the construction phase of a state of the art pressure oxidation facility to process the Company's substantial refractory resource base. The Company's combined 3,600km2 license holding has untapped resource potential. The Company is a leading employer and contributor to the development of the local economy in the Amur region, Russian Far East, where it has operated since 1994.

Petropavlovsk is a shareholder (31.1%) of IRC Limited and is the guarantor of the US$340 million project finance facility (US$234 million principal outstanding as at 31 December 2016). IRC is a vertically integrated iron ore producer and developer in the Russian Far East and Northeastern China. IRC is listed on the Hong Kong Stock Exchange (ticker: 1029.HK).

Petropavlovsk is listed on the Main Market of the London Stock Exchange (ticker POG:LN).

Financial Review

Note: Figures may not add up due to rounding

Financial Highlights

(a) Calculation of total cash costs ("TCC") is set out in the section Hard-rock mines below.

(b) All-in sustaining costs ("AISC") and all-in costs ("AIC") are calculated in accordance with guidelines for reporting all-in sustaining costs and all-in costs published by the World Gold Council. Calculation is set out in the section All-in sustaining costs and all-in costs below.

(c) US$100 million convertible bonds due on 18 March 2020 at amortised cost.

Revenue

Group revenue during the period was US$304.0 million, 20% higher than the US$254.0 million achieved in H1 2016.

Revenue from hard-rock mines was US$291.7 million, 25% higher than the US$234.2 million achieved in H1 2016. Gold remains the key commodity produced and sold by the Group, comprising 96% of total revenue generated in H1 2017. The physical volume of gold sold from hard-rock mines increased by 19% from 195,434 ounces in H1 2016 to 231,760 ounces in H1 2017. The average realised gold priceu increased by 5% from US$1,194/oz in H1 2016 to US$1,255/oz in H1 2017. The average realised gold priceu includes a US$12/oz effect from hedge arrangements (H1 2016: US$(28)/oz).

Hard-rock mines sold 48,182 ounces of silver in H1 2017 at an average price of US$17/oz, compared to 48,124 ounces in H1 2016 at an average price of US$15/oz.

Revenue generated as a result of third-party work by the Group's in-house service companies was US$12.4 million in H1 2017, a US$7.4 million decrease compared to US$19.8 million in H1 2016. This revenue is substantially attributable to sales generated by the Group's engineering and research institute, Irgiredmet, primarily through engineering services and the procurement of materials, consumables and equipment for third parties, which comprised US$11.4 million in H1 2017 compared to US$17.5 million in H1 2016.

Cash flow hedge arrangements

In order to increase certainty in respect of a significant proportion of its cash flows, the Group has entered into a number of gold forward contracts.

Forward contracts to sell an aggregate of 99,998 ounces of gold matured during the H1 2017 and contributed US$2.8 million to cash revenue (H1 2016: US$(5.5) million net cash settlement paid by the Group from forward contracts to sell an aggregate of 65,828 ounces of gold).

The Group constantly monitors the gold price and hedges some portion of production as considered necessary. Forward contracts to sell an aggregate of 500Koz of gold at an average price of US$1,252 per ounce were outstanding as at 30 June 2017. Forward contracts to sell an aggregate of 479Koz of gold at an average price of US$1,253 per ounce are outstanding as at 11 September 2017.

Underlying EBITDA¨ and analysis of operating costs

(a) Group's share of interest expense, investment income, other finance gains and losses, foreign exchange losses, taxation, depreciation and impairment recognised by an associate (IRC)

Underlying EBITDAu as contributed by business segments is set out below.

Hard-rock mines

During this period, hard-rock mines generated underlying EBITDAu of US$134.5 million compared to US$103.8 million underlying EBITDA in H1 2016.

Total cash costs¨ for hard-rock mines increased from US$663/oz in H1 2016 to US$675/oz in H1 2017. The increase in TCC primarily reflects the effect of Rouble appreciation, inflation of certain Rouble denominated costs and lower recoveries at Pioneer and Malomir, which was compensated by a mining tax concession the Group continued to apply in H1 2017. The increase in the average realised gold priceu from US$1,194/oz in H1 2016 to US$1,255/oz in H1 2017 and the increase in physical ounces sold had a US$33.3million positive contribution to underlying EBITDAu in H1 2017. This effect was offset by the increase in total cash costsu, which had a US$2.6 million impact on the underlying EBITDA¨.

The key components of the operating cash expenses are wages, electricity, diesel, chemical reagents and consumables, as set out in the table below. The key cost drivers affecting the operating cash expenses are stripping ratios, production volumes of ore mined and processed, grades of ore processed, recovery rates, cost inflation and fluctuations in the Rouble to US Dollar exchange rate.

Compared with H1 2016 there was ongoing inflation of certain Rouble denominated costs, in particular, electricity costs increased by up to 12% in Rouble terms (increased by up to 37% in US Dollar terms) and the cost of diesel increased by up to 9% in Rouble terms (increased by up to 33% in US Dollar terms). An 18% appreciation of the Rouble against the US Dollar has occurred during H1 2017 compared to H1 2016, with the average exchange rate for the period going from 70.54 Roubles per US Dollar in H1 2016 to 57.93 Roubles per US Dollar in H1 2017.

Refinery and transportation costs are variable costs dependent on production volume. Mining tax is also a variable cost dependent on production volume and the gold price realised. The mining tax rate is 6%. The Group continued applying a two-year mining tax concession.

(a) Excluding deferred stripping

All-in sustaining costs¨  and all-in costsu

AISCu  increased from US$762/oz in H1 2016 to US$965/oz in H1 2017. The increase in AISCu  reflects the sustaining capital expenditure, primarily in relation to Pioneer and Malomir underground projects and expansion of tailing dams at Pioneer and Albyn, ongoing exploration focused on near mine resource expansion, prospective stripping at Albyn in advance of the mining in 2018 and the increase in central administration expenses.

AICu  increased from US$761/oz in H1 2016 to US$1,044/oz in H1 2017, primarily reflecting the increase in AISCu  explained above and capital expenditure in relation to the POX project.

(a) Refractory ore stockpiles to be processed at the POX Hub.

Corporate and other

The Group has corporate offices in London, Moscow and Blagoveschensk, which together represent the central administration function. Central administration expenses increased by US$10.0 million from US$13.1 million in H1 2016 to US$23.1 million in H1 2017. The increase in central administration expenses is primarily attributed to a US$5.2 million increase in staff costs, mainly as a result of the proposed key management bonus accrual, an increase in Russian staff costs due to the appreciation of RUB against US Dollar and general increase in Russian salaries, and US$4 million professional fees incurred in relation to corporate projects.

During H1 2017, other operations contributed US$(20.3) million to underlying EBITDA vs. US$(15.8) million in H1 2016. Included in result of corporate and other operations in H1 2017 is a US$3.0 million share in losses generated by IRC.

Interest income and expense

The Group earned US$0.4 million interest income on its cash deposits with banks.

Interest expense for the period was comprised of US$6.0 million effective interest on the Convertible Bonds and US$24.3 million interest on bank facilities (H1 2016: US$5.9 million and US$24.5 million, respectively). A further US$16.0 million of this interest expense was capitalised as part of mine development costs within property, plant and equipment (H1 2016: US$nil).

Other finance gains and losses

-

Other finance gains for the period comprised US$2.0 million compared to US$2.3 million in H1 2016. Included in other finance gains is a financial guarantee fee of US$2.0 million (H1 2016: US$2.3 million) charged in connection with the ICBC facility.

Other finance losses for the period comprised US$6.1 million compared to US$1.5 million in H1 2016. Included in other finance losses are US$5.8 million (H1 2016: US$1.5 million) fair value losses on the revaluation of the embedded option for the bondholders to convert into the equity of the Company and a US$0.4 million (H1 2016: US$nil) loss on bank debt refinancing.

Taxation

The Group is subject to corporation tax under UK, Russia and Cyprus tax legislation. The average statutory tax rate for H1 2017 was 19.5% in the UK and 20% in Russia.

The tax charge for the period arises primarily in relation to the Group's gold mining operations and is represented by a current tax charge of US$19.9 million (H1 2016: US$15.0 million) and a deferred tax charge, which is a non-cash item, of US$2.4 million (H1 2016: deferred tax credit of US$19.5 million). Included in the deferred tax is a US$4.5 million credit (H1 2016: US$17.6 million credit) arising foreign exchange effect which primarily arises because the tax base for a significant portion of the future taxable deductions in relation to the Group's property, plant and equipment are denominated in Russian Roubles, whilst the future depreciation charges associated with these assets will be based on their US Dollar carrying value.

During the period, the Group made corporation tax payments in aggregate of US$14.4 million in Russia (H1 2016: corporation tax payments in aggregate of US$19.3 million in Russia).

Earnings per share

Basic profit per share for H1 2017 was US$0.01 compared to US$0.00 basic profit per share for H1 2016. The key factor affecting the basic profit per share was the increase of net profit for the period attributable to equity holders of Petropavlovsk PLC from the net profit of US$9.2 million for the first half of 2016 to US$23.3 million net profit for the first half of 2017.

The total number of Ordinary Shares in issue as at 30 June 2017 was 3,303,768,532 (30 June 2016: 3,303,768,532).

Financial position and cash flows

(b) Including US$41.8 million cash CAPEX

Key movements in cash and net debt

As at 30 June 2017, there were no undrawn facilities available to the Group.

Capital expenditure ¨

The Group invested an aggregate of US$41.8 million in H1 2017 compared to US$11.9 million in H1 2016. The key areas of focus this year were on the POX project, for which active development was recommenced ahead of scheduled commissioning in 2018, exploration and development to support the underground mining at Pioneer and Malomir, expansion of tailing dams at Pioneer and Albyn and ongoing exploration related to the areas adjacent to the ore bodies of the Group's main mining operations.

Following the recommencement of active development of the POX project and the development of Pioneer and Malomir underground mining operations, the Group capitalised US$16 million of interest expense incurred in relation to the Group's debt into the cost of the aforementioned assets.

(a) Including US$15.5 million of development expenditure in relation to the POX Hub which is considered to be non-sustaining capital expenditure for the purposes of calculating all-in sustaining costs and all-in costs.

(b) Including US$7.5 million of expenditure in relation to the underground mining project at Pioneer to be sustaining capital expenditure for the purposes of calculating the all-in sustaining costs and all-in costs.

(c) Including US$2.2 million of expenditure in relation to the underground mining project at Malomir to be sustaining capital expenditure for the purposes of calculating the all-in sustaining costs and all-in costs.

(d) Including US$1.3 million of expenditure in relation to Malomir flotation (including tailing dams), which is considered to be non-sustaining capital expenditure for the purposes of calculating all-in sustaining costs and all-in costs.

Foreign currency exchange differences

The Group's principal subsidiaries have a US Dollar functional currency. Foreign exchange differences arise on the translation of monetary assets and liabilities denominated in foreign currencies, which for the principal subsidiaries of the Group are the Russian Rouble and GB Pounds Sterling.

The following exchange rates to the US Dollar have been applied to translate monetary assets and liabilities denominated in foreign currencies.

The Rouble recovered by 3% against the US Dollar during H1 2017, from RUB60.66 : US$1 as at 31 December 2016 to RUB59.09 : US$1 as at 30 June 2017. The average year-on-year appreciation of the Rouble against the US Dollar was approximately 18%, with the average exchange rate for H1 2017 being RUB57.93 : US$1 compared to RUB70.54 : US$1 for H1 2016. The Group recognised foreign exchange losses of US$0.5 million in H1 2017 (H1 2016: US$5.9 million) arising primarily on Rouble denominated net monetary assets.

- Contingent liabilities

The Group applies a two years mining tax concession since 1 July 2016 in its capacity of a participant to the Regional investment project in accordance with the Russian Federal Law 144-FZ dated 25 May 2016. The position of the Russian tax authorities is that the effective date for the aforementioned concession should be 1 January 2017 and, accordingly, the Group should be liable for the mining tax of approximately RUB1 billion (an equivalent of approximately US$16.9 million as at 30 June 2017) for the six month period to 31 December 2016. The matter is currently being considered by the courts. To date decisions made by the Tribunal which took place in May 2017 and the Court of Appeal which took place in August 2017 have not been in favour of the Group. The Group continues to consider its interpretation of relevant tax legislation and tax filing position are appropriate and has filed an appeal to the Cassation Court accordingly.

- Going concern

The Group monitors and manages its liquidity risk on an ongoing basis to ensure that it has access to sufficient funds to meet its obligations. Cash forecasts are produced regularly based on a number of inputs including, but not limited to, forecast commodity prices and impact of hedging arrangements, Group mining plan, forecast expenditure and debt repayment schedules. Sensitivities are run for different scenarios including, but not limited to, changes in commodity prices, cost inflation, different production rates from the Group's producing assets and the timing of expenditure on development projects. This is done to identify risks to liquidity and covenant compliance and enable management to develop appropriate and timely mitigation strategies. The Group meets its capital requirements through a combination of sources including cash generated from operations and external debt.

The Group performed an assessment of the forecast cash flows and covenant compliance in relation to bank facilities for the period of 12 months from the date of approval of the Half Year Report for the period ended 30 June 2017. As at 30 June 2017, the Group had sufficient liquidity headroom and complied with related financial covenants. Following the successful completion of the Bank Debt Refinancing, the Group is also satisfied that it has sufficient headroom under a base case scenario for the period to September 2018 and expects to comply with related financial covenants. In the meantime, the Group's projections under a layered stressed case that is based on US$1,125/oz gold price, which is at the bottom end of market consensus forecasts, indicate that unless mitigating actions can be taken, there will be insufficient liquidity and non-compliance with certain covenants under a layered stressed case for the relevant period to September 2018. These mitigating actions include items within the control of the management, such as accessing deposits not currently in the Group's mining plan, cost cutting and reduction of capital expenditure subject to receipt of necessary consents. These actions would account for approximately 50% of the forecast shortfall under the layered stressed case. Furthermore, management would also pursue raising additional equity, refinancing the existing debt and/or divesting the shares in IRC including an immediate settlement of any amounts of the guarantee fee outstanding to fully mitigate any shortfalls. Management is also reasonably confident that necessary waivers or consents could be obtained from the senior lenders if necessary. If a missed debt repayment occurs or financial covenant requirements are not met, this would result in events of default which, through cross-defaults and cross-accelerations, could cause all other Group's debt arrangements to become repayable on demand.

The Group has guaranteed the outstanding amounts IRC owes to ICBC. The outstanding loan principal was US$234 million as at 30 June 2017. The assessment of whether there is any material uncertainty that IRC will be able to repay this facility as it falls due is another key element of the Group's overall going concern assessment. IRC has agreed with ICBC to restructure and reschedule two repayment instalments under the ICBC Facility Agreement, which were originally due for payment on 20 June 2017 and 20 December 2017, with the next repayment instalment due on 20 June 2018. IRC also obtained waivers from ICBC in respect of obligations to maintain certain cash deposits with ICBC until 30 June 2018 and obligations to comply with certain financial covenants until 31 December 2017 (inclusive). Following the ramp up and commercial production at K&S, IRC management are forecasting that IRC will have sufficient capital through working capital to pay its financial obligations as and when they fall due in the foreseeable future and throughout the going concern period. However, if scheduled full commercial production of the K&S project is not achieved or the market conditions turn out to be significantly less favorable than predicted IRC's financial liquidity may be adversely impacted. IRC would then need to carry out contingency plans including entering into negotiations with banks or other investors for additional debt or equity financing.

Having taken into account the aforementioned factors and after making enquiries and considering the uncertainties described above, the Directors have a reasonable expectation that the Group will have adequate resources to continue in operational existence for the foreseeable future, being at least the next 12 months from the date of approval of the Half Year Report for the period ended 30 June 2017. Accordingly, they continue to adopt the going concern basis of accounting in preparing the interim consolidated financial statements for the period ended 30 June 2017.

2017 Outlook

The Group is confident it can achieve 2017 production guidance of 420 - 460Koz. The Group's operating cash expenses are substantially Rouble denominated. The Group expects its total average cash costs of production in 2017 to be c.US$700/oz at current exchange rates. Net debt is expected to decrease to c.US$560 million by the end of 2017, assuming an average gold price of US$1,265/oz for the remainder of 2017.

Operations Report

Pioneer

Note: from the beginning of 2017, the Company moved to using gold poured as the definition for production

The main sources of low grade ore were pits of the Alexandra, Yuzhnaya and Promezhutachnaya zones. This ore was blended with lower grade material from stockpiles.

Heap leach operations commenced on schedule in April.

The development of the North East Bakhmut underground mine progressed as planned. Underground work during H1 totaled c.1,446m. The first ore was mined in June - c.3.5kt with an average gold content of c.2.7 g/t. As per the mine plan, production began at a low grade 'bridge' area between North East Bakhmut 2 and 3. Ore grades are expected to improve as mining moves into the higher grade North East Bakhmut 3 zone.

The significant increase in doré gold production in relation to gold recovered is mainly due to the successful implementation of measures for cleaning resin, and the resulting reduction in gold in circuit.

In H2, the main sources of low grade ore are expected to be Alexandra, Yuzhnaya and Andreevskaya West, with high grade ore to be mined from NE Bahkmut via underground.

The H2 gold production forecast for Pioneer is c.73,000-98,000oz.

Pokrovskiy

Note: from the beginning of 2017, the Company moved to using gold poured as the definition for production

The Zeyskaya and Vodorazdelnaya zones were the main sources of low grade ore, which was blended with ore from stockpiles. This contributed to the decrease in processing recovery at the plant compared to H1 2016, due to the technological qualities of ores from stockpiles (initially scheduled), which were worse than expected.

Heap leaching began in April in line with the mining plan.

In H2, the main sources of low grade ore (c.15,000oz) are again expected to be Zeyskaya and Vodorazdelnaya.

Malomir

Note: from the beginning of 2017, the Company moved to using gold poured as the definition for production

The main sources of low grade ore were pits at the Quartzitovoye and Magnetitovoye zones. Ore from stockpiles also contributed to production.

Construction of an underground mine at Quartzitovoye 1 began in January 2017, after delays due to the late mobilization of equipment by the mining contractor. Since May, the contractor has worked at the scheduled capacity in accordance with the mining plan. In the first half of the year, c.697m of underground workings had been completed. In spite of the delay, the first ore was mined in June - a total of c.4.2kt with an average gold content of c.5.4 g/t.

The volumes of ore treated through the plant were in line with the plan. Recovery rates were lower than planned for H1 2016 due to ore from the Quartzitovoye 2 pit being more refractory than expected. This pit was completed in H1.

In H2, the main sources of low grade ore will be Quartzitovoye 1 and Magnetitovoye. High grade ore will be mined from underground at Quartzitovoye 1.

The Malomir production forecast for the second half of the year is c.20,000-30,000oz.

Albyn

Note: from the beginning of 2017, the Company moved to using gold poured as the definition for production

The main sources of ore were the Central and Eastern zones of the Albyn main pit, with a small amount of ore supplied from stockpiles. The plant operated as normal throughout the year.

In H2, the main source of ore will be the Central zone of the Albyn main pit, with some ore from stockpiles. The gold production forecast for the second half of the year is c.80,000-85,000oz.

Note: figures in this release may not add up due to rounding

Development Projects

POX

POG Refractory Mineral Resource Base

Defined within Petropavlovsk's substantial 20.2Moz JORC resources (including 7.2Moz JORC reserves) are 9.3Moz refractory gold resources (including 4Moz refractory reserves), with underexplored resource upside within the highly prospective 3,600km2 license holding. Unlocking the 9.3Moz refractory resources supports Petropavlovsk's long term growth objectives in doubling the average life of mine and sustaining the production profile.

All Petropavlovsk's defined economic refractory ounces are within the Malomir license area (964km2) and Pioneer license areas (1,375km2). Both areas sit along or above the Mongolo-Okhotskiy mineralised belt. This same belt also hosts a number of large deposits, including Sukhoi Log and Taseevskoe-Baley to the west of the Amur region.

■ Malomir is the only large known refractory deposit within the north east part of the Amur Region and remains largely under explored. 62% of Malomir's JORC reserves are refractory. The area is highly prospective for further resource growth due to favorable geology and alluvial gold deposits, for many of which the hard rock sources are yet to be found

■ In addition to Pioneer's significant non refractory reserves, further refractory resource potential exists within the Pioneer licenses, particularly along the contact between granitoid and Jurassic host rocks, south and south west of the Pioneer RIP plant. 56% of Pioneer's Mineral Resources are refractory.

Construction

In 2010, the POX Hub and the Malomir flotation plant were fully permitted for construction, and in 2011 construction began. It was put on hold in 2013 following the decline in the gold price. The plant (including equipment) was carefully put on care and maintenance to allow active construction to restart in 2017.

Malomir Flotation Plant (nameplate capacity 5.4Mtpa)

The Malomir flotation facility is a staged build plant largely utilising existing crushing and grinding capacities and infrastructure.

■ Stage 1 capacity is 3.6Mtpa across two parallel 1.8Mtpa lines. Stage 1 utilises existing crushers and mills currently used for non-refractory processing. Flotation concentrate production is scheduled for H1 2018. Initially the concentrate will be stockpiled before being transported to the POX Hub ahead of the staged autoclave commissioning from Q4 2018

■ Stage 2 expands the flotation plant to 5.4Mtpa by adding a third 1.8Mtpa line. This will fully calibrate the flotation plant capacity with the existing 6Mtpa crushing and grinding capacity. Stage 2 expansion is scheduled for completion and commissioning in 2019

■ Non-refractory processing will continue using a smaller existing crushing and grinding line and the RIP plant

■ Stage 1 of the Malomir flotation plant is more than 90% complete. During H1 2017, work concentrated on piping, ventilation, and the interior of the flotation building, including fittings, and also work on auxiliary facilities

Pioneer Flotation Plant (nameplate capacity 6.0Mtpa)

The Pioneer flotation plant is scheduled for construction in 2021, ahead of concentrate production from 2023. Like Malomir it will utilise existing crushing and grinding circuits, reducing capital requirements.

POX Hub (nameplate capacity c.500ktpa)

Construction of the POX Hub is now approximately 75% complete. Greater than 80% of the project equipment is on site, including all critical path items and long lead items. The four 15m x 4m autoclaves, each with a volume of 66m3, were received on site, installed and lined in 2013. All core structures are complete including the oxygen, autoclave and filtration plant buildings.

During 2016, the Company renewed key contracts with Outotec. Outotec is responsible for the design and development of the plant. All assembling, installation and commissioning works are carried out under Outotec installation and technical supervision.

In January 2017, the contract was awarded to commence all the piping, welding and assembly works, which are now well under way.

POX Construction Progress

During 2017, the oxygen plant, supporting POX Hub infrastructure and all piping, welding and assembly works are scheduled for completion. The oxygen plant is now very close to overall mechanical completion with only electrical and control/instrumentation construction less than 90% complete. Commissioning of the oxygen plant is scheduled for Q2 2018.

At the autoclave section the civil and structural construction is now 85 to 90% complete. Mechanical construction is 70% complete and progressing well, with all large mechanical equipment, including four autoclave vessels, in place. The major outstanding construction includes piping, electrical construction and control & instrumentation, which is at an early stage but remains on schedule for POX plant commissioning in Q4 2018.

Construction of the filtration building is rapidly progressing with piping, civil and structural construction now 80% complete. The mechanical construction is 45% complete and the installation of the first press-filter is in progress. Piping work, electrical construction and the installation of control & instrumentation is yet to start as per the construction schedule.

The outside construction including thickeners, diesel generators and the steam plant are progressing fast in order to complete the principal outside work before winter. Civil construction is now 80% complete whilst structural construction is 60% complete. The latter mainly relates to large structures and access platforms with piping support - other minor structures are still outstanding. Platework on thickeners is 75% complete and mechanical construction is 50% complete with significant equipment in the steam and diesel generator plant scheduled be installed. Piping, electrical construction and control & instrumentation is yet to be completed.

Construction progress has been monitored by an independent technical consultancy, which considers that a one year time frame to complete the remaining work is very achievable.

During Q4 2017, the Malomir flotation plant (Stage 1) is scheduled for commissioning, whilst flotation concentrate production is due to commence from Q1 2018. In Q4 2018, the POX Hub is scheduled to commence a staged dry and wet commissioning, one autoclave at a time. The ramp up to commercial production is due to occur throughout 2019.

POX Capital Cost

The budget for the POX Hub and flotation plant at Malomir remains unchanged. Of the c.US$120 million outstanding capital estimated as of the beginning of 2017, c.US$16.8 million has been spent during the first six months of 2017. The independent technical consultants who monitor the project noted that based on the current average spend and remaining budget, there is sufficient capital for 20 months; the project is to be completed in eighteen months.

Underground

During H1 2017, development of the underground mines at Pioneer and Malomir progressed towards planned full scale production. The Group is finalising works and establishing safety permits and certifications to start full scale mining in H2 2017.

In H1 2017, development of Pioneer's underground mine declines advanced by 1446.1m. The main ventilation fan has been delivered to the site and is now being installed by a reputable Russian contractor. It is expected to be commissioned by the end of September 2017. The first ore was already mined from the sublevel development in June 2017. At the end of July, a total of 3.5kt of ore at 2.7g/t of gold had been produced from the lower grade zone. Full scale production from the high grade NE Bakhmut No 3 zone is expected to start by the end of 2017.

Despite a slow start at Malomir due to delays with contractor mobilisation, the underground developments advanced 696.9m in the first six months of the year and in July 2017, developments reached the main Quartzitovoye ore body 55. Work on a sublevel drift on level +390m began in August. The first development ore was produced in June 2017 with total production of 4.2kt of ore at 5.4g/t of gold at the end of July 2017.

The first stope mining from ore body 55 will require the lower sublevel at an elevation of +375 to be completed. In addition, a pumping station would need to be constructed and commissioned at the +375m level, as well as a main ventilation facility. An agreement with a reputable Russian contractor has been signed to deliver, install and commission the main ventilation facility before the end of September 2017. Completion of this work and first stope mining is currently expected to commence in Q4 2017.

As reported, a new high grade pay shoot was discovered at Quartzitovoye (zone 49, west of ore body 55). Sublevels +390 and +375 have already been developed here in preparation for mining the first stope. The decision to start mining here will depend on the result of geotechnical assessment into how this may affect declines located nearby.

Because of the conservative approach taken to production guidance, the delays in underground production are currently not expected to impact the Group's 2017 production target.

Exploration

Pioneer

Pioneer's 1,375km2 area offers a number of exploration opportunities for both non-refractory and refractory resources, including potentially high grade exploration targets. As previously reported, the Pioneer exploration program for 2016 was successful, leading to the expansion of Pioneer's non-refractory resources and reserves and the identification of promising new exploration targets. Significant 2016 results include:

■ First NE Bakhmut JORC reserve for underground mining

■ First JORC resource for potential underground mining at Bakhmut-Promezhutochnaya

■ New high grade pay shoot at Andreevskaya

■ Identification of Sosnovaya, a large (9km long) gold-arsenic anomaly, south of Pioneer

■ Discovery of Katrin, a new satellite non-refractory deposit

■ Discovery of extensions at the Brekchievaya and Shirokaya zones in the Alexandra area, north of Pioneer

In the first six months of 2017 the Group continued exploration, focusing mainly on near mine resource expansion. The most notable results of this work include:

■ Discovery of two new zones of non-refractory mineralisation suitable for open pit mining, north of NE Bakhmut No 2

■ Identification of further down dip extensions of the high grade pay shoot at NE Bakhmut No 2, which remains open at depth offering further potential for underground resource and reserve expansion

■ First JORC mineral resources and ore reserves (unaudited) for the Katrin satellite deposit, suggesting it offers an immediate opportunity to provide high grade open pit ore

Drilling and trenching also confirmed the presence of large scale refractory gold mineralisation at the Sosnovaya anomaly, although the grade of the intersections is too low to represent an immediate interest.

Katrin

Katrin is a high grade non-refractory satellite deposit situated south of Pioneer within the same geological setting to the Zheltunak deposit, which has been mined since 2011 producing 926kt of ore at an average grade of 1.91g/t Au (57koz of contained gold). To date, five individual ore bodies were discovered and explored. Three out of the five orebodies have sufficient exploration to support a JORC resource estimate. These three have a JORC resource of 32koz including c.26koz of Indicated resource, at a grade of 2.53g/t and c.6koz of Inferred at a grade of 1.29g/t. This estimate is yet to undergo an independent technical audit.

Katrin is hosted within a 1km long silification zone within Cretaceous volcanites. The zone is open in both strike directions as well as down-dip, offering the opportunity for further discoveries. Two ore bodies, which are yet to be explored and included in the resource estimate, have already been identified. One of them is located 200m south from Ore Body 1 and another north-west from Ore Body 3. Furthermore, drilling in August 2017 discovered extensions to the Ore Body No 3 that are yet to be included in the estimate. Significant high-grade drill intersections from these new discoveries include:

■ 8.5m @ 2.9g/t (drill hole C-511-5, interval 73.5-82.0m)

■ 2.0m @ 4.12g/t (drill hole C-515-29, interval 8.0-12.0m)

■ 4.0m @ 3.97g/t (drill hole C-515-32, interval 76.0-80.0m)

■ 3.7m @ 5.38g/t (drill hole C-519-21, interval 113.0-116.7m)

■ 7.0m @ 2.52g/t (drill hole C-518-17, interval 60.8-67.8m)

NE Bakhmut

Underground resource and reserve exploration took place at NE Bakhmut (surface and underground drilling and underground development). In 2017, the most significant results were in the NE Bakhmut No 2 area. Two new zones of mineralisation potentially suitable for open pit mining were discovered north from the depleted pit at NE Bakhmut No 2. The Oblomochnaya zone, which has been extensively explored, is being prepared for open pit mining and should contribute to the 2017 and 2018 production profile. It is a shallow, sub-horizontal mineralised zone only 30-35m below the surface. Geological interpretations suggest this zone was formed as a result of the NE Bakhmut hard rock orebody being eroded and material being deposited, forming a soft oxide mineralised seam which later was buried under a layer of Neogenic sand formation. The unaudited resource estimate suggests Oblomochnaya contains c.23koz of JORC gold resources, of which c.19koz at 0.98g/t is Indicated and 4.5koz at 1.05g/t is Inferred. Metallurgical tests have confirmed that the material is suitable for RIP processing. It is expected that both the overburden and the ore will be amenable to free digging, making it a low cost open pit mining target.

In the course of Oblomochnaya exploration, a second new zone was identified directly below Oblomochnaya. To date, it has been intersected by only three drill holes, with the best intersections including 5.3m at 1.64g/t and 5.2m at 7.56g/t. It remains open in a down dip direction and in both strike directions.

Surface drilling proved a high grade pay shoot mined from open pit at NE Bakhmut No 2 to a depth of 140m below the pit floor. The best deep intersection is 19.6m @ 10.90g/t. The pay shoot is 145m long and remains open in a down dip direction. There are several further high grade intersections including [email protected]/t and [email protected]/t, which belong to smaller parallel zones and/or apophysis; these await follow up exploration and inclusion in the resource model.

In-fill underground drilling continued at a 'bridge' area between pay shoots at NE Bakhmut No 2 and 3. It did not result in changes to the overall resources or reserves - the results are in line with earlier exploration.

Alexandra Area

In 2017, drilling discovered additional low grade mineralisation at the Shirokaya zone (profile 976) with the following drill intersections:

■ 135.2m @ 0.48g/t (drill hole C-9244)

■ 122.0m @ 0.71g/t (drill hole C-9245)

■ 136.0m @ 0.50g/t (drill hole C-9246)

■ 30.0 @ 0.42g/t (drill hole C-9247)

These drill holes did not exit from the mineralisation, which appears to be a bulk stockwork potentially suitable for open pit mining. Mineralisation is expected to be refractory, which is typical for Shirokaya.

Nikolaevskaya

Exploration continued at south west extensions of the Nikolaevskaya zone with eight drill holes and seven trenches completed in H1 2017. A strike extension exceeding 1,200m in length has been proven. The gold mineralisation discovered is relatively narrow, not particularly high grade and refractory, which is typical for Nikolaevskaya.

The best drill intersections for 2017 include:

■ 1.9m @ 4.02g/t (drill hole C-9355, interval 36.2 - 38.1m)

■ 2.9m @ 1.41g/t (drill hole C-9354, interval 29.3 - 32.2m)

■ 1.6m @ 2.35g/t (drill hole C-9386, interval 44.7 - 46.3m)

This mineralisation is yet to be modelled and included in JORC resource estimates.

Sosnovaya

Trenching and drilling completed in late 2016 at a 9km long geochemical anomaly at Sosnovaya confirmed the presence of low grade gold mineralisation with selected intersections including:

■ 14.2m @ 0.80g/t (drill hole C-182-4, interval 26.7 - 40.9m)

■ 42.6m @ 0.31g/t (drill hole C-599-11, interval 36.4 - 79.0m)

■ 1.3m @ 1.14g/t (trench K-622-3, interval 227.5 - 228.8m)

Mineralisation discovered so far is too low grade to represent an immediate economic interest. However, since almost every drill hole completed intersected bulk gold grade halos (0.1 - 0.3g/t) indicating extensive hydrothermal processes, these results are still considered encouraging. Group geologists are analysing results, updating their exploration model and intend to continue exploring this target in the future.

Geochemical surveys and geological traversing started at two other early stage exploration targets, Aprelskiy and Talali (Sosnovaya). Aprelskiy is located c.10km west from the Pioneer RIP plant within an area of extensive historical alluvial mining. Talali is located west from the Alexandra deposit and c.20km north west from the Pioneer plant on the same tectonic structure that hosts Alexandra, and also within an area of historical alluvial production. The results of this work are expected to be available in H1 2018.

Albyn

Ulgen

In 2017, exploration also continued at Ulgen, located c.30km south west from the Albyn plant in an area of extensive historical alluvial gold production. The best new trench intersections include [email protected]/t, [email protected]/t and [email protected]/t. Exploration completed to date, which includes 80m to 350m spaced trenches and six drill holes, proved gold mineralisation extends along the strike for 3km. It remains open in both strike directions as well as in a down dip direction. Exploration results at Ulgen are very encouraging as there are many similarities with Elginskoye, where JORC Resources and Reserves currently stand at 2.8Moz. No further exploration is planned at Ulgen in 2017 as due to its remote location and lack of local infrastructure it is unlikely to offer an immediate production upside. Ulgen remains a significant exploration target and work is expected to continue in the future.

Unglichikan

In 2017, exploration at Unglichikan continued with drilling at the south group of the mineralised zones over a strike length of 1,200m. The 2017 drilling results confirmed known mineralisation and extended it down dip to a depth of 90 to 130m from the surface. The last down dip intersections include 4.7m at 5.34g/t, 14.7m at 2.97g/t, and 0.8m at 26.9g/t where both grade and thickness appear to increase with depth, suggesting there may also be potential for underground mining at Unglichikan. The 2017 drilling results are yet to be incorporated into the JORC resource model.

Malomir

Following successful exploration drilling at Quartzitovoye in 2016, a maiden non-refractory reserve of 207koz @ 5.85g/t was defined in 2017, underpinning an initial six year production plan for high grade underground mining. 2016 drilling confirmed that high grade mineralisation remains open at depth, with the deepest holes greater than 440m below the surface (245m below the open pit floor), intersecting attractive grades and thicknesses.

In May 2017, underground developments at Quartzitovoye led to the discovery of a previously unknown high grade pay shoot producing three intersections: 5.32m @ 69.9g/t, 1.8m @ 42.9 g/t and 1.01m @ 12.2 g/t. The pay shoot is steep dipping and hosted within low grade zone No 49 and mined from the open pit, which stopped approximately 90m above. It appears this high grade shoot is controlled by an intersection between the structure of zone No 49, striking north south, and a steep east west contact between plagiogranites and schists.

In preparation for the trial mining, the pay shoot has now been explored by underground workings on 390m and 375m levels. It now has a proven strike length of c.55m, an average thickness of c.3m with an average grade of c.14g/t and grades of up to 458g/t in selected samples. It remains open in both up and down directions. It is also considered possible that other similar pay shoots could be discovered within zone 49, which has a total strike length of 280m.

Underground development has now reached the main high grade Quartzitovoye orebody 55, intersecting it in two points on a 390m level at the north and in the centre. Underground sampling results are in agreement with the drill hole data and the resource model.

FY17 Outlook

The Company reconfirms its full year production forecast of c.420,000 - 460,000oz, maintaining this range in case of possible delays in scalable production from underground, whilst the first production from POX is expected as planned.

Total cash costs for the year are expected to be c.US$700/oz at current exchange rates, at the upper end of original guidance (US$600 - 700/oz). Net debt is expected to decrease to c.US$560 million, assuming an average gold price of US$1,265/oz for the rest of the period.

Forward contracts to sell an aggregate of 500Koz of gold over a period from July 2017 to December 2019 at an average price of US$1,252/oz were outstanding as at 30 June 2017.

IRC

IRC Ltd. is a producer and developer of industrial commodities with its shares quoted on the Hong Kong Stock Exchange (Stock Code 1029). IRC released its interim results for the six months ended 30 June 2017 on 31 August 2017, highlights from which are described below.

During the period, satisfactory progress was made with the ramp up of K&S, IRC's key development project, which is now producing significant volumes of concentrate (over one million tonnes since inception). The plant was operating at c.50% capacity as at June 2017. IRC remains confident in resolving the outstanding issues and aims at operating the plant at close to full capacity by the end of 2017.

IRC enjoyed a threefold increase in revenue for the period to US$51.2 million (30 June 2016: US$16.1 million), whilst K&S generated EBITDAu of US$14 million. Overall, IRC made a net operating gain of US$2.3 million (30 June 2016: loss of US$11.4 million), and the loss for the period fell to US$9.7 million (30 June 2016: loss of US$9.9 million).

The production and sales volumes of iron ore concentrate more than tripled, with production volume up 271% to 697,431 tonnes (30 June 2016: 188,111 tonnes), and sales volume up 218% to 698,632 tonnes (30 June 2016: 219,352 tonnes).

Finally, ICBC agreed to restructure the loan repayment schedule, including a full principal repayment holiday in 2017.

The full report is available to view on the IRC website at http://www.ircgroup.com.hk 

Principal Risks and Uncertainties

The Group is exposed to a variety of risks and uncertainties which could significantly affect its business and financial results. A detailed review of the key risks facing the Group is set out in the Risks to Our Performance section on pages 22 to 33 of the 2016 Annual Report, which is available on the Group's website, www.petropavlovsk.net. This also includes a description of the potential impact of such risks on the Group together with measures in place to manage or mitigate against each specific risk where this is within the Group's control.

The Board's view of the principal risks that could impact the Group for the remainder of the current financial year remain largely unchanged from those set out in the 2016 Annual Report, with the exception of the matter detailed below under 'Funding and liquidity'.

The principal risks relate to the following:

Operational risks

■ Production

■ Exploration

■ The quality and quantity of the Group's Mineral Resources and Ore Reserves

■ Projects, specifically in relation to the POX and underground mining projects

Financial risks

■ Funding and liquidity: The Group is satisfied that it has sufficient headroom under a base case scenario for the period to September 2018 and expects to comply with related financial covenants. However, under a layered stress case the Group's projections indicate that there will be insufficient headroom and non-compliance with certain covenants unless certain mitigating actions are taken. Further details are provided in the 'going concern' section of this interim announcement.

■ Gold price

■ Foreign exchange

■ IRC

Health, safety and environmental risks

■ Safety of our employees and third parties

Legal and regulatory risks

■ The various licences and permits which are needed by the Group in order to operate

■ Operating in Russia

Directors' Responsibilities Statement

We confirm that to the best of our knowledge:

■ The condensed set of financial statements, which has been prepared in accordance with IAS34 "Interim Financial Reporting" as endorsed and adopted by the European Union, gives a true and fair view of the assets, liabilities, financial position and profit or loss of the company, or the undertakings included in the consolidation as a whole as required by DTR4.2.4R;

■ The interim management report includes a fair review of the information required by DTR4.2.7R (indication of important events and their impact, and description of principal risks and uncertainties for the remaining six months of the financial year); and

■ The interim management report includes a fair review of the information required on related party transactions as required by DTR4.2.8R.

By order of the Board,

Ian Ashby Andrey Maruta

Chairman Chief Financial Officer

11 September 2017

Independent Review Report (Auditors)

INDEPENDENT REVIEW REPORT TO PETROPAVLOVSK PLC

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 which comprises the income statement, the balance sheet, the statement of changes in equity, the cash flow statement and related notes 1 to 24. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Deloitte LLP

Statutory Auditor

London, United Kingdom

11 September 2017

Consolidated Financial Statements

PETROPAVLOVSK PLC

Condensed Consolidated Income Statement

Six months ended 30 June 2017

PETROPAVLOVSK PLC

Condensed Consolidated Statement of Comprehensive Income

Six months ended 30 June 2017

PETROPAVLOVSK PLC

Condensed Consolidated Balance Sheet

At 30 June 2017

(a) See note 2 for details regarding the restatement.

This condensed consolidated interim financial information was approved by the Directors on 11 September 2017.

Ian Ashby Andrey Maruta

Director Director

PETROPAVLOVSK PLC

Condensed Consolidated Statement of Changes in Equity

Six months ended 30 June 2017