21st Sep 2006 07:03
Peter Hambro Mining PLC21 September 2006 PETER HAMBRO MINING plc Interim Results Peter Hambro Mining plc is pleased to present the results of a successful half year's activity. Highlights 6 months to 6 months to Variance 12 months to 30/6/2006 30/6/2005 for period 31/12/2005Total attributable gold production, oz* 108,363 102,178 6% 249,000Pokrovskiy Rudnik gold production, oz 93,600 84,600 11% 185,700Pokrovskiy Rudnik average gold price received (US$/oz) US$573 US$422 36% US$442Pokrovskiy Rudnik Cash Operating Cost (GIS US$/oz) US$135 US$149 -9% US$125Operating profit, US$'000 19,890 8,022 148% 17,490Earnings per share, US$ 0.140 0.079 77% 0.17\* Total attributable gold production is comprised of production of the Group's subsidiaries, share of production in joint ventures and other investments. Results Results for the first six months of 2006 (the "Period") for Peter Hambro Mining Plc ("PHM" or "the Group") compared to the equivalent period of 2005: • The Group attributable gold production increased by 6% to 108,363 oz (first 6 months of 2005 - 102,178oz); • Average realised gold sales price was US$573/oz - up by 36% (first 6 months of 2005 - US$422/oz). The Group remains unhedged; • Gold Institute Standard Cash Operating Costs at Pokrovskiy were 9% lower than the same period during the previous years at US$135/oz (first 6 months of 2005 - US$149/oz); • Operating profit c.US$20m - 148% up compared to the same period of 2005 (first 6 months of 2005 - c.US$8m); • Pokrovskiy gold recoveries have recently increased due both to a number of technological improvements and longer leach times; • Pioneer confirmation work shows excellent correlation between geochemical and geophysical predictions. Out of 22 predictions of high-grade ore columns, 8 have been explored so far and 8 confirmed; • The full feasibility study documentation on Pioneer is expected to be submitted to the State Committee on Reserves and Resources for approval in March 2007 following their preliminary visit to the site. Heap leach production scheduled to start in 2007 with first recoveries in the forth quarter; • Malomir - major ore column discovered at North-East end of the Diagonal zone; • The full feasibility study documentation on Novogodnee Monto is expected to be submitted to the State Committee on Reserves and Resources for approval by the end of 2006; • Positive results received from the ten active exploration programmes. Chairman's Statement The first six months of 2006 have been very satisfactory; and it is particularly gratifying to be able to report a 148% increase in pre-tax profits and a 77% increase in earnings per share compared to the same period last year. This was achieved in a year with unusually cold weather conditions in Russia. The result is also remarkable because Pokrovskiy's GIS cash operating costs decreased, on a like for like basis, by 9% while the prices of its consumables have risen sharply. Cement is up by 37%, diesel is up by 26%, cyanide by 18%, explosives by 14% and electricity by 7%. The decrease in costs has been achieved by further improvement in expenditure controls at the operational level and the improvement of profit-oriented financial discipline. In addition, efficient use of waste material for the construction of haul roads to Pioneer lowered GIS costs by approximately US$17/oz. The Group is always conscious of the health and safety risks inherent in the mining industry and has not allowed cost control and profit maximisation to compromise its efforts to use best practice in the all important need to look after its employees and the environment. Fortunately the price of gold was also buoyant during the period but the average 36% increase in the Group's sale price is only a small part of its increased profitability. Progress on the Group's new near-term production targets at Pioneer, Malomir, Pokrovskiy flanks and Yamal properties is on track and an increase in earnings fits the Group's objective of having profitable production as the platform for its substantial organic growth programme. By the middle of 2007 it is anticipated that the Group will have received approvals of mining plans on three new properties.Exploration on the Group's extensive portfolio of longer term projects has continued and on several there are preliminary indications of potential to host the next Pioneer or Malomir. However the near-term projects have been given higher priority for the time being. The Group has received its semi-annual report produced by independent geological consultants, Resource Computing International and the geological information in the half-year results is derived from this report. To my mind, the most important element of this report is the confirmation of our geologists' resource predictions at Pioneer based on geochemical and geophysical survey results. Here the Group's geologists forecast 22 high-grade ore columns and so far, on the 8 sites they have explored, we have achieved a 100% success ratio. The State Commission on Reserves and Resources made a preliminary visit to Pioneer and, following this, it is expected that the feasibility study, which is due to be delivered in the first quarter of 2007, will be based on lower cut-off grades and greater mining depths than our previous expectations and contains the restated reserves and resources. I hope that the geological information we have included will give shareholders an insight into the extent of the exceptional exploration portfolio that the Group has acquired in Russia at a time when many Western producers are finding it hard to replace mined out reserves. Organic growth of this nature remains the core of our growth strategy while, at the same time, we continue the development of our near-term assets. Prospects for the remainder of the year are encouraging, as production is slightly ahead of our forecasts, and the world-wide price of gold continues to reflect the fears of investors about stagflation and geopolitical instability. Peter Hambro Executive Chairman Group Operations Report Pokrovskiy During the Period, 93,600oz of gold were recovered compared to 84,600oz during the same period of 2005 due to achievement of stable operations at the gold extraction plant at the newly increased throughput capacity of 1.8mtpa of ore. Work continues on further expansion, to bring the throughput capacity of the plant to 2.2mtpa of ore, in the second half of the year. Pokrovskiy operations achieved a remarkable decrease in unit operating costs, in spite of increases in raw material and energy costs of c.20%, average rouble appreciation of c.3% and the mining of harder ore. This was the result of an improved comprehensive cost control policy. In addition to the equipment bought in 2004-2005, a further five 45-tonne capacity Belaz trucks were acquired and put into use. Pokrovskiy Rudnik Processing Operations 6 months to 30 June Units 2006 2005* Var %Resin in Pulp Plant Ore from pit t '000 608.5 410** +48%Average grade g/t 3.85 4.9 -21%Ore from warehouse t '000 108.5 - n/aAverage grade g/t 4.14 - n/aOre from stockpile t '000 101.5 281 -64%Average grade g/t 3.0 2.4 +25%Total milled t '000 818 691 +18%Average grade g/t 3.8 3.9 -3%Gold content oz '000 99.6 86.5 +15%Recovery rate % 86.6% 92.2% -6%Gold recovered oz '000 86 80 +8%Heap Leach Ore stacked t '000 345 341 +1%Average grade g/t 1.0 1.4 -29%Gold content oz '000 11 16 -31%Recovery rate % 68.3% 31.0% +120%Gold recovered oz '000 7 5 +40%Total Gold recovered oz '000 93.6 84.6 +11%* Certain comparative numbers have been rounded up.** Comparative number includes c.7,500 tonnes of ore from Pioneer deposit. Mining Pokrovskiy Rudnik Mining Operations 6 months to 30 June Units 2006 2005 Var %Mining Total material moved m3'000 2,624 2,427 +8%Ore mined t '000 889 616 +44%Average grade g/t 3.2 3.7 -14%Gold content oz '000 90.9 73.8 +23%Including high grade ore t '000 608.5 402 +51%Average grade g/t 3.85 4.9 -21%Gold content oz '000 75.5 64 +18%Note: Comparative numbers for Pokrovskiy Rudnik Mining Operations in 2005 have been amended relative to previous disclosure to reflect the fact that data provided for Pioneer mining operations is now shown separately (see below). Resin in Pulp Plant 818,000 tonnes of ore were treated through the mill in the first half of the year - 18% more than during the same period of 2005 - and the plant's capacity reached an annual rate of 1.8 million tonnes of ore in June 2006. Works on the planned plant expansion and production streamlining are expected to be completed in the second half of the year with the final capacity of 2.2mtpa. Due to the high standard of works undertaken in 2004-2005 for the plant's expansion, the resultant increased capacity of the mill allowed economic processing of lower grade material and increased the total gold produced. Previously this material would have been treated using heap leach technologies which have lower recovery rates than the plant. An increase in the gold price enabled treatment of lower grade material not previously included in the Group's reserves. Some decrease in recovery rates compared to the same period last year (86.6% in 2006 vs. 92.2% in 2005) can be explained by a significant proportion of primary ore being treated through the mill. Technological improvements made to the resin in pulp plant in the first half of the year in order to increase recovery rates from the primary ores resulted in an increase in recovery rates in July and August to 93%. The Group continues to embrace the improvement of technologies and expects to meet its budgeted recovery level of 91% in the second half of 2006. Heap Leach Operations Test work carried out during last year in order to improve heap leach technology proved successful, allowing the application of new methods this year on a larger scale. These new methods involve ore being left on heap leach pads throughout the winter until spring for further leaching and ore for the following year's treatment being stacked on pads during autumn of the previous year. This method allowed the start of the leaching one month earlier than in the previous year and produced 2,000oz of additional gold from these test works, significantly improving recovery rates at the pads under test from 30.7% in the first half of 2005 to 68.3% in the same period of 2006. This will give the Group an opportunity to treat a larger amount of low grade ore through the heap leach process and also to increase recovery rates using this process. It should be noted, however, that the exceptionally cold last winter in Russia caused the stacking of new ore on the pads to be delayed by approximately one month and that heap leach production is generally higher in the warmer, second half of the year. Gold Institute Standard ("GIS") Operating Cost Analysis The Group reports and breaks down Pokrovskiy Rudnik's operating costs according to the internationally recognised GIS following the industry's best practices. The GIS cost analysis for the period is as follows: 6m to 6m to Variance 12m to 30/6/06 30/6/05 31/12/05Pokrovskiy Rudnik All figures reported in US$ per oz of gold producedDirect mining expenses 92.9 97.8 -5% 95Third-party smelting, refining and transportation costs 6.4 4.3 49% 4.5By-product credits (0.5) (0.3) 67% (0.9)Other 36.4 47 -23% 26.8 Cash Operating Costs 135.2 148.8 -9% 125.4 Royalties 36.8 25.2 46% 27.1Production taxes 7.7 7.1 8% 6.2 Total Cash Costs 179.7 181.1 -1% 158.7 Non-cash movement in stock 22.9 15.1 52% 28.6Depreciation/Amortisation 52.4 47.7 10% 42.4 Total Production Costs 255.0 243.9 5% 229.7 Despite increasing input costs, with cement up by 37%, diesel up by 26%, cyanide by 18%, explosives by 14% and electricity by 7%, the total direct mining costs were kept in line with the previous period due to implementation of a tighter expenditure control at the operational level and employing improved profit-oriented financial discipline. An increase in the number of ounces produced also improved the cost per ounce figure. Royalties and refining/transportation costs are in direct correlation with the gold price hence the increase in these costs in the first half of 2006 in comparison with the same period in the previous year. Depreciation and amortisation expenses have changed in line with the increase of production assets caused by the plant and mine fleet expansion. Non-cash movement reflects the cost of mining incurred in the previous periods but accounted for in the first half of 2006 when the actual gold was produced. Pioneer Test mining operations at Pioneer during the first half of 2006 were aimed at finalising geological exploration of the deposit and preparation for its full scale exploitation. Pioneer Test Mining Operations 6 months to 30 June Units 2006 2005 Var %Total material moved m3 '000 392 328 +20%Ore mined t '000 13 36 -64%Average grade g/t 1.3 2.8 -54%Gold content oz '000 0.5 3.2 -84% During the course of the first half of the year, metallurgical studies of Pioneer ore have continued, utilising capacity at the Pokrovskiy main treatment plant and the heap leach facility. Infrastructure planning at Pioneer (for the location of leach pads, process equipment and ancillary buildings) is completed, and the supply of power has been commissioned, comprising a 4MW first stage substation and power line to Pioneer from Pokrovskiy. Contracts for the supply of the equipment were signed during the first half 2006. The feasibility study is scheduled to be finalised in the first quarter of 2007 and subsequently submitted to the State Committee on Reserves and Resources for approval. Omchak Joint Venture ("Omchak JV") Through its subsidiaries the Omchak JV produced c.23,000oz of gold. As almost 80% of the gold produced by the Omchak JV is from alluvial deposits, the majority of production occurs during the warmer second half of the year and the exceptionally cold weather in the area exacerbated the seasonality of the production. The Group's attributable share of production was 11,500oz. This was 32% less compared to the same period in the previous year due to the Group's previously announced decreased share in the Omchak JV, which was down from 65% to 50% in December 2005. This decrease did not affect profitability of the Group because it was offset by an increased production at the higher-yielding Pokrovskiy mine. OOO Zeyazoloto and OOO Noviye Tekhnologii, which were acquired by the Omchak JV in 2005, had a successful six months together producing in total c.1,447oz gold. Alongside their successful production activities, these companies were also involved in the acquisition of local licences for the right to explore and produce alluvial gold at local deposits. New licensed areas acquired in this process have confirmed reserves that are expected to yield a planned annual production of alluvial gold in the Amur region of an additional c.10,000oz gold per year starting in 2007 for some five years. The Uduma deposit located in the Sakha Republic (Yakutia) was also acquired by Omchak in 2005. Evaluation works were carried out at this deposit in order to complete an audit of reserves and resources and produce a detailed production plan for 2007 and 2008 by the end of this year. At the Verkhne-Aliinskoe gold property in the Chita Region, acquired by Omchak JV in 2005, preliminary development and exploration continues including environmental studies, and topographical survey works concerning the reclamation of land in accordance with the conditions set out in the licence agreements. Group Exploration and Development Report The exploration and development report does not constitute a reserves and resources update for the Group, as the latter is provided each year in the second quarter of the year. The purpose of this report is to provide an update on the Group's active exploration activities in the extensive portfolio of license areas belonging to the Group. Pokrovskiy deposit area and flanks During the first half of 2006 all exploration works at the main Pokrovskiy deposit were concentrated on pit expansion and optimisation. The previously discussed "ore bridge" or "saddle" between Glavnoye and Ozernoye ore bodies has been mined, thereby merging the two pits, and the potential for a pit expansion to the east has been confirmed. The study to redesign the merged pit for expansion and deepening started in the first half of the year, and is expected to be completed before year end. The expected increase in reserves and resources by virtue of this expansion and deepening should be included in the year end reserve/resource review. Work on the flanks of Pokrovskiy was carried out both on inner (Pokrovka-2, Verkhne-Sergeevsky, Dalniy and Vodorazdelny zones) and outer (Zeltunak, Velikiye Luzhki, Proletarskiy) areas. Licences covering the outer flanks of Pokrovskiy were acquired by the Group at the end of 2005. Inner Flanks Pokrovka-2 (fanglomerates) Active exploration works have been launched on this area where an entirely new type of mineralisation in 'fanglomerates' (conglomerate rocks interpreted as flood deposits which have fanned out) was identified as a result of 2005 exploration works. Results of drilling and trenching on this area confirmed that these potentially constitute a large resource. A second significant mineralised zone that had previously been identified in the basement rock below the fanglomerates in the east of Pokrovka-2 has now been confirmed in a series of drill holes as a flat-lying structure at relatively shallow depths of 50-60m. Grades in two holes reach values of 3 - 25g/t, but many assays are still awaited from these holes. Fanglomerate bulk sampling is to be done in extra large trenches - channels 5m deep and 15m wide, to provide representative samples during the second half of 2006. Vodorazdelny During the first half of 2006 a significant north-south trending structure was explored. A series of drill holes drilled by the predecessors found gold (up to 3-16g/t, with average likely to be 1.5-2g/t) and silver. This prospective zone extends below the fanglomerates southwards and is planned to be drilled by the Group in the second half of 2006. Verkhne-Sergeevsky A geochemical anomaly in the Dalniy area of the extreme north-west of the licence area is being explored, currently by trenching. A line of 6 holes have been drilled in this area and gold has been found in two of the holes. In the winter, once the ground is hard enough, it is intended to drive more trenches across this area. To the south, between the Verkhne-Sergeevsky area and Pokrovka-1, a flat-lying gold-mineralised zone has been identified below the dacite sill. This could be significant as so far almost all mineralisation at Pokrovka has been above or within the sill. 14 holes have been drilled in this area, which should allow the definition of a new Russian category P1 resource to be given in next year's annual reserves and resources update. Nadvigovy This area is located south-west of Pokrovka-1, close to the Trans-Siberian railway line. A geochemical anomaly identified in 2005 was further investigated by trenching and drilling in the first half of the year. It has now been interpreted as a number of parallel southward-dipping thrusts with gold mineralisation, mostly low-grade but with isolated assays up to 3 and 4g/t. Further holes with a northward inclination are planned to be drilled here in the second part of 2006 in order to define intersections more precisely. Along with this, it is planned also to drill a series of shallow holes in order to explore an interpreted north-east south-west mineralised structure. Outer flanks Active exploration works in an outer set of prospects under a recently acquired licence ('Zheltunak') were launched in the first half of 2006. This licence covers a number of separate 'outer flanks' areas at distances of 5-15km from Pokrovka. Zheltunak area Geophysical and lithogeochemical studies have been completed and trenching is planned in the second half of 2006 to explore a mineralised zone trending south-east - north-west. Old data from previous trench exploration indicates grades up to 40g/t in the north central area of the licence. The mineralisation is of classic volcanic-hosted epithermal type, and a series of shallow drill holes are planned to be drilled to confirm the earlier results. Velikiye Luzhki Geological and geochemical survey work has been completed, and a series of shallow drillhole sections are to be drilled. Because of soft ground conditions, further exploration work (in particular, trenching) is planned for the winter. Discoveries so far indicate the presence of mineralisation with grades up to 11.8g/t in isolated samples. Trench data from previous studies indicates intersections up to 7m at 18g/t, and 14m at 2.26g/t, with many additional lower grade intersections. Proletarskiy This area is adjacent to the Trans-Siberian railway, opposite the Nadvigovy area in the south-west corner of the Pokrovskiy licensed area. Permission has now been received for exploration work to begin. Geological mapping has shown grey shales with 'rusty' alteration and silicification, and the limited data from previous work indicates gold grades up to 1.5g/t. However, structurally this area is prospective, lying on the intersection of a fault parallel to the Sergeevsky fault, the mineralised structure which passes through the central Pokrovka-1 area. Exploration work is to be launched in the second half of 2006. Pioneer During the first half of the year three new ore columns (Bakhmut 2, Yuzhnaya south and Yuzhnaya further south) earlier predicted by geochemical modelling were confirmed by deep drilling and one new column (Andreevskaya, located 1 km to the east of Yuzhnaya zone) was intersected. This brings the total number of columns up to 8 (three on Yuzhnaya, two on Promezhutochnaya, two on Bakhmut and new Andreevskaya) out of 22 identified by the geochemical model. Further exploration works at Andreevskaya, Zapadnaya, Zvezdochka and Yuzhnaya zones confirmed existence of mineralisation and delivered promising results. The large open pit developed on the Promezhutochnaya zone has now been taken to a depth of 10m depth where coarse visible gold has been identified, similar to that identified on the first ore column at Bakhmut. The excellent correlation between the predictive geochemical model and actual results bodes particularly well for the Andreevskaya zone where a predicted 2km eastwards extension has been confirmed in trenches, with a zone width of up to 20m indicated by shallow drillhole data. As part of the feasibility study, 6 metallurgical samples have been collected varying in size from 139 kilograms to 2 tonnes. Three of these are of primary ore, from drillholes, and three of oxidised ore, from trenches. These samples have been sent for analysis to Irgiredmet, a Russian research and project design scientific institution, and to the Tula institute. One set of results has been received from a trench oxide sample; the others are expected in the very near future. A new Micromine model on the three main ore zones was completed in June 2006, and the results from this will be included in the end of year reserve/resource restatement. During the first half of 2006, the State Committee on Reserves and Resources (the "GKZ") inspectors visited and reviewed exploration works at Pioneer undertaken by the Company's geologists. This inspection was done in advance of the required submission to the GKZ of the full feasibility study documentation due in the first quarter of 2007. Inspectors noted the high quality of work undertaken and agreed with the geological interpretation of the deposit's mineralisation by the Company's Chief Geologist. The GKZ established that the resources should be estimated to a depth of 300m rather than the 200m hitherto assumed and a further recommendation to use a cut-off grade of 0.4g/t for the report was given which should yield an increase in reserves in absolute terms. This will require deeper drilling of some of the holes. The GKZ also expect to see some work to establish Russian Category C2 resources beyond the initial pit area, in zones Andreevskaya, Zapadnaya, Zvezdochka, and Yuzhnaya. With the exception of Yuzhnaya this will require additional work beyond that already planned. In the second half of 2006 exploration will be focused on Bakhmut and Promezhutochnaya which will form part of the basis of the Feasibility Study, due for completion at the end of the first quarter of 2007. This will then be submitted to the GKZ, along with Russian Category C2 estimates for significant sections of the Yuzhnaya, Andreevskaya, Zapadnaya and Zvezdochka zones outside of the planned initial pit area. Collection and processing of representative bulk samples of primary ore will also be undertaken in the second half of 2006 with a shaft to be sunk to perhaps 50-60m depth from the pit base (at Bakhmut). Preparations for this have already started. Malomir During exploration/confirmation works on the deposit it was established that the mining licence area for the deposit encompasses two major gold deposits of differing geology and ore types: • The Diagonal zone, to the south of the east-western Malomir fault where gold mineralisation is hosted by quartz veins and stockworks as well as disseminated in crush zones, with associated pyrite and arsenopyrite. • The Quartzite zone where mineralisation, which was originally thought to be a continuous low-grade dissemination within the granitoids, now appears to be in the form of higher grade zones in both granitoids and metasomatites, and associated with a series of crush zones: i.e. much more similar to the main Diagonal zone mineralisation. A new Micromine model for the central section of the Diagonal zone was started in the first half of the year and is expected to be completed in the second half of the year, and should allow the release of new JORC compliant resource estimates. Within the central zone, where revised and increased reserve of 28t of gold (from the previously estimated 22t) on a 400m length of the central part of Diagonal zone was reported in March, a large shallow open cut 220m x 300m in extent has been excavated, in order to establish the geometry and continuity of the ore zones. This has broadly confirmed the geological interpretation but has also yielded a favourable surprise in that a mineralised branch structure has been discovered which extends below the Diagonal thrust. This means that there is a possibility for mineralisation to be present below the thrust and within parallel known ore zones. A further 5,000m of drilling and 5,000m of trenching are intended before the end of 2006 on the central Malomir licence and on the flanks of the Diagonal zone. Exploration has been carried out also on flanks at Malomir deposit with a geological report to be prepared by the first quarter of 2007. It has also been established (by trenching and wide spaced drilling) that the diagonal zone remains open to both the south west and north east. On the Quartzite zone, initial assay results from the first three trenches, have shown that the presence of the high-grade intervals located within areas of low grade material. Results so far include the following trench intersections: • Trench 202: 3 intersections - 19m at 3g/t, 5m at 2g/t, 1m at 7.7g/t • Trench 201: 2 intersections - 25m at 1+ g/t, 17m at 3g/t. Coarse visible gold in quartz metasomatites was found. An extensive trenching and drilling programme is scheduled for the second half of the year. Voroshilovskoye Latest exploration work on the deposit is disappointing, and it seems now that, although the original gold content of approximately 150,000oz of Russian Category C1 and C2 reserves was confirmed by the exploration works, there is little likelihood of this becoming a project of the size and quality which the Group is likely to exploit. Discussions are being held within the Group with a view to disposal of this asset. Tokur The new importance of Malomir and the difficulty of equipment access on the rugged terrain of Tokur lowered the exploration priority for the deposit with the team of geologists and equipment transferred to the Malomir site. However it is not expected that this will affect the Group's compliance with the terms of licences for the deposit. Currently manual trenching continues at the site. Albin Acquired in 2005, this is a prospective area located south-east of Tokur and Voroshilovskoye deposits. Initially three prospective areas here have been identified. Preliminary exploration work was started here in the first half of 2006 and a full scale exploration programme should proceed in the second half starting with trenching and drilling in the central area where, from old drillhole data, mineralisation is already known to extend to at least 150m depth. Russian category P1 resources of 5t gold (c.160,000oz), at an average grade of 5-6g/t, are received from a small central zone from old data, but the potential there is estimated by the Group's Chief Geologist for up to 20t. Other Amur region projects Exploration at the Group's portfolio assets - Izvestkovaya Sopka, Adamikha, Gar II and Bryantinskaya - remains at a very early stage. Nevertheless, new data available at each is very encouraging in that gold mineralisation is being identified - in many cases with high-grade assays. Within a further 6 months, each of these four areas should yield substantial quantities of real trenching and drilling assay data, and an indication of the size of potential resources. Some of these licence areas could contain the next major Pioneer or Malomir. Hence, for the future organic growth of the company, even though completion of current exploration work at Pioneer, Malomir, and Pokrovskiy flanks has taken priority in order to achieve short-term targets, the exploration efforts on these licences continues. Izvestkovaya Sopka An exploration licence for this area in the central Amur oblast, 150km east of Pokrovskiy Rudnik, was acquired in 2005. In the first half of 2006 detailed mapping including geochemical and geophysical (magnetic) surveys was completed over the whole licence area (4.5km2), which identified gold anomalies on the north side of the deposit. A number of ore bodies have been identified with the mineralisation currently open in all directions. In the eastern area of the licence (zone Shirokinskaya) there are polymetallic massive sulphide ores (pyrhotite/magnetite/chalcopyrite/pyrite) associated with skarnoids, and coarse gold at grades of up to 2.2g/t. In the far south-western part of the licence area, a single trench (no.516) has intersected significant ore intervals (at 16.6g/t over 19m and 5.2g/t over 1m). The main fieldwork is scheduled to be finished by the end of 2006 with a report to be prepared in the first half of 2007 on preliminary exploration with recommendations on ongoing exploration and evaluation. Gar II This is an exploration licence area of 92 km2 in the central Amur oblast 30km to the north-west from Izvestkovaya Sopka which was acquired by the Group in 2005. During the first half of 2006, trenching, shallow drilling and geochemistry were carried out. Within this area, lithogeochemistry has been done in two areas of 10km2 in total. Trenching is continuing, and before the end of 2006 deep drilling is to start. Adamikha This is an exploration licence area (with a total area of 240km2) located 40km east of Izvestkovaya Sopka and 190km east of Pokrovka, in the central Amur oblast and was acquired by the Group in 2005. So far only preliminary exploration work has been carried out. Trenching and drilling are due to start in the second half of 2006, though an initial 4 trenches are to be opened in the northern area imminently, together with a series of shallow mapping holes in an attempt to locate the hard-rock source of major placer gold deposits that start from this area. In the southern mineralised area epithermal quartz veins and stockworks in Cretaceous volcanics with gold grades up to 2g/t have been found. Bryantinskiy (Solnechnoye) This licence area (with a total area of c.150km2) was acquired by the Group in 2005. It is located in the far north of the Amur region. During the first half of 2006 a complete geochemical survey of the area was finalised indicating clear secondary gold and silver anomalies. There were also some trenches explored with gold assays resulting up to 9 - 15g/t. Drilling and trenching continued in this area during the summer despite the problems of soft ground. Deeper drilling is expected to commence in the second half of the year. A preliminary estimate of resources in the Bryantinskaya licence area is about 50t of gold (1.5moz). A preliminary exploration report is scheduled to be produced in the first quarter of 2007. Odolgo During the first half of 2006 a report on the result of geological exploration with computation of the Russian reserves category C2 was produced and sent to Amur Regional Committee on Reserves and Resources for their consideration. The deposit is estimated (with some additional exploration) at up to 10t of gold (300,000oz) reserves or more. There is a further similar structure 3km to the north of the explored metamorphic zone which is planned for further exploration works in 2006. First production from the deposit is scheduled for the second half of 2007 at a production rate of 200kg, i.e. 6,000oz per annum. Yamal Region Assets Novogodnee Monto During the first half of 2006 works on the Novogodnee Monto deposit were concentrated on the finalisation of a feasibility study and its submission to GKZ. It is expected that approval to start mining will be received by the end of 2006. The Petropavlovskoye deposit This deposit is located 1km west of Novogodnee Monto and parallel to it. Extensive drilling carried out in 2005 to delineate the central portion of the deposit as well as to establish its northerly and southerly continuations was continued in the first half of 2006 by excavation in the central part of the deposit with the purpose of gaining an understanding of the geological structure of this zone. Information obtained from it shows a thick zone (50m - 200m wide) trending north-south, crossed by east-west quartz veins at intervals of 3-4m, containing high gold grades (7-10g/t, compared with an average of 1+ g/t for the zone as a whole). Knowledge of the presence of these 'ladder veins' helps greatly in planning further exploration of the zone. Toupugol Within the Toupugol exploration area (near the western margin of the licence area, 5km west from Novogodnee Manto), this year's exploration works have discovered a completely new area of lenses of magnetite ore similar to that at Novogodnee Monto; so far of unknown size, and with intersected gold grades up to 2.3 - 6g/t. Similar grades are seen in all of the magnetite ores found so far in this area. Exploration at this area of significant interest will be continued in the second half of the year. Yamalskaya Gornaya Kompaniya (YGK) Yamalskaya Gornaya Kompaniya holds a series of exploration licences in the Yamal region in a line both to the north and south of Novogodnee Monto, parallel to the river Ob. This is a range of assets in a variety of different geological settings, with potential for large base-metal and polymetallic resources, as well as significant precious-metal (gold, platinum group metals "PGM") potential to be explored. Yarshor-Laptayeganskaya area The licence area is 26.5km by 6km, located 20-30km north-east of the Novogodnee Monto deposit, along a thrust belt which contains metasomatised black slates intruded by beresitised granitoids, hence referred as "Malomir 2" by the Group's Chief Geologist because of the similarity of the geological setting. The zone is over 26km in length, and thus significantly larger than the known extent of Malomir. Assay data from a small number of samples indicate grades of up to 1g/t. However, the first set of new trenches have been completed with a number of samples containing visible coarse gold, hence the grades are likely to be considerably higher. There are also geological reasons to expect the presence of PGMs. Ozernoye The Ozernoye deposit consists of Bushveld-style ultrabasics with reefs of PGM mineralisation containing platinum, palladium, and also gold and silver. Potential by-product copper grades in sulphides are from 0.5-2.5%, and up to 2-5% vanadium is also reported. Individual reefs with disseminated sulphides are up to 5m in thickness. Individual zones with disseminated sulphides are 1,500-3,400m long with up to 50m outcrop wide. One zone so far explored is known to be continuous along strike for 1.5km and down dip for 200m, open in all directions. Russian Category P1 resources are 100,000oz of gold, 200,000oz of platinum and palladium, and 40,000t of copper, with potential resources estimated at up to 1moz of gold, similar for platinum and palladium, plus 2mt of copper. Sibileiskaya area This consists of skarns around a granitoid massif. Exploration drilling has started. One intersection so far has yielded a gold grade of 285g/t within the skarn. Further results are awaited. Exploration work on the Toupugol/Khanmeishorskaya licence area continues; work at Petropavlovskoye is proceeding well, with increased understanding of the geology. Discovery of gold-bearing magnetite zones within the western Toupugol area is encouraging. It is expected that more detailed information will be available for the Group's annual update on exploration and development due to be announced during the first half of 2007. Complex of Chemical Laboratories Pokrovskiy laboratory In April of 2006 a new automatic sample preparation complex from Hammersley (New Zealand) was installed which allowed for the capacity of the laboratory to be increased from 10,000 samples a month up to 12,000 samples a month. This laboratory is dedicated to analysis of samples from Pokrovskiy, Pokrovskiy flanks, Pioneer and Odolgo. Tokur laboratory In order to comply with the increased amount of exploration works at the Malomir deposit the assay capacity of this laboratory was doubled in May 2006 from 3,000 up to 6,000 samples a month. This laboratory analyses samples from Tokur, Malomir and Voroshilovskoye. Blagoveshensk laboratory This laboratory has a planned capacity of 3,000 assays a month and 6,000 geochemical samples a month. At this laboratory in the first half of 2006 the development of the department of mineralogical analyses has been commissioned and work on the first stage has already commenced. Yamalzoloto The Labytnangy laboratory has an installed capacity of 5,000 assays a month and 3,000 geochemical samples a month. Currently 100% of the Company's analytical requirements are fulfilled in its own laboratories. The analysis generally takes 1 month from the taking of the sample to receipt of the result. Gold Price/Treasury The Group's average realised gold price for the period was US$573/oz, up 36% against US$422/oz during the first six months of 2005. The Russian rouble strengthened against the US Dollar by 6% during the Period and was RuR27.0789/US$ at 30 June 2006 (RuR28.04/US$ - 30/6/05, RuR28.78/US$ - 31/12/05). The US$3.9m of exchange gain (versus US$0.3m of exchange loss in the comparable period of the last year) the Group enjoyed is partially a result of a more efficient treasury policy. The Group has a policy of no long term gold forward sales or hedging. Conference Call A conference call to discuss the announcement will be hosted by Peter Hambro, Executive Chairman, Alexey Maslovskiy, Director, Business Development and Andrey Maruta, Finance Director, Peter Hambro Mining plc, on Thursday, 21 September 2006 at 14:00 UK 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: 6013254. Replay will be available after the call has finished for seven days on 0845 245 5205 in the UK and on +44 (0) 1452 55 00 00 internationally with the access code in both cases 6013254#. Enquiries: Peter Hambro Mining Plc +44 (0) 20 7201 8900Alya Samokhvalova, Director of External CommunicationMariana Adams, Investor Relations Merlin David Simonson / Tom Randell +44 (0) 20 7653 6620Maria Suleymanova +44 (0) 798 528 2492 In this interim report we present financial items such as "cash operating costs", "total cash costs" and "total production costs" that have been determined using industry standards as per the Gold Institute and are not measures under generally accepted accounting principles in the United Kingdom ("UK GAAP"). An investor should not consider these items in isolation or as alternatives to any measure of financial performance presented in accordance with UK GAAP either in this document or in any document incorporated by reference herein. While the Gold Institute has provided definitions for the calculation of "cash operating costs", "total cash costs" and "total production costs", the definitions of certain non-GAAP financial measures included herein may vary significantly from those of other gold mining companies, and by themselves do not necessarily provide a basis for comparison with other gold mining companies. However, we believe that total cash costs and total production costs in total by mine and per ounce by mine are useful indicators to investors and management of a mine'sperformance because they provide a very useful indication of a mine's profitability, efficiency and cash flows. They also show the trend in costs as the mine matures over time and on a consistent basis. These costs can also be used as a benchmark of performance to allow for comparison against other mines of other gold mining companies. PETER HAMBRO MINING plc INTERIM SUMMARISED CONSOLIDATED ACCOUNTS FOR THE PERIOD ENDED 30th JUNE 2006 Registered number: 4343841 Independent Review Report to PETER HAMBRO MINING plc We have been instructed by the Company to review the financial information ofPeter Hambro Mining plc for the period ended 30 June 2006 which comprises theSummarised Consolidated Profit and Loss Account, Summarised Consolidated BalanceSheet, Summarised Consolidated Statement of Cash Flows, and the related notes 1to 19. We have read the other information contained in the interim report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the Company in accordance with guidance containedin Bulletin 1999/4 "Review of interim financial information" issued by theAuditing Practices Board. To the fullest extent permitted by law, we do notaccept or assume responsibility to anyone other than the Company, for our work,for this report, or for the conclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the AIMRules of the London Stock Exchange which require that the accounting policiesand presentation applied to the interim figures should be consistent with thoseapplied in preparing the preceding annual accounts except where any changes, andthe reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of Group management and applyinganalytical procedures to the financial information and underlying financial dataand based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information of Peter Hambro Mining plc aspresented for the six months ended 30 June 2006. St. Paul's House, MOORE STEPHENS LLPWarwick Lane, London Registered AuditorEC4M 7BP Chartered Accountants 21 September 2006 PETER HAMBRO MINING plc Summarised Consolidated Profit and Loss Account for the period ended 30 June 2006 (expressed in US $'000) Note ------ Six months to Six months to Year to 30 June 2006 30 June 2005 31 December 2005 $'000 $'000 $'000 Turnover: group and shareof joint ventures 63,108 42,311 114,579Less: share of jointventures' turnover (4,084) (6,034) (23,330) ---------- ---------- -----------Group turnover 2 59,024 36,277 91,249 Operating profit 3 19,890 8,022 17,490 Profit on disposal ofinterest in business - - 3,822Loss on disposal ofinterest in joint venture - - (413)Share of operating profitof joint ventures (88) 1,040 2,324Amortisation of goodwillin joint ventures (413) (514) (1,046) Interest payable andsimilar charges 4 (6,181) (932) (5,953) Interest receivable andsimilar income 4,440 466 3,807 ---------- ---------- ----------- Profit on ordinary activitiesbefore taxationGroup 18,350 7,795 19,194Joint ventures (702) 287 837 ---------- ---------- ----------- 17,648 8,082 20,031 Taxation on profit onordinary activities 5 (6,511) (2,147) (6,032) ---------- ---------- ----------- Profit on ordinary activitiesafter taxationGroup 11,973 6,470 13,985Joint ventures (836) (535) 14 ---------- ---------- ----------- 11,137 5,935 13,999 Minority interests (19) (41) (744) ---------- ---------- ----------- Profit retained for theperiod 13 11,118 5,894 13,255 ========== ========== =========== Earnings per ordinaryshare 17 $0.140 $0.079 $0.17Diluted earnings per share 17 $0.138 $0.075 $0.17 There are no recognised gains or losses other than those included in the profitand loss account. The accompanying notes are an integral part of this profit and loss account. PETER HAMBRO MINING plc Summarised Consolidated Balance Sheet as at 30 June 2006 (expressed in US $'000) Note ------ 30 June 31 December 30 June 2006 2005 2005 $'000 $'000 $'000Fixed AssetsIntangible assetsGoodwill (176) (176) (2,953)Mineral properties 102,323 102,231 79,675Capitalised exploration anddevelopment expenditure 47,447 30,555 15,961Tangible assetsProperty, plant and equipment 84,977 74,959 66,332 Investments 6 764 448 561Investments in joint ventures:Goodwill 1,129 1,467 2,428Share of gross assets 21,952 17,313 25,607Share of gross liabilities (13,219) (8,171) (14,622) -------- -------- -------- 245,197 218,626 172,989Current AssetsStock and work in progress 33,538 23,521 23,430Debtors 7, 10 38,296 31,273 22,808Cash at bank and in hand 10 142,284 144,534 24,865 -------- -------- -------- 214,118 199,328 71,103Creditors, amounts falling duewithin one year 8, 10 (31,873) (18,909) (14,453) -------- -------- -------- Net Current Assets 182,245 180,419 56,650 -------- -------- -------- Total Assets less CurrentLiabilities 427,442 399,045 229,639 Creditors, amounts falling due aftermore than one year 9, 10 (134,407) (136,170) (3,911)Provision for liabilities andcharges 11 (19,542) (18,426) (2,783) -------- -------- --------Net Assets 273,493 244,449 222,945 ======== ======== ======== PETER HAMBRO MINING plc Summarised Consolidated Balance Sheet (continued) as at 30 June 2006 (expressed in US $'000) Note ------ 30 June 31 December 30 June 2006 2005 2005 $'000 $'000 $'000Capital and ReservesShare capital 12 1,298 1,273 1,220Share premium 12 17,797 - 168,946Other distributable reserve 176,722 176,722 -Merger reserve 8,755 8,755 8,755Contingent reserve on acquisition 3,152 3,152 6,304Share incentive reserve - - 40Equity reserve on bonds 1,583 1,583 -Profit and loss account 59,558 48,440 35,486 -------- -------- --------Equity shareholders' funds 13 268,865 239,925 220,751Minority interests 4,628 4,524 2,194 -------- -------- -------- 273,493 244,449 222,945 ======== ======== ======== The accompanying notes are an integral part of this balance sheet. These financial statements were approved by the Directors on 21 September 2006 P.C.P. Hambro PETER HAMBRO MINING plc Summarised Consolidated Statement of Cash Flows for the period ended 30 June 2006 (expressed in US $'000) ------------ ---------- ---------- Note Six months to Six months to Year to 30 June 2006 30 June 2005 31 December 2005 $ '000s $ '000s $ '000s ------------ ---------- ---------- Net cash inflow from operating activities 14 11,545 6,968 15,719 Net cash outflow fromreturns on investments and servicing of finance (4,357) (4,427) (4,303) Taxation paid (3,894) (1,604) (3,401) Capital expenditure (32,397) (20,893) (40,529) Financial investment 3,021 5,041 13,708 Acquisitions and disposals (991) 143 (10,838) ------- ------ ------- Cash outflow before financing (27,073) (14,772) (29,644) Cash inflow from increase in debt and lease financing 15, 16 7,001 (940) 126,987 Net receipt fromissuing shares 17,822 14,723 21,337 ------- ------ -------(Decrease)/increase incash at bank and in hand (2,250) (989) 118,680 ======= ====== ======= PETER HAMBRO MINING plc Summarised Consolidated Financial Statements for the period ended 30 June 2006 Notes 1. Principal Accounting Policies a) Basis of preparation The interim financial statements have been prepared on the basis of theaccounting policies expected to apply for the financial year to 31 December 2006and are consistent with the accounting policies set out in the Group's financialstatements for the year ended 31 December 2005. The interim financial statementsare unaudited but have been reviewed by the auditors and their report is set outon page 1. The interim financial statements do not comprise statutory accountswithin the meaning of Section 240 of the Companies Act 1985. The comparativefigures for the year ended 31 December 2005 are derived from the statutoryaccounts filed with the Registrar of Companies. The auditors' report on thestatutory accounts was unqualified and did not contain a statement under Section237 of the Companies Act 1985. b) Basis of consolidation The financial statements consist of Peter Hambro Mining plc (the "Company") andits respective subsidiary undertakings (the "Group"). On the acquisition of abusiness, including an interest in a subsidiary undertaking, fair values areattributed to the Group's share of net separable assets. Where the cost ofacquisition exceeds the fair values attributable to such net assets thedifference is treated as purchased goodwill and capitalised in the balance sheetin the year of acquisition. c) Comparative figures Certain comparative figures have been restated to be consistent with the currentperiod's presentation. 2. Turnover Turnover represents the earnings from the provision of goods and services withinthe Group's ordinary activities, exclusive of Value Added Tax. 3. Operating profit 30 June 30 June 2006 2005 $'000 $'000 --- --- Operating profit 19,890 8,022 -------- -------- 19,890 8,022 -------- -------- Operating profit includes a foreign exchange gain of US$3.9 million arising onthe translation of the Group's results into US dollars (six months of 2005:foreign exchange loss US$0.3 million). Also refer to the monetary assets andliabilities analysis in Note 10. 4. Interest Payable and Similar Charges 30 June 2006 30 June 2005 $'000 $'000 Finance lease charge 12 53Bank loan interest 309 564Bonds interest payable 4,988 -Bonds issue finance costs amortisation 410 - Other loan interest 106 93Share of joint ventures' interest payable andsimilar charges 369 239 -------- -------- 6,194 949Less finance cost capitalised (13) (17) -------- -------- 6,181 932 -------- -------- 5. Taxation on profit on ordinary activities 30 June 2006 30 June 2005 $'000 $'000 Current tax:Foreign tax (24%) 5,283 765 ------- ------- Total current tax 5,283 765 ------- ------- Deferred tax:Origination and reversal of timing differences 1,094 561 ------- ------- Total deferred tax 1,094 561 ------- ------- Tax related to joint venture OmchakProfit tax (24%) 8 207Deferred tax charge 126 614 ------- ------- 134 821 ------- -------Tax related to joint venture RudnoyeProfit tax (24%) - - ------- ------- - - ------- ------- Tax on profit on ordinary activities 6,511 2,147 ------- ------- 6. Investments 30 June 31 December 2006 2005 $'000 $'000 Investments - other 708 447Shares in subsidiaries and joint ventures 56 1 -------- --------- 764 448 -------- --------- The Company and the Group have the following material subsidiaries and othersignificant investments, which were consolidated in these financial statements. Principal Country of Principal Principal Effective subsidiary incorporation activity country of proportion and joint operation of shares venture heldundertakings Held directly by the Company Eponymousco Ltd United Kingdom Holding Company United Kingdom 100% VictoriaResources Ltd United Kingdom Holding Company United Kingdom 100% Peter HambroMining GroupFinance Ltd Guernsey Finance Company United Kingdom 100% Yamal Holdings Ltd Cyprus Holding Company Cyprus 100% Peter Hambro Mining (Cyprus) Ltd Cyprus Holding Company Cyprus 100% ZAO Management Company PHM Russia Holding Company Russia 100% Gold exploration andOOO Olga Russia production Russia 100% Gold exploration andOAO Pokrovskiy Rudnik Russia production Russia 98.6% GoldZAO ZRK Omchak exploration and(Joint Venture) Russia production Russia 50% 6. Investments (continued) Principal Country of Principal Principal Effectivesubsidiary and incorporation activity country of proportion ofjoint venture operation shares heldundertakings Held indirectly via 100% owned subsidiaries GoldOOO Tokurskiy exploration andRudnik Russia production Russia 100% Gold exploration and OOO GRK Victoria Russia production Russia 100% Gold exploration andOAO ZDP Koboldo Russia production Russia 91.7% Project and engineeringZAO PHM Engineering Russia services Russia 75% Security OOO Obereg Russia services Russia 100% Gold exploration andOOO Spanch Russia production Russia 100% Gold exploration andZAO Amur Dore Russia production Russia 100% 6. Investments (continued) Principal subsidiary Country of Principal Principal Effectiveand joint venture incorporation activity country of proportion ofundertakings operation shares held Held indirectly via Pokrovskiy Rudnik Gold exploration andOAO YamalZoloto Russia production Russia 98.7% ExplorationOOO NPGF Regis Russia work Russia 51% Gold ZAO Rudnoye exploration and(Joint Venture) Russia production Russia 49% OOO Kapstroy Russia Construction Russia 98.7% OAO Yamalskaya Construction and GoldGornaya Kompania exploration and("YGK") Russia production Russia 73.9% Gold exploration and ZAO Region Russia production Russia 98.7% Held indirectly via YGK Chrome exploration andZAO SeverChrome Russia production Russia 73.9% In March 2006 Peter Hambro Mining (Cyprus) Ltd acquired 100% of OOO Spanch andZAO Amur Dore for a consideration of US$9,000 and US$1,085,000 respectively. OOOSpanch and ZAO Amur Dore have been consolidated in these financial statements. In June 2006 YGK set up a wholly owned company ZAO SeverChrome. ZAO SeverChromehas been consolidated in these financial statements. ZAO Region was set up in 2004 but its operational activity began in 2006. ZAORegion has been consolidated in these financial statements. PETER HAMBRO MINING plc Summarised Consolidated Financial Statements for the period ended 30 June 2006 Notes (continued) 7. Debtors 30 June 31 December 2006 2005 $'000 $'000 Prepayments 11,410 8,950VAT recoverable 13,712 9,480Other debtors 7,276 5,630Interest accrued 4,715 1,913Due from Hainault Ltd - 4,000Due from Rudnoye joint venture 1,070 1,007Loans issued 113 293 -------- --------- 38,296 31,273 -------- --------- 8. Creditors, amounts falling due within one year 30 June 31 December 2006 2005 $'000 $'000 Trade creditors 2,835 4,139Advances from customers 2,590 -Tax liability 1,294 1,174Finance lease liabilities 50 243Accrued interest on Bonds issued 3,879 3,879Short term loans 12,524 174Short term element of long term loans 316 3,222Due to former shareholders of subsidiary 115 -Other creditors 8,270 6,078 -------- --------- 31,873 18,909 -------- --------- 9. Creditors, amounts falling due after more than one year 30 June 31 December 2006 2005 $'000 $'000 Long term borrowing - 2,250Guaranteed Convertible Bonds 134,407 133,920 -------- --------- 134,407 136,170 -------- --------- In August 2005 the Group issued US$140 million of convertible bonds due in 2010(the "Bonds"). The Bonds were issued at par by the Company's wholly ownedsubsidiary Peter Hambro Mining Group Finance Ltd and are guaranteed by theCompany. The Bonds carry a coupon rate of 7.125% payable semi-annually inarrears and can be converted into fully paid ordinary shares of 1p each of theCompany at the price of 756 p per share. If not converted or previously redeemedthe Bonds will be redeemed at par on or about 11 August 2010. 10. Monetary assets and liabilities 30 June 31 December 2006 2005 $'000 $'000 Debtors - US dollar 4,242 5,827Debtors - Russian rouble 33,769 25,055Debtors - GBP 285 391Cash - US dollar 101,994 124,929Cash - Russian rouble 32,728 15,409Cash - GBP 7,562 4,196 -------- --------- 180,580 175,807 -------- --------- Monetary assets - US dollar 106,236 130,756Monetary assets - Russian rouble 66,497 40,464Monetary assets - GBP 7,847 4,587 -------- --------- 180,580 175,807 -------- --------- Creditors (short and long-term) - US dollar 139,161 143,772Creditors (short and long-term) - Russianrouble 26,340 8,844Creditors (short and long-term) - GBP 779 2,463 -------- --------- 166,280 155,079 -------- --------- The Russian rouble strengthened against the US Dollar by 6% during the first sixmonths of 2006 and was RuR27.08/US$ at 30 June 2006 (RuR28.78/US$ - 31/12/05). 11. Provision for liabilities and charges 30 June 31 December 2006 2005 $'000 $'000 Provision for restoration andclosing costs 193 171Deferred tax provision 4,349 3,255RBS holders 15,000 15,000 -------- ----------- 19,452 18,426 -------- ----------- Provision at 1 January 18,426 2,182 Charge for restoration cost 22 43Deferred tax charge in profit andloss account for period (Note 5) 1,094 1,182Deferred tax as a result ofacquisition - 19Addition (RBS holders) * - 15,000 -------- ----------- Provision at period end 19,542 18,426 -------- ----------- 11. Provision for liabilities and charges (continued) * One of the Company's subsidiaries, Pokrovskiy Rudnik, set up a Reserve BonusScheme (the "Scheme") for certain senior Group executives of that company. TheScheme was never fully implemented. Under the scheme participants were to beawarded freely transferable 'Scheme units' at the end of each year from 2002 to2012 based on US$5 per ounce of gold added to the designated reserves for theScheme. Agreement has been reached with those entitled to participate in the Scheme (the"Eligible Persons") for the Scheme not to proceed. The Independent Directors,being Sir Rudolph Agnew, Peter Hill-Wood and Philip Leatham, having takenprofessional advice and consulted with the Company's nominated adviser, haveagreed that the sum of US$15,000,000 in aggregate (the "Scheme Payment") is faircompensation to the Eligible Persons for the Scheme not proceeding. TheIndependent Directors also considered that this payment is less than the cost tothe Group (as determined by reference to the estimated net present value of theongoing payment obligations for the Company under the Scheme). The sum ofUS$15,000,000 was subsequently paid in August 2006. 12. Share Capital Company ------------------Ordinary shares 30 June 2006 31 December 2005 --- --- $'000 $'000 --- ---Allotted, called up and fully paid:At the beginning of the period 1,273 1,193Contingent shares issued inrelation to acquisition of PeterHambro Mining (Cyprus) Ltd - 13Shares issued in relation toacquisition of C shares ofEponymousco Ltd - 40Other new issues 25 27 -------- ---------At the end of the period 1,298 1,273 -------- --------- Number of shares (par value £0.01) No'000 No'000 Authorised 100,000 100,000 -------- --------- Issued at the beginning of theperiod 78,957 73,999Contingent shares issued inrelation to acquisition of PeterHambro Mining (Cyprus) Ltd - 750Shares issued in relation toacquisition of C shares ofEponymousco Ltd - 2,759Other new issues 1,449 1,449 -------- ---------At the end of the period 80,406 78,957 -------- --------- On 18 April 2006 the Company issued 1,448,545 ordinary shares at a price of£6.875 per share pursuant to a Share Option Agreement with the InternationalFinance Corporation (the "IFC"). As a result of this transaction a share premiumof US$17.8m was created. 13. Equity shareholders' funds 30 June 2006 31 December 2005 $'000 $'000 --- --- Opening balance 239,925 200,134Issue of share capital 17,822 28,145Issue of contingent shares - (3,152)Equity reserve on bonds - 1,583Share incentive reserve - (40)Profit for the period 11,118 13,255 -------- --------- 268,865 239,925 -------- --------- The availability of the Group's reserves for distribution will be determined, tothe extent that they include reserves held in the Russian subsidiaries and jointventure undertakings, by applicable legislation in Russia and in accordance withtheir statutory financial statements, which are prepared in accordance withRussian accounting regulations. These differ significantly from UK GAAP. Thedistributable reserves may therefore differ significantly from the figure shownabove. 14. Net Cash Inflow from Operating Activities 30 June 2006 30 June 2005 $'000 $'000Cash received from customers 61,214 36,366Cash paid to suppliers and employees (36,761) (21,446)Other proceeds 409 34Other expenses (13,317) (7,986) --------- ---------Net cash inflow from operating activities 11,545 6,968 --------- --------- 15. Reconciliation of Net Cash Flow to Movement in Net Debt 30 June 2006 $'000 Decrease in cash at bank and in hand (2,250)Cash inflow from increase in debt and lease financing (7,001) ---------Change in net debt resulting from cash flow (9,251) --------- Bonds issue cost amortisation (487) ---------Movement in net debt in the period (9,738) ---------Net debt at 1 January 4,725 ---------Net debt at 30 June (5,013) --------- 16. Analysis of Net Debt At 1 Jan. 06 Cash Flow Other non-cash Exchange At 30 June 06 changes movement $'000 $'000 $'000 $'000 $'000 ------- ------- ------- -------- -------- Cash in handand at the bank 144,534 (2,250) - - 142,284Debt duewithin one year (174) (12,350) - - (12,524)Debt due after one year (140,000) - - - (140,000)Less equitycomponent 1,583 - - - 1,583Bonds issuecost capitalised 4,497 - (487) - 4,010 ------- ------- ------- -------- --------Net Cash preleasing /sales & leaseback 10,440 (14,600) (487) - (4,647) ------- ------- ------- -------- --------Finance leases/ sales &lease back (5,715) 5,349 - - (366) ------- ------- ------- -------- -------- Net Cash inc.leasing 4,725 (9,251) (487) - (5,013) ------- ------- ------- -------- -------- 17. Earnings per ordinary share Six months to Six months to Year to 30 June 2006 30 June 2005 31 December 2005 $'000 $'000 $'000Profit for the period US$'000 11,118 5,894 13,255Weighted average number ofordinary shares 79,543,972 74,618,249 76,618,392Earnings per ordinary share $0.140 $0.079 $0.17 --------- --------- ---------Weighted average number ofordinary shares 79,543,972 74,618,249 76,618,392C shares - 2,759,368 -Contingent shares 750,000 1,500,000 750,000 --------- --------- ---------Weighted average number ofdiluted shares 80,293,972 78,877,617 77,368,392 --------- --------- ---------Diluted earnings per share $0.138 $0.075 $0.017 --------- --------- --------- 18. Business segment information Gold mining Construction and Exploration and Corporate Consolidated other services evaluation ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ 6m 2006 6m 2005 6m 2006 6m 2005 6m 2006 6m 2005 6m 2006 6m 2005 6m 2006 6m 2005 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------Turnover----------Gold sales 51,477 35,455 - - - - - - 51,477 35,455Silver sales 286 63 - - - - - - 286 63Otherexternal sales - - 6,447 473 814 286 - - 7,261 759Inter-segmentsales - - 3,244 384 3,969 1,179 3,212 961 10,425 2,524 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------Subtotal 51,763 35,518 9,691 857 4,783 1,465 3,212 961 69,449 38,801 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------(Less:inter-segmentsales) - - (3,244) (384) (3,969) (1,179) (3,212) (961) (10,425) (2,524) ------ ------ ------ ------ ------ ------ ------ ------ ------ ------Total groupturnover 51,763 35,518 6,447 473 814 286 - - 59,024 36,277 ====== ====== ====== ====== ====== ====== ====== ====== ======= ====== 18. Business segment information (continued) Gold mining Construction and Exploration and Corporate Consolidated other services evaluation ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ 6m 2006 6m 2005 6m 2006 6m 2005 6m 2006 6m 2005 6m 2006 6m 2005 6m 2006 6m 2005 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------Expenses----------Net operating expensesexcludingbelow expenses 18,738 16,208 6,689 418 1,011 1,117 6,273 3,152 32,711 20,895Inter-segmentexpenses - - 2,804 368 3,853 838 1,287 961 7,944 2,167Transport andrefining costs 578 365 - - - - - - 578 365Royalties 3,308 2,115 - - - - - - 3,308 2,115Depreciationandamortisation 4,716 4,012 165 7 104 12 580 476 5,565 4,507 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------Subtotal 27,340 22,700 9,658 793 4,968 1,967 8,140 4,589 50,106 30,049 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------(Less:inter-segmentsales) - - (2,804) (368) (3,853) (838) (1,287) (961) (7,944) (2,167)Total groupexpenses 27,340 22,700 6,854 425 1,115 1,129 6,853 3,628 42,162 27,882 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------Segment result 24,423 12,818 (407) 48 (301) (843) (6,853) (3,628) 16,862 8,395 ====== ====== ====== ====== ====== ====== ====== ====== ====== ======Exchange(gain)/loss (3,855) 295 ------ ------Unallocatedexpenses 827 78 ------ ------Operatingprofit 19,890 8,022 ------ ------ ------ ------ ------ ------ ------ ------ ====== ======Jointventuresoperating (501) 456 - - - - - - (501) 456result ------ ------ ------ ------ ------ ------ ------ ------ ------ ------Operatingprofit afterJVs 19,389 8,478 ------ ------(Interestexpenses) (6,181) (932)Interest andsimilar income 4,440 536(Income taxes) (6,511) (2,147)(Minorityinterest) (19) (41) ------ ------Profitretained forthe period 11,118 5,894======== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== 18. Business segment information (continued) Gold mining Construction and Exploration and Corporate Consolidated other services evaluation ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ 6m 2006 6m 2005 6m 2006 6m 2005 6m 2006 6m 2005 6m 2006 6m 2005 6m 2006 6m 2005 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------Otherinformation---------------- Segment assets 165,236 97,146 12,786 1,795 95,642 61,681 175,789 70,057 449,453 230,679Group share ofgross assetsin JVs 23,081 28,035 - - - - - - 23,081 28,035 ------- ------ ------ ------ ------ ------ ------- ------ ------- -------Consolidatedtotal assets 188,317 125,181 12,786 1,795 95,642 61,681 175,789 70,057 472,534 258,714 ------- ------ ------ ------ ------ ------ ------- ------ ------- ------- Segmentliabilities 26,051 17,363 1,895 1,580 3,247 1,241 159,257 3,157 190,450 23,341Group share ofgrossliabilities inJVs 13,219 14,622 - - - - - - 13,219 14,622 ------- ------- ------ ------ ------ ------ ------- ------ ------- -------Consolidatedtotalliabilities 39,270 31,985 1,895 1,580 3,247 1,241 159,257 3,157 203,669 37,963 ------- ------- ------ ------ ------ ------ ------- ------ ------- ------- Capitalexpenditures 22,936 16,288 227 234 8,937 3,623 297 748 32,397 20,893 ======= ======= ====== ====== ====== ====== ======= ====== ======= ======= 19. Post balance sheet events An additional c.5,300 oz of gold which had been produced during the first halfwas refined and sold in the week following the period end. The Group accountsfor gold that has yet to be processed and sold at the lower of cost or netrealisable value. Had this gold been refined and sold in the previous week,first half net profit would have been about US$1.5 million higher. As previously disclosed under Note 11 the amount of US$15,000,000 due to the RBSholders was subsequently paid in August 2006. Under the terms of the acquisition agreement of Peter Hambro Mining (Cyprus)Ltd, Peter Hambro Mining plc issued 750,000 shares to Reagrove Services Ltd inJuly 2006. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
POG.L