22nd Sep 2005 07:02
Peter Hambro Mining PLC22 September 2005 PETER HAMBRO MINING PLC Interim Results Peter Hambro Mining plc is pleased to present the results of a successful halfyear's activity. Highlights 6 months to 6 months to Variance for 12 months to 30/6/2005 30/6/2004 period 31/12/2004--------------------------------------------------------------------------------PokrovskiyRudnik goldproduction, oz 84,600 60,025 +41% 154,000--------------------------------------------------------------------------------Otherattributablegold production, oz 17,578 14,307 +23% 55,000--------------------------------------------------------------------------------Totalattributablegold production, oz 102,178 74,332 +37% 209,000--------------------------------------------------------------------------------PokrovskiyRudnik CashOperating Cost(GIS US$/oz) US$149 US$130 +14% US$107--------------------------------------------------------------------------------PokrovskiyRudnik averagegold pricereceived(US$/oz) US$422 US$394 +7% US$405-------------------------------------------------------------------------------- Figures in US$'000 unless 6 months to 6 months to Variance for 12 months tootherwise stated 30/6/2005 30/6/2004 period 31/12/2004---------------------------------------------------------------------------------Turnover:Group andshare of jointventures 42,311 28,182 +50% 85,502--------------------------------------------------------------------------------Operatingprofit 8,022 5,316 +51% 22,703--------------------------------------------------------------------------------Pre tax profit 8,082 4,427 +83% 24,304--------------------------------------------------------------------------------Profitretained forthe period 5,894 3,214 +83% 15,318--------------------------------------------------------------------------------Net cashinflow fromoperatingactivities 6,968 4,136 +68% 20,532--------------------------------------------------------------------------------Earnings pershare, US$ 0.079 0.049 +61% 0.22--------------------------------------------------------------------------------Dilutedearnings pershare, US$ 0.075 0.046 +63% 0.21--------------------------------------------------------------------------------Weightedaverage numberof shares('000) duringthe period 74,618 65,159 +15% 69,615-------------------------------------------------------------------------------- Net Assets (atclose ofperiod) 222,945 188,558 +18% 202,264--------------------------------------------------------------------------------Net Cash (atclose ofperiod) 13,377 35,192 -62% 13,271------------------------------------------------------------------------------- Results Results for the first six months of 2005 (the "Period") for Peter Hambro Miningplc ("PHM" or "the Group") compared to the equivalent period of 2004: • Attributable gold production increased by 37% to 102,178 ounces; • Gold Institute Standard Cash Operating Costs at Pokrovskiy have increased in line with the inflation and rouble appreciation, US$149/oz (6 months of 2004 - US$130/oz); • Average realised gold sales price was US$422/oz (6 months of 2004 - US$394/oz) with immediate beneficial impact; • Profit retained up by 83% to US$5.9m (6 months of 2004 - US$3.21m); • Net cash of US$13.4m before the effect of the August 2005 US$140m fundraising; • Exploration and development spending during thePeriod on budget at US$16.0m up from the figure for 2004 of US$10.3m reflecting the increased E&D activity throughout the Group; • Interim resin-in-pulp plant ("RIP") expansion programme to 2.2m tpa on schedule. Chairman's statement On reading this report, even though it is only a snapshot of the Group's results for the first half of its financial year, you will, I am sure, join mein congratulating all involved in the Group's operations, as it reports anotherperiod of delivery on all targets. I am very pleased to report thatproduction for the first half of 2005 was on budget and on schedule to meet theGroup's production forecast of 271,000 oz of gold for the year. The results of successful increase in Pokrovskiy's processing capacity to 1.5million tonnes of ore per year show up fully in these figures for the first timeand the recently announced plans for interim expansion to 2.2m tpa is intendedto result in a tripling of capacity between 2002 and 2006. An increase inproduction has offset to some extent increased costs and has enabled us tominimise the increase in the unit cost per ounce. However, inflation,particularly in energy costs, will make it hard for us to do this again untilthe new production capacity at Pokrovskiy comes on stream. It should beremembered, though, that costs are always higher in the first half. Gold production at Pokrovskiy continues to be highly profitable and I am gladthat we have begun the implementation of this interim expansion as a first steptowards the million ounce target. This was accompanied by the US$140mfundraising and the proceeds of this issue give greater certainty that ourtarget is achievable. I look forward to the remainder of the year withconfidence. Peter Hambro. Executive Chairman Pokrovskiy Operations Report In the Period, 84,600oz of gold were recovered compared to 60,025oz during thesame period of 2004 with direct mining expenses at Pokrovskiy kept generally inline with the level in the compared period. The principal achievement during thePeriod was the implementation of stable operations of the gold extraction plantat the new increased capacity of 1.5m tpa. Pokrovskiy Rudnik Processing Operations 6 months to 30 June -------------------------------------------------------------------------------- Units 2005 2004 Var %Resin in Pulp PlantOre from pit t '000 409.5 304 +35%Average grade g/t 4.9 4.2 +17%Ore from stockpile t '000 281 202 +39%Average grade g/t 2.4 2.8 -14%Total milled t '000 691 506 +37%Average grade g/t 3.9 3.7 +5%Gold content oz '000 86.5 59.6 +45%Recovery rate % 92.2 90.3 +2%Gold recovered oz '000 79.8 53.9 +48%Heap LeachOre stacked t '000 341.0 309.0 +10%Average grade g/t 1.4 1.8 -22%Gold content oz '000 16.0 17.7 -10%Recovery rate % 30.7% 35% -12%Gold recovered oz '000 4.8 6.2 -23%TotalGold recovered oz '000 84.6 60.1 +41% -------------------------------------------------------------------------------- Mining The use of MicroMine to manage operational grade control, together with over onemillion tonnes of advanced stripping carried out in 2004, allowed to mine highquality ore and reduced dilution. During the Period, the Group commencedpreparations for the expansion of the mining works to fulfil the one millionounce production target which includes the renewal, maintenance and expansion ofits mining fleet. Overall, the gold content in the material delivered from thepit increased by 61%. Pokrovskiy Rudnik Mining Operations 6 months to 30 June-------------------------------------------------------------------------------- Units 2005 2004 Var %MiningTotal material moved m3 '000 2,755 2,034 +35%Ore mined t '000 652 438 +49%Average grade g/t 3.7 3.5 +6%Gold content oz '000 77.0 49.6 +55%Including high grade ore t '000 424 304 +39%Average grade g/t 4.9 4.2 +17%Gold content oz '000 66.6 41.4 +61%-------------------------------------------------------------------------------- Resin in Pulp Plant The plant capacity was increased by 50% in late 2004. During the Period 691,000twere processed through the plant, compared with 506,000t in the first half of2004, representing a 37% increase year-on-year. The increased capacity from 1mtpa to 1.5m tpa at the mill has allowed the Group to carry out essentialmaintenance on the circuits which optimises operations and will increase thelife expectancy of the mill liners and allows production at full capacity on anongoing basis. Plans for further expansion work to take the Plant capacity to 2.2m tpa has beenannounced and the work has already started. The Group announced that it hasplans to further increase the capacity of the mills with expected completion ofworks in the third quarter of 2006. The expansion project will encompass theconstruction of a further SAG mill and the increase in capacity of the resincircuits. It is expected that the existing mill building will have sufficientspace to house the extra machinery and hence costs are expected to be onlyc.US$5m in total. This is an interim expansion toward the larger growth ofoperations to fulfil Pokrovskiy and the Pokrovskiy flanks' contribution towardsthe one million ounce target. Analysis on the larger expansion possibilities isongoing and will be announced on completion of the current expansion project. Heap Leach Operations Double stacking introduced to the heap leach process over the last year resultedin significant increases in recovery rates which allows the treatment of orepreviously considered to be non-economical. A by-product of this is that theremay be possible increases in the reserve base of the deposit to incorporate thelower grade that it is now possible to treat economically. During the Period,the Pokrovskiy heap-leach processed 1.4g/t material as opposed to 1.8g/t in thesame period of 2004. The 30.7% (down from 35%) recovery for the Period reflectsthe late start to the heap leach season due to weather conditions. Double stacking also allowed the Group to carry out the heap leach maintenanceschedule in a more optimal way without disrupting the production process. Oncethe maintenance work is completed in 2006 the capacity of the heap leach shouldbe increased to 1m tpa. Gold Institute Standard ("GIS") Operating Cost Analysis The Group reports and breaks down Pokrovskiy Rudnik's operating costs accordingto the internationally recognised GIS following industry's best practices. The GIS cost analysis for the period is as follows: 6m to 6m to Variance 12m to 30/6/05 30/6/04 31/12/04Pokrovskiy RudnikAll figures reported in US$ per oz of gold produced Direct miningexpenses 97.8 100.7 -3% 73.0Third-party smelting,refining andtransportation costs 4.3 5.8 -26% 6.1By-productcredits (0.3) (0.4) (0.2)Other 47 24.2 94% 28.0 Cash OperatingCosts 148.8 130.3 14% 106.9-------------------------------------------------------------------------------- Royalties 25.2 23.3 8% 22.7Production taxes 7.1 7.0 1% 5.1 Total Cash Costs 181.1 160.6 13% 134.7-------------------------------------------------------------------------------- Non-cash movementin stock 15.1 7.9 91% 12.4Depreciation/Amortisation 47.7 38.6 24% 37.2 Total ProductionCosts 243.9 207.1 18% 184.3-------------------------------------------------------------------------------- Direct mining expenses during the Period have increased as a result of theglobal environment of increasing input costs but on a per ounce basis thisincrease is offset by the increase in ounces produced. Globally the costs ofmany of the raw materials required to operate a mine have increased, rangingfrom energy to reagents. Part of these costs occur in the non-cash movement instock line of the GIS table, as the cost of mining is not brought to accountuntil the gold is produced, and will be reflected in future costs. Significant increase in other expenses was a result of greater insurance covertaken out by Pokrovskiy Rudnik. Depreciation and Amortisation expenses changedin line with the increase of production assets caused by the plant and minefleet expansion. Although the increase in total ounces produced partly offsets the increasedprices of raw materials, it is also partly due to the large number of costcontrol and reduction measures put in place at Pokrovskiy that costs are notaffected as adversely as one might expect. One of such measures was theimplementation of the MicroMine mine planning software which has decreased oredilution and increased efficiency. The introduction of a computer monitoringsystem using satellites and global positioning system hardware has also resultedin a decrease in fuel consumption and an increase in stockpiling efficiencies. The Group will continue to use cost controls and logistics improvement measuresin order to tackle rising raw materials and energy prices in the currentenvironment of high raw materials inflation. Omchak Joint Venture Production from the currently 65%-owned Omchak Joint Venture ("Omchak JV") isahead of target for the year. During the Period Omchak JV produced 26,177oz(25,081oz in the first half year 2004). The production attributable to PHM of17,015oz increased 36% compared to the same period of 2004 due to the increasesin Omchak JV venture production and the increase of the Company's Group's stakein Omchak JV. The seasonal operations of the majority of Omchak JV's assetsshifts the main production towards the second part of the year. As disclosed inthe 2004 annual report, dependent on the dividend payment by the asset holdingentities, the production attributable to PHM may be reduced by 20-30,000 ouncesfor the year if Omchak's assets deliver an enhanced dividend cashflow to theGroup. Due to the fact that an increase in dividend cashflow is expected tooccur in the second half of 2005, PHM's share in Omchak JV is expected to beadjusted at year end. The management team of Omchak JV aims to increase their reserve base through newacquisitions and expansions to new regions. In May 2005, Omchak JV announced itssuccess in the auction of the combined exploration and extraction licence forVerkhne-Alliinskiy gold property in the Chita Region of Russia. The licence isestimated to contain gold reserves and resources of 76,000oz and 593,000oz inRussian categories C1 and C2 respectively and silver reserves and resources of138,000oz and 752,000oz in Russian categories C1 and C2 respectively. In the Amur Region Omchak JV's subsidiary OOO "Noviye Tekhnologii" startedpreparatory works for the commencement of production on five licence areasacquired during 2004. Works during the Period were concentrated mainly onpreparation of the machinery for the production season and approval of miningplans. Mining works commenced in May 2005 and included stripping and preparationof machinery for washing of gold bearing sands. Exploration and Development Report Pokrovskiy Flanks Further exploration works were undertaken on Pokrovskiy deposit and its flanksin order to confirm the geochemical gold anomalies identified by a geochemicalmodelling study undertaken by Vladivostok consultancy firm Ecocentre. Work atthe Pokrovskiy flanks, contiguous to the existing Pokrovskiy pit shell, focusedon extending strike from the existing mine along fault extensions, andconfirming mineralisation at previously identified gold anomalies. Pioneer Deposit On 20 July 2005 the Company Group released an announcement that the recent trialmining exercise and the availability of the Group's three new laboratories forassay work has allowed an update of reserves and resources at Pioneer. Pioneer'soverall resources have been updated and also partly recalculated usingAustralian JORC classification. According to the Russian classification systemthe relevant zones of the Pioneer deposit contain a total of C2 1.9 millionounces and P1/P2 1.9 million ounces. As was undertaken at Pokrovskiy during2004, we have implemented the MicroMine mine planning software at Pioneer.By-products of using MicroMine are the independent audit of the deposit by theMicroMine team and a JORC resource estimate. It has been found that the totalJORC estimate for Pioneer is 2.2 million ounces which is 14% higher than thatunder the Russian classification system. The results of the work have confirmedPHM's confidence in the amenability of the deposit to a large scale gold miningand processing operation and hence work has commenced on the basicinfrastructure requirements of such operation. For more detailed information please refer to PHM's press release dated 20 July2005 "Pioneer Reserves & Resources Update and Feasibility Study ProgressReport". Amur North East Belt Malomir In February 2005 the Group announced that it was successful in the auction forthe combined exploration and extraction licence over the Malomir gold deposit inthe North East of the Amur Region, Far East Russia. This acquisition was anotherstep in the Group's long-term strategy of combining several gold properties inthe North East area of Amur Region to help to benefit from operationalsynergies. The Group already held licences for two areas adjacent to the depositwhich it had explored for two years. The Diagonal Zone, at the centre of theMalomir licence area, was extensively explored by Soviet geologists. Since theGroup's registration of the licence for the deposit in May 2005 a constructionof a man camp for employees and relevant infrastructure has commenced to aidexploration and the development work. PHM has initiated an extensive programmeof confirmation and other drilling to form the basis of a pre-feasibility study.2,500 metres of drilling and 55,000 cubic metres of trenching have beencompleted to date, with all the samples being analysed at the Group's laboratoryin Tokur village. The Group is planning to significantly increase the number ofdrilling rigs working on the project in order to complete confirmatoryexploration works on the deposit as soon as possible. Works on theinfrastructure of the deposit are at an advanced stage with a telephone andinternet connection to be established shortly, as well as an all-year roadconnecting Malomir, with the main road to be completed by April 2006. Tokur Trenching and drilling has been carried out in the Glavniy fault zone and on theflanks of the Tokur deposit with 980.5m of core drilling and 2,831.9m3 oftrenching accomplished. The results of this work are expected later this year. Voroshilovskiy As planned, detailed exploration continued in the area with 8,896m3 oftrenching. The results of the geochemical exploration, trenches and drill holeshave now been received by the Group and are being processed. The geophysical andgeochemical results identify two prospective ore structures. Within the twonewly identified structures, gold grades reaching 8.8 - 11.3g/t have beenindicated from grab sampling. Trenching has already intersected the indicatedorebody with visible gold noted at the surface. YamalZoloto Following an acquisition of 90% of YamalZoloto in April 2004 the Groupcommissioned a full scope exploration programme on the PHM license area wherenine prospective mineralization zones were identified by an independenthydro-geochemical survey. The study covers the whole licensed area and theresults were acquired by YamalZoloto as the basis for planning futureexploration works. The main focus of works has been on two areas most exploredby previous exploration works, Novogodnee Monto and Petropavlovskoye deposits.The Group expects to finalise the pre-feasibility study on these two deposits byearly 2006. The study will be prepared by the leading Russian consultinginstitution ZNIGRI. The metallurgical tests carried out by this institutionwere almost completed during the Period. In addition to the established gold reserves and resources included in thepre-feasibility study calculations the deposit is estimated to contain 6.2million tonnes of iron ore at 40%, including 4.9 million tonnes located withinthe boundaries of gold mineralisation. The Group is in advanced negotiations to subscribe for shares in Yamal Mining,the State-owned company that owns the balance of YamalZoloto. It is anticipatedthat completion of this acquisition will be announced in early October.The Group will also carry on exploration works on other prospective areas. Chagoyansk Field work is ongoing and trench sample assay results are already beingreceived. Two samples gave gold grades of 1.94g/t (on 1m width) and 0.45g/t (on0.3m interval). Further trenches were dug for confirmation of theaero-geophysical survey which identified potassium anomalies and the data fromthe works done by previous explorers which indicated a high gold-bearingpotential. A drilling programme commenced on the areas identified through aero-geophysicalsurvey. 6 of 10 planned drill holes have been drilled with results expectedlater in the year. Chemical LaboratoryAfter commissioning in January 2005, PHM's complex of chemical laboratories hasbeen working at full capacity and operates as planned. The complex consists ofthe chemical Laboratory at Pokrovskiy, serving Pokrovskiy, Pokrovskiy Flanks,Pioneer and Odolgo; the chemical Laboratory at Tokur, serving Tokur, Malomir,Voroshilovskoye; , and the chemical Laboratory in Blagoveschensk, servingChagoyansk for assay samples and all other deposits for geochemical analysis.Total capacity of the laboratory complex is 22,000 samples per month. The central Group laboratory in Blagoveschensk also has the responsibility ofmonitoring all the other Group laboratories. The Blagoveschensk laboratory hasalso implemented an X-Ray spectrum method for the analysis of polymetals. Theconstruction of a new laboratory in Labitnangi (YamalZoloto) was also commencedin the Period with a planned capacity of 5,000 samples a month (assay analysis)and 3,000 samples a month (geochemical analysis). The implementation of the new laboratory complex facilities, which are some ofthe biggest and best equipped in Russia, increased the Group's ability to carryout high quality exploration works and thorough control of the currentproduction activities. Currently 100% of PHM's samples are analysed in-house andwith an execution time of one month. All Groups' laboratories are certified bythe state and independent state control of analyses is maintained on regularbasis according to Russian regulations. Gold Price/Treasury The Group's average realised gold price for the Period was US$422/oz, up 7%against US$394/oz achieved in the first six months of 2004. The Roublestrengthened against the Dollar by one percent during the Period and wasRUR28.67/US$ at 30 June 2005 (RUR29.03/US$ - 30/6/04). The Group has a policy ofno long term gold forward sales or hedging. A fundraising to obtain US$140m through a Convertible bond issue was completedin August 2005. It should provide the greater part of PHM's expected externalfinance requirements to reach the 2009 one million ounce production target. Thisfundraising is expected to significantly increase the Group's interest expensecharges in the second half of 2005. Conference Call A conference call to discuss the announcement will be hosted by Jay Hambro,Director, Business Development and Philip Leatham, Financial Director, PeterHambro Mining plc, on Thursday, 22 September 2005 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. Replay will be available after the call has finished for seven days on 0845 2455205 in the UK and on +44 (0) 1452 55 0000 internationally with the access codein both cases 9297786. Enquiries: Alya Samokhvalova +44 (0) 20 7201 8900Director of External Communication, Peter Hambro Mining plc Mariana AdamsInvestor Relations, Peter Hambro Mining plc David Simonson / Tom Randell +44 (0) 20 7653 6620Merlin PETER HAMBRO MINING plc INTERIM SUMMARISED CONSOLIDATED ACCOUNTS FOR THE PERIOD ENDED 30 JUNE 2005 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 2005 set out on pages 12 to23 and we have read the other information contained in the interim report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the financial information. Directors' responsibilitiesThe 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 require that the accounting policies andpresentation 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 performedWe 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 United Kingdom Auditing Standards and thereforeprovides a lower level of assurance than an audit. Accordingly we do not expressan audit opinion on the financial information. Review conclusionOn 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 2005. St. Paul's House, MOORE STEPHENSWarwick Lane, London Registered AuditorEC4M 7BP Chartered Accountants 21 September 2005 PETER HAMBRO MINING plc Summarised Consolidated Profit and Loss Account for the period ended 30 June 2005 (expressed in US $'000s) Note Six months to Six months to Year to 30 June 2005 30 June 2004 31 December 2004 $'000 $'000 $'000 Turnover: group andshare of joint ventures 42,311 28,182 85,502Less: share of jointventures' turnover (6,034) (5,015) (23,394) ---------- ---------- -----------Group turnover 2 36,277 23,167 62,108 Operating profit 8,022 5,316 22,703 Share of operatingprofit of joint ventures 1,040 928 4,829Amortisation ofgoodwill in joint ventures (514) (389) (954)Interest payable andsimilar charges 4 (932) (2,009) (3,661) Other income 466 581 1,387 ---------- ---------- ----------- Profit on ordinaryactivities beforetaxationGroup 7,795 4,131 20,916Joint ventures 287 296 3,388 ---------- ---------- ----------- 8,082 4,427 24,304 Taxation on profit onordinary activities 5 (2,147) (931) (8,253) ---------- ---------- ----------- Profit on ordinaryactivities after taxation Group 6,470 3,580 13,801Joint ventures (535) (84) 2,250 ---------- ---------- ----------- 5,935 3,496 16,051 Minority interests (41) (282) (733) ---------- ---------- ----------- Profit retained forthe period 5,894 3,214 15,318 ========== ========== =========== Earnings per ordinaryshare 15 $0.079 $0.049 $0.22Diluted earnings per share 15 $0.075 $0.046 $0.21 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 2005 (expressed in US $'000s) Note 30 June 31 December 30 June 2005 2004 2004 $'000 $'000 $'000Fixed AssetsIntangible assetsGoodwill (2,953) (2,776) -Mineral properties 79,675 80,653 75,260Capitalised exploration anddevelopment expenditure 15,961 10,251 4,747Deferred stripping costs 2,032 1,597 -Tangible assetsProperty, plant and equipment 66,332 60,579 45,137 Investments 6 561 1,399 36Investments in joint ventures:Goodwill 2,428 2,821 2,559Share of gross assets 25,607 21,366 17,749Share of gross liabilities (14,622) (10,188) (11,172)Loans - 3,400 1,600 -------- -------- -------- 175,021 169,102 135,916Current AssetsStock and work in progress 21,398 15,697 12,096Debtors 7 22,808 17,784 17,904Cash at bank and in hand 24,865 25,854 52,544 --------- -------- -------- 69,071 59,335 82,544Creditors, amounts falling duewithin one year 8 (14,453) (15,607) (21,613) ---------- -------- ------- Net Current Assets 54,618 43,728 60,931 ---------- -------- ------- Total Assets less CurrentLiabilities 229,639 212,830 196,847 Creditors, amounts falling dueafter more than one year 9 (3,911) (8,384) (6,845) Provision for liabilities andcharges (2,783) (2,182) (1,444) --------- -------- --------Net Assets 222,945 202,264 188,558 ========== ======== ======== PETER HAMBRO MINING plc Summarised Consolidated Balance Sheet (continued) as at 30 June 2005 (expressed in US $'000s) Note 30 June 31 December 2004 30 June 2005 $'000 2004 $'000 $'000Capital and ReservesShare capital 10 1,220 1,193 1,193Share premium 10 168,946 154,252 153,932Merger reserve 8,755 8,755 8,755Contingent reserve on acquisition 6,304 6,304 6,304Share incentive reserve 40 40 40Profit and loss account 35,486 29,590 17,486 ---------- -------- --------Equity shareholders' funds 11 220,751 200,134 187,710Minority interests 2,194 2,130 848 ---------- -------- -------- 222,945 202,264 188,558 ========== ======== ======== The accompanying notes are an integral part of this balance sheet. These financial statements were approved by the Directors on 21 September 2005 P.C.P. Hambro PETER HAMBRO MINING plc Summarised Consolidated Statement of Cash Flows for the period ended 30 June 2005 (expressed in US $'000s) Note Six months to Six months to Year to 30 June 2005 30 June 2004 31 December 2004 $ '000s $ '000s $ '000s ----------- ---------- ---------- Net cash inflowfrom operatingactivities 12 6,968 4,136 20,532 Net cash outflowfrom returns oninvestments andservicing offinance (4,427) (1,976) (3,297) Taxation Paid (1,604) (380) (4,223) CapitalExpenditure andFinancialinvestment (15,852) (7,118) (31,921) Acquisitions andDisposals 143 (6,986) (13,387) ------- ------ ------- Cash Outflowbefore Financing (14,772) (12,324) (32,296) Cash (inflow)from(increase) indebt and leasefinancing 13, 14 (940) (18,827) (25,862)Net receipt fromissuing shares 14,723 68,868 69,185 ------- ------ -------(Decrease)/increasein cash at bank and in hand (989) 37,717 11,027 ======= ======= ======= PETER HAMBRO MINING plc Summarised Consolidated Financial Statements for the period ended 30 June 2005 Notes 1. Principal Accounting Policies a) Basis of preparationThe interim financial statements have been prepared in accordance with theaccounting policies set out in the Group's financial statements for the yearended 31 December 2004. The interim financial statements are unaudited but havebeen reviewed by the auditors and their report is set out on page 1. The interimfinancial statements do not comprise statutory accounts within the meaning ofSection 240 of the Companies Act 1985. The comparative figures for the yearended 31 December 2004 are derived from the statutory accounts filed with theRegistrar of Companies. The auditors' report on the statutory accounts wasunqualified and did not contain a statement under Section 237 of the CompaniesAct 1985. b) Basis of consolidationThe 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 figuresCertain comparative figures have been restated to be consistent with the currentperiod's presentation. 2. Turnover All proceeds are receivable in the ordinary course of business and are recordedexclusive of Value Added Tax. 3. Reserve Bonus Scheme As reported in the 2004 Annual Report & Accounts, the holders of the ReserveBonus Units have reassessed the effect of the scheme on the affairs of the Groupand its shareholders. In light of this, subject to clarification of the Russianand UK tax consequences for both the holders and the Company, the holdersindicated a willingness to implement a revised scheme that would be of the mostbenefit to them and the Group's shareholders. The Committee of IndependentDirectors has received a re-evaluation of reserves and resources at Pioneer fromMicroMine in June/July 2005 and is reviewing the implementation of such ascheme, amongst a number of other options, with advice from the Company'sadvisors and independent consultants as necessary and will make a recommendationin due course. Once received, approval of the recommendation will be sought fromshareholders at the earliest opportunity. 4. Interest Payable and Similar Charges 30 June 2005 30 June 2004 $'000 $'000 Finance lease charge 53 309Bank loan interest 564 1,961Other loan interest 93 48Share of joint ventures' interestpayable and similar charges 239 243 --------- ---------- 949 2,561Less finance cost capitalised (17) (552) --------- ---------- 932 2,009 --------- ---------- 5. Taxation The Company does not anticipate a corporation tax charge for the period as allprofits arise in its subsidiary Pokrovskiy Rudnik and the Company itself hassuffered losses. The Russian profit tax charge for Pokrovskiy Rudnik for theperiod ended 30 June 2005, based on the tax rate 24% was US$698,000 (2004 -US$653,000). The rest of the tax charge relates to the deferred tax. 6. Investments 30 June 2005 31 December 2004 $'000 $'000 Investments - other 36 36Shares in subsidiaries and joint ventures 525 1,363 -------- --------- 561 1,399 -------- --------- The Company and the Group have the following material subsidiaries and othersignificant investments, which were consolidated in these financial statements. Principal subsidiary Country of Principal Principal country Effective proportion and joint venture incorporation activity of operation of shares held undertakings------------------------------------------------------------------------------------------------------ Eponymousco Ltd United Kingdom Holding Company United Kingdom 100% Victoria Resources Ltd United Kingdom Holding Company United Kingdom 100% Peter Hambro Mining (Cyprus) Ltd Cyprus Holding Company Cyprus 100% Management CompanyPHM * Russia Holding Company Russia 100% Olga Russia Gold exploration Russia 100% and production Pokrovskiy Rudnik Russia Gold exploration Russia 97.7% and productionJoint Venture Omchak Russia Gold exploration Russia 65% and productionTokurskiy Rudnik Russia Gold exploration Russia 100% and productionGRK Victoria Russia Gold exploration Russia 100% and productionKoboldo Russia Gold exploration Russia 91.7% and production Held indirectly via Pokrovskiy Rudnik Yamalzoloto Russia Gold exploration Russia 88% and productionNPFG Regis Russia Gold exploration Russia 51% and productionJoint Venture Rudnoye Russia Gold exploration Russia 49% and productionKapstroy Russia Construction Russia 97.7% In June 2005 Tokurskiy Rudnik acquired 91.66% of OAO Koboldo for a considerationof US$288,000. Koboldo has been consolidated in these financial statements. In February 2005 Pokrovskiy Rudnik set up a wholly owned construction companyKapstroy. Kapstroy is intended to carry on construction activities for the Groupas well as for third parties. Kapstroy has been consolidated in these financialstatements. * Management Company PHM has been consolidated in these financial statements asits activities began in 2005 (2004 - no consolidation on the grounds of noactivity). 7. Debtors 30 June 2005 31 December 2004 $'000 $'000 Prepayments 8,586 4,655Tax prepaid 77 -VAT recoverable 8,863 7,325Other debtors 3,344 2,538Due from Rudnoye joint ventures 1,120 822Loans issued 818 2,444 -------- --------- 22,808 17,784 -------- --------- 8. Creditors, amounts falling due within one year 30 June 2005 31 December 2004 $'000 $'000 Trade creditors 2,233 1,968Tax liability - 1,418Finance lease liabilities falling due withinone year 434 652Short term loans 3,921 4,137Short term element of long term loans 3,222 2,895Due to former shareholders of subsidiary 308 1,516Due to MC PHM - 432Other creditors 4,335 2,589 -------- --------- 14,453 15,607 -------- --------- 9. Creditors, amounts falling due after more than one year 30 June 2005 31 December 2004 $'000 $'000 Due to former shareholders of subsidiary - 3,486Long term borrowing 3,861 4,655Finance lease liabilities falling due afterone year 50 243 -------- --------- 3,911 8,384 -------- --------- 10. Share Capital Company ---------------------------Ordinary shares 30 June 31 December 2005 2004 $'000 $'000Allotted, called up and fully paid:At the beginning of the period 1,193 1,010Other new issues 27 183 -------- ---------At the end of the period 1,220 1,193 -------- --------- Number of shares (par value £0.01) No'000 No'000 Authorised 100,000 100,000 -------- --------- Issued at the beginning of theperiod 73,999 63,999Other new issues 1,449 10,000 -------- ---------At the end of the period 75,448 73,999 -------- --------- On 14 April 2005 the Company issued 1,448,545 ordinary shares at a price of£5.50 per share pursuant to an Equity Subscription Agreement with theInternational Finance Corporation (the IFC). As a result of this transaction ashare premium of US$14.7m after commissions and share issue costs of US$203,000was created.The IFC was also granted an option to subscribe for an additional 1,448,545shares in the Company. The option exercise price is at a 25% premium to £5.50per share (subject to an anti-dilution adjustment). Unless exercised earlier,the option will lapse on 4 April 2013. 11. Equity shareholders' funds 30 June 2005 31 December 2004 $'000 $'000 Opening balance 200,134 115,633Issue of share capital 14,723 69,183Issue of contingent shares - -Profit for the period 5,894 15,318 -------- --------- 220,751 200,134 -------- --------- 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. 12. Net Cash inflow from Operating Activities 30 June 2005 30 June 2004 $'000 $'000Cash received from customers 36,366 23,167Cash paid to suppliers and employees (21,446) (14,108)Other proceeds 34 53Other expenses (7,986) (4,976) --------- ---------Net cash inflow from operating activities 6,968 4,136 --------- --------- 13. Reconciliation of Net Cash Flow to Movement in Net Debt 30 June 2005 $'000 Decrease in cash at bank and in hand (989)Cash inflow from increase in debt and lease financing 940 ---------Change in net debt resulting from cash flow (49) Exchange difference 155 ---------Movement in net debt in the period 106Net debt at 1 January 13,271 ---------Net debt at 30 June 13,377 --------- 14. Analysis of Net Debt At 1 January 05 Cash Flow Exchange movement At 30 June 05 $'000 $'000 $'000 $'000 ---------- -------- -------- ---------- Cash in handand at thebank 25,854 (989) - 24,865Debt duewithin oneyear (4,138) 62 155 (3,921) ---------- -------- -------- ----------Net Cash preleasing /sales & leaseback 21,716 (927) 155 20,944 ---------- -------- -------- ----------Finance leases/ sales &lease back (8,445) 878 - (7,567) ---------- -------- -------- ---------- Net Cash inc.leasing 13,271 (49) 155 13,377 ---------- -------- -------- ---------- 15. Earnings per ordinary share Six months to Six months to Year to 30 June 2005 30 June 2004 31 December 2004 $'000 $'000 $'000Profit for the period US$'000 5,894 3,214 15,318Weighted average number ofordinary shares 74,618,249 65,158,815 69,615,032Earnings per ordinary share US$0.079 US$0.049 US$0.22 --------- --------- ---------Weighted average number ofordinary shares 74,618,249 65,158,815 69,615,032C shares 2,759,368 2,759,368 2,759,368Contingent shares 1,500,000 1,500,000 1,500,000 --------- --------- ---------Weighted average number ofdiluted shares 78,877,617 69,418,183 73,874,400 --------- --------- ---------Diluted earnings per share US$0.075 US$0.046 US$0.21 --------- --------- --------- 16. Post balance sheet events In August 2005 the Group issued US$140 million of Convertible Bonds due in 2010(the "Bonds"). The Bonds carry a coupon rate of 7.125% payable semi-annually inarrears and can be converted into fully paid 1p ordinary shares of the Company.If not converted or previously redeemed the Bonds will be redeemed at par on orabout 11 August 2010. On 19 July 2005 the holders of 2,759,368 "C" shares in Eponymousco paid up£1.01, being the uncalled amount and, in accordance with the terms of theiragreement with the Company, exchanged their "C" shares for fully paid shares inthe Company. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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