Sale of non core assets

5 December 2012

Sale of Non-Core Assets

Petropavlovsk PLC ("the Company" or, together with its subsidiaries, "the Group") announces it has yesterday signed a Share Purchase Agreement relating to the transfer of 65% of the issued shares in CJSC ZRK Omchak ("Omchak") to OJSC Susumanzoloto ("Susumanzoloto"). The total consideration for the sale is US$21,650,000, payable in four equal tranches as follows:

n US$5,412,500 on or before 31 January 2013

n US$5,412,500 on or before 30 June 2013

n US$5,412,500 on or before 30 September 2013

n US$5,412,500 on or before 31 December 2013

The Group increased its holding to 90% of the issued shares in Omchak in 2010. Prior to this, Omchak was a joint venture with Susumanzoloto and OJSC Shkolnoe, with the Group originally holding 50%. As a joint venture, Omchak produced gold from alluvial operations. In 2011, ownership of all the alluvial licences was transferred to another subsidiary of the Group. Omchak now holds five licences to explore and develop hard-rock gold deposits: Bukhtinskaya, Kulinskoye and Verkhne-Aliinskoye in the Chita region of Russia and Birysinskiy and Mirichun in the Irkutsk region, as well as Verkne-Kaurchakskaya in the Altay region, which is held indirectly via Omchak's wholly owned subsidiary. None of these assets are producing. As at 1 January 2012, Verkhne Aliinskoye held 0.24Moz of Measured + Indicated and a further 0.47Moz of Inferred Mineral Resources. The remaining five assets are greenfield projects at an early stage of exploration.

The prior approval of the Federal Antimonopoly Service of Russia has already been obtained for the transaction. Following completion of the transaction, Petropavlovsk will remain a 25% shareholder in Omchak.

The transaction will result in an accounting loss of approximately US$30 million to be recognised in the results for the year ending 31 December 2012, reversing the fair value gain of approximately US$26 million which arose in 2010.

Commenting, Chairman, Peter Hambro said:

"The Group has adopted a strategy to focus on its core projects, thereby optimising its capital expenditure requirements and deleveraging its balance sheet, we are pleased to have confirmed the sale of these non-core assets."

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