17th Jul 2006 07:01
Peter Hambro Mining PLC17 July 2006 17 July 2006 Trading Update Peter Hambro Mining Plc ("PHM" or the "Group") issues this trading statement asan update and in advance of its results for the six months to 30 June 2006 ("thePeriod"). A full results announcement will be issued on 21 September 2006. Highlights for the Period include: • Production: o PHM total attributable production of 108,363 oz is 6 % up on the same period for 2005 with Pokrovskiy Mine production of 93,600 oz of gold for the period, 11% up on the same period 2005; o Omchak Joint Venture attributable production of c.11,500 oz of gold for the period. This is 32% lower than the same period for 2005 but in line with the Group's forecast; o The Group is on track to meet its 250,000 oz per annum production target for 2006 • Unit costs at Pokrovskiy were in accordance with the Group's internal forecast for the first six months of the year; • Average realised gold sales price was US$573/oz, which is 36% higher than the same period last year; • Geological highlights o At Pioneer, geochemically predicted high grade ore columns have been confirmed by drilling; some with exceptional grades of more than 1,200 grams of gold per tonne; o At Malomir 67 intersections have been identified with 12 ore bodies with grades up to 20 g/t (averaging 1.2-3.0 g/t) over thicknesses of 3m to 93m; • The Group announced in January 2006, its detailed plan, expected costs and evaluation regarding the 2009 "Million Ounce" production target. The related capital expenditure programme for this is on track; • The International Finance Corporation exercised fully its right to invest a further US$17.4m and subscribed for further ordinary shares in PHM; • Positive conclusions of an independent review by SRK of the potential of the licence areas in the Yamalanenetsky Autonomous Region. Commenting on the announcement, Peter Hambro, Executive Chairman, said: "It is again a pleasure to report more and solid progress by PHM during thefirst half of the year. PHM has seen growth in attributable production, in spiteof a reduction in our Omchak joint-venture ownership. The success of theexpansion of the Pokrovskiy plant has helped to increase production there by11%. The Pokrovskiy Mill now has 1.8 million tonnes per year capacity and themodifications in the heap leach methods we are using show that the processing ofvery low grade ore is now economically viable. It is noteworthy that the production increase at Pokrovskiy comes whileintentionally processing lower grades at a time of high gold prices; thusincreasing the overall reserve and resource base at this deposit. Overall we have marginally beaten our plans, achieved positive explorationdevelopments and continued our planned advance towards the "Million Ounce"target that we have set ourselves. The results of exploration work on the fanglomerates and flanks of Pokrovskiy,at Pioneer and at Malomir continue to support our belief that the gold in theground is more than sufficient to achieve this. It is particularly reassuringthat the high grade ore columns that our geologists predicted would exist atPioneer have been confirmed by drilling and assaying. Bonanza grades of over1,200 grams of gold per tonne of ore are a welcome bonus. At the Yamal licence areas, our expectations have been confirmed and supportedby SRK's report of the existence of ore grade mineralisation potentiallycontaining in excess of 5m oz of gold in two licence areas. I believe this isevidence of the long term benefits that come from a strong and sustainedcommitment to exploration. It is a testament to the focused efforts of our management and all employeesthat, despite the pressures on our operating costs, Pokrovskiy continues to beone of the lowest cost producers in Russia" Operations Report Pokrovskiy Mine Pokrovskiy Rudnik is continuing the success achieved during 2005 producing93,600 oz of gold compared to 84,600 oz in the same period of 2005. Unit operating costs were generally contained in line with those of the previousperiod, despite increases in raw material costs, rouble appreciation and themining of harder ore. In addition to the equipment bought in 2004-2005, another five 45-tonne capacityBelaz trucks were acquired and put into use. This allowed stable mining levelsin line with the schedule and contributed to mining cost optimisation. The old30-tonne capacity Belaz trucks were repaired and sold as part of the programmeof cost savings introduced in 2005 and successfully implemented during the firsthalf of 2006. Mining operations Pokrovskiy Rudnik Mining Operations 6 months to June 30th Units 2006 2005 Var %MiningTotal Material Moved m(3) '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%Of which high grade ore t '000 717 402 +78%Average grade g/t 3.9 4.9 -20%Gold content oz '000 90 64 +41% Processing operations - Resin in Pulp plant 818,000 tonnes of ore were treated through the mill in the first half of theyear - 18% more than during the same period in 2005 - and the plant's capacityreached an annual rate of 1.8 million tonnes of ore in June 2006. Works on the planned plant expansion and production streamlining will continue during the second half of the year. Due to the high standard of works undertaken in 2004-2005 for the plant'sexpansion, the resultant increased capacity of the mill allowed economicprocessing of lower grade material and increased total gold produced. Previouslythis material would have been treated using heap leach technologies which havelower recovery rates than the plant. An increase in the gold price enabled treatment of lower grade material notpreviously included in the Group's reserves. This helped increase the totalreserves of Pokrovskiy Rudnik. Some decrease in recovery rates compared to the same period last year (86.6% in2006 vs. 92.2% in 2005) can be explained by an increased proportion of hard rockbeing treated through the mill. Technological improvements were made to theResin in Pulp plant in order to increase recovery rates from the harder ores andthese new technologies are currently being implemented at the plant and areexpected to bring recovery rates up to 91% in the second half of 2006. Heap Leach Test work carried out during last year in order to improve heap leach technologyproved successful, allowing the application of new methods this year on a largerscale. These involve ore being left on heap leach pads through the winter untilspring for further leaching and ore for the following year's treatment beingstacked on pads during autumn of the previous year. This method allowed thestart of the leaching one month earlier than in the previous year and produced2,000 oz of additional gold from these test works; significantly improvingrecovery rates at the pads under test from 30.7% in the first half of 2005 to68.3% in the same period of 2006. This will give the Company an opportunity totreat a larger amount of low grade ore through the heap leach process and alsoto increase recovery rates using this process. It should be noted, however, that the exceptionally cold recent winter in Russiacaused the stacking of new ore on the pads to be delayed by approximately onemonth. Pokrovskiy Rudnik Processing Operations 6 months to June 30th Units 2006 2005 Var %Resin in Pulp PlantOre from pit t '000 717 402 +78%Average grade g/t 3.9 4.9 -20%Ore from stockpile t '000 102 281 -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 LeachOre 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%TotalGold recovered oz '000 93.6 84.6 +11% The measures introduced enabled increased production from lower grade materialwhich had not previously been accounted for in the mineable reserves of thedeposit. This resulted in an increase of reserves and mine life extension. Table showing the breakdown of gold production at Pokrovskiy Rudnik by month forthe six months to June 30th 2006 vs. 2005 (ounces) Month 2006 2005January 14.69 13.70February 12.25 11.23March 15.37 12.81April 16.77 11.32May 17.38 16.66June * 17.10 18.86Total 93.6 84.6 * The somewhat lower production in June is a result of intentionally processinglower grades which began in May, a time of high gold prices. Nevertheless theproduction numbers are in line with the Group's internal monthly and annualforecast. Pioneer Mine Mining operations at Pioneer during the first half of 2006 were aimed atfinalising geological exploration of the deposit and preparation for its fullscale exploitation. This involved in particular, the collection of bulk samplesfor metallurgical tests from the Bakhmut and Promezhutochnaya ore zones. ----------- ---------Mining operations Units 2006 1H 2005 1H--------------- ---------- Actual Actual ----------- ------------------------- Pioneer Deposit--------------- ---------- ----------- ----------Total Material Moved '000 m3 392 328--------------- ---------- ----------- ----------incl. stripping '000 m3 385 308--------------- ---------- ----------- ----------ore '000 m3 7 19--------------- ---------- ----------- ----------Ore Mined '000 t 13 36--------------- ---------- ----------- ----------Grade g/t 1.3 2.8--------------- ---------- ----------- ----------Gold '000 oz 0.5 3.2--------------- ---------- ----------- ---------- Omchak Joint Venture Through its subsidiaries, the Omchak JV produced c. 23,000 of gold. As almost80% of the gold produced by the Omchak JV is from alluvial deposits, themajority of production occurs during the second half of the year and theexceptionally cold weather in the area exacerbated the skew in production. PHM'sattributable share of production was 11,500 oz. This was a 32% decline comparedto the same period in the previous year due to PHM's previously announceddecreased share in the JV, down from 65% to 50%. OOO Zeyazoloto and OOO Noviye Tekhnologii, which were acquired by the jointventure in 2005, continued successfully, producing c. 1,447 oz. gold. Alongsidetheir successful production activities these companies were also involved in theacquisition of local licences for the right to explore and produce alluvial goldat local deposits. New licensed areas acquired in this process have confirmedreserves that are expected to yield a planned annual production of alluvial goldin the Amur region of c.10,000 oz gold per year starting in 2007 for upwards offive years. The Uduma deposit located in the Sakha Republic (Yakutia) was also acquired byOmchak in 2005. Evaluation works were carried out at this deposit in order tocomplete an audit of reserves and produce a detailed production plan for 2007and 2008 by the end of this year. At the assets in the Chita Region, development and confirmatory explorationworks have been carried out; including environmental studies, and topographicalworks concerning the reclamation of land in accordance with the conditions setout in the licence agreements. Exploration and Development Report Exploration activities during the period were concentrated primarily on assetsinvolved in the Group's "Million Ounces" production plan. Currently the Group isat the stage of preparing all necessary works which need to be done within theframework of feasibility studies for this plan. During the first half of theyear 260 drill holes were made with a total length of 41,578m, and 320,575m3 oftrenching was excavated. Pokrovskiy Flanks Metallurgical and geological studies were continued on the fanglomerates atPokrovka-II and the main results are expected in the second half of 2006.Exploration also continued on other areas of the Pokrovskiy flanks, namely theVerkhne-Sergeevsky, Dalniy and Kontaktoviy areas where new ore intersectionswere crossed and exploration works need to be continued. Pioneer Deposit Exploration work at Pioneer was concentrated on the geological and metallurgicalelements necessary for the planned commencement of production in 2007. Bulksampling for metallurgical test work was also carried out to verify assays fromtrench and shallow-hole sampling. At the Promezhutochnaya and Yuzhnaya zones, infill drilling was undertaken inthe recently discovered ore columns, together with the construction of a 330m x230m shallow open-pit to expose the ore zone and ore column so as to check thecontinuity of mineralisation. Shallow confirmation drilling was performedadjacent to the deposit to establish the absence of mineralisation in areas ofplanned infrastructure. Shallow exploration drilling was also undertaken in theZvezdochka and Vostochnaya zones. As a result of all these studies two highgrade ore columns were confirmed at the Promezhutochnaya zone, with reportedgold grades in them up to 198 g/t. Three ore columns were established in theYuzhnaya zone with reported gold grades up to 20 g/t. At the Andreevskaya zone apredicted ore column was duly confirmed. This was intersected by two drill holesand showed gold grades up to 1,225 g/t. However exploration work had to besuspended until the autumn because of boggy ground conditions. Based on the new geological model of Pioneer, drilling (hole no.337) on theintersection of a satellite lineament and fault at the Andreevskaya zone, in ananalogous position to the Bakhmut zone Apophysis 1, has resulted in thediscovery of a very high grade gold/silver intersection: two samples with gradesof 1,225 and 1,064 g/t Au, and an average grade of 222 g/t Au over an 8.5minterval at a downhole depth of 70-78m from surface (true depth estimated at 60-70m). Malomir In the first half 2006, as a result of drilling and trenching in black shaleson the left bank of the Malomir river, three shallow-dipping ore zones in quartz/sulphide stockworks above the Diagonal thrust were outlined. This work allowedidentification of 67 intersections with 12 ore bodies. Gold grades wereestablished up to 20 g/t (averaging 1.2-3.0 g/t) over thicknesses of 3m to 93m. Reserves and resources on the evaluated part of the deposit are C1 1.3 m oz ofgold, and C2+P1 1.6m oz of gold. In addition, 6 metallurgical bulk samples(140-2,000 kg) were sent for testing. Trenching exploration works have beenstarted on the Quartzite zone (beresitised granitoids) to the north of Malomirriver. The extension of the main Malomir ore zone to the north-east was furtherexplored; and positive indications which were previously only predicted wereconfirmed by real exploration data. Yamalzoloto and Yamal Mining Company An independent review by SRK of the potential of the Toupugol-Khanmeishorskylicence area and the status of the Novogodnee Monto project was completed. Thereport stated that the licence area represents a high quality exploration assetwith significant potential and that the current work being carried out isjustified and that the project clearly has the potential to support an operatingmine. The report concluded that "the two licences combined represent a valuableaddition to the Peter Hambro Mining Plc portfolio and that it is reasonable toexpect that the Feasibility Study at Novogodnee Monto, combined with ongoingexploration of the Toupugol-Khanmeishorsky will in due course confirm theexistence of ore grade mineralisation containing in excess of five millionounces of gold." It is also expected that magnetite zone reserves at Novogodnee Monto will beconfirmed in September 2006. Exploration was also continued at Petropavlovskoyewhere a 2,500m length of continuous mineralised zone has been established.Promising preliminary exploration results for gold and platinum group metalswere also received at some of the licence areas of Yamal Mining Company.Detailed results will be announced when available. Izvestkovaya Sopka Three separate high grade ore intersections in pyroxene skarns have beendiscovered in trenches with gold grades from 1.08g/t to 327 g/t, averaging 33.8g/t over a thickness of 10 m. Exploration by drilling and trenching iscontinuing. The orebody has been followed down dip by drilling and trenching (gold grade16.6 g/t over a 19.0m thickness) in the Maristy stream valley. An ore intervalof silver, 610.3 g/t over a 3.0m thickness, (maximum 1,169 g/t over 1.0m) inskarns was also discovered. Gold has not been found in these samples. Gold Price/Treasury The Group's average realised gold price for the period was US$573/oz, up 36%against US$422/oz during the first six months of 2005. The Russian roublestrengthened against the US Dollar by 6% during the Period and was RuR27.0789/US$ at 30 June 2006 (RuR28.04/US$ - 30/6/05, RuR28.78/US$ - 31/12/05). TheGroup has a policy of no long term gold forward sales or hedging. July Site Visit From 11th to 14th July 2006 a number of institutional analysts made a site visit to the Pokrovskiy operations and attended a geological workshop. During the course of the workshop the visitors asked about preliminary exploration results. Amongst this was information concerning preliminary assay results from deposits in the Yamal Region in relation to Platinum, Palladium, Gold and Copper grades. Due to the nature of its early-stage exploration these assay results are not yet sufficient to make investment decisions or predict the economics of recovering what metal they might contain. Conference Call A conference call to discuss today's trading update will be hosted by PeterHambro, Executive Chairman of Peter Hambro Mining Plc at 14:00 pm 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 it willbe +44 (0) 1452 542 300 with the access code in both cases 2813327. 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 code in bothcases 2813327# Enquiries:Alya Samokhvalova / Marianna Adams +44 (0) 20 7201 8900Peter Hambro Mining Plc David Simonson / Tom Randell / Maria Suleymanova +44 (0) 20 7653 6620Merlin This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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