16th Jul 2007 07:00
Peter Hambro Mining PLC16 July 2007 16 July 2007 Trading Update Peter Hambro Mining Plc ("PHM" or the "Group") issues this trading statement as an update and in advance of its results for the six months to 30 June 2007 ("the Period"). A full results announcement for the Period will be issued on 24 September 2007. Highlights: • Production: o PHM total attributable production of c.134,300 oz is 24% up from 108,363 oz on the same period for 2006 with Pokrovskiy Mine production of c.116,800 oz of gold for the Period, 25% up from 93,600 oz on the same period in 2006; o Omchak Joint Venture attributable production of c.11,400 oz of gold for the Period. This is generally in line with the same period for 2006 and in accordance with the Group's forecast; o Production from the Group's other newly developing production operations totalled c.6,200 oz which is a 88% increase over the same period last year; o The Directors believe that the Group is currently on track to meet its 283,000 oz per annum production target for 2007; • Unit costs at Pokrovskiy were in line with the Group's internal forecast for the first six months of the year; • The average realised gold sales price was US$652/oz, which is 14% higher than the same period last year; • In January 2007, the Group announced its detailed plan, expected costs and time schedule regarding the development of the Pioneer deposit. The programme for this development is on track to yield the first production from the deposit in September 2007; • Pioneer highlights: o Construction works and equipment deliveries are proceeding according to timetable and start up of production from the deposit is on schedule to commence in September; o Construction of the man camp and main infrastructure at the deposit has been completed which has allowed for the transfer of the labour force, previously trained at Pokrovskiy, to Pioneer operations; o The mining fleet for future mining operations has been fully equipped by the addition of new excavators and dump trucks; o Leaching tanks, crusher, SAG mill, classifiers, pumps and other supporting machinery for the plant were constructed or purchased, set up and installed; o In exploration, the high-grade Andreevskaya gold zone is included in the primary targets thus improving the deposit economics, and exploration shows that, in three ore zones, high grade gold mineralisation continues at depths of 300 to 350m. Lateral extensions of several ore zones have been identified; o Construction of production facilities is continuing, in particular in the heap leach area, the crushing and screening complex, the technological unit for the extraction of gold, the tailings dam, and road and infrastructure units. • Wardell Armstrong International Limited has been commissioned to produce a competent person's report on all of the Group's assets. It is intended that work on this will commence in September 2007 and that the results thereof will be published as soon as they have been approved by the Board. This is expected to be in the fourth quarter of 2007. • Results of metallurgical test-work on the non-oxidised ore at Pioneer and Malomir show that a combination of gravity separation and flotation produces excellent results. • The encouraging metallurgical test-work results and our increasing knowledge of the extent of the ore zones at Malomir have resulted in a requirement for further work on a revised implementation plan to take into account the improved prospects for production. This means that the initial gold production date is likely to be postponed, as previously announced, for a period of 6-12 months beyond the initial planned 2008 start-up date. • Group exploration activities on its large portfolio of exploration and development properties are producing some excellent results which are being analysed currently. It is intended that the results will be published in detail with the Group's half-year results on 24 September 2007. Commenting on the announcement, Peter Hambro, Executive Chairman, said: "It is again a pleasure to report strong progress made by PHM during the firsthalf of the year. I think that an impressive 25% increase of production at thePokrovskiy plant in spite of the treatment of primary types of ore through themill is a spectacular achievement and is further proof of the outstandingcapabilities of PHM's engineering team. We are currently on budget and on time with the development of all projectsexcept Malomir as announced earlier this year, where the postponed productiondate is the result of good news on the potential of the deposit, and I amdelighted that the first of our new production deposits, Pioneer, is on targetto commence production in September 2007, as expected. The recent preliminaryexploration results from Pioneer are encouraging. As we announced in February, increasing knowledge of the three ore zones atMalomir and the change of the scale of this project means that production startup has been postponed for a period of 6-12 months beyond the initially planned2008 start up. Cost control has remained one of our highest priorities and we are proud to saythat operating costs are broadly in line both with our budget and with ourestimates of Russian inflation. The Group has a large exploration and development budget and it is pleasing tonote that this seems to be being spent fruitfully. I am glad to see that some ofthe Group's newly developing production operations are beginning to producemeaningful quantities of gold for the first time. Prospects for the remainder of the Group's financial year remain good. We commissioned an independent review of all our assets by Wardell Armstrongwhich is scheduled to commence in September and we expect to report the finalresults of this review in autumn 2007. This report is expected to includeaudited JORC reserves and resources for the Pioneer deposit." Operations Report Pokrovskiy Mine Pokrovskiy Rudnik is continuing the success achieved during 2006 producing116,800 oz of gold in the first six month of 2007 compared to 93,600 oz in thesame period of 2006. This 25% increase was achieved due to the stable work ofthe plant, improved recovery rates and higher head grades through the mill. Theincrease in recovery rates was a result of the range of measures introduced byspecialists at Pokrovskiy in 2006. Amongst these measures were adjustments tothe crushing-grinding circuit, creation of an intermediate stockpile forblending purposes and increase in the leaching time. Unit operating costs were generally contained in line with those of the previousperiod, increasing only slightly and in line with Russian inflation. Mining operations Planned advance stripping works (prospective stripping) were carried outaccording to the mining plan using geological computer models of the deposit(Micromine). The capacity of the intermediate blending ore stockpile wasincreased further to 200,000 tonnes which allowed for an optimal ore mixture tobe sent to the resin-in-pulp plant. Pokrovskiy Rudnik Mining Operations 6 months to 30 June -------------------- Units 2007 2006 Var,%Mining -------- -------- -------- --------Total Material Moved m3'000 2,458 2,624 -6%Ore mined t'000 1,197 889 35%Average grade g/t 3.6 3.2 13%Gold content oz'000 136.8 90.9 50% Processing operations - Resin in Pulp plant 863,000 tonnes of ore were treated through the mill in the first half of theyear - 6% more than during the same period in 2006. Significant improvement of recovery rates from 86.6% in the first half of 2006 up to 91.0% for the sameperiod this year allowed for an increase in the plant's gold output. This wasachieved by the introduction of a number of technological improvements last yearincluding the creation of the intermediate stockpile where five different typesof ore from Pokrovskiy pit are blended. This stockpile allows for an optimalmix of different types of ore to go through the resin-in-pulp plant. Due tothis and other improvements, notwithstanding the commitment to the processing of primary ore from the deposit, 91% recovery rates were achieved at the plant.The increased capacity of the plant compensated for the longer leaching time forthe harder and less oxidised material through the mill. Heap Leach The increase in the capacity of the gold processing plant and the rise in thegold price allowed for lower grade ore to be processed through the heap leachwithout an increase in the volume of mining works and without decreasing theoverall gold production of Pokrovskiy Rudnik. The recovery rates, although 22% lower than in 2006 due to a shorter period ofleaching as a result of the later start of the leaching season caused by weatherconditions, were still impressive for this type of operation in the conditionsof the Russian Far East. Pokrovskiy Rudnik Processing Operations 6 months to 30 June -------------------- Units 2007 2006 Var,%Resin in Pulp Plant -------- -------- -------- -------- Ore from pit t'000 352 609 -42%Average grade g/t 4.43 3.85 15%Ore from stockpile t'000 511 109 369%Average grade g/t 4.43 4.14 7%Total milled t'000 863 818 6%Average grade g/t 4.4 3.8 16%Gold content oz'000 122.7 99.6 23%Recovery rate % 91.0% 86.6% 5%Gold recovered oz'000 112 86 30% Heap Leach Ore stacked t'000 354 345 3%Average grade g/t 0.8 1.0 -20%Gold content oz'000 10 11 -9%Recovery rate % 53.6% 68.3% -22%Gold recovered oz'000 5 7 -29% Total Gold recovered oz'000 116.8 93.6 25% Table showing the breakdown of gold production at Pokrovskiy Rudnik by month for the six months to 30 June 2007 compared to 2006 Month 2007 2006 '000oz '000oz-------------------- -------- --------January 19.93 14.69February 16.42 12.25March 17.90 15.37April 20.02 16.77May 21.54 17.38June 21.00 17.10Total 116.81 93.6-------------------- -------- -------- Pioneer Mine At Pioneer, in the first half of 2007, efforts were concentrated on preparingthe deposit for first production in September according to schedule. Miningworks were carried out in order to complete geological exploration works and toprepare the deposit for operation. Extensive metallurgical test work, including laboratory analyses and pilot testworks, aimed at understanding the composition and improving the recovery ratesof non-oxidised material indicated that a combination of gravity separation andfloatation processes produces excellent results. Gold recovery in concentratefrom flotation is 90 - 92% and flotation produces a concentrate that isapproximately 2-4% by weight of the ore. Further gold recoveries fromconcentrate using the autoclave process amount to c.95%. The main volume of work (trenches, overburden stripping, drilling) was carriedout within the Promezhutochnaya, Yuzhnaya and Andreevskaya ore zones. The main purpose of this work was tracing the ore bodies at surface (Yuzhnayaore zone) and delineating the deeper levels (60-250m) by sparse drill holes inregions of outlined ore bodies. Construction works for production facilities are continuing, in particular inthe heap leach area, the crushing and grinding complex, the technological unitfor the extraction of gold, the tailings dam, and road and infrastructure units. During the first half of the year, the construction of the man camp and maininfrastructure at the deposit was completed which allowed for an increase in the workforce at the site in order to complete all works to schedule. Two EKG-5A mine excavators were brought into operation as well as six Volvo andCaterpillar dump trucks (37-38 tonnes capacity). Leaching tanks, crusher, SAGmill, classifiers, pumps and other supporting machinery were constructed orpurchased, set up and installed. The Group is planning to have the firstproduction from this deposit in September 2007. Mining operations Units 2007 1H 2006 1H Actual Actual-------------------- ---------- ---------- ---------- Pioneer Deposit-------------------- ---------- ---------- ----------Total Material Moved '000 m3 666 392-------------------- ---------- ---------- ----------Ore Mined '000 t 38 13-------------------- ---------- ---------- ----------Grade g/t 1.8 1.3-------------------- ---------- ---------- ----------Gold '000 oz 2.2 0.5-------------------- ---------- ---------- ---------- Final exploration works at the deposit were concentrated on its preparation forfuture production. At the Yuzhnaya ore zone the length of the ore interval wasconfirmed at 350m. The thickness of ore intervals varied from a few metres to64.5m. Variation of the gold grade in a series of channel samples is from 0.6 to15.8-17.5g/t. In occasional samples, high grades of silver have been noted up to64.5g/t. From deep drill holes it has been established that the Yuzhnaya,Promezhutochnaya and Bakhmut ore zones can be traced down dips at depth to morethan 300-350m along almost their whole length. Productivity of the ore bodies atthese depths in general is unchanged. Continuation of the Bakhmut ore zone in a north-easterly direction has beenestablished increasing the length of the zone to 520m. The intersected thicknessof ore bodies on newly identified blocks reaches 4.8-12.4m with average gradesof gold 1.1-1.5g/t. The Andreevskaya ore zone has been intersected by trenches at 40-80m intervalsalong the strike for a distance of 500m, the drill holes here were done on a 60x 30-40m grid. The thickness of the zone at surface varies from 4m to 16.3m, averaging 9.2m andfrom drill hole data at depth, 6.4m. Average grades of gold from trench datavary from 0.92g/t to 55.81g/t. An extension of the Andreevskaya zone has been established. The Vostochnaya and Zvezdochka ore zones have been intersected by separatetrenches and drill holes. Malomir Deposit In accordance with the plans, detailed exploration work was carried out in thenorth-eastern part of the deposit. In the Period, 32,160m of drilling and58,900m(3) trenching was completed. A grid of drill holes and trenches (40m x40m), intended for the computation of economic reserves of gold of category C1,was established on an area of width 320-350m and length of about 600m. A number of metallurgical tests on the different types of ore at the Malomirdeposit were carried out at the Group's laboratories and at specialistscientific institutions, including Irgiredmet. A process of gravity separationand flotation of non-oxidised types of ore similar to that at Pioneer wassuggested and proved to yield impressive results. Gold recovery in concentratefrom flotation is 83-86% and flotation produces a concentrate that isapproximately 4-6% by weight of the ore. Cyanide leaching of oxide ore gives upto 84% recovery. At the junction of ore body No.10 with the Diagonal zone, two ore columns havebeen delineated. In plan, the width of the columns is 50-140m, and they areseparated by a narrow (up to 30-40m) strip of lower grade ore. Down dip, bothore columns have been traced for 320m. Reserves of metal in the columnsconstitute, from initial estimates, c.418,000 oz at a gold grade of 2-2.5g/t (ata 0.8g/t cut off). Adjacent to the Severniy Fault at depths of 130-240m, a major body 150-200mwide, of cataclastic quartz metasomatites has been discovered. This zoneconstitutes an extension, to depth, of the main Diagonal zone. Within this newore zone, several ore bodies of thickness from 20 to 46m, and gold gradestypically of 1.0-2.2g/t (and up to a maximum of 40g/t), have been defined. Inthe same area of the deposit, at shallower depths, 45-130m, drilling hasintersected separate ore bodies from 3 to 27m thick with gold grades typicallyof 1.0-2.5g/t. On the southern continuation of the mineralised zone of the Diagonal fault itscontinuation has been identified by drill holes as having a thickness of 3.0 to6.9m and gold grade of 0.94-1.48g/t. Two metallurgical bulk samples have been taken from ore bodies in the Quartzitearea. Newly Developing Production Operations A number of alluvial mining enterprises, now included in the Group, carried outworks at the sites of the Group's operational and exploration activitiesallowing for additional profits for the Group without major investment ininfrastructure or detailed exploration works. Two of them - OAO ZDP Koboldo andZAO Amur-Dore - which extract gold from alluvial deposits in the North East ofthe Amur Region in close proximity to the Tokur and Malomir deposits, producedc.3,900 oz of gold in the first half of 2007. The enterprises exploit alluvialdeposits using dredging methods and with the use of washing apparatus. Plans for 2007 envisage an increase in the production of alluvial gold by 1.5times (up to 16,000 oz) in comparison with 2006. Joint Ventures in the Amur Region Priisk Solovyevskiy, Nagima and Odolgo, all of which are in different types ofjoint venture arrangements with PHM, produced c.2,265 oz of attributable goldduring the first half of 2007. On 30 May 2007, a modular plant with gravitational technology for the extractionand processing of concentrate using the intensive cyanidation method was putinto operation at the Odolgo site. During June, commissioning works andsimultaneous exploitation works were carried out. The first batch of concentratewas processed at the Pokrovskiy resin-in-pulp plant in June at a newly builtintensive cyanidation facility. Omchak Joint Venture Through its subsidiaries, Omchak produced c.23,000 oz of gold in the first halfof 2007. This represents c.32.3% of the scheduled production for 2007 and is inline with the previous year's production and in accordance with the internalbudget for the first half of 2007. As more than 67% of the gold produced byOmchak comes from the exploitation of placer deposits, the majority ofproduction occurs during the second half of the year. PHM's attributable shareof production was c.11,400 oz as it owns a 50% interest in Omchak. During the first half of the year Omchak's subsidiaries, OOO Zeyazoloto and OOONoviye Tekhnologii carried out and completed the necessary preparation works for2007 production season including the delivery of fuels and lubricants, technicalrepair works, stripping works and the assembly of washing apparatus. In June,gold production commenced. Omchak also carried out geological exploration works at three projects in theChita region in accordance with approved plans and licence conditions. At the Verkhne-Aliinskiy gold deposit, exploration drilling was completed aswell as trenching works and the collection of samples for geotechnical andtechnological analysis. Since the start of 2007, 12,623m of drilling and20,000m3 of trenching has been carried out, and 1,347 core samples and 112trench samples analysed yielding samples with gold grades up to 166.6g/t. At the flanks of the Bukhtinskiy prospective area, aerial geophysicalexploration is being carried out as well as a geochemical survey. Ore samplesand mineralogical samples are being analysed. At the Kuliinskiy ore field, geological exploration is scheduled to commence inJuly 2007 and mining by the end of the year. It is planned to carry out15,000m3 of trenching and collect more than 200 drill samples. Exploration and Development Report During the first half of 2007, the Group's exploration team concentrated theirefforts on the most advanced projects of the Group in order to prepare them forexploitation according to the Group's schedule. Works on other projects wereprogressed according to the frameworks of the exploration plans and licenceterms. During this Period, the Group carried out 348,600m(3) of trenching and105,642m of drilling. Yamal In the first half of 2007 OAO Yamalzoloto carried out appraisal work on twooperating projects: the Novogodnee Monto deposit and at theToupugol-Khanmeishorskiy area. At Novogodnee Monto, finalisation andconfirmation of the feasibility study on current exploration conditions wasaccomplished. At the Toupugol-Khanmeishorskiy area the following work wascarried out: drilling - 12,747m (127 boreholes), including structure drilling -2,324m (72 boreholes); trenching - 52,596m(3); assaying: core sampling - 7,085samples (7,041m core), slurry - 249 samples (256m core), lithogeochemical -1,110 samples (4,084m core). As the Petropavlovskoye deposit, located 400m from Novogodnee Monto, is a vitalpart of the plan regarding the future development of the area, intensiveexploration works were continued here in 2007. Detailed drilling was carriedout in a grid of 40m x 20m in the northern section of the deposit. Yamalskaya Gornaya Company In the Period, OOO Yamalskaya Gornaya Company (YGK) carried out geologicalexploration works including office study and laboratory-analytical works and theinitial stages of field works on 8 projects contained in 6 licence areas. During the Period, a complete summary was made for the Ozerno-Pyatirechensk areaof all geological, geophysical, geochemical information gathered from threeyears of field works based on the results of ore sampling from core drill holesand excavation (6,200 samples), aerial litho chemical (more than 8,000 samples)and geophysical exploration, geological observations following prospectingtraversing (more than 3,500 tonnes). Following this correlation of results the previously forecasted presence ofthree potential ore bearing zones on the Ozernoye site was confirmed. A numberof more prospective sites were singled out according to complex characteristics;the evaluation of these areas is expected to be carried out in 2007. Other Assets The Group has acquired seven new exploration licences in the Amur region, on avariety of prospective areas, some of which have already been extensivelyexplored and on which ore deposits are defined and reserves and resources havebeen established. These require some additional drilling to confirm. Other assets are greenfield properties in prospective areas (with known goldanomalies). Meanwhile, exploration work continues, with promising results, onthe Adamikha and Gar-II licence areas in the middle of the Amur region. Detailedinformation will be made available in half-year results on 24 September 2007. Gold Price/Treasury The Group's average realised gold price for the period was US$652/oz, up 14%against US$573/oz during the first six months of 2006. The Russian roublestrengthened against the US Dollar by 2% during the Period and was RuR25.82/US$at 30 June 2007 (RuR27.08/US$ - 30 June 2006, RuR26.33/US$ - 31 December 2006).The Group has a policy of no long term gold forward sales or hedging. June Site Visit From 2 to 6 June 2007 a number of institutional analysts made a site visit tothe Pokrovskiy, Pioneer and Malomir operations and attended a geologicalworkshop. The Group also met a local representative of Rosprirodnadzor and wasable to discuss with him recent developments in the industry. The visit to Pioneer demonstrated the excellent progress in the deposit'sdevelopment in particular with regard to the works underway to allow firstproduction in September 2007 as set out in the schedule. At Pioneer the visitorswere able to witness the first concrete being poured for the foundations of thenew plant. During the visit to Malomir analysts were able to discuss the increased volumeof mineralised material now identified at the deposit and the consequent likelypostponement of production start-up allowing time to complete the additionalanalytical work on the deposit. As announced on 26 February 2007, production atMalomir postponed for a period of 6-12 months beyond the initially planned 2008start up. The geological team working at Malomir have now delineated threedeposits in total (two more than originally anticipated) and therefore furtherdetailed analysis of these areas is required before the deposit is brought intoproduction. 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 release has been reviewed by Dr. Stephen Henley, who is an independentgeological advisor to the Board of Directors of Peter Hambro Mining Plc. Dr.Henley is qualified to act in the capacity of a Competent Person for thepurposes of this statement. Dr. Stephen Henley holds a PhD in Geology (University of Nottingham, 1970). Heis a Fellow of the Geological Society, a Fellow of the Institution of Materials,Minerals and Mining, and a Chartered Engineer. He is also a Charter Member ofthe International Association for Mathematical Geology. He has been employed inexploration, mining, academic and geological consultancy posts since 1970 andhas participated in Competent Person studies on a variety of different mineralsand types of deposit, including gold, polymetallic and chromite projects. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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