TIDMPOG
RNS Number : 0850W
Petropavlovsk PLC
30 July 2018
30 July 2018
Petropavlovsk PLC (the "Company")
2018 Half Year Trading Update
Petropavlovsk PLC ("Petropavlovsk", or the "Company" and,
together with its subsidiaries, the "Group") today issues its
trading update for the period from 1 January 2018 through 30 June
2018 ("the Period" or "H1 2018") in advance of its 2018 Half-Year
Interim Results, which are expected to be published on 27th
September 2018.
H1 2018 Highlights and FY 2018 Outlook
Operational Review
-- A full operational review is under way after being launched
by the CEO following his appointment at end-June
-- This has revealed recent disruptions to mining operations;
measures to mitigate these are being developed and implemented to
optimise mining and maximise margins
-- However the Company has adjusted its full year production
guidance conservatively, as provided in this release.
Production
-- 13% yoy decrease in H1 total gold production due to lower
grades processed and a decrease in the contribution from gold in
circuit - c.201,400oz vs c.232,400oz in H1 2017
-- Mixed performance at underground operations: the production
of development ore at Quartzitovoye underground mine in H1 2018
contributed significantly to Malomir's overall production, whilst
the development of NE Bakhmut at Pioneer is behind schedule;
measures have been introduced in order to increase the contribution
of underground operations to overall production by the end of H2
2018
-- An optimisation plan for the current mining schedule is being
developed.
Gold Sales
-- 13% yoy decrease in physical volumes of gold sold - c.201,400
vs c.231,800 in H1 2017
-- 2% yoy increase in average realised gold price - US$1,285/oz
vs US$1,255/oz
-- As at 30 June 2018, the Group had outstanding hedging
contracts for c.300koz of gold at an average price of
US$1,252/oz.
Development
-- Malomir flotation plant operations have commenced following
delays in their scheduled commissioning due to lack of strategic
leadership in H1 2018
o A programme has been developed to accelerate the ramp up of
the flotation plant to its designed capacity
-- POX commissioning expected in December 2018 versus previous
guidance of Q4 2018, again due to disruptions and instability in H1
2018
o POX production excluded from full year estimates as a
result
-- Dry commissioning scheduled for August 2018 following a
number of measures introduced to improve the timeline.
Year End Guidance
-- Company guidance has been amended conservatively following a
review and measures have been introduced to improve
performance:
o Full year production expected to be within the revised range
of c.400-410Koz (from c.420-460Koz) due to the exclusion of POX
production from full year estimates
o Cash costs of production are currently expected to be 15-20%
higher than guidance given at the beginning of the year
(US$700-750/oz, based on a RUB:US$ exchange rate of 58) due to the
suboptimal organisation of mining works in H1
-- Capex for the year is expected to be c.US$105m as guided.
Appointment of CFO and Non-Executive Director
-- The Board is pleased to announce that Mr Alexey Dubynin has
been appointed as Chief Financial Officer, a non-Board appointment.
Alexey has been employed by the Company since 2012, initially as
Head of Internal Audit and as Group Financial Controller from April
2013. Prior to his employment with Petropavlovsk, Alexey was
employed by a number of Russian companies within the mining and
metallurgical sectors. Alexey is a fellow member of the Association
of Chartered Certified Accountants.
-- The Company also announces the appointment of Mr Bektas
Mukazhanov as a Non-Independent Non-Executive Director on 27 July
2018
-- Mr Mukazhanov is an Investment Advisor at Fincraft Holdings
Ltd, the major shareholder of Petropavlovsk. Mr Mukazhanov holds
degrees in computer science and information technology and is a CFA
charterholder. Mr Mukazhanov was formerly a Director of the Company
from 8 February 2018 until 8 June 2018. There is no other
information to disclose in respect of Listing Rule 9.6.13
-- The Company is entering into a relationship agreement with
Fincraft Holdings Ltd in line with best practice corporate
governance.
IRC Update
-- Previous Board arranged to provide bridge loan to IRC during
recent period of financial difficulty
-- The new Board is resolved to achieve a solution to remove the
Company's guarantee of IRC's bank debt and will update shareholders
in due course.
Gold production - Dore (incl. GIC movement), '000oz
------------------------------------------------------------
Q2 2018 Q2 2017 H1 2018 H1 2017
=============== ========== ========= ========= =========
Pioneer 37.7 47.9 78.6 96.4
=============== ========== ========= ========= =========
Pokrovskiy 1.4 8.4 5.6 14.2
=============== ========== ========= ========= =========
Malomir 18.8 12.3 46.8 28.7
=============== ========== ========= ========= =========
Albyn 30.9 45.7 70.3 93.1
=============== ========== ========= ========= =========
Total 88.8 114.3 201.4 232.4
--------------- ---------- --------- --------- ---------
Note: From the beginning of 2017, the Company moved to using
gold poured as the definition for production.
Comment from Sir Roderic Lyne, Non-Executive Chairman
"Following our election in June and the return of Pavel
Maslovskiy as Chief Executive Officer, the Board and I would like
to reiterate our commitment to the strategic objective: that
Petropavlovsk should be at the forefront of Russian gold mining,
delivering sustainable and profitable growth through experienced
management, technological development and exploration success.
We have worked hard over the past four weeks to stabilise and
restore momentum to the Group after a difficult year. On 29 June
the Board initiated a review of all of the Group's activities. We
have commenced a formal process with a leading recruitment agency
to bring in new independent non-executive Directors with relevant
experience in order to establish a diverse and fully compliant
Board. I hope to have further news on this front within a few
weeks.
The Board wishes to develop clear lines of communication with
all stakeholders. I believe that a productive and transparent
dialogue with our stakeholders will benefit Petropavlovsk. It is
our common aim to realise the Company's undoubted potential and
unlock its value.
Comment from Dr Pavel Maslovskiy, Chief Executive Officer
Following my reappointment at end-June and with the support of
the Board, I have been reviewing every aspect of the Company's
operational activities, and will continue to do this in the weeks
ahead. Recent events had a negative impact in certain areas and
have caused some disruption to our operational and development
plans. Primarily due to this, we have decided to adjust our
guidance for the year to be more conservative, and to introduce a
programme of measures to rectify the delays in order to improve
current schedules.
The review has shown that the POX Hub development project was
partially delayed in H1. We now expect its commissioning in
December 2018. This is slightly later than we would have hoped and
as such we expect no meaningful production from POX during 2018.
This affects our total production for the year, which is now
expected to be within the revised range of 400-410Koz. I am working
closely with the operational team in order to devise and implement
a plan to get us back on track.
I am confident of our ability to bring POX into operation in
2019, and of the huge contribution that the successful execution of
this project will make to the Group's production and value. The POX
plant is the result of almost a decade of work from a strong group
of scientists and engineers. Our general development progress on
this project has also been assessed by an independent third party,
which confirmed that commissioning in Q4 is feasible. Our
development team has a renewed focus on POX construction activities
in general, and they are looking forward to demonstrating our new
capabilities once the project is complete.
Our engineering and scientific team is currently focused on the
Malomir flotation plant, which has just commenced work with a
significant delay compared to the original timeline. Our
development team is currently exploring potential technological and
functional improvements in order that the first line of the plant
may be brought to full capacity by September, and to commission the
second line in October.
Once these improvements are introduced, we expect to produce
20-30kt of high grade flotation concentrate by the end of the year,
ensuring that POX facilities are commissioned smoothly. In
addition, this is a marketable product that can potentially be sold
to third parties, providing additional flexibility if required. The
impact of these improvements on production and cash flow
projections is currently being evaluated.
My current assessment is that company guidance on Total Cash
Costs should have been 15-20% higher than the US$700-750/oz
provided at the beginning of the year.
The previous Board failed to secure a repayment schedule with
IRC and ICBC, and deemed it appropriate to provide a bridge loan to
IRC during its recent period of financial difficulty. We are
working to improve the guarantee situation and to clarify the
relationship between Petropavlovsk and IRC and recently held a
joint meeting of the Boards of the two companies in order to bring
the new Board of Petropavlovsk fully up to date. We hope to have
further news for our shareholders in the course of this year.
It has been a pleasure to resume the position of CEO and during
my recent trip to benefit from the wise counsel of our experts on
the ground. The support they have shown for the new Board in recent
weeks is truly humbling and I am dedicated to providing our
collective operational team with the constructive strategic
leadership they seek in order to achieve optimum performance over
the critical months ahead."
Operations Report
Pioneer
Pioneer mining operations
-------------------------------------------------------------------
Units Q2 2018 Q2 2017 H1 2018 H1 2017
---------------- --------- -------- -------- -------- --------
Total material
moved m3 '000 5, 362 3, 812 9, 449 7, 206
---------------- --------- -------- -------- -------- --------
Ore mined t '000 842 1, 895 2, 183 2, 935
---------------- --------- -------- -------- -------- --------
Average grade g/t 0.99 0.78 0.96 0.90
---------------- --------- -------- -------- -------- --------
oz.
Gold content '000 26.8 47.5 67.1 85.1
---------------- --------- -------- -------- -------- --------
Pioneer processing operations
-------------------------------------------------------------------
Resin-in-pulp (RIP) plant
-------------------------------------------------------------------
Total milled t '000 1, 670 1, 707 3, 267 3, 349
---------------- --------- -------- -------- -------- --------
Average grade g/t 0.83 0.78 0.85 0.79
---------------- --------- -------- -------- -------- --------
oz.
Gold content '000 44.4 42.7 88.8 85.4
---------------- --------- -------- -------- -------- --------
Recovery % 80.6 82.4 78.8 76.8
---------------- --------- -------- -------- -------- --------
oz.
Gold recovered '000 35.8 35.2 70.0 65.6
---------------- --------- -------- -------- -------- --------
Heap leach operations
-------------------------------------------------------------------
Total stacked t '000 225 359 225 359
---------------- --------- -------- -------- -------- --------
Average grade g/t 0.50 0.51 0.50 0.51
---------------- --------- -------- -------- -------- --------
oz.
Gold content '000 3.6 5.9 3.6 5.9
---------------- --------- -------- -------- -------- --------
Recovery % 28.5 39.6 28.5 39.6
---------------- --------- -------- -------- -------- --------
oz.
Gold recovered '000 1.0 2.3 1.0 2.3
---------------- --------- -------- -------- -------- --------
Pioneer gold
production oz.
- Dore '000 37.7 47.9 78.6 96.4
---------------- --------- -------- -------- -------- --------
Mining took place at 6 open pits of Yuzhnaya, NE Bakhmut,
Alexandra and Kulisnaya, as well as at Katrin in the Sosnovy area
south of Pioneer, and Alexandra to the north. Most work took place
at the Yuzhny pit. In addition, some ore was blended in from
stockpiles.
Underground mining development has been carried out at NE
Bakhmut 3 (beneath open pit 6.3), specifically between +55m and -5m
levels beneath open pit 6.3. Capital development, pre-production
development and mine preparation works including sublevel ore
development took place. In addition, development continued at the
two lower grade ore bodies located south-west of the main ore body.
Total underground development in H1 comprised 2,167m, and 48kt of
development ore was mined with an average grade of 2.3g/t. Ore was
predominantly mined from sublevel developments and therefore gold
grades were significantly lower compared to the average reserve
grade. Both the process plant and the heap leach operations
functioned as planned.
In H2 it is expected that mining at Alexandra pit 10 and at the
southern side of the Yuzhny pit will be completed, and the team
expects to reach and extract high-grade ores with grades up to
4.0g/t from NE Bakhmut pit 6.4. Regarding underground development,
in H2 it is envisaged that stope mining will commence at the main
ore body between -5m and +40m levels. Development is expected to
reach the -50m level, providing access to areas where production is
planned for 2019.
Pokrovskiy
Pokrovskiy mining operations
---------------------------------------------------------------------
Units Q2 2018 Q2 2017 H1 2018 H1 2017
------------------ --------- -------- -------- -------- --------
Total material
moved m3 '000 - 1 ,036 152 2 ,073
------------------ --------- -------- -------- -------- --------
Ore mined t '000 - 392 116 520
------------------ --------- -------- -------- -------- --------
Average grade g/t - 0.51 0.59 0.50
------------------ --------- -------- -------- -------- --------
oz.
Gold content '000 - 6.4 2.2 8.4
------------------ --------- -------- -------- -------- --------
Pokrovskiy processing operations
---------------------------------------------------------------------
Resin-in-pulp (RIP) plant
---------------------------------------------------------------------
Total milled t '000 - 450 223 888
------------------ --------- -------- -------- -------- --------
Average grade g/t - 0.47 0.55 0.44
------------------ --------- -------- -------- -------- --------
oz.
Gold content '000 - 6.8 4.0 12.4
------------------ --------- -------- -------- -------- --------
Recovery % - 84.8 94.2 78.3
------------------ --------- -------- -------- -------- --------
oz.
Gold recovered '000 - 5.8 3.7 9.7
------------------ --------- -------- -------- -------- --------
Heap leach operations
---------------------------------------------------------------------
Total stacked t '000 - 246 - 246
------------------ --------- -------- -------- -------- --------
Average grade g/t - 0.40 - 0.40
------------------ --------- -------- -------- -------- --------
oz.
Gold content '000 - 3.2 - 3.2
------------------ --------- -------- -------- -------- --------
Recovery % - 22.4 - 22.4
------------------ --------- -------- -------- -------- --------
oz.
Gold recovered '000 - 0.7 - 0.7
------------------ --------- -------- -------- -------- --------
Pokrovskiy
gold production oz.
- Dore '000 1.4 8.4 5.6 14.2
------------------ --------- -------- -------- -------- --------
Mining at ore bodies accessed in 2017 (Zeyskoye pit 1 and
Vodorazdelnoye) stopped in Q1 2018. All ore extracted was processed
at the RIP (resin-in-pulp) plant in Q1 2018, together with ore from
stockpiles.
All mining works at the deposit are now complete and the process
plant is undergoing reconstruction as part of the POX project.
Malomir
Malomir mining operations
-------------------------------------------------------------------
Units Q2 2018 Q2 2017 H1 2018 H1 2017
---------------- --------- -------- -------- -------- --------
Total material
moved m3 '000 2, 266 2, 772 4, 245 5, 126
---------------- --------- -------- -------- -------- --------
Ore mined t '000 674 675 1, 317 1, 434
---------------- --------- -------- -------- -------- --------
Average grade g/t 1.09 0.68 1.22 0.78
---------------- --------- -------- -------- -------- --------
oz.
Gold content '000 23.5 14.9 51.5 36.0
---------------- --------- -------- -------- -------- --------
Malomir processing operations
-------------------------------------------------------------------
Resin-in-pulp (RIP) plant
-------------------------------------------------------------------
Total milled t '000 772 858 1, 645 1, 652
---------------- --------- -------- -------- -------- --------
Average grade g/t 1.05 0.71 1.15 0.78
---------------- --------- -------- -------- -------- --------
oz.
Gold content '000 26.0 19.6 60.8 41.7
---------------- --------- -------- -------- -------- --------
Recovery % 68.7 58.9 72.4 59.8
---------------- --------- -------- -------- -------- --------
oz.
Gold recovered '000 17.9 11.5 44.0 24.9
---------------- --------- -------- -------- -------- --------
Flotation
Plant
---------------- --------- -------- -------- -------- --------
Ore t '000 98 - 98 -
---------------- --------- -------- -------- -------- --------
Grade g/t 0.98 - 0.98 -
---------------- --------- -------- -------- -------- --------
oz.
Gold content '000 3.1 - 3.1 -
---------------- --------- -------- -------- -------- --------
Recovery % 86.5 - 86.5 -
---------------- --------- -------- -------- -------- --------
Yield % 2.2 - 2.2 -
---------------- --------- -------- -------- -------- --------
Concentrate
produced t '000 2.1 - 2.1 -
---------------- --------- -------- -------- -------- --------
Grade g/t 39 - 39 -
---------------- --------- -------- -------- -------- --------
oz.
Gold content '000 2.7 - 2.7 -
---------------- --------- -------- -------- -------- --------
Malomir gold
production oz.
- Dore '000 18.8 12.3 46.8 28.7
---------------- --------- -------- -------- -------- --------
Non-refractory mining focused on the Quartzitovoye 1 and
Dorozhny pits. Pit expansion continued at Magnetitovoye 2 with the
view to commence ore mining there in H2 2018, and continue mining
in 2019. In Q2, the mining of refractory ores for the flotation
plant began at the Central pit. In addition, minor non-refractory
ore residuals were extracted for further cyanidation.
Underground mining development continued at Quartzitovoye 1,
whilst capital development, pre-production development and mine
preparation works including sublevel ore development continued
between +375m and +300m levels. Total underground development in H1
comprised 3,760m, and 158kt of ore was mined with an average grade
of 5.4g/t.
All development ore extracted from underground together with
non-refractory ore mined from pits was processed at the RIP plant
using cyanidation technology. The process plant operated as
scheduled.
Commissioning began at the flotation plant in June. Major
refractory ore mining works to feed the flotation plant will focus
on the Central open pit, where high grade ores with average grades
of up to 2g/t are expected, alongside low grade ore with an average
grade of 0.8-1.0g/t. Significant volumes of refractory ore are also
available via stockpiles.
Albyn
Albyn mining operations
-------------------------------------------------------------------
Units Q2 2018 Q2 2017 H1 2018 H1 2017
---------------- --------- -------- -------- -------- --------
Total material
moved m3 '000 5, 165 7, 426 10, 107 14, 942
---------------- --------- -------- -------- -------- --------
Ore mined t '000 1, 010 1, 258 1, 877 2, 633
---------------- --------- -------- -------- -------- --------
Average grade g/t 0.96 1.19 0.97 1.14
---------------- --------- -------- -------- -------- --------
oz.
Gold content '000 31.2 48.1 58.3 96.4
---------------- --------- -------- -------- -------- --------
Albyn processing operations
-------------------------------------------------------------------
Resin-in-pulp (RIP) plant
-------------------------------------------------------------------
Total milled t '000 1, 155 1, 152 2, 291 2, 290
---------------- --------- -------- -------- -------- --------
Average grade g/t 0.94 1.23 1.01 1.14
---------------- --------- -------- -------- -------- --------
oz.
Gold content '000 34.9 45.6 74.1 84.3
---------------- --------- -------- -------- -------- --------
Recovery % 94.3 93.6 93.9 93.0
---------------- --------- -------- -------- -------- --------
oz.
Gold recovered '000 32.9 42.6 69.6 78.4
---------------- --------- -------- -------- -------- --------
Albyn gold
production oz.
- Dore '000 30.9 45.7 70.3 93.1
---------------- --------- -------- -------- -------- --------
Overburden removal and mining works continued at the eastern,
central and southern areas of the Central pit. The process plant
operated as planned with a high recovery rate.
In H2 it is expected that the access and extraction of ore in
the central area will be completed down to the planned elevation of
520m. In addition, the development of the eastern and western areas
of the ore zone is scheduled to be completed.
IRC Limited (IRC)
Petropavlovsk is a shareholder (31.1%) of IRC and is the
guarantor of the US$340m project finance facility. IRC is a
vertically integrated iron ore producer and developer in the
Russian Far East and North Eastern China, listed on the Hong Kong
Stock Exchange (Ticker: 1029.HK).
On 27(th) July, IRC released its trading update for the period
ended 30 June 2018, the highlights from which are extracted
below:
K&S
-- Production and sales volumes in 2Q2018 increased by 53% and
47% respectively comparing with the same period last year
-- Record high monthly production and sales volumes of 201,000
tonnes and 192,000 tonnes respectively
-- Average production capacity at 73% in 2Q2018, up 12% points
from the 1Q2018 production capacity of 61%
-- Successfully operated at 105% of K&S' designed capacity
during a 24-hour production run; operated at more than 90% capacity
continuously for 72 hours
-- Additional mining fleet on site to support the ramp-up
programme.
Kuranakh
-- Care and maintenance process satisfactory.
Corporate
-- ICBC June repayment made after obtaining a bridge loan
-- ICBC waivers obtained.
Please refer to the IRC website, http://www.ircgroup.com.hk to
access the full release.
As announced on 13 June 2018, under the previous Board and as a
precautionary measure, the Group entered into a bridge loan
agreement with IRC having failed to negotiate with IRC and ICBC on
a scheduled facility repayment. The current Board is working to
improve this situation and shall update shareholders in due course
on the outcome of these efforts.
Conference Call and Webcast
A live conference call and webcast will take place today at
9.00am BST. Participants will be able to listen to the call by
dialing one of the following numbers shortly before 9.00am BST:
UK Toll: 02034281542
UK Toll Free: 08082370040
Russia Toll Free: 810 800 2136 5011
Russia Toll: 04956469304
Ukraine Toll Free: 0800 501 988
Pin: 73533850#
A presentation will be webcasted and can be accessed via this
link, from which a recording of the call will also be made
available:
http://webcasting.buchanan.uk.com/broadcast/5b4745e358af64687c93efb9
About Petropavlovsk
Petropavlovsk is one of Russia's leading gold mining companies.
As at 31 March 2018, the Company had
produced approximately 6.9Moz of gold.
At this time, Petropavlovsk is in the construction phase of a
state of the art pressure oxidation facility to process the
Company's substantial refractory resource base. The Company's
combined 3,430km(2) license holding has untapped resource
potential. The Company is a leading employer and contributor to the
development of the local economy in the Amur region, Russian Far
East, where it has operated since 1994.
Petropavlovsk is a shareholder (31.1%) of IRC Limited and is the
guarantor of IRC's US$340 million project finance facility. IRC is
a vertically integrated iron ore producer and developer in the
Russian Far East and North-eastern China. IRC is listed on the Hong
Kong Stock Exchange (ticker: 1029.HK).
Petropavlovsk is listed on the Main Market of the London Stock
Exchange (ticker POG:LN).
Enquiries
For more information, please visit www.petropavlovsk.net and
www.ircgroup.com.hk or contact:
Petropavlovsk PLC Buchanan
Alya Samokhvalova Bobby Morse
Grace Hanratty Chris Judd
+44 (0) 20 7201 8900 +44 (0) 207 466 5000
TeamIR@petropavlovsk.net POG@buchanan.uk.com
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
TSTBIGDRISDBGIC
(END) Dow Jones Newswires
July 30, 2018 02:01 ET (06:01 GMT)
Petropavlovsk (LSE:POG)
Historical Stock Chart
From Apr 2024 to May 2024
Petropavlovsk (LSE:POG)
Historical Stock Chart
From May 2023 to May 2024