TIDMPOG
RNS Number : 1791V
Petropavlovsk PLC
26 January 2017
PRESS RELEASE
26 January 2017
Petropavlovsk PLC
2016 Full Year Production Results & 2017 Guidance
Petropavlovsk PLC ("Petropavlovsk" or the "Company" or, together
with its subsidiaries, the "Group") announces the following:
2016 Results (unaudited) Highlights
-- Full year 2016 gold production of c.416,000oz (2H16:
228,900oz) in line with revised 2016 guidance
-- Full year gold sales of c.400,000oz
-- Average realised gold price of c.US$1,222/oz, including
US$(21)/oz effect from hedging
-- The Group re-iterates forecast 2016 total cash costs of
c.US$700/oz, and all in sustaining cash costs of c.US$800/oz
-- Due to high grade Andreevskaya ounces being deferred to the
2017 mine schedule, the Group's average processed grade for 2016
was 0.9 g/t
-- Forecast total capital expenditure of c.US$30 million
-- Successful exploration works at the Albyn mine (Elginskoye
deposit), are expected to add up to 2Moz ore reserves, which would
significantly increase Albyn's mine life
-- Full scale construction of the pressure oxidation facility
("POX Hub") has resumed and is scheduled for completion in 2018
-- Successful refinancing of the Group's bank debt totalling
c.US$430 million, including a revised maturity profile - inclusive
of option to extend the 2019 maturity payment to 2022 upon certain
conditions being satisfied. The Sberbank US$100m commodity linked
loan facility remains on schedule for completion of final
documentation, effective Q1 2017
2017 Guidance
-- Gold production for 2017 is forecast between
420,000-460,000oz per annum, predominantly from open pit operations
as underground production is scheduled to commence in H2 2017
-- Total cash cost (TCC/oz) guidance of US$600-700/oz and all in
sustaining cash costs (AISC/oz) of US$800-900oz
-- Outstanding forward sales contracts of c.50,000oz at a gold
price of US$1,303/oz as at 31 December 2016
-- Capital expenditure for the year is expected to be
c.US$100m-US$110m, c.60% of which is allocated to the Pressure
Oxidation ("POX Hub") development, including Malomir
floatation.
Corporate Strategy
For 2017, Petropavlovsk remains focused on optimising its
current asset base. The Company continues to maximise cash
generation from its four operating mines, Pioneer, Albyn, Malomir
and Pokrovskiy. Simultaneously, it continues to drive to first
production its key growth projects, the POX Hub and the development
of underground operations, on time and on budget.
Annual gold production by mine (koz)
Year ended Year
Dec 2016 ended
(unaudited) 31 Dec
2015
Pioneer 141.9 231.4
Pokrovskiy 37.6 56.0
Malomir 56.8 59.1
Albyn 180.0 157.6
-------------- --------------- ---------
Total 416.3 504.1
-------------- --------------- ---------
Annual operating results by Group
Year ended Year ended
Dec 2016 31 Dec
(unaudited) 2015
Total material moved
(000 m3) 61,947 74,775
Total ore tonnes mined
(kt) 10,798 13,960
---------------------------- ------------- -----------
Combined plant throughput
(kt) 16,166 15,910
Avg weighted process
recovery rate (%) 86.1 83.0
Average weighted processed
grade (g/t) 0.91 1.14
Total heap leach (kt) 1,141 1,341
Avg weighted leach
grade (g/t) 0.50 0.55
Avg weighted leach
recovery rate (%) 51 52
---------------------------- ------------- -----------
Total gold produced
(koz) 416.0 504.1
Total gold sold (oz) 400.0 481.9
c.700
Total cash costs (US$/oz) (a) 749
c.800
AISC (US$/oz) (a) 874
Average realised gold
price (US$/oz) 1,222 1,178
c.30.0
Cash CAPEX (US$m) (a) 32.6
(a) Forecast
Pavel Maslovskiy, Chief Executive, comments:
"2016 was a transformative year for Petropavlovsk. We
successfully finalised a two-year balance sheet restructuring,
maintaining our focus on deleveraging.
We started 2015 with the refinancing of our convertible bond and
concluded 2016 by refinancing US$430m of our bank debt. The bank
refinancing allows us to self-fund the completion of our state of
the art POX Hub from free cash flow, assuming a prevailing gold
price of $1250/oz, and retain 100% ownership of the project and the
upside. The POX Hub enables Petropavlovsk to begin unlocking the
value embedded within our 4Moz reserve of refractory ore base from
2018/19.
In 2016 key contracts were agreed with Outotec, a leading global
provider of refractory processing technologies and orders for
outstanding long lead items have been agreed. Full scale
construction has been resumed. Outstanding CAPEX to completion of
the POX Hub is estimated at c.US$120m, with c.US$60-65m budgeted
for 2017. Although, we believe there is opportunity for additional
cost savings throughout the construction process.
Underground development at Pioneer is on track for first
production in H1 2017. Our experienced, local underground mining
contractor and our in-house underground operations team are working
extremely well together to deliver the projects on time and on
budget. Nevertheless, underground mining is a new mining method for
Petropavlovsk and we feel it prudent to be conservative with the
potential contribution of underground ounces to our 2017 production
guidance, as we continue to derisk both Pioneer and Malomir
underground operations through the ramp up stage.
Operationally, the Petropavlovsk team again demonstrated a
committed approach to operational excellence, ensuring the safe,
responsible optimisation of our assets in spite of challenging
circumstances experienced in 2016. Flooding and unusually cold
weather prevented the team from delivering on the original mine
schedule, resulting in a lower average processed grade for 2016.
However, with strong capital discipline and dedicated cost control
we were successful in achieving preliminary TCC of US$700/oz,
further improving the Group margin per ounce. We expect to benefit
from further cost optimisations in 2017, with guided TCC/oz between
US$600-US$700/oz and AISC/oz of US$800-US$900/oz.
We are proud of our exploration team, which with a limited 2016
budget has again successfully replenished ore reserves in excess of
the Group's annual depletion. This demonstrates the strength of our
regional and technical expertise and ability to discover ounces
very cheaply.
In summary, I am pleased with our 2016 operational perseverance
under adverse conditions and now look forward to 2017 and 2018 as
we maximise our existing asset potential and transform the Group
from an open pit non-refractory producer to one of Russia's leading
refractory and non-refractory producers from both open pit and
underground operations."
About Petropavlovsk
Petropavlovsk is one of Russia's leading gold mining companies,
operating some of the largest gold mines in Russia in terms of gold
production, processing capacity and resource base. As at 31
December 2016, the Company had produced approximately 6.4Moz of
gold.
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 3,600km(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 the US$340m project finance facility (US$234m
principal outstanding, as at 31 December 2016). 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 Maitland
Alexandra Carse Neil Bennett
Grace Hanratty James Isola
+44 (0) 20 7201 8900 +44 (0) 20 7379 5151
TeamIR@petropavlovsk.net Petropavlovsk-Maitland@maitland.co.uk
Annual operating results by mine
Pioneer
Pioneer mining operations
--------------------------------------------------------------------------------
H2 2016 H2 Year Year
(unaudited) 2015 ended ended
31 Dec 31
2016 Dec
(unaudited) 2015
---------------------- -------- ------------- ------- ------------- -------
m(3)
Total material moved '000 7,763 11,112 17,360 23,980
Ore mined t '000 1,610 2,870 3,266 6,016
Average grade g/t 0.96 1.54 0.95 1.28
Gold content koz 49.5 141.8 99.4 248.4
Processing operations (Resin in pulp
plant)
-------------------------------------------------------- ------------- -------
Total milled t '000 3,328 3,190 6,700 6,582
Average grade g/t 0.74 1.42 0.75 1.25
Gold content koz 79.6 146 159.8 264.5
Recovery rate % 88.3% 87.1% 85.5% 85.0%
Gold recovered koz 70.3 127.1 136.6 224.7
Heap leach operations
-------------------------------------------------------- ------------- -------
Ore stacked t '000 420 429 701 800
Average grade g/t 0.53 0.53 0.53 0.56
Gold content koz 7.2 7 12.0 14.5
44.1
Recovery rate % 53.5% 69.9% % 46.2%
Gold recovered koz 3.8 5.1 5.3 6.7
Total gold recovered koz 74.1 132.2 141.9 231.4
Mining
As scheduled, in 2016 Pioneer production was mined from open pit
operations. The blend of ore was sourced from Alexandra, Bakhmut
and Vostochnaya zones, as well as from stockpiles.
Pioneer's mining schedule for 2016 accounted for an increase in
production in the fourth quarter as operations accessed high grade
ore at the Andreevskaya zone, following extensive waste stripping
throughout the year. Unusual weather conditions resulted in
disruptions and ultimately deferred access to the high grade zone
(into 2017).
The unusual weather conditions also caused some delays in the
heap leach operations but successful scheduling adjustments meant
target stacking and production were achieved as planned for
2016.
Processing
The plant performed as expected in 2016, delivering on all
technological performance indicators. Throughput saw a slight
year-on-year increase to 6.7Mt pa. During H2, optimising the blend
of ore for processing resulted in a significantly improved gold
recovery rate.
Exploration
At the Brekchievaya zone, a 500m extension east was confirmed.
Assay results have shown the thickness of mineralisation varies
between 1.4m to 1.7m, with grades of between 9.05g/t to 12.15g/t.
Proximity, grade and metallurgy suggest this discovery could
provide additional non-refractory feed to the Pioneer RIP
plant.
At NE Bakhmut #2, surface drilling intersected a sub horizontal,
mineralised zone 30-35m below surface. This orebody is a soft
oxidised material expected to be suitable for open pit mining and
RIP recovery. Current works show an average mineralised width of
6.9m at 1.1g/t, along a 300m strike and still open in North and
West directions.
The 2017 exploration programme includes further work to
delineate both these areas.
Albyn
Albyn mining operations
H2 2016 H2 Year Year
(unaudited) 2015 ended ended
31 Dec 31
2016 Dec
(unaudited) 2015
---------------------- -------- ------------- ------- ------------- -------
m(3)
Total material moved '000 15,754 17,993 31,763 36,722
Ore mined t '000 2,440 2,349 4,970 4,906
Average grade g/t 1.42 1.09 1.25 1.15
Gold content koz 111.5 83 199.5 181.5
Processing operations (Resin in pulp
plant)
-------------------------------------------------------- ------------- -------
Total milled t '000 2,334 2,326 4,675 4,600
Average grade g/t 1.45 1.07 1.28 0.89
Gold content koz 108.6 80.3 192.5 168.8
Recovery rate % 94.6% 94.5% 93.5% 93.3%
Gold recovered koz 102.8 75.9 180.0 157.6
Mining
As scheduled, Albyn production in 2016 was from open pit
operations. In H1 the majority of ore was mined and processed from
the Eastern section of the pit, as well as from stockpiles, whilst
stripping works were under way at the Northern section. In H2 ore
was mined and processed from the Eastern section as well as the
higher grade Northern section of the pit.
Year-on-year dilution was significantly improved and mining
grades increased by 12%.
Processing
The plant performed as expected in 2016, delivering on all
technological performance indicators. Throughput saw a slight year
on year increase to 4.7Mt pa with gold recovery rates increasing
from 92% in H1 to 94.6% in H2.
Exploration
Within the 1,100 km(2) Albyn license area, 28km west of the
Albyn RIP plant, at a small mine, Yasnoe, which was operational
under State ownership in the 1950s. Historical work, under State
ownership, focused on quartz veins, reporting thicknesses from
0.12m to 3.0m with grades up to 32.6g/t.
The 2016 Petropavlovsk exploration programme confirmed a 3km
mineralised extension. Five trenches were developed to explore this
structure beyond the historically mined area. Initial assay results
from one of the trenches confirmed the presence of a subparallel
shallow-dipping (c.30 degrees along slope) gold bearing structure,
with intersects of 12.2m @ 4.72g/t, 6.0m @ 3.09g/t and 6.0m @
2.37g/t. Once the assays from the other four trenches have been
received and interpreted, the 2017 exploration programme budgets
for further focused exploration works to be carried out.
The feasibility study for the Elginskoye deposit is being
finalised and reviewed by Russian Technical
authorities. This only includes resource definition drilling for
part of the Elginskoye deposit. It is expected that additional
exploration work will further define additional reserves and
resources. The current submission indicates a potential increase of
up to 2Moz JORC ore reserves.
Malomir
Malomir mining operations
H2 2016 H2 Year Year
(unaudited) 2015 ended ended
31 Dec 31
2016 Dec
(unaudited) 2015
---------------------- -------- ------------- ------ ------------- -------
m(3)
Total material moved '000 4,394 4,421 8,115 8,904
Ore mined t '000 1,145 1,067 1,535 2,105
Average grade g/t 1.08 0.93 1.11 1.01
Gold content koz 39.9 31.9 54.9 68.5
Processing operations (Resin in pulp
plant)
------------------------------------------------------- ------------- -------
Total milled t '000 1,446 1,486 3,000 2,937
Average grade g/t 0.98 0.84 0.86 0.93
Gold content koz 45.4 40.3 82.5 88
Recovery rate % 70.2% 65.8% 68.9% 67.2%
Gold recovered koz 31.9 26.5 56.8 59.1
Mining
As scheduled, Malomir production in 2016 was from open pit
operations. An optimal blend of ore was mined from Quartzitovoye 2,
Magnetitovoye, and stockpiles. In 2016, Quartzitovoye 1 mainly
underwent waste stripping works, providing the appropriate access
to ore for the 2017 mine schedule.
Processing
The plant performed as expected in 2016, delivering on all
technological performance indicators, resulting in improved gold
recovery rates from H1 to H2 and year on year.
Exploration
Exploration drilling confirmed further mineral resource for
potential underground mining at Quartzitovoye 1. The JORC Ore
reserve estimate is under way. The development of an underground
mine at Quartzitovoye is scheduled for H1 2017. Further exploration
is expected to continue from the underground work.
Pokrovskiy
Pokrovskiy mining operations
H2 2016 H2 Year Year
(unaudited) 2015 ended ended
31 Dec 31
2016 Dec
(unaudited) 2015
---------------------- -------- ------------- ------ ------------- -------
m(3)
Total material moved '000 2,456 2,509 4,709 5,169
Ore mined t '000 695 639 1,027 933
Average grade g/t 0.69 1.31 0.79 1.41
Gold content koz 15.5 27.0 26.0 42.2
Processing operations (Resin in pulp
plant)
------------------------------------------------------- ------------- -------
Total milled t '000 892 925 1,791 1,791
Average grade g/t 0.67 0.97 0.65 1.04
Gold content koz 19.3 29.0 37.1 59.7
Recovery rate % 89.3% 87.1% 90.1% 84.3%
Gold recovered koz 17.2 25 33.5 50.4
Heap leach operations
------------------------------------------------------- ------------- -------
Ore stacked t '000 247 295 440 541
Average grade g/t 0.46 0.53 0.45 0.53
Gold content koz 3.6 5 6.3 9.2
Recovery rate % 78.8% 84.0% 64.8% 60.6%
Gold recovered koz 2.8 4.2 4.1 5.6
Total gold recovered koz 20.1 29.2 37.6 56
Mining
As scheduled, Pokrovskiy production in 2016 was from open pit
operations. An optimal blend of ore was mined from Pokrovka 1,
Pokrovka 2 and satellite deposit Zheltunak.
Despite the unusual weather conditions causing some delays in
the heap leach operations, successful scheduling adjustments meant
target stacking and production were achieved as planned for
2016.
Processing
The plant performed as expected in 2016, delivering on all
technological performance indicators.
Forward-looking statements
This release may include statements that are, or may be deemed
to be, "forward-looking statements". These forward-looking
statements can be identified by the use of forward-looking
terminology, including the terms "believes", "estimates", "plans",
"projects", "anticipates", "expects", "intends", "may", "will" or
"should" or, in each case, their negative or other variations or
comparable terminology, or by discussions of strategy, plans,
objectives, goals, future events or intentions. These forward-
looking statements include all matters that are not historical
facts. They appear in a number of places throughout this release
and include, but are not limited to, statements regarding the
Group's intentions, beliefs or current expectations concerning,
among other things, the Group's results of operations, financial
position, liquidity, prospects, growth, strategies and expectations
of the industry.
By their nature, forward-looking statements involve risk and
uncertainty because they relate to future events and circumstances.
Forward- looking statements are not guarantees of future
performance and the development of the markets and the industry in
which the Group operates may differ materially from those described
in, or suggested by, any forward- looking statements contained in
this release. In addition, even if the development of the markets
and the industry in which the Group operates are consistent with
the forward-looking statements contained in this release, those
developments may not be indicative of developments in subsequent
periods. A number of factors could cause developments to differ
materially from those expressed or implied by the forward-looking
statements including, without limitation, general economic and
business conditions, industry trends, competition, commodity
prices, changes in law or regulation, currency fluctuations
(including the US dollar and Rouble), the Group's ability to
recover its reserves or develop new reserves, changes in its
business strategy, political and economic uncertainty. Save as
required by the Listing and Disclosure and Transparency Rules, the
Company is under no obligation to update the information contained
in this release.
Past performance cannot be relied on as a guide to future
performance.
The content of websites referred to in this announcement does
not form part of this announcement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
MSCGLGDBLUDBGRL
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