TIDMPOG
RNS Number : 0371U
Petropavlovsk PLC
31 March 2021
31 March 2021
Petropavlovsk PLC
Management Update and 2021 Guidance
Petropavlovsk PLC ("Petropavlovsk" or the "Company" or, together
with its subsidiaries, the "Group") today issues its 2021 guidance
and provides a management update following the appointment of a new
management team led by CEO Denis Alexandrov.
Management Update
Business Review
Following the appointment of Denis Alexandrov as CEO in December
2020 and with the support of the new management team that joined in
January of this year, a comprehensive review of the business, its
corporate structure, internal controls, operational policies and
processes is under way with the aim of delivering greater
transparency and operational efficiency and outlining a clear
pathway to future growth for the benefit of all stakeholders. The
outputs from this review will include:
-- Opportunities to simplify the corporate structure, improve
management systems, standardise processes and reduce G&A costs.
Examples include the streamlining of administrative personnel,
reduction of duplicated functions and services within the Group,
removal of intermediaries and the cancellation of contracts with
certain counterparties. The review has already resulted in
immediate cost savings through revised procurement and contracting
procedures;
-- A new medium-term corporate development strategy delivered by
Q3 2021 and followed by the proposal of a dividend policy; and
-- Completion of a full management restructuring by the end of
Q2 2021, including addressing management oversight and talent gaps
within the existing structure and adding critical core competencies
that were missing within the management team.
New Management Team
As part of this process of upgrading core internal competencies,
the Board of Directors of Petropavlovsk welcomed new members of the
management team that will bring a fresh external perspective and
help to lead the transformation of the business. This team of
experienced professionals brings with it a broad range of
competencies that will be critical in the continued development and
execution of the Company's strategy. They include a new Chief
Operating Officer, Deputy CEO for Corporate Development, and heads
of human resources and administration, procurement and logistics,
communications, capital construction and investment projects,
business transformation, regional affairs, and legal affairs. More
information on these new team members and any additional management
hires will be added to the corporate website upon completion of the
restructuring process.
KPMG Forensic Investigation
In parallel with the management review and as previously
announced, KPMG LLP ("KPMG") is conducting a separate forensic
audit into certain related-party and other transactions undertaken
by the Company and IRC Ltd, the 31.1%-owned iron ore miner listed
in Hong Kong, in the three years to August 2020.
The Board will update shareholders on the initial findings of
the KPMG led audit which are expected to be completed by the end of
Q2 2021.
2021 Outlook and Guidance
Petropavlovsk provided an update on full 2020 sales and
production on 26(th) January 2021. The business review process has
already agreed a revised budget for 2021, which includes the
following production targets and guidance for capital
expenditure:
Gold production
-- Total 2021 gold production of 430 - 470koz, comprising of own
gold production of 370 - 390koz and third-party gold production of
60 - 80koz.
-- Pioneer: production will increase compared with FY 2020
output of 119koz driven by higher grades and the commissioning of
the 3.6Mtpa flotation plant by the end of Q2 2021 which will allow
the Company to begin processing Pioneer's abundant refractory
reserves at the POX Hub.
-- Albyn : production is expected to be lower than FY 2020
production of 127koz due to lower volumes and lower recoveries
resulting from the switch to processing ore from the nearby
Elginskoye deposit.
-- Malomir: production in terms of volumes, grades and
recoveries is expected to be broadly in line with FY 2020 output of
140koz.
-- Third-party material: production is expected to be lower than
FY 2020 production of 163koz due to reduced volumes of concentrate
available for purchase and lower concentrate grades. Management
disruption in 2020, prior to the arrival of the new executive team,
resulted in the Company missing the crucial annual contracting
window to secure sufficient concentrate for 2021 delivery and
processing. However, efforts are underway to source additional
material to meet the guided range and secure supplies for 2022.
Capex
-- Total capex of US$140m, consisting of sustaining and
development capex of US$120m and exploration spend of c.US$20m.
This compares to capex for FY 2020 of c.US$118m (unaudited).
-- Approximately half of the total 2021 sustaining and
development capex spend has been allocated to completing
construction of the new Pioneer flotation plant and third flotation
line at Malomir.
-- Scheduled for launch by the end of Q2 2021, the Pioneer
flotation plant will double the Group's capacity to process
refractory ore from its own mines from 3.6Mtpa (at the existing
Malomir flotation plant) to a combined group total capacity of
7.2Mtpa, thus reducing the POX Hub's reliance on treating
low-margin third-party concentrates.
-- Construction of a third line at the Malomir flotation
facility will add a further 1.8Mtpa of capacity from Q3 2022,
increasing the Group's combined flotation capacity to 9.0Mtpa.
-- In addition to completing these two key projects, the Company
has also included spending designed to support future mining
activities, including exploration, mining equipment modernisation
and work on expanding tailings facilities.
-- Significant year on year uplift in exploration spend to
c.US$20m, with a particular focus on exploration in the highly
prospective and extensive areas at / around Malomir and Albyn.
Liquidity management
-- Gold pre-pays: as previously announced, these amounted to
US$63.8m on 31 December 2020. Management intends to settle the
pre-pays by year end, converting the gold credit limits currently
in place into a standard credit line to support liquidity.
-- US$500m notes: work has commenced to refinance the senior
notes maturing November 2022 with the aim of reducing the size and
cost of servicing debt.
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014.
About Petropavlovsk
Petropavlovsk PLC (LSE: POG. MOEX: POGR) is a major integrated
Russian gold producer with JORC Resources of 21.03Moz Au which
include Reserves of 8.46Moz Au. Following its IPO on the
Alternative Investment Market (AIM) in 2002, Petropavlovsk was
promoted to the London Stock Exchange in 2009, where today it is a
Premium Listed company and a constituent of the FTSE 250, FTSE 350
and FTSE All Share indices. The Company's shares also trade on the
Moscow Exchange and are a constituent of the flagship RTS / MOEX
index.
Petropavlovsk's key operating mines (Pioneer, Malomir and Albyn)
are in the Amur Region in the Russian Far East. Petropavlovsk has
produced a total of c . 8.2 Moz of gold since operations began in
1994 and has a strong track record of mine development, expansion
and asset optimisation.
The Group recently entered a new era of growth following the
successful commissioning and start-up of its flagship asset, the
Pressure Oxidation (POX) Hub at Pokrovskiy, which enables the
processing of the Company's abundant refractory reserves and
resources.
Petropavlovsk is one of the region's largest employers and one
of the largest contributors to the sustainable development of the
local economy.
Enquiries
Please visit www.petropavlovskplc.com or contact:
Petropavlovsk PLC +44 (0) 20 7201 8900
Patrick Pittaway / Max Zaltsman / Viktoriya TeamIR@petropavlovskplc.com
Kim
Hudson Sandler +44 (0) 20 7796 4133
Charlie Jack / Katerina Parker / Elfie Kent Petropavlovsk@hudsonsandler.com
Cautionary note on 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 future price of gold, the Group's results
of operations, financial position, liquidity, prospects, growth,
estimation of mineral reserves and resources and strategies, and
exchange rates and the expectations of the industry. By their
nature, forward-looking statements involve risk and uncertainty
because they relate to future events and circumstances [outside the
control of the Group. 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 results and/or developments to differ materially from those
expressed or implied by the forward-looking statements including,
without limitation, general economic and business
conditions, demand, supply and prices for gold and other
long-term commodity price assumptions (and their effect on the
timing and feasibility of future projects and developments), trends
in the gold mining industry and conditions of the international
gold markets, competition, actions and activities of governmental
authorities (including changes in laws, regulations or taxation),
currency fluctuations (including as between the US Dollar and
Rouble), the Group's ability to recover its reserves or develop new
reserves, changes in its business strategy, any litigation, and
political and economic uncertainty. Except as required by
applicable law, rule or regulation (including the Listing and
Disclosure Guidance and Transparency Rules), the Group does not
undertake any obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. 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.
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