TIDMPOG
RNS Number : 9516V
Petropavlovsk PLC
20 April 2021
20 April 2021
Petropavlovsk PLC
Q1 2021 Production and Sales Report
Petropavlovsk PLC ("Petropavlovsk" or the "Company" or, together
with its subsidiaries, the "Group") today issues its sales and
production results for the period from 1 January 2021 to 31 March
2021 (the "Period" or "Q1").
Mr Denis Alexandrov, CEO said: "Gold production from our own ore
in Q1 2021 was broadly in line with Q4 2020 and keeps us on track
to meet our guidance of 430 - 470koz for the year. Quarterly output
was reduced year-on-year due to lower production from Albyn, where
mining has moved to the nearby Elginskoye deposit, and as a result
of processing lower volumes and grades of third-party concentrates
at our POX hub. In the second half of the year, we anticipate
higher output at Pioneer, following the commissioning of its new
flotation plant in Q2, and a potential increase in third-party
material.
I continue to work with the new management team on our extensive
business review that we hope will lay the foundations for the
Company's future growth. This review has already delivered a
revised management structure that is nearing completion. It will
also evaluate the Group's development strategy that we expect to
complete in Q3 2021, with the results to be shared later in the
year."
Operational Highlights
Gold Production and Sales
-- Q1 2021 total gold production of 95.6koz, a decrease of 49%
compared to Q1 2020 (186.2koz)
-- Own mined gold production amounted to 82.4koz in Q1 2021 (Q1
2020: 102.0koz) with marginally higher Malomir production offset by
reduced output at Albyn and Pioneer
-- 3rd-party concentrate gold production decreased to 13.2koz in
Q1 2021 (Q1 2020: 84.2koz) due to expected lower volumes of
concentrate available for purchase and lower grades in the
concentrates supplied
Gold production '000oz
Asset Q1 2021 Q1 2020
------------------------------ -------- --------
Pioneer 24.1 26.4
Malomir 36.0 35.2
Albyn 22.3 40.4
3rd-party concentrate (POX
Hub) 13.2 84.2
Total G roup 95.6 186.2
------------------------------ -------- --------
Note: Numbers may not add up due to rounding effect
-- Q1 2021 gold sales totalled 95.6koz (Q1 2020: 162.5koz)
-- Average realised gold price for the period was 14% higher at
US$1,789/oz, with no gains or losses from hedging in Q1 2021 (Q1
2020: US$1,570/oz)
2021 Guidance
-- As announced on 31 March 2021, the Company expects total 2021
gold production of 430 - 470koz, comprising own gold production of
370 - 390koz and gold production from 3rd-party concentrate of 60 -
80koz
Pokrovskiy Pressure Oxidation (POX) Hub
-- In Q1 2021, a total of 51.8kt of refractory gold concentrate
was processed through the POX Hub, comprising 32.9kt from Malomir
concentrate with an average grade of 28.5g/t and 18.9kt from
3rd-party concentrate with an average grade of 30.1g/t
-- Of the 36.0koz of total gold production at Malomir in Q1
2021, 28.0koz was recovered from processing refractory concentrates
at the POX Hub with recoveries averaging 92.9% and the balance from
non-refractory gold ore
-- The processing of 3rd-party refractory concentrates yielded
total gold production of 13.2koz
Debt Principal and Cash
-- Debt principal outstanding as of 31 March 2021 was US$538m
(31 December 2020: US$538.0m)
-- Cash (unaudited) as of 31 March 2021 was US$7.5m (31 December
2020: US$35.4m) with the cash balance decline explained by the fact
that a portion of March gold proceeds was received in early
April
-- The Company continues to settle the interest-bearing gold
prepays which stood at c.US$53.3m as at 31 March 2021 (US$63.8m as
at 31 December 2020), a net decrease of c.US$10.5m for the period.
The Company plans to fully settle the gold prepays by the end of
the year with the intention that future liquidity needs will be met
through more flexible credit facilities on better terms
-- The Company has already secured a revolving credit facility
(RCF) with Gazprombank for c.US$66m at a rate of 3.5-4.5%, which is
significantly lower cost than existing borrowings. The Company
intends to increase that amount going forward
Hedging
-- Zero cost collars remain with a gold price floor of
US$1,600/oz and a cap of US$1,832/oz for 3,500koz maturing every
month until December 2021
-- Zero cost collars with a RUB:USD price floor of RUB75.00 and
a cap in the range of between RUB90.65 and RUB100.00 for US$7.0m
maturing every month until December 2021
Responsible Business
-- No fatal accidents occurred at Petropavlovsk's operations,
neither among the Company's employees nor contractors
-- An increase in number of accidents and, consequently, LTIFR
during the period is partially attributable to an improved
methodology, reflecting an enhanced accident classification system.
The availability of robust data and accurate record keeping are the
first steps towards the improvement of health and safety reporting
and is in alignment with international best practices
-- In April 2021, the company appointed a group Deputy CEO for
Health & Safety, Mr Roman Dertinov, who brings a wealth of
experience in both major Russian and international companies
-- Zero environmental incidents were reported in Q1 2021
Metric Units Q1 2021 Q1 2020
--------------------------- --------------------- -------- --------
LTIFR Per 1m hours worked 2.01 0.98
Environmental incidents Number 0 0
--------------------------- --------------------- -------- --------
Note: Environmental incidents defined as moderate or serious
-- A community consultation was organised at Ekimchan village to
introduce and explain our projects to local residents, NGOs and
local authorities, with a key focus on environmental safety. The
meetings were held in strict compliance with COVID-19 sanitary
measures
COVID-19 Update
-- No material COVID-19 outbreaks have occurred at our
operations so far this year. The Company continues to implement
strict quarantine and safety measures at all its operations
-- As of 31 March 2021, there have been 56 reported cases among
the Group's employees this year. All affected employees are
self-isolating or receiving medical care
-- In March 2021, the Company launched a campaign to encourage
and assist employees to take advantage of the Russian government's
free vaccination programme
-- At the time of the reporting, the Group's supply chains
remain fully functional
Development Update
Start-up of Pioneer flotation plant and expansion of the Malomir
flotation facility
-- As previously announced, the commissioning of the Pioneer
flotation plant is scheduled for Q2 2021
-- Once operational, the new Pioneer flotation plant will double
the Group's capacity to process refractory gold 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 3rd-party concentrates
-- The construction of a third line at the Malomir flotation
plant is underway and will add an additional 1.8Mtpa of flotation
capacity from Q3 2022, bringing the total combined Group capacity
to 9.0Mtpa
Corporate Update
-- On 30 June 2020, the Company (acting through its then board
of directors, the majority of whom were not re-elected by
shareholders at the annual general meeting held later that day)
announced that it had asked the Takeover Panel to investigate
whether a concert party including the Company's largest
shareholder, Joint Stock Company Uzhuralzoloto Group of Companies
("UGC"), had acted in breach of Rule 9 of the Takeover Code. The
Company has been informed by the Takeover Panel (acting through the
Panel Executive) that, based on the information currently available
to the Panel Executive, there is insufficient evidence to conclude
that UGC was acting in concert with any other shareholder of the
Company at the time when it acquired its interest in the Company
and/or converted its convertible bonds into ordinary shares of the
Company. In the light of this, the Company was informed that the
Panel Executive concluded that there is currently no obligation for
UGC to make an offer for the Company under Rule 9.1 of the Takeover
Code
-- As at the date of this release, the Company has received
Conversion Notices in respect of the exercise of conversion rights
under the US$125m Convertible Bonds amounting to an aggregate of
US$87m (balance remaining of US$38m), which resulted in the issue
of c.644.4m new ordinary shares
-- The Company continues to work on refinancing the US$500m
senior notes maturing in November 2022 with the aim of reducing the
size and cost of servicing debt
-- The Company continues to explore options that would relieve
it of the loan guarantee it currently provides on IRC's behalf
while realising a value for its IRC stake that is fair to its
shareholders
IRC Results Highlights
IRC is a vertically integrated iron ore concentrate producer in
the Russian Far East, listed on the Hong Kong Stock Exchange
(ticker: 1029.HK). Petropavlovsk is a major IRC shareholder (31.1%)
and acts as guarantor for IRC's $240m loan facility with
Gazprombank. In accordance with IAS 28, IRC is treated as an
investment in associate.
The following selected summary is based on the IRC Annual
Results for the year ended 31 December 2020, which were published
on 30 March 2021.
Financial Highlights
-- Revenue increased by 26.8% to US$224.6m (2019: US$177.2m)
-- EBITDA excluding non-recurring items and FX improved to
US$79.7m (2019: US$33.3m)
-- Maiden underlying profit of US$24.2m (2019: Loss of
US$21.0m)
-- Profit attributable to shareholders amounted to US$100.6m
(2019: Loss of US$38.7m)
-- Cash balance increased to US$20.4m (31 December 2019:
US$4.3m)
Operating Highlights
-- K&S improved its production rate to 87% capacity (2019:
79%)
-- Production volumes increased by 10.1% to 2,748kt (2019:
2,497kt)
-- Sales increased by 4.6% to 2,577kt (2019: 2,464kt); growth in
volume could have been further improved if not for railway logistic
issues in December 2020
Operations Report
Pioneer
Pioneer is currently focused on mining non-refractory ores from
several conventional open pits and underground operations. The
construction of new flotation facilities at Pioneer will lead to a
transition, starting in Q2 2021, from mining non-refractory to
mainly refractory ores which will be concentrated ahead of
processing at the POX Hub.
PIONEER Units Q1 2021 Q1 2020
----------------------------------- ---------- -------- --------
Mining operations
----------------------------------- ---------- -------- --------
Total material moved m3 '000 4,720 4,573
Ore mined t '000 1,085 841
Average grade g/t 1.02 0.94
Gold content oz. '000 35.4 25.3
--------
Processing operations (RIP
plant)
----------------------------------- ---------- -------- --------
Ore milled t '000 1,314 1,316
Average grade g/t 0.67 0.78
Gold content oz. '000 28.2 32.8
Recovery % 80.6 87.3
Gold recovered oz. '000 22.7 28.6
Total gold production (doré) oz. '000 24.1 26.4
----------------------------------- ---------- -------- --------
Note: numbers may not add up due to fluctuation of gold in
circuit and / or rounding.
In Q1 2021, Pioneer processed non-refractory ore from both open
pit and underground mining operations to produce 24.1koz from ore
with an average grade of 0.67g/t and recoveries of c.81%, in line
with expectations. The lower grade of ore processed relative to
mined grades reflects the impact of stockpiling higher grade
refractory gold ores ahead of the start-up of the flotation plant
Pioneer as well as a lower proportion of high grade non-refractory
ore from underground mining versus Q1 2020. The lower recoveries
seen during the period were a reflection of a higher proportion of
transitional (semi non-refractory) ore in the processed blend.
Capital development work for underground mining of high grade
ore at the Andreevskaya ore zone continued during the period.
Mining at Andreevskaya is now scheduled to commence by mid-June of
this year.
Malomir
Malomir is a conventional open-pit mine and underground
operation transitioning towards mainly refractory ore processing
using the onsite flotation plant. The resulting concentrate is
shipped for processing to the POX Hub. The Malomir deposit has
extensive refractory reserves and resources and both near-mine and
surrounding areas are considered highly prospective for the
discovery of further refractory gold ounces.
MALOMIR Units Q1 2021 Q1 2020
----------------------------------- ---------- -------- --------
Mining operations
----------------------------------- ---------- -------- --------
Total material moved m3 '000 2,273 2,211
Non-refractory ore mined: t '000 110 84
Average grade g/t 1.89 1.93
Gold content oz. '000 6.7 5.2
Refractory ore mined: t '000 1,176 1,261
Average grade g/t 1.17 1.12
Gold content oz. '000 44.2 45.6
Resin-in-pulp (RIP plant), non-refractory
ores
----------------------------------------------- -------- --------
Ore milled t '000 110 101
Average grade g/t 2.18 1.81
Gold content oz. '000 7.7 5.9
Recovery % 71.9 70.3
Gold recovered oz. '000 5.5 4.1
Flotation plant (refractory
ores)
----------------------------------- ---------- -------- --------
Ore milled t '000 958 969
Average grade g/t 1.26 1.28
Gold content oz. '000 38.8 40.0
Recovery % 83.2 86.9
Concentrate yield % 3.7 3.7
Concentrate produced t '000 35.5 36.0
Average grade g/t 28.2 30.3
Gold content oz. '000 32.3 34.7
POX Plant (Malomir concentrate)
----------------------------------- ---------- -------- --------
Concentrate treated t '000 32.9 38.0
Average grade g/t 28.5 30.1
Gold in concentrate oz. '000 30.1 37.1
Recovery % 92.9 91.5
Gold recovered oz. '000 28.0 33.9
Total gold production (doré) oz. '000 36.0 35.2
----------------------------------- ---------- -------- --------
Note: numbers may not add up due to fluctuation of gold in
circuit and / or rounding.
Malomir predominantly treated refractory ore in Q1 2021 with
performance largely in-line with expectations. In total, 1,176kt of
refractory ore with an average grade of 1.17g/t was mined with
28.0koz of gold recovered from processing at the POX Hub. The POX
plant recovery rates for Malomir concentrate were 92.9%, in-line
with expectations and project design rates.
Mining of non-refractory ore was largely from underground
operations with some non-refractory gold mined from the
Magnetitovoye open pit. In total, 110kt of non-refractory ore was
mined at an average grade of 1.89g/t with 5.5koz gold recovered
from the RIP plant. Underground mining occurred at the deeper
levels of the Quartzitovoye deposit where the complex configuration
of the ore body led to increased dilution, which has negatively
affecting mined grades since early last year.
Albyn
The Albyn processing facility is currently being used to treat
ore from the nearby Elginskoye satellite deposit, which replaced
the Albyn pit as the main source of non-refractory ore starting
from 2021. Albyn could also potentially treat ore from the
earlier-stage Unglichikanskoye deposit in the future. Both of these
licences are owned 75% through TEMI LLC.
As of 31/12/2019, these deposits contained JORC Measured,
Indicated and Inferred Mineral Resources of 3.93Moz Au which
include 2.32Moz of JORC Proved and Probable Ore Reserves.
ALBYN Units Q1 2021 Q1 2020
----------------------------------- ---------- -------- --------
Mining operations
----------------------------------- ---------- -------- --------
Total material moved m3 '000 3,197 3,353
Ore mined t '000 3,338 1,293
Average grade g/t 0.95 1.06
Gold content oz. '000 102.0 43.9
Processing operations (RIP
plant)
----------------------------------- ---------- -------- --------
Ore milled t '000 792 1,152
Average grade g/t 0.96 1.16
Gold content oz. '000 24.5 42.9
Recovery % 88.3 94.0
Gold recovered oz. '000 21.6 40.3
Total gold production (doré) oz. '000 22.3 40.4
----------------------------------- ---------- -------- --------
Note: numbers may not add up due to fluctuation of gold in
circuit and / or rounding, Data shown on a consolidated basis.
Following the depletion of the Albyn deposit late last year, the
Albyn plant saw reduced output in Q1 2021 due to the switch to
processing ore from the nearby Elginskoye deposit which is harder
to mill and where recoveries in the RIP plant are lower than for
Albyn ore.
In Q1 2021, a total of 792kt of ore at 0.96g/t was processed at
the Albyn plant to produce 22.3koz of gold.
Given the uneven distribution of non-refractory and refractory
ore at Elginskoye and the fact that refractory ore cannot be
treated efficiently at the Albyn plant, some material is being
stockpiled leading to a lower volume of ore processed at Albyn than
is mined at Elginskoye. Further exploration and metallurgical
studies are planned at Elginskoye in 2021 to complete full-scale
metallurgical mapping of the deposit and to convert resources to
reserves. This work will likely result in updated production
plans.
3rd-party concentrate (POX Hub)
3rd-party concentrate processing is a temporary solution that
optimises unused POX Hub capacity, which allows the Group to
demonstrate the production potential of the POX Hub and improve
Group cash flow
3RD PARTY CONCENTRATE Units Q1 2021 Q1 2020
----------------------------------- ---------- -------- --------
POX plant
----------------------------------- ---------- -------- --------
Concentrate treated t '000 18.9 35.0
Average grade g/t 30.1 72.3
Gold in concentrate oz. '000 18.3 81.3
Recovery % 93.4 94.2
Gold recovered oz. '000 17.0 76.5
Total gold production (doré) oz. '000 13.2 84.2
----------------------------------- ---------- -------- --------
Note: numbers may not add up due to fluctuation of gold in
circuit and / or rounding
In Q1 2021, the Company processed 18.9kt of 3rd-party
concentrate at an average grade of 30g/t to produce 13.2koz of
gold. Production was down year-on-year due to lower availability of
3rd-party concentrate for processing and lower grades in the
concentrate that was supplied. Production was also negatively
affected by the build-up of gold in circuit during the quarter.
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 . 8.3 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.
For more information
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.
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