TIDMPOG
RNS Number : 8960F
Petropavlovsk PLC
21 July 2021
21 July 2021
Petropavlovsk PLC
H1 2021 Trading Update
Petropavlovsk PLC ("Petropavlovsk" or the "Company" or, together
with its subsidiaries, the "Group") today issues its sales and
production results for the quarter ending 30 June 2021 ("Q2 2021")
and for the first half of the year (the "period" or "H1 2021").
Mr Denis Alexandrov, CEO, said:
"The first half of 2021 was a transitional period for
Petropavlovsk as we prepared to launch the Pioneer flotation plant,
which heralds the mine's shift from processing non-refractory ore
to being a producer of refractory concentrate to feed our
Pokrovskiy POX hub. I am proud to highlight that we launched the
plant one month ahead of our revised schedule. With the Pioneer
flotation plant and increased deliveries of 3rd-party concentrate
in the second half, we are confident of meeting our full-year
production guidance for 2021."
Operational Highlights
Gold Production and Sales
-- H1 2021 gold production totalled 195.0koz, a decrease of 39%
versus 320.6koz in H1 2020
-- Own mined gold production amounted to 158.3koz in H1 2021 (H1
2020: 213.7koz), with the 26% year-on-year decrease primarily due
to the switch to processing ore from the Elginskoye deposit at
Albyn and preparations for the launch of the Pioneer flotation
plant, which entailed a shift to mining refractory ore for
stockpiling and a planned temporary shutdown of the processing
plant in April
-- 3rd-party concentrate gold production decreased by 66% to
36.7koz in H1 2021 (H1 2020: 106.9koz) due to expected lower
volumes of concentrate available for purchase and lower grades in
the concentrates supplied
Gold production '000oz
----------------------------------- -------- -------- -------- --------
Asset Q2 2021 Q2 2020 H1 2021 H1 2020
----------------------------------- -------- -------- -------- --------
Pioneer 21.8 33.9 4 6.0 60. 3
Malomir 34.1 46.4 70. 1 81. 6
Albyn 19.9 31.3 42. 3 71. 8
3rd-party concentrate (POX Hub) 23.5 22. 7 36.7 106.9
Total Group 99.4 134.3 195.0 320. 6
----------------------------------- -------- -------- -------- --------
Note: Numbers may not add up due to rounding effect
-- Gold sales totalled 187.1koz in H1 2021 (H1 2020:
312.4koz)
-- Average realised gold price for H1 2021 was 9% higher at
US$1,795/oz (H1 2020: US$1,640/oz), with no gains or losses from
hedging during the half year
2021 Guidance
-- The Company affirms its guidance of total 2021 gold
production of 430 - 470koz, comprising own gold production of 370 -
390koz and gold production from 3rd-party concentrate of 60 -
80koz, with H2 2021 to include production from the new Pioneer
flotation plant and increased supplies of 3rd-party concentrate
Pokrovskiy Pressure Oxidation (POX) Hub
-- A total of 123kt of refractory gold concentrate was processed
through the POX Hub in H1 2021, including 76kt from Malomir with an
average grade of 28.5g/t and 38kt of 3rd-party concentrate with an
average grade of 30.7g/t
-- The new flotation plant at Pioneer supplied 8kt of
concentrate at an average grade of 21.9g/t to the POX Hub in May
and June, with 5.5koz of gold recovered for the period (95%
recovery rate)
Business review
-- The ongoing business review led by CEO Denis Alexandrov and
the management team is well underway. Its focus has been to
establish opportunities to deliver efficiencies regarding the
corporate structure, management systems and operational processes.
The review, which is also addressing outstanding talent and
competency gaps, will enable the development of a new medium-term
corporate strategy to be completed in Q3 2021
Balance Sheet and Liquidity
-- Cash (unaudited) as of 30 June 2021 was US$34.4m (31 March
2021: US$7.5m, 31 December 2020: US$35.4m)
-- Debt principal outstanding as of 30 June 2021 was US$573m (31
March 2021: US$538m, 31 December 2020: US$538m) with the increase
due to use of the Gazprombank ("GPB") revolving credit facility for
day-to-day working capital requirements
-- Interest-bearing gold prepays stood at US$37.1m as at 30 June
2021 (US$53.3m as at 31 March 2021, US$63.8m as at 31 December
2020), a net decrease of US$16.2m over the course of Q2 2021 and
US$26.7m since the beginning of the year. The Company plans to
fully settle the gold prepays by year-end
-- To replace the gold prepays and support day-to-day liquidity
needs with more flexible credit facilities, the Group has secured a
US$50m increase in the limit of its revolving credit facilities
("RCF") with GPB from c.US$66m to c.US$116m, with a maturity
extension from May 2022 to June 2026. At interest rates of 2.8 -
4.5%, the RCF is significantly lower cost than existing borrowings.
The Company intends to further increase the credit limit under the
RCF going forward
-- On 13 July 2021, the Company announced the launch by its
wholly-owned subsidiary Petropavlovsk 2016 of an offer to purchase
for cash up to US$200m of the aggregate principal amount of its
8.125% guaranteed notes maturing 2022 (the "US500m Notes"). The
offer to purchase is available, subject to eligibility confirmation
and registration, from the tender offer website:
https://debtxportal.issuerservices.citigroup.com . The tender offer
is the first step in the Company's plan to refinance the US$500m
Notes, which is aimed at reducing the size and cost of servicing
the debt
-- Petropavlovsk has secured the offer of a US$200m term loan
(30 June 2023 maturity), to be used for the partial buy-back of the
US$500m Notes in accordance with the announced tender offer. The
term loan interest rate is significantly lower than the 8.125%
coupon on the US$ 500 Notes
Hedging
-- Zero cost collars remain in place 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 remain in place 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 have occurred at Petropavlovsk's
operations this year, neither among the Group's employees nor its
contractors
-- An increase in the number of reported incidents and,
consequently, LTIFR during the period is partially attributable to
an improved reporting methodology being implemented this year. The
severity of reported injuries has decreased during the period, and
we have seen a positive trend in the monthly reduction of injuries
since the beginning of the year. The availability and in-depth
analysis of robust data are the first steps towards improving
health and safety reporting, in alignment with international best
practices
-- A strengthened health and safety leadership team, led since
April by Head of Health & Safety Roman Dertinov, has resulted
in the drafting of a new and improved set of Fundamental Safety
Rules, which have now been approved by the Board of Directors and
are being rolled out across the Group
-- The team is also implementing several new long-term injury
prevention projects, including initiatives specifically aimed at
addressing falls from height and electrical safety
-- Zero environmental incidents were reported in H1 2021
Metric Units Q2 2021 Q2 2020 H1 2021 H1 2020
------------------------- ------------------- -------- -------- -------- --------
LTIFR Per 1m hrs worked 1.50 1.49 1.75 1.23
Environmental incidents Number 0 0 0 0
------------------------- ------------------- -------- -------- -------- --------
Note: Environmental incidents defined as moderate or serious
-- Due to recent severe flooding in the Amur region, the Company
is carrying out daily environmental monitoring of local rivers and
streams. No material environmental pollution has been
identified
COVID-19 Update
-- No material COVID-19 outbreaks have occurred at our sites
this year to date, and the Company continues to implement strict
quarantine and safety measures across its operations
-- As of 5 July 2021, there have been 86 reported cases among
the Group's employees this year. All affected employees are
self-isolating or receiving medical care
-- In Q2 2021, the Company launched an on-site vaccination
programme at each of its mines, accompanied by a supporting
informational campaign via corporate and social media and other
communications channels
-- As of 5 July 2021, 28% of the Group's employees have been
fully vaccinated (2 doses) and an additional 38% have exhibited
Covid antibodies
-- At the time of reporting, the Group's supply chains remain
fully functional
Development Update
Start-up of Pioneer flotation plant and expansion of the Malomir
flotation facility
-- On 31 May 2021, the Company launched the Pioneer flotation
plant, with the capacity to process 3.6Mt pa of ore, thereby
doubling the Group's total processing capacity for refractory gold
ore from its own mines to 7.2Mtpa (including the existing Malomir
plant)
-- The Pioneer flotation plant is expected to produce up to 60kt
of flotation concentrate this year, and up to 100kt in 2022,
reducing the Company's reliance on 3rd-party concentrate to feed
the Pokrovskiy POX plant
-- The construction of a third line at the Malomir flotation
plant continued to progress in Q2 2021 and will add an additional
1.8Mtpa of flotation capacity upon completion in Q3 2022, bringing
the total combined Group capacity to 9.0Mtpa
Corporate Update
-- On 12 July 2021, the Board of Directors appointed Mr. Evgeny
Potapov as a non-executive director. Mr. Potapov was nominated by
Uzhuralzoloto Group of Companies ("UGC"), the Company's largest
shareholder, pursuant to the relationship agreement in place
between the Company and UGC. Mr Potapov replaced Mr. Maxim Kharin,
who resigned from the Board
-- Petropavlovsk continues to act as guarantor in relation to
the obligations of IRC Limited's subsidiary K&S under two loan
facility agreements with GPB. IRC continues to pay down the debt in
line with the repayment schedule. As at 30 June 2021, the
outstanding loan principal amounted to US$194m
Operations Report
Pioneer
Pioneer mines refractory and non-refractory ores from several
conventional open pits and underground operations. The launch of a
new flotation plant at Pioneer in Q2 2021 was a major step in the
mine's transition from mining non-refractory to mainly refractory
ores, which are concentrated ahead of processing at the POX
Hub.
PIONEER Units Q2 2021 Q2 2020 H1 2021 H1 2020
-------------------------- ---------- -------- -------- -------- --------
Mining operations
-------------------------- ---------- -------- -------- -------- --------
Total material moved m3 '000 4,873 4,886 9,593 9,459
Non-refractory ore mined t '000 788 669 1,499 1,510
-------------------------- ---------- -------- -------- -------- --------
Average grade g/t 1.10 1.03 1.02 0.98
Gold content oz. '000 27.8 22.2 49.3 47.5
Refractory ore mined t '000 371 - 745 -
-------------------------- ---------- -------- -------- -------- --------
Average grade g/t 1.04 - 1.10 -
Gold content oz. '000 12.4 - 26.3 -
Processing operations (RIP plant)
-------------------------------------- -------- -------- -------- --------
Ore milled t '000 490 1,398 1,804 2,714
Average grade g/t 1.50 0.85 0.89 0.81
Gold content oz. '000 23.6 38.2 51. 8 71 .0
Recovery % 80% 82% 80% 84%
Gold recovered oz. '000 18.9 31.3 41.6 59.9
Flotation plant (refractory ores)
-------------------------------------- -------- -------- -------- --------
Ore milled t '000 314 - 314 -
Average grade g/t 0.77 - 0.77 -
Gold content oz. '000 7.8 - 7.8 -
Recovery % 78% - 78% -
Concentrate yield % 2.7% - 2.7% -
Concentrate produced t '000 8.6 - 8.6 -
Average grade g/t 22.0 - 22.0 -
Gold content oz. '000 6.1 - 6.1 -
POX Plant (Pioneer concentrate)
-------------------------------------- -------- -------- -------- --------
Concentrate treated t '000 8.1 - 8.1 -
Average grade g/t 21.9 - 21.9 -
Gold in concentrate oz. '000 5.7 - 5.7 -
Recovery % 95% - 95% -
Gold recovered oz. '000 5.5 - 5.5 -
Total gold production
(doré) oz. '000 21.8 33.9 46.0 60.3
-------------------------- ---------- -------- -------- -------- --------
Note: numbers may not add up due to fluctuation of gold in
circuit and / or rounding
In H1 2021, Pioneer processed non-refractory ore from both open
pit and underground mining operations, recovering 41.6koz at an
average grade of 0.89g/t and recoveries of 80%, in line with
expectations. Following its launch in May until the end of the
period, the Pioneer flotation plant processed 314kt of refractory
ore at an average grade of 0.77g/t with recoveries of 78% to
produce 8.6kt of refractory concentrate for further processing at
the POX Hub.
In June, several days of anomalous torrential rain led to
flooding in parts of north-western Amur region. At Pioneer, the
nearby Ulunga River spilled over its banks and water flowed into
parts of Open Pit 6/1, which was depleted in 2016. As a safety
precaution, personnel and equipment were evacuated from one of
Pioneer's underground mines as an entrance to that section is
located near the flooded area. Mine personnel erected temporary
dams and other workings to return the river to its normal flow,
preventing any damage to the underground mine. Mining and
processing activity at Pioneer continued throughout the
incident.
Capital development work for underground mining of the
Andreevskaya ore zone was halted in Q2 2021 to conduct additional
infill drilling to verify its resources. The drilling has been
completed and development work on Andreevskaya has resumed, with
the start of mining now scheduled for August.
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 Q2 2021 Q2 2020 H1 2021 H1 2020
----------------------------------- ---------- -------- -------- -------- --------
Mining operations
----------------------------------- ---------- -------- -------- -------- --------
Total material moved m3 '000 2,767 2,623 5,040 4,834
Non-refractory ore mined t '000 43 131 153 228
----------------------------------- ---------- -------- -------- -------- --------
Average grade g/t 2.21 2.01 2.20 1.94
Gold content oz. '000 3.1 8.5 10.8 14.2
Refractory ore mined t '000 1,216 1,082 2,392 2,339
----------------------------------- ---------- -------- -------- -------- --------
Average grade g/t 1.79 1.16 1.49 1.14
Gold content oz. '000 70.1 40.2 114.3 85.3
Processing operations (RIP plant)
Resin-in-pulp (RIP plant), non-refractory
ores
----------------------------------------------- -------- -------- -------- --------
Ore milled t '000 29 129 138 230
Average grade g/t 2.30 1.97 2.21 1.9 0
Gold content oz. '000 2.1 8.1 9.8 14 .0
Recovery % 71% 78% 72% 75%
Gold recovered oz. '000 1.5 6.3 7.0 10.5
Flotation plant (refractory ores)
----------------------------------------------- -------- -------- -------- --------
Ore milled t '000 1,046 935 2,004 1,904
Average grade g/t 1.34 1.29 1.30 1.29
Gold content oz. '000 45.1 38.9 83.9 78.8
Recovery % 83% 83% 83% 85%
Concentrate yield % 3.9% 3.7% 3.8% 3.7%
Concentrate produced t '000 40.7 34.7 76.2 70.4
Average grade g/t 28.7 29.0 28.5 29.6
Gold content oz. '000 37.5 32.4 69.7 67.1
POX Plant (Malomir concentrate)
----------------------------------------------- -------- -------- -------- --------
Concentrate treated t '000 43.2 38.0 76.1 76.4
Average grade g/t 28.5 29.8 28.5 29.9
Gold in concentrate oz. '000 39.6 36.5 69.7 73.5
Recovery % 93% 92% 93% 92%
Gold recovered oz. '000 36.9 33.4 64.8 67.3
Total gold production (doré) oz. '000 34.1 46.4 70.1 81.6
----------------------------------- ---------- -------- -------- -------- --------
Note: numbers may not add up due to fluctuation of gold in
circuit and / or rounding
Malomir predominantly treated refractory ore in H1 2021,
processing a total of 2,004kt of ore at an average grade of
1.30g/t. A total of 64.8koz of gold was recovered from processing
76.1kt of Malomir concentrate at the POX Hub during the period with
recovery rates of 93%, in-line with expectations and project design
rates.
Mining of non-refractory ore in H1 2021 was largely from
underground operations with a total of 128kt of non-refractory ore
treated at an average grade of 2.21g/t with 7.0koz gold recovered
at the RIP plant. Average grades from the underground mine improved
by 16% as compared to H1 2020.
Albyn
The Albyn processing facility is currently being used to treat
ore from the nearby Elginskoye satellite deposit, which replaced
the depleted 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 31/12/2020, the Albyn deposits had JORC Measured,
Indicated and Inferred Mineral Resources of 4.2 1 Moz Au which
include 2. 18 Moz of JORC Proved and Probable Ore Reserves.
ALBYN Units Q2 2021 Q2 2020 H1 2021 H1 2020
----------------------------------- ---------- -------- -------- -------- --------
Mining operations
----------------------------------- ---------- -------- -------- -------- --------
Total material moved m3 '000 3,551 3,450 6,749 6,803
Non-refractory ore mined t '000 2,231 552 4,307 1,845
----------------------------------- ---------- -------- -------- -------- --------
Average grade g/t 0.86 0.66 0.89 0.94
Gold content oz. '000 62.0 11.7 123.0 55.7
Refractory ore mined t '000 878 - 2,141 -
----------------------------------- ---------- -------- -------- -------- --------
Average grade g/t 1.10 - 1.05 -
Gold content oz. '000 31.0 - 72.1 -
Processing operations (RIP plant)
----------------------------------------------- -------- -------- -------- --------
Ore milled t '000 865 1,166 1,657 2,318
Average grade g/t 0.89 0.85 0.93 1.00
Gold content oz. '000 24.9 32.0 49.3 74.9
Recovery % 86% 94% 87% 94%
Gold recovered oz. '000 21.4 30.0 43.0 70.3
Total gold production (doré) oz. '000 19.9 31.3 42.3 71.8
----------------------------------- ---------- -------- -------- -------- --------
Note: numbers may not add up due to fluctuation of gold in
circuit and / or rounding. Data shown on a consolidated basis
As expected, the Albyn plant saw reduced output in H1 2021 due
to the switch to processing ore from the nearby Elginskoye deposit,
which is harder to mill and for which recoveries are lower. A total
of 1,657kt of ore grading 0.93g/t was processed at the Albyn plant
during the period, producing 42.3koz 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 in progress at Elginskoye 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)
Petropavlovsk processes 3rd-party concentrate as a means to
optimise unused POX Hub capacity, which allows the Group to
demonstrate the production potential of the POX Hub and improve
Group cash flow.
3RD PARTY CONCENTRATES Units Q2 2021 Q2 2020 H1 2021 H1 2020
----------------------------------- ---------- -------- -------- -------- --------
POX plant
----------------------------------- ---------- -------- -------- -------- --------
Concentrate treated t '000 19.5 19.8 38.4 54.8
Average grade g/t 31.2 38.2 30.7 60.0
Gold in concentrate oz. '000 19.6 24.3 37.8 105.7
Recovery % 95% 94% 94% 94%
Gold recovered oz. '000 18.5 23.0 35.6 99.5
Total gold production (doré) oz. '000 23.5 22.7 36.7 106.9
----------------------------------- ---------- -------- -------- -------- --------
Note: numbers may not add up due to fluctuation of gold in
circuit and / or rounding
In H1 2021, the POX Hub treated 38.4kt of 3rd-party concentrate
at an average grade of 30.7g/t to recover 35.6koz of gold. As per
the previously announced 2021 production guidance, output was down
year-on-year due to lower availability of 3rd-party concentrate for
processing and substantially lower grades in the concentrate
supplied.
About Petropavlovsk
Petropavlovsk PLC (LSE: POG. MOEX: POGR) is a major integrated
Russian gold producer with JORC Resources of 19.50Moz Au which
include Reserves of 7.16Moz 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 RTS Index and MOEX
Index.
The Company's key operating mines (Pioneer, Malomir and Albyn)
and its Pokrovskiy Pressure Oxidation (POX) Hub, are located in the
Amur Region in the Russian Far East. Petropavlovsk has produced a
total of c.8.5Moz of gold since operations began in 1994 and has a
strong track record of mine development, expansion, and asset
optimisation.
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
John Mann / Patrick Pittaway / Max Zaltsman TeamIR@petropavlovskplc.com
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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