TIDMPOG
RNS Number : 3605D
Petropavlovsk PLC
26 April 2017
26 April 2017
Petropavlovsk PLC
Annual Results for the Year Ended 31 December 2016
Petropavlovsk PLC ("Petropavlovsk" or the "Company" or, together
with its subsidiaries, the "Group") today issued its audited annual
results for the year ended 31 December 2016.
Peter Hambro, Chairman, comments: "2016 has been a
transformative year for Petropavlovsk as we returned to
profitability, refinanced our debt with our Russian lenders and
proceeded with several major production initiatives, including our
POX Hub and underground mining at Pioneer and Malomir. Looking
ahead the Group is well positioned to execute on its long term
corporate strategy and to create value through organic growth and
delivering sustainable cash flow."
Financial Highlights
-- Underlying EBITDA of US$200.1m, a 16% improvement on 2015
primarily due to contribution from mines as a result of higher
realised gold price achieved and improvement in TCC.
-- Group total cash costs (TCC) of US$660/oz, outperformed
guidance and was a 12% improvement on 2015, due to cost
optimisation measures and positive effect of Rouble
depreciation.
-- Group all in sustaining cash costs (AISC) were in line with
guidance at US$807/oz, an 8% improvement on 2015.
-- Average realised gold price of US$1,222/oz (including
US$(21)/oz effect from hedging), an increase of 4% on 2015. Gold
sales of c.400,000oz, 17% lower than 2015.
-- The Group had forward contracts to sell 50Koz of gold at an
average price of US$1,303/oz and 547Koz of gold at an average price
of US$1,253/oz as at 31 December 2016 and 26 April 2017,
respectively.
-- Net profit of US$31.7m (EPS: US$0.01), compared to a net loss
of US$297.5 million for 2015, which reflects improvement in
underlying EBITDA, substantially lower losses from IRC Limited
(IRC) and deferred tax credit (mostly due to Rouble
devaluation).
-- Capital expenditure of US$29.4m, a reduction of 10% from
2015.
-- Successful refinancing of c.US$430 million of the Group's
bank debt, including a revised maturity profile until September
2022 subject to certain conditions being satisfied. US$100m
commodity linked loan facility remains on schedule for completion
of final documentation, effective May 2017.
-- Reduction in the year end Net Debt to US$598.6m vs US$610m as
at 31 December 2015. Bringing a 15% improvement in the Net Debt/
EBITDA ratio to 3:1 in comparison with the full year 2015.
Operational Highlights
-- Gold production of 416,300oz in line with revised 2016
guidance, a 17% reduction from 2015. This was predominantly due to
a strategic focus on production of profitable ounces and the impact
of extreme weather conditions on the mining schedule.
-- Commenced development of our maiden underground mine at
Pioneer's high grade NE Bakhmut in Q2 2016. First production
scheduled for Q2 2017.
-- Total of 20.2Moz Mineral Resource, including 8Moz Ore
Reserves. Ore Reserves primarily impacted by mining depletion and
the strategic disposal of non-core assets, while partially offset
by additions of 1Moz reserves from Albyn's Elginskoye deposit and
370koz maiden underground reserve.
Year ended Year ended
units 31 Dec 2016 31 Dec 2015
--------------------------------- ---------- ------------ ------------
Total gold produced (koz) koz 416.3 504.1
Gold sold (oz) oz 399.9 481.9
TCC (US$/oz) US$/oz 660 749
AISC (US$/oz) US$/oz 807 874
Average realised gold
price (US$/oz) US$/oz 1,222 1,178
Revenue US$m 540.7 599.9
Underlying EBITDA(1) US$m 200.1 172.8
Profit/ (loss) US$m 31.7 (297.5)
Basic earnings/ (loss) per share US$/share 0.01 (0.09)
Capital expenditure US$m 29.4 32.6
Net debt(2) US$m (598.6) (610.0)
Notes
(1) Note 34 to the Consolidated Financial Statements
(2) Note 29 to the Consolidated Financial Statements
Development Highlights
-- Pressure Oxidation Hub (POX Hub)
o US$430m debt refinancing allows 100% self-funding of the POX
Hub from internal cash flow generated by the Group's current
non-refractory operations assuming an average US$1250/oz gold price
throughout the construction and ramp up phase.
o Updated project economics (assuming US$1,200/oz gold and
USD:RUR 60)
-- NPV: US$603m (post tax 10%)
-- IRR: 65%
o In 2016, key contracts were executed, namely industry leader,
Outotec, were reinitiated as the project managers. All orders for
long lead items were placed.
o POX Hub 65% construction complete, as at 31 December 2016.
Full scale construction was resumed in January 2017. Staged
commissioning from Q4 2108.
o Malomir Flotation Plant (Stage 1: 3.6Mtpa) 90% construction
complete. Scheduled to complete and commission from Q4 2017.
Production, trucking and stockpiling throughout 2018 ensuring a
steady autoclave staged ramp up.
-- Pioneer Underground
o Increased underground Mineral Resource and defined first
underground Ore Reserve
-- Total 460koz Resource, an increase of 194% from 2015.
-- Including 165koz Reserve @ 4.46 g/t.
o NE Bakhmut Underground
-- 100% of the defined 165koz Reserve is within NE Bakhmut,
sustaining a viable 6 year life of mine.
-- 2016 drill programme results in a 300% uplift in Mineral
Resource to 299Koz
-- Underground potential remains open in multiple directions,
offering further potential for high grade mine life expansion.
-- Appointed underground contractor for immediate mobilisation
of personnel and equipment.
-- Development and ventilation portals completed in H2 2016,
with development decline progressing well, totalling 675m at 31
December 2016. First production schedule for Q2 2017.
-- Malomir (Quartzitovoye) Underground
o Increased underground Mineral Resource and defined first
underground Ore Reserve
-- Total 283koz @ 6.58 g/t resource including 207koz @ 5.85 g/t
reserve, sustaining a viable 6 year life of mine.
-- Orebody remains open in multiple directions, offering further
potential for high grade mine life expansion.
o Appointed underground contractor for mobilisation of personnel
and equipment in Q1 2017. First production scheduled for H2
2017.
2017 Targets
-- 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 at Pioneer and
Malomir in Q2 and H2, respectively, and ramp up gradually.
-- Total cash cost (TCC/oz) guidance of US$600-700/oz and all in
sustaining cash costs (AISC/oz) of US$800-900/oz
-- Commence and ramp up underground production at Pioneer's high
grade NE Bakhmut, with ongoing development. Further enhance
understanding of high grade underground zones with reserve and
resource infill and exploration underground drill programme.
-- Commence and ramp up underground production at Malomir's high
grade Quartzitovoye, with ongoing development.
-- Complete construction of Malomir flotation plant (Stage 1) in
preparation for refractory concentrate production and stockpiling
at the POX Hub throughout 2018, ahead of commissioning in Q4
2018.
-- Capital expenditure for 2017 is expected to be
c.US$100m-US$110m including c.US$15-20mln exploration capex and
US$85-90mln development and maintenance capex. Development capex is
predominantly comprised of POX Hub and Malomir flotation plant
expenditures.
Corporate Strategy
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, while
creating value for equity investors by growing sustainable cash
flows via expansion due to successful exploration and development
of the POX Hub and underground operations at Pioneer and Malomir.
It is based on the quality of our assets, our focus on operational
and development excellence, and our experience, demonstrated by
management's track record of driving meaningful organic growth.
IRC Limited (POG 31.10% equity shareholder)
Petropavlovsk is a shareholder (31.1%) of IRC 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).
IRC Annual Results for the year ended 31 December 2016:
-- Financials
o Net loss reduced by 96% to US$18.2 million (31 December 2015:
US$509.0 million)
o Underlying results excluding impairment charges reduced by 37%
to US$18.2 million (31 December 2015: US$28.9 million)
o Overall cost reduced by 67% to US$35.2 million (31 December
2015: US$106.7 million)
-- Corporate
o Successfully completed equity fundraising of US$25 million
with a core investor
o Amicable settlement with CNEEC, received cash compensation of
US$4.5 million and outstanding construction payment liability
reduced by US$3.9 million
-- Operations
o K&S began shipments to customers in China - products well
received with good market demand
o Care and maintenance process satisfactory in Kuranakh,
assessing feasibility of re-opening and other options
IRC Q1 for the three months ended 31 March 2017:
-- Produced 316,770 tonnes of iron ore concentrates (Up 120%
compared to Q4 2016)
-- Sold 321,886 tonnes of iron ore concentrates (Up 168%
compared to Q4 2016)
-- Cash flow positive operations from K&S for the first full
quarter
-- Operated at peak of c. 75% plant capacity in March, after
repair of ball mill, with steady c.50% capacity achieved
-- Full processing operations now estimated to reach full
capacity in 2H 2017.
Q1 2017 Production Results and Conference Call
Petropavlovsk will be publishing their Q1 2017 Production
Results tomorrow, Thursday 27 April 2017, at 0700 BST.
There will be a conference call hosted after the results at
09.00 BST. Please find details below:
Call Details
UK toll free number 0800 368 0649
UK Local number 020 3059 8125
International participant + 44 20 3059 8125
To join the call, please use:
Participant Password: Petropavlovsk
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 6.3Moz 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
Alexandra Carse
Grace Hanratty
+44 (0) 20 7201 8900
TeamIR@petropavlovsk.net
Maitland
Neil Bennett
James Isola
+44 (0) 20 7379 5151
Petropavlovsk-Maitland@maitland.co.uk
Chairman's Statement
At the end of another busy year, it is a pleasure to be able to
say that Petropavlovsk has achieved in 2016 many of the goals that
I set out in my Chairman's Statement for 2015, and a pleasure to
introduce you to our 2016 Annual Report and Accounts. It was,
indeed, a transformative year, not least because the Group returned
to profitability. Our net profit increased by 111%, much of which
was accomplished thanks to a 4th consecutive year of cost reduction
in addition to reduction in impairment losses in IRC, and, with IRC
becoming an associate to the Group, limiting exposure to their
results to our ownership. We must thank the efforts of all
concerned to maintain a disciplined focus on cost control, in turn
enabling us to maximise the margin on which our success depends,
though cost control by itself will not deliver profit. I am pleased
to note that production from our established open pit operations
was in line with our revised guidance, delivering the sustainable
cash flow that my 2015 statement hoped for.
Following the 2015 capital restructure, our team began the
refinancing process with our Russian lenders. In this task, we
needed to get the banks to extend the maturity profile of their
loans to us so that the new maturity profile would match our
production. I am pleased to say that this was achieved successfully
and that the banks, understanding the importance of our plans to
restart the POX Hub project for the treatment of refractory ore,
agreed to encompass the capital expenditure that this would involve
in nearby years. This allows us to unlock 100% of the value
otherwise encapsulated in the c.4 million ounces of gold reserves
in the quartz/sulphur matrix that is refractory ore. We continue to
expect that the cost per ounce to produce this will not be
significantly different from those we have seen in our
non-refractory operations.
The POX Hub remains our core organic growth development project
and key value driver for the business. The bank refinancing, while
increasing near term capex for the Company, means that we no longer
needed to give away part of the value in the POX Hub. Construction
is 65% complete and scheduled for commissioning in Q4 2018. In
2016, we also took our first steps underground, a natural
progression for us as a hitherto open pit operation with a vast
refractory reserve and resource base. Both Pioneer and Malomir
licenses host sources of high grade ore and the feasibility work
supported operations.
Our corporate strategy is to create value for equity investors
by growing our sustainable cash flows and to do this by continuing
our efficient and successful exploration and development
programmes. It remains our intention to deliver a meaningful share
of the cash flow to shareholders as soon as the debt burden is
substantially reduced. The advent of our underground operations in
the nearest future and that of our production from the refractory
ores is scheduled to do this. The team needs us to maximise the
benefits inherent in our high quality assets - both material and
personal, using the excellence and experience that is demonstrated
by management's track record.
Reserves and Resources, tonnes and grade are the watchwords of
the gold mining industry and we have updated you accordingly. 2016
exploration has brought considerable infill success, including a
340% increase in Reserves at the Elginskoye/Albyn complex,
approximately a 200% increase in underground Resource at Pioneer,
as well as a brand new greenfield discovery between Pokrovskiy and
Pioneer.
2016 was also a significant year for IRC, the iron ore producer
on the Chinese border in which our company holds a 31% stake, and
whose borrowings from ICBC we guarantee. Following a challenging
period, I am delighted to say that, as of its first quarter's
results, it is now a cash generative operation and our shareholding
in IRC is, in my view, is of significant potential value to the
Company. I am very grateful to our team, the financiers at ICBC and
Sinosure, and the contractor CNEEC, for the way in which the issues
were finally resolved.
With the refinancing and rescheduling of our bank debt behind us
and the excellent prospects for underground mining, the pressure
oxidation of refractory ore and the new discoveries of gold ahead
of us, I feel confident about our long term plans; particularly so
at today's higher gold prices, even though we have protected
ourselves by some 600,000 ounces of price hedging. Indeed so
confident am I that the Board and I have felt it appropriate now to
address the succession planning issues that our Board Review has
highlighted.
Petropavlovsk is unique in being a British company with a London
Board and with all its assets located in the Russian Federation and
managed and operated by local people. Having managed the London end
of this business for 23 years, with Pavel Maslovskiy running the
Russian end, in good times and in bad, I have a clear understanding
of what is involved and realise that passing on the baton will not
be an easy task. As is usual in such matters, the Board has decided
that the task of advancing succession matters should be undertaken
by the Nomination Committee. This is in progress: Alex Green has
joined Andrew Vickerman and Robert Jenkins on this Committee and I
will retire from the committee and as its Chairman.
I should like to thank Robert Jenkins for taking over the role
of Senior Independent Director from Sir Roderic Lyne and also to
thank my other colleagues on the Board for the time and effort they
have devoted to the company during the year. In addition, and on
behalf of my colleagues, I want to thank the executives, the
managers and all the teams that have contributed to the success of
2016.
Peter Hambro,
Chairman
CEO Statement
2016 was a transformational year for Petropavlovsk shaped by the
refinancing of our bank debt, enabling the construction ramp up of
our landmark POX Hub. The business returned to profitability as
supported by a fourth consecutive year of cost reductions, and the
operational progression into underground mining as we access the
high grade reserve and resource potential that extends below our
existing pits, further sustaining our long life of mine.
Solid Foundation
Our established, bulk tonnage, open pit non-refractory
operations enabled us to deliver total annual production of 416koz,
in line with revised guidance. Unexpected weather conditions
experienced throughout the year intermittently impaired mining and
in particular access to scheduled high grade ore at Andreevskaya.
These ounces were deferred to the 2017 mine plan and require
increased blending of lower grade stockpile material. This resulted
in a 20% reduction in average processed grade from 2015. Cost
control and operational efficiencies remain critical to our
strategy. Without these we would not have been able to deliver
another year of reduced costs:
-- TCC of US$660/oz, a 12% reduction on 2015 and below our US$700/oz 2016 guidance
-- AISC of US$807/oz, an 8% reduction on 2015 and in line with 2016 guidance.
This marked the fourth consecutive annual reduction in TCC and
AISC representing a 35% reduction since 2013, due to cost
optimisation measures and positive effect of Rouble
depreciation.
In 2016, the Resin-in-Pulp (RIP) plants operated at full
capacity with Group throughput of 16.2Mt, a 2% increase on 2015.
The responsible optimisation of productivity and operational
efficiency remains central to our way of working. As such,
following extensive research and testing throughout the year, we
implemented a dedicated resin treatment facility at Pokrovskiy
designed to improve the processing efficiency of the resin sorption
at the Group "RIP" plants. We expect this to significantly reduce
the impact of gold in circuit, thereby increasing productivity.
In 2016, our solid and stable asset base and operational
excellence have allowed us to generate positive operational cash
flows and return to profitability. We achieved net profit of
US$31.7m, resulted to a large extent from higher profitability of
our operations and the reduced impact from IRC. Underlying EBITDA
was US$200.1 million, an improvement of 16% on 2015 due to
maximised margins.
Underpinning our business model is our exploration success in
unlocking the abundant gold potential within our 3,600km2 license
holding. Our current 20.2Moz Resource, supporting greater than a 15
year life of mine, demonstrates our value in investing our long
term sustainability.
Targeted exploration on replenishing depleted ounces, resource
to reserve conversion and exploring brownfield near term
non-refractory potential was very successful in 2016. We converted
1.6Moz of Resources to Reserves of which the majority were at our
100% non-refractory Albyn mine, Elginskoye deposit. Instrumental to
our strategic growth objectives, we defined our first underground
Reserve of 370koz, underpinning an initial 6 year life of mine at
both Pioneer and Malomir.
Building for the Future
It is important to remember that Petropavlovsk's foundations lie
at Pokrovskiy, acquired in the early stages of exploration in 1994
and which subsequently became the backbone of the Group. As the
mine nears the end of its reserve life, we made the strategic
decision to develop it into the base for the POX Hub. Its excellent
operational infrastructure, skilled labour, proximity to regional
infrastructure and access to naturally occurring limestone drove
our decision.
The refinancing of our bank debt was paramount to the
achievements of 2016 and has opened up our future opportunities.
With the agreement that Petropavlovsk retained 100% of the value of
our core growth project, the POX Hub, my colleagues and our
partners, Sberbank and VTB, successfully extended the debt maturity
profile, in line with our production profile, thereby enabling us
to fund development out of free cash flows (assuming a prevailing
gold price of $1,250/oz).
Unlocking 4Moz refractory Reserves embedded within our existing
asset base, equivalent to approximately 50% of our current Ore
Reserves, represents meaningful value to Petropavlovsk. Following
the refinancing, together with independent consultants, we updated
our project economics, giving an IRR of 65% and NPV10 of US$603
million, adding a minimum of 200koz per annum to our production
profile at a steady rate.
At Malomir, currently producing 57koz in 2016 completing the POX
Hub will grow its production profile to make it the largest
contributing Group asset by 2019 with a falling cost trajectory
in-line with current group operating costs of c.US$700/oz.
Development progresses at full scale and is currently under
budget. In 2016, Outotec contracts were reinitiated and orders for
long lead items placed. Flotation concentrate production is
scheduled to commence at Malomir from H1 2018 for trucking and
stockpiling ahead of the POX Hub commissioning from Q4 2018.
Expanding our Expertise
Prior to 2016, Petropavlovsk was an exclusively open pit
operation. Following successful feasibility studies development of
our first underground mine at Pioneer began in 2016, with
development at Malomir scheduled to commence early 2017. First
production is scheduled for H2 2017. We have appointed contractors
and development is underway, with 675m of decline development
completed at Pioneer by year end.
By and large, Petropavlovsk has utilised an owner-operator
business model. However, given underground is a new mining method,
with start-up execution risk, we have utilised well respected local
contractors to mitigate this risk during this development growth
phase. Notwithstanding, the long history of underground mining in
the Amur region, access to highly skilled labour and existing
expertise within the Group, we intend to bring the underground
operational function in house over time.
Our extensive regional experience in gold mining not only within
Russia but specifically the Amur region, gives us a competitive
edge in a complex marketplace. We have established our presence as
a leading employer and contributor to the local economy, nurturing
the talent of its people, who in turn have built Petropavlovsk into
the business it is today. Senior management, a number of whom have
worked for Petropavlovsk for more than a decade, have extensive
technical expertise. Together within the larger in house
exploration, construction, research, engineering capabilities we
have established, our strategic vision of being a fully integrated
operating gold miner.
Positioning for Growth
With the development of our POX Hub and underground firmly
underway, as we emerge from a period of introspection and
optimistically look ahead, 2017 is set to be another pivotal
building block towards achieving our vision of being a mid-tier
producer of refractory and non-refractory ore from 2019.
I would like to thank the Board and our stakeholders for their
guidance in 2016. Further, I would like to thank the management
team for their commitment, strength of character and ability to
effectively navigate the challenges of the last few years enabling
us to reach this juncture.
We look forward to sharing our key milestones throughout this
next phase of growth, while maintaining our devoted commitment to
maximising sustainable margins, in 2017.
Pavel Maslovskiy,
Chief Executive Officer
Operational Review
Pioneer Mine
Pioneer is one of the Group's most prospective assets, providing
near term growth from its underground non-refractory exploration
and development potential, and its regional exploration potential
(Pioneer flanks). Long term growth includes bringing forward the
flotation plant (6.0Mtpa) development, currently scheduled for
2021, and the untapped greenfield exploration potential within its
1,375km2 total license area.
2016 Progress
-- Maintained total cash costs below US$650/oz.
-- Commenced development of our maiden underground mine at NE
Bakhmut in Q3.
-- First ore scheduled to be mined from underground in Q2
2017.
-- Significantly increased existing underground Mineral Resource
and defined first Ore Reserve at NE Bakhmut
-- Enhanced understanding of high grade underground zones and
continuity of mineralisation at depth
2017 Targets
-- Commence mining from underground, ramping up to 200ktpa
throughout the year
-- Progress underground development into the deeper NE Bakhmut 3
higher grade main area
-- Ongoing underground reserve and resource drilling
-- Maintain open pit mining and operating excellence.
-- Reduce Lost Time Injury Frequency Rate (LTIFR)
Pioneer mining operations
Year ended Year ended
31-Dec-16 31-Dec-15
-------------------------------------------- ------ ---------- ----------
m(3)
Total material moved '000 17,360 23,980
Ore mined t '000 3,266 6,016
Average grade g/t 0.95 1.28
Gold content koz 99.4 248.4
Processing operations (Resin-in-pulp plant)
-------------------------------------------- ------ ---------- ----------
Total milled t '000 6,700 6,582
Average grade g/t 0.74 1.25
Gold content koz 159.8 264.5
Recovery rate % 85.5% 85.0%
Gold recovered koz 136.6 224.7
Heap leach operations
-------------------------------------------- ------ ---------- ----------
Ore stacked t '000 701 800
Average grade g/t 0.53 0.56
Gold content koz 12.0 14.5
Recovery rate % 44.1 % 46.2%
Gold recovered koz 5.3 6.7
Total gold recovered koz 141.9 231.4
Operational Performance
Pioneer open pits produced 141.9koz (2015: 231.4koz),
representing 34% of the Group consolidated annual gold production.
Ore was mined from Alexandra, Bakhmut, Vostochnaya and taken from
stockpiles. Following extensive waste stripping throughout the
year, high grade ore was expected from Andreevskaya East pit in Q4
2016. However, unusual weather conditions resulted in disruptions
and ultimately deferred access to the high grade zone (into 2017)
resulting in average grade mined of 0.95g/t, 35% lower than
2015.
Underground development has commenced, with stope mining
scheduled to start in Q2 2017. Including the ventilation decline, a
total of 675m of decline development was completed in 2016.
The RIP plant processed 6.7Mtpa of ore, a 2% increase on 2015.
Metallurgical recovery averaged 85.5%, inline with 2015.
The heap leach operation produced 5.3koz.
The plant performed as expected, delivering on all technological
performance indicators.
Total cash costs were US$631/oz, in line with 2015. All-in
sustaining costs were US$789/oz, a 5% increase from 2015.
2017 Outlook
The 2017 Pioneer production profile is expected to be in line
with 2016, underpinned by open pit operations at Alexandra,
Yuzhnaya, Promezhutochnaya and NE Bakhmut 4 and 5, in addition to
deferred high grade material from Andreevskaya East, as a result of
the mining disruptions late in 2016.
Operations are due to begin in 2017 at the maiden underground
mine at NE Bakhmut, which is set to provide production upside. High
grade underground mining is scheduled to commence in H2 2017. In
addition, the underground exploration drilling programme is to
begin at the deeper extensions below the defined Resource, where
deep surface drilling has intersected high grade
mineralisation.
Albyn Mine
Albyn is currently the Company's largest producing mine with a
100% non-refractory defined resource base. The highly prospective
1,100km2 license area is largely under explored, presenting
potential near term upside from high grade, non-refractory
resources to be discovered. The main orebodies at Albyn are open in
a down dip direction beyond of the feasible depth of open pit
mining, offering longer term growth potential to establish mineral
resource and ore reserves for underground mining.
2016 Progress
-- Reduced total cash costs and all-in sustaining costs by
greater than 20%
-- Significantly increased Ore Reserves at Elginskoye,
demonstrating sustainable production and extended life of mine
potential.
-- Encouraging initial results showing 3km strike extension at
Yasnoye.
-- Completed infill drill programme on the southern end of
Unglichikan deposit in preparation for mining to commence in
2017.
2017 Targets
-- Commence mining at Unglichikan to provide additional high
grade ore for Albyn plant.
-- Drill deeper targets below Albyn pit to model and assess
underground potential.
-- Exploration programme at Unglichikan and Afanasevskoye to
further expand Albyn's non-refractory reserve and resource base and
subsequent life of mine.
-- Sustain open pit mining and operating excellence.
Albyn mining operations
Year ended Year ended
31-Dec-16 31-Dec-15
-------------------------------------------- ------ ---------- ----------
m(3)
Total material moved '000 31,763 36,722
Ore mined t '000 4,970 4,906
Average grade g/t 1.25 1.15
Gold content koz 199.5 181.5
Processing operations (Resin-in-pulp plant)
-------------------------------------------- ------ ---------- ----------
Total milled t '000 4,675 4,600
Average grade g/t 1.28 0.89
Gold content koz 192.5 168.8
Recovery rate % 93.5% 93.3%
Gold recovered koz 180.0 157.6
Operational Performance
Albyn produced 180.0koz, representing 43% of the Group's
consolidated annual gold production. This was a 14% increase on
2015. Ore was mined throughout the year from Eastern and Northern
sections of the pit and processed from stockpiles. The average
annual mined grade was 1.25 g/t, a 9% increase on 2015, due to
reduction in dilution and mining from the thicker main zone.
The RIP plant processed 4.68Mtpa of ore, a 2% increase on 2015.
Metallurgical recovery averaged 93.5%, a marginal improvement on
2015.
The plant performed as expected, delivering on all technological
performance indicators.
Now the Group's largest producing mine, Albyn has successfully
been a key target for cost reduction. Total cash costs of
US$581/oz, a 22% improvement on 2015 and all-in sustaining costs of
US$719/oz, a 21% improvement on 2015. This was primarily due to
higher processed grades and higher operational recoveries.
2017 Outlook
The 2017 Albyn production profile continues to be underpinned by
open pit operations at Albyn, with a moderate contribution from the
Unglichikan deposit, as a new pit.
Based on recent successes extending mine life at Albyn with
Elginskoye, the key focus for 2017 is on further exploration at
Unglichikan and Afanasevskoye, to expand the non-refractory reserve
and resource base and subsequent life of mine.
Malomir
Malomir is the Group's largest asset by Reserve and Resource
with approximately 90% of the reserve base categorised as
refractory ore. Completing the POX Hub, which is scheduled for the
end of 2018, will unlock material value embedded with the existing
defined asset base and extend the expected life of mine to greater
than 16 years, with untapped resource potential within the 964km2
license area.
2016 Progress
-- Reduced total cash cost by 25%
-- Completed underground feasibility study at Quartzitovoye and
appointed underground contractor
-- Increased existing underground Mineral Resource and defined
first Ore Reserve at Quartzitovoye.
-- Enhanced understanding of high grade underground zones and
continuity of mineralisation at depth.
2017 Targets
-- Complete and commission the 3.6Mtpa (Stage 1) flotation
plant, with production and stockpiling of refractory concentrate
from early 2018 ahead of the POX Hub commissioning.
-- Commenced underground development at Quartzitovoye. Mining
scheduled to start from H2 2017.
-- Prepare underground drill chambers ahead of exploration drill
programme to delineate the extent and continuity of the high grade
mineralisation
-- Sustain open pit mining and operating excellence.
-- Reduce LTIFR
Malomir mining operations
Year ended Year ended
31-Dec-16 31-Dec-15
-------------------------------------------- --------- ---------- ----------
Total material moved m(3) '000 8,115 8,904
Ore mined t '000 1,535 2,105
Average grade g/t 1.11 1.01
Gold content koz 54.9 68.5
Processing operations (Resin-in-pulp plant)
-------------------------------------------- --------- ---------- ----------
Total milled t '000 3,000 2,937
Average grade g/t 0.86 0.93
Gold content koz 82.5 88
Recovery rate % 68.9% 67.2%
Gold recovered koz 56.8 59.1
Operational Performance
Malomir produced 56.8koz (2015: 59.1koz), representing 14% of
the Group consolidated annual gold production. This was 4% lower
than 2015. Ore was mined throughout the year from Quartzitovoye 2,
Magnetitovoye, and stockpiles. The average annual mined grade was
1.11g/t, a 10% improvement on 2015. This takes into account waste
stripping at Quartzitovoye 1 throughout most of the year, in order
to prepare access to ore for 2017.
The RIP plant processed 3.0Mtpa of ore, a 2% increase on 2015.
Metallurgical recovery averaged 68.9%, a 3% improvement on 2015.
The plant performed as expected in 2016, delivering on all
technological performance indicators.
Total cash costs of US$824/oz, a 25% improvement on 2015. All-in
sustaining costs of US$1004/oz, a 15% improvement on 2015.
2017 Outlook
The 2017 Malomir production profile is expected to be in line
with 2016, with sustainable production upside from underground
mining operations commencing in H2 2017.
In Q4 2017, Malomir will begin to transition into the Group's
flagship asset in line with the scheduled completion and
commissioning of Stage 1 3.6Mtpa flotation plant to process
refractory ore. From 2018, Malomir concentrate production and
stockpiling will be continue to ensure the POX Hub commissioning,
scheduled for Q4 2018, runs smoothly.
Pokrovskiy
Pokrovskiy was the license and subsequently the mine which the
Group was built. Today, as it nears the end of its mine life having
produced c.2.01Moz since 1999, the mine will transition into the
POX Hub, currently under full scale construction. The POX Hub is an
integral part of the Group's future plans and Pokrovskiy provides
the ideal strategic location, not only due to the excellent onsite
and regional infrastructure, but also its close proximity to
Pioneer's limestone deposit, lime being a key ingredient for the
pressure oxidation process.
2016 Progress
-- Maintained total cash costs
-- In line with our development strategy to transition
Pokrovskiy mine into the POX Hub, there was no material exploration
in 2016.
-- Completed and implemented resin cleansing facility
2017 Targets
-- Mining at Pokrovka 1 pit
-- Begin transition to the POX Hub
o Adapt infrastructure, where appropriate
o Staged conversion of the RIP plant.
Pokrovskiy mining operations
Year ended Year ended
31-Dec-16 31-Dec-15
-------------------------------------------- --------- ---------- ----------
Total material moved m(3) '000 4,709 5,169
Ore mined t '000 1,027 933
Average grade g/t 0.79 1.41
Gold content koz 26.0 42.2
Processing operations (Resin-in-pulp plant)
-------------------------------------------- --------- ---------- ----------
Total milled t '000 1,791 1,791
Average grade g/t 0.65 1.04
Gold content koz 37.1 59.7
Recovery rate % 90.1% 84.3%
Gold recovered koz 33.5 50.4
Heap leach operations
-------------------------------------------- --------- ---------- ----------
Ore stacked t '000 440 541
Average grade g/t 0.45 0.53
Gold content koz 6.3 9.2
Recovery rate % 64.8% 60.6%
Gold recovered koz 4.1 5.6
Total gold recovered koz 37.6 56
Operational Performance
Pokrovskiy produced 37.6koz (56koz) representing 9% of the
Group's consolidated annual gold production. Ore was mined from
Pokrovka 1, Pokrovka 2, satellite deposit Zheltunak and from
stockpiles.
Despite the unusual weather conditions causing some delays to
the heap leach operations, successful scheduling adjustments meant
target stacking and production were achieved as planned. The heap
leach operation produced 4.1koz.
The RIP plant processed 1.79Mtpa of ore, unchanged from 2015.
Metallurgical recovery at the plant averaged 90.1%, a 7%
improvement on 2015, despite 38% decrease in head grade from 1.04
to 0.65 g/t.
The plant performed as expected, delivering on all technological
performance indicators.
Total cash costs of US$878/oz, in line with 2015. All-in
sustaining costs of US$988/oz, an 8% increase on 2015.
Outlook
As Pokrovskiy is coming to the end of its reserves, RIP
production is scheduled to stop at the end of 2017. The heap leach
will remain operational throughout the 2018, processing remaining
stockpiles. The Group is actively developing the POX Hub, which is
scheduled to commence producing refractory concentrate from Q4
2018. Pokrovskiy will continue its life as the POX Hub,
Petropavlovsk's strategic processing centre for refractory
concentrates.
Following the successful debt restructuring in 2016, the Group
resumed development of the Pressure Oxidation Facility (POX Hub) at
Pokrovskiy. Utilising and adapting existing infrastructure
(including the 1.8Mtpa RIP plant) has a beneficial impact on
capital costs, with US$90million gross value of for buildings and
equipment being incorporated directly into the POX Hub
facility.
Financial Review
FINANCIAL HIGHLIGHTS
2016 2015
US$ million US$ million
--------------------------------------------- ------------ ------------
Continuing operations
Total attributable gold production ('000oz) 416.3 504.1
Gold sold ('000oz) 399.9 481.9
Group revenue 540.7 599.9
Average realised gold price (US$/oz) 1,222 1,178
Average LBMA gold price afternoon fixing
(US$/oz) 1,250 1,160
Total average cash costs (US$/oz) (a) 660 749
All-in sustaining costs (b) 807 874
Underlying EBITDA(c) 200.1 172.8
Profit/(loss) for the period 31.7 (297.5)
--------------------------------------------- ------------ ------------
From continuing operations 31.7 (190.5)
From discontinued operations - (107.0)
--------------------------------------------- ------------ ------------
Basic profit/(loss) per share US$0.01 (US$0.09)
--------------------------------------------- ------------ ------------
From continuing operations US$0.01 (US$0.07)
From discontinued operations - (US$0.02)
--------------------------------------------- ------------ ------------
Net cash from operating activities 37.0 103.4
--------------------------------------------- ------------ ------------
From continuing operations 37.0 111.0
From discontinued operations - (7.6)
--------------------------------------------- ------------ ------------
(a) Calculation of total cash costs ("TCC") is set out in the
section Hard-rock mines operations below.
(b) All-in sustaining costs ("AISC") and all-in costs ("AIC")
are calculated in accordance with guidelines for reporting all-in
sustaining costs and all-in costs published by the World Gold
Council. Calculation is set out in the section All-in sustaining
costs and all-in costs below.
(c) Reconciliation of profit/(loss) for the period and
underlying EBITDA is set out in note 34 to the consolidated
financial statements.
31 December 31 December
2016 2015
US$ million US$ million
--------------------------- ----------- -----------
Cash and cash equivalents 12.6 28.2 (d)
Loans (522.8) (552.8)
Convertible bonds (e) (88.4) (85.5)
--------------------------- ----------- -----------
Net Debt (598.6) (610.0)
--------------------------- ----------- -----------
(d) Including US$15.1 million received under investment
agreement with the Russian Ministry of Far East Development.
(e) US$100.0 million convertible bonds due on 18 March 2020 at amortised cost.
Note: Figures may not add up due to rounding
Revenue
2016 2015
US$ million US$ million
------------------------------ ----------- -----------
Revenue from hard-rock mines 490.0 568.7
Revenue from other operations 50.7 31.2
------------------------------- ----------- -----------
540.7 599.9
------------------------------ ----------- -----------
Physical volumes of gold production and sales
2016 2015
oz oz
-------------------------------- ------- -------
Gold sold from hard-rock mines 399,858 481,884
Movement in gold in circuit and
doré-bars 16,442 22,216
--------------------------------- ------- -------
Total attributable production 416,300 504,100
--------------------------------- ------- -------
Group revenue during the period was US$540.7 million, 10% lower
than the US$599.9 million achieved in 2015.
Revenue from hard-rock mines was US$490.0 million, 14% lower
than the US$568.7 million achieved in 2015. Gold remains the key
commodity produced and sold by the Group, comprising 90% of total
revenue generated in 2016. The physical volume of gold sold from
hard-rock mines decreased by 17% from 481,884 ounces in 2015 to
399,858 ounces in 2016. The average realised gold price increased
by 4% from US$1,178/oz in 2015 to US$1,222/oz in 2016. Average
realised gold price includes US$(21)/oz effect from hedge
arrangements (2015: US$20/oz).
Hard-rock mines sold 98,231 ounces of silver in 2016 at an
average price of US$16/oz, compared to 68,075 ounces in 2015 at an
average price of US$15/oz.
Revenue generated as a result of third-party work by the Group's
in-house service companies was US$50.7 million in 2016, a US$19.5
million increase compared to US$31.2 million in 2015. This revenue
is substantially attributable to sales generated by Group's
engineering and research institute, Irgiredmet, primarily through
engineering services and the procurement of materials, consumables
and equipment for third parties, which comprised US$44.8 million in
2016 compared to US$28.6 million in 2015.
Cash flow hedge arrangements
In order to increase certainty in respect of a significant
proportion of its cash flows, the Group has entered into a number
of gold forward contracts.
Forward contracts to sell an aggregate of 134,545 ounces of gold
matured during the year and resulted in US$(8.5) million net cash
settlement paid by the Group (2015: US$12.6 million contribution to
cash revenue from forward contracts to sell an aggregate of 178,449
ounces of gold).
The Group constantly monitors gold price and hedges some portion
of production as considered necessary. Forward contracts to sell an
aggregate of 50,006 ounces of gold at an average price of US$1,303
per ounce were outstanding as at 31 December 2016. In February -
March 2017, the Group entered into forward contracts to sell an
aggregate of 549,994 ounces of gold during the years 2017 - 2019 at
an average price of US$1,252/oz, thus, satisfying bank debt
refinancing conditions. Forward contracts to sell an aggregate of
546,968 ounces of gold at an average price of US$1,253 per ounce
are outstanding as at 26 April 2017.
Underlying EBITDA and analysis of operating costs
2016 2015
US$ million US$ million
------------------------------------------------- -------------- ------------
Profit/(loss) for the period from continuing
operations 31.7 (190.5)
Add/(less):
Interest expense 61.0 71.5
Investment income (0.6) (1.0)
Other finance gains (11.9) (9.1)
Other finance losses 1.5 -
Foreign exchange losses 5.2 12.0
Taxation (4.7) 48.9
Depreciation 105.3 129.1
Impairment of exploration and evaluation assets 9.2 37.4
Impairment of ore stockpiles 1.2 17.4
Share of results of associates ((a) () 2.4 57.0
Underlying EBITDA 200.1 172.8
------------------------------------------------- -------------- ------------
(a) Group's share of interest expense, investment income, other
finance gains and losses, foreign exchange losses, taxation,
depreciation and impairment recognised by an associate (IRC)
Underlying EBITDA as contributed by business segments is set out
below.
2016 2015
US$ million US$ million
----------------------------------------- -------------- ------------
Pioneer 79.2 118.6
Pokrovskiy 13.2 16.1
Malomir 22.0 5.7
Albyn 110.4 66.5
----------------------------------------- -------------- ------------
Total Hard-rock mines 224.7 206.9
Corporate and other (24.6) (34.1)
Underlying EBITDA 200.1 172.8
----------------------------------------- -------------- ------------
Hard-rock mines
This period, hard-rock mines generated underlying EBITDA of
US$224.7 million compared to US$206.9 million underlying EBITDA in
2015.
Total cash costs for hard-rock mines decreased from US$749/oz in
2015 to US$660/oz in 2016, primarily reflecting the effect of cost
optimisation measures undertaken by the Group in response to the
lower gold price environment as well as the positive effect of
Rouble depreciation. The increase in the average realised gold
price from US$1,178/oz in 2015 to US$1,222/oz in 2016 and the
improved total cash costs had US$53.2 million positive contribution
to underlying EBITDA in 2016. This effect was offset by the
decrease in physical ounces sold which resulted in a US$35.2
million decrease in underlying EBITDA.
The key components of the operating cash expenses are wages,
electricity, diesel, chemical reagents and consumables, as set out
in the table below. The key cost drivers affecting the operating
cash expenses are stripping ratios, production volumes of ore mined
and processed, grades of ore processed, recovery rates, cost
inflation and fluctuations in the Rouble to US Dollar exchange
rate.
Compared with 2015 there was no significant inflation of Rouble
denominated costs, in particular, electricity costs increased by up
to 3% in Rouble terms (decreased by up to 6% in US Dollar terms)
while the cost of diesel remained at the same level (decreased by
up to 9% in US Dollar terms). The impact of Rouble price inflation
was mitigated by the 10% average depreciation of the Rouble against
the US Dollar, with the average exchange rate for the period
increasing from 61.30 Roubles per US Dollar in 2015 to 67.18
Roubles per US Dollar in 2016.
Refinery and transportation costs are variable costs dependent
on the production volume. Mining tax is also a variable cost
dependent on production volume and the gold price realised. The
mining tax rate is 6%. Since the second half of 2016, the Group
applies two-year mining tax concession.
2016 2015
------------------
US$ million % US$ million %
------------------------------------- ------------ ---- ------------ ----
Staff cost 54.7 21 61.8 19
Materials 97.4 37 129.9 39
Fuel 40.3 15 55.3 17
Electricity 23.3 9 25.0 8
Other external services 22.1 8 27.4 8
Other operating expenses 28.2 10 29.8 9
266.0 100 329.2 100
------------------------------------- ------------ ---- ------------ ----
Movement in ore stockpiles, work
in progress and bullion in process
attributable to gold production
(a) (40.5) (17.8)
-------------------------------------- ------------ ---- ------------ ----
Total operating cash expenses 225.6 311.4
-------------------------------------- ------------ ---- ------------ ----
(a) Excluding deferred stripping
Hard-rock mines 2016 2015
----------------------------------------
Pioneer Pokrovskiy Malomir Albyn Total Total
US$ US$ US$ US$ US$ US$
million million million million million million
---------------------------- -------- ---------- -------- -------- -------- --------
Revenue
Gold 163.5 46.7 67.1 211.2 488.5 567.6
Silver 1.0 0.3 0.1 0.2 1.5 1.0
---------------------------- -------- ---------- -------- -------- -------- --------
164.5 47.0 67.2 211.4 490.0 568.7
---------------------------- -------- ---------- -------- -------- -------- --------
Expenses
Operating cash expenses 77.9 31.9 41.6 74.2 225.6 311.4
Refinery and transportation 0.2 0.1 0.1 0.3 0.7 1.1
Other taxes 1.9 0.5 1.6 2.2 6.3 7.7
Mining tax 5.2 1.3 1.9 6.3 14.7 33.1
Deferred stripping costs - - - 18.0 18.0 8.4
Depreciation 38.8 6.6 13.6 45.7 104.7 127.2
Impairment of exploration
and evaluation assets - - - 9.2 9.2 2.5
Impairment/(reversal
of impairment) of ore
stockpiles 6.1 1.0 (5.8) (0.1) 1.2 17.4
Operating expenses 130.2 41.4 53.0 155.7 380.3 508.9
Result of precious metals
operations 34.3 5.6 14.2 55.6 109.7 59.8
---------------------------- -------- ---------- -------- -------- -------- --------
Add/(less):
Depreciation 38.8 6.6 13.6 45.7 104.7 127.2
Impairment of exploration
and evaluation assets - - - 9.2 9.2 2.5
Impairment/(reversal
of impairment) of ore
stockpiles 6.1 1.0 (5.8) (0.1) 1.2 17.4
---------------------------- -------- ---------- -------- -------- -------- --------
Segment EBITDA 79.2 13.2 22.0 110.4 224.7 206.9
---------------------------- -------- ---------- -------- -------- -------- --------
Physical volume of gold
sold, oz 133,605 38,151 54,760 173,342 399,858 481,884
---------------------------- -------- ---------- -------- -------- -------- --------
Cash costs
Operating cash expenses 77.9 31.9 41.6 74.2 225.6 311.4
Refinery and transportation 0.2 0.1 0.1 0.3 0.7 1.1
Other taxes 1.9 0.5 1.6 2.2 6.3 7.7
Mining tax 5.2 1.3 1.9 6.3 14.7 33.1
Deferred stripping costs - - - 18.0 18.0 8.4
Operating cash costs 85.3 33.8 45.2 101.0 265.3 361.8
Deduct: co-product revenue (1.0) (0.3) (0.1) (0.2) (1.5) (1.0)
---------------------------- -------- ---------- -------- -------- -------- --------
Total cash costs 84.3 33.5 45.1 100.8 263.7 360.7
---------------------------- -------- ---------- -------- -------- -------- --------
Average TCC/oz, US$/oz 631 878 824 581 660 749
All-in sustaining costs and all-in costs
AISC decreased from US$874/oz in 2015 to US$807/oz in 2016,
reflecting the reduction in TCC as well as lower sustaining capital
expenditure related to the existing mining operations.
AIC decreased from US$932/oz in 2015 to US$838/oz in 2016,
reflecting the decrease in AISC explained above, reversal of
impairment of refractory ore stockpiles due a higher gold price and
decrease in exploration expenditure.
Hard-rock mines 2016 2015
----------------------------------------
Pioneer Pokrovskiy Malomir Albyn Total Total
US$ US$ US$ US$ US$ US$
million million million million million million
------------------------------------ -------- ---------- -------- -------- -------- --------
Physical volume of
gold sold, oz 133,605 38,151 54,760 173,342 399,858 481,884
------------------------------------ -------- ---------- -------- -------- -------- --------
Total cash costs 84.3 33.5 45.1 100.8 263.7 360.7
Average TCC/oz, US$/oz 631 878 824 581 660 749
------------------------------------ -------- ---------- -------- -------- -------- --------
Impairment/(reversal
of impairment) of ore
stockpiles 6.3 1.0 (0.0) (0.1) 7.2 9.2
------------------------------------ -------- ---------- -------- -------- -------- --------
Adjusted operating
costs 90.6 34.5 45.1 100.6 270.9 369.9
Central administration
expenses 10.9 3.1 4.5 14.1 32.6 30.4
Capitalised stripping
at end of the period - - 3.6 22.6 26.2 18.0
Capitalised stripping
at beginning of the
period - - - (18.0) (18.0) (8.4)
Close-down and site
restoration 0.1 - - 0.1 0.2 (1.7)
Sustaining capital
expenditure 3.9 0.1 1.7 5.2 10.9 12.7
------------------------------------ -------- ---------- -------- -------- -------- --------
All-in sustaining costs 105.5 37.7 55.0 124.7 322.8 420.9
------------------------------------ -------- ---------- -------- -------- -------- --------
All-in sustaining costs,
US$/oz 789 988 1,004 719 807 874
------------------------------------ -------- ---------- -------- -------- -------- --------
Exploration expenditure 8.5 0.1 1.9 6.2 16.6 18.9
Capital expenditure 1.0 - 0.8 - 1.9 1.0
(Reversal of impairment)/impairment
of ore stockpiles (a) (0.2) - (5.8) - (6.0) 8.2
------------------------------------ -------- ---------- -------- -------- -------- --------
All-in costs 114.8 37.8 51.9 130.8 335.3 449.0
------------------------------------ -------- ---------- -------- -------- -------- --------
All-in costs, US$/oz 859 990 948 755 838 932
------------------------------------ -------- ---------- -------- -------- -------- --------
(a) Refractory ore stockpiles to be processed at the POX Hub.
Corporate and other
The Group has corporate offices in London, Moscow and
Blagoveschensk which together represent the central administration
function. Central administration expenses increased by US$2.2
million from US$30.4 million in 2015 to US$32.6 million in
2016.
During 2016, other operations contributed US$(24.6) million to
underlying EBITDA vs. US$(34.1) million in 2015. Included in result
of corporate in other operations in 2016 is a US$3.6 million share
in losses generated by IRC.
Impairment review
The Group undertook an impairment review of the tangible assets
attributable to its gold mining projects, exploration assets
adjacent to the existing mines and supporting in-house service
companies and concluded no impairment was required as at 31
December 2016, with exception of an individual licence impairment
referred to below.
The forecast future cash flows are based on the Group's current
mining plan that assumes POX Hub completion in the year 2018. The
other key assumptions which formed the basis of forecasting future
cash flows and the value in use calculation are set out below:
Year ended Year ended
31 December 2016 31 December
2015
----------------------- ------------------ -------------
Long-term gold price US$1,200/oz US$1,150/oz
Discount rate (a) 8% 8%
RUB/US$ exchange rate RUB60.0/US$ RUB65.0/US$
----------------------- ------------------ -------------
(a) Being the post-tax real weighted average cost of capital,
equivalent to a nominal pre-tax discount rate of 10.1% (2015:
10.1%)
Following the decision to suspend exploration at Kharginskoye
ore field, an immediate extension of the Albyn deposit, and to
surrender the license, a US$9.2 million impairment charges were
recorded against associated exploration and evaluation costs
previously capitalised within exploration and evaluation
assets.
As at 31 December 2016, all exploration and evaluation assets on
the balance sheet related to the areas adjacent to the existing
mines.
Impairment of ore stockpiles
The Group assessed the recoverability of the carrying value of
ore stockpiles and recorded impairment charges/(reversals) of
impairment as set out below:
Year ended 31 December
Year ended 31 December 2016 2015
------------------------------------------------ ------------------------------------------------
Pre-tax Post-tax Pre-tax Post-tax
impairment impairment impairment impairment
charge/ charge/ charge/ charge/
(reversal (reversal (reversal (reversal
of impairment) Taxation of impairment) of impairment) Taxation of impairment)
US$ million US$ million US$ million US$ million US$ million US$ million
------------ ---------------- ------------ ---------------- ---------------- ------------ ----------------
Pokrovskiy 1.0 (0.2) 0.8 (0.9) 0.2 (0.7)
Pioneer 6.1 (1.2) 4.9 11.9 (2.4) 9.6
Malomir (5.8) 1.2 (4.7) 6.1 (1.2) 4.9
Albyn (0.1) - (0.1) 0.3 (0.1) 0.2
------------ ---------------- ------------ ---------------- ---------------- ------------ ----------------
1.2 (0.2) 0.9 17.4 (3.5) 13.9
------------ ---------------- ------------ ---------------- ---------------- ------------ ----------------
Interest income and expense
2016 2015
US$ million US$ million
------------------ ----------- -----------
Investment income 0.6 1.0
------------------- ----------- -----------
The Group earned US$0.6 million interest income on its cash
deposits with banks.
2016 2015
US$ million US$ million
----------------- ----------- -----------
Interest expense 60.8 71.3
Other 0.2 0.2
------------------ ----------- -----------
61.0 71.5
----------------- ----------- -----------
Interest expense for the period was comprised of US$11.9 million
effective interest on the Convertible Bonds and US$48.9 million
interest on bank facilities (2015: US$13.6 million and US$57.7
million, respectively). There no interest expense was capitalised
as part of mine development costs within property, plant and
equipment
Other finance gains and losses
Other finance gains for the period comprised US$11.9 million
compared to US$9.1 million in 2015. Included in other finance gains
is financial guarantee fee of US$4.5 million (2015: US$2.2 million)
charged in connection with the ICBC facility and US$7.4 million
(2015: US$6.4 million) fair value gain on revaluation of the
embedded option for the bondholders to convert into the equity of
the Company. The Group also recognised US$1.5 million loss on bank
debt refinancing.
Taxation
2016 2015
US$ million US$ million
-------------------- ----------- -----------
Tax (credit)/charge (4.7) 48.9
--------------------- ----------- -----------
The Group is subject to corporation tax under UK, Russia and
Cyprus tax legislation. The average statutory tax rate for 2016 was
20% in the UK and 20% in Russia.
The tax charge for the period arises primarily in relation to
the Group's gold mining operations and is represented by a current
tax charge of US$29.8 million in 2016 (2015: US$31.8 million) and a
deferred tax credit, which is a non-cash item, of US$34.5 million
(2015: deferred tax charge of US$17.1 million). Included in the
deferred tax credit in 2016 is a US$26.0 million foreign exchange
effect which primarily arises because the tax base for a
significant portion of the future taxable deductions in relation to
the Group's property, plant and equipment are denominated in
Russian Rouble whilst the future depreciation charges associated
with these assets will be based on their US Dollar carrying
value.
During the period, the Group made corporation tax payments in
aggregate of US$35.3 million in Russia (2015: corporation tax
payments in aggregate of US$32.9 million in Russia).
Profit/(loss) per share
2016 2015
--------------------------------------------- --------------- ------------------
Profit/(loss) for the period from continuing
operations attributable to equity holders
of Petropavlovsk PLC US$33.7 million (US$190.2 million)
Weighted average number of Ordinary
Shares 3,302,148,536 2,657,332,030
Basic profit/(loss) per ordinary share
from continuing operations US$0.01 (US$0.07)
--------------------------------------------- --------------- ------------------
Basic profit per share for 2016 was US$0.01 compared to US$0.07
basic loss per share for 2015. The key factor affecting the basic
profit/(loss) per share was the increase of net profit for the
period attributable to equity holders of Petropavlovsk PLC from the
net loss of US$190.2 million for 2015 to US$33.7 million net profit
for 2016.
The total number of Ordinary Shares in issue as at 31 December
2016 was 3,303,768,532 (31 December 2015: 3,300,561,697).
The Group has a number of potentially dilutive instruments which
were anti-dilutive in the 2015 and 2016 and, accordingly, diluted
profit/(loss) per share was not different from the basic
profit/(loss) per share.
Financial position and cash flows
31 December 31 December
2016 2015
US$ million US$ million
------------------------------------------------- ---------------- ----------------
Cash and cash equivalents 12.6 28.2
Loans (522.8) (552.8)
Convertible bonds (a) (88.4) (85.5)
------------------------------------------------- ---------------- ----------------
Net Debt (598.6) (610.0)
------------------------------------------------- ---------------- ----------------
(a) US$100.0 million convertible bonds due on 18 March 2020 at amortised
cost.
2016 2015
30 June 2013 30 June 2013
US$ million US$ million
------------------------------------------------- ---------------- ----------------
Net cash from operating activities:
Continuing operations 37.0 111.0
Discontinued operations - (7.6)
------------------------------------------------- ---------------- ----------------
37.0 103.4
------------------------------------------------- ---------------- ----------------
Net cash used in investing activities:
Continuing operations (8.7)(b) (23.2)
Discontinued operations - (43.0)
(8.7)(b) (66.2)
------------------------------------------------- ---------------- ----------------
Net cash used in financing activities:
Continuing operations (46.8) (110.6)
Discontinued operations - 74.2
------------------------------------------------- ---------------- ----------------
(46.8) (36.4)
------------------------------------------------- ---------------- ----------------
(b) Including US$29.4 million cash CAPEX and US$19.2 million
proceeds from disposal of subsidiaries
Key movements in cash and net debt from continuing
operations
Cash Debt Net Debt
US$ million US$ million US$ million
--------------------------------------------- ----------- ----------- -----------
As at 1 January 2016 28.2 (a) (638.3) (610.0)
Net cash generated by operating activities
before working capital changes 189.3
Increase in working capital (63.3)
Income tax paid (35.3)
Capital expenditure (12.8)
Exploration expenditure (16.6)
Amounts repaid under bank loans, net (27.0) 27.0
Interest accrued (60.8)
Interest paid (53.7) 53.7
Transaction costs in connection with
bank loans (4.0) 5.5
Bank debt refinancing 1.5
Proceeds from disposal of subsidiaries,
net of cash disposed and net of liabilities
settled 19.2
Funds advanced to the Group under investment
agreement with the Russian Ministry
of Far East Development 30.8
Funds transferred under investment
agreement with the Russian Ministry
of Far East Development (47.7)
Foreign exchange 2.8 0.2
Other 2.7
--------------------------------------------- ----------- ----------- -----------
As at 31 December 2016 12.6 (611.2) (598.6)
--------------------------------------------- ----------- ----------- -----------
(a) Including US$15.1 million received under investment
agreement with the Russian Ministry of Far East Development
The increase in working capital reflects US$25.8 million
increase in trade and other receivables and US$37.7 million
reduction in trade and other payables.
As at 31 December 2016, there were no undrawn facilities
available to the continuing operations.
Capital expenditure
The Group invested an aggregate of US$29.4 million on its gold
projects compared to US$32.6 million invested in 2015. The key
areas of focus this year were on fulfilling existing contractual
commitments in relation to the POX Hub project, exploration to
support the underground mining at Pioneer, expansion of tailing
dams at Pioneer and Albyn and ongoing exploration related to the
areas adjacent to the ore bodies of the Group's main mining
operations.
Exploration Development Total
expenditure expenditure
and other
CAPEX (a)
US$ million US$ million US$ million
-------------------------------------- ------------ ------------ -----------
POX - 1.9 1.9
Pokrovskiy and Pioneer (b) 8.6 3.7 12.3
Malomir 1.9 1.6 3.5
Albyn 6.1 4.9 11.0
Upgrade of in-house service companies - 0.6 0.6
16.6 12.8 29.4
-------------------------------------- ------------ ------------ -----------
(a) Including US$1.9 million of development expenditure in
relation to the POX Hub which is considered to be non-sustaining
capital expenditure for the purposes of calculating all-in
sustaining costs and all-in costs.
(b) Including US$5.5 million of exploration expenditure in
relation to the underground mining project at Pioneer to be
non-sustaining capital expenditure for the purposes of calculating
the all-in sustaining costs and all-in costs.
Foreign currency exchange differences
The Group's principal subsidiaries have a US Dollar functional
currency. Foreign exchange differences arise on translation of
monetary assets and liabilities denominated in foreign currencies,
which for the principal subsidiaries of the Group are the Russian
Rouble and GB Pounds Sterling.
The following exchange rates to the US Dollar have been applied
to translate monetary assets and liabilities denominated in foreign
currencies.
31 December 31 December 2015
2016
------------------------- ----------- ----------------
GB Pounds Sterling (GBP:
US$) 0.81 0.68
Russian Rouble (RUB
: US$) 60.66 72.88
-------------------------- ----------- ----------------
The Rouble recovered by 17% against the US Dollar during 2016,
from RUB72.88 : US$1 as at 31 December 2015 to RUB60.66 : US$1 as
at 31 December 2016. The average year-on-year depreciation of the
Rouble against the US Dollar was approximately 10%, with the
average exchange rate for 2016 being RUB67.18 : US$1 compared to
RUB61.30 : US$1 for 2015.
As a result of the significant volatility of the Russian Rouble,
the Group recognised foreign exchange losses of US$5.2 million in
2016 (2015: US$12 million) arising primarily on Rouble denominated
net monetary assets.
Refinancing of the Group's bank debt
In December 2016, the Group refinanced US$430 million
outstanding principal of the Group's US$530 million bank debt,
including a revised maturity profile and renegotiation of the
financial and operational covenants.
Results of the bank debt refinancing are set out below.
December
2016
US$ million
------------------------------------ ------------
Carrying value of liabilities
de-recognised 428.2
Fair value of new liabilities
recognised:
Bank debt 426.7
Call option over the Company's
shares 3.0
Loss on bank debt refinancing (1.5)
------------------------------------- ------------
Cash settled call option was issued in relation to 3.6 per cent.
of the outstanding aggregate ordinary share capital in the Company
and is exercisable between December 2019 and March 2023 at strike
price of GBP0.068.
Transaction costs of US$4.9 million were further
capitalised.
The Group is currently completing the final documentation to
refinance the remaining US$100 million bank debt. Once this has
been completed, the Group's entire bank debt of US$530 million has
been refinanced.
Disposal of subsidiaries
The Group entered into agreements to sell its wholly owned
subsidiary LLC Ilijnskoye and its associate JSC Verkhnetisskaya Ore
Mining Company for an aggregate cash consideration of an equivalent
to US$20 million, payable in tranches during 2016, out of which
US$19.8 million were attributed to the value of Visokoe asset held
by LLC Ilijnskoye and the remainder to JSC Verkhnetisskaya Ore
Mining Company. The disposal of LLC Ilijnskoye was completed on 11
May 2016. The Group recognised US$0.5 million net loss on this
disposal.
Investment agreement with the Russian Ministry of Far East
Development
On 14 December 2015, the Group entered into an investment
agreement with the Russian Ministry of Far East Development (the
'Investment Agreement'). The Investment Agreement involves
provision of RUB5.5 billion (an equivalent to c.US$91 million as at
31 December 2016) funding towards the construction of the
electricity power line in the North-East of the Amur Region of
Russia, where the Group's Albyn and Malomir mines and adjacent
licence areas are operated, during the period 2015 - 2019. The
funds are advanced to the Group and then should be transferred to
the joint-stock company Far East Grid Distribution Company
('DRSK'), who is to engage a contractor to build the relevant power
supply infrastructure. The Group's responsibility under the
Investment Agreement will be to monitor the progress and to report
to the Russian Ministry of Far East Development. The Group will be
taking ultimate responsibility for the construction of the power
line. Upon completion, the Group will get access to the enhanced
capacity of the power supply infrastructure in the region. Under
the terms of the Investment Agreement, the Group has certain
capital commitments, including further development of Albyn and
Malomir mines.
As at 31 December 2015, the Group received RUB1.1billion (an
equivalent to US$15.1 million) funds under the Investment
Agreement. During 2016, the Group received further RUB2.0 billion
(an equivalent to US$30.8 million) under the Investment Agreement
and transferred an aggregate RUB3.1 billion (an equivalent to
US$47.7 million) to DRSK.
Going concern
The Group monitors and manages its liquidity risk on an ongoing
basis to ensure that it has access to sufficient funds to meet its
obligations. Cash forecasts are prepared regularly based on a
number of inputs including, but not limited to, forecast commodity
prices and impact of hedging arrangements, the Group's mining plan,
forecast expenditure and debt repayment schedules. Sensitivities
are run for different scenarios including, but not limited to,
changes in commodity prices, cost inflation, different production
rates from the Group's producing assets and the timing of
expenditure on development projects. This is done to identify risks
to liquidity and covenant compliance and enable management to
develop appropriate and timely mitigation strategies. The Group
meets its capital requirements through a combination of sources
including cash generated from operations and external debt.
The Group performed an assessment of the forecast cash flows and
covenant compliance in relation to bank facilities for the period
of 12 months from the date of approval of the 2016 Annual Report
and Accounts. As at 31 December 2016, the Group had sufficient
liquidity headroom and complied with related financial covenants.
Following the successful completion of the bank debt refinancing,
the Group is also satisfied that it has sufficient headroom under a
base case scenario for the period to May 2018 and expects to comply
with related financial covenants. In the meantime, the Group's
projections under a reasonable downside scenario indicate that,
unless mitigating actions can be taken including accessing deposits
not currently in the Group's mining plan, there will be
insufficient liquidity and non-compliance with certain financial
covenants under a reasonable downside scenario for the relevant
period to May 2018. If a missed debt repayment occurs or financial
covenant requirements are not met, this would result in events of
default which, through cross-defaults and cross-accelerations,
could cause all other Group's debt arrangements to become repayable
on demand. The Directors are confident that, should it be required,
relevant mitigating actions could be successfully implemented.
The Group has guaranteed the outstanding amounts IRC owes to
ICBC. The outstanding loan principal was US$234 million as at 31
December 2016. The assessment of whether there is any material
uncertainty that IRC will be able to repay this facility as it
falls due is another key element of the Group's overall going
concern assessment. IRC has agreed with ICBC to restructure and
reschedule two repayment instalments under the ICBC Facility
Agreement, which are originally due for payment on 20 June 2017 and
20 December 2017, with next repayment instalment due on 20 June
2018. IRC also obtained waivers from ICBC in respect of obligations
to maintain certain cash deposits with ICBC until 30 June 2018 and
obligations to comply with certain financial covenants until 31
December 2017 (inclusive).
Having taken into account the aforementioned factors, and after
making enquiries and considering the uncertainties described above,
the Directors have a reasonable expectation that the Group will
have adequate resources to continue in operational existence for
the foreseeable future, being at least the next 12 months from the
date of approval of the 2016 Annual Report and Accounts.
Accordingly, they continue to adopt the going concern basis of
accounting in preparing these consolidated financial
statements.
2017 Outlook
The Group is confident to achieve 2017 production guidance of
460Koz. The Group's operating cash expenses are substantially
Rouble denominated. The Group expects its total average cash costs
of production in 2017 to be c.US$700/oz at current exchange rate.
Net debt is expected to decrease to c.US$550 million by the end of
2017, assuming an average gold price of US$1,200/oz for the
remainder of 2017.
Risk Review
Petropavlovsk's principal risks and uncertainties continue to
fall with four main categories: operational, financial, health and
safety and legal risk.
The 2016 review was supported by the robust risk management and
internal control systems and procedures outlined within our Annual
Report and Accounts. Broadly our principal risks have remained
unchanged or improved.
The below list should not be regarded as complete of
comprehensive list of all potential risk and uncertainties that the
Group may face:
-- Production related risk
-- Exploration related risk
-- Project related risks
-- Financial risks
-- Gold price risk
-- Currency risk
-- IRC related risks
-- Health, safety and environmental risk
-- Legal and regulatory risks
Further details on the Risks to Our Performance, including
internal processes around Risk Management can be found in our 2016
Annual Report and Accounts
Reserve & Resources
Since 2008 and in accordance with best industry practices,
Petropavlovsk has been reporting its Mineral Resources and Ore
Reserves in accordance with JORC Code. Following the strategic
disposal of the non core projects Visokoye, Yamal and Nimanskaya in
2016, all the Group's remaining mining assets are located in the
Amur Region.
Total Mineral Resource ounces (including Reserves) as of 31
December 2016 amounted to 20.2Moz, compared to 23.3Moz in 2015,
with a total reserve of 7.95Moz compared to 8.41Moz the previous
year. The decrease was mainly driven by the disposals of capital
intensive non-core assets and to a lesser extent by mine
depletion.
A total of 1.22Moz of Ore Reserves were disposed of with
Visokoye, whilst 3.55Moz of Mineral Resources (including Ore
Reserves) were disposed of with the Visokoye and Yamal projects.
Full Mineral Resource and Ore Reserve statements for Visokoye and
Yamal can be found in the Petropavlovsk Annual Report and Accounts
2015.
During 2016, the Group made exceptionally good progress
developing reserves at Elginskoye, one of the significant satellite
orebodies within the Albyn project area. Successful exploration and
a feasibility study resulted in an increase in JORC Ore Reserves at
Elginskoye from 0.28 to 1.24Moz (a 340% increase), providing a
solid foundation for Albyn's long term production. We also achieved
a remarkable 76% increase in Mineral Resources for underground
mining from 0.42 to 0.74Moz, and received our first maiden
underground Ore Reserve estimate amounted to 0.37Moz.
This includes a new Pioneer NE Bakhmut underground Ore Reserve
of 0.17Moz @ 4.46g/t, and 0.21Moz @ 5.85g/t at Malomir Quartzitovoe
1. The new Ore Reserve will support 6 year life of mine for both
mines with strong potential for resource, reserve and consequent
life of mine expansion.
Overall, we successfully converted c.1.55Moz of Resources into
Reserves during 2016.
Pioneer, Albyn, Malomir and Pokrovskiy Mineral Resource and Ore
Reserve statements were prepared by Wardell Armstrong International
in April 2017 in accordance with JORC Code (2012). A summary of
their technical audit can be found on the company web site.
The tables below provide a summary and an asset-by-asset
breakdown of Mineral Resources and Ore Reserves.
Total Ore Reserves for open pit and underground extraction (as
at 31 December 2016, in accordance with JORC Code)
Category Tonnage Grade Gold
(kt) (g/t (Moz)
Au)
---------------- ----------------- -------- ------ -------
Total Proven 32,032 0.82 0.84
---------------- ----------------- -------- ------ -------
Probable 229,667 0.96 7.11
---------------------------------- -------- ------ -------
Proven+Probable 261,699 0.95 7.95
---------------------------------- -------- ------ -------
Non-Refractory Proven 22,177 0.69 0.49
---------------- ----------------- -------- ------ -------
Probable 95,632 1.10 3.39
---------------------------------- -------- ------ -------
Proven+Probable 117,809 1.03 3.88
---------------------------------- -------- ------ -------
Refractory Proven 9,854 1.11 0.35
---------------- ----------------- -------- ------ -------
Probable 134,036 0.86 3.72
---------------------------------- -------- ------ -------
Proven+Probable 143,890 0.88 4.07
---------------------------------- -------- ------ -------
Note: Figures may not add up due to rounding.
Total Ore Reserves for open pit extraction (as at 31 December
2016, in accordance with JORC Code)
Category Tonnage Grade Gold
(kt) (g/t (Moz)
Au)
---------------- ----------------- -------- ------ -------
Total Proven 32,032 0.82 0.84
---------------- ----------------- -------- ------ -------
Probable 227,415 0.92 6.74
---------------------------------- -------- ------ -------
Proven+Probable 259,446 0.91 7.58
---------------------------------- -------- ------ -------
Non-Refractory Proven 22,177 0.69 0.49
---------------- ----------------- -------- ------ -------
Probable 93,379 1.01 3.02
---------------------------------- -------- ------ -------
Proven+Probable 115,557 0.95 3.51
---------------------------------- -------- ------ -------
Refractory Proven 9,854 1.11 0.35
---------------- ----------------- -------- ------ -------
Probable 134,036 0.86 3.72
---------------------------------- -------- ------ -------
Proven+Probable 143,890 0.88 4.07
---------------------------------- -------- ------ -------
Note: Figures may not add up due to rounding.
Total Ore Reserves for underground extraction (as at 31 December
2016) (WAI April 2017, in accordance with JORC Code 2012)
Category Tonnage Grade Gold
(kt) (g/t (Moz)
Au)
---------------- ----------------- -------- ------ -------
Total Proven - - -
---------------- ----------------- -------- ------ -------
Probable 2,253 5.14 0.37
---------------------------------- -------- ------ -------
Proven+Probable 2,253 5.14 0.37
---------------------------------- -------- ------ -------
Non-Refractory Proven - - -
---------------- ----------------- -------- ------ -------
Probable 2,253 5.14 0.37
---------------------------------- -------- ------ -------
Proven+Probable 2,253 5.14 0.37
---------------------------------- -------- ------ -------
Refractory Proven - - -
---------------- ----------------- -------- ------ -------
Probable - - -
---------------------------------- -------- ------ -------
Proven+Probable - - -
---------------------------------- -------- ------ -------
Note: Figures may not add up due to rounding.
Total Mineral Resource for potential open pit and underground
extraction (as at 31 December 2016) (in accordance with JORC
Code)
Category Tonnage Grade Metal
(kt) (g/t (Moz)
Au)
---------------- ------------ -------- ------ ---------
Total Measured 51,859 0.94 1.57
---------------- ------------ -------- ------ ---------
Indicated 418,167 0.89 11.96
----------------------------- -------- ------ ---------
Measured +
Indicated 470,026 0.90 13.53
----------------------------- -------- ------ ---------
Inferred 257,409 0.80 6.63
----------------------------- -------- ------ ---------
Non-Refractory Measured 33,654 0.91 0.99
---------------- ------------ -------- ------ ---------
Indicated 207,117 0.96 6.36
----------------------------- -------- ------ ---------
Measured +
Indicated 240,771 0.95 7.35
----------------------------- -------- ------ ---------
Inferred 115,328 0.96 3.55
----------------------------- -------- ------ ---------
Refractory Measured 18,205 0.99 0.58
---------------- ------------ -------- ------ ---------
Indicated 211,050 0.82 5.60
----------------------------- -------- ------ ---------
Measured +
Indicated 229,255 0.84 6.18
----------------------------- -------- ------ ---------
Inferred 142,081 0.67 3.08
----------------------------- -------- ------ ---------
Note: Mineral Resources are reported inclusive
of Ore Reserves. Figures may not add up due
to rounding.
Total Mineral Resource for potential open pit extraction (as at
31 December 2016) (in accordance with JORC Code)
Category Tonnage Grade Metal
(kt) (g/t (Moz)
Au)
---------------- ------------ -------- ------ ---------
Total Measured 51,859 0.94 1.57
---------------- ------------ -------- ------ ---------
Indicated 415,393 0.85 11.37
----------------------------- -------- ------ ---------
Measured +
Indicated 467,252 0.86 12.94
----------------------------- -------- ------ ---------
Inferred 256,155 0.79 6.48
----------------------------- -------- ------ ---------
Non-Refractory Measured 33,654 0.91 0.99
---------------- ------------ -------- ------ ---------
Indicated 204,343 0.88 5.78
----------------------------- -------- ------ ---------
Measured +
Indicated 237,997 0.88 6.76
----------------------------- -------- ------ ---------
Inferred 114,074 0.93 3.40
----------------------------- -------- ------ ---------
Refractory Measured 18,205 0.99 0.58
---------------- ------------ -------- ------ ---------
Indicated 211,050 0.82 5.60
----------------------------- -------- ------ ---------
Measured +
Indicated 229,255 0.84 6.18
----------------------------- -------- ------ ---------
Inferred 142,081 0.67 3.08
----------------------------- -------- ------ ---------
Note: Mineral Resources are reported inclusive
of Ore Reserves. Figures may not add up due
to rounding.
Total Mineral Resource for potential underground extraction (WAI
April 2017, as at 31 December 2016) (in accordance with JORC Code
2012)
Category Tonnage Grade Metal
(kt) (g/t (Moz)
Au)
---------------- ------------ -------- ------ -------
Total Measured - - -
---------------- ------------ -------- ------ -------
Indicated 2,774 6.56 0.59
----------------------------- -------- ------ -------
Measured +
Indicated 2,774 6.56 0.59
----------------------------- -------- ------ -------
Inferred 1,254 3.92 0.16
----------------------------- -------- ------ -------
Non-Refractory Measured - - -
---------------- ------------ -------- ------ -------
Indicated 2,774 6.56 0.59
----------------------------- -------- ------ -------
Measured +
Indicated 2,774 6.56 0.59
----------------------------- -------- ------ -------
Inferred 1,254 3.92 0.16
----------------------------- -------- ------ -------
Refractory Measured - - -
---------------- ------------ -------- ------ -------
Indicated - - -
----------------------------- -------- ------ -------
Measured +
Indicated - - -
----------------------------- -------- ------ -------
Inferred - - -
----------------------------- -------- ------ -------
Note: Mineral Resources are reported inclusive of Ore Reserves.
Figures may not add up due to rounding.
Summary of Ore Reserves by asset (as at 31 December 2016)
Pioneer
(WAI, April 2017, in accordance with JORC Code 2012)
Category Tonnage Grade Gold
(kt) (g/t (Moz)
Au)
---------------------------- ----------------- -------- ------ -------
Total Proven 15,585 0.68 0.34
---------------------------- ----------------- -------- ------ -------
Probable 86,876 0.82 2.29
---------------------------------------------- -------- ------ -------
Proven+Probable 102,460 0.80 2.63
---------------------------------------------- -------- ------ -------
Non-Refractory Open
Pit Proven 14,122 0.65 0.30
---------------------------- ----------------- -------- ------ -------
Probable 30,243 0.73 0.71
---------------------------------------------- -------- ------ -------
Proven+Probable 44,366 0.70 1.00
---------------------------------------------- -------- ------ -------
Non-Refractory Underground Proven - - -
---------------------------- ----------------- -------- ------ -------
Probable 1,154 4.46 0.17
---------------------------------------------- -------- ------ -------
Proven+Probable 1,154 4.46 0.17
---------------------------------------------- -------- ------ -------
Subtotal Non-Refractory
Open Pit and Underground Proven 14,122 0.65 0.30
---------------------------- ----------------- -------- ------ -------
Probable 31,398 0.86 0.87
---------------------------------------------- -------- ------ -------
Proven+Probable 45,520 0.80 1.17
---------------------------------------------- -------- ------ -------
Refractory Open
Pit Proven 1,462 0.87 0.04
---------------------------- ----------------- -------- ------ -------
Probable 55,478 0.80 1.42
---------------------------------------------- -------- ------ -------
Proven+Probable 56,940 0.80 1.46
---------------------------------------------- -------- ------ -------
Subtotal Non-Refractory
and Refractory Open
Pit Proven 15,585 0.68 0.34
---------------------------- ----------------- -------- ------ -------
Probable 85,721 0.77 2.13
---------------------------------------------- -------- ------ -------
Proven+Probable 101,306 0.76 2.46
---------------------------------------------- -------- ------ -------
Albyn
(WAI, April 2017, in accordance with JORC Code 2012)
Category Tonnage Grade Gold
(kt) (g/t (Moz)
Au)
--------------------- ----------------- -------- ------ -------
Total Proven 4,952 0.51 0.08
--------------------- ----------------- -------- ------ -------
Probable 52,302 1.18 1.98
--------------------------------------- -------- ------ -------
Proven+Probable 57,254 1.12 2.06
--------------------------------------- -------- ------ -------
Non-Refractory Open
Pit Proven 4,952 0.51 0.08
--------------------- ----------------- -------- ------ -------
Probable 52,302 1.18 1.98
--------------------------------------- -------- ------ -------
Proven+Probable 57,254 1.12 2.06
--------------------------------------- -------- ------ -------
Refractory Open
Pit Proven - - -
--------------------- ----------------- -------- ------ -------
Probable - - -
--------------------------------------- -------- ------ -------
Proven+Probable - - -
--------------------------------------- -------- ------ -------
Note: All Albyn Ore Reserve is for open pit extraction.
Malomir
(WAI, April 2017, in accordance with JORC Code 2012)
Category Tonnage Grade Gold
(kt) (g/t (Moz)
Au)
---------------------------- ----------------- -------- ------ -------
Total Proven 8,416 1.15 0.31
---------------------------- ----------------- -------- ------ -------
Probable 86,755 0.97 2.70
---------------------------------------------- -------- ------ -------
Proven+Probable 95,171 0.98 3.01
---------------------------------------------- -------- ------ -------
Non-Refractory Open
Pit Proven 24 1.16 0.001
---------------------------- ----------------- -------- ------ -------
Probable 7,100 0.83 0.19
---------------------------------------------- -------- ------ -------
Proven+Probable 7,124 0.83 0.19
---------------------------------------------- -------- ------ -------
Non-Refractory Underground Proven - - -
---------------------------- ----------------- -------- ------ -------
Probable 1,098 5.85 0.21
---------------------------------------------- -------- ------ -------
Proven+Probable 1,098 5.85 0.21
---------------------------------------------- -------- ------ -------
Subtotal Non-Refractory
Open Pit and Underground Proven 24 1.16 0.001
---------------------------- ----------------- -------- ------ -------
Probable 8,198 1.50 0.40
---------------------------------------------- -------- ------ -------
Proven+Probable 8,222 1.50 0.40
---------------------------------------------- -------- ------ -------
Refractory Open
Pit Proven 8,392 1.15 0.31
---------------------------- ----------------- -------- ------ -------
Probable 78,557 0.91 2.30
---------------------------------------------- -------- ------ -------
Proven+Probable 86,949 0.93 2.61
---------------------------------------------- -------- ------ -------
Subtotal Non-Refractory
and Refractory Open
Pit Proven 8,416 1.15 0.31
---------------------------- ----------------- -------- ------ -------
Probable 85,657 0.90 2.49
---------------------------------------------- -------- ------ -------
Proven+Probable 94,073 0.93 2.80
---------------------------------------------- -------- ------ -------
Pokrovskiy & Burinda
(WAI, April 2017, in accordance with JORC Code 2012)
Category Tonnage Grade Gold
(kt) (g/t (Moz)
Au)
--------------------- ----------------- -------- ------ -------
Total Proven 1,051 0.55 0.02
--------------------- ----------------- -------- ------ -------
Probable 1,540 0.74 0.04
--------------------------------------- -------- ------ -------
Proven+Probable 2,590 0.66 0.06
--------------------------------------- -------- ------ -------
Non-Refractory Open
Pit Proven 1,051 0.55 0.02
--------------------- ----------------- -------- ------ -------
Probable 1,540 0.74 0.04
--------------------------------------- -------- ------ -------
Proven+Probable 2,590 0.66 0.06
--------------------------------------- -------- ------ -------
Refractory Open
Pit Proven - - -
--------------------- ----------------- -------- ------ -------
Probable - - -
--------------------------------------- -------- ------ -------
Proven+Probable - - -
--------------------------------------- -------- ------ -------
Note: All Pokrovskiy&Burinda Ore Reserve is for open pit
extraction.
Tokur
(WAI, 2010, in accordance with JORC Code 2004)
Category Tonnage Grade Gold
(kt) (g/t (Moz)
Au)
--------------------- ----------------- -------- ------ -------
Total Proven 2,028 1.47 0.10
--------------------- ----------------- -------- ------ -------
Probable 2,195 1.44 0.10
--------------------------------------- -------- ------ -------
Proven+Probable 4,223 1.45 0.20
--------------------------------------- -------- ------ -------
Non-Refractory Open
Pit Proven 2,028 1.47 0.10
--------------------- ----------------- -------- ------ -------
Probable 2,195 1.44 0.10
--------------------------------------- -------- ------ -------
Proven+Probable 4,223 1.45 0.20
--------------------------------------- -------- ------ -------
Refractory Open
Pit Proven - - -
--------------------- ----------------- -------- ------ -------
Probable - - -
--------------------------------------- -------- ------ -------
Proven+Probable - - -
--------------------------------------- -------- ------ -------
Note: All Tokur Ore Reserve is for open pit extraction
Notes on Ore Reserve statement:
(1) Group Ore Reserves statements are prepared by WAI;
Pokrovskiy, Pioneer, Malomir and Albyn reserves are prepared in
April 2017 in accordance with JORC Code 2012; Tokur Reserves are
prepared in 2010 in accordance with JORC Code 2004
(2) Pioneer, Malomir Albyn and Pokrovskiy Ore Reserves for open
pit extraction are estimated within economical pit shells using a
$1,200/oz gold price assumption and applying other modifying
factors based on projected performance of these operating mines.
Tokur reserves have been based on a $1,000/oz gold price
assumption, together with the operating costs assumptions relevant
at the time of the estimate.
(3) Open Pit Reserve cut-off grade for reporting varies from 0.3
to 0.5g/t Au, depending on the asset and processing method.
(4) Underground Ore Reserve estimates use mine design with
decline access and trackless mining equipment; variants of open
stoping with predominantly uncemented back fill are used; Ore
Reserve figures have been adjusted for anticipated dilution and
mine recovery.
(5) Underground Reserve cut-off grade for reporting is 1.5g/t Au
for Pioneer and 1.7g/t Au for Malomir.
(6) Figures may not add up due to rounding.
Summary of Mineral Resources by asset (as at 31 December
2016)
Pioneer
(WAI, April 2017, in accordance with JORC Code 2012)
Category Tonnage Grade Metal
(kt) (g/t (Moz)
Au)
----------------------------- ------------ -------- ------ -------
Total Measured 19,520 0.68 0.43
----------------------------- ------------ -------- ------ -------
Indicated 160,670 0.75 3.89
------------------------------------------ -------- ------ -------
Measured +
Indicated 180,190 0.74 4.32
------------------------------------------ -------- ------ -------
Inferred 57,058 0.66 1.20
------------------------------------------ -------- ------ -------
Non-Refractory
Open Pit Measured 9,842 0.58 0.18
----------------------------- ------------ -------- ------ -------
Indicated 64,520 0.63 1.30
------------------------------------------ -------- ------ -------
Measured +
Indicated 74,362 0.62 1.48
------------------------------------------ -------- ------ -------
Inferred 21,883 0.66 0.46
------------------------------------------ -------- ------ -------
Non-Refractory
Underground Measured - - -
----------------------------- ------------ -------- ------ -------
Indicated 1,924 5.82 0.36
------------------------------------------ -------- ------ -------
Measured +
Indicated 1,924 5.82 0.36
------------------------------------------ -------- ------ -------
Inferred 765 4.05 0.10
------------------------------------------ -------- ------ -------
Sub-total Non-Refractory
(Open Pit and Underground) Measured 9,842 0.58 0.18
----------------------------- ------------ -------- ------ -------
Indicated 66,444 0.78 1.66
------------------------------------------ -------- ------ -------
Measured +
Indicated 76,286 0.75 1.84
------------------------------------------ -------- ------ -------
Inferred 22,648 0.77 0.56
------------------------------------------ -------- ------ -------
Refractory Open
Pit Measured 9,678 0.79 0.25
----------------------------- ------------ -------- ------ -------
Indicated 94,226 0.74 2.23
------------------------------------------ -------- ------ -------
Measured +
Indicated 103,904 0.74 2.48
------------------------------------------ -------- ------ -------
Inferred 34,410 0.58 0.64
------------------------------------------ -------- ------ -------
Sub-total Open
Pit (Refractory
and Non-Refractory) Measured 19,520 0.68 0.43
----------------------------- ------------ -------- ------ -------
Indicated 158,746 0.69 3.53
------------------------------------------ -------- ------ -------
Measured +
Indicated 178,266 0.69 3.95
------------------------------------------ -------- ------ -------
Inferred 56,293 0.61 1.10
------------------------------------------ -------- ------ -------
Albyn
(WAI, April 2017, in accordance with JORC Code 2012)
Category Tonnage Grade Metal
(kt) (g/t (Moz)
Au)
---------------- ------------ -------- ------ -------
Total Measured 5,049 0.52 0.09
---------------- ------------ -------- ------ -------
Indicated 74,025 1.13 2.69
----------------------------- -------- ------ -------
Measured +
Indicated 79,074 1.09 2.78
----------------------------- -------- ------ -------
Inferred 60,442 1.02 1.99
----------------------------- -------- ------ -------
Non-Refractory Measured 5,049 0.52 0.09
---------------- ------------ -------- ------ -------
Indicated 74,025 1.13 2.69
----------------------------- -------- ------ -------
Measured +
Indicated 79,074 1.09 2.78
----------------------------- -------- ------ -------
Inferred 60,442 1.02 1.99
----------------------------- -------- ------ -------
Refractory Measured - - -
---------------- ------------ -------- ------ -------
Indicated - - -
----------------------------- -------- ------ -------
Measured +
Indicated - - -
----------------------------- -------- ------ -------
Inferred - - -
----------------------------- -------- ------ -------
Note: All Albyn Mineral Resources is for open pit extraction
Malomir
(WAI, April 2017, in accordance with JORC Code 2012)
Category Tonnage Grade Metal
(kt) (g/t (Moz)
Au)
----------------------------- ------------ -------- ------ -------
Total Measured 8,558 1.21 0.33
----------------------------- ------------ -------- ------ -------
Indicated 135,865 0.91 3.99
------------------------------------------ -------- ------ -------
Measured +
Indicated 144,423 0.93 4.33
------------------------------------------ -------- ------ -------
Inferred 118,944 0.71 2.73
------------------------------------------ -------- ------ -------
Non-Refractory
Open Pit Measured 31 1.19 0.001
----------------------------- ------------ -------- ------ -------
Indicated 18,191 0.68 0.40
------------------------------------------ -------- ------ -------
Measured +
Indicated 18,222 0.68 0.40
------------------------------------------ -------- ------ -------
Inferred 10,784 0.68 0.24
------------------------------------------ -------- ------ -------
Non-Refractory
Underground Measured - - -
----------------------------- ------------ -------- ------ -------
Indicated 850 8.23 0.23
------------------------------------------ -------- ------ -------
Measured +
Indicated 850 8.23 0.23
------------------------------------------ -------- ------ -------
Inferred 489 3.72 0.06
------------------------------------------ -------- ------ -------
Sub-total Non-Refractory
(Open Pit and Underground) Measured 31 1.20 0.001
----------------------------- ------------ -------- ------ -------
Indicated 19,041 1.02 0.62
------------------------------------------ -------- ------ -------
Measured +
Indicated 19,072 1.02 0.63
------------------------------------------ -------- ------ -------
Inferred 11,273 0.81 0.29
------------------------------------------ -------- ------ -------
Refractory Open
Pit Measured 8,527 1.21 0.33
----------------------------- ------------ -------- ------ -------
Indicated 116,824 0.90 3.37
------------------------------------------ -------- ------ -------
Measured +
Indicated 125,351 0.92 3.70
------------------------------------------ -------- ------ -------
Inferred 107,671 0.70 2.44
------------------------------------------ -------- ------ -------
Sub-total Open
Pit (Refractory
and Non-Refractory) Measured 8,558 1.21 0.33
----------------------------- ------------ -------- ------ -------
Indicated 135,015 0.87 3.77
------------------------------------------ -------- ------ -------
Measured +
Indicated 143,573 0.89 4.10
------------------------------------------ -------- ------ -------
Inferred 118,455 0.70 2.68
------------------------------------------ -------- ------ -------
Pokrovka & Burinda
(WAI, April 2017, in accordance with JORC Code 2012)
Category Tonnage Grade Metal
(kt) (g/t (Moz)
Au)
---------------- ------------ -------- ------ -------
Total Measured 6,780 1.01 0.22
---------------- ------------ -------- ------ -------
Indicated 31,511 0.83 0.84
----------------------------- -------- ------ -------
Measured +
Indicated 38,291 0.86 1.06
----------------------------- -------- ------ -------
Inferred 10,259 0.99 0.33
----------------------------- -------- ------ -------
Non-Refractory Measured 6,780 1.01 0.22
---------------- ------------ -------- ------ -------
Indicated 31,511 0.83 0.84
----------------------------- -------- ------ -------
Measured +
Indicated 38,291 0.86 1.06
----------------------------- -------- ------ -------
Inferred 10,259 0.99 0.33
----------------------------- -------- ------ -------
Refractory Measured - - -
---------------- ------------ -------- ------ -------
Indicated - - -
----------------------------- -------- ------ -------
Measured +
Indicated - - -
----------------------------- -------- ------ -------
Inferred - - -
----------------------------- -------- ------ -------
Note: All Pokrovka & Burinda Mineral Resources is for open
pit extraction
Tokur
(WAI, 2010, in accordance with JORC Code 2004)
Category Tonnage Grade Metal
(kt) (g/t (Moz)
Au)
---------------- ------------ -------- ------ -------
Total Measured 11,952 1.30 0.50
---------------- ------------ -------- ------ -------
Indicated 16,096 1.06 0.55
----------------------------- -------- ------ -------
Measured +
Indicated 28,048 1.16 1.05
----------------------------- -------- ------ -------
Inferred 10,706 1.09 0.38
----------------------------- -------- ------ -------
Non-Refractory Measured 11,952 1.30 0.50
---------------- ------------ -------- ------ -------
Indicated 16,096 1.06 0.55
----------------------------- -------- ------ -------
Measured +
Indicated 28,048 1.16 1.05
----------------------------- -------- ------ -------
Inferred 10,706 1.09 0.38
----------------------------- -------- ------ -------
Refractory Measured - - -
---------------- ------------ -------- ------ -------
Indicated - - -
----------------------------- -------- ------ -------
Measured +
Indicated - - -
----------------------------- -------- ------ -------
Inferred - - -
----------------------------- -------- ------ -------
Note: All Tokur Mineral Resources is for open pit extraction
Notes to Mineral Resource Statement:
(1) Mineral Resources include Ore Reserves.
(2) Mineral Resources for Pokrovskiy, Pioneer, Malomir and Albyn
are audited by WAI in accordance with JORC Code 2012 in April 2015
with a further review of changes in April 2016 and April 2017;
Mineral Resources for Tokur reviewed by WAI in 2010 in accordance
with JORC Code 2004.
(3) Open Pit Mineral Resources for Pokrovskiy, Pioneer, Malomir
and Albyn are constrained by conceptual open-pit shells at a
US$1,500/oz long term gold price.; Tokur Mineral Resources have no
open pit constraints.
(4) The cut-off grade for the Mineral Resource for open pit
mining varies from 0.30 to 0.4g/t depending on the type of
mineralisation and proposed processing method.
(5) Minimum mining widths dependant on reconciliation have been
applied to the open pit Mineral Resource.
(6) Mineral Resources for potential underground extraction were
audited by WAI in accordance with JORC Code 2012 in April 2017.
(7) Cut-off grade is 1.5g/t is used to report Mineral Resource for potential underground mining.
(8) Mineral resources are not reserves until they have
demonstrated economic viability based on a feasibility or
pre-feasibility study.
(9) Grade represents estimated contained metal in the ground and
has not been adjusted for metallurgical recovery.
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.
The financial information set out above does not constitute the
company's statutory accounts for the years ended 31 December 2016
or 2015, but is derived from those accounts. Statutory accounts for
2015 have been delivered to the Registrar of Companies and those
for 2016 will be delivered following the company's annual general
meeting. The auditors have reported on those accounts: their
reports were unqualified, did not draw attention to any matters by
way of emphasis and did not contain statements under s498(2) or (3)
of the Companies Act 2006.
PETROPAVLOVSK PLC
Consolidated Income Statement
For the year ended 31 December 2016
2016 2015
note US$'000 US$'000
------------------------------------------------- ---- ----------------------- ---------
Continuing operations
Group revenue 5 540,684 599,914
Operating expenses 6 (460,103) (619,635)
------------------------------------------------- ---- ----------------------- ---------
80,581 (19,721)
Share of results of associates 14 (3,581) (60,422)
------------------------------------------------- ---- ----------------------- ---------
Operating profit/(loss) 77,000 (80,143)
Investment income 9 556 1,018
Interest expense 9 (60,976) (71,514)
Other finance gains 9 11,976 9,064
Other finance losses 9 (1,548) -
------------------------------------------------- ---- ----------------------- ---------
Profit/(loss) before taxation 27,008 (141,575)
Taxation 10 4,698 (48,879)
------------------------------------------------- ---- ----------------------- ---------
Profit/(loss) for the period from continuing
operations 31,706 (190,454)
------------------------------------------------- ---- ----------------------- ---------
Discontinued operations (a)
Loss for the period from discontinued operations - (107,023)
------------------------------------------------- ---- ----------------------- ---------
Profit/(loss) for the period 31,706 (297,477)
------------------------------------------------- ---- ----------------------- ---------
Attributable to:
Equity shareholders of Petropavlovsk PLC 33,719 (238,759)
------------------------------------------------- ---- ----------------------- ---------
Continuing operations 33,719 (190,155)
Discontinued operations - (48,604)
------------------------------------------------- ---- ----------------------- ---------
Non-controlling interests (2,013) (58,718)
------------------------------------------------- ---- ----------------------- ---------
Continuing operations (2,013) (299)
Discontinued operations - (58,419)
------------------------------------------------- ---- ----------------------- ---------
Profit/(loss) per share
Basic profit/(loss) per share 11
From continuing operations US$0.01 (US$0.07)
From discontinued operations - (US$0.02)
------------------------------------------------- ---- ----------------------- ---------
US$0.01 (US$0.09)
------------------------------------------------- ---- ----------------------- ---------
Diluted profit/(loss) per share 11
From continuing operations US$0.01 (US$0.07)
From discontinued operations - (US$0.02)
------------------------------------------------- ---- ----------------------- ---------
US$0.01 (US$0.09)
------------------------------------------------- ---- ----------------------- ---------
(a) IRC was presented as a discontinued operation in the income
statement for the period from 1 January until 7 August 2015, when
it ceased being a subsidiary and became an associate to the
Group.
PETROPAVLOVSK PLC
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2016
2016 2015
US$'000 US$'000
----------------------------------------------------- --------------------- ---------
Profit/(loss) for the period 31,706 (297,477)
------------------------------------------------------ --------------------- ---------
Items that may be reclassified subsequently
to profit or loss:
----------------------------------------------------- --------------------- ---------
Revaluation of available-for-sale investments 834 161
Exchange differences:
Exchange differences on translating foreign
operations 2,577 (4,121)
Transfer of foreign currency translation
reserve to profit or loss on disposal of
a foreign operation - 2,601
Share of other comprehensive income of associate 560 -
Cash flow hedges:
Fair value (losses)/gains (4,940) 7,090
Tax thereon 988 (1,418)
Transfer to revenue 8,494 (9,436)
Tax thereon (1,699) 1,888
Other comprehensive profit/(loss) for the
period net of tax 6,814 (3,235)
------------------------------------------------------ --------------------- ---------
Total comprehensive profit/(loss) for the
period 38,520 (300,712)
------------------------------------------------------ --------------------- ---------
Attributable to:
Equity shareholders of Petropavlovsk PLC 40,494 (241,916)
Non-controlling interests (1,974) (58,796)
------------------------------------------------------ --------------------- ---------
38,520 (300,712)
----------------------------------------------------- --------------------- ---------
Total comprehensive profit/(loss) for the
period attributable to equity shareholders
of Petropavlovsk PLC arises from:
Continuing operations 40,494 (195,360)
Discontinued operations (a) - (46,556)
------------------------------------------------------ --------------------- ---------
40,494 (241,916)
----------------------------------------------------- --------------------- ---------
(a) IRC was presented as a discontinued operation in the income
statement for the period from 1 January 2015 until 7 August 2015,
when it ceased being a subsidiary and became an associate to the
Group.
PETROPAVLOVSK PLC
Consolidated Balance Sheet
At 31 December 2016
note 2016 2015
US$'000 US$'000
----------------------------------------------- ----- ---------- ----------
Assets
Non-current assets
Exploration and evaluation assets 12 49,270 68,993
Property, plant and equipment 13 953,794 1,038,343
Prepayments for property, plant and equipment 694 1,841
Investments in associates 14 36,140 39,394
Available-for-sale investments 1,105 271
Inventories 15 51,686 51,434
Other non-current assets 2,154 175
1,094,843 1,200,451
----------------------------------------------- ----- ---------- ----------
Current assets
Inventories 15 183,266 175,222
Trade and other receivables 16 89,736 48,096
Derivative financial instruments 18 7,478 3,925
Cash and cash equivalents 17 12,642 28,239
----------------------------------------------- ----- ---------- ----------
293,122 255,482
----------------------------------------------- ----- ---------- ----------
Total assets 1,387,965 1,455,933
----------------------------------------------- ----- ---------- ----------
Liabilities
Current liabilities
Trade and other payables 19 (55,638) (96,567)
Current income tax payable (2,288) (4,748)
Borrowings 20 (85,306) (260,248)
(143,232) (361,563)
----------------------------------------------- ----- ---------- ----------
Net current assets/(liabilities) 149,890 (106,081)
----------------------------------------------- ----- ---------- ----------
Non-current liabilities
Borrowings 20 (525,906) (378,030)
Derivative financial instruments 18 (10,314) (14,684)
Deferred tax liabilities 21 (139,728) (173,499)
Provision for close down and restoration
costs 22 (19,152) (17,184)
----------------------------------------------- ----- ---------- ----------
(695,100) (583,397)
----------------------------------------------- ----- ---------- ----------
Total liabilities (838,332) (944,960)
----------------------------------------------- ----- ---------- ----------
Net assets 549,633 510,973
----------------------------------------------- ----- ---------- ----------
Equity
Share capital 23 48,920 48,874
Share premium 518,142 518,142
Own shares 24 - (8,933)
Hedging reserve 5,900 3,096
Share based payments reserve - 280
Other reserves (17,574) (20,985)
Retained losses (22,202) (47,922)
----------------------------------------------- ----- ---------- ----------
Equity attributable to the shareholders
of Petropavlovsk PLC 533,186 492,552
----------------------------------------------- ----- ---------- ----------
Non-controlling interests 16,447 18,421
----------------------------------------------- ----- ---------- ----------
Total equity 549,633 510,973
----------------------------------------------- ----- ---------- ----------
These consolidated financial statements for Petropavlovsk PLC,
registered number 4343841, were approved by the Directors on 26
April 2017 and signed on their behalf by
Peter Hambro Andrey Maruta
Director Director
PETROPAVLOVSK PLC
Consolidated Statement of Changes in Equity
For the year ended 31 December 2016
Total attributable to equity holders of Petropavlovsk PLC
Share
Convertible based
Share Share Own bond payments Hedging Other Retained Non-controlling Total
capital premium shares(a) Reserve reserve reserve reserves(b) earnings/(losses) Total interests equity
US$'000 US$'000 US$'000 US$'000 US$' 000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
--------------- --------- ---------- ---------- ------------ --------- -------- ------------ ------------------ ---------- ---------------- ----------
Balance
at 1 January
2015 3,041 376,991 (8,925) 48,235 3,283 4,947 (16,709) 137,704 548,567 196,804 745,371
Total
comprehensive
(loss)/income - - - - - (1,851) (1,306) (238,759) (241,916) (58,796) (300,712)
---------------- --------- ---------- ---------- ------------ --------- -------- ------------ ------------------ ---------- ---------------- ----------
Loss for the
period - - - - - - - (238,759) (238,759) (58,718) (297,477)
Other
comprehensive
(loss)/income - - - - - (1,851) (1,306) - (3,157) (78) (3,235)
---------------- --------- ---------- ---------- ------------ --------- -------- ------------ ------------------ ---------- ---------------- ----------
Share based
payments - - - - 17 - - - 17 - 17
Deferred share
awards - - - - 280 - - - 280 - 280
Right issue and
settlement of
the -
Existing Bonds 45,833 141,151 (8) (48,235) - - - 48,235 186,976 - 186,976
Issue of
ordinary
shares by
subsidiaries - - - - - - - (2,487) (2,487) 51,921 49,434
Other
transaction
with non-
controlling
interests - - - - - - 866 249 1,115 243 1,358
Disposal of
subsidiaries
(c) - - - - (3,300) - (866) 4,166 - (171,751) (171,751)
Transfer to
retained
earnings - - - - - - (2,970) 2,970 - - -
Balance
at 31 December 18,421
2015 48,874 518,142 (8,933) - 280 3,096 (20,985) (47,922) 492,552 (d) 510,973
Total
comprehensive
income/(loss) - - - - - 2,804 3,411 34,279 40,494 (1,974) 38,520
---------------- --------- ---------- ---------- ------------ --------- -------- ------------ ------------------ ---------- ---------------- ----------
Profit/(loss)
for
the period - - - - - - - 33,719 33,719 (2,013) 31,706
Other
comprehensive
income/(loss) - - - - - 2,804 3,411 560 6,775 39 6,814
---------------- --------- ---------- ---------- ------------ --------- -------- ------------ ------------------ ---------- ---------------- ----------
Deferred share
awards 46 - 8,933 - (280) - - (8,559) 140 - 140
Balance
at 31 December
2016 48,920 518,142 - - - 5,900 (17,574) (22,202) 533,186 16,447 549,633
---------------- --------- ---------- ---------- ------------ --------- -------- ------------ ------------------ ---------- ---------------- ----------
(a) Own shares represented 1,441,406 Ordinary Shares held by the
Company's EBT until they were transferred upon vesting of the
Deferred Share Award on 1 May 2016.
(b) Including translation reserve of US$(15.6) million, 31 December 2015: US$(18.2) million.
(c) IRC Limited ('IRC') (note 14).
(d) IRC was the only non-wholly owned subsidiary of the Group
that had a material non-controlling interest (note 14).
PETROPAVLOVSK PLC
Consolidated Cash Flow Statement
For the year ended 31 December 2016
2016 2015 (a)
note US$'000 US$'000
----------------------------------------------------------------------- ----- ----------------------- -------------
Cash flows from operating activities
Cash generated from operations 25 126,013 208,841
Interest paid (53,708) (72,174)
Income tax paid (35,305) (33,287)
----------------------------------------------------------------------- ----- ----------------------- -------------
Net cash from operating activities 37,000 103,380
----------------------------------------------------------------------- ----- ----------------------- -------------
Cash flows from investing activities
Proceeds from disposal of subsidiaries, net of cash disposed and
liabilities settled 27 19,188 6,485
Proceeds from disposal of the Group's interests in associates 14 231 1,000
Purchase of property, plant and equipment (12,770) (58,804) (b)
Exploration expenditure (16,590) (18,854) (b)
Proceeds from disposal of property, plant and equipment 742 847
Loans granted - (47)
Repayment of amounts loaned to other parties 1 42
Interest received 540 2,183
Dividends received from joint venture - 917
----------------------------------------------------------------------- ----- ----------------------- -------------
Net cash used in investing activities (8,658) (66,231)
----------------------------------------------------------------------- ----- ----------------------- -------------
Cash flows from financing activities
Proceeds from issue of ordinary shares capital, net of transaction
costs - 156,163
Proceeds from issue of ordinary shares by IRC, net of transaction
costs - 49,434
Proceeds from borrowings 295,250(c) 82,885(d)
Repayments of borrowings (322,221)(c) (304,178)(d)
Debt transaction costs paid in connection with bank loans (4,031) (1,896)
Debt transaction costs paid in connection with ICBC facility - (72)
Restricted bank deposit placed in connection with ICBC facility - (1,000)
Refinancing costs - (34,418)
Funds advanced to the Group under investment agreement with the
Russian Ministry of Far East
Development 32 30,771 15,093
Funds transferred under investment agreement with the Russian Ministry
of Far East Development 32 (47,665) -
Guarantee fee in connection with ICBC facility 1,126 2,169
Dividends paid to non-controlling interests - (536)
Purchase of own shares - (8)
----------------------------------------------------------------------- ----- ----------------------- -------------
Net cash used in financing activities (46,770) (36,364)
----------------------------------------------------------------------- ----- ----------------------- -------------
Net (decrease)/increase in cash and cash equivalents in the period (18,428) 785
Effect of exchange rates on cash and cash equivalents 2,831 (5,270)
Cash and cash equivalents at beginning of period 17 28,239 48,080
Cash and cash equivalents re-classified as assets held for sale
at beginning of the period - 55,459
Cash and cash equivalents re-classified as assets held for sale at
disposal - (70,815)
Cash and cash equivalents at end of period 17 12,642 28,239
----------------------------------------------------------------------- ----- ----------------------- -------------
(a) IRC was presented as a discontinued operation in the income
statement for the period from 1 January until 7 August 2015, when
it ceased being a subsidiary and became an associate to the
Group.
(b) Including US$45.1 million related to discontinued operations
for the year ended 31 December 2015.
(c) Including US$295.25 million in conenction to bank debt refinancing (note 20).
(d) Including US$62.5 million proceeds from borrowings and
US$36.2 million repayments of borrowings for the year ended 31
December 2015 related to discontinued operations.
PETROPAVLOVSK PLC
Notes to the Consolidated Financial Statements
For the year ended 31 December 2016
1. General information
Petropavlovsk PLC (the 'Company') is a company incorporated and
registered in England and Wales. The address of the registered
office is 11 Grosvenor Place, London SW1X 7HH.
2. Significant accounting policies
2.1. Basis of preparation and presentation
The consolidated financial statements of Petropavlovsk PLC and
its subsidiaries (the 'Group') have been prepared in accordance
with International Financial Reporting Standards ('IFRS') as
adopted by the European Union, IFRIC Interpretations and the
Companies Act 2006. The consolidated financial statements have been
prepared under the historical cost convention, as modified by the
revaluation of available-for-sale financial investments, financial
assets and financial liabilities (including derivative instruments)
at fair value through profit or loss. The principal accounting
policies applied in the preparation of these consolidated financial
statements are set out below. These policies have been consistently
applied to all years presented, unless otherwise stated.
Going concern
The Group monitors and manages its liquidity risk on an ongoing
basis to ensure that it has access to sufficient funds to meet its
obligations. Cash forecasts are prepared regularly based on a
number of inputs including, but not limited to, forecast commodity
prices and impact of hedging arrangements, the Group's mining plan,
forecast expenditure and debt repayment schedules. Sensitivities
are run for different scenarios including, but not limited to,
changes in commodity prices, cost inflation, different production
rates from the Group's producing assets and the timing of
expenditure on development projects. This is done to identify risks
to liquidity and covenant compliance and enable management to
develop appropriate and timely mitigation strategies. The Group
meets its capital requirements through a combination of sources
including cash generated from operations and external debt.
The Group performed an assessment of the forecast cash flows and
covenant compliance in relation to bank facilities for the period
of 12 months from the date of approval of the 2016 Annual Report
and Accounts. As at 31 December 2016, the Group had sufficient
liquidity headroom and complied with related financial covenants.
Following the successful completion of the Bank Debt Refinancing,
the Group is also satisfied that it has sufficient headroom under a
base case scenario for the period to May 2018 and expects to comply
with related financial covenants. In the meantime, the Group's
projections under a reasonable downside scenario indicate that,
unless mitigating actions can be taken including accessing deposits
not currently in the Group's mining plan, there will be
insufficient liquidity and non-compliance with certain financial
covenants under a reasonable downside scenario for the relevant
period to May 2018. If a missed debt repayment occurs or financial
covenant requirements are not met, this would result in events of
default which, through cross-defaults and cross-accelerations,
could cause all other Group's debt arrangements to become repayable
on demand. The Directors are confident that, should it be required,
relevant mitigating actions could be successfully implemented.
The Group has guaranteed the outstanding amounts IRC owes to
ICBC. The outstanding loan principal was US$234 million as at 31
December 2016. The assessment of whether there is any material
uncertainty that IRC will be able to repay this facility as it
falls due is another key element of the Group's overall going
concern assessment. IRC has agreed with ICBC to restructure and
reschedule two repayment instalments under the ICBC Facility
Agreement, which are originally due for payment on 20 June 2017 and
20 December 2017, with next repayment instalment due on 20 June
2018. IRC also obtained waivers from ICBC in respect of obligations
to maintain certain cash deposits with ICBC until 30 June 2018 and
obligations to comply with certain financial covenants until 31
December 2017 (inclusive).
Having taken into account the aforementioned factors, and after
making enquiries and considering the uncertainties described above,
the Directors have a reasonable expectation that the Group will
have adequate resources to continue in operational existence for
the foreseeable future, being at least the next 12 months from the
date of approval of the 2016 Annual Report and Accounts.
Accordingly, they continue to adopt the going concern basis of
accounting in preparing these consolidated financial
statements.
2.2. Adoption of new and revised standards and interpretations
New and revised standards and interpretations adopted for the
current reporting period
The following new and revised Standards and Interpretations that
were effective for annual periods beginning on or after 1 January
2016 and applicable to the Group have been adopted:
- Amendments to IAS 1 'Presentation of Financial Statements';
- Amendments to IAS 16 and IAS 38 'Clarification of Acceptable
Methods of Depreciation and Amortisation';
- Amendments to IFRS 10 and IAS 28 'Sale or Contribution of
Assets between an Investor and its Associate or Joint Venture';
- Annual improvements to IFRSs: 2012-2014 Cycle
These standards, amendments, and interpretations have not had a
significant impact on amounts reported, presentation or disclosure
in these consolidated financial statements.
New standards, amendments and interpretations that are
applicable to the Group, issued but not yet effective for the
reporting period beginning 1 January 2016 and not early adopted
At the date of approval of these financial statements, the
following Standards and Interpretations which have not been applied
in these consolidated financial statements were in issue but not
yet effective (and in some cases had not yet been adopted by the
EU):
- IFRS 9 'Financial instruments':
The standard addresses the classification, measurement and
recognition of financial assets and financial liabilities,
introduces new rules for hedge accounting and a new impairment
model for financial assets. The standard is effective for annual
periods beginning in or after 1 January 2018.
Classification and measurement: IFRS 9 establishes a
principles-based approach to determining whether a financial asset
should be measured at amortised cost or fair value, based on the
cash flow characteristics of the asset and the business model in
which the asset is held. The Group anticipates that the
classification and measurement basis for its financial assets will
be largely unchanged under this model.
Impairment: The new impairment model requires the recognition of
impairment provision based on expected credit losses rather than
only incurred credit losses. While the Group has not yet undertaken
a detailed assessment of how its impairment provision will be
affected by the new model, it may result in an earlier recognition
of credit losses.
Hedge accounting: The adoption of the new standard would not
materially change the amounts recognised in relation to existing
hedging arrangements but could provide scope to apply hedge
accounting to a broader range of transactions in the future.
- IFRS 15 'Revenue from contracts with customers'
The standard replaces IAS 18 'Revenue' and IAS 11 'Construction
Contracts' and related interpretations and is effective for annual
periods beginning in or after 1 January 2018.
The new standard is based on the principal that revenue is
recognised when control of a good or service is transferred to a
customer.
The Group's revenue is predominantly derived from gold sales,
where the point of recognition is dependent on the contract sales
terms. As the transfer of risks and rewards generally coincides
with the transfer of control at a point in time, the timing and
amount of revenue recognised for the sale of gold is unlikely to be
materially affected.
- IFRS 16 'Leases'
The standard replaces IAS 17 'Accounting for Leases' and related
interpretations and is effective for annual periods beginning in or
after 1 January 2019.
The standard will affect primarily the change the accounting
treatment by lessees of leases currently classified as operating
leases. Lease agreements will give rise to the recognition by the
lessee of an asset, representing the right to use the leased item,
and a related liability for future lease payments. Lease costs will
be recognised in the income statement in the form of depreciation
of the right-of-use asset over the lease term, and finance charges
representing the unwind of the discount on the lease liability. The
accounting for lessors will not significantly change.
As at the reporting date, the Group has non-cancellable
operating lease commitments (note 31). However, the Group has not
yet determined to what extent these commitments will result in the
recognition of an asset and a liability for future payments and how
this will affect the Group's profit and classification of cash
flows. Some of the commitments may be covered by the exception for
short-term and low-value leases and some commitments may relate to
arrangements that will not qualify as leases under IFRS 16. Based
on the volume of lease arrangements, the Group's assets and
liabilities and profit are unlikely to be materially affected.
There are no other standards and amendments that are not yet
effective and would be expected to have a significant impact on the
Group's financial statements.
2.3. Basis of consolidation
These consolidated financial statements consist of the financial
statements of the Company and its subsidiaries as at the balance
sheet date. Subsidiaries are all entities over which the Group has
control.
Control is achieved when the Group is exposed, or has rights, to
variable returns from its involvement with the subsidiary and has
the ability to affect those returns through its power over the
subsidiary. Specifically, the Group controls a subsidiary if, and
only if, it has all of the following:
- power over the subsidiary (i.e. existing rights that give it
the current ability to direct the relevant activities of the
subsidiary);
- exposure, or rights, to variable returns from its involvement with the subsidiary; and
- the ability to use its power over the subsidiary to affect its returns.
When the Group has less than a majority of the voting rights of
a subsidiary or similar rights of a subsidiary, it considers all
relevant facts and circumstances in assessing whether it has power
over the subsidiary including:
- the size of the Group's holding of voting rights relative to
the size and dispersion of holdings of the other vote holders;
- potential voting rights held by the Group, other vote holders or other parties;
- rights arising from other contractual arrangements; and
- any additional facts and circumstances that indicate that the
Group has, or does not have, the current ability to direct the
relevant activities at the time that decisions need to be made,
including voting patterns at previous shareholders' meetings.
The Company reassesses whether or not it controls a subsidiary
if facts and circumstances indicate that there are changes to one
or more of the three elements of control listed above.
Consolidation of a subsidiary begins when the Group obtains
control over the subsidiary and ceases when the Group loses control
of the subsidiary. Specifically, income and expenses of a
subsidiary acquired or disposed of during the year are included in
the consolidated statement of income and other comprehensive income
from the date the Group gains control until the date when the Group
ceases to control the subsidiary.
Inter-company transactions, balances and unrealised gains on
transactions between Group companies are eliminated on
consolidation. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset
transferred. Where necessary, adjustments are made to the financial
statements of subsidiaries to ensure consistency of accounting
policies with the policies adopted by the Group.
Non-controlling interests in the net assets of consolidated
subsidiaries are identified separately from the Group's equity
therein. The interests of non-controlling shareholders may be
initially measured at fair value or at the non-controlling
interests' proportionate share of the fair value of the acquiree's
identifiable net assets. The choice of measurement is made on an
acquisition-by-acquisition basis. Subsequent to acquisition, the
carrying amount of non-controlling interests is the amount of those
interests at initial recognition plus the non-controlling
interests' share of subsequent changes in equity. The recognised
income and expense are attributed to non-controlling interests even
if this results in the non-controlling interests having a deficit
balance.
2.4. Non-controlling interests
The Group treats transactions with non-controlling interests as
transactions with equity owners. For purchases from non-controlling
interests, the difference between any consideration paid and the
relevant share acquired of the carrying value of net assets of the
subsidiary is recorded in equity. Gains or losses on disposals to
non-controlling interests are also recorded in equity.
2.5. Investments in associates
An associate is an entity over which the Group is in a position
to exercise significant influence and that is neither a subsidiary
nor an interest in a joint venture. Significant influence is the
power to participate in the financial and operating policy
decisions of the investee but is not control or joint control over
those policies.
Investments in associates are accounted for using the equity
method of accounting, except when the investment is classified as
held for sale, in which case it is accounted for in accordance with
IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations. Investments in associates are carried in the balance
sheet at cost as adjusted by post-acquisition changes in the
Group's share of the net assets of the associate, less any
impairment in the value of individual investments. Losses of an
associate in excess of the Group's interest in that associate
(which includes any long-term interests that, in substance, form
part of the Group's net investment in the associate) are recognised
only to the extent that the Group has incurred legal or
constructive obligations or made payments on behalf of the
associate.
Any excess of the cost of acquisition over the Group's share of
the net fair value of the identifiable assets, liabilities and
contingent liabilities of the associate recognised at the date of
acquisition is recognised as goodwill. The goodwill is included
within the carrying amount of the investment and is assessed for
impairment as part of that investment. Any excess of the Group's
share of the net fair value of the identifiable assets, liabilities
and contingent liabilities over the cost of acquisition, after
reassessment, is recognised immediately in profit or loss.
When a Group entity transacts with an associate of the Group,
profits and losses are eliminated to the extent of the Group's
interest in the relevant associate. Losses may provide evidence of
an impairment of the asset transferred in which case appropriate
provision is made for the impairment.
2.6. Foreign currency translation
Items included in the financial statements of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates (the functional
currency). For the purpose of the consolidated financial
statements, the results and financial position of each Group
company are expressed in US Dollars, which is the Group's
presentation currency. The functional currency of the Company is
the US Dollar.
The rates of exchange used to translate balances from other
currencies into US Dollars were as follows (currency per US
Dollar):
Average year Average year
As at ended As at ended
31 December 31 December 31 December 31 December
2016 2016 2015 2015
--------------------- ------------- ------------- ------------- -------------
GB Pounds Sterling
(GBP : US$) 0.81 0.74 0.68 0.65
Russian Rouble (RUB
: US$) 60.66 67.18 72.88 61.30
--------------------- ------------- ------------- ------------- -------------
In preparing the financial statements of the individual
companies, transactions in currencies other than the entity's
functional currency (foreign currencies) are translated into the
functional currency using the exchange rates prevailing at the
dates of the transactions or valuation where items are remeasured.
Foreign exchange gains and losses resulting from the settlement of
such transactions and from the translation at the year-end exchange
rates of monetary assets and liabilities denominated in foreign
currencies are recognised in the income statement. Non-monetary
items carried at fair value that are denominated in foreign
currencies are translated at the rates prevailing at the date when
the fair value was determined. Non-monetary items that are measured
in terms of historical cost in a foreign currency are not
retranslated.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Group's foreign operations which
have a functional currency other than US Dollars are translated at
exchange rates prevailing on the balance sheet date. Income and
expense items are translated at the average exchange rates for the
year, unless exchange rates fluctuate significantly during that
year, in which case the exchange rates at the date of transactions
are used. Exchange differences arising, if any, are recognised in
other comprehensive income and expenses and accumulated in equity,
with share attributed to non-controlling interests as appropriate.
On the disposal of a foreign operation, all of the accumulated
exchange differences in respect of that operation attributable to
the shareholders of the Company are reclassified to profit or
loss.
Goodwill and fair value adjustments arising on the acquisition
of a foreign operation are treated as assets and liabilities of the
foreign operation.
2.7. Intangible assets
Exploration and evaluation expenditure and mineral rights
acquired
Exploration and evaluation expenditure incurred in relation to
those projects where such expenditure is considered likely to be
recoverable through future extraction activity or sale, or where
the exploration activities have not reached a stage which permits a
reasonable assessment of the existence of reserves, are capitalised
and recorded on the balance sheet within intangible assets for
mining projects at the exploration stage.
Exploration and evaluation expenditure comprise costs directly
attributable to:
- researching and analysing existing exploration data;
- conducting geological studies, exploratory drilling and sampling;
- examining and testing extraction and treatment methods;
- compiling pre-feasibility and feasibility studies; and
- costs incurred in acquiring mineral rights, the entry premiums
paid to gain access to areas of interest and amounts payable to
third parties to acquire interests in existing projects.
Mineral rights acquired through a business combination or an
asset acquisition are capitalised separately from goodwill if the
asset is separable or arises from contractual or legal rights and
the fair value can be measured reliably on initial recognition.
Exploration and evaluation expenditure capitalised and mining
rights acquired are subsequently valued at cost less impairment. In
circumstances where a project is abandoned, the cumulative
capitalised costs related to the project are written off in the
period when such decision is made.
Exploration and evaluation expenditure capitalised and mining
rights within intangible assets are not depreciated. These assets
are transferred to mine development costs within property, plant
and equipment when a decision is taken to proceed with the
development of the project.
2.8. Property, plant and equipment
Mine development costs
Development expenditure incurred by or on behalf of the Group is
accumulated separately for each area of interest in which
economically recoverable resources have been identified. Such
expenditure includes costs directly attributable to the
construction of a mine and the related infrastructure. Once a
development decision has been taken, the carrying amount of the
exploration and evaluation expenditure in respect of the area of
interest is aggregated with the development expenditure and
classified under non-current assets as 'mine development costs'.
Mine development costs are reclassified as 'mining assets' at the
end of the commissioning phase, when the mine is capable of
operating in the manner intended by management.
Mine development costs are not depreciated, except for property
plant and equipment used in the development of a mine. Such
property, plant and equipment are depreciated on a straight-line
basis based on estimated useful lives and depreciation is
capitalised as part of mine development costs.
Mining assets
Mining assets are stated at cost less accumulated depreciation.
Mining assets include the cost of acquiring and developing mining
assets and mineral rights, buildings, vehicles, plant and machinery
and other equipment located on mine sites and used in the mining
operations.
Mining assets, where economic benefits from the asset are
consumed in a pattern which is linked to the production level, are
depreciated using a units of production method based on the volume
of ore reserves. This results in a depreciation charge proportional
to the depletion of reserves. The basis for determining ore reserve
estimates is set out in note 3.2. Where the mining plan anticipates
future capital expenditure to support the mining activity over the
life of the mine, the depreciable amount is adjusted for such
estimated future expenditure.
Certain property, plant and equipment within mining assets are
depreciated based on estimated useful lives, if shorter than the
remaining life of the mine or if such property, plant and equipment
can be moved to another site subsequent to the mine closure.
Mining assets related to alluvial gold operations are
depreciated on a straight-line basis based on estimated useful
lives.
Non-mining assets
Non-mining assets are stated at cost less accumulated
depreciation. Non-mining assets are depreciated on a straight-line
basis based on estimated useful lives.
Capital construction in progress
Capital construction in progress is stated at cost. On
completion, the cost of construction is transferred to the
appropriate category of property, plant and equipment. Capital
construction in progress is not depreciated.
Depreciation
Property, plant and equipment are depreciated using a units of
production method as set out above or on a straight-line basis
based on estimated useful lives. Estimated useful lives normally
vary as set out below.
Average life
Number of
years
--------------------- -------------
Buildings 15-50
Plant and machinery 3-20
Vehicles 5-7
Office equipment 5-10
Computer equipment 3-5
--------------------- -------------
Residual values and useful lives are reviewed and adjusted if
appropriate, at each balance sheet date. Changes to the estimated
residual values or useful lives are accounted for
prospectively.
2.9. Impairment of non-financial assets
Property, plant and equipment and finite life intangible assets
are reviewed by management for impairment if there is any
indication that the carrying amount may not be recoverable. This
applies to the Group's share of the assets held by the joint
ventures as well as the assets held by the Group itself.
When a review for impairment is conducted, the recoverable
amount is assessed by reference to the higher of 'value in use'
(being the net present value of expected future cash flows of the
relevant cash generating unit) or 'fair value less costs to sell'.
Where there is no binding sale agreement or active market, fair
value less costs to sell is based on the best information available
to reflect the amount the Group could receive for the cash
generating unit in an arm's length transaction. Future cash flows
are based on:
- estimates of the quantities of the reserves and mineral
resources for which there is a high degree of confidence of
economic extraction;
- future production levels;
- future commodity prices (assuming the current market prices
will revert to the Group's assessment of the long-term average
price, generally over a period of up to five years); and
- future cash costs of production, capital expenditure,
environment protection, rehabilitation and closure.
IAS 36 'Impairment of assets' includes a number of restrictions
on the future cash flows that can be recognised in respect of
future restructurings and improvement related capital expenditure.
When calculating 'value in use', it also requires that calculations
should be based on exchange rates current at the time of the
assessment.
For operations with a functional currency other than the US
Dollar, the impairment review is undertaken in the relevant
functional currency. These estimates are based on detailed mine
plans and operating budgets, modified as appropriate to meet the
requirements of IAS 36 'Impairment of assets'.
The discount rate applied is based upon a post-tax discount rate
that reflects current market assessments of the time value of money
and the risks associated with the relevant cash flows, to the
extent that such risks are not reflected in the forecast cash
flows.
If the carrying amount of the asset exceeds its recoverable
amount, the asset is impaired and an impairment loss is charged to
the income statement so as to reduce the carrying amount in the
balance sheet to its recoverable amount. A previously recognised
impairment loss is reversed if the recoverable amount increases as
a result of a reversal of the conditions that originally resulted
in the impairment. This reversal is recognised in the income
statement and is limited to the carrying amount that would have
been determined, net of depreciation, had no impairment loss been
recognised in prior years.
2.10. Deferred stripping costs
In open pit mining operations, removal of overburden and other
waste materials, referred to as stripping, is required to obtain
access to the ore body.
Stripping costs incurred during the development of the mine are
capitalised as part of mine development costs and are subsequently
depreciated over the life of a mine on a units of production
basis.
Stripping costs incurred during the production phase of a mine
are deferred as part of cost of inventory and are written off to
the income statement in the period over which economic benefits
related to the stripping activity are realised where this is the
most appropriate basis for matching the costs against the related
economic benefits.
Where, during the production phase, further development of the
mine requires a phase of unusually high overburden removal activity
that is similar in nature to pre-production mine development, such
stripping costs are considered in a manner consistent with
stripping costs incurred during the development of the mine before
the commercial production commences.
In gold alluvial operations, stripping activity is sometimes
undertaken in preparation for the next season. Stripping costs are
then deferred as part of cost of inventory and are written off to
the income statement in the following year to match related
production.
2.11. Provisions for close down and restoration costs
Close down and restoration costs include the dismantling and
demolition of infrastructure and the removal of residual materials
and remediation of disturbed areas. Close down and restoration
costs are provided for in the accounting period when the legal or
constructive obligation arising from the related disturbance
occurs, whether this occurs during the mine development or during
the production phase, based on the net present value of estimated
future costs. Provisions for close down and restoration costs do
not include any additional obligations which are expected to arise
from future disturbance. The costs are estimated on the basis of a
closure plan. The cost estimates are calculated annually during the
life of the operation to reflect known developments and are subject
to formal review at regular intervals.
The amortisation or unwinding of the discount applied in
establishing the net present value of provisions is charged to the
income statement in each accounting period. The amortisation of the
discount is shown as a financing cost, rather than as an operating
cost. Other movements in the provisions for close down and
restoration costs, including those resulting from new disturbance,
updated cost estimates, changes to the lives of operations and
revisions to discount rates are capitalised within property, plant
and equipment. These costs are then depreciated over the lives of
the assets to which they relate.
Where rehabilitation is conducted systematically over the life
of the operation, rather than at the time of closure, provision is
made for the outstanding continuous rehabilitation work at each
balance sheet date. All other costs of continuous rehabilitation
are charged to the income statement as incurred.
Changes in the measurement of a liability relating to the
decommissioning of plant or other site preparation work (that
result from changes in the estimated timing or amount of the cash
flow or a change in the discount rate), are added to or deducted
from the cost of the related asset in the current period. If a
decrease in the liability exceeds the carrying amount of the asset,
the excess is recognised immediately in the income statement. If
the asset value is increased and there is an indication that the
revised carrying value is not recoverable, an impairment test is
performed in accordance with the accounting policy set out
above.
2.12. Financial instruments
Financial instruments recognised in the balance sheet include
cash and cash equivalents, other investments, trade and other
receivables, borrowings, derivatives, and trade and other
payables.
Financial instruments are initially measured at fair value when
the Group becomes a party to their contractual arrangements.
Transaction costs are included in the initial measurement of
financial instruments, except financial instruments classified as
at fair value through profit or loss. The subsequent measurement of
financial instruments is dealt with below.
Financial assets
Financial assets are classified into the following specified
categories: 'financial assets at fair value through profit or
loss', 'held-to-maturity investments', 'available-for-sale
financial assets' and 'loans and receivables'. The classification
depends on the nature and purpose of the financial assets and is
determined at the time of initial recognition. Financial assets are
recognised at trade-date, the date on which the Group commits to
purchase the asset. The Group does not hold any financial assets
which meet the definition of 'held-to-maturity investments'.
Financial assets at fair value through profit or loss
This category has two sub-categories: financial assets held for
trading, and those designated at fair value through profit or loss
at inception. A financial asset is classified in this category if
acquired principally for the purpose of selling in the short term
or if so designated by management. Derivatives are also categorised
as held for trading unless they are designated as hedges. Assets in
this category are classified as current if they are either held for
trading or are expected to be realised within 12 months of the
balance sheet date.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial
assets that are either designated in this category or not
classified in any of the other categories. They are included within
non-current assets unless the investment matures or management
intends to dispose of them within 12 months of the balance sheet
date. Available-for-sale financial assets are initially measured at
cost and subsequently carried at fair value. Changes in the
carrying amount of available-for-sale financial assets are
recognised in other comprehensive income and accumulated under the
heading of other reserve in equity. When the investment is disposed
of or is determined to be impaired, the cumulative gain or loss
previously accumulated in equity is reclassified to the income
statement.
Loans and receivables
Loans and receivables are non-derivative financial assets fixed
or determinable payments that are not quoted on an active market.
Loans and receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method, less any impairment. Interest income is recognised
by applying the effective interest rate, except for short-term
receivables when the recognition of interest would be
immaterial.
Effective interest method
The effective interest rate method is a method of calculating
the amortised cost of a financial asset and of allocating interest
income over the relevant period. The effective interest rate is the
rate that exactly discounts estimated future cash receipts through
the expected life of the financial asset, or where appropriate, a
shorter period, to the net carrying amount on initial
recognition.
Cash and cash equivalents
Cash and cash equivalents are defined as cash on hand, demand
deposits and short-term, highly liquid investments readily
convertible to known amounts of cash and subject to insignificant
risk of changes in value and are measured at cost which is deemed
to be fair value as they have a short-term maturity.
Trade receivables
Trade receivables are measured on initial recognition at fair
value and are subsequently measured at amortised cost using the
effective interest rate method. Impairment of trade receivables is
established when there is objective evidence as a result of a loss
event that the Group will not be able to collect all amounts due
according to the original terms of the receivables. The amount of
the impairment is the difference between the asset's carrying
amount and the present value of estimated future cash flows,
discounted at the original effective interest rate. The impairment
is recognised in the income statement.
Other investments
Listed investments and unlisted equity investments, other than
investments in subsidiaries, joint ventures and associates, are
classified as available-for-sale financial assets and subsequently
measured at fair value. Fair values for unlisted equity investments
are estimated using methods reflecting the economic circumstances
of the investee. Equity investments for which fair value cannot be
measured reliably are recognised at cost less impairment. Changes
in the carrying amount of available-for-sale financial assets are
recognised in other comprehensive income and accumulated under
within Other reserves in equity. When the investment is disposed of
or is determined to be impaired, the cumulative gain or loss
previously accumulated in the investments revaluation reserve is
reclassified to the income statement as 'gains and losses from
investment securities'.
Financial liabilities
Financial liabilities, other than derivatives, are measured on
initial recognition at fair value and are subsequently measured at
amortised cost, using the effective interest rate method.
Borrowings
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently stated at
amortised cost; any difference between the proceeds (net of
transaction costs) and the redemption value is recognised in the
income statement over the period of the borrowings using the
effective interest method.
Borrowings are classified as current liabilities unless the
Group has an unconditional right to defer settlement of the
liability for at least 12 months after the balance sheet date.
Derivative financial instruments
In accordance with IAS 39 the fair value of all derivatives is
separately recorded on the balance sheet. Derivatives are initially
recognised at fair value at the date the derivative contracts are
entered into and are subsequently remeasured to their fair value at
the balance sheet date. The resulting gain or loss is recognised in
the income statement immediately unless the derivative is
designated and effective as a hedging instrument, in which event
the timing of the recognition in the income statement depends on
the nature of the hedge relationship.
Derivatives embedded in other financial instruments or
non-financial host contracts are treated as separate derivatives
when their risks and characteristics are not closely related to
their host-contract and the host contract is not carried at fair
value. Embedded derivatives are recognised at fair value at
inception. Any change to the fair value of the embedded derivatives
is recognised in other finance gains or losses within the income
statement. Embedded derivatives which are settled net are disclosed
in line with the maturity of their host contracts.
The fair value of embedded derivatives is determined by using
market prices where available. In other cases, fair value will be
calculated using quotations from independent financial
institutions, or by using appropriate valuation techniques.
Hedge accounting
The Group designates certain derivative financial instruments as
hedging relationships. For the purposes of hedge accounting,
hedging relationships may be of three types:
- Fair value hedges are hedges of particular risks that may
change the fair value of a recognised asset or liability;
- Cash flow hedges are hedges of particular risks that may
change the amount or timing of future cash flows; and
- Hedges of net investment in a foreign entity are hedges of
particular risks that may change the carrying value of the net
assets of a foreign entity.
Currently the Group only has cash flow hedge relationships.
To qualify for hedge accounting the hedging relationship must
meet several strict conditions on documentation, probability of
occurrence, hedge effectiveness and reliability of measurement. If
these conditions are not met, then the relationship does not
qualify for hedge accounting. In this case the hedging instrument
and the hedged item are reported independently as if there were no
hedging relationship.
The effective portion of changes in fair value of derivatives
that are designated and qualify as cash flow hedges is recognised
in other comprehensive income. The fair value gain or loss relating
to the ineffective portion is recognised immediately in profit or
loss.
Amounts previously recognised in other comprehensive income and
accumulated in hedging reserve in equity are reclassified to profit
or loss in the periods when the hedged item is recognised in profit
or loss, in the same line of the income statement as the recognised
hedged item.
Hedge accounting is discontinued when the Group revokes the
hedging relationship, the hedging instrument expires or is sold,
terminated or exercised, or no longer qualifies for hedge
accounting. Any gain or loss recognised in other comprehensive
income at that time is accumulated in equity and is reclassified to
profit or loss when the forecast transaction is ultimately
recognised in profit or loss. When a forecast transaction is no
longer expected to occur, the gain or loss accumulated in equity is
recognised immediately in profit or loss.
Trade payables
Trade payables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of the Group after deducting all of its
liabilities. Equity instruments issued are recorded at the proceeds
received, net of direct issue cost.
Impairment of financial assets
The Group assesses at each balance sheet date whether there is
objective evidence that a financial asset or a group of financial
assets is impaired. In the case of equity securities classified as
available-for-sale, a significant or prolonged decline in the fair
value of the security below its cost is considered in determining
whether the securities are impaired. If any such evidence exists
for available-for-sale financial assets, the cumulative loss -
measured as the difference between the acquisition cost and the
current fair value, less any impairment loss on that financial
asset previously recognised in profit or loss - is removed from
equity and recognised in the income statement. Impairment losses
recognised in the income statement on equity instruments are not
reversed.
2.13. Provisions
Provisions are recognised when the Group has a present
obligation, whether legal or constructive, as a result of a past
event for which it is probable that an outflow of resources
embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the
obligation.
Provisions are measured at the present value of management's
best estimate of the expenditure required to settle the obligation
at the balance sheet date. The discount rate used to determine the
present value reflects current market assessments of the time value
of money and the risks specific to the liability.
2.14. Inventories
Inventories include the following major categories:
- stores and spares represent raw materials consumed in the
production process as well as spare parts and other maintenance
supplies.
- construction materials represent materials for use in capital
construction and mine development.
- ore in stockpiles represent material that, at the time of
extraction, is expected to be processed into a saleable form and
sold at a profit. Ore in stockpiles is valued at the average cost
per tonne of mining and stockpiling the ore. Quantities of ore in
stockpiles ore are assessed through surveys and assays. Ore in
stockpiles is classified between current and non-current inventory
based on the expected processing schedule in accordance with the
Group's mining plan.
- work in progress inventory primarily represents gold in
processing circuit that has not completed the production process.
Work in progress inventory is valued at the average production
costs.
- deferred stripping costs are included in inventories where
appropriate, as set out in note 2.10.
Inventories are valued at the lower of cost and net realisable
value, with cost being determined primarily on a weighted average
cost basis.
Provisions are recorded to reduce ore in stockpiles, work in
process and finished goods inventory to net realisable value where
the net realisable value is lower than relevant inventory cost at
the balance sheet date. Net realisable value is determined with
reference to relevant market prices less estimated costs to
complete production and bring the inventory into its saleable form.
Provisions are also recorded to reduce mine operating supplies to
net realisable value, which is generally determined with reference
to salvage or scrap value, when it is determined that the supplies
are obsolete. Provisions are reversed to reflect subsequent
recoveries in net realisable value where the inventory is still on
hand at the balance sheet date.
2.15. Leases
Leases where the lessor retains substantially all the risks and
rewards of ownership are classified as operating leases. Payments
made under operating leases (net of any incentives received from
the lessor) are charged to the income statement on a straight-line
basis over the period of the lease.
2.16. Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable, stated at the invoiced value net of
discounts and value added tax.
Sales of gold and silver
The majority of the Group's revenue is derived from the sale of
refined gold and silver, the latter being a by-product of gold
production. Revenue from the sale of gold and silver is recognised
when:
- the risks and rewards of ownership as specified in individual
contracts are transferred to the buyer;
- the Group retains neither a continuing involvement nor control over the goods sold;
- the amount of revenue can be measured reliably; and
- it is probable that the economic benefits associated with the
transaction will flow to the Group.
Other revenue
Other revenue is recognised as follows:
- Engineering and construction contracts: When the outcome of a
construction contract can be estimated reliably, revenue and costs
are recognised by reference to the stage of completion of the
contract activity at the balance sheet date. When the outcome of a
construction contract cannot be estimated reliably, contract
revenue is recognised to the extent of contract costs incurred
where it is probable they will be recoverable. When it is probable
that contract costs will exceed total contract revenue, the
expected loss is recognised as an expense immediately.
- Revenue from sales of goods is recognised when the goods are
delivered to the buyer and the risks and benefits associated with
ownership are transferred to the buyer.
- Rental income from operating leases is recognised on a
straight line basis over the term of the relevant lease
2.17. Borrowing costs
Borrowing costs are generally expensed as incurred except where
they relate to the financing of acquisition, construction or
development of qualifying assets, which are mining projects under
development that necessarily take a substantial period of time to
get prepared for their intended use. Such borrowing costs are
capitalised and added to mine development costs of the mining
project when the decision is made to proceed with the development
of the project and until such time when the project is
substantially ready for its intended use (which is when commercial
production is ready to commence) or if active development is
suspended or ceases.
To the extent that funds are borrowed to finance a specific
mining project, borrowing costs capitalised represent the actual
borrowing costs incurred. To the extent that funds are borrowed for
the general purpose, borrowing costs capitalised are determined by
applying the interest rate applicable to appropriate borrowings
outstanding during the period to the average amount of capital
expenditure incurred to develop the relevant mining project during
the period.
2.18. Taxation
Tax expense for the period comprises current and deferred tax.
Tax is recognised in the income statement, except to the extent
that it relates to items recognised in the statement of
comprehensive income or directly in equity. In this case, the tax
is also recognised in the statement of comprehensive income or
directly in equity, respectively.
Current tax is the tax expected to be payable on the taxable
income for the year calculated using rates that have been enacted
or substantively enacted by the balance sheet date. It includes
adjustments for tax expected to be payable or recoverable in
respect of previous periods.
Full provision is made for deferred taxation on all temporary
differences existing at the balance sheet date with certain limited
exceptions. Temporary differences are the difference between the
carrying value of an asset or liability and its tax base. The main
exceptions to this principle are as follows:
- tax payable on the future remittance of the past earnings of
subsidiaries, associates and jointly controlled entities is
provided for except where the Company is able to control the
remittance of profits and it is probable that there will be no
remittance in the foreseeable future;
- deferred tax is not provided on the initial recognition of
goodwill or from the initial recognition of an asset or liability
in a transaction that does not affect accounting profit or taxable
profit and is not a business combination, such as on the
recognition of a provision for close down and restoration costs and
the related asset or on the inception of finance lease; and
- deferred tax assets are recognised only to the extent that it
is more likely than not that they will be recovered.
Deferred tax is provided in respect of fair value adjustments on
acquisitions. These adjustments may relate to assets such as mining
rights that, in general, are not eligible for income tax
allowances. In such cases, the provision for deferred tax is based
on the difference between the carrying value of the asset and its
nil income tax base.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised using tax rates that have been enacted, or substantively
enacted. Deferred tax is charged or credited in the income
statement, except when it relates to items charged or credited
directly to equity, in which case the deferred tax is also dealt
within equity.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set-off current tax assets against
current tax liabilities, when they relate to income taxes levied by
the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
3. Areas of judgement in applying accounting policies and key
sources of estimation uncertainty
When preparing the consolidated financial statements in
accordance with the accounting policies as set out in note 2,
management necessarily makes judgements and estimates that can have
a significant impact on the financial statements. These judgements
and estimates are based on management's best knowledge of the
relevant facts and circumstances and previous experience. Actual
results may differ from these estimates under different assumptions
and conditions.
3.1. Critical accounting judgements
Taxation
The Group is subject to income tax in the UK, Russian Federation
and Cyprus. Assessing the outcome of uncertain tax positions
requires judgements to be made. The Group recognises liabilities
for anticipated tax issues based on estimates of whether additional
taxes will be due, such estimates are based on the status of
ongoing discussions with the relevant tax authorities and advice
from independent tax advisers. Details of tax charge for the year
are set out in note 10.
Deferred tax assets, including those arising from tax losses
carried forward for the future tax periods, capital losses and
temporary differences, are recognised only where it is considered
more likely than not that they will be recovered. The likelihood of
such recoverability is dependent on the generation of sufficient
future taxable profits which a relevant deferred tax asset can be
utilised to offset.
Assumptions about the generation of future taxable profits
depend on management's estimates of future cash flows. Judgements
are also required about the application of income tax legislation.
These judgements and assumptions are subject to risk and
uncertainty and there is a possibility that changes in
circumstances will alter expectations, which may impact the amount
of deferred tax assets recognised on the balance sheet and the
amount of other tax losses and temporary differences not yet
recognised. In such circumstances, the carrying amount of
recognised deferred tax assets may require adjustment, resulting in
a corresponding charge or credit to the income statement.
Details of deferred tax disclosures out in note 21.
3.2. Key sources of estimation uncertainty
Ore reserve estimates
The Group estimates its ore reserves and mineral resources based
on the Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves (the JORC Code) and the
internally used Russian Classification System, adjusted to conform
with the mining activity to be undertaken under the Group mining
plan. Both the JORC Code and the Russian Classification System
require the use of reasonable investment assumptions when reporting
reserves, including future production estimates, expected future
commodity prices and production cash costs.
Ore reserve estimates are used in the calculation of
depreciation of mining assets using a units of production method
(note 13), impairment charges (note 6) and for forecasting the
timing of the payment of close down and restoration costs (note
22). Also, for the purposes of impairment reviews and the
assessment of life of mine for forecasting the timing of the
payment of close down and restoration costs, the Group may take
into account mineral resources in addition to ore reserves where
there is a high degree of confidence that such resources will be
extracted.
Ore reserve estimates may change from period to period as
additional geological data becomes available during the course of
operations or economic assumptions used to estimate reserves
change. Such changes in estimated reserves may affect the Group's
financial results and financial position in a number of ways,
including the following:
- asset carrying values due to changes in estimated future cash flows (note 6);
- depreciation charged in the income statement where such
charges are determined by using a units of production method or
where the useful economic lives of assets are determined with
reference to the life of the mine;
- provisions for close down and restoration costs where changes
in estimated reserves affect expectations about the timing of the
payment of such costs (note 22); and
- carrying value of deferred tax assets and liabilities (note
21) where changes in estimated reserves affect the carrying value
of the relevant assets and liabilities.
Exploration and evaluation costs
The Group's accounting policy for exploration and evaluation
expenditure results in exploration and evaluation expenditure being
capitalised for those projects where such expenditure is considered
likely to be recoverable through future extraction activity or sale
or where the exploration activities have not reached a stage which
permits a reasonable assessment of the existence of reserves. This
policy requires management to make certain estimates and
assumptions as to future events and circumstances, in particular
whether the Group will proceed with development based on existence
of reserves or whether an economically viable extraction operation
can be established. Such estimates and assumptions may change from
period to period as new information becomes available. If,
subsequent to the exploration and evaluation expenditure being
capitalised, a judgement is made that recovery of the expenditure
is unlikely or the project is to be abandoned, the relevant
capitalised amount will be written off to the income statement.
Details of exploration and evaluation assets are set out in note
12.
Deferred stripping costs
The calculation of deferred stripping costs requires the use of
estimates to assess the improved access to the ore to be mined in
future periods. Changes to the Group's mining plan and pit design
may result in changes to the timing of realisation of the stripping
activity. As a result, there could be significant adjustments to
the amounts of deferred stripping costs capitalised and their
classification between current and non-current assets. Details of
deferred stripping costs capitalised are set out in note 15.
Impairment and impairment reversals
The Group reviews the carrying values of its tangible and
exploration and evaluation assets to determine whether there is any
indication that those assets are impaired.
The recoverable amount of an asset, or cash-generating unit
('CGU'), is measured as the higher of fair value less costs to sell
and value in use.
Management necessarily apply their judgement in allocating
assets to CGUs as well as in making assumptions to be applied
within the value in use calculation. The key assumptions which
formed the basis of forecasting future cash flows and the value in
use calculation are set out in note 6.
Subsequent changes to CGU allocation or estimates and
assumptions in the value in use calculation could impact the
carrying value of the respective assets. The impairment assessments
are sensitive to changes in commodity prices and discount rates.
Changes to these assumptions would result in changes to impairment
and/or impairment reversal conclusions, which could have a
significant effect on the consolidated financial statements.
Details of impairment and/or impairment reversals are set out in
note 6.
Close down and restoration costs
Costs associated with restoration and rehabilitation of mining
sites are typical for extractive industries and are normally
incurred at the end of the life of the mine. Provision is
recognised for each mining site for such costs discounted to their
net present value, as soon as the obligation to incur such costs
arises. The costs are estimated on the basis of the scope of site
restoration and rehabilitation activity in accordance with the mine
closure plan and represent management's best estimate of the
expenditure that will be incurred. Estimates are reviewed annually
as new information becomes available.
The initial provision for close down and restoration costs
together with other movements in the provision, including those
resulting from updated cost estimates, changes to the estimated
lives of the mines, and revisions to discount rates are capitalised
within 'mine development costs' or 'mining assets' of property,
plant and equipment. Capitalised costs are depreciated over the
life of the mine they relate to and the provision is increased each
period via unwinding the discount on the provision. Changes to the
estimated future costs are recognised in the balance sheet by
adjusting both the asset and the provision.
The actual costs may be different from those estimated due to
changes in relevant laws and regulations, changes in prices as well
as changes to the restoration techniques. The actual timing of cash
outflows may be also different from those estimated due to changes
in the life of the mine as a result of changes in ore reserves or
processing levels. As a result, there could be significant
adjustments to the provision for close down and restoration costs
established which would affect future financial results.
Details of provision for close down and restoration costs are
set out in note 22.
4. Segment information
The Group's reportable segments under IFRS 8, which are aligned
with its operating locations, were determined to be Pokrovskiy,
Pioneer, Malomir and Albyn hard-rock gold mines which are engaged
in gold and silver production as well as field exploration and mine
development.
Alluvial operations segment comprised an alluvial gold operation
which was engaged in gold production and field exploration. This
operation was disposed of on 22 April 2015 and, accordingly,
alluvial operations are no longer a reportable segment.
Corporate and Other segment amalgamates corporate
administration, in-house geological exploration and construction
and engineering expertise, engineering and scientific operations
and other supporting in-house functions as well as various gold
projects and other activities that do not meet the reportable
segment criteria.
Reportable operating segments are based on the internal reports
provided to the Chief Operating Decision Maker ('CODM') to evaluate
segment performance, decide how to allocate resources and make
other operating decisions and reflect the way the Group's
businesses are managed and reported.
The financial performance of the segments is principally
evaluated with reference to operating profit less foreign exchange
impacts.
2016 Pioneer Pokrovskiy Malomir Albyn Corporate Consolidated
and other
US$'000 US$'000 US$'000 US$'000 US$'000 US$' 000
----------------------- ----------------------- ------------------- ------------------- -------------------- ---------------------- -----------------------
Revenue
Gold (a) 163,514 46,692 67,107 211,155 - 488,468
Silver 958 275 101 207 - 1,541
Other external revenue - - - - 50,675 50,675
Inter-segment revenue - - 1,233 390 101,032 102,655
Intra-group
eliminations - - (1,233) (390) (101,032) (102,655)
----------------------- ----------------------- ------------------- ------------------- -------------------- ---------------------- -----------------------
Total Group revenue
from external
customers 164,472 46,967 67,208 211,362 50,675 540,684
----------------------- ----------------------- ------------------- ------------------- -------------------- ---------------------- -----------------------
Operating expenses
and income
Operating cash costs (85,273) (33,777) (45,243) (100,979) (48,995) (314,267)
Depreciation (38,776) (6,586) (13,632) (45,729) (529) (105,252)
Central administration
expenses - - - - (32,623) (32,623)
Impairment of
exploration
and evaluation assets - - - (9,155) - (9,155)
(Impairment/)reversal
of impairment of
ore stockpiles (6,110) (1,002) 5,826 123 - (1,163)
Gain on disposal
of non-trading loans - - - - 6,724 6,724
Gain on disposal
of subsidiaries - - - - 791 791
Total operating
expenses
((b) () (130,159) (41,365) (53,049) (155,740) (74,632) (454,945)
----------------------- ----------------------- ------------------- ------------------- -------------------- ---------------------- -----------------------
Share of results
of associates - - - - (3,581) (3,581)
----------------------- ----------------------- ------------------- ------------------- -------------------- ---------------------- -----------------------
Segment result 34,313 5,602 14,159 55,622 (27,538) 82,158
----------------------- ----------------------- ------------------- ------------------- -------------------- ---------------------- -----------------------
Foreign exchange
losses (5,158)
----------------------- ----------------------- ------------------- ------------------- -------------------- ---------------------- -----------------------
Operating profit 77,000
Investment income 556
Interest expense (60,976)
Other finance gains 11,976
Other finance losses (1,548)
Taxation 4,698
----------------------- ----------------------- ------------------- ------------------- -------------------- ---------------------- -----------------------
Profit for the period
from continuing
operations 31,706
----------------------- ----------------------- ------------------- ------------------- -------------------- ---------------------- -----------------------
Segment assets 444,611 19,724 402,878 390,646 124,665 1,382,524
Segment liabilities (13,387) (4,034) (8,963) (15,975) (45,033) (87,392)
Deferred tax - net (139,728)
Unallocated cash 4,843
Loans given 598
Borrowings (611,212)
Net assets 549,633
----------------------- ----------------------- ------------------- ------------------- -------------------- ---------------------- -----------------------
Other segment
information
----------------------- ----------------------- ------------------- ------------------- -------------------- ---------------------- -----------------------
Additions to
non-current
assets:
Exploration and
evaluation
expenditure
capitalised
within intangible
assets 2,219 - 838 4,082 217 7,356
Other additions to
intangible assets - - - - - -
Capital expenditure 14,052 96 2,765 7,488 1,380 25,781
Other items
capitalised
(c) 349 177 389 1,262 - 2,177
Average number of
employees 1,658 964 926 1,450 3,066 8,064
----------------------- ----------------------- ------------------- ------------------- -------------------- ---------------------- -----------------------
(a) Including US$(8.5) million net cash settlement paid by the Group under the cash flow hedge.
(b) Operating expenses less foreign exchange losses (note 6).
(c) Close down and restoration costs (note 13).
2015 Pioneer Pokrovskiy Malomir Albyn Alluvial Corporate Consolidated
operations and other
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$' 000
--------------------------- ---------- ----------- --------- ----------- ------------ ----------- -------------
Revenue
Gold (d) 253,914 61,002 71,044 181,687 - - 567,647
Silver 641 168 84 149 - - 1,042
Other external revenue - - - - - 31,225 31,225
Inter-segment revenue - - 1,284 433 - 130,042 131,759
Intra-group eliminations - - (1,284) (433) - (130,042) (131,759)
--------------------------- ---------- ----------- --------- ----------- ------------ ----------- -------------
Total Group revenue
from external customers 254,555 61,170 71,128 181,836 - 31,225 599,914
--------------------------- ---------- ----------- --------- ----------- ------------ ----------- -------------
Operating expenses
and income
Operating cash costs (135,926) (45,082) (65,434) (115,314) 1,006 (32,159) (392,909)
Depreciation (45,864) (12,344) (18,195) (50,819) (1,388) (494) (129,104)
Central administration
expenses - - - - - (30,419) (30,419)
Impairment of exploration
and evaluation assets - (2,324) (140) - - (34,978) (37,442)
Impairment of ore
stockpiles (11,945) 884 (6,065) (299) - - (17,425)
Loss on disposal
of subsidiaries - - - - (384) - (384)
--------------------------- ---------- ----------- --------- ----------- ------------ ----------- -------------
Total operating expenses
((e) () (193,735) (58,866) (89,834) (166,432) (766) (98,050) (607,683)
Share of net profit
of associates - - - - - (60,422) (60,422)
--------------------------- ---------- ----------- --------- ----------- ------------ ----------- -------------
Segment result 60,820 2,304 (18,706) 15,404 (766) (127,247) (68,191)
Foreign exchange
losses (11,952)
--------------------------- ---------- ----------- --------- ----------- ------------ ----------- -------------
Operating loss (80,143)
Investment income 1,018
Interest expense (71,514)
Other finance gains 9,064
Taxation (48,879)
--------------------------- ---------- ----------- --------- ----------- ------------ ----------- -------------
Loss for the period
from continuing
operations (190,454)
--------------------------- ---------- ----------- --------- ----------- ------------ ----------- -------------
Segment assets 407,004 40,357 425,029 447,161 - 130,690 1,450,241
Segment liabilities (21,005) (6,632) (10,136) (36,459) - (58,951) (133,183)
Deferred tax - net (173,499)
Unallocated cash 5,193
Loans given 499
Borrowings (638,278)
Net assets 510,973
--------------------------- ---------- ----------- --------- ----------- ------------ ----------- -------------
Other segment information
--------------------------- ---------- ----------- --------- ----------- ------------ ----------- -------------
Additions to non-current
assets:
Exploration and
evaluation
expenditure capitalised
within intangible
assets 450 44 3,711 3,441 - 1,530 9,176
Other additions to
intangible assets - - - - - - -
Capital expenditure 15,171 816 4,520 9,611 - 962 31,080
Other items capitalised
(f) (1,350) (61) (836) (1,999) - - (4,246)
Average number of
employees 1,760 989 937 1,510 - 3,273 8,469
--------------------------- ---------- ----------- --------- ----------- ------------ ----------- -------------
(d) Including US$9.4 million contribution from the cash flow hedge.
(e) Operating expenses less foreign exchange losses (note 6).
(f) Close down and restoration costs (note 13).
Entity wide disclosures
Revenue by geographical location (a)
2016 2015
US$'000 US$'000
---------------- ------------------- --------
Russia and CIS 540,606 599,686
Other 78 228
---------------- ------------------- --------
540,684 599,914
---------------- ------------------- --------
(a) Based on the location to which the product is shipped or in which the services are provided.
Non-current assets by location of asset (b)
2016 2015
US$'000 US$'000
-------- ------------------ ----------
Russia 1,091,541 1,199,941
Other 43 64
-------- ------------------ ----------
1,091,584 1,200,005
-------- ------------------ ----------
(b) Excluding financial instruments and deferred tax assets.
Information about major customers
During the years ended 31 December 2016 and 2015, the Group
generated revenues from the sales of gold to Russian banks for
Russian domestic sales of gold. Included in gold sales revenue for
the year ended 31 December 2016 are revenues of US$488 million
which arose from sales of gold to two banks that individually
accounted for more than 10% of the Group's revenue, namely US$292
million to Sberbank of Russia and US$197 million to VTB (2015:
US$571 million which arose from sales of gold to two banks that
individually accounted for more than 10% of the Group's revenue,
namely US$366 million to Sberbank of Russia and US$205 million to
VTB). The proportion of Group revenue of each bank may vary from
year to year depending on commercial terms agreed with each bank.
Management considers there is no major customer concentration risk
due to high liquidity inherent to gold as a commodity.
5. Revenue
Continuing operations
2016 2015
US$'000 US$'000
---------------------------------------- -------- --------
Sales of goods 522,491 585,643
Engineering and construction contracts 17,531 13,515
Rental income 662 756
---------------------------------------- -------- --------
540,684 599,914
Investment income 556 1,018
541,240 600,932
---------------------------------------- -------- --------
Discontinued operations
Period to
7 August
2016 2015
US$'000 US$'000
----------------------- --------- ----------
Sales of goods - 49,180
Engineering contracts - 1,102
50,282
Investment income - 1,163
----------------------- --------- ----------
51,445
--------------------------------- ----------
6. Operating expenses and income
2016 2015
US$'000 US$'000
------------------------------------------------- ----------------------- --------
Net operating expenses (a) 419,519 522,013
Impairment of exploration and evaluation assets 9,155 37,442
Impairment of ore stockpiles (a) 1,163 17,425
Central administration expenses (a) 32,623 30,419
Foreign exchange losses 5,158 11,952
Gain on disposal of non-trading loans (6,724) -
(Gain)/loss on disposal of subsidiaries ((b)
() (791) 384
460,103 619,635
------------------------------------------------- ----------------------- --------
(a) As set out below.
(b) Note 27.
Net operating expenses
2016 2015
US$'000 US$'000
Depreciation 105,252 129,104
Staff costs 63,022 70,632
Materials 100,638 131,914
Fuel 40,621 55,835
External services 25,619 29,004
Mining tax 14,713 33,138
Electricity 23,305 25,008
Smelting and transportation costs 699 1,079
Movement in ore stockpiles, deferred stripping,
work in progress and bullion in process attributable
to gold production (22,475) (11,777)
Taxes other than income 6,352 7,928
Insurance 6,409 7,244
Professional fees 877 554
Office costs 324 304
Operating lease rentals 3,173 645
Business travel expenses 1,434 1,541
Provision for impairment of trade and other
receivables 282 1,261
Bank charges 205 855
Goods for resale 24,186 12,816
Other operating expenses 25,231 24,514
Other (income) / expenses (348) 414
------------------------------------------------------- --------- ----------
419,519 522,013
------------------------------------------------------- --------- ----------
Central administration expenses
2016 2015
US$'000 US$'000
-------------------------- -------- --------
Staff costs 17,067 18,908
Professional fees 8,214 2,040
Insurance 789 1,191
Operating lease rentals 1,893 1,900
Business travel expenses 881 1,611
Office costs 489 544
Other 3,290 4,225
32,623 30,419
--------
Impairment charges
Impairment of mining assets and exploration and evaluation
assets
The Group undertook an impairment review of the tangible assets
attributable to its gold mining projects, exploration assets
adjacent to the existing mines and supporting in-house service
companies and concluded no impairment was required as at 31
December 2016, with exception of an individual licence impairment
referred to below.
The forecast future cash flows are based on the Group's mining
plan that assumes POX Hub completion in the year 2018. The other
key assumptions which formed the basis of forecasting future cash
flows and the value in use calculation are set out below:
Year ended Year ended
31 December 2016 31 December
2015
Long-term gold price US$1,200/oz US$1,150/oz
Discount rate (a) 8% 8%
RUB/US$ exchange rate RUB60.0/US$ RUB65.0/US$
(a) Being the post-tax real weighted average cost of capital,
equivalent to a nominal pre-tax discount rate of 10.1% (2015:
10.1%)
Following the decision to suspend exploration on the
Kharginskoye ore field, an immediate extension of the Albyn
deposit, and to surrender the license, a US$9.2 million impairment
charges were recorded against associated exploration and evaluation
costs previously capitalised within exploration and evaluation
assets.
As at 31 December 2016, all exploration and evaluation assets on
the balance sheet related to the areas adjacent to the existing
mines.
Impairment of ore stockpiles
The Group assessed the recoverability of the carrying value of
ore stockpiles and recorded impairment charges/reversals of
impairment as set out below:
Year ended 31 December
Year ended 31 December 2016 2015
Pre-tax Post-tax Pre-tax Post-tax
impairment impairment impairment impairment
charge/ charge/ charge/ charge/
(reversal (reversal (reversal (reversal
of impairment) Taxation of impairment) of impairment) Taxation of impairment)
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Pokrovskiy 1,002 (200) 802 (884) 177 (707)
Pioneer 6,110 (1,223) 4,887 11,945 (2,390) 9,555
Malomir (5,826) 1,165 (4,661) 6,065 (1,213) 4,852
Albyn (123) 25 (98) 299 (60) 239
1,163 (233) 930 17,425 (3,486) 13,939
7. Auditor's remuneration
The Group, including its overseas subsidiaries, obtained the
following services from the Company's auditor and their
associates:
2016 2015
US$'000 US$'000
Audit fees and related fees
Fees payable to the Company's auditor for the
annual audit of the parent company and consolidated
financial statements 577 611
Fees payable to the Company's auditor and their
associates for other services to the Group:
For the audit of the Company's subsidiaries
as part of the audit of the consolidated financial
statements 285 269
For the audit of subsidiary statutory accounts
pursuant to legislation (a) 55 77
917 957
Non-audit fees
Other services pursuant to legislation - interim
review 185 342
Fees for reporting accountants services (b) 1,153 231
Tax services - 45
1,338 618
(a) Including the statutory audit of subsidiaries in the UK and Cyprus.
(b) Fees payable in relation to the Proposed Acquisition
announced on 28 April 2016 (2015: Fees payable in relation to the
Refinancing).
8. Staff costs
Continuing operations
2016 2015
US$'000 US$'000
Wages and salaries 61,996 69,806
Social security costs 17,732 19,235
Pension costs 221 219
Share-based compensation 140 280
80,089 89,540
Average number of employees 8,064 8,469
Discontinued operations
Period to
7 August
2016 2015
US$'000 US$'000
Wages and salaries - 12,613
Social security costs - 3,287
Pension costs - 158
Share-based compensation - 17
- 16,075
Average number of employees - 1,752
9. Financial income and expenses
2016 2015
US$'000 US$'000
---------
Investment income
Interest income 556 1,018
---------
556 1,018
---------
Interest expense
Interest on bank loans (48,934) (57,731)
Interest on convertible bonds (11,867) (13,570)
---------
(60,801) (71,301)
Unwinding of discount on environmental obligation (175) (213)
(60,976) (71,514)
---------
Other finance gains
Gain on settlement of the Existing Bonds - 478
Fair value gain on derivative financial instruments
(a) 7,434 6,417
Financial guarantee fee (b) 4,542 2,169
11,976 9,064
Other finance losses
Loss on bank debt refinancing (c) (1,548) -
---------
(1,548) -
---------
(a) Result from re-measurement of the conversion option of the
New Bonds to fair value (note 20).
(b) Note 26.
(c) Note 20.
10. Taxation
2016 2015
US$'000 US$'000
---------------------------------------------- -------------------------- --------
Current tax
Russian current tax 29,788 31,752
29,788 31,752
--------------------------
Deferred tax
(Reversal)/origination of timing differences
(a) (34,486) 17,127
---------------------------------------------- --------------------------
Total tax (credit)/charge (4,698) 48,879
---------------------------------------------- --------------------------
(a) Including effect of foreign exchange movements in respect of
deductible temporary differences of US$(26.0) million (year ended
31 December 2015: US$40.3 million) which primarily arises as the
tax base for a significant portion of the future taxable deductions
in relation to the Group's property, plant and equipment are
denominated in Russian Rouble whilst the future depreciation
charges associated with these assets will be based on their US
Dollar carrying value and reflects the movements in the Russian
Rouble to the US Dollar exchange rate.
The charge for the year can be reconciled to the loss before tax
per the income statement as follows:
2016 2015
US$'000 US$'000
Profit/(loss) before tax from continuing operations 27,008 (141,575)
Less: share of results of associates 3,581 60,422
Profit/(loss) before tax from continuing operations
(excluding associates) 30,589 (81,153)
Tax on profit/loss from continuing operations
(excluding associates) at the Russian corporation
tax rate of 20% (2015: 20%) 6,118 (16,231)
Effect of different tax rates of subsidiaries
operating in other jurisdictions 36 (1,446)
Tax effect of expenses that are not deductible
for tax purposes 1,765 9,674
Tax effect of tax losses for which no deferred
income tax asset was recognised (b) 14,778 26,583
Utilisation of previously unrecognised tax losses (2,574) (767)
Foreign exchange movements in respect of deductible
temporary differences (c) (26,025) 40,305
Other adjustments 1,204 (9,239)
Tax (credit)/charge for the period (4,698) 48,879
(b) Primarily relate to central administration expenses and interest expense incurred in the UK.
(c) Foreign exchange movements arise as the tax base for a
significant portion of the future taxable deductions in relation to
the Group's property, plant and equipment are denominated in
Russian Rouble whilst the future depreciation charges associated
with these assets will be based on their US Dollar carrying value
and reflects the movements in the Russian Rouble to the US Dollar
exchange rate.
Tax legislation is subject to varying interpretations. In
addition, there is a risk of tax authorities making arbitrary
judgements of business activities. If a particular treatment, based
on management's judgement of the Group's business activities, was
to be challenged by the tax authorities, the Group may be subject
to tax claims and exposures. The Directors do not anticipate that
these exposures will have a material adverse effect upon the
Group's financial position.
11. Earnings per share
2016 2015
US$'000 US$'000
Profit/(loss) for the period attributable to
equity holders of Petropavlovsk PLC 33,719 (238,759)
From continuing operations 33,719 (190,155)
From discontinued operations - (48,604)
Interest expense on convertible bonds, net -
of tax (a) -
Profit/(loss) used to determine diluted earnings
per share 33,719 (238,759)
From continuing operations 33,719 (190,155)
From discontinued operations - (48,604)
No of shares No of shares
Weighted average number of Ordinary Shares 3,302,148,536 2,657,332,030
Adjustments for dilutive potential Ordinary -(b)
Shares (a) -
Weighted average number of Ordinary Shares
for diluted earnings per share 3,302,148,536 2,657,332,030
US$ US$
Basic profit/(loss) per share 0.01 (0.09)
From continuing operations 0.01 (0.07)
From discontinued operations - (0.02)
Diluted profit/(loss) per share 0.01 (0.09)
From continuing operations 0.01 (0.07)
From discontinued operations - (0.02)
(a) Convertible bonds which could potentially dilute basic
profit/(loss) per ordinary share in the future are not included in
the calculation of diluted profit/(loss) per share because they
were anti-dilutive for the year ended 31 December 2016 and
2015.
(b) The Group had a potentially dilutive option issued to
International Finance Corporation ('IFC') to subscribe for
1,067,273 Ordinary Shares (note 23) which was anti-dilutive and
therefore was not included in the calculation of diluted loss per
share for the year ended 31 December 2015.
12. Exploration and evaluation assets
Visokoe Flanks Flanks
of Pokrovskiy of Other Total
Albyn (a)
US$'000 US$'000 US$'000 US$'000 US$'000
At 1 January 2016 16,251 2,287 39,080 11,375 68,993
Additions 213 2,285 4,082 776 7,356
Impairment (b) - - (9,155) - (9,155)
Reallocation and other transfers - (269) (58) (3) (330)
Disposal of subsidiary (c) (16,464) - - - (16,464)
Disposal - (1,130) - - (1,130)
At 31 December 2016 - 3,173 33,949 12,148 49,270
(a) Represent amounts capitalised in respect of a number of projects in the Amur Region.
(b) Note 6.
(c) Note 27.
Visokoe Flanks Flanks
of Pokrovskiy of Other Total
Albyn (d)
US$'000 US$'000 US$'000 US$'000 US$'000
At 1 January 2015 48,293 4,385 35,639 9,216 97,533
Additions 458 500 3,441 4,777 9,176
Impairment (e) (32,500) (2,324) - (2,618) (37,442)
Reallocation and other
transfers - (274) - - (274)
At 31 December 2015 16,251 2,287 39,080 11,375 68,993
(d) Represent amounts capitalised in respect of a number of
projects in the Amur Region and Guyana.
(e) Note 6.
13. Property, plant and equipment
Capital
construction
Mining Non-mining in progress
assets assets ((b) () Total
US$'000 US$'000 US$'000 US$'000
Cost
At 1 January 2015 1,846,753 206,171 338,564 2,391,488
Additions 20,203 1,012 9,865 31,080
Close down and restoration cost capitalised
(note 22) (4,246) - - (4,246)
Transfers from capital construction
in progress (a) 5,779 961 (6,740) -
Disposals (7,091) (4,633) (56) (11,780)
Reallocation and other transfers 493 (141) (46) 306
Foreign exchange differences - (5,672) - (5,672)
At 31 December 2015 1,861,891 197,698 341,587 2,401,176
Additions 19,470 885 5,426 25,781
Close down and restoration cost capitalised
(note 22) 2,177 - - 2,177
Transfers from capital construction
in progress (a) 2,523 159 (2,682) -
Disposals (19,645) (6,235) (77) (25,957)
Disposal of subsidiaries (919) (2,052) (2,436) (5,407)
Reallocation and other transfers 9,844 (808) (8,856) 180
Foreign exchange differences - 3,907 - 3,907
At 31 December 2016 1,875,341 193,554 332,962 2,401,857
Accumulated depreciation and impairment
At 1 January 2015 1,066,050 175,923 6,483 1,248,456
Charge for the year 122,328 6,165 - 128,493
Disposals (5,680) (4,183) - (9,863)
Reallocation and other transfers 276 28 1 305
Foreign exchange differences - (4,558) - (4,558)
At 31 December 2015 1,182,974 173,375 6,484 1,362,833
Charge for the year 100,934 5,034 - 105,968
Disposals (16,748) (6,036) - (22,784)
Disposal of subsidiaries - (1,127) - (1,127)
Reallocation and other transfers 662 (662) - -
Foreign exchange differences - 3,173 - 3,173
At 31 December 2016 1,267,822 173,757 6,484 1,448,063
Net book value
At 31 December 2015 (c) 678,917 24,323 335,103 1,038,343
At 31 December 2016 (c) 607,519 19,797 326,478 953,794
(a) Being costs primarily associated with continuous development
of Malomir, Albyn and Pioneer projects.
(b) Including US$200.3 million costs associated with the POX Hub
project (31 December 2015: US$197.4 million)
(c) Property, plant and equipment with a net book value of
US$110.0million (31 December 2015: US$125.6 million) have been
pledged to secure borrowings of the Group.
14. Investments in associates
2016 2015
US$'000 US$'000
--------
IRC Limited ('IRC') 36,140 39,163
JSC Verkhnetisskaya Ore Mining Company
(a) - 231
36,140 39,394
--------
(a) On 27 May 2016 the Group sold its 49% interest in CJSC
Verkhnetisskaya Ore Mining Company (note 27).
Summarised financial information for those associates that are
material to the Group is set out below.
IRC IRC
Year ended Year ended
31 December 31 December
2016 2015
US$'000 US$'000
Non-current assets
Exploration and evaluation assets 6,966 6,717
Property, plant and equipment 246,191 199,714
Prepayments for property, plant and equipment 87,499 88,859
Other non-current assets 4,773 2,277
345,429 297,567
Current assets
Cash and cash equivalents 31,342 56,144
Other current assets 44,184 55,038
75,526 111,182
Current liabilities
Borrowings (a) 66,147 53,050
Other current liabilities 21,414 18,398
87,561 71,448
Non-current liabilities
Borrowings (a) 177,239 215,238
Other non-current liabilities 34,431 12,773
211,670 228,011
Net assets 121,724 109,290
(a) On 6 December 2010, KS GOK LLC ('K&S'), a subsidiary of
IRC, entered into a US$400 million Engineering Procurement and
Construction Contract with China National Electric Engineering
Corporation for the construction of the Group's mining operations
at K&S. On 13 December 2010, K&S entered into a project
finance facility agreement with the Industrial and Commercial Bank
of China Limited ('ICBC') (the 'ICBC Facility Agreement') pursuant
to which ICBC would lend US$340 million to K&S to be used to
fund the construction of the Group's mining operations at K&S
in time for the start of major construction works in early 2011.
Interest under the facility was charged at 2.80% above London
Interbank Offering rate ('LIBOR') per annum. The facility is
guaranteed by the Company (note 26) and originally was repayable
semi-annually in 16 instalments US$21.25 million each, starting
from December 2014 and is fully repayable by June 2022. ICBC has
agreed to restructure two repayment instalments originally due for
payment on 20 June 2017 and 20 December 2017 in an aggregate amount
of US$42.5 million evenly into five subsequent semi-annual
repayment instalments as such each of the repayment instalment due
on 20 June 2018, 20 December 2018, 20 June 2019, 20 December 2019
and 20 June 2020 is increased by US$8.5 million to an amount equal
to US$42.5 million. The outstanding loan principal was US$233.75
million as at 31 December 2016 (31 December 2015: US$276.25
million).The loan is carried at amortised cost with effective
interest rate at 6.13% per annum (2015: 5.91%). As at 31 December
2015, US$2.1 million was deposited in a debt service reserve
accounts ('DSRA') with ICBC under a security deposit agreement
related to the ICBC Facility Agreement. In January 2016, IRC placed
US$28.3 million in order to replenish the DSRA level pursuant to
the security deposit agreement. In accordance with the waiver and
consent letter dated 19 April 2016, which conditions precedent were
satisfied on 21 June 2016, ICBC waived the restriction on
withdrawing from the DSRA for the repayment of the ICBC loan and
related interest and the requirement of IRC to maintain the DSRA
until 30 June 2018. Accordingly, balance of US$1.98 million
remained in the DSRA as at 31 December 2016 without replenishment.
ICBC Facility Agreement contains certain financial covenants to
which ICBC has agreed to grant a waiver until 31 December 2017,
inclusive. As at 30 June 2016, The Group's entire 31.1% ownership
in the issued capital of IRC was pledged to ICBC as security for
the obligations of the Company as guarantor and in consideration
for the waiver of financial covenants under the ICBC facility (31
December 2015: 521,376,470 ordinary shares (approximately 8.47%) in
the issued capital of IRC were pledged to ICBC).
IRC IRC
Year ended
31 December Period from
2016 7 August
to 31 December
2015
US$'000 US$'000
Revenue 16,467 31,627
Net operating expenses (34,503) (199,081)
including
Depreciation (1,155) (371)
Impairment of mining assets - (138,623)
Impairment of exploration and evaluation assets - (4,475)
Impairment of ore stockpiles (841) (7,492)
Impairment of investments in joint ventures (47) (5,895)
Foreign exchange losses (3,440) (1,075)
Investment income 413 295
Interest expense (1,189) (683)
Taxation (315) (774)
Loss for the period (19,127) (168,616)
Other comprehensive profit/(loss) 1,555 (1,740)
Total comprehensive loss (17,572) (170,356)
Following issue of shares by IRC in December 2016 and dilution
of Group's interest in IRC (note 35), the Group recognised US$3.3
million gain on deemed disposal on 4.73% interest in IRC.
15. Inventories
2016 2015
US$'000 US$'000
Current
Construction materials 5,072 6,952
Stores and spares 57,699 66,534
Ore in stockpiles (a), (c) 17,104 17,249
Work in progress 72,782 53,579
Deferred stripping costs 26,187 17,981
Bullion in process 1,189 1,212
Other 3,233 11,715
183,266 175,222
Non-current
Ore in stockpiles (a), (b), (c) 51,686 51,434
51,686 51,434
(a) Note 6.
(b) Ore in stockpiles that is not planned to be processed within
twelve months after the reporting period.
(c) As at 31 December 2016, ore in stockpiles include balances
in the aggregate of US$45.5 million carried at net realisable value
(2015: US$63.1 million).
16. Trade and other receivables
2016 2015
US$'000 US$'000
Current
VAT recoverable 30,265 31,489
Advances to suppliers 11,394 3,320
Trade receivables ((a) () 6,160 4,018
Other debtors (b) 41,917 9,269
89,736 48,096
(a) Net of provision for impairment of US$0.2 million (2015:
US$0.4 million). Trade receivables are generally due for settlement
between three and twelve months.
(b) Net of provision for impairment of US$1.3 million (2015: US$1.2 million).
There is no significant concentration of credit risk with
respect to trade and other receivables. The Group has implemented
policies that require appropriate credit checks on potential
customers before granting credit. The Group has adopted a policy of
only dealing with creditworthy counterparties. The Group's exposure
and credit ratings of its counterparties are monitored by the Board
of Directors. The maximum credit risk of such financial assets is
represented by the carrying value of the asset.
The Directors consider that the carrying amount of trade and
other receivables approximates their fair value.
17. Cash and cash equivalents
2016 2015
US$'000 US$'000
Cash at bank and in hand 10,284 22,144 (a)
Short-term bank deposits 2,358 6,095
12,642 28,239
(a) Including US$15.1 million received under investment
agreement with the Russian Ministry of Far East Development (note
32).
18. Derivative financial instruments
31 December 2016 31 December 2015
Assets Liabilities Assets Liabilities
US$'000 US$'000 US$'000 US$'000
Forward gold contracts - cash flow hedge (a), (b), (c) 7,478 - 3,925 -
Call Option over the Company's shares - (3,064) - -
Conversion option (d), (e) - (7,250) - (14,684)
7,478 (10,314) 3,925 (14,684)
7,478 13,503
(a) Forward contracts to sell an aggregate of 50,006 ounces of
gold at an average price of US$1,303 per ounce are outstanding as
at 31 December 2016 (31 December 2015: 71,551 ounces of gold at an
average price of US$1,116 per ounce).
(b) Measured at fair value and considered as Level 2 of the fair
value hierarchy which valuation incorporates the following
inputs:
- gold forward curves observable at quoted intervals; and
- observable credit spreads.
(c) The hedged forecast transactions are expected to occur at
various dates during the next 12 months.
Gain and losses recognised in the hedging reserve in equity as
at the reporting date will be recognised in the income statement in
the periods during which the hedged gold sale transactions affect
the income statement.
There was no ineffectiveness to be recorded from the cash flow
hedge during the years ended 31 December 2016 and 2015.
(d) Note 20.
(e) Measured at fair value and considered as Level 2 of the fair
value hierarchy which valuation incorporates the following
inputs:
- the Group's credit risk;
- historic share price volatility;
- the conversion price;
- time to maturity; and
- risk free rate.
19. Trade and other payables
2016 2015
US$'000 US$'000
Trade payables 25,068 44,263
Advances from customers 2,148 569
Advances received on resale and commission
contracts (a) 1,847 12,770
Accruals and other payables 26,575 38,965(b)
55,638 96,567
(a) Amounts included in advances received on resale and
commission contracts at 31 December 2016 and 31 December 2015
relate to services performed by the Group's subsidiary, Irgiredmet,
in its activity to procure materials such as reagents, consumables
and equipment for third parties.
(b) Including US$15.1 million liability under an investment
agreement with the Russian Ministry of Far East Development (note
32).
The Directors consider that the carrying amount of trade and
other payables approximates to their fair value.
20. Borrowings
2016 2015
US$'000 US$'000
Borrowings at amortised cost
Convertible bonds (a),(b) 88,369 85,503
Bank loans (c), (d) 522,843 552,775
611,212 638,278
85,306
Amount due for settlement within 12 months (c) 260,248
Amount due for settlement after 12 months 525,906 378,030
611,212 638,278
(a) Liability component of the US$100 million Convertible Bonds
due on 18 March 2020, measured at amortised cost. The interest
charged was calculated by applying an effective interest rate of
13.89% to the liability component.
The conversion option of the US$100 million Convertible Bonds
represents the fair value of the embedded option for the
bondholders to convert into the equity of the Company ("the
Conversion Right"). As the Company can elect to pay the cash value
in lieu of delivering the Ordinary Shares following the exercise of
the Conversion Right, the conversion option is a derivative
liability. Accordingly, the conversion option is measured at fair
value and is presented separately within derivative financial
liabilities.
(b) The liability component of the New Bonds was arrived at as set out below.
18 March
2015
US$' 000
Par value of the New Bonds 100,000
Fair value uplift of the New Bonds 9,400
Less: Refinancing costs (5,130)
Less: Conversion option of the New Bonds recognised separately (21,100)
Liability component of the New Bonds 83,170
The liability component of the New Bonds is measured at
amortised cost. The interest charged was calculated by applying an
effective interest rate of 13.89% to the liability component.
The conversion option of the New Bonds represents the fair value
of the embedded option for the bondholders to convert into the
equity of the Company ("the Conversion Right"). As the Company can
elect to pay the cash value in lieu of delivering the Ordinary
Shares following the exercise of the Conversion Right, the
conversion option is a derivative liability. Accordingly, the
conversion option is measured at fair value and is presented
separately within derivative financial liabilities.
As at 31 December 2016, the fair value of debt component of the
convertible bonds, considered as Level 2 of the fair value
hierarchy, amounted to US$97.3 million (31 December 2015: US$92.8
million). Valuation incorporates the following inputs: the Group's
credit risk, time to maturity and risk free rate.
As at 31 December 2016, the fair value of the convertible bonds,
considered as Level 1 of the fair value hierarchy and calculated by
applying the market traded price to the convertible bonds
outstanding, amounted to US$103.9 million (31 December 2015:
US$106.3 million).
(c) In December 2016, the Group refinanced US$430 million
outstanding principal of the Group's US$530 million bank debt,
including a revised maturity profile from May 2018 to September
2022 and renegotiation of the financial and operational
covenants:
December
2016
US$' 000
------------------------------------
Carrying value of liabilities
de-recognised 428,246
Fair value of new liabilities
recognised:
Bank debt 426,730
Call option over the Company's
shares 3,064
Loss on bank debt refinancing (1,548)
-------------------------------------
Cash settled call option was issued in relation to 3.6 per cent.
of the outstanding aggregate ordinary share capital in the Company
and is exercisable between December 2019 and March 2023 at strike
price of GBP0.068.
Transaction costs of US$4.9 million were further
capitalised.
(d) As at 31 December 2016, US$233.1 million (2015: US$540.0
million) bank loans are secured against certain items of property,
plant and equipment of the Group (note 13) and shares in
subsidiaries held by Petropavlovsk PLC: 100% of LLC Albynskiy
Rudnik; 89.73% of LLC Malomirskiy Rudnik; 100% of LLC Temi.
The weighted average interest rate paid during the year ended 31
December 2016 was 9.0% (2015: 9.1%).
The carrying value of the bank loans approximated their fair
value at each period end.
As at 31 December 2016, bank loans with an aggregate carrying
value of US$522.8 million (2015: US$552.8 million) contain certain
financial covenants.
As at 31 December 2016, the amounts undrawn under the bank loans
were US$ nil (2015: US$ nil).
The Group is currently completing the final documentation for
the remaining US$100 million bank debt. Included in the amounts due
for settlement within 12 months are US$75 million, based on
facility terms that existed as at 31 December 2017.
21. Deferred taxation
2016 2015
US$'000 US$'000
At 1 January 173,499 156,814
Deferred tax (credited)/charged to income
statement(a) (34,486) 17,127
Deferred tax charged/(credited) to equity 711 (469)
Transfer to liabilities associated with
assets classified as held for sale - 28
Exchange differences 4 (1)
At 31 December 139,728 173,499
Deferred tax assets - -
Deferred tax liabilities (139,728) (173,499)
Net deferred tax liability (139,728) (173,499)
(a) Note 10.
Charged/
(credited) Credited At 31
At 1 January to the income directly Exchange December
2016 statement to equity differences 2016
US$'000 US$'000 US$'000 US$'000 US$'000
Property, plant and equipment 143,374 (24,979) - 45 118,440
Inventory 16,451 (6,477) - - 9,974
Exploration and evaluation
assets 2,996 (215) - - 2,781
Fair value adjustments 246 (117) - - 129
Other temporary differences 10,432 (2,698) 711 (41) 8,404
173,499 (34,486) 711 4 139,728
Transfer
to liabilities
Charged/ associated
(credited) Charged with assets
to the directly classified At 31
At 1 January income to as held Exchange December
2015 statement equity for sale differences 2015
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Property, plant and
equipment 123,344 19,957 - 147 (74) 143,374
Inventory 21,906 (5,367) - (88) - 16,451
Exploration and evaluation
assets 3,529 (515) - (18) - 2,996
Fair value adjustments 409 (120) - (43) - 246
Other temporary differences 7,626 3,172 (469) 30 73 10,432
156,814 17,127 (469) 28 (1) 173,499
As at 31 December 2016, the Group did not recognise deferred tax
assets in respect of the accumulated tax losses from continuing
operations comprising US$620.2 million that can be carried forward
against future taxable income (2015: US$528.9 million). Tax losses
of US$484.0 million arise primarily in the UK and can be carried
forward indefinitely and tax losses of US$136.2million arise in
Russia and expire primarily between 2020 and 2026.
As at 31 December 2016, the Group did not recognise deferred tax
assets of US$0.01 million (2015: US$3.1 million) in respect of
temporary differences arising on certain capitalised development
costs attributable to continuing operations.
The Group has not recorded a deferred tax liability in respect
of withholding tax and other taxes that would be payable on the
unremitted earnings associated with investments in its subsidiaries
and associates and interests in joint ventures as the Group is able
to control the timing of the reversal of those temporary
differences and does not intend to reverse them in the foreseeable
future. As at 31 December 2016, statutory unremitted earnings from
continuing operations comprised in aggregate US$839.4 million
(2015: US$597.0 million).
22. Provision for close down and restoration costs
2016 2015
US$'000 US$'000
At 1 January 17,184 21,217
Unwinding of discount 175 213
Change in estimates(a) 2,177 (4,246)
Disposal of subsidiary (384) -
At 31 December 19,152 17,184
(a) Primarily reflects the effect of change in the forecast the
Russian Rouble to the US Dollar exchange rate following a
significant depreciation of the Russian Rouble against the US
Dollar during the year ended 31 December 2015 and subsequent
appreciation the Russian Rouble during the year ended 31 December
2016.
The Group recognised provisions in relation to close down and
restoration costs for the following mining operations:
2016 2015
US$'000 US$'000
Pokrovskiy 2,842 2,646
Pioneer 3,155 2,754
Malomir 6,049 5,610
Albyn 7,106 5,790
Yamal - 384
19,152 17,184
The provision recognised represents the present value of the
estimated expenditure that will be incurred, which has been arrived
at using the long-term risk-free pre-tax cost of borrowing. The
expenditure arises at different times over the life of mine. The
expected timing of significant cash outflows is between years 2018
and 2032, varying from mine site to mine site.
23. Share capital
2016 2015
No of shares US$'000 No of shares US$'000
Allotted, called up and fully paid
At 1 January 3,300,561,697 48,874 197,638,425 3,041
Issued during the period 3,206,835 46 3,102,923,272 45,833
At 31 December 3,303,768,532 48,920 3,300,561,697 48,874
The Company has one class of ordinary shares which carry no
right to fixed income.
The Company had an option issued to the IFC on 20 April 2009 to
subscribe for 1,067,273 Ordinary Shares at an exercise price of
GBP11.84 per share, subject to adjustments. The option expired
unexercised on 25 May 2015.
24. Own shares
2016 2015
US$'000 US$'000
At 1 January 8,933 8,925
New shares transferred to the EBT 46 -
Vesting Deferred shares award (8,979) -
Rights issue - 8
At 31 December - 8,933 (a)
(a) 1,441,406 Ordinary Shares held by the Company's EBT.
25. Notes to the cash flow statement
Reconciliation of profit/(loss) before tax to operating cash
flow
2016 2015
US$'000 US$'000
Profit/(loss) before tax including discontinued
operations 27,008 (248,179)
Adjustments for:
Share of results of joint ventures - (588)
Share of results of associate 3,581 60,422
Investment income (556) (4,351)
Other finance gains (11,976) (6,894)
Other finance losses 1,548 -
Interest expense 60,976 72,703
Share based payments 140 297
Depreciation 105,252 121,599
Impairment of exploration and evaluation
assets 9,155 37,442
Impairment of ore stockpiles 1,163 17,425
Effect of processing previously impaired
stockpiles (7,536) (8,535)
Provision for impairment of trade and
other receivables 282 1,264
Write-down to adjust the carrying value
of IRC's net assets to fair value less
costs to sell - 96,639
Loss on disposals of property, plant and
equipment 2,431 1,090
(Gain)/loss on disposal of subsidiaries (791) 384
Foreign exchange losses 5,158 15,237
Gain on disposal of non-trading loans (6,724) -
Other non-cash items 177 5,337
Changes in working capital:
(Increase)/ decrease in trade and other
receivables (25,828) 3,621
Decrease in inventories 298 22,675
(Increase)/ decrease in trade and other
payables (37,745) 21,253
Net cash generated from operations 126,013 208,841
Non-cash transactions
Except for the issue of the Ordinary Shares in exchange for the
Existing Bonds, there have been no significant non-cash
transactions during the year ended 31 December 2015.
There were no significant non-cash transactions during the year
ended 31 December 2016.
26. Related parties
Related parties the Group entered into transactions with during
the reporting period
PJSC Asian-Pacific Bank ('Asian-Pacific Bank') and LLC Insurance
Company Helios Reserve ('Helios') are considered to be related
parties as members of key management have an interest in and
collectively exercise significant influence over these
entities.
The Petropavlovsk Foundation for Social Investment (the
'Petropavlovsk Foundation') is considered to be a related party due
to the participation of the key management of the Group in the
governing board of the Petropavlovsk Foundation and their presence
in its board of guardians.
JSC Verkhnetisskaya Ore Mining Company ('Verkhnetisskaya') is an
associate to the Group and hence was a related party until 27 May
2016 when the Group disposed its interest in Verkhnetisskaya.
CJSC ZRK Omchak and its wholly owned subsidiary LLC Kaurchak
('Omchak') are associates to the Group and hence were related
parties until 29 April 2015 when the Group disposed its interest in
Omchak.
IRC Limited and its subsidiaries (Note 35) are associates to the
Group and hence are related parties since 7 August 2015.
Transactions with related parties which the Group entered into
during the years ended 31 December 2016 and 2015 are set out
below.
Trading Transactions
Related party transactions the Group entered into that relate to
the day-to-day operation of the business are set out below.
Sales to related Purchases from
parties related parties
2016 2015 2016 2015
US$'000 US$'000 US$'000 US$'000
Asian-Pacific Bank
Other 22 575 102 113
22 575 102 113
Trading transactions with other related
parties
Insurance arrangements with Helios,
rent and other transactions with other
entities in which key management have
interest and exercises a significant
influence or control 66 1,182 3,514 5,716
Associates
IRC Limited and its subsidiaries 69 49 1,996 1,152
CJSC ZRK Omchak and its wholly owned
subsidiary LLC Kaurchak - 2 - -
135 1,233 5,510 6,868
During the year ended 31 December 2016, the Group made US$0.2
million charitable donations to the Petropavlovsk Foundation (2015:
US$0.4 million).
The outstanding balances with related parties at 31 December
2016 and 2015 are set out below.
Amounts owed by Amounts owed to
related parties related parties
at 31 December at 31 December
2016 2015 2016 2015
US$'000 US$'000 US$'000 US$'000
Helios and other entities in which key
management have interest and exercises
a significant influence or control 1,383 1,328 1 450
Asian-Pacific Bank 1 -
IRC Limited and its subsidiaries 14,502(a) 2,023 1,704 1,233
15,886 3,351 1,705 1,683
(a) Including US$12.5 million advanced to IRC in December 2016.
This balance was fully repaid in January 2017.
Banking arrangements
The Group has current and deposit bank accounts with
Asian-Pacific Bank.
The bank balances at 31 December 2016 and 2015 are set out
below.
2016 2015
US$'000 US$'000
Asian-Pacific
Bank 629 3,208
-
Financing transactions
The Group has charged a fee for the provision of the guarantee
to IRC (note 14), equal to 1.75% on the outstanding loan amount
under the ICBC Facility Agreement and which amounted to US$4.5
million during the year ended 31 December 2016 (31 December 2015:
US$2.2 million). The Guarantee fee principal outstanding amounted
to an equivalent of US$3.4 million (31 December 2015:US$nil).
The Group had an interest-free unsecured loan issued to
Verkhnetisskaya. Loan principal outstanding amounted to an
equivalent of US$2.8 million as at 31 December 2015.
During the year ended 31 December 2015, the Group received a
number of loans from Asian-Pacific Bank. Loan principal outstanding
as at 31 December 2016 was US$nil (31 December 2015: an equivalent
of US$2.7 million). During the year ended 31 December 2016,
interest charged on loans received from Asian-Pacific Bank
comprised US$0.03 million (31 December 2015: US$0.5 million).
Key management compensation
Key management personnel, comprising a group of 15 (2015: 18)
individuals, including Executive and Non-Executive Directors of the
Company and members of senior management, are those having
authority and responsibility for planning, directing and
controlling the activities of the Group.
2016 2015
US$'000 US$'000
Wages and salaries 6,103 7,231
Pension costs 182 357
Share-based compensation 610 280
6,895 7,868
27. Disposal of subsidiaries
During the year ended 31 December 2016, the Group entered into
agreements to sell its wholly owned subsidiary LLC Ilijnskoye and
its associate JSC Verkhnetisskaya Ore Mining Company for an
aggregate cash consideration of an equivalent to US$20 million,
payable in tranches during 2016, out of which US$19.8 million were
attributed to the value of Visokoe asset held by LLC Ilijnskoye and
the remainder to JSC Verkhnetisskaya Ore Mining Company.The
disposal of LLC Ilijnskoye was completed on 11 May 2016.
The net assets of LLC Ilijnskoye at the date of disposal are set
out below.
11 May 2016
US$'000
Exploration and evaluation assets 16,464
Property, plant and equipment 3,361
Inventories 21
Trade and other receivables 80
Cash and cash equivalents 9
Trade and other payables (156)
Net assets disposed 19,779
Consideration ((a) () 19,269
Loss on disposal 510
Net cash inflow arising on disposal:
Consideration received in cash and cash equivalents ((a)
() 19,269
Less: cash and cash equivalents disposed of (9)
19,260
(a) Net of transaction costs.
During the year ended 31 December 2016, the Group disposed its
interests in a number of non-core investments. Aggregate cash
outflows arising from the aforementioned disposals was US$72
thousand and aggregate gain was US$1.3 million representing net
liabilities disposed of.
28. Share based payments
On 31 March 2015, the Remuneration Committee approved a bonus of
GBP555,000 to the Chief Executive Officer, of which 50% is payable
in cash and 50% in the form of a Deferred Share Award. The number
of shares awarded will be based on the market share price at the
date of award, being 1 May 2015. The vesting of this award will be
subject to Chief Executive Officer's continued service for a
12-month period from the date of award unless he departs the
Company as a 'good' leaver.
29. Analysis of net debt
At 1 January Disposal Net cash Exchange Non-cash At 31 December
2016 of subsidiaries Movement movement changes 2016
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
--------------- ----------------- ---------- --------- ---------------
28,239
Cash and cash equivalents (a) (99) (18,329) 2,831 - 12,642
Borrowings (638,278) - 84,710 173 (57,817) (611,212)
(57,817)
Net debt (610,039) (99) 66,381 3,004 (b) (598,570)
--------------- ---------- --------- ---------------
(a) Including US$15.1 million received under investment
agreement with the Russian Ministry of Far East Development (note
32).
(b) Being amortisation of borrowings and the effect of the bank
debt refinancing (note 20).
At 1 January Net cash Exchange Non-cash At 31 December
2015 movement movement changes 2015
US$'000 US$'000 US$'000 US$'000 US$'000
Cash and cash 28,239
equivalents 48,080 (15,173) (4,668) - (c)
Borrowings (977,804) 316,188 (105) 23,443 (638,278)
23,443
Net debt (929,724) 301,015 (4,773) (d) (610,039)
(c) Including US$15.1 million received under investment
agreement with the Russian Ministry of Far East Development (note
32).
(d) Being amortisation of borrowings and the effect of the Refinancing.
30. Financial instruments and financial risk management
Capital risk management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other
stakeholders and to optimise the weighted average cost of capital
and tax efficiency subject to maintaining sufficient financial
flexibility to undertake its investment plans.
The capital structure of the Group consists of net debt (as
detailed in note 29) and equity (comprising issued capital,
reserves and retained earnings). As at 31 December 2016, the
capital comprised US$1.2 billion (2015: US$1.2 billion).
In order to maintain or adjust the capital structure, the Group
may adjust the amount of dividends paid to shareholders, return
capital to shareholders, issue new shares or sell assets to reduce
debt. The Group adopts a modular approach in developing its
projects in order to minimise upfront capital expenditure and
related funding requirements. The Group manages in detail its
funding requirements on a 12 month rolling basis and maintains a
five year forecast in order to identify medium-term funding
needs.
The Group is not subject to any externally imposed capital
requirements.
Significant accounting policies
Details of significant accounting policies and methods adopted,
including the criteria for recognition, the basis of measurement
and the basis on which income and expenses are recognised, in
respect of each class of financial asset, financial liability and
equity instrument are disclosed in note 2 to the consolidated
financial statements.
Categories of financial instruments
2016 2015
US$'000 US$'000
Financial assets
Cash and cash equivalents 12,642 28,239
Derivative financial instruments 7,478 3,925
Loans and receivables 41,102 12,473
Available-for-sale investments 1,105 271
Financial liabilities
Trade and other payables - at amortised cost 43,688 60,642
Borrowings - at amortised cost 611,212 638,278
Derivative financial instruments 10,314 14,684
Financial risk management
The Group's activities expose it to interest rate risk, foreign
currency risk, risk of change in the commodity prices, credit risk
and liquidity risk. The Group's overall risk management programme
focuses on the unpredictability of financial markets and seeks to
minimise potential adverse effects on the Group's financial
performance.
Risk management is carried out by a central finance department
and all key risk management decisions are approved by the Board of
Directors. The Group identifies and evaluates financial risks in
close cooperation with the Group's operating units. The Board
provides written principles for overall risk management, as well as
guidance covering specific areas, such as foreign exchange risk,
interest rate risk, gold price risk, credit risk and investment of
excess liquidity.
Interest rate risk
The Group's fixed rate borrowings and are carried at amortised
cost. They are therefore not subject to interest rate risk as
defined in IFRS 7, since neither the carrying amount nor the future
cash flows will fluctuate because of a change in market interest
rates. The Group does not have borrowings with variable interest
rates.
Foreign exchange risk
The Group operates internationally and is exposed to foreign
exchange risk arising from fluctuations in currencies the Group
transacts, primarily US Dollars, GB Pounds Sterling and Russian
Roubles.
Exchange rate risks are mitigated to the extent considered
necessary by the Board of Directors, through holding the relevant
currencies. At present, the Group does not undertake any foreign
currency transaction hedging.
The carrying amounts of the Group's foreign currency denominated
monetary assets and monetary liabilities at period end are set out
below.
Assets Liabilities
2016 2015 2016 2015
US$'000 US$'000 US$'000 US$'000
Russian Roubles 39,404 56,795 35,675 56,817
US Dollars (a) 5,355 2,875 4,700 7,278
GB Pounds Sterling 2,444 357 813 943
EUR 54 80 18 42
Other currencies 49 92 288 220
(a) US Dollar denominated monetary assets and liabilities in
Group companies with Rouble functional currency.
The table set out below illustrates the Group's profit
sensitivity to changes in exchange rates by 25% (2015: 25%),
representing management's assessment of a reasonably possible
change in foreign exchange currency rates. The analysis was applied
to monetary assets and liabilities at the reporting dates
denominated in respective currencies.
2016 2015
US$'000 US$'000
Russian Rouble currency impact 932 5
US Dollar currency impact 164 1,101
GB Pounds Sterling currency impact 408 146
EUR currency impact 9 10
Other currencies 60 32
Credit risk
The Group's principal financial assets are cash and cash
equivalents, comprising current accounts, amounts held on deposit
with financial institutions and investments in money market and
liquidity funds. In the case of deposits and investments in money
market and liquidity funds, the Group is exposed to a credit risk,
which results from the non-performance of contractual agreements on
the part of the contract party. The Group is also exposed to a
credit risk in relation to the amounts guaranteed under the ICBC
facility (note 14).
The credit risk on liquid funds held in current accounts and
available on demand is limited because the main counterparties are
banks with high credit-ratings assigned by international
credit-rating agencies. Having performed a high level due
diligence, management does not consider the credit risk associated
with Asian-Pacific Bank and other banks without international
credit rating to be high. Asian-Pacific Bank has a wide network of
branches in the Amur region and, therefore, is extensively used by
the entities of the precious metals segment (note 26).
The Group's maximum exposure to credit risk is limited to the
carrying amounts of the financial assets recorded in the
consolidated financial statements and the outstanding principal and
interest under the ICBC facility (note 14).
The major financial assets at the balance sheet date are cash
and cash equivalents held with the counterparties as set out
below.
Counterparty Credit rating Carrying amount Carrying amount
at 31 December at 31 December
2016 2015
US$'000 US$'000
Barclays A 4,056 -
Sberbank BBB- 3,936 512
VTB BB+ 1,067 3,760
Alfa-Bank BB+ 846 -
Asian-Pacific Bank CCC 629 3,208
Bank of Cyprus B- 365 -
UBS A 212 173
Royal Bank of Scotland BBB+ 5 4,835
Treasury of Russian Federation (a) - - 15,093
(a) Funds received under investment agreement with the Russian
Ministry of Far East Development (note 32).
Commodity price risk
The Group generates most of its revenue from the sale of gold
and iron ore concentrate. The Group's policy is to sell its
products at the prevailing market price. In 2016 and 2015, the
Group has entered into gold forward contracts to protect cash flows
from the volatility in the gold price (note 18).
Liquidity risk
Liquidity risk is the risk that suitable sources of funding for
the Group's business activities may not be available. The Group
constantly monitors the level of funding required to meet its
short, medium and long term obligations. The Group also monitors
compliance with restrictive covenants set out in various loan
agreements (note 20) to ensure there is no breach of covenants
resulting in associated loans become payable immediately.
Effective management of liquidity risk has the objective of
ensuring the availability of adequate funding to meet short-term
requirements and due obligations as well as the objective of
ensuring a sufficient level of flexibility in order to fund the
development plans of the Group's businesses.
The table below details the Group's remaining contractual
maturity for its non-derivative financial liabilities with agreed
repayment periods. The amounts disclosed are the contractual
undiscounted cash flows and so these balances will not necessarily
agree with the amounts disclosed in the balance sheet. The
contractual maturity is based on the earliest date on which the
Group may be required to pay.
3 months
0 - 3 - 1 - 2
months 1 year years 2 - 3 years 3 - 6 years
US$'000 US$'000 US$'000 US$'000 US$'000
2016
Borrowings
- Convertible bonds - - - 100,000
- Loans 1,524 83,782 (a) 46,255 86,475 311,759
Future interest payments
(b) 13,257 38,670 44,589 40,322 74,730
Trade and other payables 34,658 9,030 - - -
49,439 131,482 90,844 126,797 486,489
2015
Borrowings
- Convertible bonds - - - - 100,000
- Loans 41,744 210,105 288,274 16,817 -
Future interest payments
(b) 10,952 34,911 22,786 9,354 11,250
Trade and other payables 28,070 32,572 - - -
80,766 277,588 311,060 26,171 111,250
(a) Including US$75 million based on facility contractual terms
existing as at 31 December 2016 (note 20).
(b) Future interest payments have been estimated using interest
rates applicable at 31 December. There are no borrowings that are
subject to variable interest rates and, therefore, subject to
change in line with the market rates.
31. Operating lease arrangements
The Group as a Lessee
2016 2015
US$'000 US$'000
Minimum lease payments under operating leases
recognised as an expense in the year 5,057 2,535
At the balance sheet date, the Group had outstanding commitments
for future minimum lease payments under a non-cancellable operating
lease for office premises, which fall due as follows:
2016 2015
US$'000 US$'000
Expiring:
Within one year 319 383
In two to five years 531 1,148
850 1,531
The Group as a Lessor
The Group earned property rental income from continuing
operations during the year of US$0.7 million (2015: US$0.8million)
on buildings owned by its subsidiary Irgiredmet.
32. Capital commitments
At 31 December 2016, the Group had entered into contractual
commitments in relation to its continuing operations for the
acquisition of property, plant and equipment and mine development
costs in relation to POX Hub project amounting to US$3.8 million
(31 December 2015: US$1.0 million).
Investment agreement with the Russian Ministry of Far East
Development
On 14 December 2015, the Group entered into an investment
agreement with the Russian Ministry of Far East Development (the
'Investment Agreement'). The Investment Agreement involves
provision of RUB5.5billion (an equivalent to c.US$91 million as at
31 December 2016) funding towards the construction of the
electricity power line in the North-East of the Amur Region of
Russia, where the Group's Albyn and Malomir mines and adjacent
licence areas are operated, during the period 2015 - 2019. The
funds are advanced to the Group and then should be transferred to
the joint-stock company Far East Grid Distribution Company
('DRSK'), who is to engage a contractor to build the relevant power
supply infrastructure. The Group's responsibility under the
Investment Agreement will be to monitor the progress and to report
to the Russian Ministry of Far East Development. The Group will be
taking ultimate responsibility for the construction of the power
line. Upon completion, the Group will get access to the enhanced
capacity of the power supply infrastructure in the region. Under
the terms of the Investment Agreement, the Group has certain
capital commitments, including further development of Albyn and
Malomir mines.
As at 31 December 2015, the Group received RUB1.1billion (an
equivalent to US$15.1 million) funds under the Investment
Agreement. During 2016, the Group received further RUB2.0 billion
(an equivalent to US$30.8 million) under the Investment Agreement
and transferred an aggregate RUB3.1 billion (an equivalent to
US$47.7 million) to DRSK.
33. Subsequent events
Hedging agreements
In February - March 2017, the Group has entered into forward
contracts to sell an aggregate of 549,994oz of gold during the
years 2017 - 2019 at an average price of US$1,252/oz.
34. Reconciliation of non-GAAP measures (unaudited)
2016 2015
US$'000 US$'000
Profit/(loss) for the period from continuing
operations 31,706 (190,454)
Add/(less):
Interest expense 60,976 71,514
Investment income (556) (1,018)
Other finance gains (11,976) (9,064)
Other finance losses 1,548 -
Foreign exchange losses 5,158 11,952
Taxation (4,698) 48,879
Depreciation 105,252 129,104
Impairment of exploration and evaluation
assets 9,155 37,442
Impairment of ore stockpiles 1,163 17,425
Share of results of associates (a) 2,356 57,009
Underlying EBITDA 200,084 172,789
(a) Group's share of interest expense, investment income, other
finance gains and losses, foreign exchange losses, taxation,
depreciation and impairment recognised by an associate (note
14).
35. Principal subsidiaries and other significant investments
The Group has the following principal subsidiaries and other
significant investments, which were consolidated in this financial
information.
Principal Country Principal activity Proportion of Proportion of
subsidiary, of incorporation shares held shares held
joint venture by Petropavlovsk by the Group
and associate PLC
undertakings
31 December 31 December 31 December 31 December
2016 2015 2016 2015
------------
Subsidiary
CJSC Management
Company
Petropavlovsk Russia Management company 100% 100% 100% 100%
Petropavlovsk
2010 Limited Jersey Finance company 100% 100% 100% 100%
JSC Pokrovskiy Gold exploration
Rudnik Russia and production 43.5% 43.5% 98.61% 98.61%
LLC Malomirskiy Gold exploration
Rudnik Russia and production - - 99.86% 99.86%
LLC Albynskiy Gold exploration
Rudnik Russia and production - - 100% 100%
Gold exploration
LLC Osipkan Russia and production - - 100% 100%
LLC Tokurskiy Gold exploration
Rudnik Russia and production - - 100% 100%
Gold exploration
LLC Rudoperspektiva Russia and production - - 100% 100%
Gold exploration
JSC YamalZoloto Russia and production - - - 100%
Gold exploration
LLC Iljinskoye Russia and production - - - 100%
Gold exploration
LLC Potok Russia and production - - - 100%
Gold exploration
LLC Temi Russia and production - - 75% 75%
Gold exploration
LLC AGPK Russia and production - - 98.61% 98.61%
Gold exploration
LLC PPOP Russia and production - - 98.61% -
Gold exploration
Major Miners Inc. Guyana and production - - - 100%
Universal Mining Gold exploration
Inc. Guyana and production - - 100% 100%
Cuyuni River
Ventures Gold exploration
Inc. Guyana and production - - - 100%
LLC Kapstroi Russia Construction services - - 100% 100%
LLC NPGF Regis Russia Exploration services - - 100% 100%
CJSC ZRK
Dalgeologiya Russia Exploration services - - 98.61% 98.61%
Project and
engineering
JSC PHM Engineering Russia services - - 94% 94%
JSC Irgiredmet Russia Research services - - 99.69% 99.69%
LLC NIC
Gydrometallurgia Russia Research services - - 100% 100%
Repair and
LLC BMRP Russia maintenance - - 100% 100%
Production of
explosive
LLC AVT-Amur Russia materials - - 49% 49%
Transportation
LLC Transit Russia services - - 100% 100%
Pokrovskiy Mining
College Russia Educational institute - - 98.61% 98.61%
Associate
JSC Verkhnetisskaya Gold exploration
Ore Mining Company Russia and production - - - 49%
Management and
IRC Limited (a) HK holding company - - 31.10% 35.83%
IRC and its principal subsidiary and joint venture undertakings ('IRC')
Management and
IRC Limited HK holding company - - 31.10% 35.83%
Principal
subsidiaries
of IRC
LLC
Petropavlovsk-Iron
Ore Russia Management company - - 31.10% 35.83%
LLC Olekminsky Iron ore exploration
Rudnik Russia and production - - 31.10% 35.83%
Iron ore exploration
LLC KS GOK Russia and production - - 31.10% 35.83%
LLC Garinsky Mining
& Metallurgical Iron ore exploration
Complex Russia and production - - 30.97% 35.83%
LLC Kostenginskiy Iron ore exploration
GOK Russia and production - - 31.10% 35.83%
LLC
Orlovo-Sokhatinsky Iron ore exploration
Rudnik Russia and production - - 31.10% 35.83%
JSC Giproruda Russia Engineering services - - 21.86% 25.18%
Infrastructure
LLC SHMTP Russia project - - 31.10% 35.83%
LLC Amursnab Russia Procurement services - - 31.07% 35.83%
Heilongjiang Jiatal
Titanium Co., Titanium sponge
Limited China project - - 31.10% 35.83%
Iron ore exploration
LLC Uralmining Russia and production - - 31.10% 35.83%
LLC Gorniy Park Russia Molybdenym project - - 18.75% 17.95%
Joint ventures
of IRC
Heilongjiang
Jianlong
Vanadium Industries
Co., Limited China Vanadium project - - 14.31% 16.48%
(a) IRC Limited and its principal subsidiary and joint venture undertakings.
36. Related undertakings of the Group
The Group consists of the parent company, Petropavlovsk PLC,
incorporated in the United Kingdom and its subsidiaries, associates
and joint ventures. In accordance with Section 409 of the Companies
Act 2006 a full list of related undertakings, the country of
incorporation and the effective percentage of equity owned as at 31
December 2016 is disclosed below. The Group's principal
subsidiaries and other significant investments are set out in note
35.
Name of undertaking Country Proportion Registered address
of of shares
incorporation held by
the Group
Subsidiaries
Aricom B Finance Plc UK 100% 11 Grosvenor Place, London, SW1X 7HH
Aricom Finance UK Limited UK 100% 11 Grosvenor Place, London, SW1X 7HH
Aricom Treasury UK Limited UK 100% 11 Grosvenor Place, London, SW1X 7HH
Aricom Services Limited UK 100% 11 Grosvenor Place, London, SW1X 7HH
Aricom Roubles Treasury 11 Grosvenor Place, London, SW1X 7HH
UK Limited UK 100%
Aricom B Limited UK 100% 11 Grosvenor Place, London, SW1X 7HH
Aricom B Roubles Treasury 11 Grosvenor Place, London, SW1X 7HH
Limited UK 100%
Petropavlovsk Rouble 11 Grosvenor Place, London, SW1X 7HH
UK Limited UK 98.61%
Eponymousco Limited UK 100% 11 Grosvenor Place, London, SW1X 7HH
Victoria Resources Limited UK 100% 11 Grosvenor Place, London, SW1X 7HH
Peter Hambro Mining 11 Grosvenor Place, London, SW1X 7HH
Treasury UK Limited UK 100%
Peter Hambro Mining 11 Grosvenor Place, London, SW1X 7HH
Rouble Treasury Limited UK 100%
Petropavlovsk 2010 Limited Jersey 100% 13-14 Esplanade, St. Helier, JE1 1EE
Petropavlovsk (Jersey) 13-14 Esplanade, St. Helier, JE1 1EE
Limited Jersey 100%
Peter Hambro Mining
Group Finance Limited PO Box 409, Elizabeth House, Ruette
Guernsey 100% Braye, St. Peter Port, GY1 3WA
CJSC Management Company Russia 100% 675000, Amur Region, Blagoveshchensk,
Petropavlovsk Lenina Street, 140/1
JSC Pokrovskiy Rudnik Russia 98.61% 676150, Amur Region, Magdagachinskiy
District, Tygda Village, Sovetskaya
Street, 17
LLC Malomirskiy Rudnik Russia 99.86% 675000, Amur Region, Blagoveshchensk,
Lenina Street, 140/1
LLC Albynskiy Rudnik Russia 100% 675000, Amur Region, Blagoveshchensk,
Lenina Street, 140/1
LLC Osipkan Russia 100% 675000, Amur Region, Blagoveshchensk,
Lenina Street, 140/1
LLC Tokurskiy Rudnik Russia 100% 676581, Amur Region, Selemdzhinskiy
District, Tokur Village, Vorozhejkina
Street, 16
LLC Rudoperspektiva Russia 100% 675000, Amur Region, Blagoveshchensk,
Lenina Street, 140/1
LLC Temi Russia 75% 675000, Amur Region, Blagoveshchensk,
Lenina Street, 140/1
LLC AGPK Russia 98.61% 675000, Amur Region, Blagoveshchensk,
Lenina Street, 140/1
LLC PPOP Russia 98.61% 675002, Amur Region, Blagoveshchensk,
Amurskaya Street, 17
LLC Kapstroi Russia 100% 675002, Amur Region, Blagoveshchensk,
Amurskaya Street, 17
LLC NPGF Regis Russia 100% 675027, Amur Region, Blagoveshchensk,
Western Industrial Hub
CJSC ZRK Dalgeologiya Russia 98.61% 680041, Khabarovskiy Region, Khabarovsk,
Balashovskaya Street, 15
JSC PHM Engineering Russia 94% 105082, Moscow, Rubtsov Pereulok,
13
JSC Irgiredmet Russia 99.69% 664025, Irkutsk, Gagarina Boulevard,
38
LLC NIC Gydrometallurgia Russia 100% 196247, St. Petersburg, Leninskiy
Prospekt, 151
100% 675016, Amur Region, Blagoveshchensk,
LLC BMRP Russia Kalinina Street, 137
LLC AVT-Amur Russia 49% 675000, Amur Region, Blagoveshchensk,
Lenina Street, 140/1
100% 676572, Amur Region, Selemdzhinskiy
District, Fevralsk Urban Village,
LLC Transit Russia Vysotskogo Street, 1
98.61% 676244, Amur Region, Zeya, Zolotogorskoe
Pokrovskiy Mining College Russia Shosse, 6
Universal Mining Inc. Guyana 100% Lot 8 Pere Street, Kitty, Georgetown
Peter Hambro Mining 14 Souliou Street, Aglantzia, Nicosia,
(Cyprus) Limited Cyprus 100% 2102
Malomyrskiy Rudnik (Cyprus) 14 Souliou Street, Aglantzia, Nicosia,
Ltd Cyprus 100% 2102
14 Souliou Street, Aglantzia, Nicosia,
Voltimand Limited Cyprus 100% 2102
14 Souliou Street, Aglantzia, Nicosia,
Horatio Limited Cyprus 100% 2102
14 Souliou Street, Aglantzia, Nicosia,
Sicinius Limited Cyprus 100% 2102
Syncrom High Corporation 14 Souliou Street, Aglantzia, Nicosia,
Ltd Cyprus 100% 2102
Cayman Clifton House, 75 Fort Street, PO
Cayiron Limited Islands 100% Box 1350, Grand Cayman, KY1-1108
----------
Associates
31.10% 6H, 9 Queen's Road Central, Central,
IRC Limited HK Hong Kong
Subsidiaries of IRC
LLC Petropavlovsk- Iron Russia 31.10% 127055, Moscow, Lesnaya Street, 43,
Ore Office 313
LLC Olekminsky Rudnik Russia 31.10% 676253, Amur Region, Tyndinskiy District,
Village Olekma
LLC KS GOK Russia 31.10% 679000, The Jewish Autonomous Region,
Birobidzhan, 60-Letiya SSSR Street,
Building 22B
LLC Garinsky Mining Russia 30.97% 675027, Amur Region, Blagoveshchensk,
& Metallurgical Complex Ignatievskaya Road, 19
LLC Kostenginskiy GOK Russia 31.10% 679000, The Jewish Autonomous Region,
Birobidzhan, 60-Letiya SSSR Street,
Building 22B.
LLC Orlovo-Sokhatinsky Russia 31.10% 675027, Amur Region, Blagoveshchensk,
Rudnik Ignatievskaya Road, 19
JSC Giproruda Russia 21.86% St. Petersburg, Leninskiy Avenue,151
31.10% 682818, RF, Khabarovsk Territory,
Town Sovetskaya Gavan, Pervomayskaya
LLC SHMTP Russia Street, 48A
31.07% 127055, Moscow, Lesnaya Street, 43,
LLC Amursnab Russia Office 313
LLC Uralmining Russia 31.10% 105082, Moscow, Spartakovskaya Square,
14, Building 1
LLC Gorniy Park Russia 18.75% 101000, Moscow, Pokrovka Street,1/13/6
Building 2, Office 35
LLC Garinskaya Infrastructure Russia 31.10% 675027, Amur Region, Blagoveshchensk,
Ignatievskaya Road, 19
LLC TOK Russia 31.10% 676282, Amur Region, Tynda, Sovetskaya
Street,1A
Lucilius Investments 31.10% Souliou 14, Aglantzia, 2102 Nicosia
Limited Cyprus
Kapucius Services Limited Cyprus 31.10% Souliou 14, Aglantzia, 2102 Nicosia
30.97% Themistokli Dervi 12, Palais D' Ivoire,
Lapwing Limited Cyprus 2(nd) Floor, 1066 Nicosia
Russian Titan Company 31.10% Souliou 14, Aglantzia, 2102 Nicosia
Limited Cyprus
Brasenose Services Limited Cyprus 31.10% Souliou 14, Aglantzia, 2102 Nicosia
Tenaviva Limited Cyprus 31.10% Souliou 14, Aglantzia, 2102 Nicosia
Esimanor Limited Cyprus 31.10% Souliou 14, Aglantzia, 2102 Nicosia
Metellus Limited Cyprus 31.10% Souliou 14, Aglantzia, 2102 Nicosia
Dardanius Limited Cyprus 31.10% Souliou 14, Aglantzia, 2102 Nicosia
Rumier Holdings Limited Cyprus 31.10% Souliou 14, Aglantzia, 2102 Nicosia
Guiner Enterprises Limited Cyprus 31.10% Souliou 14, Aglantzia, 2102 Nicosia
Expokom Limited Cyprus 31.10% Souliou 14, Aglantzia, 2102 Nicosia
Arfin Limited Cyprus 31.10% Souliou 14, Aglantzia, 2102 Nicosia
Caedmon Limited Cyprus 18.75% Souliou 14, Aglantzia, 2102 Nicosia
Thorholdco (Cyprus) 31.10% Souliou 14, Aglantzia, 2102 Nicosia
Limited Cyprus
Heilongjiang Jiatal China 31.10% 668, Songxing Street, Jiamusi, Heilongjiang
Titanium Co., Limited Province
31.10% 6H, 9 Queen's Road Central, Central,
Ariti HK Limited Hong Kong Hong Kong
31.10% 6H, 9 Queen's Road Central, Central,
Ariva HK Limited Hong Kong Hong Kong
31.10% P.O. Box 31119 Grand Pavilion, Hibiscus
Cayman Way, 802 West Bay Road, Grand Cayman,
Thorrouble Limited Islands KY1-1205
31.10% P.O. Box 31119 Grand Pavilion, Hibiscus
Cayman Way, 802 West Bay Road, Grand Cayman,
Thordollar Limited Islands KY1-1205
31.10% P.O. Box 31119 Grand Pavilion, Hibiscus
Cayman Way, 802 West Bay Road, Grand Cayman,
Thorholdco Limited Islands KY1-1205
Aricom UK Limited UK 31.10% 11 Grosvenor Place, London, SW1X 7HH
Aricom Limited UK 31.10% 11 Grosvenor Place, London, SW1X 7HH
Joint ventures of IRC
Heilongjiang Jianlong China 14.31% Building 50, Block12, Advanced Business
Vanadium Industries Park, No. 188.West Road, South Ring
Co., Limited 4, Fengtai District, Bejing
----------
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SEDSIMFWSEEL
(END) Dow Jones Newswires
April 26, 2017 02:14 ET (06:14 GMT)
Petropavlovsk (LSE:POG)
Historical Stock Chart
From Jun 2024 to Jul 2024
Petropavlovsk (LSE:POG)
Historical Stock Chart
From Jul 2023 to Jul 2024