TIDMPOG
RNS Number : 2638D
Petropavlovsk PLC
30 January 2018
30 January 2018
Petropavlovsk PLC
2017 Full Year Production Results & 2018 Guidance
Petropavlovsk PLC ("Petropavlovsk" or the "Company" or, together
with its subsidiaries, the "Group") announces the following:
2017 Highlights
-- Full year 2017 gold production of c.439,600oz (H1 2017:
c.232,400oz), within guidance of 420,000-460,000oz
-- Full year gold sales (unaudited) of c.439,800oz
-- Average realized gold price (unaudited) of c.US$1,262/oz,
including c.US$2/oz positive effect from hedging
-- Full scale construction of the pressure oxidation facility
("POX Hub") on schedule for the commencement of commissioning and
first production during Q4 2018. Works have included preparing the
Pokrovskiy mine for closure to be converted into the POX Hub
site
-- Planned underground development substantially completed at
Pioneer and Malomir during the year in spite of some delays;
production began at both underground mines
-- Successful issuance of US$500m 8.125% guaranteed notes improves the Group's capital profile
-- Company used net proceeds to repay loans provided pursuant to
banking facilities by Sberbank and VTB Bank
-- A decrease in outstanding debt principal of US$26m to US$604m
as of 31st December 2017, compared to 31st December 2016
(US$630m)
-- Total cash cost (TCC/oz) for 2017 expected to be just above
US$700/oz due to rouble appreciation towards the end of 2017
-- Total CAPEX for 2017 of c.US$93m, including:
-- c.US$42m related to refractory ore processing (c.US$33m of which relates to the POX Hub)
-- c.US$35m related to underground mine development and exploration
-- c.US$16m on other capex
2018 Guidance
-- 2018 gold production in the range of c.420,000-460,000oz
including first production from POX Hub
-- Pokrovskiy mine closure and completion and ramping up of new
developments (underground and the POX Hub) reflect normal start up
risks
-- FY Total Cash Costs expected to be within the range of
US$700-750/oz, an increase vs 2017 due to the continued negative
effect of rouble appreciation
-- This guidance is based on a stronger rouble assumption (RUR58/US$)
-- CAPEX forecast for 2018 is c.US$105m, including:
-- c.US$62m related to the completion and commissioning of the POX Hub
-- c.US$6m for Malomir flotation including related tailings
-- c.US$10m for underground mine development at Pioneer and Malomir
-- c.US$15m for exploration
-- c.US12m of other
-- The POX Hub is expected to produce first gold in Q4 2018
-- The new Malomir flotation plant is expected to be
commissioned in April 2018 with first concentrate production
shortly thereafter
-- Outstanding forward sales contracts of 400,000oz at a gold
price of US$1,252/oz as at 31 December 2017
Corporate Strategy
Petropavlovsk's strategy is to leverage the Company's
substantial refractory resource base whilst optimising its
non-refractory resources. The focus remains on producing profitable
gold ounces, maximising cash generation from operating mines and
enhancing open pit production, with a gradual ramp up of higher
grade underground operations at Pioneer and Malomir. The POX Hub,
which remains the top priority for management in 2018, is at the
heart of the Group's growth prospects.
Gold production - Doré (incl. gold in circuit
("GIC") movement), '000oz
---------------------------------------------------------- ------------
Q4 2017 Q4 2016 Year ended Year ended
31 Dec 2017 31 Dec 2016
=============== =========== ========== ================ ============
Pioneer 30.0 28.0 161.8 133.2
=============== =========== ========== ================ ============
Albyn 43.6 48.8 181.6 173.9
=============== =========== ========== ================ ============
Malomir 21.8 14.9 65.6 54.9
=============== =========== ========== ================ ============
Pokrovskiy 7.8 10.5 30.6 38.2
=============== =========== ========== ================ ============
Total 103.2 102.2 439.6 400.2
--------------- ----------- ---------- ---------------- ------------
*Note: from the beginning of 2017, the Company moved to using
gold poured as the definition for production. Comparable 2016 gold
production numbers are adjusted accordingly.
Ian Ashby, Chairman, Comments
"Petropavlovsk produced almost 440,000oz in 2017, a 20% increase
on the previous year from both Pioneer and Malomir, which falls
comfortably within our guided range of 420,000-460,000oz. Both of
our flagship mines -Pioneer and Albyn - outperformed the previous
year's production. Pioneer's output in ounces for the year improved
partly due to GIC reduction.
We continued with the development of our underground operations
at Pioneer and Malomir, which traditionally have been open pit
mines. Developing underground operations at both mines
simultaneously has proved to be challenging, and we did face some
delays, mainly due to development delays at Malomir and issues with
underground water at NE Bakhmut, Pioneer. Solid progress at Malomir
towards the end of the year meant that these delays did not have a
material impact on total production.
Fiscal year 2018 marks the beginning of a new era for
Petropavlovsk with the closure of our Pokrovskiy mine, as the site
is being transformed into a key component of the POX Hub, our
flagship development project. The construction of the POX Hub
progressed as planned during the year and commissioning is expected
to commence in September 2018. We have been cautious in our
guidance around full year production from the POX Hub as the
technology, whilst proven globally, is new to Petropavlovsk.
The Board has consequently taken a conservative approach towards
the production forecast for 2018.
The Company plans to commence the production of concentrate at
Malomir's flotation plant from April 2018. This is in order to
accumulate a sufficient stockpile for processing ahead of the
commissioning of the POX Hub. The additional option of selling this
high-grade concentrate, should there be any delays with the POX Hub
commissioning, helps to de-risk the Group's financial position in
this transitional year.
The bond issue in November 2017 has provided greater stability
to the Group and, under these improved conditions, the Board
continues to pursue its previously stated strategy. That is, to
focus on organic growth in order to maximise returns from the
Company's current asset portfolio, including the completion of the
POX Hub, and to monetise the Company's underground operations to
generate additional cash flow and further strengthen the Company's
balance sheet."
Capital Markets Day
Petropavlovsk is planning an institutional capital markets day
in London during April 2018.
The event will focus on technical aspects of the Company's
flagship POX Hub development project and will include presentations
from industry experts, both internal and external.
A presentation will be made available on the Company's website
following the event, full details of which will be circulated in
due course.
About Petropavlovsk
Petropavlovsk is one of Russia's leading gold mining companies.
As at 31 December 2017, the Company had produced approximately
6.8Moz of gold.
At this time, 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 3,430km(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$340 million project finance facility (US$234
million principal outstanding as at 31 December 2017). 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).
Operations Report
Pioneer
Pioneer open pit and underground mining operations
-----------------------------------------------------------------------------
Units Q4 2017 Q4 2016 Year ended Year ended
31 Dec 31 Dec
2017 2016
------------------ --------- ---------- -------- ----------- -----------
Total material
moved m3 '000 4,219 3,689 15,857 17,360
------------------ --------- ---------- -------- ----------- -----------
Ore mined t '000 1,393 1,009 8,489 3,266
------------------ --------- ---------- -------- ----------- -----------
Average grade g/t 0.56 1.07 0.72 0.95
------------------ --------- ---------- -------- ----------- -----------
oz.
Gold content '000 25.3 34.7 196.4 99.4
------------------ --------- ---------- -------- ----------- -----------
Pioneer processing operations
-----------------------------------------------------------------------------
Resin-in-pulp (RIP) plant
-----------------------------------------------------------------------------
Total milled t '000 1,692 1,669 6,783 6,700
------------------ --------- ---------- -------- ----------- -----------
Average grade g/t 0.56 0.78 0,68 0.75
------------------ --------- ---------- -------- ----------- -----------
oz.
Gold content '000 30.5 41.9 148.9 159.8
------------------ --------- ---------- -------- ----------- -----------
Recovery % 72.0% 93.3% 75.3% 85.5%
------------------ --------- ---------- -------- ----------- -----------
oz.
Gold recovered '000 22.0 39.1 112.1 136.6
------------------ --------- ---------- -------- ----------- -----------
Heap leach operations
-----------------------------------------------------------------------------
Total stacked t '000 44 84 752 701
------------------ --------- ---------- -------- ----------- -----------
Average grade g/t 0.45 0.55 0.49 0.53
------------------ --------- ---------- -------- ----------- -----------
oz.
Gold content '000 0.6 1.5 11.7 12.0
------------------ --------- ---------- -------- ----------- -----------
Recovery % 190.0%(*) 72.2% 51.8% 44.1 %
------------------ --------- ---------- -------- ----------- -----------
oz.
Gold recovered '000 1.2 1.1 6.1 5.3
------------------ --------- ---------- -------- ----------- -----------
Pioneer gold
production oz.
- Doré(**) '000 30.0 28.0 161.8 133.2
------------------ --------- ---------- -------- ----------- -----------
Notes (also applicable to tables below):
* Because it takes weeks to recover gold via heap leach, monthly
and quarterly recovery figures cannot be accurately measured and
sometimes may result in erroneous values. Only full year figures
should be used as a representative gold recovery measure for Group
heap leach operations.
(**) "Gold recovered" lines represent gold recovered from the
ore processed during the period; "gold production - doré" shows the
amount of gold contained in the doré bars produced during the
period. The difference between "gold production - doré" and "Gold
recovered" is due to changes in the amount of gold in circuit,
which is gold remaining in the processing circuit of the plant:
primarily in resin sorbent, cyanide solution, and in the form of
electrolytic product.
In 2017, Pioneer produced 161.8koz, 37% of total Group
production, and a 21% increase from 2016 (133.2koz). The increase
is attributable to a significant reduction of gold in circuit,
which is gold remaining in the processing circuit of the plant
(primarily in resin sorbent and cyanide solution, in the form of
electrolytic product). The release of gold in circuit was primarily
achieved through the successful commissioning, in Q1 2017, of a
resin treatment facility that releases gold "trapped" in used
resin.
The main sources of ore at Pioneer were pits of the Alexandra,
Yuzhnaya, Promezhutachnaya and Andreevskaya-West zones. This ore
was blended with lower grade material from stockpiles. RIP
processing recoveries were lower compared to the previous year due
to lower head grades and the ore processed being more refractory
than in the previous year. Heap leach operations commenced on
schedule in April 2017 and operated as normal through the warmer
season until the end of October.
During 2017, a total of 3,646m (50,268m(3) ) of underground
development was completed. The first underground ore was produced
in June. In total, 35.1kt of underground ore with an average gold
content of 2.78g/t was mined in 2017. Water inflow into the mine
was higher than expected and delayed the decline development,
resulting in less underground production than expected. The Group
is expanding its pumping facilities and expects to see Pioneer
underground in full production in Q1 2018.
Albyn
Albyn mining operations
-------------------------------------------------------------------------
Units Q4 2017 Q4 2016 Year ended Year ended
31 Dec 31 Dec
2017 2016
---------------- --------- -------- -------- ----------- -----------
Total material
moved m3 '000 5,838 7,863 28,557 31,763
---------------- --------- -------- -------- ----------- -----------
Ore mined t '000 1,586 1,456 5,263 4,970
---------------- --------- -------- -------- ----------- -----------
Average grade g/t 1.24 1.54 1.16 1.25
---------------- --------- -------- -------- ----------- -----------
oz.
Gold content '000 63.1 72.1 196.5 199.5
---------------- --------- -------- -------- ----------- -----------
Albyn processing operations
-------------------------------------------------------------------------
Resin-in-pulp (RIP) plant
-------------------------------------------------------------------------
Total milled t '000 1,154 1,173 4,618 4,675
---------------- --------- -------- -------- ----------- -----------
Average grade g/t 1.19 1.69 1.16 1.28
---------------- --------- -------- -------- ----------- -----------
oz.
Gold content '000 44.3 63.7 171.9 192.5
---------------- --------- -------- -------- ----------- -----------
Recovery % 93.7% 95.1% 93.3% 93.5%
---------------- --------- -------- -------- ----------- -----------
oz.
Gold recovered '000 41.5 60.6 160.3 180.0
---------------- --------- -------- -------- ----------- -----------
Albyn gold
production oz.
- Doré '000 43.6 48.8 181.6 173.9
---------------- --------- -------- -------- ----------- -----------
In 2017 Albyn produced 181.6koz, 41% of total Group production,
a 4% increase on 2016 (173.9koz). The main sources of ore were the
Central and Eastern zones of the Albyn main pit, with a small
amount of ore supplied from stockpiles. The processing plant had
consistently high recoveries - over 90% - throughout the year.
Preparations were carried out for the production of ore from
Unglichikan, which is expected to become of one of the additional
feeders for the Albyn plant in 2018.
Malomir
Malomir open pit and underground mining operations
-------------------------------------------------------------------------
Units Q4 2017 Q4 2016 Year ended Year ended
31 Dec 31 Dec
2017 2016
---------------- --------- -------- -------- ----------- -----------
Total material
moved m3 '000 1,929 2,339 9,380 8,115
---------------- --------- -------- -------- ----------- -----------
Ore mined t '000 579 690 2,770 1,535
---------------- --------- -------- -------- ----------- -----------
Average grade g/t 1.49 1.00 0.97 1.11
---------------- --------- -------- -------- ----------- -----------
oz.
Gold content '000 27.8 22.2 86.1 54.9
---------------- --------- -------- -------- ----------- -----------
Malomir processing operations
-------------------------------------------------------------------------
Resin-in-pulp (RIP) plant
-------------------------------------------------------------------------
Total milled t '000 901 745 3,404 3,000
---------------- --------- -------- -------- ----------- -----------
Average grade g/t 1.17 0.97 0.91 0.86
---------------- --------- -------- -------- ----------- -----------
oz.
Gold content '000 33.8 23.2 99.5 82.5
---------------- --------- -------- -------- ----------- -----------
Recovery % 71.8% 71.5% 64.9% 68.9%
---------------- --------- -------- -------- ----------- -----------
oz.
Gold recovered '000 24.2 16.6 64.6 56.8
---------------- --------- -------- -------- ----------- -----------
Malomir gold
production oz.
- Doré '000 21.8 14.9 65.6 54.9
---------------- --------- -------- -------- ----------- -----------
In 2017 Malomir produced 65.6koz, 15% of total Group production,
and a 20% increase from 2016 (54.9koz). The increase is mostly
attributable to the processing of high grade underground ore and to
an overall increase in plant throughput.
The main sources of ore were pits of the Quartzitovoye and
Magnetitovoye zones, blended with high grade ore mined from
underground and low grade ore from stockpiles. The volumes of ore
treated through the plant increased by 13% compared to 2016, which
was in line with the mining plan.
The Quartzitovoye 2 pit was completed in H1, though recovery
rates from the pit were lower than planned due to its ore being
more refractory than expected.
The construction of an underground mine at Quartzitovoye 1 began
in January 2017, and 3,084m (47,157m(3) ) of underground
development was completed during the year.
Delays primarily related to mining contractor mobilisation
experienced in Q1 2017 were largely rectified by the end of Q3. In
December, full scale stope mining commenced, resulting in strong
production towards the year end. A total of 73.6kt of ore was mined
from underground with an average gold content of 8.03g/t during
2017. The Quartzitovoye underground mine is expected to be in full
production throughout 2018.
Pokrovskiy
Pokrovskiy mining operations
---------------------------------------------------------------------------
Units Q4 2017 Q4 2016 Year ended Year ended
31 Dec 31 Dec
2017 2016
------------------ --------- -------- -------- ----------- -----------
Total material
moved m3 '000 773 1,123 3,745 4,709
------------------ --------- -------- -------- ----------- -----------
Ore mined t '000 473 257 1,468 1,027
------------------ --------- -------- -------- ----------- -----------
Average grade g/t 0.52 0,68 0.51 0.79
------------------ --------- -------- -------- ----------- -----------
oz.
Gold content '000 7.9 5.6 24.1 26.0
------------------ --------- -------- -------- ----------- -----------
Pokrovskiy processing operations
---------------------------------------------------------------------------
Resin-in-pulp (RIP) plant
---------------------------------------------------------------------------
Total milled t '000 463 452 1,815 1,791
------------------ --------- -------- -------- ----------- -----------
Average grade g/t 0.51 0.72 0.47 0.65
------------------ --------- -------- -------- ----------- -----------
oz.
Gold content '000 7.6 10.5 27.4 37.1
------------------ --------- -------- -------- ----------- -----------
Recovery % 85.4% 87.2% 82.9% 90.1%
------------------ --------- -------- -------- ----------- -----------
oz.
Gold recovered '000 6.5 9.1 22.7 33.5
------------------ --------- -------- -------- ----------- -----------
Heap leach operations
---------------------------------------------------------------------------
Total stacked t '000 55 16 498 440
------------------ --------- -------- -------- ----------- -----------
Average grade g/t 0.40 0.44 0.39 0.45
------------------ --------- -------- -------- ----------- -----------
oz.
Gold content '000 0.7 0.2 6.3 6.3
------------------ --------- -------- -------- ----------- -----------
Recovery % 122.7% 371.4% 45.4% 64.8%
------------------ --------- -------- -------- ----------- -----------
oz.
Gold recovered '000 0.9 0.8 2.9 4.1
------------------ --------- -------- -------- ----------- -----------
Pokrovskiy
gold production oz.
- Doré '000 7.8 10.5 30.6 38.2
------------------ --------- -------- -------- ----------- -----------
In 2017, Pokrovskiy produced 30.6koz, 7% of total Group
production, and a 20% decrease from 2016 (38.2koz) due to the
mine's closure.
The Zeyskaya and Vodorazdelnaya zones were the main sources of
low grade ore, which was blended with ore from stockpiles. This
contributed to a year-on-year decrease in H1 processing recovery at
the plant as this material was of lower quality than expected.
Leading up to the transition of the RIP plant into a key POX Hub
component, both RIP and heap leach plants operated as planned. Heap
leaching commenced in April and ended with the arrival of cold
weather in October.
Enquiries
For more information, please visit www.petropavlovsk.net and
www.ircgroup.com.hk or contact:
Petropavlovsk PLC Buchanan
Alya Samokhvalova Bobby Morse
Grace Hanratty Anna Michniewicz
+44 (0) 20 7201 8900 +44 (0) 207 466 5000
TeamIR@petropavlovsk.net POG@buchanan.uk.com
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014.
Cautionary note on forward-looking statements
This release may include statements that are, or may be deemed
to be, "forward-looking statements". These forward-looking
statements can be identified by the use of forward-looking
terminology, including the terms "believes", "estimates", "plans",
"projects", "anticipates", "expects", "intends", "may", "will" or
"should" or, in each case, their negative or other variations or
comparable terminology, or by discussions of strategy, plans,
objectives, goals, future events or intentions. These forward-
looking statements include all matters that are not historical
facts. They appear in a number of places throughout this release
and include, but are not limited to, statements regarding the
Group's intentions, beliefs or current expectations concerning,
among other things, the future price of gold, the Group's results
of operations, financial position, liquidity, prospects, growth,
estimation of mineral reserves and resources and strategies, and
exchange rates and the expectations of the industry.
By their nature, forward-looking statements involve risk and
uncertainty because they relate to future events and circumstances
outside the control of the Group. Forward-looking statements are
not guarantees of future performance and the development of the
markets and the industry in which the Group operates may differ
materially from those described in, or suggested by, any forward-
looking statements contained in this release. In addition, even if
the development of the markets and the industry in which the Group
operates are consistent with the forward looking statements
contained in this release, those developments may not be indicative
of developments in subsequent periods. A number of factors could
cause results and/or developments to differ materially from those
expressed or implied by the forward-looking statements including,
without limitation, general economic and business conditions,
demand, supply and prices for gold and other long-term commodity
price assumptions (and their effect on the timing and feasibility
of future projects and developments), trends in the gold mining
industry and conditions of the international gold markets,
competition, actions and activities of governmental authorities
(including changes in laws, regulations or taxation), currency
fluctuations (including as between the US Dollar and Rouble), the
Group's ability to recover its reserves or develop new reserves,
changes in its business strategy, any litigation, and political and
economic uncertainty. Except as required by applicable law, rule or
regulation (including the Listing and Disclosure Guidance and
Transparency Rules), the Group does not undertake any obligation to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.
Past performance cannot be relied on as a guide to future
performance.
The content of websites referred to in this announcement does
not form part of this announcement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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