TIDMPOG
RNS Number : 3433G
Petropavlovsk PLC
23 July 2019
23 July 2019
Petropavlovsk PLC
2019 Half Year Trading Update
Petropavlovsk PLC ("Petropavlovsk" or the "Company" or, together
with its subsidiaries, the "Group") today issues its trading update
for the period from 1 January 2019 through to 30 June 2019 ("the
Period" or "H1 2019") in advance of its 2019 Half-Year Interim
Results which are expected to be published on 10 September
2019.
H1 2019 Highlights
Gold sales
-- A 12% increase in total gold sales to 225.1koz (H1 2018:
201.4koz), including 61.3koz from the processing of refractory gold
concentrate at the new POX Hub
-- Average realised gold price of US$1,286/oz (H1 2018:
US$1,285/oz), including a US$(26)/oz effect from hedging
-- On track to meet full-year target of c.450koz - 500koz
including the processing of 2018 Malomir stockpiles but excluding
upside from 3(rd) party concentrate purchases. It is expected that
Group production in H2 2019 will be higher compared to H1 2019
Gold sales '000oz
----------------------------------------------------------------
Asset Q2 2019 Q2 2018 H1 2019 H1 2018
------------------------ -------- -------- -------- --------
Pioneer 30.8 37.7 52.7 78.7
Albyn 37.9 30.9 79.2 70.3
Malomir incl. POX(1) 48.6 18.8 93.1 46.8
Pokrovskiy 0.2 1.4 0.2 5.6
------------------------ -------- -------- -------- --------
Total 117.5 88.8 225.1 201.4
(1) Sales at Malomir includes 34.6koz produced via the POX Hub
in Q2 2019 and 61.3koz produced in H1 2019
Pokrovskiy Pressure Oxidation (POX) Hub
-- A total of 61.3koz were produced from 76kt of Malomir refractory concentrates
-- Further improvements were made to the POX process, achieving
stable recoveries of up to 93%-94% across the plant earlier in
July
-- All four autoclaves tested and proven to be fully functional.
Each autoclave can treat both 3(rd) party and the Company's own
concentrates
Update on 3(rd) party refractory concentrates
-- Two batches of 3(rd) party material have been secured,
including 20kt grading 40-60g/t and 17kt of material grading
65-75g/t, with ongoing deliveries to site
-- The Company began processing an initial batch of 40-60g/t material in early July
New US$125m convertible bond offering and redemption of US$100m
convertible bonds due 2020
-- On 20 June 2019, the Company announced the redemption of its
US$100m convertible bonds maturing 2020 and successful placement of
new 5-year US$125m convertible bonds maturing 2024
-- The new convertible bonds are an important step for the
Company in rescheduling its debt maturities while it continues to
advance the POX project to full capacity. Furthermore, the increase
in the issue amount is being used to fund construction of a new
flotation facility at Pioneer to unlock the value of its refractory
ores and more fully utilise existing capacity at the POX Hub
-- The new convertible issue carries a lower coupon of 8.25% and
was significantly oversubscribed, with high demand from
international blue-chip institutional investors
Construction of a new flotation facility at Pioneer
-- The construction of a new flotation facility at Pioneer will
double the Company's refractory ore processing capacity from
3.6Mtpa to 7.2Mtpa
-- Significant existing infrastructure at Pioneer has resulted
in a low capital cost estimate for the new flotation facility
(US$25m to US$30m), making it both a strategic and high-return
project for the Group
-- Initial construction activities commenced in June, with an
estimated construction period of 12-14 months and commissioning
expected to commence in Q4 2020
Full year 2019 outlook
-- Gold sales of c.450 - 500koz remains unchanged given a
seasonally stronger H2, with upside from the processing of 3rd
party refractory concentrates
-- Capex of US$45m - US$55m remains unchanged; however,
construction of a new flotation facility at Pioneer will require
additional spending of US$25m - US$30m over a 12 - 14 month period,
a portion of which will fall into 2019
-- As at 30 June 2019, forward gold sales contracts totaling
130koz at an average price of US$1,281/oz were outstanding
Capital markets day
-- Petropavlovsk management will be hosting a Capital Markets
Day alongside its H1 2019 financial results on 10 September
2019
-- This will be held at the London offices of Buchanan
Communications, commencing 9.00am BST. Full details of the agenda,
together with details of conferencing and webcast facilities will
be available on the Company's website closer to the date
IRC update
-- The K&S mine successfully operated at 97% of capacity
during the first half of May 2019 following which an issue emerged
in the crusher feeder that has since been resolved, enabling the
mine to post a record monthly rate of 93% of capacity in June 2019
as the ramp up to full production resumed
-- The benchmark 65% Fe Platts price increased to c.US$123/t by
the end of June, averaging c.US$105/t during H1 2019
-- IRC has maintained its policy of hedging iron ore prices for
up to half of its production, with the remaining volume left
unhedged
Dr Pavel Maslovskiy, CEO, comments:
"Following the management and Board-led turnaround in the second
half of 2018, momentum in our operations has been maintained with
gold sales up 12% on the first half of 2018. As such, I am pleased
to report we remain firmly on track to deliver on 2019 guidance for
gold sales of between 450,000oz and 500,000oz in 2019.
Together, the successful commissioning of the POX Hub and
ramp-up of concentrate production from Malomir are transforming our
business, with 27% of sales in the first half coming from our
significant refractory ore reserves. POX has seen a steady increase
in throughput, reaching its design capacity in record time. The
diligent planning of the design engineering team has meant that
autoclave recoveries reached 98% within the first few months of
commissioning. As such, the focus of the engineering team during
ramp-up has been to minimise gold losses in processing stages which
follow the autoclaves (thickening, conditioning and filtration),
and several adjustments and improvements have been introduced at
each stage. As a result, recovery rates through the entire circuit
have been increasing and achieved stable design rates earlier in
July. POX throughput will increase further as the remaining
autoclaves come online with increased processing of third-party
concentrates.
Malomir has enjoyed one of its strongest performances for
several years with the successful commissioning of two flotation
circuits in 2018 delivering a steady source of refractory
concentrates to the POX Hub at above design grades. With refractory
gold reserves of c.3Moz and resources of close to 7Moz, Malomir has
a mine-life of up to 18 years. Non-refractory production also
improved in the first half with a strong performance from the
underground operations at Quartzitovoye.
Albyn delivered a strong performance during the six-month
period, with sales of c.79koz gold from non-refractory ore. Albyn
benefitted from higher grades as we approach the bottom of the
designed pit. The preparation of the Elginskoye mine for
commissioning in 2020 as well as Unglichikanskoye in 2022 has
progressed well. These two sites should provide Albyn with a
significant mine-life exceeding 18 years.
Operations at Pioneer were impacted by water ingress issues
during the first quarter and the second quarter saw production
improve to a more normal rate. To date, the focus at Pioneer has
been the extraction of predominantly non-refractory ores from three
open pits and one underground operation. I am; however, delighted
the Board has approved construction of two new flotation circuits
and that work is now underway. This will result in the production
profile of Pioneer changing significantly from 2020 as abundant and
accessible refractory ore reserves are mined for processing at the
POX Hub.
I am pleased to witness that the stabilisation of our business
in 2018 and re-establishment of our growth plans have been
recognised in the performance of both our shares and bonds which
have increased by 55% and 23%, respectively, in the first half of
2019. The redemption and reissue of the Company's convertible bonds
saw considerable demand and is an important step for the Company in
rescheduling debt maturities at a lower cost while it continues to
bring the POX Hub up to full capacity. Furthermore, I am delighted
to welcome a new major shareholder. With most of the major capital
expenditure on POX now behind us, we look forward to working with
all stakeholders to deliver the next phase of our growth
strategy.
Finally, I would like to extend my thanks and appreciation to
all our employees who have worked tirelessly during a period of
considerable change to place Petropavlovsk firmly on a growth path,
to meet our targets and ensure we remain on track to deliver value
for all our shareholders and stakeholders."
Operations Report
Pioneer
PIONEER Units Q2 2019 Q2 2018 H1 2019 H1 2018
---------------------------------------- ---------- -------- -------- -------- --------
Mining operations
---------------------------------------- ---------- -------- -------- -------- --------
Total material moved m3 '000 5,431 5,362 10,490 9,449
Ore mined t '000 865 1,189 1,196 2,531
Average grade g/t 0.97 1.32 0.97 1.11
Gold content oz. '000 27.0 50.4 37.1 90.6
---------------------------------------- ---------- -------- -------- -------- --------
Processing operations (RIP plant)
---------------------------------------------------- -------- -------- -------- --------
Total milled t '000 1,412 1,670 2,819 3,267
Average grade g/t 0.83 0.83 0.72 0.84
Gold content oz. '000 37.7 44.3 65.0 88.8
Recovery % 80.0 80.7 80.5 78.9
Gold recovered oz. '000 30.1 35.8 52.4 70.0
---------------------------------------- ---------- -------- -------- -------- --------
Heap leach operations
---------------------------------------------------- -------- -------- -------- --------
Total stacked t '000 - 325 - 325
Average grade g/t - 0.50 - 0.50
Gold content oz. '000 - 5.2 - 5.2
Recovery % - 19.8 - 19.8
Gold recovered oz. '000 1.1 1.0 1.1 1.0
---------------------------------------- ---------- -------- -------- -------- --------
Pioneer gold production (doré)[1] oz. '000 30.8 37.7 52.7 78.7
---------------------------------------- ---------- -------- -------- -------- --------
Pioneer is currently focused on mining non-refractory ores from
several conventional open pits and underground operations. However,
the commencement of new flotation facilities at Pioneer will lead
to a transition starting in Q4 2020 from mining non-refractory to
mainly refractory ores for processing at the newly commissioned POX
Hub.
H1 production rates were below expectation due to a shortfall in
underground production rates caused by the ingress of water earlier
in the year. Remediation measures included additional pumps and
cement backfilling leading to a resumption in planned production
rates. In Q2 2019, shortfalls in underground operations were partly
offset by higher grade ores from the underground mine.
For 2019, production from Pioneer is expected to be slightly
below guidance given at the start of the year due to the impact of
water ingress in Q1 2019. These shortfalls are expected to be
compensated for by higher production from Albyn and Malomir.
Albyn
ALBYN Units Q2 2019 Q2 2018 H1 2019 H1 2018
-------------------------------------- ---------- -------- -------- -------- --------
Mining Operations
-------------------------------------- ---------- -------- -------- -------- --------
Total material moved m3 '000 3,124 5,165 6,347 10,107
Ore mined t '000 1,373 1,010 2,429 1,877
Average grade g/t 1.11 0.96 1.17 0.97
Gold content oz. '000 48.9 31.2 91.0 58.3
-------------------------------------- ---------- -------- -------- -------- --------
Processing operations (RIP Plant)
-------------------------------------------------- -------- -------- -------- --------
Total milled t '000 1,197 1,155 2,333 2,291
Average grade g/t 1.09 0.94 1.12 1.01
Gold content oz. '000 41.8 34.9 83.7 74.1
Recovery % 94.2 94.3 94.0 93.9
Gold recovered oz. '000 39.4 32.9 78.6 69.6
-------------------------------------- ---------- -------- -------- -------- --------
Albyn gold production (doré)[2] oz. '000 37.9 30.9 79.2 70.3
-------------------------------------- ---------- -------- -------- -------- --------
Albyn is the Group's principal non-refractory asset and operates
as a conventional open pit and RIP circuit. The Elginskoye pit is
being developed to replace the Albyn pit as the main source of ore
from 2020.
During H1, production at Albyn exceeded expectations due to
higher grades and, for 2019, production is expected to be slightly
above the guidance given at the start of the year.
Malomir
MALOMIR Units Q2 2019 Q2 2018 H1 2019 H1 2018
------------------------------- ---------- -------- -------- -------- --------
Mining Operations
------------------------------- ---------- -------- -------- -------- --------
Total material moved m3 '000 1,915 2,266 3,838 4,245
Non-refractory ore t '000 137 674 233 1,309
Average grade g/t 3.67 1.09 4.70 1.19
Gold content oz. '000 16.2 23.5 35.2 49.9
------------------------------- ---------- -------- -------- -------- --------
Refractory ore t '000 1,409 - 2,713 -
Average grade g/t 1.21 - 1.03 -
Gold content oz. '000 54.8 - 90.0 -
------------------------------- ---------- -------- -------- -------- --------
Malomir Processing Operations
------------------------------------------- -------- -------- -------- --------
Resin-in-pulp (RIP plant), non-refractory
ores
----------------------------------------------------- -------- -------- --------
Total milled t '000 179 772 347 1,645
Average grade g/t 3.26 1.05 3.61 1.15
Gold content oz. '000 18.7 26.0 40.2 60.7
Recovery % 76.0 68.7 79.4 72.4
Gold recovered oz. '000 14.2 17.9 31.9 44.0
------------------------------- ---------- -------- -------- -------- --------
Flotation Plant, refractory ores
------------------------------------------- -------- -------- -------- --------
Ore t '000 917 98 1,812 98
Grade g/t 1.19 0.98 0.97 0.98
Gold content oz. '000 35.1 3.1 56.3 3.1
Recovery % 87.0 86.5 87.0 86.5
Yield % 3.7 2.2 3.3 2.2
Concentrate produced t '000 34 2.1 59 2.1
Grade g/t 28.1 39.0 25.8 39.0
Gold content oz. '000 30.6 2.7 48.9 2.7
------------------------------- ---------- -------- -------- -------- --------
POX Plant
------------------------------------------- -------- -------- -------- --------
Concentrate treated t '000 44 - 76 -
Grade g/t 27.8 - 29.7 -
Gold in concentrate oz. '000 39.0 - 72.1 -
Recovery % 87.8 - 86.0 -
Gold recovered oz. '000 34.2 - 62.0 -
------------------------------- ---------- -------- -------- -------- --------
Malomir total gold production
(doré)[3] oz. '000 48.6 18.8 93.1 46.8
------------------------------- ---------- -------- -------- -------- --------
Malomir is a conventional open-pit and underground operation
transitioning towards mainly refractory ore processing at the
Company's newly commissioned POX Hub. Malomir has extensive
refractory reserves and resources and both near-mine and
surrounding areas are considered highly prospective for the
discovery of further refractory gold ounces.
During H1 a total of 233kt of non-refractory ore was mined (H1
2018: 1,309kt) at an average grade of 4.7g/t (H1 2018: 1.19g/t)
resulting in gold recovered of 31.9koz of gold (H1 2018: 44.0koz).
This was higher than expected due to a strong performance at the
Quarzitovoye underground mine. RIP recovery improved from 68.7% in
Q2 2018 to 76.0% in Q2 2019 due to higher head grade and less
refractory nature of the feed.
During H1 a total of 2,713kt of refractory ore was mined (H1
2018: nil) at an average grade of 1.03g/t (H1 2018: nil), in-line
with expectations. The flotation plant continued to deliver strong
results, with recoveries averaging 87%. The total gold content for
H1 2019 in flotation concentrates was 48.9koz (H1 2018:
2.7koz).
For 2019, production from Malomir is expected to remain in-line
or slightly exceed the guidance given at the start of the year.
Pokrovskiy
The Pokrovskiy mine and processing facilities ceased operations
in Q1 2018. The site has been rehabilitated and is now the site of
the new POX Hub. As such, there were no mining activities in H1
2019 with only a small amount of gold produced from the
re-circulation of residual tailing solutions.
The Pokrovskiy Pressure Oxidation (POX) Hub
The POX Hub is a state-of-the-art centralised facility for
processing refractory concentrates from the Company's own mines
and/or from third parties.
In H1 2019, the POX Hub treated a total of 76kt of concentrates
grading 29.7g/t from Malomir, including 29kt grading 28.2g/t which
was mined and stockpiled in 2018. In total, 61.3koz of gold was
produced at an average recovery of 86%, slightly below the design
rate of 93% (for Malomir concentrates) caused by losses of gold
into tailings in the filtration unit - a portion of which the
Company did succeed in recovering through the recirculation of
tailings solution.
Autoclave throughput successfully achieved its design capacity
of 11.5tph (for Malomir concentrate) and the focus has been on
achieving stable recovery rates through the whole process. New
filter tissues have been installed in the filtration unit to
resolve the issue of gold losses, resulting in recovery rates
improving up to 93%-94% across the plant earlier in July.
The plant has now operated continuously for nearly seven months
by running the autoclaves in pairs and on a rotation basis. All
four autoclaves have now been tested and shown to be fully
operational.
After the reporting period, on 5 July 2019, the POX plant began
treating an initial batch of 3(rd) party concentrates.
New US$125m Convertible Bonds Issue
On 20 June 2019, the Group successfully placed a new US$125m
convertible bond offering. The offering was met with strong demand
- resulting in a significantly oversubscribed book that was
supported by a range of investors. Issued at par, the new
convertible instrument carries a coupon of 8.25% per annum, payable
quarterly in arrears. Unless converted, redeemed or purchased and
cancelled, the bonds will be redeemed at par on the maturity date
which is expected to be in July 2024. The initial conversion price
is US$0.1350, subject to customary adjustment provisions set out in
the terms and conditions of the bond issue.
The new bonds have enabled Petropavlovsk to repurchase the
short-dated US$100m convertible issue, originally scheduled to
mature in March 2020, which carried a higher coupon of 9.00%. This
both reduces the cost of the Group's debt and significantly
de-risks the repayment schedule during the period of the POX Hub
ramp-up.
The US$25 million net proceeds from the issue of the new bonds
will be used to advance construction of a new flotation facility at
Pioneer to take advantage of the 2.16Moz of refractory reserves at
the site.
Pioneer Flotation Construction
The Board of Directors has decided to advance construction of a
two-line flotation plant at Pioneer to accelerate the rate at which
the Company processes its own refractory concentrate through the
POX Hub.
With an estimated capex of US$25m - US$30m spread over during
12-14 months, pre-construction of the two-line flotation facility
commenced during Q2 2019.
First production of concentrates is scheduled for Q4 2020 and,
once in full production, the flotation plant will have a capacity
of 3.6Mtpa and is expected to deliver up to 110ktpa of additional
concentrate grading 20g/t - 30g/t to the POX Hub.
FY 2019 Guidance
FY 2019 guidance remains unchanged, noting that gold production
is seasonally stronger in the second half of the year.
Gold production
The Group is targeting FY 2019 sales of 450 - 500Koz, which is
significantly above 2018 levels due to increased output from
Malomir and the processing of refractory concentrates (including
the processing of refractory concentrate stockpiles built up in
2018) at the newly commissioned POX Hub. Further guidance beyond
2020 will be given at the capital markets day on 10 September
2019.
Capex
Total capital expenditure for the year remains unchanged at
c.US$45m-US$55m. The commencement of development of the Pioneer
flotation plant will require additional capex during the balance of
2019.
Gold hedging and forward sales
Forward contracts to sell an aggregate of 130koz of gold at an
average price of US$1,281/oz were outstanding as at 30 June
2019.
About Petropavlovsk
With a Premium Listing on the London Stock Exchange,
Petropavlovsk (LSE: POG) is a major integrated Russian gold
producer with JORC Resources of 20.5Moz Au which include Reserves
of 8.2Moz Au.
The Company's key operating mines (Pioneer, Malomir and Albyn)
are in the Amur Region in the Russian Far East and the Company has
produced a total of c.7.3Moz of gold since operations began in
1994. Petropavlovsk has a strong track record of mine development,
expansion and asset optimisation.
The Group recently entered a new era of growth following the
successful commissioning and start-up of its flagship asset, the
Pressure Oxidation (POX) Hub at Pokrovskiy, which enables the
processing of the Company's abundant refractory reserves and
resources.
Petropavlovsk is one of the region's largest employers and one
of the largest contributors to the sustainable development of the
local economy.
For more information
Please visit www.petropavlovsk.net and www.ircgroup.com.hk or
contact:
Petropavlovsk PLC +44 (0) 20 7201 8900
Patrick Pittaway / Max Zaltsman / Viktoriya TeamIR@petropavlovsk.net
Kim
Peel Hunt LLP
Ross Allister / James Bavister / David
McKeown +44 (0) 20 7418 8900
Canaccord Genuity Limited
Henry Fitzgerald-O'Connor / James Asensio +44 (0) 20 7523 8000
Buchanan +44 (0) 20 7466 5000
Bobby Morse / Ariadna Peretz POG@buchanan.uk.com
Cautionary note on forward-looking statements
This release may include statements that are, or may be deemed
to be, "forward-looking statements". These forward-looking
statements can be identified by the use of forward-looking
terminology, including the terms "believes", "estimates", "plans",
"projects", "anticipates", "expects", "intends", "may", "will" or
"should" or, in each case, their negative or other variations or
comparable terminology, or by discussions of strategy, plans,
objectives, goals, future events or intentions. These forward
looking statements include all matters that are not historical
facts. They appear in a number of places throughout this release
and include, but are not limited to, statements regarding the
Group's intentions, beliefs or current expectations concerning,
among other things, the future price of gold, the Group's results
of operations, financial position, liquidity, prospects, growth,
estimation of mineral reserves and resources and strategies, and
exchange rates and the expectations of the industry. By their
nature, forward-looking statements involve risk and uncertainty
because they relate to future events and circumstances [outside the
control of the Group. Forward-looking statements are not guarantees
of future performance and the development of the markets and the
industry in which the Group operates may differ materially from
those described in, or suggested by, any forward- looking
statements contained in this release. In addition, even if the
development of the markets and the industry in which the Group
operates are consistent with the forward looking statements
contained in this release, those developments may not be indicative
of developments in subsequent periods. A number of factors could
cause results and/or developments to differ materially from those
expressed or implied by the forward-looking statements including,
without limitation, general economic and business conditions,
demand, supply and prices for gold and other long-term commodity
price assumptions (and their effect on the timing and feasibility
of future projects and developments), trends in the gold mining
industry and conditions of the international gold markets,
competition, actions and activities of governmental authorities
(including changes in laws, regulations or taxation), currency
fluctuations (including as between the US Dollar and Rouble), the
Group's ability to recover its reserves or develop new reserves,
changes in its business strategy, any litigation, and political and
economic uncertainty. Except as required by applicable law, rule or
regulation (including the Listing and Disclosure Guidance and
Transparency Rules), the Group does not undertake any obligation to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise. Past
performance cannot be relied on as a guide to future performance.
The content of websites referred to in this announcement does not
form part of this announcement.
[1] Numbers may not add up since gold recovered and gold
produced are affected by changes in the gold in circuit; primarily
in resin sorbent, cyanide solution and electrolytic product
[2] Numbers may not add up since gold recovered and gold
produced are affected by changes in the gold in circuit; primarily
in resin sorbent, cyanide solution and electrolytic product
[3] Numbers may not add up since gold recovered and gold
produced are affected by changes in the gold in circuit; primarily
in resin sorbent, cyanide solution and electrolytic product
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
TSTFMGZNGZLGLZZ
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July 23, 2019 02:00 ET (06:00 GMT)
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