TIDMPOG
RNS Number : 7811L
Petropavlovsk PLC
10 September 2019
10 September 2019
Petropavlovsk PLC (the "Company")
Half Year Report for the Period Ended 30 June 2019
Petropavlovsk PLC ("Petropavlovsk", or the "Company" and,
together with its subsidiaries, the "Group") today issues its Half
Year Report for the period from 1 January 2019 to 30 June 2019 ("H1
2019" or the "Period").
Comments from Sir Roderic Lyne, Non-Executive Chairman
"These are fine results for the half year. The smooth ramp-up of
the Pressure Oxidation Hub has been an outstanding success. The
Malomir mine now contributes around 40% of the EBITDA derived from
our mining operations. Construction has begun on a new flotation
line at Pioneer which will double refractory ore processing
capacity. Processing of third-party concentrates started in July.
The Group is on track to meet the full-year production target set
at the start of the year. The target for Total Cash Costs for the
year has been revised downward, building on a 6% reduction in TCC
and 10% decrease in AISC in H1. Revenues are up. Profits are
up.
The Group's large investment in developing its Pressure
Oxidation process over the past decade is now bearing fruit. This
is one of only two POX Hubs in Russia equipped to process the
abundant refractory ores in the country. The successful ramp-up to
achieve, by July, recovery rates of 95% is an exceptional
achievement for the team at Petropavlovsk under Pavel Maslovskiy's
leadership.
A platform has been built for future profitable growth.
Petropavlovsk is now positioned to capitalise on higher gold prices
and enhance cash generation. The strengthening of the balance sheet
through efficient operations and cost control is a key strategic
priority for the Board and Management. With a new major shareholder
and the successful commissioning of the POX Hub, Petropavlovsk is
on the way to becoming one of the leading miners and developers of
refractory ores in Russia."
Financial Highlights
-- Gold sales increased 12% to 225.1koz (H1 2018: 201.4koz)
-- Group revenues increased 13% to US$305 million (H1 2018:
US$270 million) due to higher volumes of gold sold
-- Average realised gold price of US$1,286/oz (H1 2018:
US$1,285/oz)
-- Underlying EBITDA [1]rose 37% to US$83 million (H1 2018:
US$61 million)
-- Operating Profit of US$3 million increased from a loss of
US$24 million H1 2018 due to higher production and lower costs.
This is after and notwithstanding a foreign exchange loss of US$14
million due to the strength of the Rouble over the H1 2019
Period
-- Profit of US$14 million in H1 2019 compares to a loss of
US$40 million in H1 2018. This includes a net US$38 million of
other finance gains and an increase in interest expense of US$14
million
-- 6% reduction in Total Cash Costs ("TCC ") to US$841/oz (H1
2018: US$899/oz) primarily due to lower TCC at the mines which
offset the cost of unused capacity at the Pokrovskiy Pressure
Oxidation (POX) Hub and an increase in mining tax rates
-- The Group's share of its associate, IRC, losses increased to
US$7.9m (30 June 2018: US$4.8m loss) with the ramp up in operations
being more than offset by foreign exchange losses and an
exceptional write down of financing costs
-- 10% decrease in All-in Sustaining Costs ("AISC ") to
US$1,029/oz (H1 2018: US$1,138/oz), reflecting the decrease in TCC
and lower impairment of non-refractory ore stockpiles
-- Decrease in capex to US$45.0 million (H1 2018: US$67.2
million) reflecting that the major portion of the capex programme
on the POX Hub has now been completed
-- 2% decrease in Net Debt to US$557 million (31 December 2018:
US$568 million) with cash and cash equivalents of US$39 million
-- Forward contracts to sell an aggregate of c.130koz of gold
were outstanding at 30 June 2019 at an average price of
US$1,281/oz
Operational Highlights
-- 12% increase in gold sales to 225.1koz (H1 2018: 201.4koz)
which includes 61.3koz from the processing of refractory gold
concentrate at the new POX Hub
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) Gold sales at Malomir includes 34.6koz produced via the POX
Hub in Q2 2019 and 61.3koz produced in H1 2019
-- Further details on the production performance from each of
our mines was provided on 23 July 2019 and can be accessed via this
link.
Refractory Gold Processing
POX Hub and Malomir flotation plant
-- All four autoclaves fully functional and working in rotation.
Each autoclave can profitably treat third-party and the Company's
own concentrates
-- A total of 61.3koz gold was produced in H1 from 76kt of
Malomir concentrates grading 29.7g/t during the ramp-up
-- The design rate of 7,000 to 7,500 annual operating hours (per
autoclave) has now been achieved for Malomir concentrates
-- H1 average gold recovery rates through the POX plant at 86%
for Malomir concentrates as the plant was ramping up
-- In July, gold recovery rates through the POX plant averaged
95% for the first batch of 3(rd) party material
-- TCC [2]for processing Malomir refractory ores (including
autoclave processing) were c.US$980/oz in H1 and in line with
expectations. This includes maintenance, commissioning and ramp-up
costs as well as additional costs relating to concentrates produced
at Malomir in 2018. As a result, TCC for processing Malomir
refractory ores are expected to decrease in H2
-- Unit processing costs through the autoclaves were c.US$230/t
in H1 2019. Due to the high fixed-cost base (currently c.65% of
costs are fixed), unit costs are expected to fall in H2 2019 as
planned throughput is increased
-- For FY 2019, Malomir is expected to produce a total of
c.125kt - 145kt of concentrate at higher grades due higher-grade
ore in accordance with the mine plan
-- In total c.200kt - 225kt of refractory ores are expected to
be processed through the POX Hub in 2019, including c.40kt - 60kt
of third-party material, c.125kt - 130kt of Malomir concentrates
produced in 2019 and c.35kt of Malomir concentrates produced in
2018
Third-party refractory concentrates
-- Two batches of third-party materials were secured in H1 2019,
including 20kt grading 40-50g/t and 18kt of material grading
65-75g/t
-- The POX Hub began processing a portion of the 40-50g/t
material in early July, successfully achieving recoveries up to
95%
-- The Company is in the process of negotiating to secure a
further c.20kt - 22kt of third-party concentrate for processing in
H2
2019 Guidance
-- The Company remains on track to meet its full-year target of
c.450koz - 500koz of gold sales (including the processing of 2018
Malomir stockpiles but excluding upside from third-party
concentrate purchases)
-- TCC guidance for FY 2019 has been revised downwards from
US$850 - US$950/oz to US$750 - US$850/oz due to strong operational
performance, including a smoother-than expected ramp-up of the POX
Hub and its planned increase in utilisation in H2
-- Capex of US$45-US$55 million, as per guidance given at the
start of the year. This excludes the construction of a new
flotation facility at Pioneer, announced on 19 June 2019, which
requires additional spending of US$30 million over a 12 - 14 month
period, a portion of which falls in 2019
Responsible Business
-- The LTIFR declined by 55% to 1.29 (H1 2018: 2.84). Safety
remains a top priority for the Company and, while this demonstrates
that our strategy to reduce the number of LTIFRs and accidents is
working, our goal is zero harm
-- Water and energy consumption increased by 19% and 75%,
respectively as a result of the commissioning and ramp up of POX
Hub at the end of 2018
-- Greenhouse Gas Emission (GHG) declined to 1.06tCO(2) e/oz due
to an increase in gold production in H1 2019 compared to H1
2018
-- Zero serious or major environmental incidents occurred during
the Period
Metric Units H1 2019 H1 2018
---------------------- ------------------ -------- --------
LTIFR - 1.29 2.84
Water used Million m(3) 11.5 9.7
Energy consumption Million GJ 2.8 1.6
GHG Tonne CO(2) e/oz 1.06 1.08
---------------------- ------------------ -------- --------
Development Update
Construction of a new flotation facility at Pioneer
-- Construction of a new flotation facility at Pioneer will
double the Group's refractory ore processing capacity from 3.6Mtpa
to 7.2Mtpa
-- Initial construction activities commenced in June 2019 with
commissioning expected to commence in Q4 2020
-- Capex is now expected to be US$30 million which benefits from
previous spending in 2010 and 2011 that included buildings,
thickeners and tanks, prior to the project being put on hold
-- Following its restart, key contracts to supply major
equipment items have been renewed and processing equipment has
begun arriving on site
-- Construction work to date has focused on the heating plant,
an extension to the flotation building and on laying foundations
for the flotation circuit
Elginskoye deposit at Albyn
-- Extensive in-fill drilling took place to increase the
accuracy of near and medium-term mining plans at Elginskoye ahead
of the commencement of mining in 2020. The construction of a c.30km
all season road between Albyn and Elginskoye was also completed
during H1 2019
Exploration Highlights
Pioneer
-- Two drill holes intersected mineralisation 30 to 70m below
the pit floor at NE Bakhmut 1, confirming that mineralisation
extends well below the current open pit
-- Our technical team is currently evaluating the possibility of
deepening the pit shell
Albyn
-- Drilling also confirmed existing reserve estimates and should
increase Proven reserves at the mine
-- Resource expansion drilling on the periphery of Elginskoye
has extended the known gold mineralisation to the south-west,
south-east and north. Outside of the current JORC Resource model,
the best intersections were:
- 4.4m @ 5.89g/t
- 4.7m @ 3.92g/t
- 3.4m @ 2.77g/t
- 1.8m @ 4.94g/t
- 4.8m @ 4.86g/t
Malomir
-- Drilling at Osipkan, a satellite of Tokur located 130km away
from Malomir, has identified two zones equivalent to Inferred under
JORC gold resources, including 97koz (2.5Mt @ 1.23g/t) and 22koz
(458kt @ 1.50g/t)
Corporate Matters
Fitch Rating Upgrade to B- with Positive Outlook
-- On 21 August 2019, Fitch Ratings upgraded its Long-Term
Issuer Default Rating and senior unsecured rating to 'B-' from
'CCC' with a Positive Outlook, citing:
- a significant strengthening in Petropavlovsk's liquidity
position due to the refinancing of the convertible bond;
- repayment of US$57 million in bridge loans by IRC Limited; and
- increased visibility for production due to the launch of the POX plant
-- Fitch stated that the Positive Outlook reflects the
"potential for significant deleveraging to take place by end-2020
based on higher production, lower costs, and third-party
concentrate increasing the utilisation of the POX hub".
-- Fitch also recognised the important steps the Company has
taken towards improved Corporate Governance, stating that the Board
now consists of "five non-executive members out of seven, including
a non-executive chair".
Refinancing of IRC's project finance facility with
Gazprombank
-- On 12 March 2019, Petropavlovsk shareholders approved the
Company's proposal to guarantee the obligations of Kimkano-Sutarsky
Mining and Beneficiation Plant LLC ("K&S"), a wholly owned
subsidiary of IRC Ltd ("IRC"), under two facility agreements with
JSC Gazprombank ("Gazprombank") totalling US$240million
-- The new Gazprombank facility allowed IRC to repay in full an
outstanding project finance facility K&S had with Industrial
and Commercial Bank of China Ltd ("ICBC") and has enabled repayment
to Petropavlovsk of c.US$56million, as received, in respect of
bridge loan financings advanced in 2018 and payment of US$6million
in guarantee fees owing to it
-- The guarantee structure of the new Gazprombank facility is on
more favourable terms than the ICBC facility and provides IRC with
an extended period to repay its debt finance, while resulting in
lower risk for Petropavlovsk
-- The arrangement is expected to alleviate the cashflow
position of IRC and provides it with a more manageable repayment
schedule that is in line with the ramp up of the K&S mine
-- Detailed information regarding the refinancing may be found
in an announcement published by Petropavlovsk dated 15 February
2019 (The Recommended Proposal to Guarantee the Obligations of
K&S, a Wholly Owned Subsidiary of IRC Limited, under Two
Facility Agreements with JSC Gazprombank) and the related circular
(https://www.petropavlovsk.net/wp-content/uploads/2019/02/c114994CCL-pfp.pdf)
Entry into Share Retention Agreement and agreement on guarantee
fees in respect of New Recourse Agreement
-- In connection with the Gazprombank Facilities, on 28 June
2019, Petropavlovsk and IRC entered into a share retention
agreement with Gazprombank (the "Share Retention Agreement") and,
on 09 September 2019, Petropavlovsk, IRC and K&S entered into
an agreement on the terms of guarantee fees in respect of the New
Recourse Agreement (the "New Recourse Agreement")
-- Under the Share Retention Agreement, unless otherwise agreed
with Gazprombank, for so long as the Gazprombank Facilities or any
sum thereunder is outstanding:
- Petropavlovsk must retain at least a 20% direct or indirect
interest in IRC (and the grant of any option, preemptive right or
similar right in respect of Petropavlovsk's interest in IRC would
constitute a disposal for the purpose of this covenant); and
- Petropavlovsk must not create, grant or permit to subsist any
encumbrance over any direct or indirect interest in IRC (other than
any encumbrance arising by operation of law or where following such
encumbrance, Petropavlovsk has at least a 20% interest in IRC which
remains unencumbered)
-- Under the New Recourse Agreement, IRC has an obligation to
pay the Company a monthly fee to compensate Petropavlovsk for
entering into the guarantee of the two facility agreements
-- It has been agreed with IRC and K&S that the fee will be
calculated as 3.07% per annum, commencing 12 March 2019, on the
maximum amount that may be payable by the Company under the
facility agreements of US$240 million
-- This level of fees has been confirmed by an independent
expert as being on normal commercial terms and terms that are
reasonable in all circumstances
-- In addition, IRC is expected to contribute towards
professional fees and expenses of approximately US$1.5 million
incurred by Petropavlovsk in connection with the refinancing
New US$125 million convertible bond offering and redemption of
US$100 million convertible bonds due 2020
-- On 20 June 2019, the Company announced the redemption of its
US$100 million convertible bonds maturing 2020 and successful
placement of new 5-year US$125 million 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'
-- The new convertible issue carries a lower coupon of 8.25% and
was significantly oversubscribed
New major shareholder
-- On 11 July 2019, JSC Fincraft Resources entered into a sale
and purchase deed relating to the transfer of the issued share
capital of Fincraft Holdings Ltd, a major Petropavlovsk
shareholder, to LLC Research & Production Association Altair
("Altair"), a limited liability company incorporated in Russia
-- The ultimate beneficiary of Altair is Mr Roman Trotsenko
Resignation of Non-Executive Director
-- On 30 July 2019, the Board accepted the resignation of Mr
Bektas Mukazhanov, a Non-Executive Director
-- Mr Mukazhanov was an Investment Advisor at Fincraft Holdings
Ltd the Company's major shareholder at the time of his appointment
on 27 July 2018
IRC Update
Petropavlovsk is a major shareholder in IRC (31.1%), a
Hong-Kong-listed producer and developer of industrial commodities.
On 30 August 2019, IRC released its interim results for the six
months ended 30 June 2019. The results are available to view on the
IRC website at http://www.ircgroup.com.hk
Key highlights from the report are as follows:
Financials
-- Revenue increased by 27% to US$89.2 million (30 June 2018:
US$70.2 million)
-- EBITDA of the mine in production segment increased 63% to
US$23.7 million (30 June 2018: US$14.6 million)
-- Write-off of unamortised loan costs, a non-recurring item, of
US$11.5 million due to refinancing of the ICBC loan
-- Loss for the period of US$25.2 million (30 June 2018: US$15.6
million)
Operations
-- K&S - Production and sales volumes increased:
-- Production volume up 16% to 1,262,938 tonnes (30 June 2018:
1,084,602 tonnes)
-- Sales volume up 18% to 1,239,398 tonnes (30 June 2018:
1,046,649 tonnes)
-- K&S - operated at record-breaking 93% capacity in June;
average production capacity of about 80% in 1H 2019
-- Kuranakh - Care and maintenance process satisfactory
CEO Comments
Commenting on the announcement, Pavel Maslovskiy, Chief
Executive Officer said: "This is a strong set of results which
underscores the financial outcome of the operational turnaround
underway and steady ramp up of our key asset, the POX Hub. One of
the major benefits of the robust performance at our operations is
that total cash costs for H1 2019 were lower than the guidance
originally given at the start of the year. The excellent work of
our technical teams now gives us the confidence to decrease total
cash cost guidance for the full year to US$750 - US$850/oz. I am
particularly pleased to report on our efforts to control costs
against the background of ramping up production at the
recently-commissioned POX Hub - which accounted for 27% of total
gold produced in H1 2019. I expect that in H2 2019 the TCC for
refractory processing will decrease as ramp-up costs will be lower,
while capacity utilisation will steadily increase.
The commissioning of the POX plant has enabled Petropavlovsk to
unlock the potential of our refractory ore reserves at Malomir,
which has led to a near-doubling of gold production from a year
ago. This highlights the Group's ability to generate meaningful
cash from refractory gold since Malomir now contributes around 40%
of Group EBITDA compared to less than 20% a year ago. Looking
forward, the portion of cash flow derived from refractory gold
processing will increase, demonstrating Petropavlovsk's ability to
monetise its significant refractory ore reserves.
Having successfully commissioned all four autoclaves, maximising
capacity utilsation and providing POX with the most profitable
feeds has become an important focus. The Malomir flotation plant is
providing a stable supply of our own refractory concentrates to the
Hub and any increase in production or supply of third-party
concentrates will have a positive impact on unit costs given the
high level of fixed costs. In total, we expect around 200kt - 225kt
of refractory concentrates to be processed through POX in the
current year, including third-party material.
Looking beyond 2019, with the ongoing construction of flotation
facilities at our other refractory asset, Pioneer, our goal is to
replicate the success of Malomir and thereby double the Group's
production of own concentrates which will meaningfully increase
capacity utilisation at the POX Hub organically. However,
better-than-expected yields during the concentration stage at the
Malomir flotation plant means an additional 50kt of spare
concentrate capacity is potentially available at the POX Hub. This
figure can be even higher if we manage to improve the original
designed parameters of Pioneer flotation plant as well. In these
circumstances, it is important for us to investigate existing
inorganic opportunities with respect to the many higher-grade
refractory assets in the region which may be stranded and would
require our POX technology to unlock their value. Petropavlovsk's
comprehensive scientific and engineering expertise is essential in
this regard and we will only consider assets that are accretive to
shareholder value.
Over the Period, our other non-refractory assets also performed
well, with Albyn significantly decreasing TCC due to higher grades
and cost control. Some operational challenges were experienced at
Pioneer earlier in the year due to water ingress which affected
production, and which has since been resolved. For 2019, production
from Pioneer is expected to fall slightly below guidance given at
the start of the year, with any shortfall compensated by higher
production from Albyn and Malomir.
Overall our 2019 full year production is on track to meet
guidance with potential upside from gold produced from third-party
concentrates. Perhaps most importantly, these results also
highlight the relationship between operating performance and our
safety record, as the Group LTIFR more than halved to 1.29 in H1
2019 from a year ago.
Finally, with IRC in a stronger position given the ongoing ramp
up at the K&S plant and restructured debt repayment schedule,
we are actively seeking to reduce of our ownership of IRC and are
considering a range of potential options, in discussion with
Gazprombank with respect to the share retention agreement.
I look forward to discussing this in more detail, along with our
guidance for beyond 2020, at our Capital Markets Day which is being
held today following our H1 2019 financial results presentation
which starts at 9.00am BST. Both these events will be webcast live
and may be accessed through this link. Presentation materials can
also be found on our website."
Webcast of H1 2019 Financial Results and Capital Markets Day
A live webcast of the Company's financial results presentation
will take place today at 9:00am BST and will be immediately
followed by our Capital Markets Day presentations. The webcast can
be accessed via this link.
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 Communications +44 (0) 20 7466 5000
Bobby Morse / Ariadna Peretz 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.
Financial Review
Note: Figures may not add up due to rounding
Financial Highlights
H1 2019 H1 2018
(restated)(c)
-------------------------------------- ------------- -------- ---------------
Gold produced '000oz 225.1 201.4
Gold sold '000oz 225.0 201.4
Group revenue US$ million 305.3 270.5
Average realised gold price.. US$/oz 1,286 1,285
Average LBMA gold price afternoon
fixing US$/oz 1,307 1,318
Total Cash Costs(u) (a) US$/oz 841 899
All-in Sustaining Costs(u)
(b) US$/oz 1,029 1,138
All-in Costs(u) (b) US$/oz 1,091 1,353
Underlying EBITDA(u) US$ million 83.3 60.7
Operating profit/(loss) US$ million 2.5 (23.7)
Profit/(loss) before tax US$ million 16.8 (33.1)
Profit/(loss) for the period US$ million 13.5 (39.9)
Profit/(loss) for the period
attributable to equity shareholders
of Petropavlovsk PLC US$ million 14.3 (40.3)
Basic profit/(loss) per share US$ 0.00 (0.01)
Net cash from operating activities US$ million 1.1 127.8
-------------------------------------- ------------- -------- ---------------
(a) Calculation of Total Cash Costs(u) ("TCC") is set out in the section Hard rock mines below.
(b) All-in Sustaining Costs(u) ("AISC") and All-in Costs(u)
("AIC") are calculated in accordance with guidelines for reporting
All-in Sustaining Costs(u) and All-in Costs(u) published by the
World Gold Council. Calculation is set out in the section All-in
Sustaining Costs(u) and All-in Costs(u) below.
(c) See note 2 of the Consolidated Financial Statements for
details regarding the restatement.
30 June 2019 31 December
2018
--------------------------- ------------ ------------ -----------
Cash and cash equivalents US$ million 39.1 26.2
Notes(a) US$ million (499.5) (499.0)
Convertible bonds (b) US$ million (97.0) (95.2)
--------------------------- ------------ ------------ -----------
Net Debt(u) US$ million (557.4) (568.0)
--------------------------- ------------ ------------ -----------
(a) US$500 million Guaranteed Notes due on 14 November 2022 at amortised cost.
(b) US$100 million convertible bonds due on 18 March 2020 at amortised cost.
Revenue
H1 2019 H1 2018
US$ million US$ million
------------------------------ ----------- -----------
Revenue from hard rock mines 290.0 259.3
Revenue from other operations 15.3 11.2
------------------------------- ----------- -----------
305.3 270.5
------------------------------ ----------- -----------
Group revenue during the period was US$305.3 million, 13% higher
than the US$270.5 million achieved in H1 2018.
Revenue from hard rock mines was US$290.0 million, 12% higher
than the US$259.3 million achieved in H1 2018. Gold remains the key
commodity produced and sold by the Group, comprising 95% of total
revenue generated in H1 2019. The physical volume of gold sold from
hard rock mines increased by 12% from c.201,400 oz in H1 2018 to
c.225,031 oz in H1 2019. The average realised gold price(u)
slightly increased from US$1,285/oz in H1 2018 to US$1,286/oz in H1
2019. The average realised gold price(u) includes a US$(26)/oz
effect from hedge arrangements (H1 2018: US$(32)/oz).
Hard rock sold 42,976oz of silver in H1 2019 at an average price
of US$15/oz, compared to 37,385 oz in H1 2018 at an average price
of US$16/oz.
Revenue generated as a result of third-party work by the Group's
in-house service companies was US$15.3 million in H1 2019, a US$4.1
million increase compared to US$11.2 million in H1 2018. This
revenue is substantially attributable to sales generated by the
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$13.0 million in H1 2019 compared to US$9.1 million in H1
2018.
Cash flow hedge arrangements
In order to increase certainty in respect of a significant
proportion of its cash flows, the Group has entered into a number
of gold forward contracts.
Forward contracts to sell an aggregate of 99,984 oz of gold
matured during the H1 2019 and resulted in US$(6.0) million net
cash settlement paid by the Group (H1 2018: US$(6.5) million cash
net cash settlement paid by the Group on forward contracts to sell
99,984 oz of gold).
The Group constantly monitors the gold price and hedges some
portion of production as considered appropriate. Forward contracts
to sell an aggregate of c.130,000 oz of gold at an average price of
US$1,281/oz were outstanding as at 30 June 2019. Forward contracts
to sell an aggregate of c.96,700 oz of gold at an average price of
US$1,291.8/oz are outstanding as at 9 September 2019.
Underlying EBITDA.. and analysis of operating costs
H1 2019 H1 2018
(restated)(b)
US$ million US$ million
--------------------------------------------- -------------- ---------------
Profit/(loss) for the period 13.5 (39.9)
Add/(less):
Investment income (2.5) (0.7)
Interest expense 26.0 12.0
Other finance gains (48.3) (10.3)
Other finance losses 10.6 8.4
Foreign exchange losses/(gains) 14.0 (0.1)
Taxation 3.2 6.7
Depreciation 54.0 48.2
Impairment of exploration and evaluation
assets - 12.2
(Reversal of impairment)/impairment of ore
stockpiles (0.8) 14.5
(Reversal of impairment)/impairment of gold
in circuit (0.1) 0.7
Impairment of non-trading loans - 0.7
Share of results of associates (a) 13.7 8.1
Underlying EBITDA(u) 83.3 60.7
--------------------------------------------- -------------- ---------------
(a) Group's share of interest expense, investment income, other
finance gains and losses, foreign exchange gains or losses,
taxation, depreciation and impairment/reversal of impairment
recognised by an associate (IRC).
(b) See note 2 of the Consolidated Financial Statements for
details regarding the restatement.
Underlying EBITDA(u) as contributed by business segments is set
out below.
H1 2019 H1 2018
US$ million US$ million
-------------------------------------------- -------------- --------------------
Pioneer 7.8 34.8
Pokrovskiy - 0.1
Malomir 39.6 14.7
Albyn 52.7 28.1
-------------------------------------------- -------------- --------------------
Total Hard rock mines 100.1 77.6
Corporate and other (16.7) (16.9)
Underlying EBITDA(u) 83.3 60.7
-------------------------------------------- -------------- --------------------
Hard rock mines
During this period, hard rock mines generated Underlying
EBITDA(u) of US$100.1 million compared to US$77.6 million
Underlying EBITDA in H1 2018.
Total Cash Costs.. for hard rock mines decreased from US$899/oz
in H1 2018 to US$841/oz in H1 2019. The decrease in TCC(u)
primarily reflects the effect of higher grades of ore processed and
higher recoveries achieved at Albyn and Malomir as well as by the
effect of Rouble depreciation, achieved despite the sub-optimal
performance of Pioneer which TCC(u) increased from US$843/oz in H1
2018 up to US$1,138/oz in H1 2019 due to lower processed grades as
a result of lower than expected contribution from the underground
mining. The positive effect of overall TCC(u) decrease was
partially offset by the inflation of certain Rouble denominated
costs. The increase in physical ounces sold from c. 201,400oz in H1
2018 to c. 225,031oz in H1 2019 and increase in the average
realised gold price(u) from US$1,285/oz in H1 2018 to US$1,286/oz
in H1 2019 resulted in US$9.4 million increase in the Underlying
EBITDA... The decrease in TCC.. contributed to a further US$13.0
million positive contribution to the 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 H1 2018 there was ongoing inflation of certain
Rouble denominated costs, in particular, electricity costs
increased by c.5% in Rouble terms (decreased by c.4% in US Dollar
terms) and the cost of diesel increased by c.17% in Rouble terms
(increased by c.7% in US Dollar terms). The Rouble depreciated
against the US Dollar by 10% in H1 2019 compared to H1 2018, with
the average exchange rate for the period of 65.20 Roubles per US
Dollar in H1 2019 compared to 59.33 Roubles per US Dollar in H1
2018, somewhat mitigating the effect of Rouble denominated costs
inflation.
Refinery and transportation costs are variable costs dependent
on production volume. Mining tax is also a variable cost dependent
on production volume and the gold price realised. The Russian
statutory mining tax rate is 6%. Under the Russian Federal Law
144-FZ dated 23 May 2016 that introduced certain amendments to the
Russian Tax Code, taxpayers who are participants in Regional
Investment Projects ("RIP") have the right to apply the reduced
mining tax rate provided certain conditions are met. LLC
Malomirskiy Rudnik and LLC Albynskiy Rudnik met eligibility
criteria and applied 1.2% mining tax rate in H1 2019 while JSC
Pokrovskiy Rudnik applied full mining tax rate in H1 2019,
resulting in US$6.7 million mining tax expense compared to nil in
H1 2018 when 0% mining tax rate was applied by the Group.
H1 2019 H1 2018
------------------
US$ million % US$ million %
-------------------------------------- ------------ ---- ------------ ----
Staff cost 40.8 24 36.3 23
Materials 42.4 25 49.1 31
Fuel 22.5 13 24.2 15
Electricity 17.0 10 14.5 9
Other external services 33.2 20 23.4 15
Other operating expenses 12.5 8 11.6 7
168.4 100 159.1 100
-------------------------------------- ------------ ---- ------------ ----
Movement in ore stockpiles, gold
in circuit, bullion in process,
limestone and flotation concentrate
attributable to gold production
(a) (4.1) (1.0)
--------------------------------------- ------------ ---- ------------ ----
Total operating cash expenses 164.4 158.1
--------------------------------------- ------------ ---- ------------ ----
(a) Excluding deferred stripping
Hard rock mines H1 2019 H1 2018
------------------------------
Pioneer Malomir Albyn Total Total
US$ US$ US$ US$ US$
million million million million million
------------------------------- -------- -------- ---------- -------- --------
Revenue
Gold 67.9 119.4 102.1 289.4 258.7
Silver 0.3 0.2 0.1 0.7 0.6
68.2 119.7 102.2 290.0 259.3
------------------------------- -------- -------- ---------- -------- --------
Expenses
Operating cash expenses 50.6 71.8 42.0 164.4 158.1
Refinery and transportation 0.1 0.2 0.1 0.4 0.3
Other taxes 0.9 1.6 0.9 3.4 3.1
Mining tax 4.2 1.3 1.3 6.7 -
Deferred stripping costs 4.6 5.3 5.2 15.1 20.1
Depreciation 17.0 17.4 18.9 53.4 48.0
Impairment of exploration
and
evaluation assets - - - - 12.2
Impairment/(reversal of
impairment) of ore stockpiles 3.1 - (4.0) (0.8) 14.5
(Reversal of impairment)/
impairment of gold in circuit (0.1) - - (0.1) 0.7
Operating expenses 80.5 97.5 64.4 242.4 257.1
------------------------------- -------- -------- ---------- -------- --------
Result of precious metals
operations (12.3) 22.1 37.8 47.6 2.2
------------------------------- -------- -------- ---------- -------- --------
Add/(less):
Depreciation 17.0 17.4 18.9 53.4 48.0
Impairment of exploration
and
evaluation assets - - - - 12.2
Impairment/(reversal of
impairment) of ore stockpiles 3.1 - (4.0) (0.8) 14.5
(Reversal of impairment)/
impairment of gold in circuit (0.1) - - (0.1) 0.7
------------------------------- -------- -------- ---------- -------- --------
Segment EBITDA.. 7.8 39.6 52.7 100.1 77.6
------------------------------- -------- -------- ---------- -------- --------
Physical volume of gold
sold, oz 52,805 92,938 79,288 225,031 201,381
------------------------------- -------- -------- ---------- -------- --------
Cash costs
Operating cash expenses 50.6 71.8 42.0 164.4 158.1
Refinery and transportation 0.1 0.2 0.1 0.4 0.3
Other taxes 0.9 1.6 0.9 3.4 3.1
Mining tax 4.2 1.3 1.3 6.7 -
Deferred stripping costs 4.6 5.3 5.2 15.1 20.1
Operating cash costs 60.4 80.1 49.4 190.0 181.7
Deduct: co-product revenue (0.3) (0.2) (0.1) (0.7) (0.6)
Total ash osts(u) 60.1 79.9 49.3 189.3 181.1
------------------------------- -------- -------- ---------- -------- --------
TCC(u) , US$/oz 1,138 860 622 841 899
All-in Sustaining Costs(u) and All-in Costs(u)
AISC.. decreased from US$1,138/oz in H1 2018 to US$1,029/oz in
H1 2019. The decrease in AISC(u) reflects the decrease in TCC as
well as decrease in impairment of non-refractory ore stockpiles at
Albyn. This effect was partially mitigated by the increase in
sustaining capital expenditures related to the existing mining
operations.
AIC(u) decreased from US$1,353/oz in H1 2018 to US$1,091/oz in
H1 2019, primarily reflecting the decrease in
AISC(u) explained above and Capital Expenditure(u) in relation to the POX project.
Hard rock mines H1 2019 H1 2018
--------------------------------
Pioneer Malomir Albyn Total Total
US$ US$ US$ US$ US$
million million million million million
-------------------------------- -------- -------- -------- ----------- ----------
Physical volume of gold
sold, oz 52,805 92,938 79,288 225,031 201,381
-------- -------- -------- -----------
Total Cash Costs(u) 60.1 79.9 49.3 189.3 181.1
TCC(u) , US$/oz 1,138 860 622 841 899
-------------------------------- -------- -------- -------- ----------- ----------
Impairment/(reversal of
impairment) of ore stockpiles 3.1 - (4.0) (0.8) 14.5
(Reversal of impairment)/
impairment of gold in circuit (0.1) - - (0.1) 0.7
-------------------------------- -------- -------- -------- ----------- ----------
Adjusted operating costs 63.1 79.9 45.4 188.4 196.2
Central administration
expenses 5.2 9.1 7.7 22.0 19.8
Capitalised stripping at
end of the period 20.8 8.5 7.4 36.7 28.4
Capitalised stripping at
beginning of the period (22.9) (11.5) (12.6) (47.0) (39.8)
Close-down and site restoration 0.1 0.1 0.3 0.5 0.6
Sustaining exploration
expenditures 2.1 1.2 0.1 3.4 12.3
Sustaining Capital Expenditure 11.1 6.9 9.6 27.6 11.7
-------------------------------- -------- -------- -------- ----------- ----------
All-in Sustaining Costs(u) 79.5 94.2 57.9 231.7 229.3
-------------------------------- -------- -------- -------- ----------- ----------
All-in Sustaining Costs(u)
, US$/oz 1,506 1,013 731 1,029 1,138
-------------------------------- -------- -------- -------- ----------- ----------
Exploration Expenditure(u) 0.6 0.3 3.9 4.8 0.7
Capital Expenditure(u) 3.4 5.8 - 9.2 42.5
All-in Costs(u) 83.6 100.2 61.9 245.6 272.5
-------------------------------- -------- -------- -------- ----------- ----------
All-in Costs(u) , US$/oz 1,582 1,078 780 1,091 1,353
-------------------------------- -------- -------- -------- ----------- ----------
Corporate and other
Corporate and other operations contributed US$(16.7) million to
Underlying EBITDA.. in H1 2019 compared to US$(16.9) million in H1
2018. Corporate and other operations primarily include central
administration function, result of in-house service companies and
the Group's share of results of its associate IRC.
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$19.8 million in H1 2018 to US$22.0 million in H1
2019.
The Group's share of loss generated by IRC is US$(7.9) million
(H1 2018: US$(4.9) million share of losses generated by IRC), with
the ramp up of operations being more than offset by the refinancing
and foreign exchange losses. IRC contributed US$ 5.8 million to the
Group's Underlying EBITDA(u) in H1 2019 (H1 2018: US$3.3
million).
Impairment review
Impairment of mining assets
As at 30 June 2019 and 30 June 2018, the Group identified no
impairment indicators or indicators of impairment reversal for the
cash generating units related to its gold mining projects and
supporting in-house service companies.
As at 31 December 2018, the Group recognised impairment
reversals at the Malomir and Albyn CGUs of US$83.0 million (US$66.4
million post-tax) and US$18.7 million (US$15.2 million post-tax),
respectively.
Impairment of exploration and evaluation assets
As at 30 June 2019, the Group performed a review of its
exploration and evaluation assets and concluded no impairment was
required (30 June 2018 and 31 December 2018: the Group performed a
review of its exploration and evaluation assets and concluded to
suspend exploration at the Flanks of Malomir and surrender the
relevant licences. An aggregate impairment charge of US$12.2
million was recorded against associated exploration and evaluation
assets). All exploration and evaluation assets in the statement of
financial position related to the areas adjacent to the existing
mines.
Interest income and expense
H1 2019 H1 2018
US$ million US$ million
------------------ ----------- -----------
Investment income 2.5 0.7
------------------- ----------- -----------
The Group recognised US$1.8 million interest income on loans
granted and US$0.7 million interest income on cash deposits with
banks.
H1 2019 H1 2018
US$ million US$ million
--------------------- ----------- -----------
Interest expense 35.1 29.3
Interest capitalised (9.4) (17.5)
Other 0.3 0.2
---------------------- ----------- -----------
26.0 12.0
--------------------- ----------- -----------
Interest expense for the period comprised of US$20.8 million
effective interest on the Notes, US$6.4 million effective interest
on the Convertible Bonds, US$7.7 million interest on prepayments
for gold supply agreements and US$0.3 million interest on finance
lease (H1 2018: US$20.8 million effective interest on the Notes,
US$6.1 million effective interest on the Convertible Bonds, US$0.5
million interest on Sberbank facility and US$1.8 million interest
on prepayments for gold supply agreements).
As the Group continued with completion of the POX Hub, this
project met eligibility criteria for borrowing costs capitalization
under IAS 23 "Borrowing Costs". US$9.4 million of interest expense
was capitalised within property, plant and equipment (H1 2018:
US$17.5 million interest capitalized in relation to property, plant
and equipment). With all four autoclaves of the POX Hub now fully
functional, interest capitalisation in relation to POX Hub will
cease in H2 2019, resulting in further increase in net interest
expense from H2 2019 onwards. Construction of the new flotation
line at Pioneer is expected to meet eligibility criteria for
borrowing costs capitalization with relevant interest to be
capitalized going forward.
Other finance gains and losses
Net other finance gains for the period totalled US$37.7 million
compared to US$1.9 million of net other finance gains in H1 2018.
Key elements of other finance gains and losses this period
include:
- An aggregate of US$39.1 million gains recognised following
refinancing of IRC's project finance facility as set out in section
"Corporate activities" below;
- US$9.2 million fair value gain on the call option to acquire
25% interest in the Group's subsidiary LLC TEMI from its current
shareholder as set out in section "Corporate activities" below;
- US$(9.2) million fair value loss from re-measurement of the
conversion option of the Convertible Bonds and US$(1.1) million
fair value loss from re-measurement of the issued the Call Option
over the Company's shares which was exercised in H1 2019.
Taxation
H1 2018
H1 2019 (restated)
US$ million US$ million
----------- ----------- -----------
Tax charge 3.2 6.7
--------------- ----------- -----------
The Group is subject to corporation tax under the UK, Russia and
Cyprus tax legislation. The statutory tax rate for 2019 was 19.0%
in the UK and 20% in Russia. Under the Russian Federal Law 144-FZ
dated 23 May 2016 taxpayers who are participants in Regional
Investment Projects ("RIP") have the right to apply the reduced
corporation tax rate over the period until 2027, subject to
eligibility criteria. In 2019 and 2018, LLC Albynskiy Rudnik has
received tax relief as a RIP participant and was entitled to the
reduced statutory corporation tax rate of 17%.
The tax charge for the period arises primarily related to the
Group's gold mining operations and is represented by a current tax
charge of US$12.3 million (H1 2018: US$9.9 million) and a deferred
tax credit, which is a non-cash item, of US$9.1 million (H1 2018:
deferred tax credit of US$3.1 million). Included in the deferred
tax charge in 2019 is a US$16.3 million credit (H1 2018: US$11.9
million charge) 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 Roubles, 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$16.6 million in Russia (H1 2018: corporation tax
payments in aggregate of US$0.1 million in Russia).
Earnings per share
H1 2018
H1 2019 (restated)
------------------------------------------- --------------- -----------------
Profit/(loss) for the period attributable
to equity holders of Petropavlovsk PLC US$14.3 million US$(40.3) million
Weighted average number of Ordinary Shares 3,308,154,243 3,303,768,532
Basic profit/(loss) per ordinary share US$0.00 US$(0.01)
------------------------------------------- --------------- -----------------
Basic profit per share for H1 2019 was US$0.00 compared to
US$(0.01) basic loss per share for H1 2018. The key factor
affecting the basic profit per share was the increase of net profit
for the period attributable to equity holders of Petropavlovsk PLC
from the net loss of US$(40.3) million for H1 2018 to US$14.3
million net profit for H1 2019.
The total number of Ordinary Shares in issue as at 30 June 2019
was 3,310,210,281 (30 June 2018: 3,303,768,532).
Financial position and cash flows
30 June 2019 31 December 2018
US$ million US$ million
---------------------------------------- ------------------ -----------------------
Cash and cash equivalents 39.1 26.2
Notes (a) (499.5) (499.0)
Convertible bonds (b) (97.0) (95.2)
---------------------------------------- ------------------ -----------------------
Net Debt.. (557.4) (568.0)
---------------------------------------- ------------------ -----------------------
(a) US$500 million Guaranteed Notes due on 14 November 2022 at amortised
cost.
(b) US$100 million convertible bonds due on 18 March 2020 at amortised
cost.
H1 2019 H1 2018
US$ million US$ million
--------------------------------------------- ----------- -----------
Net cash from operating activities 1.1 127.8
Net cash from/(used in) investing activities
(c) 6.4 (95.1)
Net cash from/(used in) financing activities 3.2 (9.0)
--------------------------------------------- ----------- -----------
(c) Including US$45.0 million cash CAPEX (H1 2018: US$67.2 million)...
Key movements in cash and Net Debt(u)
Cash Debt Net Debt(u)
US$ million US$ million US$ million
------------------------------------------- ----------- ----------- -----------
As at 1 January 2019 26.2 (594.2) (568.0)
Net cash generated by operating activities
before working capital changes 70.6
Decrease in working capital (20.3)
Corporation tax paid (16.6)
Capital Expenditure(u) (45.0)
Repayment of loans granted to an associate 56.2
Interest accrued (27.2)
Interest paid (32.7)(d) 24.9
Payment for the call option to acquire
non-controlling 25% interest in the
Group's subsidiary LLC TEMI (7.0)
ICBC Guarantee fee received 6.0
Interest received 2.6
Other (0.9)
------------------------------------------- ----------- ----------- -----------
As at 30 June 2019 39.1 (596.5) (557.4)
------------------------------------------- ----------- ----------- -----------
(d) Including US$7.7 million interest paid in relation to
advance payments from Gazprombank and Sberbank.
Capital Expenditure ..
The Group invested an aggregate of US$45.0 million in H1 2019
compared to US$67.2 million in H1 2018. The key areas of focus this
period were on the POX project completion, exploration and
development to support the underground mining at Pioneer and
Malomir, 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.
The Group capitalised US$9.4 million of interest expense
incurred in relation to the Group's debt into the cost of the POX
hub and Malomir flotation (H1 2018: US$17.5 million into the cost
of the POX Hub and Malomir flotation).
Exploration Development Total
expenditure expenditure CAPEX(u)
and other
CAPEX(u)
US$ million US$ million US$ million
-------------------------------- ------------ ------------ -----------
POX (a) - 9.1 9.1
Pioneer (b) 2.7 10.4 13.2
Malomir(c), (d) 1.5 5.6 7.1
Albyn 4.0 8.5 12.5
Corporate and in-house services - 3.1 3.1
8.2 36.8 45.0
-------------------------------- ------------ ------------ -----------
(a) Including US$ 9.1 million of development expenditure in
relation to the POX Hub which is considered to be non-sustaining
Capital Expenditure(u) for the purposes of calculating AISC(u) and
AIC(u) .
(b) Including US$ 5.1 million of expenditure in relation to the
underground mining project at Pioneer to be sustaining Capital
Expenditure(u) for the purposes of calculating the AISC(u) and
AIC(u) .
(c) Including US$ 1.2 million of expenditure in relation to the
underground mining project at Malomir to be sustaining Capital
Expenditure(u) for the purposes of calculating the AISC(u) and
AIC(u) .
(d) Including US$ 4.2million of expenditure in relation to
Malomir flotation (including tailing dams), which is considered to
be sustaining Capital Expenditure(u) for the purposes of
calculating AISC(u) and AIC(u) .
Foreign currency exchange differences
The Group's principal subsidiaries have a US Dollar functional
currency. Foreign exchange differences arise on the 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.
30 June 2019 31 December 2018
------------------------- ------------ ----------------
GB Pounds Sterling (GBP:
US$) 0.79 0.78
Russian Rouble (RUB:
US$) 63.08 69.47
-------------------------- ------------ ----------------
The Rouble recovered by 9% against the US Dollar during H1 2019,
from RUB69.47: US$1 as at 31 December 2018 to RUB63.08 : US$1 as at
30 June 2019. The average period-on-period depreciation of the
Rouble against the US Dollar was approximately 10%, with the
average exchange rate for H1 2019 being RUB65.20: US$1 compared to
RUB59.33 : US$1 for H1 2018. The Group recognised foreign exchange
losses of US$14.0 million in H1 2019 (H1 2018: US$0.1 million
gains) arising primarily on Rouble denominated net monetary
liabilities (including advance payments received from Gazprombank
and Sberbank under gold sales agreements).
Corporate activities
Guarantee over IRC's external borrowings and refinancing of
IRC's project finance facility
The Group historically entered into an arrangement to provide a
guarantee over its associate's, IRC, external borrowings, the ICBC
Facility ('ICBC Guarantee'). At 31 December 2018 the principal
amounts outstanding subject to the ICBC guarantee were US$169.6
million. Under the terms of the arrangement the Group was entitled
to receive an annual fee equal to 1.75% of the outstanding amount,
which amounted to US$0.7 million during the period (H1 2018: US$2.1
million).
In March 2019, IRC has refinanced the ICBC Facility through
entering into a US$240 million new facility with Gazprombank
('Gazprombank Facility'). The facility was fully drawn down during
the period and was used, inter alia, to repay the amounts
outstanding under the ICBC Facility in full, the two loans provided
to IRC by the Group in 2018 in the equivalent of approximately
US$57 million and part of the guarantee fee of US$6 million owed by
IRC to the Group in respect of the guarantee of the ICBC Facility.
The remaining outstanding contractual guarantee fee of
approximately US$5.7 million (which corresponding fair value after
provision for credit losses equals US$4.8 million) is payable by
IRC no later than 31 March 2020 (31 December 2018: outstanding
contractual guarantee fee of US$10.3 million with corresponding
fair value after provision for credit losses of US$6.8
million).
A new guarantee was issued by the Group over part of the
Gazprombank Facility ('Gazprombank Guarantee'), the guarantee
mechanism is implemented through a series of five guarantees that
fluctuate in value through the eight-year life of the loan, with
the possibility of the initial US$160 million principal amounts
guaranteed reducing to US$40 million within two to three years,
subject to certain conditions being met. For the final two years of
the Gazprombank Facility, the guaranteed amounts will increase to
US$120 million to cover the final principal and interest
repayments. If certain springing recourse events transpire,
including default on a scheduled payment, then full outstanding
loan balance is accelerated and subject to the guarantee. Under the
Gazprombank Guarantee arrangements, the guarantee fee receivable is
determined at each reporting date on an independently determined
fair value basis, which for the H1 2019 was estimated at the annual
rate of 3.07% for 2019 by reference to the average outstanding
principal balance under Gazprombank Facility. The accrued guarantee
fee was $2.0 million, with corresponding value of $1.8 million
after provision for expected credit losses.
The following assets and liabilities have been recognised in
relation to the ICBC Guarantee and Gazprombank Guarantee as at 30
June 2019 and 31 December 2018:
31 December
30 June 2019 2018
US$ million US$ million
----------------------------------------------- ------------- ------------
Other receivables - ICBC Guarantee 4.8 6.8
Other receivables - Gazpombank Guarantee 1.8 -
Financial guarantee contract - ICBC Guarantee - (37.4)
Financial guarantee contract - Gazpombank (7.3) -
Guarantee
----------------------------------------------- ------------- ------------
The following gains and losses resulting from the aforementioned
transactions were recognised within Other finance gains and losses
during the period:
H1 2019
US$ million
------------------------------------------------------- ------------
Fair value change on ICBC Guarantee fee receivable 4.0
Gazpombank Guarantee fee for the period 1.8
De-recognition of liability under ICBC Guarantee
arrangements 37.4
Recognition of liability under Gazpombank Guarantee
arrangements (7.3)
Reversal of provision for expected credit losses
following repayment of loans advanced to IRC in 2018 3.2
------------------------------------------------------- ------------
39.1
------------------------------------------------------- ------------
Option to acquire non-controlling 25% interest in LLC TEMI
In May 2019, the Group entered into the option contract to
acquire non-controlling 25% interest in LLC TEMI, holder of
Elginskoye license, from its shareholder Agestina Limited for an
aggregate consideration of US$60 million (adjusted to US$53 million
if certain conditions are met). The option premium payable is US$13
million, out of which US$7.0 million was paid during the six months
ended 30 June 2019. The outstanding option premium can be settled
in either cash or the Company's shares. The exercise period of the
option is 730 days from 22 May 2019.
The fair value of the call option, net of unpaid premium, was
US$9.6 million on initial recognition, resulting in a corresponding
gain recognised within Other finance gains in the statement of
profit or loss. This gain on initial recognition is primarily due
to improvement in the gold price outlook between the pricing and
completion of the transaction together with the judgements taken
with regards to certain inputs into the relevant valuation models,
in particular, historic volatility used as a proxy of the expected
volatility of the underlying assets and being historic volatility
of the comparable listed companies used for the valuations under
IFRS 13 as opposed to historic gold market volatility used for the
valuation of the contractual option premium. As at 30 June 2019,
the fair value of the derivative financial asset has increased to
US$16.2 million reflecting a loss on re-measurement to fair value
of US$0.4 million and the initial US$7.0 million cash payment.
Placement of US$125 million new convertible bonds and concurrent
repurchase of outstanding US$100 million Convertible Bonds
In July 2019, the Group has issued US$125 million convertible
bonds due 2024. The bonds were issued by the Group's wholly owned
subsidiary Petropavlovsk 2010 Limited (the "Issuer") and are
guaranteed by the Company. The bonds carry a coupon of 8.25% per
annum, payable quarterly in arrears. The bonds are, subject to
certain conditions, convertible into fully paid ordinary shares of
the Company with an initial exchange price of US$0.1350, subject to
customary adjustment provisions.
Concurrently with the issue of the US$125 million convertible
bonds, the Group also concluded the invitation to repurchase (the
"Repurchase") any and all of the outstanding US$100 million 9.00%
convertible bonds due 2020 (the "Existing Bonds"). Holders whose
Existing Bonds have been accepted for purchase by the Issuer
pursuant to the Repurchase were eligible to receive US$1,080 per
US$1,000 in principal amount of the Existing Bonds (the "Repurchase
Price"). The Issuer also paid, in respect of Existing Bonds
accepted for purchase pursuant to the Repurchase, a cash amount
representing the accrued but unpaid interest ("Accrued Interest")
on each US$1,000 in aggregate principal amount of Existing Bonds
accepted for repurchase from and including 18 June 2019, being the
immediately preceding interest payment date applicable to the
Existing Bonds, to but excluding the settlement date for the
Repurchase (the "Repurchase Settlement Date"). The remaining
Existing Bonds were redeemed at the Repurchase Price on 9 July
2019. The Issuer also paid a cash amount representing the Accrued
Interest on each US$1,000 in aggregate principal amount of Existing
Bonds from and including 18 June 2019 to redemption. The Existing
Bonds were subsequently cancelled by the Issuer.
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 the 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 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, advances received from customers under
prepayment arrangements and external debt.
The Group performed an assessment of the forecast cash flows for
the period of 12 months from the date of approval of the Half Year
Report for the period ended 30 June 2019. As at 30 June 2019, the
Group had sufficient liquidity headroom. The Group is also
satisfied that it has sufficient headroom under a base case
scenario for the period to December 2020. The Group has also
performed projections under a layered stressed case that is based
on a gold price, which is reduced to a level approximately 18%
below the current spot price, gold production approximately 3%
lower than projected, and Russian Rouble : US Dollar exchange rate
that is approximately 7% stronger than the average of the market
consensus forecasts. This layered stressed case indicates
sufficient liquidity for a period of at least 12 months including
under downside IRC performance scenarios.
As at 30 June 2019, the Group has guaranteed the outstanding
amounts IRC owed to Gazprombank. The outstanding loan principal was
US$234 million as at 30 June 2019 and the facility is subject to an
initial $160 million guarantee by the Group (see note 21). 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
projections demonstrate that IRC expects to have sufficient
liquidity over the next 12 months and expects to meet its
obligations under the Gazprombank Facility. If a missed repayment
under debt or guarantee obligations occurs which, if not remedied
by the Group, 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.
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 Half Year Report for the period ended 30
June 2019. Accordingly, they continue to adopt the going concern
basis of accounting in preparing these condensed consolidated
financial statements
Development Update
Processing Development
Pioneer Flotation
Construction of a flotation plant at Pioneer, which was put on
hold in 2014 due to gold price weakness, resumed in June 2019 with
an estimated construction period lasting 12 to 14 months. Prior to
being put on hold, the major works completed included the main
building shell. Following its restart, key contracts to supply
major equipment items were renewed and processing equipment has
already started arriving on site.
Construction work to date has focused on the heating plant, an
extension to the flotation building where reagents are prepared and
on foundations for the flotation circuit. Construction remains on
schedule for completion in Q4 2020.
Mine Development
Elginskoye (Albyn)
Preparation works ahead of the commencement of mining in 2020
included extensive grade control and reserve definition drilling,
and an extensive program of metallurgical sampling was completed
during the Period. This has resulted in an increased confidence in
the orebody and Elginskoye reserves are being updated. An access
and haulage road connecting Elginskoye site with Albyn was
completed. Waste stripping followed by initial ore mining is
expected to commence in Q4 2019.
Quartzitovyoe underground mine (Malomir producing mine)
During H1 2019, stope mining progressed between 285 and 390m
elevations whilst access and development work was carried out to
access reserves situated between 210m and 285m elevations. Stope
mining at the upper parts of the mine (above the 285m level) is in
its final stages and production is switching to the lower parts of
the mine (above the 210m level). Flooding due to heavy rainfall in
July and August is not expected to affect 2019 production targets.
Exploration and stope definition drilling to define further
resources and reserves in deeper parts of the mine below 210m level
is scheduled for H2 2019.
NE Bakhmut (Pioneer producing mine)
During H1 2019, underground ore production from NE Bakhmut 3
continued to be slightly below budget due to more
challenging-than-expected ground and hydrogeological conditions.
Heavy rainfall in July and early August slowed production early in
H2 2019, however, equipment and resources were diverted to assist
with the development of NE Bakhmut 2 area and accelerate the
commencement of production. The access decline at the NE Bakhmut 2
has now reached the level of first production at 25m and the first
sublevels and cross cuts into the orebody were completed. Stope
mining is expected to commence ahead of schedule which should
offset any production shortages from the Bakhmut No 3 area for the
full year.
Andreevskaya and Nikolaevskaya (Pioneer proposed mines)
Mine design and permitting is progressing ahead underground
development work due to start at the Andreevskaya and Nikolaevskaya
zones. In order to provide more refractory ores for the Pioneer
flotation plant, where construction has been brought forward,
development works at non-refractory Andreevskaya deposit have been
rescheduled from H2 2019 to H2 2020.
Exploration
Pioneer
During H1 2019, exploration took place at several zones with the
most significant results being at Nikolaevskaya and NE Bakhmut.
Nikolaevskaya
Four drill holes were completed which targeted deeper extensions
of high-grade mineralisation. Highlights at a 1.5g/t cutoff grade,
included:
- 7.5m @ 5.17g/t (C-2362)
- 1.0m @ 4.0g/t (C-2346)
NE Bakhmut
Two drill holes with a total length of 520m were completed under
NE Bakhmut sub pit 1, with mineralisation intersected between 30m
to 70m below the existing open pit floor. The best intersections at
a cut-off grade 0.4g/t were:
- 14.5m @ 1.17g/t (drill hole 6334)
- 7.2m @ 3.77g/t (drill hole 1083)
- 5.3m @ 1.36g/t (drill hole 1083)
The results confirm that NE Bakhmut 1 mineralisation extends
below the existing open pit and the Company is currently evaluating
the possibility of deepening the pit.
Katrin
During H1 2019, drilling comprising of 21 drill holes which were
completed at the west and north-east extensions of existing
mineralisation at Katrin. Most holes did not discover significant
gold grades which suggests that the along-strike extensions of the
Katrin ore body have now largely been defined.
Only two drill holes (C-506-1 and C-506-24) were completed at
the south-west side of Katrin which intersected mineralisation,
including 4.6m @ 0.57g/t and 7.0m @ 1.91g/t. Although the Katrin
ore body has now largely been defined, the surrounding areas remain
prospective for discovery of similar-style mineralisation.
Zvezdochka-2
This zone is located 2-2.5km north-west of the Yuzhnaya zone,
hosted by granodiorites and diorite-porphyries.
In H1 2019, a 164m long trench K-1384 was completed and sampled. The best intersections included:
- 7.0m @ 14.3g/t
- 26.0m @ 0.63g/t
Zvezdochka offers potential for a small increase in both
refractory and non-refractory resources.
Ulunginskaya
In H1 2019, seven drill holes were completed at the northern
side of the zone which discovered further refractory
mineralisation. The best intersections included:
- 14.4m @ 1.62g/t (C-2657, completed in 2018, assays received in 2019)
- 11.0m @ 0.91g/t (C-2658, completed in 2018, assays received in 2019)
- 20m @ 0.78g/t (C-2699)
- 27.9m @ 0.92g/t (C-2694A)
- 8.2m @ 0.62 g/t (C-2692)
- 5.1m @ 0.88g/t (C-2698)
This drilling is expected to increase Ulunginskaya refractory
Resources and Reserves.
Other Pioneer Exploration Results
Smaller exploration programmes were also completed at
Nadvigoviy, Vodorazdelniy, Daktuy and Krestyanskiy-Olgakan. In
addition, the Group has commenced a comprehensive metallurgical
test programme on its refractory resources. This programme aims to
study the variability of metallurgical properties across the
deposit to increase confidence in the mid-term production plan with
the results expected soon.
Malomir
Osipkan
A total of 300m of drilling was completed during H1 2019, with
Osipkan located c.130km (by road) east of Malomir and c.30km
south-west (by road) from Tokur. With c.1Moz of JORC resources,
Tokur has potential to be fully developed into an open pit and/or
underground mine.
Recent exploration has complemented work undertaken prior to
2011, which included 197,798m3 of trenching and 1,981m of diamond
drilling. Based on that work, a resource estimate at Osipkan was
prepared and approved by the local authority.
Total category C2 material, which is equivalent to Indicated or
Inferred under JORC, amounted to 97koz within 2.5Mt of material at
an average grade of 1.23g/t. In addition, 22koz of P1 category,
which is equivalent to Inferred under JORC, gold resources were
also estimated within 458kt of material at an average grade of
1.50g/t.
These resources are yet to be re-evaluated in accordance with
JORC and added to the JORC statement. Osipkan is a Tokur satellite,
which will benefit from this discovery.
Albyn
Elginskoye
Extensive in-fill and resource expansion drilling has been
undertaken. A total of 207 in-fill holes with a total length of
11,674m were drilled within the Elginskoye Phase 1 pit to create a
20m x 20m drill grid and increase confidence in the reserve
estimates and to increase the accuracy of short-term planning ahead
of commencement of mining in 2020. Exploration is still ongoing
with results received to date confirming existing reserves
estimates. Once completed, the results are expected to lead to an
increase in the Proven reserves at Elginskoye, setting the
foundation for more accurate short and mid-term mining plans.
128 drill holes were completed at the central part of
Elginskoye, with total length of 15,440m to in-fill an existing
drill grid to 80m x 40m.
An extensive metallurgical sampling program to study variability
of metallurgical properties across the Phase 1 pit was also
undertaken on samples recovered from drill holes completed this
year. The results of this work are expected to be incorporated into
the updated reserves estimate.
Resource expansion drilling has also been completed at the
periphery of Elginskoye comprising 22 drill holes with a total
length of 2,755m. The extension of known gold mineralisation has
been proven at the south-west, south-east and northern sides of the
deposit, as well as at the right bank of the Poputniy stream. The
completed drill holes have proven extensions of gold
mineralisation, which is expected to increase Elginskoye Resources
and Reserves.
The best intersections, outside the current JORC Resource model,
include:
- 4.4m @ 5.89g/t (C- -264-114)
- 4.7m @ 3.92g/t (C- -256-112)
- 3.4m @ 2.77g/t (C- -256-108)
- 1.8m @ 4.94g/t (C- -220-56)
- 4.8m @ 4.86g/t (C- -228-56)
Results of this exploration are yet to be reflected in the
Elginskoye resource estimate. It is expected that they will lead to
a slight increase the Elginskoye resource base, with a greater
contribution from refractory gold ores.
Principal Risk and Uncertainties
The Group is exposed to a variety of risks and uncertainties
which could significantly affect its business and financial
results. A detailed review of the key risks facing the Group is set
out in the Principal Risks and Mitigation section on pages16 to 33
of the 2018 Annual Report, which is available on the Group's
website, www.petropavlovsk.net. This also includes a description of
the potential impact of such risks on the Group together with
measures in place to manage or mitigate against each specific risk
where this is within the Group's control.
The Board's view of the principal risks that could impact the
Group for the remainder of the current financial year remain
largely unchanged from those set out in the 2018 Annual Report with
the exception that the liquidity and funding risk has reduced as
detailed below.
The principal risks relate to the following:
Operational risks
-- Production
-- Exploration
Processing
-- Mechanical failure of POX Hub
-- Failure of POX to reach expected recovery
-- High levels of preg-robbing
Financial risks
-- Lack of funding and liquidity: During the Period the Group
redeemed its US$100m 9% Convertible Bonds due 2020 and issued
US$125 million 8.25% Convertible Bonds due 2024. This extension of
the Group's debt maturities has improved its funding position
whilst the net proceeds have been used towards the construction of
a new flotation plant at Pioneer which is a significant step
towards unlocking the value of refractory gold at Pioneer.
-- Gold price
-- Exchange rate
-- Guarantee of IRC's debt
Health, safety and environmental risks
-- Safety of our employees and third parties
-- Environmental risks: major pollution arising from operations
include: air and water pollution, land contamination and
deforestation
Loss of personnel
-- The Company is dependent on Dr Maslovskiy and other
long-serving members of the senior executive team
Country/Compliance
-- The Group requires various licences and permits in order to operate within Russia
-- The Group is subject to risks associated with operating in
Russia
Director's Responsibilities Statement
We confirm that to the best of our knowledge:
-- The condensed set of financial statements, which has been
prepared in accordance with IAS34 "Interim Financial Reporting" as
endorsed and adopted by the European Union, gives a true and fair
view of the assets, liabilities, financial position and profit or
loss of the company, or the undertakings included in the
consolidation as a whole as required by DTR4.2.4R
-- The interim management report includes a fair review of the
information required by DTR4.2.7R (indication of important events
and their impact, and description of principal risks and
uncertainties for the remaining six months of the financial year);
and
-- The interim management report includes a fair review of the
information required on related party transactions as required by
DTR4.2.8R
By order of the Board,
Sir Roderic Lyne Dr Pavel Maslovskiy
Chairman Chief Executive Officer
9 September 2019
Independent Review Report (Auditors)
INDEPENT REVIEW REPORT TO PETROPAVLOVSK PLC
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2019 which comprises the income statement,
the balance sheet, the statement of changes in equity, the cash
flow statement and related notes 1 to 25. We have read the other
information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. Our work has been undertaken so that we might
state to the company those matters we are required to state to it
in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our review
work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34 "Interim
Financial Reporting" as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2019 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
of the United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
London, United Kingdom
9 September 2019
PETROPAVLOVSK PLC
Condensed Consolidated Statement of Profit or Loss
Six months ended 30 June 2019
Six months
ended
Six months
ended 30 June 2018
(restated)
30 June 2019 (a) Year ended
31 December
(unaudited) (unaudited) 2018
note US$'000 US$'000 US$'000
------------------------------------- ---- ------------- ------------- ------------
Group revenue 305,328 270,454 499,775
Operating expenses 6 (294,910) (289,292) (388,643)
Share of results of associates 12 (7,905) (4,863) 15,480
------------------------------------- ---- ------------- ------------- ------------
- Operating profit/(loss) 2,513 (23,701) 126,612
Investment income 7 2,522 718 3,775
Interest expense 7 (25,979) (11,987) (29,520)
Other finance gains 7 48,275 10,267 13,905
Other finance losses 7 (10,555) (8,401) (32,354)
------------------------------------- ---- ------------- ------------- ------------
Profit/(loss) before taxation 16,776 (33,104) 82,418
Taxation 8 (3,233) (6,747) (56,489)
------------------------------------- ---- ------------- ------------- ------------
Profit/(loss) for the period 13,543 (39,851) 25,929
------------------------------------- ---- ------------- ------------- ------------
Attributable to:
Equity shareholders of Petropavlovsk
PLC 14,290 (40,252) 24,493
------------------------------------- ---- ------------- ------------- ------------
Non-controlling interests (747) 401 1,436
------------------------------------- ---- ------------- ------------- ------------
Profit/(loss) per share
Basic profit/(loss) per share 9 US$0.00 US$(0.01) US$0.01
------------------------------------- ---- ------------- ------------- ------------
Diluted profit/(loss) per share 9 US$0.00 US$(0.01) US$0.01
------------------------------------- ---- ------------- ------------- ------------
(a) See note 2 for details regarding the restatement.
PETROPAVLOVSK PLC
Condensed Consolidated Statement of Comprehensive Income
Six months ended 30 June 2019
Six months
Six months ended
ended 30 June 2018 Year ended
30 June 2019 (restated) 31 December
(unaudited) (a) 2018
US$'000 (unaudited) US$'000
US$'000
---------------------------------------------------- -------------- ------------- -------------
Profit/(loss) for the period 13,543 (39,851) 25,929
----------------------------------------------------- -------------- ------------- -------------
- Items that may be reclassified subsequently
to profit or loss:
---------------------------------------------------- -------------- ------------- -------------
Revaluation of investments - (17) -
Exchange differences:
Exchange differences on translating foreign
operations 1,701 (1,562) (3,183)
Share of other comprehensive (loss)/income
of associate (6,386) 460 (329)
Cash flow hedges:
Fair value (losses)/gains (15,624) 18,466 20,238
Tax thereon 2,911 (3,415) (3,743)
Transfer to revenue 5,963 6,455 3,419
Tax thereon (1,103) (1,195) (633)
Other comprehensive (loss)/profit for
the period net of tax (12,538) 19,192 15,769
----------------------------------------------------- -------------- ------------- -------------
Total comprehensive profit/(loss) for
the period 1,005 (20,659) 41,698
----------------------------------------------------- -------------- ------------- -------------
Attributable to:
Equity shareholders of Petropavlovsk PLC 1,779 (21,122) 40,203
Non-controlling interests (774) 463 1,495
----------------------------------------------------- -------------- ------------- -------------
1,005 (20,659) 41,698
---------------------------------------------------- -------------- ------------- -------------
(a) See note 2 for details regarding the restatement.
PETROPAVLOVSK PLC
Condensed Consolidated Statement of Financial Position
At 30 June 2019
30 June 2019 30 June 2018 31 December
2018
(restated)
(a)
note (unaudited) (unaudited)
US$'000 US$'000 US$'000
----------------------------------------- ----------------- ------------- ------------- ------------
- Assets
Non-current assets
Exploration and evaluation assets 10 47,982 42,037 43,115
Property, plant and equipment 11 1,098,767 963,998 1,097,075
Investments in associates 12 70,848 65,586 85,140
Inventories 13 66,892 28,671 56,805
Derivative financial instruments 16 16,158 - -
Trade and other receivables 14 538 478 547
Other non-current assets 974 331 1,177
1,302,159 1,101,101 1,283,859
----------------------------------------- ----------------- ------------- ------------- ------------
Current assets
Inventories 13 197,911 179,151 205,844
Trade and other receivables 14 83,159 87,101 66,741
Loans granted to an associate 21 - 29,437 50,966
Current tax assets 4,943 1,641 1,653
Cash and cash equivalents 15 39,138 33,107 26,152
----------------------------------------- ----------------- ------------- ------------- ------------
325,151 330,437 351,356
----------------------------------------- ----------------- ------------- ------------- ------------
Total assets 1,627,310 1,431,538 1,635,215
----------------------------------------- ----------------- ------------- ------------- ------------
Liabilities
Current liabilities
Trade and other payables 17 (216,700) (162,443) (219,845)
Current tax liabilities (80) (4,204) (1,571)
Borrowings 18 (97,045) (7,378) -
Derivative financial instruments 16 (30,110) - (9,955)
Provision for close down and
restoration costs (1,364) (194) (804)
Lease liabilities (2,856) - -
(348,155) (174,219) (232,175)
----------------------------------------- ----------------- ------------- ------------- ------------
Net current (liabilities)/assets (23,004) 156,218 119,181
----------------------------------------- ----------------- ------------- ------------- ------------
Non-current liabilities
Borrowings 18 (499,504) (591,423) (594,177)
Derivative financial instruments 16 - (14,496) (2,411)
Deferred tax liabilities (102,473) (73,821) (113,354)
Provision for close down and
restoration costs (20,289) (20,143) (20,584)
Financial guarantee contract 21 (7,274) (18,618) (37,387)
Trade and other payables 17 (43,761) - (33,779)
Lease liabilities (3,370) - -
----------------------------------------- ----------------- ------------- ------------- ------------
(676,671) (718,501) (801,692)
----------------------------------------- ----------------- ------------- ------------- ------------
Total liabilities (1,024,826) (892,720) (1,033,867)
----------------------------------------- ----------------- ------------- ------------- ------------
Net assets 602,484 538,818 601,348
----------------------------------------- ----------------- ------------- ------------- ------------
Equity
Share capital 19 49,003 48,920 48,963
Share premium 518,142 518,142 518,142
Hedging reserve (14,992) (6,139) (7,166)
Share based payments reserve 49 387 227
Other reserves (16,279) (16,376) (17,980)
Retained earnings/(losses) 55,711 (16,708) 47,538
----------------------------------------- ----------------- ------------- ------------- ------------
Equity attributable to the shareholders
of Petropavlovsk PLC 591,634 528,226 589,724
----------------------------------------- ----------------- ------------- ------------- ------------
Non-controlling interests 10,850 10,592 11,624
----------------------------------------- ----------------- ------------- ------------- ------------
Total equity 602,484 538,818 601,348
----------------------------------------- ----------------- ------------- ------------- ------------
(a) See note 2 for details regarding the restatement.
These condensed consolidated financial statements for
Petropavlovsk PLC, registered number 4343841, were approved by the
Directors on 9 September 2019 and signed on their behalf by
Sir Roderic Lyne Pavel Maslovskiy
Director Director
PETROPAVLOVSK PLC
Condensed Consolidated Statement of Changes in Equity
Six months ended 30 June 2019
Total attributable to equity holders of Petropavlovsk
PLC
Share
based Retained
Share Share payments Hedging Translation earnings/ Non-controlling Total
capital premium reserve reserve reserve (losses) Total interests equity
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
--------------- -------- -------- --------- --------- ------------ ---------- --------- ---------------- ---------
Balance
at 1 January
2018 48,920 518,142 144 (26,388) (17,500) 47,457 570,775 8,333 579,108
---------------- -------- -------- --------- --------- ------------ ---------- --------- ---------------- ---------
Correction of
errors
in accounting
for
property,
plant
and equipment
and
deferred tax
liabilities - - - - - (14,472) (14,472) 1,796 (12,676)
---------------- -------- -------- --------- --------- ------------ ---------- --------- ---------------- ---------
Balance
at 1 January
2018
(restated) (a) 48,920 518,142 144 (26,388) (17,500) 32,985 556,303 10,129 566,432
---------------- -------- -------- --------- --------- ------------ ---------- --------- ---------------- ---------
Impact of
adopting
IFRS 9 - - - - 2,703 (9,959) (7,256) - (7,256)
Impact of
adopting
IFRS 15 - - - - - 58 58 - 58
Total
comprehensive
income/(loss) - - - 20,249 (1,579) (39,792) (21,122) 463 (20,659)
---------------- -------- -------- --------- --------- ------------ ---------- --------- ---------------- ---------
(Loss)/profit
for
the period
(restated)
(a) - - - - - (40,252) (40,252) 401 (39,851)
Other
comprehensive
income/(loss) - - - 20,249 (1,579) 460 19,130 62 19,192
---------------- -------- -------- --------- --------- ------------ ---------- --------- ---------------- ---------
Deferred share
awards - - 243 - - - 243 - 243
Balance
at 30 June
2018
(restated)
(unaudited) 48,920 518,142 387 (6,139) (16,376) (16,708) 528,226 10,592 538,818
Total
comprehensive
(loss)/income - - - (1,027) (1,604) 63,956 61,325 1,032 62,357
---------------- -------- -------- --------- --------- ------------ ---------- --------- ---------------- ---------
Profit for the
period - - - - - 64,745 64,745 1,035 65,780
Other
comprehensive
(loss)/income - - - (1,027) (1,604) (789) (3,420) (3) (3,423)
---------------- -------- -------- --------- --------- ------------ ---------- --------- ---------------- ---------
Deferred share
awards 43 - (160) - - 290 173 - 173
Balance
at 31 December
2018 48,963 518,142 227 (7,166) (17,980) 47,538 589,724 11,624 601,348
---------------- -------- -------- --------- --------- ------------ ---------- --------- ---------------- ---------
Total
comprehensive
(loss)/income - - - (7,826) 1,701 7,904 1,779 (774) 1,005
---------------- -------- -------- --------- --------- ------------ ---------- --------- ---------------- ---------
Profit/(loss)
for
the period - - - - - 14,290 14,290 (747) 13,543
Other
comprehensive
(loss)/income - - - (7,826) 1,701 (6,386) (12,511) (27) (12,538)
---------------- -------- -------- --------- --------- ------------ ---------- --------- ---------------- ---------
Deferred share
awards 40 - (178) - - 269 131 - 131
---------------- -------- -------- --------- --------- ------------ ---------- --------- ---------------- ---------
Balance
at 30 June
2019
(Unaudited) 49,003 518,142 49 (14,992) (16,279) 55,711 591,634 10,850 602,484
---------------- -------- -------- --------- --------- ------------ ---------- --------- ---------------- ---------
(a) See note 2 for details regarding the restatement.
PETROPAVLOVSK PLC
Condensed Consolidated Statement of Cash Flows
Six months ended 30 June 2019
Six months Six months Year ended
ended ended
30 June 30 June 31 December
2019 2018 2018
(unaudited) (unaudited) US$'000
note US$'000 US$'000
--------------------------------------------- ----------------- ------------- ------------- --------------
- Cash flows from operating activities
Cash generated from operations 20 50,307 154,654 282,826
Interest paid (32,694) (26,793) (60,577)
Income tax paid (16,558) (98) (5,024)
--------------------------------------------- ----------------- ------------- ------------- --------------
Net cash from operating activities 1,055 127,763 217,225
--------------------------------------------- ----------------- ------------- ------------- --------------
Cash flows from investing activities
Purchase of property, plant and
equipment (40,082) (66,474) (131,213)
Expenditure on exploration and
evaluation assets (4,929) (713) (3,153)
Proceeds from disposal of property,
plant and equipment 3 1,501 1,170
Loans granted (389) (29,960) (56,960)
Repayment of loans granted to an -
associate 56,211 -
Interest received 2,610 546 3,667
Call option over non-controlling
interests 16 (7,000) - -
Net cash from/(used in) investing
activities 6,424 (95,100) (186,489)
--------------------------------------------- ----------------- ------------- ------------- --------------
Cash flows from financing activities
Notes related costs - (2,596) (2,599)
Repayments of borrowings - - (4,006)
Debt transaction costs paid in
connection with bank loans - (6,412) (6,412)
Exercise of the Call Option over
the Company's shares 16 (2,215) - -
Guarantee fee received in connection
with ICBC facility 6,000 - -
Payment of finance lease liabilities (608) - -
Net cash from/(used in) financing
activities 3,177 (9,008) (13,017)
--------------------------------------------- ----------------- ------------- ------------- --------------
Net increase in cash and cash equivalents
in the period 10,656 23,655 17,719
Effect of exchange rates on cash
and cash equivalents 2,330 (1,963) (2,982)
Cash and cash equivalents at beginning
of period 15 26,152 11,415 11,415
Cash and cash equivalents at end
of period 15 39,138 33,107 26,152
--------------------------------------------- ----------------- ------------- ------------- --------------
PETROPAVLOVSK PLC
Notes to the condensed consolidated interim financial
statements
Six months ended 30 June 2019
- 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.
These condensed consolidated interim financial statements are
for the six months ended 30 June 2019. The interim financial
statements are unaudited.
The information for the year ended 31 December 2018 does not
constitute statutory accounts as defined in section 434 of the
Companies Act 2006. This information was derived from the statutory
accounts for the year ended 31 December 2018, a copy of which has
been delivered to the Registrar of Companies. The auditor's report
on those accounts was not qualified.
The auditor's report did not contain a statement under section
498(2) or 498(3) of the Companies Act 2006.
- 2. Basis of preparation and presentation
The annual financial statements of the Company and its
subsidiaries (the "Group") for the year ended 31 December 2018 were
prepared in accordance with International Financial Reporting
Standards ("IFRS"s) as adopted by the European Union.
The condensed consolidated set of financial statements has been
prepared using accounting policies consistent with those set out in
the annual financial statements for the year ended 31 December
2018, with adoption of new and revised standards and
interpretations as set out below, and in accordance with IAS 34
"Interim Financial Reporting", as adopted by the European
Union.
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 the 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 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, advances received from customers under
prepayment arrangements and external debt.
The Group performed an assessment of the forecast cash flows for
the period of 12 months from the date of approval of the Half Year
Report for the period ended 30 June 2019. As at 30 June 2019, the
Group had sufficient liquidity headroom. The Group is also
satisfied that it has sufficient headroom under a base case
scenario for the period to December 2020. The Group has also
performed projections under a layered stressed case that is based
on a gold price, which is reduced to a level approximately 18%
below the current spot price, gold production approximately 3%
lower than projected, and Russian Rouble : US Dollar exchange rate
that is approximately 7% stronger than the average of the market
consensus forecasts. This layered stressed case indicates
sufficient liquidity for a period of at least 12 months including
under downside IRC performance scenarios.
As at 30 June 2019, the Group has guaranteed the outstanding
amounts IRC owed to Gazprombank. The outstanding loan principal was
US$234 million as at 30 June 2019 and the facility is subject to an
initial $160 million guarantee by the Group (see note 21). 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
projections demonstrate that IRC expects to have sufficient
liquidity over the next 12 months and expects to meet its
obligations under the Gazprombank Facility. If a missed repayment
under debt or guarantee obligations occurs which, if not remedied
by the Group, 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.
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 Half Year Report for the period ended 30
June 2019. Accordingly, they continue to adopt the going concern
basis of accounting in preparing these condensed consolidated
financial statements.
Correction of errors related to property, plant and equipment
and deferred tax and revision of guarantee arrangements
As disclosed in note 2 to the Group's consolidated financial
statements for the year ended 31 December 2018, a number of errors
have been identified and corrected in 2018 which details are set
out below.
As set out in the 2018 consolidated financial statements, in
calculating the depreciation expense for mining assets using the
units of production method, the Group uses volumes of ore processed
during the period divided by total ore reserve estimates, including
both refractory and non-refractory ore reserves. This ratio is then
applied to the depreciable asset base. As the planned processing of
the refractory ores required further capital investment, future
budgeted capital expenditure has been added to the net book value
of mining assets to determine the depreciable amounts. In 2018, the
Group undertook a detailed review of application of these
accounting policies and discovered that capital expenditure
incurred to date in relation to POX Hub and carried within capital
construction in progress was excluded from the depreciable amounts.
As a result, matching between expected capital expenditure and the
mining activity over the life of mine was not fully achieved and
depreciation charges in prior periods were understated. As a
consequence, property, plant and equipment was overstated by
US$53.0 million as at 30 June 2018 and associated deferred tax
liability was overstated by US$10.6 million as at 30 June 2018.
As set out in the 2018 consolidated financial statements, when
preparing consolidated financial statements for relevant prior
periods, management applied judgement with regards to whether it
was probable that future taxable profits would be available against
which the unused tax losses can be utilised and whether it would be
appropriate to recognize relevant deferred tax assets accordingly.
Management concluded that there was insufficient certainty with
regards to relevant project development and availability of future
taxable profits against which unused tax credits could be utilised
by relevant entities. This was the basis for concluding that
recognition of deferred tax assets in relation to unused tax losses
would be inappropriate. In 2018, the Group re-analysed criteria for
recognising deferred tax assets arising from the unused tax losses
under IAS 12 "Income Taxes" and concluded that recognition of
deferred tax assets to the extent that the relevant entity has
sufficient taxable temporary differences would be appropriate. As a
consequence, deferred tax liabilities were previously overstated by
US$25.1 million as at 30 June 2018.
The Group historically entered into an arrangement to provide a
guarantee over IRC's external borrowings under the ICBC Facility
(note 21). Under the terms of the arrangement the Group is entitled
to receive an annual fee equal to 1.75% of the outstanding amount.
The financial guarantee contract liability and the guarantee fee
income receivable are accounted for under IFRS 9 "Financial
instruments". This standard was adopted as at 1 January 2018. The
valuation of these instruments is complex. Given the heightened
financial challenges at IRC including the announced but incomplete
refinancing as at 31 December 2018, the Group employed an
independent third-party expert to undertake valuations of the
guarantee liability and related guarantee fee income receivable.
Respective amounts as at 31 December 2018 and 1 January 2018 were
previously reflected in the 2018 consolidated financial statements.
The same expert also performed a revised valuation as at 30 June
2018, indicating a materially higher carrying value of the
guarantee liability and reduced carrying value of the guarantee
asset to reflect relevant credit risk adjustment. As a consequence,
trade and other receivables were previously overstated by US$4.4
million and financial guarantee contract liability was previously
understated by US$11.0 million as at 30 June 2018.
These errors have been corrected by restating the comparative
amounts as set out below. Additionally, certain financial
information has been represented to conform to the presentation in
the annual financial statements for the year ended 31 December
2018.
Condensed Consolidated Statement of Financial Position
(extract)
(Decrease)/ increase
---------------------------------------------------------------
30 June Re-calculation Recognition Valuation Other (a) 30 June
2018 of depreciation of deferred of assets 2018
charges tax assets and liabilities
recognised
in relation
to the
ICBC Guarantee
Restated
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
-------------------------- ---------- ----------------- ------------- ----------------- ---------- ---------
Property, plant
and equipment 1,017,039 (53,041) - - - 963,998
Trade and other 92,525
receivables (b) - - (4,430) (516) 87,579
Deferred tax liabilities 109,535 (10,608) (25,106) - - 73,821
Financial guarantee
contract 7,647 - 10,971 - 18,618
Net assets 572,062 (42,433) 25,106 (15,401) (516) 538,818
Other reserves (19,079) - - - 2,703 (16,376)
Retained earnings/
(losses) 21,205 (42,253) 22,960 (15,401) (3,219) (16,708)
Non-controlling
interests 8,626 (180) 2,146 - - 10,592
Total equity 572,062 (42,433) 25,106 (15,401) (516) 538,818
-------------------------- ---------- ----------------- ------------- ----------------- ---------- ---------
(a) Amendments to the impact of adopting IFRS 9 as of 1 January
2019 to ensure consistency with the consolidated financial
statements for the year ended 31 December 2018.
(b) Comprises both current and non-current Trade and other
receivables previously reported as at 30 June 2018 less a current
tax asset of US$1,641 thousand presented separately on the face of
the statement of financial position in the restated 30 June 2018
comparatives, in order to be consistent with the 30 June 2019
presentation.
Condensed Consolidated Statement of Profit or Loss (extract)
(Decrease)/ increase
---------------------------------------------------------------
Six months Re-calculation Recognition Valuation Other (a) Six months
ended of depreciation of deferred of assets ended
30 June charges tax assets and liabilities 30 June
2018 recognised 2018
in relation
to the ICBC
Guarantee
Restated
US$' 000 US$' 000 US$' 000 US$' 000 US$' 000 US$' 000
---------------------- ----------- ----------------- ------------- ----------------- ---------- -----------
Operating expenses 282,818 6,474 - - - 289,292
Other finance gains 12,295 - - (2,028) - 10,267
Other finance losses - - - 8,401 - 8,401
Taxation 8,570 (1,295) (528) - - 6,747
Profit for the
period 24,771 5,179 (528) 10,429 - 39,851
---------------------- ----------- ----------------- ------------- ----------------- ---------- -----------
Attributable to:
Equity shareholders
of Petropavlovsk
PLC 25,002 5,159 (338) 10,429 - 40,252
Non-controlling
interests (231) 20 (190) - - (401)
---------------------- ----------- ----------------- ------------- ----------------- ---------- -----------
Condensed Consolidated Statement of Comprehensive Income
(extract)
(Decrease)/ increase
---------------------------------------------------------------
Six months Re-calculation Recognition Valuation Other (a) Six months
ended of depreciation of deferred of assets ended
30 June charges tax assets and liabilities 30 June
2018 recognised 2018
in relation
to the
ICBC Guarantee
Restated
US$' 000 US$' 000 US$' 000 US$' 000 US$' 000 US$' 000
---------------------- ----------- ----------------- ------------- ----------------- ---------- -----------
Profit for the
period 24,771 5,179 (528) 10,429 - 39,851
Other comprehensive
loss for the period
net of tax (19,192) - - - - (19,192)
---------------------- ----------- ----------------- ------------- ----------------- ---------- -----------
Total comprehensive
profit for the
period 5,579 5,179 (528) 10,429 - 20,659
Attributable to:
Equity shareholders
of Petropavlovsk
PLC 5,872 5,159 (338) 10,429 - 21,122
Non-controlling
interests (293) 20 (190) - - (463)
---------------------- ----------- ----------------- ------------- ----------------- ---------- -----------
Adoption of new and revised standards and interpretations
As disclosed in note 2 to the Group's consolidated financial
statements for the year ended 31 December 2108, IFRS 16 "Leases"
was effective for annual periods beginning on or after 1 January
2019 and have been adopted by the Group accordingly. The Group
applied the modified retrospective transition approach and has not
restated comparative information for the year prior to first
adoption of IFRS 16 as the impact of transition difference is not
considered material. The impact of the adoption of this standard is
disclosed below.
Impact of adoption - IFRS 16 "Leases":
The Group has adopted IFRS 16 using the modified retrospective
method of adoption, with the date of initial application as at 1
January 2019, as permitted by transitional provisions of the
standard, and has not restated comparatives for the annual period
ended on 31 December 2018. The reclassifications and the
adjustments arising from the new leasing rules are therefore
recognised in the opening balance sheet on 1 January 2019.
The right-of-use asset is initially measured at cost and
subsequently measured at cost less accumulated depreciation and
impairment losses, adjusted for any remeasurement of the lease
liability. The right-of-use asset is included within Property,
plant and equipment. The lease liability is initially measured at
the present value of the lease payments that are not paid at that
date. Subsequently, the lease liability is adjusted for interest
and lease payments, as well as the impact of lease modifications,
amongst others.
Furthermore, the classification of cash flows has changed as
operating lease payments under IAS 17 were presented as operating
cash flows; whereas under the IFRS 16 model, lease payments are
split into a principal and finance cost which will be presented as
financing and operating cash flows respectively.
On adoption of IFRS 16, the Group recognised lease liabilities
in relation to leases which had previously been classified as
'operating leases' under the principles of IAS 17 Leases. These
liabilities were measured at the present value of the remaining
lease payments, discounted using the lessee's incremental borrowing
rate as of 1 January 2019. The weighted average lessee's
incremental borrowing rate applied to the lease liabilities on 1
January 2019 was 9.3%.
The table below presents a reconciliation from operating lease
commitments disclosed as at 31 December 2018 to lease liabilities
recognised as at 1 January 2019
1 January
2019
US$' 000
----------
Operating lease commitments disclosed as at 31 December 2018 1,397
Add: Extension and termination options reasonably certain to be exercised 1,188
Less: Discounting using the incremental borrowing rate of at the date of initial application (846)
Lease liabilities recognised as at 1 January 2019 1,739
----------
Movement in the lease liabilities during the six months period
ended 30 June 2019 was as follows:
US$' 000
---------
Lease liabilities as at 1 January 2019 1,739
Additions 4,552
Interest expense 270
Payment of finance lease liabilities, including interest expense (789)
Foreign exchange differences 454
---------
Lease liabilities as at 30 June 2019 6,226
---------
The lease liabilities as at 30 June 2019 is presented in the
condensed consolidated financial statements as follows:
30 June
2019
US$' 000
---------
Current 2,856
Non-current 3,370
---------
Total lease liabilities 6,226
---------
The associated right-of-use assets were measured at the amount
equal to the lease liabilities. The recognised right-of-use assets
relate to the non-mining assets.
The movement in the right-of-use asset during the six-month
period ended 30 June 2019 was as follows:
US$' 000
---------
Right-of-use-assets as at 1 January 2019 1,739
Additions 4,552
Depreciation (1,114)
---------
Right-of-use assets as at 30 June 2019 5,177
---------
In applying IFRS 16 for the first time, the Group has used the
following practical expedients permitted by the standard:
- the use of a single discount rate to a portfolio of leases
with reasonably similar characteristics
- the accounting for operating leases with a remaining lease
term of less than 12 months as at 1 January 2019 as short-term
leases
- the exclusion of initial direct costs for the measurement of
the right-of-use asset at the date of initial application, and
- the use of hindsight in determining the lease term where the
contract contains options to extend or terminate the lease.
The group has also elected not to reassess whether a contract
contains a lease at the date of initial application. Instead, for
contracts entered into before the transition date the group relied
on its assessment made applying IAS 17 and IFRIC 4 Determining
whether an Arrangement contains a Lease.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include the
net present value of the following lease payments:
- fixed payments (including in-substance fixed payments), less any lease incentives receivable
- variable lease payment that are based on an index or a rate
- amounts expected to be payable by the lessee under residual value guarantees
- the exercise price of a purchase option if the lessee is
reasonably certain to exercise that option, and
- payments of penalties for terminating the lease, if the lease
term reflects the lessee exercising that option.
Payments associated with short-term leases, leases of low-value
assets and leases to explore for or use minerals and similar
non-regenerative resources are recognised on a straight-line basis
as an expense in profit or loss.
No other changes have been made to the Group's accounting
policies in the period ended 30 June 2019. Additional disclosures
with respect to the annual period requirements will be included in
the Group's consolidated financial statements for the year ending
31 December 2019.
New standards and interpretations that are applicable to the
Group, issued but not yet effective for the reporting period
beginning 1 January 2019
At the date of approval of these financial statements, the
following Standards and Interpretations which have not been applied
in these condensed consolidated financial statements were in issue
but not yet effective (and in some cases had not yet been adopted
by the EU):
- Amendments to References to the Conceptual Framework in IFRS Standards;
- Amendments to IFRS 3 (Oct 2018): Definition of Business;
- Amendments to IAS 1 and IAS 8 (Oct 2018): Definition of Material;
- Amendments to IFRS 10 and IAS 28 (Sept 2014): Sale or
Contribution of Assets between an Investor and its Associate or
Joint Venture.
Areas of judgement in applying accounting policies and key
sources of estimation uncertainty
When preparing the consolidated financial statements, management
necessarily makes judgements and estimates that can have a
significant impact on the financial statements. Areas of judgement
in applying accounting policies and key sources of estimation
uncertainty are consistent with those set out in the annual
financial statements for the year ended 31 December 2018 with the
addition of the estimation uncertainty in relation to the valuation
of the option to acquire non-controlling 25% interest in the
Group's subsidiary LLC TEMI the Group entered into during the six
months ended 30 June 2019 (notes 16 and 21).
- 3. Foreign currency translation
The following exchange rates to the US dollar have been applied
to translate balances and transactions in foreign currencies:
Average Average
six months six months Average
As at ended As at ended As at year ended
30 June 30 June 30 June 30 June 31 December 31 December
2019 2019 2018 2018 2018 2018
-------------------------- --------- ------------ --------- ------------ ------------- -------------
GB Pounds Sterling (GBP:
US$) 0.79 0.77 0.76 0.73 0.78 0.75
Russian Rouble (RUB:
US$) 63.08 65.20 62.76 59.33 69.47 62.68
-------------------------- --------- ------------ --------- ------------ ------------- -------------
- 4. Segment information
The Group's reportable segments under IFRS 8, which are aligned
with its operating locations, were determined to be Pokrovskiy,
Pioneer, Malomir and Albyn hard rock gold mines which are engaged
in gold and silver production as well as field exploration and mine
development. With closure of Pokrovskiy mine and the transformation
of the site into a key component of the POX Hub, Pokrovskiy ceased
being an operating segment with effect from 1 January 2019.
Corporate and Other segment amalgamates corporate
administration, in-house geological exploration and construction
and engineering expertise, engineering and scientific operations
and other supporting in-house functions as well as various gold
projects and other activities that do not meet the reportable
segment criteria.
Reportable operating segments are based on the internal reports
provided to the Chief Operating Decision Maker ('CODM') to evaluate
segment performance, decide how to allocate resources and make
other operating decisions and reflect the way the Group's
businesses are managed and reported.
The financial performance of the segments is principally
evaluated with reference to operating profit less foreign exchange
impacts.
Six months ended 30 June 2019 Corporate
Pioneer Malomir Albyn and other Consolidated
US$'000 US$'000 US$'000 US$'000 US$'000
-------------------------------------- ---------- ---------- --------- ----------- ---------------
Revenue
Gold (a) (,) (b) 67,868 119,447 102,073 - 289,388
Silver 334 221 96 - 651
Other external revenue - - - 15,289 15,289
Inter segment revenue 23,520 284 2,895 75,615 102,314
Intra group eliminations (23,520) (284) (2,895) (75,615) (102,314)
-------------------------------------- ---------- ---------- --------- ----------- ---------------
Total Group revenue from external
customers 68,202 119,668 102,169 15,289 305,328
-------------------------------------- ---------- ---------- --------- ----------- ---------------
Operating expenses and income
Operating cash costs (60,409) (80,109) (49,446) (15,888) (205,852)
Depreciation (17,014) (17,421) (18,920) (652) (54,007)
Central administration expenses - - - (21,953) (21,953)
(Impairment)/ reversal of impairment
of ore stockpiles (3,136) - 3,959 - 823
Reversal of impairment of gold in
circuit 101 - - - 101
Total operating expenses (c) (80,458) (97,530) (64,407) (38,493) (280,888)
-------------------------------------- ---------- ---------- --------- ----------- ---------------
Share of results of associates (7,905) (7,905)
Segment result (12,256) 22,138 37,762 (31,109) 16,535
-------------------------------------- ---------- ---------- --------- ----------- ---------------
Foreign exchange losses (14,022)
-------------------------------------- ---------- ---------- --------- ----------- ---------------
Operating profit 2,513
Investment income 2,522
Interest expense (25,979)
Other finance gains 48,275
Other finance losses (10,555)
Taxation (3,233)
-------------------------------------- ---------- ---------- --------- ----------- ---------------
Profit for the period 13,543
-------------------------------------- ---------- ---------- --------- ----------- ---------------
Segment assets 476,156 650,924 301,738 197,016 1,625,834
Unallocated cash 1,476
Consolidated total assets 1,627,310
-------------------------------------- ---------- ---------- --------- ----------- ---------------
(a) Including US$(6.0) million net cash settlement paid by the
Group for realised cash flow hedges.
(b) Heap leach operations at Pioneer are seasonal with
production skewed towards the second half of the year.
(c) Operating expenses excluding foreign exchange losses (note 6).
Six months Corporate
ended 30 June Pioneer Pokrovskiy Malomir Albyn and other Consolidated
2018 (restated)
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
---------------- --------------- ---------------------- ---------------- ---------------------- ---------------------- --------------
Revenue
Gold (d) (,)
(e) 101,171 7,255 60,056 90,210 - 258,692
Silver 400 29 40 126 - 595
Other external
revenue - - - - 11,167 11,167
Inter segment
revenue 195 - 552 145 88,212 89,104
Intra group
eliminations (195) - (552) (145) (88,212) (89,104)
---------------- --------------- ---------------------- ---------------- ---------------------- ---------------------- --------------
Total Group
revenue from
external
customers 101,571 7,284 60,096 90,336 11,167 270,454
---------------- --------------- ---------------------- ---------------- ---------------------- ---------------------- --------------
Operating
expenses and
income
Operating cash
costs (66,811) (7,156) (45,426) (62,264) (11,538) (193,195)
Depreciation (17,036) (536) (9,460) (21,000) (211) (48,243)
Central
administration
expenses - - - - (19,842) (19,842)
Impairment of
exploration
and evaluation
assets - - (12,194) - - (12,194)
Impairment of
ore stockpiles - - (309) (14,231) - (14,540)
Reversal of
impairment/
(impairment)
of gold in
circuit 99 (17) (578) (169) - (665)
Impairment of
non-trading
loans - - - - (676) (676)
---------------- --------------- ---------------------- ---------------- ---------------------- ---------------------- --------------
Total operating
expenses
(f) (83,748) (7,709) (67,967) (97,664) (32,267) (289,355)
Share of
results of
associates - - - - (4,863) (4,863)
---------------- --------------- ---------------------- ---------------- ---------------------- ---------------------- --------------
Segment result 17,823 (425) (7,871) (7,328) (25,963) (23,764)
Foreign
exchange gains 63
---------------- --------------- ---------------------- ---------------- ---------------------- ---------------------- --------------
Operating loss (23,701)
Investment
income 718
Interest
expense (11,987)
Other finance
gains 10,267
Other finance
losses (8,401)
Taxation (6,747)
---------------- --------------- ---------------------- ---------------- ---------------------- ---------------------- --------------
Loss for the
period (39,851)
---------------- --------------- ---------------------- ---------------- ---------------------- ---------------------- --------------
Segment assets 354,376 1,272 533,405 352,249 158,385 1,399,687
Unallocated
cash 2,414
Loans granted
to associate 29,437
---------------- --------------- ---------------------- ---------------- ---------------------- ---------------------- --------------
Consolidated
total assets 1,431,538
---------------- --------------- ---------------------- ---------------- ---------------------- ---------------------- --------------
(d) Including US$(6.5) million net cash settlement paid by the
Group for realised cash flow hedges.
(e) Heap leach operations at Pioneer and Pokrovskiy are seasonal
with production skewed towards the second half of the year.
(f) Operating expenses less foreign exchange gains (note 6).
Year ended 31 December Pioneer Pokrovskiy Malomir Albyn Corporate Consolidated
2018 and other
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
-------------------------------- ---------- ----------- --------- ---------- ----------- -------------
Revenue
Gold (g) 171,023 8,173 98,343 189,135 - 466,674
Silver 591 29 61 160 - 841
Flotation concentrate - - 3,202 - - 3,202
Other external revenue - - - - 29,058 29,058
Inter segment revenue 524 - 807 5 170,916 172,252
Intra group eliminations (524) - (807) (5) (170,916) (172,252)
-------------------------------- ---------- ----------- --------- ---------- ----------- -------------
Total Group revenue from
external customers 171,614 8,202 101,606 189,295 29,058 499,775
-------------------------------- ---------- ----------- --------- ---------- ----------- -------------
Operating expenses and
income
Operating cash costs (h) (108,466) (8,667) (63,913) (112,687) (31,286) (325,019)
Depreciation (36,982) (681) (22,701) (41,427) (445) (102,236)
Central administration
expenses - - - - (39,195) (39,195)
Reversal of impairment
of mining assets - - 82,958 - 18,737 101,695
Impairment of exploration
and evaluation assets - - (12,192) - - (12,192)
Impairment of ore stockpiles - - (309) (17,712) - (18,021)
Impairment of gold in
circuit (1,415) (17) (536) (157) - (2,125)
Total operating expenses
(i) (146,863) (9,365) (16,693) (171,983) (52,189) (397,093)
-------------------------------- ---------- ----------- --------- ---------- ----------- -------------
Share of results of associates - - - - 15,480 15,480
Segment result 24,751 (1,163) 84,913 17,312 (7,651) 118,162
-------------------------------- ---------- ----------- --------- ---------- ----------- -------------
Foreign exchange gains 8,450
-------------------------------- ---------- ----------- --------- ---------- ----------- -------------
Operating profit 126,612
Investment income 3,775
Interest expense (29,520)
Other finance gains 13,905
Other finance losses (32,354)
Taxation (56,489)
-------------------------------- ---------- ----------- --------- ---------- ----------- -------------
Profit for the period 25,929
-------------------------------- ---------- ----------- --------- ---------- ----------- -------------
Segment assets 437,203 - 630,918 319,139 188,516 1,575,776
Unallocated cash 8,473
Loans granted to associate 50,966
Consolidated total assets 1,635,215
-------------------------------- ---------- ----------- --------- ---------- ----------- -------------
(g) Net of US$(3.4) million net of cash settlement paid by the
Group for realised cash flow hedges.
(h) Operating cash costs of Malomir include cost of flotation concentrate sold US$2.6 million.
(i) Operating expenses excluding foreign exchange gains (note 6).
5. Revenue
Six months Six months Year ended
ended ended 31 December
30 June 2019 30 June 2018 2018
US$'000
US$'000 US$'000
----------------------------------------- -------------- -------------- --------------
Sales of goods:
Gold 289,388 258,692 466,674
Silver 651 595 841
Flotation concentrate - - 3,202
Other goods 7,941 5,300 14,603
Sales of services:
Engineering and construction contracts 5,565 4,521 11,653
Other services 1,463 994 2,136
Rental income 320 352 666
305,328 270,454 499,775
----------------------------------------- -------------- -------------- --------------
Timing of revenue recognition:
At a point in time 297,980 264,587 485,320
Over time 7,348 5,867 14,455
----------------------------------------- -------------- -------------- --------------
305,328 270,454 499,775
----------------------------------------- -------------- -------------- --------------
- 6. Operating expenses and income
Six months Six months Year ended
ended ended
30 June 2019 30 June 2018 31 December
2018
(restated)
US$'000 US$'000 US$'000
------------------------------------------ -------------- -------------- --------------
Net operating expenses (a) 259,859 241,438 427,255
Reversal of impairment of mining
assets and in-house service (a) - - (101,695)
Impairment of exploration and evaluation
assets - 12,194 12,192
(Reversal of impairment)/impairment
of ore stockpiles (a) (823) 14,540 18,021
(Reversal of impairment)/impairment
of gold in circuit (101) 665 2,125
Central administration expenses
(a) 21,953 19,842 39,195
Foreign exchange losses/(gains) 14,022 (63) (8,450)
Impairment of non-trading loans - 676 -
294,910 289,292 388,643
------------------------------------------ -------------- -------------- --------------
(a) As set out below.
Net operating expenses
Six months Six months Year ended
ended ended
30 June 2019 30 June 2018 31 December
2018
(restated)
US$'000 US$'000 US$'000
Depreciation 54,007 48,243 102,236
Staff costs 45,642 40,605 76,110
Materials 43,517 49,867 95,282
Fuel 22,636 24,317 45,713
External services 33,449 23,077 48,058
Mining tax charge/(credit) 6,695 - (131)
Electricity 17,038 14,460 26,563
Smelting and transportation costs 381 339 607
Movement in ore stockpiles, deferred
stripping, work in progress, bullion
in process, limestone and flotation
concentrate attributable to gold
production 11,039 19,659 (15,853)
Taxes other than income 3,378 3,196 6,418
Insurance 4,210 3,827 7,168
Operating lease rentals 1,247 985 2,034
Provision for impairment of trade
and other receivables (75) 639 1,435
Bank charges 319 167 414
Repair and maintenance 2,848 3,222 6,078
Security services 2,181 1,984 3,966
Travel expenses 1,310 1,130 2,955
Goods for resale 5,907 4,053 11,200
Other operating expenses 4,130 1,668 7,002
259,859 241,438 427,255
--------------------------------------- -------------- -------------- --------------
Central administration expenses
Six months Six months Year ended
ended ended 31 December
30 June 2019 30 June 2018 2018
US$'000 US$'000 US$'000
Staff costs 16,008 12,914 25,366
Professional fees 2,174 2,921 5,531
Insurance 417 265 616
Operating lease rentals 256 1,004 1,723
Business travel expenses 930 768 1,541
Office costs 331 261 589
Other 1,837 1,709 3,829
21,953 19,842 39,195
-------------------------- -------------- -------------- --------------
Impairment charges
Impairment of mining assets
As at 30 June 2019 and 30 June 2018, the Group identified no
impairment indicators or indicators of impairment reversal for the
cash generating units related to its gold mining projects and
supporting in-house service companies.
As at 31 December 2018, the Group identified impairment reversal
indicators for Malomir and Albyn CGUs. Detailed calculations of
recoverable amounts, which are value-in-use calculations based on
discounted cash flows, were prepared. The estimated recoverable
amounts exceeded the carrying values of the associated assets on
the statement of financial position as at 31 December 2018. Taking
into consideration the above and the removed uncertainty connected
with the timing of the final construction and performance of the
POX hub, the Directors concluded on the following:
- A reversal of impairment previously recorded against the
carrying value of the assets that are part of the Malomir CGU would
be appropriate. Accordingly, a post-tax impairment reversal of
US$66.4 million (being US$83.0 million gross impairment reversal
net of associated deferred tax liabilities) has been recorded
against the associated assets within property, plant and equipment.
The aforementioned impairment reversal takes into consideration the
effect of depreciation attributable to relevant mining assets and
intra-group transfers of previously impaired assets to Malomir.
- A further reversal of impairment previously recorded against
the carrying value of the assets of the supporting in-house service
companies would be appropriate to the extent of the headroom
available at Malomir and Albyn CGUs and relevant carrying values
allocated to these CGUs. Accordingly, a post-tax impairment
reversal of US$15.2 million (being US$18.7 million gross impairment
reversal net of associated deferred tax liabilities) has been
recorded against the associated assets within property, plant and
equipment. The aforementioned impairment reversal takes into
consideration the effect of depreciation attributable to relevant
assets and intra-group transfers of previously impaired assets.
The key assumptions which formed the basis of forecasting future
cash flows and the value in use calculation are set out below:
Year ended
31 December
2018
--------------------------- ---------------
Long-term real gold price US$1,300/oz
Discount rate (a) 8.5%
RUB/US$ exchange rate RUB67.0 : US$1
--------------------------- ---------------
(a) Being the post-tax real weighted average cost of capital,
equivalent to a nominal pre-tax discount rate of 12.5%.
Impairment of exploration and evaluation assets
As at 30 June 2019, the Group performed a review of its
exploration and evaluation assets and concluded no impairment was
required (30 June 2018 and 31 December 2018: the Group performed a
review of its exploration and evaluation assets and concluded to
suspend exploration at the Flanks of Malomir and surrender the
relevant licences. An aggregate impairment charge of US$12.2
million was recorded against associated exploration and evaluation
assets during the six months ended 30 June 2018 and year ended 31
December 2018).
As at 30 June 2019, 30 June 2018 and 31 December 2018, all
exploration and evaluation assets in the statement of financial
position related to the areas adjacent to the existing mines (note
10).
Impairment of ore stockpiles
The Group assessed the recoverability of the carrying value of
ore stockpiles and recorded reversals of impairment/ impairment
charges as set out below:
Six months ended 30 Six months ended Year ended 31 December
June 2019 30 June 2018 2018
------------------------------------------ ----------------------------------- -----------------------------------
Pre-tax
Impairment
charge Post-tax
/(reversal impairment Pre-tax Post-tax Pre-tax Post-tax
of charge/(reversal impairment impairment impairment impairment
impairment) Taxation of impairment) charge Taxation charge charge Taxation charge
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
-------- ------------ --------- -----------------
Pioneer 3,136 (627) 2,509 - - - - - -
Malomir - - - 309 (62) 247 309 (62) 247
Albyn (3,959) 673 (3,286) 14,231 (2,419) 11,812 17,712 (3,011) 14,701
(823) 46 (777) 14,540 (2,481) 12,059 18,021 (3,073) 14,948
- 7. Financial income and expenses
Six months Six months Year ended
ended ended
30 June 2019 30 June 31 December
2018 2018
(restated)
US$'000 US$'000 US$'000
Investment income
Interest income 2,522 718 3,775
2,522 718 3,775
Interest expense
Notes (20,810) (20,757) (41,886)
Convertible bonds (6,375) (6,142) (12,579)
Bank loans - (546) (1,083)
Prepayment on gold sale agreements (7,682) (1,812) (7,213)
Finance lease (270) - -
(35,137) (29,257) (62,761)
Interest capitalised 9,431 17,481 33,666
Unwinding of discount on environmental
obligation (273) (211) (425)
(25,979) (11,987) (29,520)
Other finance gains
Financial guarantee contract (a) 30,113 - -
Fair value gain on the call option
over non-controlling interests (b) 9,158 - -
Fair value gain on listed equity investments - - 244
Fair value gain on other derivative
financial instruments (c) - 10,267 13,661
Fair value gain on guarantee receivable
(d) 3,999 - -
Guarantee fee income (e) 1,842 - -
Reversal of impairment of financial
assets (f) 3,163 - -
48,275 10,267 13,905
Other finance losses
Financial guarantee contract (a) - (7,646) (25,471)
Fair value loss on listed equity investments (258) - -
Fair value loss on other derivative
financial instruments (c) (10,297) - -
Fair value loss on guarantee receivable
(d) - (755) (3,720)
Impairment of financial assets (f) - - (3,163)
(10,555) (8,401) (32,354)
-------------
(a) Being net of US$7.3 million provision for ECL under
Gazprombank guarantee arrangements and reversal of US$37.4 million
provision under ICBC guarantee following termination of the ICBC
Facility Agreement (notes 12 and 21).
(b) Result from re-measurement of the option over
non-controlling interest in the Group's subsidiary to fair value on
initial recognition and as at the reporting date (notes 16 and
21).
(c) Result from re-measurement of the conversion option of the
Convertible Bonds to fair value (note 18) and the Call Option over
the Company's shares to fair value (note 16).
(d) Result from re-measurement of receivable from IRC under ICBC
Guarantee arrangements to fair value, including US$0.7 million
guarantee fee income (note 21).
(e) Accrued guarantee fee income under Gazprombank Guarantee
arrangements, net of provision for ECL (note 21).
(f) Reversal/ (recognition) of ECL in relation to loans granted to IRC (note 21).
- 8. Taxation
Six months Six months Year ended
ended ended
30 June 2019 30 June 2018 31 December
2018
(restated)
US$'000 US$'000 US$'000
--------------
Current tax
Russian current tax 12,322 9,889 19,861
12,322 9,889 19,861
Deferred tax
(Reversal)/origination of timing differences
(a) (9,089) (3,142) 36,628
Total tax charge 3,233 6,747 56,489
(a) Including effect of foreign exchange movements in respect of
deductible temporary differences of US$(16.3) million (six months
ended 30 June 2018: US$(11.9) million, year ended 31 December 2018:
US$30.6 million) which primarily arises as the tax base for a
significant portion of the future taxable deductions in relation to
the Group's property, plant and equipment are denominated in
Russian Rouble whilst the future depreciation charges associated
with these assets will be based on their US Dollar carrying value
and reflects the movements in the Russian Rouble to the US Dollar
exchange rate.
Tax laws, regulations and court practice applicable to the Group
are complex and subject to frequent change, varying interpretations
and inconsistent and selective enforcement. There is a number of
practical uncertainties associated with the application of relevant
tax legislation and there is a risk of tax authorities making
arbitrary judgements of business activities. If a particular
treatment, based on management's judgement of the Group's business
activities, was to be challenged by the tax authorities, the Group
may be subject to tax claims and exposures. The Directors do not
anticipate that these exposures will have a material adverse effect
upon the Group's financial position.
- 9. Earnings per share
Six months Six months Year ended
ended ended
30 June 2019 30 June 2018 31 December
2018
(restated)
US$'000 US$'000 US$'000
Profit/(loss) for the period attributable
to equity holders of Petropavlovsk PLC 14,290 (40,252) 24,493
Interest expense on convertible bonds
(a) - - -
Profit/(loss) used to determine diluted
earnings per share 14,290 (40,252) 24,493
No of shares No of shares No of shares
Weighted average number of Ordinary Shares 3,308,154,243 3,303,768,532 3,305,069,755
Adjustments for dilutive potential Ordinary
Shares (a) - - -
Weighted average number of Ordinary Shares
for diluted earnings per share 3,308,154,243 3,303,768,532 3,305,069,755
US$ US$ US$
Basic profit/(loss) per share 0.00 (0.01) 0.01
Diluted profit/(loss) per share 0.00 (0.01) 0.01
(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 six months ended 30 June 2019 and 2018
and the year ended 31 December 2018.
- 10. Exploration and evaluation assets
Flanks Flanks
of Pioneer of Other Total
Albyn
US$'000 US$'000 US$'000 US$'000
At 1 January 2019 6,919 35,047 1,149 43,115
Additions 608 4,040 281 4,929
Transfer to mining assets - - (62) (62)
At 30 June 2019 7,527 39,087 1,368 47,982
- 11. Property, plant and equipment
Capital
construction
Mining Non-mining in progress
assets assets (a) Total
US$'000 US$'000 US$'000 US$'000
Cost
At 1 January 2019 1,974,286 169,521 386,415 2,530,222
Recognition of right-of-use
assets at the transition date
according to IFRS 16 - 1,739 - 1,739
At 1 January 2019 after transition 1,974,286 171,260 386,415 2,531,961
Additions (b) 19,351 8,824 16,451 44,626
Interest capitalised 9,431 9,431
Transfer from intangible assets 62 - - 62
Transfers from capital construction
in progress (c) 242,619 129 (242,748) -
Disposals (d) (7,227) (2,125) - (9,352)
Reallocation and other transfers 16 (16) - -
Foreign exchange differences - 2,233 21 2,254
At 30 June 2019 2,229,107 180,305 169,570 2,578,982
Accumulated depreciation and
impairment
At 1 January 2019 1,300,854 130,785 1,508 1,433,147
Charge for the year (e) 51,056 3,439 - 54,495
Disposals (7,078) (2,074) - (9,152)
Reallocation and other transfers 7 103 (110) -
Foreign exchange differences - 1,725 - 1,725
At 30 June 2019 1,344,839 133,978 1,398 1,480,215
Net book value
At 1 January 2019 673,432 38,736 384,907 1,097,075
At 30 June 2019 884,268 46,327 168,172 1,098,767
(a) Including US$129.5 million costs associated with the POX Hub
project (31 December 2018: US$345.8 million).
(b) Including US$4.6 million additions of right-of-use assets.
(c) Being costs primarily associated with continuous development of Malomir and Pioneer projects.
(d) Including US$4.2 million of fully depreciated mining fleet
that is not suitable for future use due to wear and tear and US$2.5
million disposals of mining fleet due to derecognition of the
replaced part.
(e) Including US$1.1 million depreciation charge of right-of-use assets.
- 12. Investments in associates
31 December
30 June 2019 30 June 2018 2018
US$'000 US$'000 US$'000
--------------
IRC Limited ('IRC') 70,848 65,586 85,140
70,848 65,586 85,140
--------------
Summarised financial information for those associates that are
material to the Group is set out below.
IRC IRC IRC
30 June 2019 30 June 2018 31 December
2018
US$'000 US$'000 US$'000
Non-current assets
Exploration and evaluation assets 7,800 7,390 7,607
Property, plant and equipment 534,189 451,038 533,446
Other non-current assets 10,986 2,791 15,185
552,975 461,219 556,238
Current assets
Cash and cash equivalents 8,286 10,028 7,637
Other current assets 46,198 46,227 34,195
54,484 56,255 41,832
Current liabilities
Borrowings (a), (b) (20,710) (89,925) (111,954)
Other current liabilities (88,615) (40,780) (55,080)
(109,325) (130,705) (167,034)
Non-current liabilities
Borrowings (a), (b) (211,113) (133,605) (100,915)
Other non-current liabilities (24,610) (29,547) (22,501)
(235,723) (163,152) (123,416)
Net assets 262,411 223,617 307,620
(a) 30 June 2019: being US$231.8 million under Gazprombank Facility.
On 18 December 2018, IRC entered into two facility agreements
for a loan in aggregate of US$240 million (the "Gazprombank
Facility"). The Gazprombank Facility will mature in 2026 and
consists of two tranches. The principal under the first tranche
amounts to US$160 million with interest being charged at the London
Inter-bank Offer Rate ("LIBOR") + 5.7% per annum and is repayable
in equal quarterly payments during the term of the Gazprombank
Facility, the final payment in December 2026. The principal under
the second tranche amounts to US$80 million with interest being
charged at LIBOR + 7.7% per annum and is repayable in full at the
end of the term, in December 2026. Interest charged on the drawn
down amounts under the two tranches is payable in equal quarterly
payments during the term of the Gazprombank Facility.
As at 30 June 2019, the entire facility amount of US$240 million
has been fully drawn down. Please refer to the note 2 for the
details on the use of the proceeds and the Group's guarantee of
this facility.
The Gazprombank Facility is secured by (i) IRC's property, plant
and equipment with net book value of US$28 million, (ii) 100%
equity share of Kapucius Services Limited in LLC KS GOK and (iii) a
guarantee from the Company. Please refer to the note 21 for the
details on the guarantee arrangements. The Gazprombank Facility is
also subject to certain financial covenants and requirements.
(b) 31 December 2018 and 30 June 2018: including US$158.8
million and US$193 million under ICBC Facility as at 31 December
2018 and 30 June 2018, respectively, and loans provided by the
Group (note 21) in the equivalent of US$54.0 million and US$29.75
million as at 31 December 2018 and 30 June 2018, respectively. On
19 March 2019, IRC repaid the outstanding loan principal and
interest under ICBC Facility in full and terminated the ICBC
facility Agreement (note 2) (the outstanding loan principal under
ICBC Facility was US$169.6 million and US$204 million as at 31
December 2018 and 30 June 2018, respectively).
IRC IRC IRC
Six months Six months Year ended
ended ended 31 December
30 June 2019 30 June 2018 2018
US$'000 US$'000 US$'000
Revenue 89,244 70,185 151,549
Net operating expenses (91,290) (67,551) (53,876)
including
Depreciation (15,048) (9,132) (21,208)
Reversal of impairment of mining assets - - 90,483
Foreign exchange (losses)/gains (5,681) 1,263 4,554
Impairment of financial assets - (7,548) (7,741)
Investment income 26 43 82
Interest expense (24,108) (10,430) (21,679)
Taxation 708 (336) (130)
(Loss)/profit for the period (25,420) (15,637) 68,205
Other comprehensive (loss)/profit (20,535) 1,479 (1,057)
Total comprehensive (loss)/profit (45,955) (14,158) 67,148
Group's share % 31.1% 31.1% 31.1%
Group's share in (loss)/profit for
the period (7,905) (4,863) 21,210
Impairment of investment in associate - - (5,730)
-------
Share of results of associate (7,905) (4,863) 15,480
-------
Impairment of investment in associate
As at 30 June 2019, the Group identified no impairment
indicators or indicators of impairment reversal in relation to its
investment in IRC (30 June 2018: no impairment indicators and 31
December 2018: detailed calculations of recoverable amounts, which
are value-in-use calculations based on discounted cash flows, were
prepared which concluded a US$5.7 million impairment was required
and recorded accordingly).
- 13. Inventories
30 June 30 June 31 December
2019 2018 2018
US$'000 US$'000 US$'000
--------
Current
Construction materials 5,456 7,313 6,267
Stores and spares 65,787 55,392 69,082
Ore in stockpiles (a), (b) 55,908 69,018 36,395
Gold in circuit 21,158 14,700 16,751
Deferred stripping costs 21,776 28,378 46,988
Bullion in process 528 329 606
Flotation concentrate 24,124 - 25,654
Other 3,174 4,021 4,101
197,911 179,151 205,844
Non-current
Ore in stockpiles (a), (b), (c) 51,938 28,671 56,805
Deferred stripping costs 14,954 - -
66,892 28,671 56,805
--------
(a) As at 30 June 2019, ore in stockpiles include balances in
the aggregate of US$36.4 million carried at net realisable value
(30 June 2018: US$13.7 million, 31 December 2018: US$10.1
million).
(b) For details of ore stockpile impairment see note 6.
(c) Ore in stockpiles that is not planned to be processed within
twelve months after the reporting period.
- 14. Trade and other receivables
30 June
30 June 2018 31 December
2019 (restated) 2018
US$'000 US$'000 US$'000
Current
VAT recoverable 24,033 18,309 20,474
Advances to suppliers 14,546 10,839 5,919
Prepayments for property, plant and
equipment 4,039 13,466 7,233
Trade receivables 8,361 14,929 13,389
Contract assets 1,960 3,112 3,307
Guarantee fee receivable (a) 6,670 8,846 6,829
Other debtors 23,550 17,600 9,590
83,159 87,101 66,741
Non-current
Other 538 478 547
538 478 547
(a) Please refer to notes 2, 12 and 21 for the details of ICBC
and Gazprombank guarantee arrangements.
The Directors consider that the carrying amount of trade and
other receivables approximates their fair value.
- 15. Cash and cash equivalents
30 June 30 June 31 December
2019 2018 2018
US$'000 US$'000 US$'000
Cash at bank and in hand 15,563 6,179 10,682
Short-term bank deposits 23,575 (a) 26,928 15,470
39,138 33,107 26,152
-----------
(a) Including US$1.0 million of restricted bank deposit as at 30
June 2019.
- 16. Derivative financial instruments
30 June 2019 30 June 2018 31 December 2018
Assets Liabilities Assets Liabilities Assets Liabilities
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Current
Forward gold contracts - cash flow
hedge (a), (b), (c) - (18,481) - - - (8,819)
Call option over the Company's shares
(d) - - - - - (1,136)
Conversion option (e), (f) - (11,629) - - - -
- (30,110) - - - (9,955)
Non-current
Forward gold contracts - cash flow
hedge (a), (b), (c) - - - (7,556) - -
Call option over the Company's shares
(d) - - - (2,900) - -
Conversion option (e), (f) - - - (4,040) - (2,411)
Call option over non-controlling
interests (g) 16,158 - - - - -
16,158 - - (14,496) - (2,411)
(a) Forward contracts to sell an aggregate of 130,000 ounces of
gold at an average price of US$1,281 per ounce are outstanding as
at 30 June 2019 (30 June 2018: 300,000 ounces at an average price
of US$1,252 per ounce, 31 December 2018: 200,000 ounces of gold at
an average price of US$1,252 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 period to December 2019.
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 six months ended 30 June 2019 and 2018 and the
year ended 31 December 2018.
(d) Cash settled call option issued in relation to 3.6 per cent.
of the outstanding aggregate ordinary share capital in the Company
exercisable between December 2018 and June 2019 at strike price of
GBP0.068 and exercised during the six months ended 30 June 2019
resulting in the net cash settlement paid by the Group of an
aggregate of US$2.2 million. Measured at fair value and considered
as Level 3 of the fair value hierarchy which valuation incorporates
the following inputs:
- historic share price volatility;
- the strike price;
- the current share price;
- time to maturity; and
- risk free rate.
(e) Note 18.
(f) Measured at fair value and considered as Level 3 of the fair
value hierarchy which valuation incorporates the following
inputs:
- the Group's credit risk;
- historic share price volatility;
- the conversion price;
- time to maturity; and
- risk free rate.
(g) Call option to acquire non-controlling 25% interest in the
Group's subsidiary LLC TEMI (note 21). Measured at fair value less
outstanding option premium and considered as Level 3 of the fair
value hierarchy which valuation incorporates the following
inputs:
- the current valuation of the underlying investment;
- historic volatility attributed to the valuation of the underlying investment;
- the exercise price;
- time to maturity; and
- risk free rate.
- 17. Trade and other payables
30 June 30 June 31 December
2019 2018 2018
US$'000 US$'000 US$'000
Current
Trade payables 50,666 24,098 50,099
Payables for property, plant and equipment 4,789 4,554 5,242
Advances from customers (a) 114,404 104,295 131,752
Advances received on resale contracts
(b) 11,287 776 5,432
Accruals and other payables 35,554 28,720 27,320
216,700 162,443 219,845
Non-current
Advances from customers (c) 43,761 - 33,779
43,761 - 33,779
(a) The current advances from customers as at 30 June 2019
include US$106.5 million (31 December 2018: US$86.0 million, 30
June 2018: US$69.1 million) and US$6.4 million (31 December 2018:
US$44.0 million, 30 June 2018: US$33.4 million) advance payments
received from Gazprombank and Sberbank, respectively, under gold
sales agreements. Advance payments are to be settled against
physical delivery of gold produced by the Group in regular
intervals over the period of up to twelve months from the reporting
date based on the sales price prevailing at delivery that is
determined with reference to LBMA fixing. For details of interest
charged in relation to the aforementioned advances please refer to
note 7.
(b) Amounts included in advances received on resale and
commission contracts at 30 June 2019, 30 June 2018 and 31 December
2018 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.
(c) The non-current advances from customers as at 30 June 2019
include US$43.8 million (31 December 2018: US$33.8 million) advance
payments received from Gazprombank under gold sales agreements.
Advance payments are to be settled against physical delivery of
gold produced by the Group in regular intervals over the period
after twelve months from the reporting date based on the sales
price prevailing at delivery that is determined with reference to
LBMA fixing. For details of interest charged in relation to the
aforementioned advances please refer to note 7.
The Directors consider that the carrying amount of trade and
other payables approximates their fair value.
- 18. Borrowings
30 June 30 June 31 December
2019 2018 2018
US$'000 US$'000 US$'000
Borrowings at amortised cost
Notes (a) 499,504 498,191 499,007
Convertible Bonds (b) 97,045 93,232 95,170
Bank loans - 7,378 -
596,549 598,801 594,177
Amount due for settlement within 12 months 97,045 7,378 -
Amount due for settlement after 12 months 499,504 591,423 594,177
596,549 598,801 594,177
(a) US$500 million Guaranteed Notes due for repayment on 14
November 2022 (the "Notes"), measured at amortised cost. The Notes
were issued by the Group's wholly owned subsidiary Petropavlovsk
2016 Limited and are guaranteed by the Company and its subsidiaries
JSC Pokrovskiy Rudnik, LLC Albynskiy Rudnik and LLC Malomirskiy
Rudnik. The Notes have been admitted to the official list of the
Irish Stock Exchange and to trading on the Global Exchange Market
of the Irish Stock Exchange on 14 November 2017. The Notes carry a
coupon of 8.125% payable semi-annually in arrears. The interest
charged was calculated by applying an effective interest rate of
8.35%.
(b) Debt 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
instruments.
As at 30 June 2019, the fair value of debt component of the
convertible bonds, considered as Level 3 of the fair value
hierarchy, amounted to US$98.5 million (30 June 2018: US$99.5
million, 31 December 2018: US$86.8 million). Valuation incorporates
the following inputs: the Group's credit risk, time to maturity and
risk free rate.
As at 30 June 2019, 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$110.1 million (30 June 2018: US$103.5
million, 31 December 2018: US$89.2 million).
The US$100 million Convertible Bonds were refinanced in July
2019 (note 24).
- 19. Share capital
30 June 2019 30 June 2018 31 December 2018
No of shares US$'000 No of shares US$'000 No of shares US$'000
Allotted, called up
and fully paid
At the beginning of
the period 3,307,151,712 48,963 3,303,768,532 48,920 3,303,768,532 48,920
Issued during the period 3,058,569 40 - - 3,383,180 43
At the end of the period 3,310,210,281 49,003 3,303,768,532 48,920 3,307,151,712 48,963
The Company has one class of ordinary shares which carry no
right to fixed income.
- 20. Notes to the cash flow statement
Reconciliation of profit before tax to operating cash flow
Six months
ended 30
June 2018
Six months Year ended
ended 30 31 December
June 2019 (restated) 2018
US$'000 US$'000 US$'000
Profit/(loss) before tax 16,776 (33,104) 82,418
Adjustments for:
Share of results of associates 7,905 4,863 (15,480)
Investment income (2,522) (718) (3,775)
Interest expense 25,979 11,987 29,520
Other finance gains (48,275) (10,267) (13,905)
Other finance losses 10,555 8,401 32,354
Share based payments 130 243 416
Depreciation 54,007 48,243 102,236
Impairment of exploration and evaluation
assets - 12,194 12,192
(Reversal of impairment)/impairment of
ore stockpiles (823) 14,540 18,021
(Reversal of impairment)/impairment of
gold in circuit (101) 665 2,124
Effect of processing previously impaired
stockpiles (5,733) (1,233) (10,496)
Effect of processing previously impaired
gold in circuit (1,413) (2,667) (3,384)
(Reversal of)/provision for impairment
of trade and other receivables (75) 639 1,435
Loss/(gain) on disposals of property,
plant and equipment 116 (858) (862)
Foreign exchange losses/(gains) 14,022 (63) (8,450)
Impairment of non-trading loans - 676 -
Reversal of impairment of mining assets - - (101,695)
Other non-cash items 73 (210) (106)
Changes in working capital:
Increase in trade and other receivables (13,990) (4,911) (18,510)
Decrease/(increase) in inventories 9,523 21,064 (26,054)
(Decrease)/increase in trade and other
payables (15,847) 85,170 204,827
Net cash generated from operations 50,307 154,654 282,826
Reconciliation of cash flows used to purchase property, plant
and equipment
Six months Six months Year ended
ended 30 ended 30 31 December
June 2019 June 2018 2018
US$'000 US$'000 US$'000
Additions to property, plant and equipment 44,626 59,219 127,253
Non-cash additions to property, plant
and equipment:
Transfer from materials 3,014 (787) (747)
Capitalised depreciation (399) (142) (293)
Finance lease additions (4,552) (2,574) (55)
42,689 55,716 126,158
Associated cash flows:
Purchase of property, plant and equipment 40,082 66,474 131,213
Increase in prepayments for property,
plant and equipment 3,194 (7,657) (1,419)
(Decrease)/increase in payables for property,
plant and equipment (452) (5,835) (5,147)
Cash movements presented in other cash
flow lines:
Changes in working capital (135) 2,734 1,511
42,689 55,716 126,158
Non-cash transactions
There were no significant non-cash transactions during the six
months ended 30 June 2019 and 30 June 2018.
An equivalent of US$8.0 million of VAT recoverable was offset
against profit tax during the year ended 31 December 2018.
- 21. Related parties
Related parties the Group entered into transactions with during
the reporting period
The Petropavlovsk Foundation for Social Investment (the
'Petropavlovsk Foundation') is considered to be a related party due
to the participation of the key management of the Group in the
governing board of the Petropavlovsk Foundation and their presence
in its board of guardians.
IRC Limited and its subsidiaries are associates to the Group and
hence are related parties since 7 August 2015.
Transactions with related parties the Group entered into during
the six months ended 30 June 2019 and 30 June 2018 and the year
ended 31 December 2018 are set out below.
Trading Transactions
Related party transactions the Group entered into that relate to
the day-to-day operation of the business are set out below.
Sales to related parties Purchases from related
parties
Six Six months
Six months months Year Six months ended
ended ended ended ended 30 June Year ended
30 June 30 June 31 December 30 June 2018 31 December
2019 2018 2018 2019 US$'000 2018
US$'000 US$'000 US$'000 US$'000 US$'000
Entities in which key management
have interest and exercises
a significant influence or
control - - - 3,287 530 764
IRC Limited and its subsidiaries 23 41 164 219 448 681
23 41 164 3,506 978 1,445
In March 2018, the Group entered into a transaction with the
member of key management personnel to purchase the office building
and land, which were subject to an operating lease arrangement. The
aggregate consideration paid was an equivalent of c.US$3.2 million.
The transaction was completed in February 2019.
During the six months ended 30 June 2019, the Group made US$0.1
million charitable donations to the Petropavlovsk Foundation (six
months ended 30 June 2018: US$0.01 million and year ended 31
December 2018: US$0.4 million).
The outstanding balances with related parties at 30 June 2019,
30 June 2018 and 31 December 2018 are set out below.
Amounts owed by related Amounts owed to related
parties parties
30 June 30 June 31 December 30 June 30 June 31 December
2019 2018 2018 2019 2018 2018
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Entities in which key management
have interest and exercises
a significant influence or
control - 797 1,556 - - -
IRC Limited and its subsidiaries 2,101 2,075 2,078 1,117 919 976
2,101 2,872 3,634 1,117 919 976
Financing transactions
Guarantee over IRC's external borrowings
The Group historically entered into an arrangement to provide a
guarantee over its associate's, IRC, external borrowings, the ICBC
Facility ('ICBC Guarantee'). At 31 December 2018 the principal
amounts outstanding subject to the ICBC guarantee were US$169.6
million. Under the terms of the arrangement the Group was entitled
to receive an annual fee equal to 1.75% of the outstanding amount,
which amounted to US$0.7 million during the six months ended 30
June 2019 (six months ended 30 June 2018: US$2.1 million; year
ended 31 December 2018: US$4.0 million).
In March 2019, IRC has refinanced the ICBC Facility through
entering into a US$240 million new facility with Gazprombank
('Gazprombank Facility'). The facility was fully drawn down during
the six months ended 30 June 2019 and was used, inter alia, to
repay the amounts outstanding under the ICBC Facility in full, the
two loans provided by the Group in the equivalent of approximately
US$57 million and part of the guarantee fee of US$6 million owed by
IRC to the Group in respect of the guarantee of the ICBC Facility.
The remaining outstanding contractual guarantee fee of
approximately US$5.7 million (which corresponding fair value after
provision for credit losses equals US$4.8 million) is payable by
IRC no later than 31 March 2020 (30 June 2018: outstanding
contractual guarantee fee of US$8.4 million with corresponding fair
value after provision for credit losses of US$8.8 million, 31
December 2018: outstanding contractual guarantee fee of US$10.3
million with corresponding fair value after provision for credit
losses of US$6.8 million).
A new guarantee was issued by the Group over part of the
Gazprombank Facility ('Gazprombank Guarantee'), the guarantee
mechanism is implemented through a series of five guarantees that
fluctuate in value through the eight-year life of the loan, with
the possibility of the initial US$160 million principal amounts
guaranteed reducing to US$40 million within two to three years,
subject to certain conditions being met. For the final two years of
the Gazprombank Facility, the guaranteed amounts will increase to
US$120 million to cover the final principal and interest
repayments. If certain springing recourse events transpire,
including default on a scheduled payment, then full outstanding
loan balance is accelerated and subject to the guarantee. Under the
Gazprombank Guarantee arrangements, the guarantee fee receivable is
determined at each reporting date on an independently determined
fair value basis, which for the six months ended 30 June 2019 was
estimated at the annual rate of 3.07% for 2019 by reference to the
average outstanding principal balance under Gazprombank Facility.
The accrued guarantee fee was $2.0 million, with corresponding
value of $1.8 million after provision for expected credit
losses
The following assets and liabilities have been recognised in
relation to the ICBC Guarantee and Gazprombank Guarantee as at 30
June 2019, 30 June 2018 and 31 December 2018:
30 June 30 June 31 December
2019 2018 2018
US$'000 US$'000 US$'000
--------
Other receivables - ICBC Guarantee
(a) 4,828 8,846 6,829
Other receivables - Gazpombank Guarantee
(b) 1,842 - -
Financial guarantee contract - ICBC
Guarantee (c) - 18,618 37,387
Financial guarantee contract - Gazpombank
Guarantee (c) 7,274 - -
(a) The fair value of the receivable, comprising both billed and
future fee receivable, less provision for credit losses.
(b) Amounts of guarantee fee for the period that are expected to
be received from IRC and calculated by applying annual rate of
3.07% for 2019 by reference to the average outstanding principal
balance under Gazprombank Facility for the period from 19 March
2019 until 30 June 2019, less provision for ECL.
(c) Measured in accordance with ECL model.
The results from relevant re-measurements of the aforementioned
assets and liabilities were recognised within Other finance gains
and losses (note 7).
Loans issued to IRC
In June 2018, the Group provided a Rouble denominated unsecured
loan to IRC in the amount of RUB1,878 million (an equivalent of
US$29.75 million). The loan carried interest of 12% per annum. The
loan was recognised net of lifetime ECL of US$0.5 million at
inception and further US$0.8 million impairment based on ECL model
was recognised during the year ended 31 December 2018. The loan was
fully repaid in March 2019 with consequent reversal of US$1.3
million previously recognised ECL (note 7).
In December 2018, the Group provided a dollar denominated
unsecured loan to IRC in the amount of US$27.0 million. The loan
carried interest of 16% per annum. The loan was recognised net of
lifetime ECL of US$1.9 million at inception. The loan was fully
repaid in March 2019 with consequent reversal of US$1.9 million
previously recognised ECL (note 7).
Other financing transactions
In March 2018, the Group entered into a loan agreement with Dr
Pavel Maslovskiy. At 30 June 2019, the loan principal outstanding
amounted to an equivalent of US$0.2 million. Interest charged
during the six months ended 30 June 2019 comprised an equivalent of
US$0.01 million.
In April 2019, the Group entered into a loan agreement with Dr
Alya Samokhvalova. At 30 June 2019, the loan principal outstanding
amounted to an equivalent of US$0.4 million. Interest charged
during the six months ended 30 June 2019 comprised an equivalent of
US$0.01 million.
Investing transactions
In May 2019, the Group entered into the option contract to
acquire non-controlling 25% interest in LLC TEMI from its
shareholder Agestina Limited for an aggregate consideration of
US$60 million (adjusted to US$53 million if certain conditions are
met). This represents a related party transaction as it is over the
equity of a subsidiary company. The option premium payable is US$13
million, out of which US$7.0 million was paid during the six months
ended 30 June 2019. The outstanding option premium is not committed
and can be settled in either cash or the Company's shares. The
exercise period of the option is 730 days from 22 May 2019.
The Group employed an independent third party expert to
undertake the valuations of the underlying 25% interest in LLC Temi
and the call option. The fair value of the call option, net of
unpaid premium, was US$9.6 million on initial recognition,
resulting in a corresponding gain recognised within Other finance
gains (note 7) in the statement of profit or loss. This gain on
initial recognition is primarily due to improvement in the gold
price outlook between the pricing and completion of the transaction
together with the judgements taken with regards to certain inputs
into the relevant valuation models, in particular, historic
volatility used as a proxy of the expected volatility of the
underlying assets and being historic volatility of the comparable
listed companies used for the valuations under IFRS 13 as opposed
to historic gold market volatility used for the valuation of the
contractual option premium. As at 30 June 2019, the fair value of
the derivative financial asset has increased to US$16.2 million
reflecting a loss on re-measurement to fair value of US$0.4 million
and the initial US$7.0 million cash payment.
There are no other related party relationships with Agestina
Limited present.
Key management compensation
Key management personnel, comprising a group of 12 individuals
during the period (six months ended 30 June 2018: 14 and year ended
31 December 2018: 16), including Executive and Non-Executive
Directors of the Company and members of senior management, are
those having authority and responsibility for planning, directing
and controlling the activities of the Group.
Six months Six months Year ended
ended ended 31 December
30 June 2019 30 June 2018 2018
US$'000 US$'000 US$'000
Wages and salaries 2,048 2,981 7,761
Pension costs 32 70 136
Share-based compensation 90 234 404
2,170 3,285 8,301
- 22. Analysis of Net Debt..
At 1 January Net cash Exchange Non-cash At 30 June
2019 movement movement changes 2019
US$'000 US$'000 US$'000 US$'000 US$'000
Cash and cash equivalents 26,152 10,656 2,330 - 39,138
24,813
Borrowings (594,177) (a) - (27,185) (596,549)
(27,185)
Net Debt(u) (568,025) 35,469 2,330 (b) (557,411)
(a) Being interest paid on borrowings.
(b) Being amortisation of borrowings (note 18).
At 1 January Net cash Exchange Non-cash At 30 June
2018 movement movement changes 2018
US$'000 US$'000 US$'000 US$'000 US$'000
Cash and cash equivalents 11,415 23,655 (1,963) - 33,107
25,114
Borrowings (596,474) (c) - (27,441) (598,801)
(27,441)
Net Debt(u) (585,059) 48,769 (1,963) (d) (565,694)
(c) Being interest paid on borrowings.
(d) Being amortisation of borrowings (note 18).
At 1 January Net cash Exchange Non-cash At 31 December
2018 movement movement changes 2018
US$'000 US$'000 US$'000 US$'000 US$'000
--------------- ---------- ---------- ---------
Cash and cash equivalents 11,415 17,719 (2,982) - 26,152
Borrowings (596,474) 57,845 (e) - (55,548) (594,177)
(55,548)
Net Debt(u) (585,059) 75,564 (2,982) (f) (568,025)
(e) Being US$53.8 interest paid on borrowings and US$4.0 million repayment of bank loan.
(f) Being amortisation of borrowings (note 18).
- 23. Capital commitments
At 30 June 2019, the Group had entered into contractual
commitments in relation to the acquisition of property, plant and
equipment amounting to US$6.6 million (30 June 2018: US$17.1
million, 31 December 2018: US$9.5 million) including US$5.1 million
in relation to POX Hub project (30 June 2018: US$12.5 million, 31
December 2018: US$6.8 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 RUB5.5 billion (an equivalent to c.US$87 million as at
30 June 2019) 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 from 2015 to 2019. The funds are passed
through the Group to the joint-stock company Far East Grid
Distribution Company ('DRSK'), which is required 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 is 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.
During the six months ended 30 June 2019 and the year ended 31
December 2018 the Group did not receive and made no transfers of
funds under the Investment Agreement.
- 24. Subsequent events
Placement of US$125 million new convertible bonds and concurrent
repurchase of outstanding U.S.$100 million Convertible Bonds
In July 2019, the Group has issued US$125 million convertible
bonds due 2024. The bonds were issued by the Group's wholly owned
subsidiary Petropavlovsk 2010 Limited (the "Issuer") and are
guaranteed by the Company. The bonds carry a coupon of 8.25% per
annum, payable quarterly in arrears. The bonds are, subject to
certain conditions, convertible into fully paid ordinary shares of
the Company with an initial exchange price of US$0.1350, subject to
customary adjustment provisions.
Concurrently with the issue of the US$125 million convertible
bonds, the Group also concluded the invitation to repurchase (the
"Repurchase") any and all of the outstanding US$100 million 9.00%
convertible bonds due 2020 (the "Existing Bonds"). Holders whose
Existing Bonds have been accepted for purchase by the Issuer
pursuant to the Repurchase were eligible to receive US$1,080 per
US$1,000 in principal amount of the Existing Bonds (the "Repurchase
Price"). The Issuer also paid, in respect of Existing Bonds
accepted for purchase pursuant to the Repurchase, a cash amount
representing the accrued but unpaid interest ("Accrued Interest")
on each US$1,000 in aggregate principal amount of Existing Bonds
accepted for repurchase from and including 18 June 2019, being the
immediately preceding interest payment date applicable to the
Existing Bonds, to but excluding the settlement date for the
Repurchase (the "Repurchase Settlement Date"). The Accrued
Interest, based on an Repurchase Settlement Date of 3 July 2019
comprised US$3.75 per US$1,000 in aggregate principal amount of
Existing Bonds.
The remaining Existing Bonds were redeemed at the Repurchase
Price on 9 July 2019. The Issuer also paid a cash amount
representing the Accrued Interest on each US$1,000 in aggregate
principal amount of Existing Bonds from and including 18 June 2019
to redemption.
The Existing Bonds were subsequently cancelled by the
Issuer.
- 25. Reconciliation of non-GAAP measures
Six months Six months Year ended
ended ended
30 June 2019 30 June 2018 31 December
2018
US$'000 (restated) US$'000
US$'000
-------------- -------------
Profit/(loss) for the period 13,543 (39,851) 25,929
Add/(less):
Investment income (2,522) (718) (3,775)
Interest expense 25,979 11,987 29,520
Other finance gains (48,275) (10,267) (13,905)
Other finance losses 10,555 8,401 32,354
Foreign exchange losses/(gains) 14,022 (63) (8,450)
Taxation 3,233 6,747 56,489
Depreciation 54,007 48,243 102,236
Reversal of impairment of mining assets
and in-house service - - (101,695)
Impairment of exploration and evaluation
assets - 12,194 12,192
(Reversal of impairment)/impairment
of ore stockpiles (823) 14,540 18,021
(Reversal of impairment)/impairment
of gold in circuit (101) 665 2,125
Impairment of non-trading loans - 676 -
Share in results of associates (a) 13,715 8,129 (8,065)
Underlying EBITDA.. 83,333 60,683 142,976
-------------- -------------
(a) Group's share of interest expense, investment income, other
finance gains and losses, foreign exchange gains or losses,
taxation, depreciation and impairment/(reversal of impairment)
recognised by an associate (note 12).
The Use and Application of Alternative Performance Measures
(APMs)
Throughout this Half Year Report, when discussing the Group's
financial performance, reference is made to APMs.
Each of the APMs is defined and calculated by the Group and as
such they are non-IFRS measures because they may include or exclude
certain items that an IFRS measure ordinarily would or would not
take into account. APMs should not be regarded as an alternative or
substitute for the equivalent measures calculated and presented in
accordance with IFRS but instead should be seen as additional
information provided to investors to enable the comparison of
information between different reporting periods of the Group.
Although the APMs used by the Group may be calculated in a
different manner and defined differently by other peers in the
precious metals mining sector (despite being similar in title),
they are nonetheless relevant and commonly used measures for the
industry in which Petropavlovsk operates. These and similar
measures are used widely by certain investors, analysts and other
interested parties as supplemental measures of financial
performance.
Some of the APMs form part of the Group's Key Performance
Indicators (KPIs), which are used to monitor progress and
performance against strategic objectives and to benchmark the
performance of the business each year.
A discussion of the relevance of each APM as well as a
description of how they are calculated is set out below, with
reconciliation to IFRS equivalents from the consolidated IFRS
financial statements (Consolidated Statement of Profit or Loss
(SPL), Consolidated Statement of Financial Position (SFP),
Consolidated Statement of Cash Flows (SCF) and the notes to the
consolidated IFRS financial statements).
Total Cash Costs (TCC)
Definition
The total cash cost per ounce is the cost of producing and
selling an ounce of gold from the Group's four hard-rock
operations.
Calculation
TCC are calculated by the Group as operating cash costs less
co-product revenue and cost of flotation concentrate sold. TCC per
oz are calculated as total cash costs divided by the ounces of gold
sold. TCC per oz are presented on a segment basis.
Operating cash costs are defined by the Group as operating cash
expenses plus refinery and transportation costs, other taxes,
mining tax and the amortisation of deferred stripping costs. This
also equates to the Group's segment result as reported under IFRS
plus each segment's share of results of associates, loss/gain on
disposal of subsidiaries, impairment of ore stockpiles and gold in
circuit, impairment of exploration and evaluation assets,
impairment of mining assets, impairment of non-trading loans,
central administration expenses, depreciation and accrual for
additional mining tax minus each segment's revenue from external
customers. Operating cash costs are presented on a segment
basis.
Operating cash expenses are defined by the Group as the total of
staff costs, materials, fuel, electricity, other external services,
other operating expenses, and the movement in ore stockpiles, work
in progress and bullion in process attributable to gold production
(excluding deferred stripping costs). The main cost drivers
affecting operating cash expenses are stripping ratios, production
volumes of ore mined / processed, recovery rates, cost inflation
and fluctuations in the rouble to US dollar exchange rate.
Other companies may calculate this measure differently.
Relevance
The Group closely monitors its current and projected costs to
track and benchmark the ongoing efficiency and effectiveness of its
operations. This monitoring includes analysing fluctuations in the
components that operating cash costs and cost per tonne mined and
processed to identify where and how efficiencies may be made.
Reconciliation
The tables below provide a reconciliation between operating
expenses and total cash costs to calculate the cash cost per ounce
sold for relevant periods.
H1 2019 Ref Corporate
Pioneer Malomir Albyn and other Total
US$'000 US$'000 US$'000 US$' 000 US$'000
---------- -------- ----------- --------
Operating expenses SPL 294,910
Deduct:
Foreign exchange note
losses 6 (14,022)
note
Depreciation 6 (54,007)
Reversal of impairment note
of ore stockpiles 6 823
Reversal of impairment note
of gold in circuit 6 101
Central administration note
expenses 6 (21,953)
note
Operating cash costs 4 60,409 80,109 49,446 15,888 205,852
Deduct:
Corporate and other note
segment 4 (15,888) (15,888)
note
Deduct: silver revenue 4 (334) (221) (96) - (651)
Total cash costs 60,075 79,888 49,350 - 189,313
Total ounces sold oz 52,805 92,938 79,288 225,031
Total cash cost per
ounce sold US$/oz 1,138 860 622 841
H1 2018 Ref Corporate
Pioneer Pokrovskiy Malomir Albyn and other Total
US$'000 US$'000 US$'000 US$'000 US$' 000 US$'000
---------- ------------- ---------- -------- ----------- -----------
Operating expenses SPL 289,292
Deduct:
Foreign exchange note
gains 6 63
note
Depreciation 6 (48,243)
Impairment of exploration note
and evaluation assets 6 (12,194)
Impairment of ore note
stockpiles 6 (14,540)
Impairment of gold note
in circuit 6 (665)
Impairment of non-trading note
loans 6 (676)
Central administration note
expenses 6 (19,842)
---------- ------------- ---------- -------- ----------- -----------
note
Operating cash costs 4 66,811 7,156 45,426 62,264 11,538 193,195
Deduct:
Corporate and other note
segment 4 (11,538) (11,538)
note
Deduct: silver revenue 4 (400) (29) (40) (126) - (595)
---------- ------------- ---------- -------- ----------- -----------
Total cash costs 66,411 7,127 45,386 62,138 - 181,062
---------- ------------- ---------- -------- ----------- -----------
Total ounces sold oz 78,733 5,646 46,726 70,275 201,381
---------- ------------- ---------- -------- ----------- -----------
Total cash cost per
ounce sold US$/oz 843 1,262 971 884 899
---------- ------------- ---------- -------- ----------- -----------
FY2018 Ref Corporate
Pioneer Pokrovskiy Malomir Albyn and other Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
---------- ------------- ---------- -------- ----------- -----------
Operating expenses SPL 388,643
Deduct:
Foreign exchange note
gains 6 8,450
note
Depreciation 6 (102,236)
Reversal of impairment note
of mining assets 6 101,695
Impairment of exploration note
and evaluation assets 6 (12,192)
Impairment of ore note
stockpiles 6 (18,021)
Impairment of gold note
in circuit 6 (2,125)
Central administration note
expenses 6 (39,195)
---------- ------------- ---------- -------- ----------- -----------
note
Operating cash costs 4 108,466 8,667 63,913 112,687 31,286 325,019
Deduct:
Corporate and other note
segment 4 (31,286) (31,286)
note
Deduct: silver revenue 4 (591) (29) (61) (160) - (841)
Deduct: cost of flotation note
concentrate 4 - - (2,558) - - (2,558)
Total ash osts 107,875 8,638 61,294 112,527 - 290,334
---------- ------------- ---------- -------- ----------- -----------
Total ounces sold oz 135,001 6,442 77,448 150,720 369,611
---------- ------------- ---------- -------- ----------- -----------
Total ash ost per
ounce sold US$/oz 799 1,341 791 747 786
---------- ------------- ---------- -------- ----------- -----------
All in Sustaining Costs (AISC)
Definition
AISC includes both operating and capital costs required to
sustain gold production on an ongoing basis, over and above the
direct mining and selling costs shown by TCC.
Calculation
AISC are calculated by the Group as TCC plus/(minus)
impairment/(reversal of impairment) of ore stockpiles and gold in
circuit, central administration expenses, plus capitalised
stripping at end of the period, minus capitalised stripping at
beginning of the period, plus close-down and site restoration and
sustaining capital and exploration expenditure. This is then
divided by the ounces of gold sold. AISC are presented on a segment
basis.
AISC are calculated in accordance with guidelines for reporting
AISC as published by the World Gold Council in June 2013. Other
companies may calculate this measure differently.
Relevance
AISC allows for a better understanding of the true cost of
producing gold once key components such as central admin costs and
the cost of sustaining capital and exploration expenditure are
taken into account. Management uses this measure to monitor the
performance of our assets and their ability to generate positive
cash flows.
Reconciliation
The tables below provide a reconciliation between total cash
costs and all-in sustaining costs to calculate all-in sustaining
cost per ounce sold for relevant periods.
H1 2019 Ref Corporate
Pioneer Malomir Albyn and other Total
US$'000 US$'000 US$'000 US$' 000 US$'000
-------------- ---------- -------- ----------- --------
Total cash costs 60,075 79,888 49,350 - 189,313
Add:
Impairment/ (reversal
of impairment) of note
ore stockpiles 6 3,136 - (3,959) - (823)
Reversal of impairment note
of gold in circuit 6 (101) - - - (101)
Central administration note
expenses 6 5,151 9,067 7,735 - 21,953
note
Net capitalised stripping 13 (2,077) (2,997) (5,184) - (10,258)
Site restoration
costs 105 114 306 - 525
Sustaining exploration
expenditures 2,126 1,204 69 - 3,399
Sustaining capital
expenditures 11,130 6,900 9,619 - 27,649
All-in sustaining
costs 79,545 94,176 57,936 - 231,657
Total ounces sold oz 52,805 92,938 79,288 - 225,031
All-in sustaining
costs per ounce sold US$/oz 1,506 1,013 731 - 1,029
H1 2018 Ref Corporate
Pioneer Pokrovskiy Malomir Albyn and other Total
US$'000 US$'000 US$'000 US$'000 US$' 000 US$'000
---------- ------------- ---------- -------- ----------- ---------
Total cash costs 66,411 7,127 45,386 62,138 - 181,062
Add:
Impairment of ore note
stockpiles 6 - - 274 14,231 - 14,505
(Reversal of impairment)/
impairment of gold note
in circuit 6 (99) 17 578 169 - 665
Central administration note
expenses 6 7,758 556 4,604 6,924 - 19,842
note
Net capitalised stripping 13 1,918 - (1,958) (11,349) - (11,389)
Site restoration
costs 37 48 279 256 - 620
Sustaining exploration
expenditures 5,307 216 4,326 2,414 - 12,263
Sustaining capital
expenditures 6,527 31 1,936 3,191 - 11,685
All-in sustaining
costs 87,859 7,995 55,425 77,974 - 229,253
---------- ------------- ---------- -------- ----------- ---------
Total ounces sold oz 78,733 5,646 46,726 70,275 - 201,381
---------- ------------- ---------- -------- ----------- ---------
All-in sustaining
costs per ounce sold US$/oz 1,116 1,416 1,186 1,110 - 1,138
---------- ------------- ---------- -------- ----------- ---------
FY2018 Ref Corporate
Pioneer Pokrovskiy Malomir Albyn and other Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
---------- ------------- ---------- -------- ----------- --------
Total cash costs 107,875 8,638 61,294 112,527 - 290,334
Add:
Impairment of ore note
stockpiles 6 - - 309 17,712 - 18,021
Impairment of gold note
in circuit 6 1,415 17 536 157 - 2,125
Central administration note
expenses 6 14,316 683 8,214 15,982 - 39,195
note
Net capitalised stripping 13 21,970 - 895 (15,644) - 7,221
Site restoration
costs 172 - 559 511 - 1,242
Sustaining exploration
expenditures 8,902 - 5,502 4,079 - 18,483
Sustaining Capital
Expenditures 20,003 - 4,612 11,471 - 36,085
All-in Sustaining
Costs 174,653 9,338 81,921 146,795 - 412,706
---------- ------------- ---------- -------- ----------- --------
Total ounces sold oz 135,001 6,442 77,448 150,720 - 369,611
---------- ------------- ---------- -------- ----------- --------
All-in Sustaining
Costs per ounce sold US$/oz 1,294 1,449 1,058 974 - 1,117
---------- ------------- ---------- -------- ----------- --------
All in Costs (AIC)
Definition
AIC comprises of AISC as well as capital expenditures for major
growth projects or enhancement capital for significant improvements
at existing operations.
Calculation
AIC are calculated by the Group as AISC plus non-sustaining
exploration and capital expenditure and (reversal of
impairment)/impairment of refractory ore stockpiles. This is then
divided by the ounces of gold sold. AIC are presented on a segment
basis.
AIC is calculated in accordance with guidelines for reporting
AIC as published by the World Gold Council in June 2013. Other
companies may calculate this measure differently.
Relevance
AIC reflect the costs of producing gold over the life-cycle of a
mine.
Reconciliation
The tables below provide a reconciliation between all-in
sustaining costs and all-in costs to calculate all-in cost per
ounce sold for relevant periods.
H1 2019 Ref Corporate
Pioneer Malomir Albyn and other Total
US$'000 US$'000 US$'000 US$' 000 US$'000
--------------- ---------- ----------- --------
All-in sustaining
costs 79,545 94,176 57,936 - 231,657
Add:
Exploration expenditure 608 266 3,921 - 4,795
Capital expenditure 3,406 5,762 - - 9,168
All-in costs 83,559 100,204 61,857 - 245,620
Total ounces sold oz 52,805 92,938 79,288 - 225,031
All-in costs per
ounce sold US$/oz 1,582 1,078 780 - 1,091
H1 2018 Ref Corporate
Pioneer Pokrovskiy Malomir Albyn and other Total
US$'000 US$'000 US$'000 US$'000 US$' 000 US$'000
---------- ------------- ---------- -------- ----------- --------
All-in sustaining
costs 87,859 7,995 55,425 77,974 - 229,253
Add:
Reversal of impairment note
of ore stockpiles 6 - - 35 - - 35
Exploration expenditure 580 - 9 124 - 713
Capital expenditure 18,691 - 23,834 - - 42,525
All-in costs 107,130 7,995 79,303 78,098 - 272,526
---------- ------------- ---------- -------- ----------- --------
Total ounces sold oz 78,733 5,646 46,726 70,275 - 201,381
---------- ------------- ---------- -------- ----------- --------
All-in costs per
ounce sold US$/oz 1,361 1,416 1,697 1,111 - 1,353
---------- ------------- ---------- -------- ----------- --------
FY2018 Ref Corporate
Pioneer Pokrovskiy Malomir Albyn and other Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
---------- ------------- ---------- -------- ----------- --------
All-in Sustaining
Costs 174,653 9,338 81,921 146,795 - 412,707
Add:
Exploration expenditure 1,092 - 1,084 971 - 3,147
Capital Expenditure 22,740 - 53,910 - - 76,650
All-in costs 198,485 9,338 136,915 147,766 - 492,504
---------- ------------- ---------- -------- ----------- --------
Total ounces sold oz 135,001 6,442 77,448 150,720 - 369,611
---------- ------------- ---------- -------- ----------- --------
All-in costs per
ounce sold US$/oz 1,470 1,449 1,768 980 - 1,332
---------- ------------- ---------- -------- ----------- --------
Average Realised Gold Sales Price
Definition
The average realised gold sales price is the mean price at which
the Group sold its gold production output throughout the reporting
period, including the realised effect of cash flow hedge contracts
during the period.
Calculation
The average realised gold sales price is calculated by dividing
total revenue received from gold sales (including the realised
effect of any hedging contracts) by the total quantity of gold sold
during the period. Other companies may calculate this measure
differently.
Relevance
As gold is the key commodity produced and sold by the Group, the
average realised gold sales price is a key driver behind the
Group's revenues and profitability.
Reconciliation
The average realised gold price has been calculated as set out
in the table below.
Ref H1 2019 H1 2018 FY2018
-------- -------- --------
note
Gold revenue 4 US$' 000 289,388 258,692 466,674
Gold sold ounces 225,031 201,381 369,611
-------- --------
Average realised gold
price US$/oz 1,286 1,285 1,263
-------- --------
Capital Expenditure (CAPEX)
Definition
CAPEX is the investment required by the Group to explore and
develop its gold assets and keep current plants and other equipment
at its gold mines in good working order.
Calculation
CAPEX represents cash flows used in investing activities, namely
Purchases of property, plant and equipment and Expenditure of
exploration and evaluation assets.
Relevance
Capital expenditure is necessary in order not only to maintain
but also to develop and grow the business. Capex requirements need
to be balanced in line with the Group's strategy and provide an
optimal allocation of the Group's funds.
Reconciliation
The table below provides a reconciliation between capital
expenditure and cash flows used in investing activities.
Ref H1 2019 H1 2018 FY2018
US$' 000 US$' 000 US$' 000
---------- ---------- -----------
Purchase of property,
plant and equipment SCF 40,082 66,474 131,213
Exploration expenditure SCF 4,929 713 3,153
---------- -----------
Total capital expenditure 45,011 67,187 134,366
---------- -----------
Net Debt
Definition
Net Debt shows how indebted a company is after total debt and
any cash (or its equivalent) are netted off against each other.
Calculation
Net Debt is calculated as the sum of current borrowings and
non-current borrowings less cash and cash equivalents. Other
companies may calculate this measure differently.
Relevance
Management considers Net Debt a key measure of the Company's
leverage and its ability to repay debt as well showing what
progress is being made in strengthening the statement of financial
position. The measure is also widely used by various
stakeholders.
Reconciliation
The table below provides calculation of net debt at relevant
reporting dates.
Ref 30 June 2019 31 December
US$'000 2018
US$'000
----- ------------- -------------
Cash and cash equivalents SFP 39,138 26,152
Borrowings SFP (596,549) (594,177)
----- -------------
Net debt (557,411) (568,025)
-------------
Underlying EBITDA
Definition
EBITDA is a common measure used to assess profitability without
the impact of different financing methods, tax, asset depreciation
and amortisation of intangibles and items of an exceptional /
non-recurring nature, or those that could make comparison of
results from prior periods less meaningful.
Calculation
Underlying EBITDA is calculated as profit/(loss) for the period
before financial income, financial expenses, foreign exchange gains
and losses, fair value changes, taxation, depreciation, impairment
charges and accrual for additional mining tax. Other companies may
calculate this measure differently.
Relevance
Underlying EBITDA is an indicator of the Group's ability to
generate operating cash flows, which are the source of funding for
the Group's working capital requirements, capital expenditure and
debt service obligations. The measure is also widely used by
various stakeholders.
Reconciliation
The tables below provide reconciliations between net profit and
Underlying EBITDA as well as reconciliation between operating
profit and Underlying EBITDA for relevant periods.
Ref H1 2019 H1 2018 FY2018
US$'000 (restated) US$'000
US$'000
--------- ------------ ----------
Profit /(loss) for the period SPL 13,543 (39,851) 25,929
Add/(less):
Investment income SPL (2,522) (718) (3,775)
Interest expense SPL 25,979 11,987 29,520
Other finance gains SPL (48,275) (10,267) (13,905)
Other finance losses SPL 10,555 8,401 32,354
Foreign exchange losses/(gains) note 6 14,022 (63) (8,450)
Taxation SPL 3,233 6,747 56,489
Depreciation note 6 54,007 48,243 102,236
Impairment of exploration
and evaluation assets note 6 - 12,194 12,192
(Reversal of impairment)/impairment
of ore stockpiles note 6 (823) 14,540 18,021
(Reversal of impairment)/impairment
of gold in circuit note 6 (101) 665 2,125
Impairment of non-trading note 6
loans - 676 -
Reversal of impairment of
mining assets note 6 - - (101,695)
Share in results of associates
(a) note 12 13,715 8,129 (8,065)
Underlying EBITDA 83,333 60,683 142,976
Corporate Consolidated
H1 2019 Pioneer Malomir Albyn and other
Ref US$'000 US$'000 US$'000 US$'000 US$'000
-------- --------------- -------------
Operating profit SPL 2,513
Foreign exchange
losses note 6 14,022
Segment result note 4 (12,256) 22,138 37,762 (31,109) 16,535
Add/ (less):
Depreciation notes 4,6 17,014 17,421 18,920 652 54,007
Impairment/ (reversal
of impairment)
of ore stockpiles notes 4,6 3,136 - (3,959) - (823)
Reversal of impairment
of gold in circuit notes 4,6 (101) - - - (101)
Share in results
of associates (a) note 12 13,715 13,715
Underlying EBITDA 7,793 39,559 52,723 (16,742) 83,333
Corporate Consolidated
H1 2018 Pioneer Pokrovskiy Malomir Albyn and other
(restated)
Ref US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
--------- --------- ------------ --------- -------- ----------- -------------
Operating loss SPL (23,701)
Foreign exchange
gains note 6 (63)
Segment result note 4 17,823 (425) (7,871) (7,328) (25,963) (23,764)
Add/ (less):
notes
Depreciation 4,6 17,036 536 9,460 21,000 211 48,243
Impairment of exploration
and evaluation notes
assets 4,6 - - 12,194 - - 12,194
Impairment of ore notes
stockpiles 4,6 - - 309 14,231 - 14,540
(Reversal of impairment)/
impairment of gold notes
in circuit 4,6 (99) 17 578 169 - 665
Impairment of non-trading notes
loans 4,6 - - - - 676 676
Share in results
of associates (a) note 12 8,129 8,129
--------- --------- ------------ --------- -------- ----------- -------------
Underlying EBITDA 34,760 128 14,670 28,072 (16,947) 60,683
--------- ------------ --------- -------- ----------- -------------
Corporate Consolidated
FY2018 Pioneer Pokrovskiy Malomir Albyn and other
Ref US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
--------- ---------- ------------- ---------- -------- ----------- -------------
Operating profit SPL 126,612
Foreign exchange
gains note 6 (8,450)
Segment result note 4 24,751 (1,163) 84,913 17,312 (7,651) 118,162
Add/ (less):
notes
Depreciation 4,6 36,982 681 22,701 41,427 445 102,236
Reversal of impairment notes
of mining assets 4,6 - - (82,958) - (18,737) (101,695)
Impairment of exploration
and evaluation notes
assets 4,6 - - 12,192 - - 12,192
Impairment of ore notes
stockpiles 4,6 - - 309 17,712 - 18,021
Impairment of gold notes
in circuit 4,6 1,415 17 536 157 - 2,125
Share of results
of associates (a) note 12 (8,065) (8,065)
--------- ---------- ------------- ---------- -------- ----------- -------------
Underlying EBITDA 63,148 (465) 37,693 76,608 (34,008) 142,976
---------- ------------- ---------- -------- ----------- -------------
(a) Group's share of interest expense, investment income, other
finance gains and losses, foreign exchange gains and losses,
taxation, depreciation and impairment/reversal of impairment
recognised by an associate and impairment recognised against
investment in the associate.
See "The Use and Application of Alternative Performance Measures
(APMs)" section for further information on our APMs
See "The Use and Application of Alternative Performance Measures
(APMs)" section for further information on our APMs
See "The Use and Application of Alternative Performance Measures
(APMs)" section for further information on our APMs
.. Throughout this document, when discussing the Group's
financial performance, reference is made to a number of financial
measures, known as Alternative Performance Measures (APMs), which
are not defined or calculated in accordance with IFRS. Go to "The
Use and Application of Alternative Performance Measures (APMs)"
section for further information on our APMs.
.. Throughout this document, when discussing the Group's
financial performance, reference is made to a number of financial
measures, known as Alternative Performance Measures (APMs), which
are not defined or calculated in accordance with IFRS. Go to "The
Use and Application of Alternative Performance Measures (APMs)"
section for further information on our APMs.
..Throughout this document, when discussing the Group's
financial performance, reference is made to a number of financial
measures, known as Alternative Performance Measures (APMs), which
are not defined or calculated in accordance with IFRS. Go to "The
Use and Application of Alternative Performance Measures (APMs)"
section for further information on our APMs.
.. Throughout this document, when discussing the Group's
financial performance, reference is made to a number of financial
measures, known as Alternative Performance Measures (APMs), which
are not defined or calculated in accordance with IFRS. Go to "The
Use and Application of Alternative Performance Measures (APMs)"
section for further information on our APMs.
.. Throughout this document, when discussing the Group's
financial performance, reference is made to a number of financial
measures, known as Alternative Performance Measures (APMs), which
are not defined or calculated in accordance with IFRS. Go to "The
Use and Application of Alternative Performance Measures (APMs)"
section for further information on our APMs.
.. Throughout this document, when discussing the Group's
financial performance, reference is made to a number of financial
measures, known as Alternative Performance Measures (APMs), which
are not defined or calculated in accordance with IFRS. Go to "The
Use and Application of Alternative Performance Measures (APMs)"
section for further information on our APMs.
.. Throughout this document, when discussing the Group's
financial performance, reference is made to a number of financial
measures, known as Alternative Performance Measures (APM), which
are not defined or calculated in accordance with IFRS. Go to "The
Use and Application of Alternative Performance Measures (APMs)"
section for further information on our APMs.
.. Throughout this document, when discussing the Group's
financial performance, reference is made to a number of financial
measures, known as Alternative Performance Measures (APM), which
are not defined or calculated in accordance with IFRS. Go to "The
Use and Application of Alternative Performance Measures (APMs)"
section for further information on our APMs.
.. Net debt is an Alternative Performance Measure (APM), which
is not defined or calculated in accordance with IFRS. Go to "The
Use and Application of Alternative performance Measures (APMs)"
section for further information about our APMs.
.. Underlying EBITDA is an Alternative Performance Measure
(APM), which is not defined or calculated in accordance with IFRS.
Go to "The Use and Application of Alternative Performance Measures
(APMs)" section for further information on our APMs.
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
IR LIFSEADIILIA
(END) Dow Jones Newswires
September 10, 2019 02:02 ET (06:02 GMT)
Petropavlovsk (LSE:POG)
Gráfica de Acción Histórica
De Mar 2024 a Abr 2024
Petropavlovsk (LSE:POG)
Gráfica de Acción Histórica
De Abr 2023 a Abr 2024