TIDMPOG
RNS Number : 0475O
Petropavlovsk PLC
27 May 2020
27 May 2020
Petropavlovsk PLC
Annual Results for the Year Ended 31 December 2019 and Q1 2020
Production Update
Petropavlovsk PLC ("Petropavlovsk" or the "Company" or, together
with its subsidiaries, the "Group"), today issues its audited
annual results for the year ended 31 December 2019, as well as its
Q1 2020 production / sales update and guidance for 2020.
The financial and operational highlights of both trading periods
are as follows:
2019 Financial Highlights
31-Dec-19 31-Dec-18 % Change
-------------------------------- ------ ---------- ---------- ---------
Total gold produced koz 517.3 422.3 +22%
Total gold sold koz 514.0 369.6 +39%
Total Cash Costs (..)
[1] $/oz 749 678 +10%
All-in Sustaining Costs
(..) $/oz 1,020 1,079 (5%)
Avg. realised gold price
(..) $/oz 1,346 1,263 +7%
-------------------------------- ------ ---------- ---------- ---------
Group revenue (including
non-precious operations) $m 741.6 499.8 +48%
Underlying EBITDA (..) $m 264.8 182.7 +45%
Operating profit $m 115.4 126.6 (9%)
Profit for the year $m 25.7 25.9 (0.8%)
Capital expenditure (..) $m 103.8 134.4 (23%)
Cash generated from operations
before working capital
changes $m 25 0.5 162.3 +54%
Cash generated from operations $m 189.3 329.8 (43%)
(Net debt (..) ) / cash $m (561.3) (568.0) (1%)
-- Total gold production increased 22%: full year guidance met,
with 517.3koz of gold produced (2018: 422.3koz), including 45.7koz
produced from third-party concentrates (2018: none)
-- Total gold sales increased 39%: 514.0koz (2018: 369.6koz)
-- Average realised gold price (..) increased 7%: $1,346/oz
(2018: $1,263/oz) for the year, including a $61/oz loss from
hedging (2018: $9/oz hedging loss)
-- Cash generated from operations before changes in working
capital increased 54% : reflecting the increase in physical sales
and higher gold price
-- Group revenue (including non-precious operations) increased
48%: $741.6m (2018: $499.8m) reflecting higher production volumes
and a higher average gold sales price
-- Underlying EBITDA (..) increased 45%: $264.8m (2018:
$182.7m)
-- Profit for the year marginally decreased by 0.8%: to $25.7m
(2018: $25.9m) reflecting higher impairment reversals in 2018 and
reduced interest capitalisation in 2019 following POX completion as
well as the impairment of the Company's holding in IRC Ltd. ("IRC")
amounting to $23.4m, as a consequence of the potential disposal of
the investment
-- Total Cash Costs (TCC (..) ) were at the lowest end of
downward revised guidance: $749/oz (2018: $678/oz) following cost
containment and the smooth ramp-up of the POX Hub despite being
higher year-on-year due to the costs associated with the ramp-up of
the POX Hub and Malomir flotation and cost inflation, partially
mitigated by higher grades and recoveries and Rouble
depreciation
-- All-in Sustaining Costs (AISC (..) ) declined 5%: $1,020/oz
(2018: $1,079/oz) assisted by an impairment reversal of ore
stockpiles and increase in physical ounces sold
-- Cash generated from operations decreased 43%: $189.3m (2018:
$329.8m) primarily reflecting changes in working capital, including
an increase in inventory of third-party flotation concentrate
purchases for processing and reduced gold prepay finance of $ 23.6
m (2018: $ 163. 8m)
-- Net debt reduction (..) : $561.3m (2018: $568.0m), the small
reduction reflects an improvement in liquidity, offset by an
increase in issued debt following convertible bond refinancing
-- Capital expenditure (..) decreased 23%: $103.8m (2018:
$134.4m) with expenditure associated with the construction of the
POX Hub largely completed
COVID-19 Response and Update
Health and safety update
-- There have been very few cases registered in the Amur region
which is a sparsely populated area roughly equivalent to half the
size of France
-- Petropavlovsk's mining operations and POX Hub are naturally
isolated away from population centres, and the Group has
implemented measures in each operating jurisdiction to meet
Government guidelines which are appropriate to the specific needs
of each location, including its head offices
-- High-level management actions taken include:
- An emergency response team has been formed to limit the spread
COVID-19 at the Group's Companies. Members of the response team are
working in co-operation with local authorities, when and if,
required;
- The response team includes representatives from each of the
Group's businesses in Russia, and coordinators have been appointed
at each location who are responsible for preventative and
counteractive measures; and
- Group business travel has been restricted and the Company's
Moscow and London offices have been closed until further notice,
with written permission required to enter buildings
-- Employee and community actions taken include:
- Mine shift patterns have been adjusted to lower the frequency of new teams arriving onsite;
- Before commencing each shift, employees and contractors are
required to undertake 14 days quarantine in four purpose-built
camps, with virus testing on arrival and before moving to the
sites;
- Medical infra-red thermometers are used daily to take the temperature of employees;
- Designated isolation zones have been set up to house any
individuals showing flu-like symptoms;
- In addition to the recommended hygiene measures, a
comprehensive site awareness campaign is being carried out; and
- Awareness programmes targeting the local community have also
been put in place, and the Company is supporting local businesses
and the community through the distribution of masks and hand
sanitisers
-- As a result, there have been no cases of COVID-19 amongst
Petropavlovsk employees
Legislative update
-- In response to the COVID-19 outbreak, the Russian Government
has been introducing a wide range of measures including non-work
period (from which Petropavlovsk is exempt as a continuous process
organisation). It has also expanded the authority of regional heads
to set further specific measures relevant for their regions;
-- While the non-work period was officially lifted by the
Federal government, most regional authorities are maintaining the
restrictions;
-- Other measures include certain tax, credit and reporting
holidays which are of benefit to certain suppliers to the Group's
business; and
-- Petropavlovsk has been included in the most recently revised
Federal list of Russia's systemically important companies.
Additionally, the JSC Pokrovskiy Mine (including Pioneer), LLC
Albynskiy Rudnik (Albyn) and LLC Malomirskiy Rudnik (Malomir)
companies have been identified as being strategically important to
the Amur Region. This entails more stringent oversight by the
Federal authorities and local Ministry of Economic Development as
well as the executive branch of local government, and the Company
believes this reduces the risk of business interruption
Logistics and sales update
-- The Company continues to monitor its supply chain and is
putting in place all necessary precautions to ensure business
continuity;
-- While the Central Bank of Russia has temporarily suspended
gold purchases, commercial banks in Russia continue to buy gold
bullion and the Company continues to sell gold through Russian
commercial banks; and
-- The Company also can export gold bullion and confirms that it
has the necessary licences in place required to export gold for
sale outside of Russia, and that it has shipped gold to the UK and
Switzerland from 2020
Corporate Developments
Debt refinancing
-- As at 31 December 2019, the Company's debt amounted to $609m,
comprising of $500m of guaranteed notes (8.125% coupon, maturing
November 2022) and $125m of convertible bonds ($109m at amortised
cost, 8.25% coupon, maturing July 2024)
-- The Board is actively considering a number of liability
management options with the aim of reducing the Company's leverage
and cost of debt
Hedging and price protection (gold and FX)
-- The previous Gold hedging programme was entered into at the
bank's request at a low level of gold prices using gold forwards
contracts, which did not allow for participation in higher prices
and which expired 31 Dec 2019
-- Commencing April 2020, the Company entered into the following
arrangements (maturing in Dec 2021):
o Zero cost collar with a RUB:USD price floor of RUB75.0 and a
cap of RUB96.2 on average for US$7m a month to secure the preferred
exchange rate of RUR/USD for funding of Group's RUB operating
expenses
o Zero cost collar with a gold price floor of $1,600/oz and a
cap of $1,832/oz for 3.5koz a month to secure the preferred level
of the gold price while leaving the upside for the gold price
increase
-- The Company's hedging policy is being reviewed, taking into
account current gold price increase trend and Group's Viability
analysis
Gazprombank gold sales and liquidity agreement
-- Gazprombank has approved a gold prepays limit of c.392koz,
valid through to the end of May 2024, allowing it to receive cash
prepay for 70% of the price of the gold for a period up to 24
months
-- This will allow the Company to receive gold prepays not
exceeding in total 33.9bn RUR (c.US$470m)
-- Advances to be settled using proceeds at the prevailing gold
price at the date of shipment
Capital allocation and dividend policy
-- Building on the Company's recent strong operational and
financial performance, the Company aims to update its capital
allocation policy in line with the Company's goal to balance
between deleveraging, capital investment and return to
shareholders
-- This policy is currently under review and a further statement
will be made in due course
Development Highlights
Construction of a new flotation facility at Pioneer
-- Construction of a new two-line flotation facility at Pioneer
commenced in 2019 to double the Group's refractory ore processing
capacity from 3.6Mtpa to 7.2Mtpa
-- All key equipment items required to complete construction of
the facility have arrived in Russia notwithstanding the COVID-19
related lockdown measures, and completion remains on schedule for
Q4 2020 commissioning
Albyn Elginskoye mine development
-- Pre-production work undertaken in 2019 included extensive
in-fill drilling to increase the accuracy of near and medium-term
mining plans and the completion of construction of a c.30km all
season road between Albyn and Elginskoye
-- Waste stripping activity remains on schedule for first
production in H2 2020 to coincide with the cessation of mining at
the Albyn open pit
2019 Reserves & Resources Update
-- As at 31 December 2019, the Company's internal estimate of
total Group Mineral Resources (including Reserves) amounted to
21.03Moz of gold, compared to 20.52Moz at the end of 2018, with
total Reserves also increasing from 8.21Moz to 8.46Moz net of
depletion
-- An estimated c.0.5Moz was depleted through mining activities
in 2019 which were more than replaced through the conversion of
Resources to Reserves predominantly at the Albyn Elginskoye and
Malomir Quartzitovoye deposits as a result of successful
exploration completed during 2019
-- An independently audited estimate is expected to be published
during Q3 2020
Corporate Matters
Refinancing of IRC's project finance facility with
Gazprombank
-- In March 2019, Petropavlovsk shareholders approved the
Company's proposal to guarantee $240m of debt facilities with
Gazprombank, on behalf of IRC Limited ("IRC")
-- The new Gazprombank facilities enabled IRC to fully repay an
outstanding project finance facility with the Industrial and
Commercial Bank of China Limited ("ICBC"), together with repayment
to Petropavlovsk of a bridge loan and guarantee fee
-- The guarantee structure of the new facility is on more
favourable terms than the ICBC facility, providing IRC with a more
manageable repayment schedule in line with the ramp up of its
K&S mining operations
New $125m convertible bond offering and redemption of $100m
convertible bonds due 2020
-- In June 2019, the Company announced the redemption of its
$100m convertible bonds maturing 2020 and successful placement of
new 5-year $125m convertible bonds maturing 2024
-- The new convertible bonds carry a lower coupon of 8.25% and
provide for a longer maturity profile
Credit agencies rating upgrades
-- In August 2019, Fitch Ratings upgraded its Long-Term Issuer
Default Rating and senior unsecured rating to 'B-' from 'CCC' with
a Positive Outlook
-- In October 2019, S&P Global Ratings upgraded
Petropavlovsk's Outlook to Positive, affirming its B- rating and
highlighting the progress which the Company has made over the past
12 months
Subsequent Events
Appointment of new Chief Financial Officer
-- Danila Kotlyarov was appointed as Chief Financial Officer on
1 February 2020, replacing Alexey Dubynin. He was subsequently
appointed to the Board as an Executive Director on 21 April
2020
-- Mr Kotlyarov holds a BA in Management from Moscow State
University and a MA in International Economics from the Moscow
State Institute of International Relations (MGIMO)
-- He is a fellow member of the Association of Chartered
Certified Accountants (ACCA), Chartered Financial Analyst (CFA) and
a member of Hong Kong and Russia Associations of Financial
Analysts
New major shareholder and appointment of Non-Executive
Director
-- Following its purchase of Aeon Mining Ltd's shareholding,
announced on 5 February 2020, Uzhuralzoloto Group of Companies
("UGC") became Petropavlovsk's largest shareholder
-- UGC is a leading privately-owned Russian gold producer with
established mining operations and development assets located in
Chelyabinsk Region, Krasnoyarsk Territory and the Republic of
Khakassia
-- Mr Maxim Kharin, Chief Financial Officer and Chairman of the
Board at UGC was nominated to the Board of Petropavlovsk, with his
appointment reviewed by the Nominations Committee and approved by
the Board, and became a Non-Executive Director on 21 April 2020
Preliminary Agreement with Stocken Board AG for the proposed
termination of the IRC guarantees with disposal of 29.9% IRC
shareholding
-- On 18 March 2020, Petropavlovsk entered into a preliminary
agreement with Stocken Board AG, that may lead to the Company's
disposal of a 29.9% shareholding in IRC for $10m, contingent on the
termination and release of Petropavlovsk from all loan guarantees
given to Gazprombank in relation to IRC
Promotion to the FTSE 250 Index
-- On 23 March 2020, the Company joined the FTSE 250 Index,
which is expected to increase its stock market profile and share
trading liquidity
Option to acquire outstanding 25% interest in TEMI LLC
-- In May 2019, Petropavlovsk entered into an option agreement
with Agestinia Trading Limited, exercisable up to 21 May 2021, to
acquire 25% of TEMI LLC (TEMI) and to increase the Company's
ownership to 100%
-- TEMI holds licences (c.1,000km(2) ) relating to substantial
non-refractory as well as refractory reserves and resources located
near to the Albyn mine and processing plant, one of the Company's
principal mining operations
-- Non-refractory reserves are expected to be suitable for
processing through Albyn's processing plant and are scheduled to
become the main feed source once mining operations at Albyn are
exhausted during 2020. First production from Elginskoye is planned
in H2 2020
-- The Company will review the possibility of exercising its
option over the year ahead
Change of external auditor
-- Following a competitive tender process overseen by the
Board's Audit Committee, PricewaterhouseCoopers LLP ("PwC") has
been invited to become the Company's statutory external auditor
commencing the year ending 31 December 2020
-- PwC's appointment is subject to shareholder approval at the
forthcoming Annual General Meeting, due to be held on 30 June
2020
-- Deloitte LLP, having been the Company's auditors since 2009,
will resign following completion of the audit for the year ended 31
December 2019
2020 Guidance
-- Production: on track to meet the full year target of 620 -
720koz Au in 2020 based on Q1 2020 production
-- Costs: TCC .. guidance of $700 - $800/oz excluding third
parties concentrate as the pricing of concentrate depends on highly
volatile gold price
-- Capital expenditure: expected to range from $70m to $80m in
2020 which includes completion of the Pioneer flotation plant,
sustaining capital expenditure (..) and exploration costs
Q1 2020 Operational Highlights
Gold production
-- 73% increase in gold produced to 186.2koz (Q1 2019:
107.7koz), of which 115.4koz (62%) came from processing refractory
gold at the POX Hub
Production by Asset (koz) Q1 2020 Q1 2019
---------------------------------- -------- --------
JSC Pokrovskiy Mine 110.7 21.9
Pioneer 26.4 21.9
Third party concentrate 84.2 -
(POX Hub)
LLC Malomirskiy Rudnik (Malomir) 35.2 44.5
LLC Albynskiy Rudnik (Albyn) 40.4 41.3
---------------------------------- -------- --------
Total Group 186.2 107.7
---------------------------------- -------- --------
Responsible Business in Q1 2020
-- Zero fatal accidents during the quarter among Group's
employees and contractors
-- 25% improvement in the Group's Lost Time Injury Frequency
Rate ("LTIFR") to 0.98 (Q1 2019: 1.31)
-- As a result of the Group's increased emphasis on ESG
practices, there was a significant improvement in environmental
performance metrics
-- On a per ounce gold produced basis, a measure of intensity,
improvements included:
- 49% decline in greenhouse gas ("GHG") emissions;
- 52% reduction in energy consumption; and
- 11% improvement in water consumption
Metric Units Q1 2020 Q1 2019
------------------------- ------------------ -------- --------
LTIFR (1) - 0.98 1.31
GHG emissions Tonne CO(2) e/oz 0.57 1.14
Water consumption m(3) /oz 45.5 51.4
Energy consumption GJ/oz 6.7 13.9
Environmental incidents
(2) Number 0 0
------------------------- ------------------ -------- --------
(1) LTIFR excludes contractors
(2) Environmental incidents denotes Category 2 (moderate) and
Category 3 (serious) environmental incidents
-- During the quarter, fire safety audits were held across the
Group's operations in preparation for the high alert season
-- Anti-Bribery and Speak-up policies were approved and adopted
as part of the Company's strengthened approach to Business Ethics
and Human Rights
-- In March 2020, a public consultation on the Environmental
Impact Assessment of the Katrin pit at Pioneer was held and was
attended by representatives of local communities, an NGO and local
administration staff
IRC Update
IRC is a vertically integrated iron ore concentrate producer in
the Russian Far East, listed on the Hong Kong Stock Exchange
(ticker: 1029.HK). Petropavlovsk is a major IRC shareholder (31.1%)
and acts as guarantor for IRC's $240m loan facility with
Gazprombank. In accordance with IAS 28, IRC is treated as an
investment in associate.
The following selected summary is based on the IRC Annual
Results for the year ended 31 December 2019.
FY 2019 Financial Highlights
-- Revenue (after hedging) increased 17% to $177.2m (2018:
$151.5m)
-- EBITDA (excluding currency movements) increased 39% to $33.3m
(2018: $23.9m)
-- Net loss of $38.7m (2018: Profit of $68.2m)
-- During 2019, a total of $30.9m was paid to Gazprombank as
principal and interest in relation to the $240m loan facilities, of
which c. $225m was outstanding at the end of 2019
FY 2019 Operations Highlights
-- K&S operated at 81% capacity in 2019, producing a record
2,576kt of iron ore concentrate (2018: 2,235kt)
-- Sales increased 11% to 2,464kt (2018: 2,224kt)
-- Refinancing of ICBC loan completed, with new Gazprombank
facilities, providing longer repayment terms in line with the ramp
up of its K&S mining operations
In addition to the full year 2019 results, the following
selected summary is based on IRC's Q1 2020 trading update for the
three months ended 31 March 2020.
Q1 2020 Operations Highlights
-- K&S operated at c.86% of designed capacity, producing a
record 671kt of iron ore concentrate (Q1 2019: 523kt)
-- Sales increased 26% to 663kt (Q1 2019: 527kt)
-- Q1 2020 iron ore prices remained stable with the 65% Fe
averaging $103 per tonne, $5 per tonne higher than Q4 2019, with
the price spread between high-grade and low-grade iron ores
widening at the time of the announcement
-- Weakness in the Russian Rouble has had a positive impact on
IRC's operating margins
Balance Sheet
-- During Q1 2020, $9.8m was paid to Gazprombank as principal
and interest in accordance with the repayment schedule
-- As at 31 March 2020, IRC's total debt outstanding was
$219.4m
COVID-19
-- No material impact on IRC's operations from COVID-19
outbreak, with measures taken to support prevention of COVID-19 at
its operations
For further details of both announcements, please refer to
http://www.ircgroup.com.hk/en/index.php
CEO's Statement
"In 2019 Petropavlovsk made significant steps towards its
strategic goals of becoming one of the leading gold producers in
Russia and creating shareholder value through modern proven
technologies based on our industry-leading research and development
capabilities. The smooth and efficient ramp up of the POX Hub
resulted in a substantial increase in gold production and cash flow
from our assets. This significantly strengthened our balance sheet
alongside the refinancing of our convertible bonds and IRC loan
facilities.
This transformative year demonstrated that our POX technology
can produce profitable ounces from some of the most challenging
ores in Russia. The Company's significant investment in this area
is now bearing fruit and our POX Hub (which is one of only two
pressure oxidation facilities in Russia) has accounted for c.35% of
our total production last year. Our POX Hub successfully produced
ounces not only from Malomir concentrates, but also from high-grade
third-party refractory concentrates from other parts of Russia and
Kazakhstan demonstrating the capability to efficiently process the
country's abundant refractory ores, placing the Company in a very
competitive position.
The foundation for our future organic growth will come from the
significant investment in and development of our producing assets.
During 2019, Pioneer saw the commencement of construction of its
flotation circuit which will transform the mine as it moves to
mining the significant refractory ores on this licence area.
Optimisation of the Malomir flotation plant has improved the scale
of our production as well as the quality and grade of our
concentrates, while Albyn has seen significant investment in
accessing the Elginskoye deposit, which comes on stream as the
current open pit reaches the end of its life.
Beyond the operational upturn from our assets, Petropavlovsk has
also substantially strengthened its Board with the appointment of
Charlotte Philipps and Katia Ray as independent non-executive
directors, ensuring the composition of our Board fully complies
with the strictest codes of UK and international Governance.
These positive developments in 2019 have assisted
Petropavlovsk's intention to deliver value to all of its
stakeholders, which saw the start of the re-rating process of its
equity and debt during the second half of 2019 and into 2020, which
has seen your Company re-established as a constituent of the FTSE
250 index.
Despite our many successes in 2019, there are still a number of
challenges ahead. Maintaining the health and safety of all our
employees in the face of the COVID-19 global pandemic is of
critical importance. By harnessing the dedication and skills of our
employees, the careful management of our reserve and resource base
of over 21Moz of gold, and maintaining the momentum of relieving
the pressure of our debt liabilities on our balance sheet through
delivering strong growth in cash flows and profitability, I and the
Board remain confident that Petropavlovsk will continue to build a
growing and sustainable business for many years to come."
Sustainability Day
Petropavlovsk is planning a Sustainability Workshop to be held
in London during Q3 2020. The event will focus on the Company's
long track record of sustainability reporting, current initiatives
and future targets.
Results Webcast
A presentation will be webcasted today at 08:30am BST and can be
accessed via this URL, from which a recording will also be made
available:
https://www.lsegissuerservices.com/spark/Petropavlovsk/events/32b4a71b-2d68-4be5-ad8b-557a374c11d8
Enquiries
Please visit www.petropavlovsk.net or contact:
Petropavlovsk PLC +44 (0) 20 7201 8900
Patrick Pittaway / Max Zaltsman / Viktoriya TeamIR@petropavlovsk.net
Kim
Peel Hunt LLP
Ross Allister / David McKeown / Alexander
Allen +44 (0) 20 7418 8900
Canaccord Genuity Limited
Henry Fitzgerald-O'Connor / James Asensio +44 (0) 20 7523 8000
Buchanan +44 (0) 20 7466 5000
Bobby Morse / Kelsey Traynor / Ariadna POG@buchanan.uk.com
Peretz
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.
The financial information set out in this release does not
constitute the Company's statutory accounts for the years ended 31
December 2019 or 2018 but is derived from those accounts. Statutory
accounts for 2018 have been delivered to the Registrar of Companies
and those for 2019 will be delivered following the Company's annual
general meeting. The auditors have reported on those accounts:
their reports were unqualified, did not draw attention to any
matters by way of emphasis and did not contain statements under
s498(2) or (3) of the Companies Act 2006.
FY 2019 CFO Statement
Note: Figures may not add up due to rounding
Financial Highlights
2019 2018(c)
------------------------------------------ ------------- ------- --------
Gold produced '000oz 517.3 422.3
Gold sold '000oz 514.0 369.6
Group revenue US$ million 741.6 499.8
Average realised gold price
(u) US$/oz 1 ,346 1,263
Average LBMA gold price afternoon
fixing US$/oz 1,393 1,269
Total Cash Costs (u) (a), (c) US$/oz 749 678
All-in Sustaining Costs (u)
(b), (c) US$/oz 1,0 20 1, 079
All-in Costs (u) (b) US$/oz 1, 103 1,332
Underlying EBITDA (u) (c) US$ million 264.8 182.7
Operating profit US$ million 115.4 126 .6
Profit before tax US$ million 52.9 82.4
Profit for the year US$ million 25.7 25.9
Profit for the year attributable
to equity shareholders of Petropavlovsk
PLC US$ million 26.9 24.5
Basic profit per share US$ 0.0 1 0.01
Cash generated from operations
before working capital changes US$ million 250.5 162.3
Net cash from operating activities US$ million 95 .4 264 .2
------------------------------------------ ------------- ------- --------
(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) Following a review of the nature of the deferred stripping
costs the Group has made a reclassification of deferred stripping
costs balance from the Inventory balance into the Mining assets
within Property, plant and equipment. Comparative information on
TCC, AISC and EBITDA for 2018 have been re-calculated accordingly
to reflect the effect of the aforementioned re-classification.
31 December 31 December
2019 2018
US$ million US$ million
--------------------------- ------------ ------------
Cash and cash equivalents 48.2 26.2
Notes (c) (500.4) (499.0)
Convertible bonds (d) (109.1) (95.2)
Net Debt (u) (561.3) (568.0)
---------------------------- ------------ ------------
(d) US$500 million Guaranteed Notes due on 14 November 2022 at amortised cost.
(e) US$125 million convertible bonds due on 03 July 2024 at amortised cost.
Revenue
2019 2018
US$ million US$ million
------------------------------ ----------- -----------
Revenue from hard rock mines 692.6 470.7
Revenue from other operations 49.0 29.1
------------------------------- ----------- -----------
741.6 499.8
------------------------------ ----------- -----------
Group revenue during the period was US$741.6 million, 48% higher
than the US$499.8 million achieved in 2018.
Revenue from hard rock mines during the period was US$692.6
million, 47% higher than the US$470.7 million achieved in 2018.
Gold remains the key commodity produced and sold by the Group,
comprising 93% of total revenue generated in 2019. The physical
volume of gold sold from hard rock mines increased by 39% from
369,611oz in 2018 to 514,005 oz in 2019. The average realised gold
price (u) increased by 7% from US$1,263/oz in 2018 to US$1,346/oz
in 2019. The average realised gold price (u) includes a US$(61)/oz
effect from hedge arrangements (2018: US$(9)/oz).
Hard rock mines sold 56,568oz of silver in 2019 at an average
price of US$15/oz, compared to 54,746oz in 2018 at an average price
of US$15/oz.
Revenue generated as a result of third-party work by the Group's
in-house service companies was US$49.0 million in 2019, a US$19.9
million increase compared to US$29.1 million in 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$45.1 million in
2019 compared to US$25.1 million in 2018.
Cash flow hedge arrangements
In order to increase certainty in respect of a significant
proportion of its cash flows, the Group has entered into a number
of gold forward contracts.
Forward contracts to sell an aggregate of 230,000oz of gold
matured during the 2019 and resulted in a US$(31.5) million net
cash settlement by the Group (2018: US$(3.4) million net cash
settlement paid by the Group on forward contracts to sell an
aggregate of 200,000oz of gold).
The Group constantly monitors the gold price and hedges some
portion of production as considered appropriate. All forward
contracts were realized in 2019 and the Group had no open hedge
positions as at 31 December 2019.
Underlying EBITDA (u) and analysis of operating costs
2019 2018
US$ million US$ million
------------------------------------------ ------------ ------------
Profit for the year 25.7 25.9
Add/(less):
Net (impairment reversals )/ impairment
losses on financial instruments (30.8) 28.6
Investment and other finance income (8.8) (3.8)
Interest expense 59.9 29.5
Net other finance losses/(gains) 42.2 (10.2)
Foreign exchange losses/(gains) 20.8 (8.5)
Taxation 27.2 56 . 5
Depreciation 137.8 14 2. 0
Impairment of exploration and evaluation
assets - 12.2
(Reversal of impairment)/impairment of
ore stockpiles (2.8) 18.0
Impairment of gold in circuit 0.1 2.1
Reversal of impairment of mining assets
and in-house service (52.2) (101.7)
Share of results of associate (c) 45.7 (8.1)
Underlying EBITDA (u) 264.8 182.7
------------------------------------------ ------------ ------------
(a) Group's share of interest expense, investment income, other
finance gains and losses, foreign exchange gains/losses, taxation,
depreciation and impairment/reversal of impairment recognised by an
associate (IRC).
Underlying EBITDA (u) (..) as contributed by business segments
is set out below.
2019 2018
US$ million US$ million
----------------------- ------------ ------------
Pioneer 53 . 3 6 4 . 0
Pokrovskiy - (0.5)
Malomir 104 . 2 48 . 3
Albyn 1 49 . 3 104 . 8
----------------------- ------------ ------------
Total Hard rock mines 306 . 8 216 . 8
( 41 . 9 (3 4 . 0
Corporate and other ) )
Underlying EBITDA (u) 2 64 . 8 1 82 . 7
----------------------- ------------ ------------
Hard rock mines
During this period, the hard rock mines generated Underlying
EBITDA (u) of US$306.8 million compared to US$216.8 million
Underlying EBITDA (u) in 2018.
Total Cash Costs (u) for hard rock mines increased from
US$678/oz in 2018 to US$749/oz in 2019. The increase in TCC (u)
primarily reflects the effect of inflation of certain Rouble
denominated costs, costs associated with the ramp-up of the POX Hub
and Malomir flotation, application of the full 6% mining tax rate
at Pioneer and progressive increase in mining tax rate to 1.2% at
Albyn and Malomir. This effect was partially mitigated by higher
grades of non-refractory ore processed at Pioneer, Albyn and
Malomir and higher recoveries achieved at Pioneer and Malomir as
well as by the effect of Rouble depreciation. The increase in
physical ounces sold from 369,611oz in 2018 to 514,005oz in 2019
resulted in US$84.4 million increase in the Underlying EBITDA (u) .
The increase in the average realized gold price (u) from
US$1,263/oz in 2018 to US$1,346/oz in 2019 contributed to a further
US$42.7 million increase in the Underlying EBITDA (u) . This effect
was partly mitigated by the increase in TCC (u) with US$(36.5)
million effect on the Underlying EBITDA (u) .
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 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 2018 there was ongoing inflation of certain Rouble
denominated costs, in particular, electricity costs increased by 3%
in Rouble terms (no changes in US Dollar terms) and the cost of
diesel increased by 12% in Rouble terms (increased by 8% in US
Dollar terms). The Rouble depreciated against the US Dollar by 3%
in 2019 compared to 2018, with the average exchange rate for the
year of RUB64.69 : US$1 in 2019 compared to RUB62.68 : US$1 in
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 2019 while JSC
Pokrovskiy Rudnik applied full mining tax rate in 2019, resulting
in US$15.9 million mining tax expense compared to nil in 2018 when
0% mining tax rate was applied by the Group.
2019 2018
------------------
US$ million % US$ million %
---------------------------------------- ------------ ---- ------------ ----
Staff cost 8 3 . 2 21 62.8 24
2
Materials 8 6 . 6 2 87.4 34
1
Flotation concentrate purchased 74.0 9 - -
Fuel 4 3 . 3 11 39.9 16
Electricity 34. 0 8 25.9 10
1
Other external services 42 . 3 1 17.9 7
Other operating expenses 32. 0 8 21.8 9
395 . 5 100 255.7 100
---------------------------------------- ------------ ---- ------------ ----
Movement in ore stockpiles, gold
in circuit , bullion in process
, limestone and flotation concentrate ( 34 .
attributable to gold production 2 ) (8.6)
----------------------------------------- ------------ ---- ------------ ----
3 61 .
Total operating cash expenses 4 247.1
----------------------------------------- ------------ ---- ------------ ----
Hard rock mines 2019 2018
------------------------------------------
Pioneer Malomir Albyn Total Total
US$ US$ US$ US$ US$
million million million million million
----------------------------------- -------------- ------------ ------------ ------------- --------
Revenue
Gold 223.2 239.4 229.1 691.7 466.7
----------------------------------- -------------- ------------ ------------ ------------- --------
Including:
Gold from 3d parties concentrate 62.9 - - 62.9 -
----------------------------------- -------------- ------------ ------------ ------------- --------
Silver 0.5 0.3 0.1 0.9 0.8
Flotation concentrate - - - - 3.2
----------------------------------- -------------- ------------ ------------ ------------- --------
223.7 239.6 229.3 692.6 470.7
----------------------------------- -------------- ------------ ------------ ------------- --------
Expenses
7 5 . 3 61
Operating cash expenses 15 8 .2 12 8 .1 0 . 4 247.1
Refinery and transportation 0.3 0.3 0.3 0.9 0.6
Other taxes 1.5 4.2 1.9 7.6 6.2
Mining tax 10.3 2.8 2.9 15.9 -
48 . 1 35
Depreciation 41 . 2 46 . 5 1 . 9 141.6
R eversal of impairment (42.8
of mining assets (42.8) - - ) (83.0)
Impairment of exploration
and evaluation assets - - - - 12.2
Impairment/(reversal of
impairment) of ore stockpiles
and gold in circuit 0.6 0.7 (4.0) (2.7) 20.1
18 2 . 12 4 476 .
Operating expenses 16 9. 4 7 . 2 3 344.9
Result of precious metals 5 6 . 105. 216 .
operations 54 . 3 9 1 3 125.8
----------------------------------- -------------- ------------ ------------ ------------- --------
Add/(less):
48 . 1 35
Depreciation 41 . 2 46 . 5 1 . 9 141.6
R eversal of impairment (42.8
of mining assets (42.8) - - ) (83.0)
Impairment of exploration
and evaluation assets - - - - 12.2
Impairment/(reversal of
impairment) of ore stockpiles
and gold in circuit 0.6 0.7 (4.0) (2.7) 20.1
----------------------------------- -------------- ------------ ------------ ------------- --------
104 . 1 49 306 . 216 .
Segment EBITDA (u) (..) 53 . 3 2 . 3 8 8
----------------------------------- -------------- ------------ ------------ ------------- --------
Physical volume of gold
sold, oz 163,398 179,791 170,817 514,005 369,611
Including:
Physical volume of g old
sold from 3d parties concentrate,
oz 42,442 - - 42,442 -
----------------------------------- -------------- ------------ ------------ ------------- --------
Cash costs
7 5 . 3 61
Operating cash expenses 15 8 .2 12 8 .1 0 . 4 247.1
Refinery and transportation 0.3 0.3 0.3 0.9 0.6
Other taxes 1.5 4.2 1.9 7.6 6.2
Mining tax 10.3 2.8 2.9 15.9 -
17 0 . 1 3 5. 80 . 38 5. 2 5 4
Operating cash costs 3 4 0 8 .0
Deduct: co-product revenue (0.5) (0.3) (0.1) (0.9) (0.8)
Deduct: cost of flotation
concentrate - - - - (2.6)
----------------------------------- -------------- ------------ ------------ ------------- --------
1 69 . 1 35 . 79 . 384 .
Total Cash Costs (u) 9 2 9 9 2 5 0.6
----------------------------------- -------------- ------------ ------------ ------------- --------
Including:
Total cash costs from 3d
parties concentrate 53.4 - - 53.4 -
----------------------------------- -------------- ------------ ------------ ------------- --------
TCC (u) , US$/oz 1,0 40 752 468 749 678
----------------------------------- -------------- ------------ ------------ ------------- --------
All-in Sustaining Costs (u) and All-in Costs (u)
AISC (u) (..) decreased from US$1,079/oz in 2018 to US$1,020/oz
in 2019. The decrease in AISC (u) primarily reflects reversal of
impairment of non-refractory ore stockpiles at Albyn as well as
increase in physical ounces sold in 2019 with an aggregate of
sustaining exploration and capital expenditures related to the
existing mining operations and underground mining projects at
Pioneer and Malomir, Malomir flotation plant, and capitalized
stripping expenditure during the period remaining at approximately
the same level as in 2018. This effect was partially offset by the
increase in TCC.
AIC (u) decreased from US$1,332/oz in 2018 to US$1,103/oz in
2019, reflecting the decrease in AISC (u) explained above, decrease
in Capital Expenditure (u) in relation to the POX project, with POX
Hub commissioned during the period and Pioneer flotation plant in
development, as well as no perspective stripping expenditure
capitalized in the period.
Hard rock mines 2019 2018
--------------------------------------
Pioneer Malomir Albyn Total Total
US$ US$ US$ US$ US$
million million million million million
-------------------------------- ----------- ----------- ------------ ------------ --------
Physical volume of gold
sold, oz 163,398 179,791 170,817 514,005 369,611
----------- ----------- ------------ ------------
1 69 . 1 35 79 . 384 .
Total Cash Costs (u) 9 . 2 9 9 2 5 0.6
TCC (u) , US$/oz 1,0 40 752 468 749 678
-------------------------------- ----------- ----------- ------------ ------------ --------
Impairment/(reversal of
impairment) of ore stockpiles
and gold in circuit 0.6 0.7 (4.0) (2.7) 20.1
-------------------------------- ----------- ----------- ------------ ------------ --------
Adjusted operating costs 170.4 135.9 75.9 382.3 270 .7
Central administration
expenses 16.7 18.4 17.5 52.5 39.2
Capitalised stripping 14.5 12.7 - 27.1 33.0
Close down and site restoration 0.2 0.2 0.6 1.1 1.2
Sustaining exploration
expenditures 4.0 0.1 0.0 4.1 18.5
Sustaining Capital Expenditure
(u) 16.9 16.5 23.9 57.2 36.1
-------------------------------- ----------- ----------- ------------ ------------ --------
All-in Sustaining Costs
(u) 222.7 183.7 117.9 524.3 398 .7
-------------------------------- ----------- ----------- ------------ ------------ --------
All-in Sustaining Costs
(u) , US$/oz 1,363 1,022 690 1,020 1, 079
-------------------------------- ----------- ----------- ------------ ------------ --------
Exploration expenditure
(u) 0.7 1.1 8.4 10.1 3.1
Capital Expenditure (u) 22.2 10.2 - 32.4 76.7
Capitalised stripping - - - - 14.0
All-in Costs (u) 245.5 195.0 126.3 566.8 492.5
-------------------------------- ----------- ----------- ------------ ------------ --------
All-in Costs (u) , US$/oz 1,503 1,085 739 1,103 1,332
-------------------------------- ----------- ----------- ------------ ------------ --------
Corporate and other
Corporate and other operations contributed US$(41.9) million to
Underlying EBITDA (u) (..) in 2019 compared to US$(34.0) million in
2018. Corporate and other operations primarily include central
administration function, the results of in-house service companies
and related charges, and the Group's share of results of its
associate IRC.
The Group has corporate offices in London, Moscow and
Blagoveshchensk, which together represent the central
administration function. Central administration expenses increased
by US$13.3 million from US$39.2 million in 2018 to US$52.5 million
in 2019.
The Group recognised US$12.0 million share of IRC losses and a
further US$23.4 million impairment of investment in IRC (2018:
US$15.5 million share of profit generated by IRC, including US$28.1
million effect from partial reversal of impairment at K&S mine
and US$(5.7) million impairment of investment in IRC). IRC
contributed US$10.3 million to the Group's Underlying EBITDA (u) in
2019.
Impairment review
Impairment of mining assets
The Group undertook a review of impairment indicators and
impairment reversal indicators of the tangible assets attributable
to its gold mining projects and supporting in-house service
companies. Detailed calculations of recoverable amounts, which are
value-in-use calculations based on discounted cash flows, were
prepared which concluded no impairment was required as at 31
December 2019 and 2018.
Having considered the excess of estimated recoverable amounts
over the carrying values of the associated assets on the statement
of financial position as at 31 December 2019 and taking into
consideration 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 Pioneer CGU would
be appropriate. Accordingly, a pre-tax impairment reversal of
US$43.5 million (being a post-tax impairment reversal of US$34.8
million) 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 Pioneer.
- A further reversal of impairment previously recorded against
the carrying value of the assets of the supporting in-house service
companies would be appropriate. Accordingly, a pre-tax impairment
reversal of US$9.4 million (being a post-tax impairment reversal of
US$7.8 million) 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.
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.
The key assumptions which formed the basis of forecasting future
cash flows and the value in use calculation are set out below:
2019 2018
--------------------------- ------------- -------------
Long-term real gold price US$1,400/oz US$1,300/oz
Discount rate (a) 7.0% 8.5%
RUB : US$ exchange rate RUB66 : US$1 RUB67 : US$1
--------------------------- ------------- -------------
(a) Being the post-tax real weighted average cost of capital,
equivalent to a nominal pre-tax discount rate of 8.7% (2018:
12.5%)
Impairment of exploration and evaluation assets
As at 31 December 2019, the Group performed a review of its
exploration and evaluation assets and concluded no impairment was
required (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$12.2 million was
recorded against associated exploration and evaluation assets).
As at 31 December 2019, all exploration and evaluation assets in
the statement of financial position related to the areas adjacent
to the existing mines with ongoing drilling and technical studies
being performed.
Investment and other finance income
2019 2018
US$ million US$ million
--------------------------- ----------- -----------
Investment income 3.2 3.8
Guarantee fee income (a) 5.6 -
--------------------------- ----------- -----------
8 . 8 3.8
--------------------------- ----------- -----------
(a) Guarantee fee income under Gazprombank Guarantee
arrangements, as set out in section "Corporate activities" below
.
The Group recognised US$1.8 million interest income on loans
granted and US$1.4 million interest income on cash deposits with
banks.
2019 2018
US$ million US$ million
----------------------- ----------- -----------
Interest expense 71.6 62.8
Interest capitalised (12.3) (33.7)
Other 0.6 0.4
------------------------ ----------- -----------
59.9 29.5
----------------------- ----------- -----------
Interest expense for the year comprised US$42.0 million of
effective interest on the Notes, US$ 13.0 million of effective
interest on the Convertible Bonds, US$16.0 million of interest on
prepayments on gold sale agreements and US$0.6 million interest on
finance lease (2018: US$41.9 million of effective interest on the
Notes, US$12.6 million of effective interest on the Convertible
Bonds, US$1.1 million of effective interest on bank facilities and
US$7.2 million of interest on prepayments on gold sale
agreements).
As the Group continued with completion of the POX Hub, this
project met eligibility criteria for borrowing costs capitalisation
under IAS 23 "Borrowing Costs". US$12.3 million of interest expense
was capitalised within property, plant and equipment (2018: US$33.7
million interest capitalised within property, plant and equipment
). With all four autoclaves of the POX Hub now fully functional,
interest capitalisation in relation to POX Hub ceased in December
2019, with increase in net interest expense from December 2019
onwards. Construction of the flotation line at Pioneer met
eligibility criteria for borrowing costs capitalization with
relevant interest to be capitalized going forward.
Net other finance gains/ ( losses )
Net other finance losses for the year totalled US$(42.2) million
compared to US$10. 2 million of net other finance gains in 2018.
Key elements of other finance gains and losses this period
include:
- US$ (31.1) million fair value loss from re-measurement of the
conversion option of the convertible bonds;
- US$(11.2) million loss on repurchase of the Existing Bonds as
set out in section "Corporate activities" below;
- US$3.6 million gain from re-measurement of receivable from IRC
under ICBC Guarantee arrangements to fair value as set out in
section "Corporate activities" below;
- US$(2.0) million fair value loss 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$(1.5) million net loss on other items.
Net impairment reversals/(impairment losses) on financial
instruments
In 2019, the Group recognised US$2.3 million revesal of
impairment of financial assets (2018: US$3.2 million impairment
losses of financial assets) and net of US$28.5 million reversal of
provision for expected credit losses under Gazprombank and ICBC
guarantee arrangements (2018: US$25.5 million provision for
expected credit losses under ICBC guarantee arrangements), as set
out in section "Corporate activities" below.
Taxation
2019 2018
US$ million US$ million
------------- ----------- -----------
Tax charge 27.2 56.5
-------------- ----------- -----------
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%. In 2019 LLC
Malomirskiy 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 year arises primarily related to the
Group's gold mining operations and is represented by a current tax
charge of US$29.7 million (2018: US$19.9 million) and a deferred
tax credit, which is a non-cash item, of US$2.4 million (2018:
deferred tax charge of US$36.6 million). Included in the deferred
tax credit in 2019 is a US$20.4 million credit (2018: US$30.6
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$32.7 million in Russia (2018: corporation tax
payments in aggregate of US$5.0 million in Russia).
Earnings per share
2019 2018
--------------------------------------- ---------------- ---------------
Profit for the year attributable to
equity holders of Petropavlovsk PLC US$ 26.9 million US$24.5 million
Weighted average number of Ordinary
Shares 3,309,193,559 3,305,069,755
Basic profit per ordinary share US$0.0 1 US$0.0 1
--------------------------------------- ---------------- ---------------
Basic profit per share for 2019 was US$0.01 (2018: basic profit
per share was US$0.01). The total number of Ordinary Shares in
issue as at 31 December 2019 was 3,310,210,281 (31 December 2018:
3,307,151,712).
Financial position and cash flows
31 December 31 December
2019 2018
US$ million US$ million
--------------------------- ----------- -----------
Cash and cash equivalents 48.2 26.2
Notes (a) (500.4) (499.0)
Convertible bonds (b) (109.1) (95.2)
Net Debt (..) (561.3) (568.0)
--------------------------- ----------- -----------
(a) US$500 million Guaranteed Notes due on 14 November 2022 at amortised cost.
(b) US$125 million convertible bonds due on 03 July 2024 at amortised cost.
2019 2018
US$ million US$ million
--------------------------------------------- ----------- -----------
Net cash from operating activities 95 .4 264.2
Net cash used in investing activities (c) ( 84 .7) ( 233 .5)
Net cash from/(used in) financing activities 8.9 (13.0)
--------------------------------------------- ----------- -----------
(c) Including US$103.8 million Capital Expenditure (u) (2018: US$134.4 million).
Key movements in cash and Net Debt (u)
Net Debt
Cash Debt (u)
US$ 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 250 . 5
Decrease in working capital (d) (61.2)
Corporation tax paid (32.7)
Capital Expenditure (u) (103.8)
Capitalized stripping (27.1)
Repayment of loans granted to an associate 56.2
Issue of Bonds, net of transaction
costs 120.6 (107.8)
Repurchase of the Existing Bonds (108.0) 96.8
Interest accrued (55.0)
(67.2)
Interest paid (e) 50.7
Payment for the call option to acquire
non-controlling 25% interest in the
Group's subsidiary LLC TEMI (13.0)
ICBC Guarantee fee 6.0
Interest received 3.3
Other (1.6)
As at 31 December 2019 48.2 (609.5) (561.3)
------------------------------------------- ----------- ----------- -----------
(d) Including an aggregate of US$187.4 million advance payments
received from Gazprombank and Sberbank outstanding as at 31
December 2019. 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.
(e) Including US$16.0 million interest paid in relation to
advance payments from Gazprombank and Sberbank.
Capital Expenditure (u) (..)
The Group invested an aggregate of US$103.8 million in 2019
compared to US$134.4 million in 2018. The key areas of focus in
2019 were on the POX project completion, exploration and
development to support the underground mining at Pioneer and
Malomir, expansion of tailings 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$12.3 million of interest expense incurred in relation to the
Group's debt into the cost of the POX Hub, Malomir flotation and
Pioneer flotation (2018: US$33.7 million into the cost of the POX
Hub and Malomir flotation).
Exploration Development Total
expenditure expenditure CAPEX
and other (u)
CAPEX (u)
US$ million US$ million US$ million
--------------------------------- ------------ ------------ -----------
POX(a) - 17.1 17.1
Pioneer (b),(c) 4.7 29.9 34.6
Malomir(d), (e) 1.2 14.1 15.2
Albyn(f) 8.4 21.6 30.0
Corporate and in-house services - 6.9 6.9
14.2 89.6 103.8
-------------------------------- ------------ ------------ -------------
(a) Including US$17.1 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$8.8 million of expenditure in relation to the
underground mining project at Pioneer to be sustaining Capital
Expenditure (u) for the purposes of calculating AISC (u) and AIC
(u) .
(c) Including US$ 15.2 million development expenditure in
relation to the Pioneer flotation (including tailing dams) to be
non-sustaining Capital Expenditure for the purposes of calculating
the AISC (u) and AIC (u) .
(d) Including US$2.8 million of development expenditure in
relation to the underground mining project at Malomir to be
sustaining Capital Expenditure (u) for the purposes of calculating
AISC (u) and AIC (u) .
(e) Including US$8.2 million of development 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) .
(f) Including US$10.1 million of development expenditure in
relation to Albyn tailing dams and US$5.3 million in relation to
road between Elginskoye and Albyn processing facilities, which are
considered to be sustaining Capital Expenditure for the purposes of
calculating AISC and AIC.
Foreign currency exchange differences
The Group's principal subsidiaries have a US Dollar functional
currency. Foreign exchange differences arise on the translation of
monetary assets and liabilities denominated in foreign currencies,
which for the principal subsidiaries of the Group are the Russian
Rouble and GB Pounds Sterling.
The following exchange rates to the US Dollar have been applied
to translate monetary assets and liabilities denominated in foreign
currencies.
31 December 31 December
2019 2018
------------------------------- ----------- -----------
GB Pounds Sterling (GBP:US$) 0.75 0.78
Russian Rouble (RUB:
US$) 61.91 69.47
-------------------------------- ----------- -----------
The Rouble recovered by 11% against the US Dollar during 2019,
from RUB69.47: US$1 as at 31 December 2018 to RUB61.91: US$1 as at
31 December 2019. The average year-on-year depreciation of the
Rouble against the US Dollar was approximately 3%, with the average
exchange rate for 2019 being RUB64.69: US$1 compared to RUB62.68:
US$1 for 2018. The Group recognised foreign exchange losses of
US$21 million in 2019 (2018: gains of US$8.5 million) arising
primarily on Rouble denominated net monetary assets.
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$0.6 million during the period (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 year ended 31 December 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.
At 31 December 2019 the remaining outstanding contractual guarantee
fee was US$5.0 million, which had a corresponding fair value after
provision for credit losses of US$4.4 million and is payable by IRC
no later than 31 December 2020 (31 December 2018: outstanding
contractual guarantee fee of US$10.3 million with a 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. The
outstanding loan principal was US$225 million as at 31 December
2019. 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 year ended
31 December 2019 was estimated at the annual rate of 3.07% for 2019
by reference to the average outstanding principal balance under
Gazprombank Facility. The guarantee fee charged for 2019 was US$5.6
million, with corresponding value of US$5.0 million after provision
for expected credit losses
The following assets and liabilities have been recognised in
relation to the ICBC Guarantee and Gazprombank Guarantee as at 31
December 2019 and 31 December 2018:
31 December 31 December
2019 2018
US$ million US$ million
----------------------------------------------- ------------ ------------
Other receivables - ICBC Guarantee 4 .4 6.8
Other receivables - Gazpombank Guarantee 5.0 -
Financial guarantee contract - ICBC Guarantee - (37.4)
Financial guarantee contract - Gazpombank ( 8 . 9 ) -
Guarantee
----------------------------------------------- ------------ ------------
The following gains and losses resulting from the aforementioned
transactions were recognised during the period:
2019
US$ million
----------------------------------------------------- ------------
Fair value change on ICBC Guarantee fee receivable 3.6
Gazpombank Guarantee fee for the year 5.0
De-recognition of liability under ICBC Guarantee
arrangements 37.4
Recognition of liability under Gazpombank Guarantee
arrangements (8.9)
Interest on loans advanced to IRC 1.8
Reversal of provision for expected credit losses
following repayment of loans advanced to IRC 3.2
----------------------------------------------------- ------------
41.1
----------------------------------------------------- ------------
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
licenses for the Elginskoye Ore Field and Afanasievskaya
Prospective Ore Area, from its shareholder Agestinia Trading
Limited for an aggregate consideration of US$60 million (adjusted
to US$53.5 million if certain conditions are met). The option
premium payable is US$13 million, which was paid during the year
ended 31 December 2019. 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. As at 31 December 2019, the fair value of the
derivative financial asset was US$11.0 million reflecting a loss on
re-measurement to fair value of US$2.0 million and the initial
US$13 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.
The US$11.2 million difference between cash paid to purchase the
Existing Bonds and the carrying value of respective debt was
recognised as loss on re-purchase of the Existing Bonds.
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 at least 12 months from the date of approval of the
2019 Annual Report and Accounts. As at 31 December 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 June 2020. The Group has also performed projections under
a layered stressed case that is based on a gold price, which is
approximately 10% lower than the upper quartile of the average of
the market consensus forecasts, processing of third-party
concentrate through POX facilities is approximately 10% lower than
projected and oxide gold production from underground operations at
Pioneer and Malomyr approximately 10% lower than projected, and
Russian Rouble : US Dollar exchange rate that is approximately 10%
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 31 December 2019, the Group has guaranteed the outstanding
amounts IRC owed to Gazprombank. The outstanding loan principal was
US$225 million as at 31 December 2019 and the facility is subject
to an initial US$160 million guarantee by the Group (see note 26).
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.
The directors have also considered the potential impacts of
Covid-19 which are described in detail in the Annual Report.
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 2019 Annual Report and Accounts.
Accordingly, they continue to adopt the going concern basis of
accounting in preparing these consolidated financial
statements.
2020 Outlook
Production is on track to meet the full year target of 620 -
720koz of gold in 2020. The Group expects TCC .. in 2020 to be in
the range of US$700 - US$800/oz excluding third parties concentrate
as the pricing of concentrate depends on highly volatile gold
price.
FY 2019 Consolidated Annual Financial Statements
Review of Ore Reserves and Mineral Resources
In line with best industry practice, Petropavlovsk reports its
Mineral Resources and Ore Reserves in accordance with the JORC
Code. The Mineral Resource and Ore Reserve estimates are an update
on independent estimates prepared by Wardell Armstrong
International (WAI), a UK based independent technical consultancy
firm, in April 2017. The updated estimates incorporate all material
exploration completed in 2017, 2018 and 2019 as well as depletion
due to mining activities. To reflect recent market trends, the
Company has increased its long-term gold price assumption for
Mineral Resource reporting from $1,500/oz to $1,700/oz. Similarly,
the long-term gold price assumption for Ore Reserve reporting was
changed from $1,200/oz to $1,400/oz.
As at 31 December 2019, total Group Mineral Resources (including
Reserves) amounted to 21.03Moz of gold compared to 20.52Moz at end
2018, with total Reserves amounting to 8.46Moz compared to 8.21Moz
at end 2018. The increase in Mineral Resources is due to a
combination of exploration success at Pioneer and Malomir and a
higher gold price assumption. In particular, the higher price
assumption has enabled tailings stored at Pioneer and Pokrovskiy to
be included as JORC Inferred Resources given their potential to be
re-processed.
There was an overall decrease in Ore Reserves at Pioneer due to
mining depletion and the use of more conservative recovery and cost
assumptions with respect to estimating refractory gold ores. This
was more than offset by an increase in Ore Reserves at Malomir and
Albyn. The increase at Malomir resulted from an updated pit design
and the inclusion of new discoveries with open pit mining potential
at the Quartzitovoye area. An increase in Ore Reserves at Albyn
resulted from successful in-fill drilling which converted Inferred
resources into Ore Reserves at the Elginskoye deposit.
The tables below provide a summary of Group Mineral Resources
and Ore Reserves. Detailed asset by asset Mineral Resource and Ore
Reserve information can be found on the Company web site.
An independently audited estimate is expected to be published
during Q3 2020.
Group Ore Reserves as at 31/12/2019 (in accordance with the JORC
Code 2012 (1) )
Total Open Pit and Underground Ore Reserves
Category Tonnage (kt) Grade (g/t Metal (Moz)
Au)
Total Proved 55,300 0.78 1.38
----------------- ------------- ----------- ------------
Probable 223,316 0.99 7.08
---------------------------------- ------------- ----------- ------------
Proved+Probable 278,616 0.94 8.46
---------------------------------- ------------- ----------- ------------
Non-Refractory Proved 22,158 0.69 0.49
----------------- ------------- ----------- ------------
Probable 57,964 1.06 1.98
---------------------------------- ------------- ----------- ------------
Proved+Probable 80,122 0.96 2.47
---------------------------------- ------------- ----------- ------------
Refractory Proved 33,141 0.84 0.89
----------------- ------------- ----------- ------------
Probable 165,352 0.96 5.10
---------------------------------- ------------- ----------- ------------
Proved+Probable 198,494 0.94 5.99
---------------------------------- ------------- ----------- ------------
Total Open Pit Ore Reserves
Category Tonnage (kt) Grade (g/t Metal (Moz)
Au)
Total Proved 55,103 0.75 1.34
----------------- ------------- ----------- ------------
Probable 221,952 0.95 6.81
---------------------------------- ------------- ----------- ------------
Proved+Probable 277,055 0.91 8.14
---------------------------------- ------------- ----------- ------------
Non-Refractory Proved 21,961 0.63 0.45
----------------- ------------- ----------- ------------
Probable 57,094 1.00 1.84
---------------------------------- ------------- ----------- ------------
Proved+Probable 79,055 0.90 2.28
---------------------------------- ------------- ----------- ------------
Refractory Proved 33,141 0.84 0.89
----------------- ------------- ----------- ------------
Probable 164,858 0.94 4.97
---------------------------------- ------------- ----------- ------------
Proved+Probable 197,999 0.92 5.86
---------------------------------- ------------- ----------- ------------
Total Underground Ore Reserves
Category Tonnage (kt) Grade (g/t Metal (Moz)
Au)
Total Proved 197 7.56 0.05
----------------- ------------- ----------- ------------
Probable 1,364 6.25 0.27
---------------------------------- ------------- ----------- ------------
Proved+Probable 1,561 6.42 0.32
---------------------------------- ------------- ----------- ------------
Non-Refractory Proved 197 7.56 0.05
----------------- ------------- ----------- ------------
Probable 870 5.08 0.14
---------------------------------- ------------- ----------- ------------
Proved+Probable 1,067 5.54 0.19
---------------------------------- ------------- ----------- ------------
Refractory Proved - - -
----------------- ------------- ----------- ------------
Probable 494 8.32 0.13
---------------------------------- ------------- ----------- ------------
Proved+Probable 494 8.32 0.13
---------------------------------- ------------- ----------- ------------
Notes:
(1) With an exception of Tokur, Group Ore Reserves statements
are prepared internally as an update of the April 2017 WAI
estimate. The Pioneer, Malomir and Albyn Reserves were prepared in
April 2020 in accordance with JORC Code 2012; Tokur Reserves were
prepared in 2010 by WAI in accordance with JORC Code 2004 and there
have been no changes to the Tokur estimates since that date
(2) Pioneer, Malomir and Albyn Ore Reserves for open pit
extraction are estimated within economical pit shells using a
US$1,400/oz gold price assumption and applying other modifying
factors based on the projected performance of these operating
mines. Tokur Reserves have been based on a US$1,000/oz gold price
assumption, together with operating costs assumptions relevant at
the time of the estimate
(3) The Open Pit Reserves cut-off grade for reporting varies
from 0.30 to 0.70g/t Au, depending on the asset and processing
method
(4) Underground Ore Reserves estimates use a mine design with
decline access, trackless mining equipment and a sublevel open
stope mining method with or without back fill
(5) Reserve figures have been adjusted for anticipated dilution
and mine recovery
(6) The Underground Reserves cut-off grade for reporting is
1.5g/t Au
(7) In accordance with JORC Code, all open pit and underground
designs have been based on Measured and Indicated Resources; in
addition to the Proved and Probable Reserves quoted above, the
design captures the following Inferred Resource:
- Pioneer: 61,006kt @ 0.30g/t (0.59Moz) of non-refractory and
7,647kt @ 0.67g/t (0.16Moz) of refractory
- Malomir: 166kt @ 0.77g/t (0.004Moz) of non-refractory and
6,453kt @ 0.89g/t (0.18Moz) of refractory
- Albyn 4,296 @ 1.01g/t (0.1Moz) of non-refractory and 55.7kt@
1.25g/t (0.02Moz) of refractory
(8) Figures may not add up due to rounding
Group Mineral Resources as at 31/12/2019 (in accordance with the
JORC Code 2012 (1) )
Total Open Pit and Underground Mineral Resources
Category Tonnage (kt) Grade (g/t Metal (Moz)
Au)
Total Measured 75,490 0.87 2.11
-------------------- ------------- ----------- ------------
Indicated 464,138 0.86 12.76
------------------------------------- ------------- ----------- ------------
Measured+Indicated 539,628 0.86 14.87
------------------------------------- ------------- ----------- ------------
Inferred 293,575 0.65 6.16
------------------------------------- ------------- ----------- ------------
Non-Refractory Measured 37,690 0.93 1.13
-------------------- ------------- ----------- ------------
Indicated 143,853 0.95 4.38
------------------------------------- ------------- ----------- ------------
Measured+Indicated 181,544 0.94 5.51
------------------------------------- ------------- ----------- ------------
Inferred 134,738 0.58 2.53
------------------------------------- ------------- ----------- ------------
Refractory Measured 37,800 0.81 0.98
-------------------- ------------- ----------- ------------
Indicated 320,285 0.81 8.38
------------------------------------- ------------- ----------- ------------
Measured+Indicated 358,084 0.81 9.37
------------------------------------- ------------- ----------- ------------
Inferred 158,837 0.71 3.63
------------------------------------- ------------- ----------- ------------
Total Open Pit Mineral Resources
Category Tonnage (kt) Grade (g/t Metal (Moz)
Au)
Total Measured 73,979 0.80 1.90
-------------------- ------------- ----------- ------------
Indicated 457,788 0.82 12.05
------------------------------------- ------------- ----------- ------------
Measured+Indicated 531,767 0.82 13.95
------------------------------------- ------------- ----------- ------------
Inferred 285,832 0.60 5.54
------------------------------------- ------------- ----------- ------------
Non-Refractory Measured 36,179 0.79 0.92
-------------------- ------------- ----------- ------------
Indicated 138,685 0.87 3.86
------------------------------------- ------------- ----------- ------------
Measured+Indicated 174,864 0.85 4.78
------------------------------------- ------------- ----------- ------------
Inferred 127,593 0.48 1.97
------------------------------------- ------------- ----------- ------------
Refractory Measured 37,800 0.81 0.98
-------------------- ------------- ----------- ------------
Indicated 319,103 0.80 8.18
------------------------------------- ------------- ----------- ------------
Measured+Indicated 356,903 0.80 9.17
------------------------------------- ------------- ----------- ------------
Inferred 158,240 0.70 3.57
------------------------------------- ------------- ----------- ------------
Total Underground Mineral Resources
Category Tonnage (kt) Grade (g/t Metal (Moz)
Au)
Total Measured 1,511 4.33 0.21
-------------------- ------------- ----------- ------------
Indicated 6,350 3.50 0.71
------------------------------------- ------------- ----------- ------------
Measured+Indicated 7,861 3.66 0.93
------------------------------------- ------------- ----------- ------------
Inferred 7,743 2.47 0.62
------------------------------------- ------------- ----------- ------------
Non-Refractory Measured 1,511 4.33 0.21
-------------------- ------------- ----------- ------------
Indicated 5,168 3.10 0.51
------------------------------------- ------------- ----------- ------------
Measured+Indicated 6,680 3.38 0.72
------------------------------------- ------------- ----------- ------------
Inferred 7,146 2.43 0.56
------------------------------------- ------------- ----------- ------------
Refractory Measured - - -
-------------------- ------------- ----------- ------------
Indicated 1,181 5.27 0.20
------------------------------------- ------------- ----------- ------------
Measured+Indicated 1,181 5.27 0.20
------------------------------------- ------------- ----------- ------------
Inferred 598 2.98 0.06
------------------------------------- ------------- ----------- ------------
Notes:
(1) Mineral Resources include Ore Reserves
(2) Mineral Resource estimates for Pokrovskiy, Pioneer, Malomir
and Albyn were prepared internally by the Group in accordance with
JORC Code 2012 as an update of the April 2017 statement audited by
WAI; Mineral Resources for Tokur were reviewed by WAI in 2010 in
accordance with JORC Code 2004 and there have been no changes to
the Tokur estimates since that date
(3) Open Pit Mineral Resources for Pokrovskiy, Pioneer, Malomir
and Albyn are constrained by conceptual open-pit shells at a
$1,700/oz long term gold price; Tokur Mineral Resources have no
open pit constraints
(4) The cut-off grade for Mineral Resources for open pit mining
varies from 0.25 to 0.50g/t depending on the type of mineralisation
and proposed processing method
(5) A cut-off grade of1.5g/t is used to report Mineral Resources
for potential underground mining at all sites with exception of
Albyn where a 1.0g/t cut off was used
(6) Mineral Resources are not Reserves until they have
demonstrated economic viability based on a feasibility or
pre-feasibility study
(7) Grade represents estimated contained metal in the ground and
has not been adjusted for metallurgical recovery
(8) Figures may not add up due to rounding
Exploration Findings
Pioneer
Exploration at North East Bakhmut (NE Bakhmut) focused on
payshoots 1 and 2, to investigate the possibility of higher-grade
underground mineralisation as well as to support ongoing mining
activities.
Highlights for the year included:
- Two drill holes intersected mineralisation 30m to 70m below
the pit floor at NE Bakhmut 1, confirming mineralisation extends
well below the current open pit, with significant intersections of
14.1m@1.17g/t (C-6334), 7.2m @ 3.77g/t (C-1083) and 5.3m @ 1.36g/t
(C-1083)
- The technical team is currently evaluating the possibility of deepening the NE Bakhmut 1 pit
- Stope definition drilling and production grade control
sampling completed at NE Bakhmut 2 resulted in underground
resources increasing from c.127 to c.142koz
Deep drilling at the Nikolaevskaya zone resulted in the
discovery of further downdip extensions of the orebody and an
increase in the mineral resource potential for underground
mining.
Deep in-fill drilling at the central section of the Andreevskaya
zone hit a payshoot with the best intersection grading 58.23g/t
over a thickness of 11.1m. Since this is an in-fill drill hole, it
does not extend the Andreevskaya ore body but demonstrates the
existence of extremely high-grade pockets of mineralisation which
would not have been detected by 40x40m drill grid. Historically,
the Andreevskaya open pit has produced approximately 25% more gold
than expected due to this effect. As a result, the existing
Andreevskaya underground resource and reserve estimates are likely
to be conservative.
Albyn
Resource expansion drilling on the periphery of Elginskoye has
extended known gold mineralisation in the south-west, south-east
and north, resulting in a 23% increase in Reserves compared to the
previous year.
Drilling at Sukholozhskiy, 500m west of the Albyn open pit,
intersected high grade mineralisation, with the best intersection
of 2.5m @ 12.3g/t.
Malomir
In-fill drilling at Quartzitovoye confirmed the presence of a
bulk stockwork to the west of ore body 55. This was previously
considered to be a target for underground mining linked to the
Quartzitovoye underground mine. However, the stockwork appears to
be an increasingly attractive target for an open pit mine that
would replace the Quartzitovoye underground mine once depleted.
Drilling at Osipkan, a Tokur satellite located 130km away from
Malomir, has identified two
zones equivalent to Inferred under JORC resources, including
97koz (2.5Mt @ 1.23g/t) and 22koz (458kt @ 1.50g/t)
Other Projects
Early stage exploration at the Chogarskaya and Verkhne-Udskaya
licences in the Khabarovsk region yielded some promising results,
including grab samples from the Chogarskaya license returning
grades of up to 22.1g/t. At the Verkhne-Udskaya license, the
average grade for mineralised trench samples is c.1g/t, whilst grab
samples taken from the areas not yet trenched have shown grades of
up to 10g/t.
Preliminary metallurgical tests suggest gold mineralisation at
Verkhne-Udskaya is non-refractory.
Post Year End Events
In February 2020, the Group acquired exploration assets at
Mariinskiy, comprising two adjacent exploration licences with a
total area of c.155km(2) located c.30km north-east of Malomir and
c.50km west from Tokur.
These licences cover an area where extensive historical alluvial
mining has taken place over a strike length of c.18km.
Historical exploration work has identified at least 30 quartz
veins with gold grades of up to 10g/t, as well as disseminated gold
mineralisation with grades of up to 2.5g/t.
The Company's in-house exploration team believe that this asset
has the potential to contain substantial gold resources, of a
similar scale and nature to known ore bodies at Malomir, including
its satellites.
Development
Pioneer flotation
Following the launch of the POX Hub, the Group has started
construction of a 3.6Mtpa flotation at Pioneer plant which is
expected to be operational from Q4 2020. The addition of a
flotation plant will enable Pioneer's substantial refractory
reserves to be processed by concentrating refractory ore at the
mine prior to transporting concentrate to the POX Hub for further
processing into doré.
The flotation plant will utilise two of the c.2.0Mt per annum
crushing and grinding lines that are currently dedicated to the RIP
circuit. Consequently, non-refractory processing capacity will be
reduced to 2.7Mtpa from 6.7Mtpa. Given the harder nature of
refractory ore, the combined annual throughput of refractory gold
ores through the two milling lines is expected to be less than
4.0Mtpa at around 3.6Mtpa.
Elginskoye
In 2019, the Group commenced an extensive exploration program to
in-fill existing drill grid and increase confidence in Ore Reserves
scheduled for mining in the short and mid-term, as well as to
expand known Mineral Resources along strike and down dip. As part
of the exploration programme, a large number of cyanide tests were
carried out to better define both refractory and non-refractory
reserves.
In H2 2019, preparation work began ahead of full-scale mining at
Elginskoye in H2 2020. As part of this work, a 30km long all-season
road was constructed to connect Elginskoye with the processing
facilities at Albyn. On-site mining infrastructure was created and
waste stripping work commenced late 2019.
As at the end of Q1 2020, mining and preparation work remains
on-schedule. The start of processing of Elginskoye ore will
coincide with cessation of Albyn ore processing. Ore from
Elginskoye will be transported by trucks to the existing Albyn RIP
plant and therefore no capital investment is required to create a
dedicated Elginskoye processing facility.
Q1 2020 Sales and Production Update
Gold sales
-- 51% increase in total gold sales to 162.5koz (Q1 2019:
107.7koz), of which 60.9koz (37%) came from processing third-party
refractory gold at the POX Hub
-- Q1 2020 average realised gold price of $1,570/oz (Q1 2019:
$1,278/oz); fully reflecting the market price of gold, following
the expiry of outstanding gold hedging contracts at the end of
December 2019
Sales by asset (koz) Q1 2020 Q1 2019
---------------------------------- -------- --------
JSC Pokrovskiy Mine 86.9 22.0
Pioneer 26.0 22.0
Third-party concentrate (POX 60.9 -
Hub)
LLC Malomirskiy Rudnik (Malomir) 35.3 44.4
LLC Albynskiy Rudnik (Albyn) 40.3 41.4
---------------------------------- -------- --------
Total Group 162.5 107.7
---------------------------------- -------- --------
Numbers may not add up due to rounding
Pokrovskiy Pressure Oxidation (POX) Hub
-- A total of 33.9koz of gold was produced from processing 35kt
of Malomir refractory concentrates with stable recoveries averaging
91.5%
-- A strong quarter for the processing of third-party
concentrates, with 84.2koz of gold produced from 35kt of high-grade
concentrate with recoveries averaging 94.2%
Q1 2020 Operations Report
JSC Pokrovskiy Mine
The JSC Pokrovskiy mine is a holder of a number of licences,
including licences for the Pokrovskiy and Pioneer deposits. The
Pokrovskiy deposit ceased operations in Q1 2018 with its site and
processing facilities converted to host the new POX Hub, where
concentrates from the Malomir flotation plant (which is reported as
part of the Malomir production table) and third-party concentrates
are processed.
Pokrovskiy Units Q1 2020 Q1 2019
---------------------------- --------- -------- --------
POX Plant (3rd party concentrates)
-----------------------------------------------------------
Concentrate treated t '000 35 -
Average grade g/t 72.3 -
Gold in concentrate oz. '000 81.3 -
Recovery % 94.2 -
Gold recovered oz. '000 76.5 -
Gold production (doré) oz. '000 84.2 -
---------------------------- --------- -------- --------
Note: numbers may not add up due to gold in circuit
The processing of third-party material was strong in the quarter
with 35kt of high-grade material (72.3g/t) processed and recoveries
averaging 94.2%, in-line with expectations.
Pioneer
Pioneer is currently focused on mining non-refractory ores from
several conventional open pits and underground operations. The
construction of a new flotation facility at Pioneer will lead to a
transition in Q4 2020 from mining non-refractory to mainly
refractory ores for processing at the POX Hub.
Pioneer Units Q1 2020 Q1 2019
----------------------------- ---------- -------- --------
Mining operations
----------------------------- ---------- -------- --------
Total material moved m3 '000 4,573 5,059
Ore mined t '000 841 331
Average grade g/t 0.94 0.95
Gold content oz. '000 25.3 10.1
Processing operations (RIP plant)
-------------------------------------------------------------
Total milled t '000 1,316 1,407
Average grade g/t 0.78 0.60
Gold content oz. '000 32.8 27.4
Recovery % 87.3 81.3
Gold recovered oz. '000 28.6 22.2
Gold production (doré) oz. '000 26.4 21.9
----------------------------- ---------- -------- --------
Note: numbers may not add up due to gold in circuit
Open-pit mining produced mostly lower grade material which was
blended with higher grade ores from the Katrin pit and high-grade
underground ore prior to processing at the plant.
Stripping of refractory ore has been starting at Bakhmut,
Yuzhnaya and Promezhutochnaya zones in accordance with schedule of
commission of flotation lines at the Pioneer processing plant in
2H2020.
LLC Malomirskiy Rudnik
LLC Malomirskiy Rudnik is a holder of a licence for the Malomir
deposit, a conventional open-pit and underground mining operation
transitioning towards mainly refractory ore processing using the
onsite flotation plant. The resulting concentrate is shipped for
processing to the Pokrovskiy POX Hub. The Malomir deposit has
extensive refractory reserves and resources and both near-mine and
surrounding areas are considered highly prospective for the
discovery of further refractory gold.
Malomir Units Q1 2020 Q1 2019
----------------------------- ---------- -------- --------
Mining Operations
----------------------------- ---------- -------- --------
Total material moved m3 '000 2,211 1,923
Non-refractory ore t '000 84 96
Average grade g/t 1.93 6.17
Gold content oz. '000 5.2 19.0
Refractory ore t '000 1,261 1,304
Average grade g/t 1.12 0.84
Gold content oz. '000 45.6 35.2
----------------------------- ---------- --------
Processing operations (RIP plant)
----------------------------------------- -------- --------
Total milled t '000 101 168
Average grade g/t 1.81 3.98
Gold content oz. '000 5.9 21.5
Recovery % 70.3 82.3
Gold recovered oz. '000 4.1 17.7
----------------------------- ---------- --------
Flotation Plant
----------------------------------------- -------- --------
Ore t '000 969 895
Grade g/t 1.28 0.73
Gold content oz. '000 40.0 21.1
Recovery % 86.9 87.0
Yield % 3.7 2.8
Concentrate produced t '000 36 25
Grade g/t 30.3 22.8
Gold content oz. '000 34.7 18.3
----------------------------- ---------- --------
POX Plant
----------------------------------------- -------- --------
Concentrate treated t '000 38 32
Grade g/t 30.1 32.2
Gold in concentrate oz. '000 37.1 33.1
Recovery % 91.5 83.8
Gold recovered oz. '000 33.9 27.7
Gold production (doré) oz. '000 35.2 44.5
----------------------------- ---------- -------- --------
Note: numbers may not add up due to gold in circuit
Mining of non-refractory ore was affected by lower grades due to
less proportion of high grade ore from underground mining compare
with Q1 last year.
Mining of refractory ore continued according to plan as well as
processing with strong flotation plant recoveries averaging 86.9%.
Recoveries at the POX Hub averaged 91.5% for the quarter.
LLC Albynskiy Rudnik
LLC Albynskiy Rudnik is a holder of the licence for the Albyn
deposit, the Group's principal non-refractory asset operating as a
conventional open pit and RIP circuit. The mine life of the Albyn
deposit is expected to cease in 2020. Thereafter, the Company
intends to use Albyn's current processing facilities to treat ore
from the Elginskoye and Unglichikanskoye as well as potentially
from smaller deposits located nearby. These deposits, under the
Company's control, contain JORC Measured, Indicated and Inferred
Mineral Resources of 3.93Moz Au, including 2.32Moz of JORC Proved
and Probable Ore Reserves. During 2020, the Elginskoye pit will be
developed to replace the Albyn pit as the main source of ore from
2020. Road construction between Elginskoye and the Albyn processing
plant was finalised in August 2019.
Albyn Units Q1 2020 Q1 2019
----------------------------- ---------- -------- --------
Mining Operations
----------------------------- ---------- -------- --------
Total material moved m3 '000 3,353 3,223
Ore mined t '000 1,293 1,056
Average grade g/t 1.06 1.24
Gold content oz. '000 43.9 42.1
Processing operations (RIP Plant)
-------------------------------------------------------------
Total milled t '000 1,152 1,137
Average grade g/t 1.16 1.15
Gold content oz. '000 42.9 41.9
Recovery % 94 93.7
Gold recovered oz. '000 40.3 39.3
Gold production (doré) oz. '000 40.4 41.3
----------------------------- ---------- -------- --------
Note: numbers may not add up due to gold in circuit
Albyn performed in line with expectations, with tonnes and
grades mined from the Albyn main ore body as well as processing
with solid recovery ratio of 94%.
Q1 2020 Exploration
In Q1 2020, the Company continued exploration with the objective
of increasing Mineral Resources at the Pioneer, Albyn and Tokur
projects.
Highlights
-- Encouraging results at the Kera prospect (previously Ulgen),
near Albyn, where grades of up to 32g/t were identified
-- Kera maiden resources estimated at c.170koz, at an average
grade of 2.98g/t (low confidence resources in accordance with
Russian classification system)
-- Exploration at Elginskoye expected to add up to 300koz to
resources
-- Extensions of gold mineralised zones were intersected at
Alexandra (Pioneer) and Osipkan (Tokur satellite)
Pioneer
Eight holes were drilled on down dip extensions of the Alexandra
zone. All eight intersected gold mineralisation with grades of
between 0.6 - 0.8g/t and thicknesses of between 9 - 60m. Based on
these results, the Company is evaluating the possibility of
extending the Alexandra pit at depth, increasing non-refractory
reserves.
Albyn
Exploration was carried out at the Kera prospect (previously
named Ulgen) and at Elginskoye. Trenching, pre-strip and drilling
intersected further potentially economic mineralisation. In the
pre-strip, where 12 lines of channel samples were completed, a
mineralised zone with average apparent thickness of 3m at an
average grade of 3.28g/t was identified, with the best assay having
a grade of 32g/t.
Five holes were drilled with a total length of 687m which
intersected gold mineralisation 40 to 80m below surface. The best
drill intersections included 7.4m @ 4.06g/t and 0.6m @ 16.2g/t.
Based on drilling and trenching completed to date, a maiden
resource estimate was prepared for the Kera prospect in accordance
with the Russian resource classification system. The P(1) category
resource, which is a broad equivalent of JORC Inferred category, is
estimated as c.170koz of gold with an average grade of 2.98g/t.
This estimate only covers a small section of known Kera
mineralisation. The Group's geologists believe that Kera has the
potential to become a 1 - 2Moz open pit reserve, capable of
supporting future Albyn production.
Drilling at Elginskoye focused on in-filling drilling in the
central part of the ore body and on extending resources towards the
south-east. A total of 8,897m of drilling was completed during Q1
2020. This work is yet to be incorporated into the Elginskoye JORC
resource model. However, an indicative estimate suggests up to
300koz could be added to existing JORC Mineral Resources.
Tokur
Some 2,390m of drilling and 24,864m(3) of trenching was
completed at the Osipkan prospect, near Tokur. This work targeted
north-west extensions of known Osipkan mineralised zones, yielding
promising results. The best trench intersections included 7.0m @
1.32g/t, 5.8m @ 0.88g/t and 1.0m @ 3.78g/t.
Selected drill hole intersections included 7.1m @ 2.53g/t,
3.0m@1.40g/t, 6.3m @ 2.17g/t and 4.8m @ 1.00g/t. Osipkan remains a
promising non-refractory prospective satellite to Tokur.
(..) 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
.. Go to "The Use and Application of Alternative Performance
Measures (APMs)" section for further information on our APMs.
.. Go to "The Use and Application of Alternative Performance
Measures (APMs)" section for further information on our APMs.
.. Go to "The Use and Application of Alternative Performance
Measures (APMs)" section for further information on our APMs.
.. Go to "The Use and Application of Alternative Performance
Measures (APMs)" section for further information on our APMs.
.. Go to "The Use and Application of Alternative Performance
Measures (APMs)" section for further information on our APMs.
.. Go to "The Use and Application of Alternative Performance
Measures (APMs)" section for further information on our APMs.
.. Go to "The Use and Application of Alternative Performance
Measures (APMs)" section for further information on our APMs.
.. Go to "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
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
FR GUGDUSUDDGGR
(END) Dow Jones Newswires
May 27, 2020 02:15 ET (06:15 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
