Petropavlovsk posts H1 2010 net loss of USD 55 million

Petropavlovsk PLC presented its results for the six months ended 30 June 2010.


2010 2009 Change

Group Revenue 195.7 214.1 -8.6

EBITDA 50 115.9 -56.9

Operating profit before exceptional items 10.7 92.5 -88.4

Net loss/profit -55.4 74.6 -174.3


In USD million

Financial Highlights

1. Gold production was 166,300oz. The reduction in production was in large part attributable to the processing of lower grades while substantial stripping work of higher- rade areas was undertaken at both Pioneer and Pokrovskiy during the Period;

2. Underlying EBITDA before exceptional items for H1 2010 of USD 50.0 million

3. Operating profit before exceptional items of USD 10.7 million

4. Cash costs per tonne of the ore processed at Pioneer decreased by 59% due to economies of scale which partially offset the effect of lower grade material processed through the mine;

5. Total cash costs of USD 538/oz mainly due to processing significantly lower grades at Pokrovskiy and Pioneer

6. Exceptional impairment provision of USD 33.1 million against amounts invested in the Titanium Sponge Joint Venture due to uncertainty arising from Chinalco, the joint venture partners’ decision not to proceed with the Titanium Sponge Joint Venture;

7. The Board has declared an interim dividend of 3 pence per share. The dividend will be paid on 29 October to shareholders on the register at October 1st 2010.

Mr Peter Hambro Chairman of Petropavlovsk said “We have had a number of notable achievements in the first half underlying EBITDA is positive, there has been a major upgrade in Pioneer’s process capacity, the Kuranakh iron ore mine is in production, Malomir started to treat gold ore on 25 August, Albyn is on track for launch in 2011, good progress has been made with external funding for the iron ore assets at K&S and a Form A1 has been lodged with the Stock Exchange of Hong Kong Limited for the possible listing of our iron ore division.

He said “In my view it is a remarkable success to have delivered a 417% increase in ore milled and a corresponding 59% decrease in costs per tonne at Pioneer, which is now a world-scale bulk tonnage operation with excellent reconciliation between predicted and recovered ounces. At the same time, we have acquired an important new licence area around Pioneer, discovered a new high grade ore column at the Bakhmut area of Pioneer and have acquired approximately 7.4 million ounces of Russian Classification System reserves and resources in the Krasnoyask region.”

He added that “In addition, the proceeds of the convertible bonds that we issued in February have enabled us to advance the timing of our investment in gold and iron ore production at a time when both of these commodities are much in demand and at a good margin compared to our expected costs.”

He also said “Looking forward to the remainder of 2010, at the present time we are not expecting a material shortfall, more than 5%, in achieving our base case annual production target of 670,000oz. Pokrovskiy, following the completion of remedial works on the south pit wall, can now move back to higher grades. In addition to the new production capacity at Pioneer coming on stream and the successful commissioning of Malomir, the achievement of this target should be aided by increased attributable production from the Omchak Joint Venture following the increase in our stake in July 2010.”

He said “In the mean time we should not forget that, historically, the Group has achieved a compound annual growth in production of 18% from 2004 to 2009, including 35% from 2007-2008, and
5 that the delivery of the new processing circuits at Pioneer and the new mine at Malomir would mean a 38% production increase from 2009 to 2010.”

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