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RNS Number : 2297X

Petropavlovsk PLC

27 August 2015

Petropavlovsk PLC

Half-Year Report for the Period Ended 30 June 2015

Petropavlovsk PLC ("Petropavlovsk", the "Company" or, together with its subsidiaries, the "Group") today issues its Half-Year Report for the period from 1 January 2015 to 30 June 2015 ("H1 2015" or the "Period").

Introducing the announcement, Peter Hambro, Chairman, said:

"It is welcome to be able to report a small Operating Profit in the first half of 2015 in spite of the lower gold price and a 26% yoy reduction in the number of ounces we sold. This compares to an operating profit of US$44m in H1 2014 when the gold price was higher. In the first half of 2015 we made further progress at our mines, continuing to deliver on our strategy of decreasing costs and generating cash to fulfil the Group's deleveraging programme and focus on our number one priority: restoring shareholder value. In particular, this involved prioritising advance stripping works, at the expense of lower-grade production, in order to be able to maximise higher-grade production in H2."

This prioritisation is in line with our new policy, which includes a targeted gross margin of c.US$500 per ounce in relation to total cash costs per ounce ("TCC/oz") at current gold prices while maintaining optimal capital and maintenance expenditure.

To achieve the gross margin target in the lower gold price environment, we have concentrated on reducing costs and success has already been achieved at our two main producing mines - Pioneer and Albyn. We intend to improve on this during the second half of 2015.

We expect these achievements to enable us to fulfil our commitments to senior lenders and, thus, achieve our targeted decrease in net debt by the end of 2015. By doing this, we continue to transfer enterprise value back to the equity holders, which is, I believe, where it belongs.

I am pleased to note that IRC has successfully raised net proceeds of c.US$50m from their open offer. These funds significantly de-risk the commissioning process at its K&S mine, which is now well underway. K&S is forecast to be one of the lowest cost iron ore mines in the world and, even in the currently depressed markets, it should generate a significant operating margin when ramped up. Petropavlovsk remains IRC's largest shareholder.

Finally, on behalf of the Board, I am pleased to welcome Alex Green, as an independent Non-Executive Director of the Company with effect from 27 August 2015. Details of his career are set out in the body of this statement. My fellow directors and I look forward to working with him and I am sure that his experience will be of great value to the Board."

Financial Highlights Overview

Costs

· A c.9% year-on-year ("yoy") decrease in average TCC/oz for the Group's four mines to US$767/oz (H1 2014: US$847/oz) mainly due to:

- Significant yoy decreases in TCC/oz of 25% and 9% at Pioneer and Albyn respectively: the Group's main mines which, combined, are expected to produce c.79% of the Group's gold production in 2015

- 13% further increase in operational efficiencies, facilitated by 66% depreciation of the Rouble against the US Dollar in H1 2015 vs H1 2014

- A 37% yoy reduction in costs per tonne mined and 36% yoy reduction in costs per tonne processed

· Decrease in TCC/oz achieved in spite of a scheduled 21% yoy decrease in grades processed, including 27% and 14% respective decrease in grades processed at Pioneer and Albyn

· 11% and 34% respective decrease in TCC/oz at Pioneer and Albyn for Q2 2015 compared with Q1 2015

- Q2 2015 TCC/oz stood at US$567/oz for Pioneer and US$611/oz for Albyn

· Inflationary pressures experienced by the Group offset by:

- The role-out of a new system of procurement, which resulted in a c.4% yoy reduction in the purchasing price for diesel

- The devaluation of the Rouble against the US Dollar, which has benefited Rouble-denominated costs, such as labour, materilas, diesel, electricity and external services. Rouble-denominated costs account for c.75% of the Group's operating cash costs

Reduction in other expenditure

· The Group's cost-cutting programme delivered impressive results:

- 31% yoy decrease in administrative costs

- 84% yoy decrease in development capex

- 48% yoy decrease in exploration capex

Net Debt

· c.US$234 million reduction in net debt as at 30 June 2015 to c.US$696 million following the Group's refinancing, compared with c.US$930 million audited net debt as at 31 December 2014

· Reiterated 2015 year-end net debt guidance of c.US$600 million

· The Company is trading comfortably within its relaxed bank covenants for the period to 30 June 2015

· Reiterated net debt : EBITDA ratio target of 1.5:1, with the Group's production plan providing sufficient cash flows for its scheduled senior bank debt repayments by the middle of 2018 and repayment of US$100 million Convertible Bonds in 2020

EBITDA

· H1 2015 underlying EBITDA of US$90 million, of which 70% was generated in Q2 (H1 2014 US$ 139 million), in line with the Group's forecast

- Resulted in an 89% reduction in loss per share at US$0.03 (H1 2014: US$0.28)

Production

· H1 2015 total gold production of 240.2koz, in line with guidance

· Petropavlovsk maintains flexibility in output in order to minimize operational expenses and maximise cash flow in low gold price environment

FY 2015 Outlook

· H2 2015 production is forecast to be significantly higher than H1, especially at Pioneer, the Group's flagship mine

· Tactical decision on absolute levels of production will be taken during the remainder of H2 2015 to achieve targeted cash flow generation and net debt repayment

· Current mine plans envisage an improvement in head grades and recovery rates across all four mines due to a combination of careful mine planning and the optimisation of technical parameters:

- Pioneer: H2 head grades calculated to more than double compared with H1; expected improvement in recovery rates

- Albyn: H2 head grades to increase by up to 33% compared with H1; recovery rates scheduled to remain stable or to slightly improve

- Malomir: H2 head grades scheduled to be the same or slightly better than in H1; improvement in recovery rates forecast

- Pokrovskiy: H2 head grades scheduled to be the same or slightly better than in H1;

- Increase in grades to be achieved not through high grading but through the planned development of pits and the exploitation of high-grade ore bodies, in accordance with the Group's mining schedules

· In addition, the Group re-iterates its full-year guidance of:

- c.US$600/oz for TCC/oz;

- c.US$600 million for net debt; and

- US$35 million for total capital expenditure

· The Group continues its exploration works and expects to make a further update on new Reserves and Resources in Q1 2016.

Board Changes

· With effect from 27 August 2015, Alex Green has been appointed as an independent Non-Executive Director of the Company. Mr Green has two decades of experience in the resources industry and has a wealth of experience including risk management, development of business strategy and corporate governance.

IRC Limited ("IRC")

· Ongoing cost optimisation programme and the depreciation of Rouble yielded significant reduction of cash costs at the Kuranakh mine

· As advised by IRC's contractor at K&S, overall work progress remains solid and K&S is on track to produce 500,000 tonnes of iron ore in 2015

· Due to the completion of their Open Offer, the Group's stake in IRC Limited reduced from 45.39% to 35.83% on 7 August 2015

· The independent auditors of IRC included an emphasis of the matter, without qualifying their review conclusion, in their report which accompanied IRC's consolidated financial statements for the six months ended 30 June 2015

· IRC's Half-year Report was released on 27 August 2015 and is available to view on the IRC website, www.ircgroup.com.hk

Commenting on the announcement, Pavel Maslovskiy, CEO, said:

"The recent downward pressure and prevailing negative short-term outlook in investor sentiment on the gold price has confirmed that the Group's strategy - decreasing costs and increasing profitability by maximising operational efficiencies, decreasing administrative and capital expenditure and optimising volumes of production - is the right choice.

The measures taken by management to decrease operational expenses were clearly demonstrated in the Q2 2015 results for our two leading mines, Pioneer and Albyn, which are scheduled to produce approximately 79% of the Group's output this year.

Although the Group's average ТСС/oz for H1 2015 was as forecast, below $800 at US$767/oz, H1 2015 ТСС/oz at Pioneer was an impressive US$598/oz, including a Q2 result of US$567/oz. This was achieved despite Pioneer's average H1 2015 head grade being 1.1g/t.

The H2 mining schedules include a planned 2.0 -2.5 times increase in processed grades at Pioneer which, alongside the continued implementation of measures to increase efficiency, is expected to bring Pioneer's H2 TCC/oz significantly lower, to less than US$500/oz.

I want to emphasise that this planned increase in grades in H2 is not going to be achieved through high grading, which could be detrimental to the mine's future economics, but rather through the planned development of pits and the exploitation of high-grade ore bodies, according to the mining schedule.

The optimisation measures at Albyn were focused on increasing recovery rates at the plant. Our metallurgical tests showed that blending ore from the main ore body with ores from satellite deposits depressed recovery rates. Thus the decision was taken to change Albyn's mining schedules accordingly, a decision which has impacted the TCC/oz at the mine: TCC/oz for Q2 2015 decreased by 34% to US$611/oz and, furthermore, we expect H2 ТСС/oz at Albyn to be lower than US$600/oz.

It is also important to note the 25% and 9% of decrease in ТСС/oz at Pioneer and Albyn respectively, of this remarkable TCC/oz decrease was due to improved operational efficiencies at every stage of the production process.

Although the H1 results at our other two mines, Malomir and Pokrovskiy, were less impressive - the targeted level of TCC/oz was not achieved - we do expect, however, that H2 TCC/oz at these mines will be less than US$800/oz due to the optimisation of mining schedules and a decrease in stripping coefficients.

Strict control of capital and administrative expenses resulted in a yoy decrease in all-in costs ("AIC") to US$1,031/oz (H1 2014: US$1,198/oz). These measures are expected to ensure that full-year AIC will not be more than 20-25% higher than ТСС/oz.

Looking at our medium-term production potential, it is important to note the further positive results from the exploration of high-grade ore bodies at deeper horizons at Pioneer. These results have allowed us to commence talks with potential foreign subcontractors to carry out detailed underground exploration."

ENQUIRIES

Petropavlovsk PLC
Alya Samokhvalova	+44 (0) 20 7201 8900
Rachel Mills

Maitland
Neil Bennett James Isola	+44 (0) 20 7379 5151

WEBCAST

There will be a webcast presentation followed by a question and answer session today at 10.00am. Please log onto the Company's website, www.petropavlovsk.net, to view. To ask a question, please dial +44(0)20 3139 4830 and, when prompted, please enter the confirmation number 49860787#.

FINANCIAL RESULTS SUMMARY

	Six months to 30 June 2015 (unaudited)	Six months to 30 June 2014 (unaudited)	Variance	Year ended 31 December 2014
Gold produced	240.2koz	306.4koz	(22%)	624.5koz
Gold sold	229.7koz	310.7koz	(26%)	617.2koz
Avg. realised gold price	US$1,221/oz	US$1,386/oz	(12%)	US$1,331/oz
Total average cash costs	US$767/oz	US$847/oz	(9%)	US$860/oz
All-In Sustaining Costs	US$983/oz	US$1,036/oz	(5%)	US$970/oz
All-in Costs	US$1,031/oz	US$1,198/oz	(14%)	US$1,088/oz
Group revenue	US$297.3m	US$453.0m	(34%)	US$865.0m
Operating profit	US$14.5m	US$44.0m	(67%)	US$51.7m
Underlying EBITDA	US$90.0m	US$139.2m	(35%)	US$251.8m
(Loss)/profit before tax	(US$26.0m)	US$8.3m	n/m	(US$14.3m)
Total net loss	(US$81.6m)	(US$95.3m)	(14%)	(US$347.7m)
Net loss attributable to equity shareholders of Petropavlovsk PLC	(US$51.8m)	(US$54.0m)	(4%)	(US$260.7m)
Basic loss per share	(US$0.03)	(US$0.28)	(89%)	(US$1.33)
Net cash from operating activities	US$11.5m	US$80.8m	(86%)	US$133.2m
From continuing operations	US$19.8m	US$104.0m	(81%)	US$168.8m
From discontinued operations	(US$8.3m)	(US$23.2m)	(64%)	(US$35.6m)
Final dividend paid	-	-	n/a	-
Interim dividend proposed/paid	-	-	n/a	-

Note: Figures may be rounded

(a) Underlying EBITDA is the profit for the Period before financial income, financial expenses, foreign exchange gains and losses, fair value changes, taxation, depreciation, amortisation and impairment charges. A reconciliation of loss for the year and underlying EBITDA is set out in note 25 to the financial statements

(b) Net Debt is as set out in note 22 to the financial statements. As at 30 of June 2014, 31 December 2014 and 30 June 2015, net debt excludes IRC and derivative financial liabilities

FINANCIAL REVIEW

- Financial Highlights

	Six months to 30 June 2015	Six months to 30 June 2014
	US$ million	US$ million
Continuing operations
Total attributable gold production ('000oz)	240.2	306.4
Gold sold ('000oz)	229.7	310.7
Group revenue	297.3	453.0
Average realised gold price (US$/oz)	1,221	1,386
Average LBMA gold price afternoon fixing (US$/oz)	1,206	1,291
Total average cash costs (US$/oz) ^(a),(b)	767	847
All-in sustaining costs ^{(a), (c)}	983	1,036
Underlying EBITDA^(d)	90.0	139.2

Loss for the period	(81.6)	(95.3)
From continuing operations	(28.9)	(16.8)
From discontinued operations	(52.7)	(78.5)

Basic loss per share	(0.03)	(0.28)
From continuing operations	(0.02)	(0.10)
From discontinued operations	(0.01)	(0.18)

Net cash from operating activities	11.5	80.8
From continuing operations	19.8	104.0
From discontinued operations	(8.3)	(23.2)

(a) Calculation of total cash costs ("TCC") is set out in the section Hard-rock mines operations below.

(b) The Group disposed its alluvial operations in April 2015. The comparative data for H1 2014 was restated accordingly to ensure comparably.

(c) All-in sustaining costs ("AISC") and all-in costs ("AIC") are calculated in accordance with guidelines for reporting all-in sustaining costs and all-in costs published by the World Gold Council. Calculation is set out in the section All-in sustaining costs and all-in costs below.

(d) Reconciliation of loss for the period and underlying EBITDA is set out in note 25 to the condensed consolidated financial statements.

	30 June 2015	31 December 2014
	US$ million	US$ million
Cash and cash equivalents	31.1	48.1
Loans	(643.0)	(664.5)
Convertible bonds ^(e)	(84.2)	(313.3)
Net Debt	(696.1)	(929.7)

(e) US$100.0 million convertible bonds due on 18 March 2020 (31 December 2014: $310.5 million convertible bonds due on 18 March 2015).

Note: Figures may not add up due to rounding

Revenue

	Six months to 30 June 2015	Six months to 30 June 2014
	US$ million	US$ million
Revenue from hard-rock mines	281.0	424.1
Revenue from alluvial operations	-	9.0
Revenue from other operations	16.3	19.9
	297.3	453.0

Physical volumes of gold production and sales

	Six months to 30 June 2015	Six months to 30 June 2014
	oz	oz
Gold sold from hard-rock mines	229,657	304,176
Gold sold from alluvial operations	-	6,519
	229,657	310,695
Movement in gold in circuit and doré-bars	10,543	(4,295)
Total attributable production	240,200	306,400

Group revenue during the period was US$297.3 million, 34% lower than the US$453.0 million achieved in H1 2014.

Revenue from hard-rock mines was US$281 million, 34% lower than the US$424.1 million achieved in H1 2014. Gold remains the key commodity produced and sold by the Group, comprising 94% of total revenue generated in H1 2015. The physical volume of gold sold from hard-rock mines decreased by 24% from 304,176 ounces in H1 2014 to 229,657 ounces in H1 2015. The average realised gold price decreased by 12% from US$1,386/oz in H1 2014 to US$1,221/oz in H1 2015. The average realised gold price was above the average market price of US$1,206/oz, reflecting the Group's efforts in effective hedging arrangements.

Hard-rock mines sold 39,763 ounces of silver in H1 2015 at an average price of US$16/oz, compared to 125,428 ounces in H1 2014 at an average price of US$21/oz.

Revenue generated as a result of third-party work by the Group's in-house service companies was US$16.3 million in H1 2015, a US$3.6 million decrease compared to US$19.9 million in H1 2014. 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$14.9 million in H1 2015 compared to US$17.6 million in H1 2014.

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 75,000 ounces of gold matured during the period and contributed US$5.6 million to cash revenue (H1 2014: US$28.8 million from forward contracts to sell an aggregate of 188,807 ounces of gold).

Forward contracts to sell an aggregate of 75,000 ounces of gold at an average price of US$1,201/oz were outstanding as at 30 June 2015.

In October 2014, the Group also purchased a number of gold put options for an aggregate of 150,000 ounces of gold with a strike price of US$1,150/oz as part of a downside protection strategy. The option contracts mature over the period from January 2015 to June 2015. The aggregate premium paid was US$4.8 million.

Forward contracts and US$(3.2) million change in the options fair value contributed US$11/oz to the average realised gold price.

The Group constantly monitors gold price and hedges some portion of production for periods of up to 12-18 months as considered necessary.

The following hedge arrangements were outstanding as at 26 August 2015:

- Forward contracts to sell an aggregate of 50,000 ounces of gold at an average price of US$1,201/oz.

Underlying EBITDA and analysis of operating costs


	Six months to 30 June 2015	Six months to 30 June 2014
	US$ million	US$ million
Loss for the period from continuing operations	(28.9)	(16.8)
Add/(less):
Interest expense	37.3	36.6
Investment income	(0.6)	(0.9)
Other finance (gains)/losses	3.8	-
Foreign exchange losses	7.4	5.4
Taxation	2.9	25.1
Depreciation	59.4	71.2
Impairment of exploration and evaluation assets	-	3.9
Impairment of ore stockpiles	8.8	14.8
Underlying EBITDA	90.0	139.2

Underlying EBITDA as contributed by business segments is set out below.


	Six months to 30 June 2015	Six months to 30 June 2014
	US$ million	US$ million
Pioneer	60.2	74.0
Pokrovskiy	5.2	20.5
Malomir	4.1	17.3
Albyn	34.8	51.9
Total Hard-rock mines	104.3	163.7
Alluvial operations	-	1.7
Corporate and other	(14.3)	(26.2)
Underlying EBITDA	90.0	139.2

Hard-rock mines

This period, hard-rock mines generated underlying EBITDA of US$104.3 million compared to US$163.7 million underlying EBITDA in H1 2014.

Total cash costs for hard-rock mines decreased from US$847/oz in H1 2014 to US$767/oz in H1 2015, primarily reflecting the effect of cost optimisation measures undertaken by the Group in response to the declining gold price environment and scheduled decrease in grades processed as well as positive effect of Rouble depreciation. The decrease in the average realised gold price from US$1,386/oz in H1 2014 to US$1,221/oz in H1 2015 and decrease in physical ounces sold resulted in US$77.9 million decrease in the underlying EBITDA. This effect was partially mitigated by the improvement of the total cash costs which had a net US$18.5 million positive contribution to the underlying EBITDA in H1 2015.

The key components of the operating cash expenses are wages, electricity, diesel, chemical reagents and consumables, as set out in the table below. The key cost drivers affecting the operating cash expenses are stripping ratios, production volumes of ore mined and processed, grades of ore processed, recovery rates, cost inflation and fluctuations in the Rouble to US Dollar exchange rate.

Compared with H1 2014 there was ongoing inflation of certain Rouble denominated costs, in particular, electricity costs in Rouble increased by up to 8% (decreased by up to 35% in US Dollar terms) and cost of chemical reagents increased by up to 4% (decreased by up to 38% in US Dollar terms). In the meantime, cost of diesel decreased by up to 4% (decreased by up to 42% in US Dollar terms) and consumables prices decreased by up to 8% (decreased by up to 45 % in US Dollar terms) as a result of procurement optimisation. The impact of Rouble price inflation was mitigated by the 66% average depreciation of the Rouble against the US Dollar, with the average exchange rate for the period going from 35.03 Roubles per US Dollar in H1 2014 to 58.06 Roubles per US Dollar in H1 2015.

Refinery and transportation costs are variable costs dependent on production volume. Mining tax is also a variable cost dependent on the production volume and the gold price. The mining tax rate is 6%.

	Six months to 30 June 2015		Six months to 30 June 2014
	US$ million	%	US$ million	%
Staff cost	33.8	19	50.8	23
Materials	72.0	40	82.1	36
Fuel	29.7	16	40.3	18
Electricity	14.2	8	19.7	9
Other external services	14.5	8	13.7	6
Other operating expenses	15.4	9	18.0	8
	179.6	100	224.6	100
Movement in ore stockpiles, work in progress and bullion in process attributable to gold production ^(a)	(32.0)		(6.8)
Total operating cash expenses	147.6		217.8

(a) Excluding deferred stripping.

	Hard-rock mines				Six months to 30 June 2015	Six months to 30 June 2014 ^(a)
	Pioneer	Pokrovskiy	Malomir	Albyn	Total	Total
	US$ million	US$ million	US$ million	US$ million	US$ million	US$ million

Revenue
Gold	118.1	29.8	38.8	93.7	280.4	421.5
Silver	0.4	0.1	0.1	0.1	0.6	2.6
	118.5	29.9	38.8	93.8	281.0	424.1

Expenses
Operating cash expenses	49.6	22.5	31.2	44.3	147.6	217.8
Refinery and transportation	0.3	0.1	0.1	0.2	0.6	1.8
Other taxes	1.4	0.3	1.2	1.4	4.3	8.0
Mining tax	7.0	1.8	2.3	5.5	16.6	23.4
Deferred stripping costs	-	-	-	7.6	7.6	9.4
Depreciation and amortisation	18.4	4.5	8.7	26.1	57.7	68.1
Impairment of exploration and evaluation assets	-	-	-	-	-	3.5
Impairment of ore stockpiles	0.8	2.1	5.1	0.8	8.8	14.8
Operating expenses	77.5	31.2	48.6	85.9	243.2	346.8
Result of precious metals operations	41.0	(1.4)	(9.8)	7.9	37.8	77.3

Segment EBITDA	60.2	5.2	4.1	34.8	104.3	163.7

Physical volume of gold sold, oz	96,708	24,295	31,628	77,026	229,657	304,176

Cash costs
Operating cash expenses	49.6	22.5	31.2	44.3	147.6	217.8
Refinery and transportation	0.3	0.1	0.1	0.2	0.6	1.8
Other taxes	1.4	0.3	1.2	1.4	4.3	8.0
Mining tax	7.0	1.8	2.3	5.5	16.6	23.4
Deferred stripping costs	-	-	-	7.6	7.6	9.4
Operating cash costs	58.3	24.7	34.8	59.0	176.7	260.4
Deduct: co-product revenue	(0.4)	(0.1)	(0.1)	(0.1)	(0.6)	(2.6)
Total cash costs	57.9	24.6	34.7	58.9	176.1	257.8

Average TCC/oz, US$/oz	598	1,011	1,098	765	767	847

(a) The Group disposed its alluvial operations in April 2015. The comparative data for H1 2014 was restated accordingly to ensure comparably.

All-in sustaining costs and all-in costs

AISC decreased from US$1,036/oz in H1 2014 to US$983/oz in H1 2015, reflecting the reduction in TCC as well as lower central administration expenses and sustaining capital expenditure related to the existing mining operations.

AIC decreased from US$1,198/oz in H1 2014 to US$1,031/oz in H1 2015, reflecting the decrease in all-in sustaining costs explained above, decrease in exploration expenditure and decrease of capital expenditure related to new projects, which was limited to fulfilling existing contractual commitments relating to POX.

	Hard-rock mines				Six months to 30 June 2015	Six months to 30 June 2014 ^(a)
	Pioneer	Pokrovskiy	Malomir	Albyn	Total	Total
	US$ million	US$ million	US$ million	US$ million	US$ million	US$ million

Physical volume of gold sold, oz	96,708	24,295	31,628	77,026	229,657	304,176

Total cash costs	57.9	24.6	34.7	58.9	176.1	257.8

Average TCC/oz, US$/oz	598	1,011	1,098	765	767	847

Impairment of ore stockpiles	0.8	2.1	5.1	0.8	8.8	14.8
Adjusted operating costs	58.6	26.7	39.8	59.7	184.8	272.6

Central administration expenses	6.6	1.7	2.2	5.2	15.7	22.4
Capitalised stripping at end of the period	17.0	-	-	9.6	26.6	17.4
Capitalised stripping at beginning of the period	-	-	-	(8.4)	(8.4)	(20.0)
Close-down and site restoration	0.1	-	0.1	0.2	0.4	2.9
Sustaining capital expenditure	1.7	-	0.1	4.8	6.6	20.0
All-in sustaining costs	84.0	28.4	42.2	71.1	225.7	315.3

All-in sustaining costs, US$/oz	869	1,167	1,335	923	983	1,036

Exploration expenditure	4.5	-	2.6	2.6	9.7	18.4
Capital expenditure	0.3	-	1.1	-	1.5	30.7
All-in costs	88.8	28.4	45.9	73.7	236.8	364.4

All-in costs, US$/oz	918	1,168	1,454	956	1,031	1,198

(a) The Group disposed its alluvial operations in April 2015. The comparative data for H1 2014 was restated accordingly to ensure comparably.

Corporate and other

The Group has corporate offices in London, Moscow and Blagoveschensk which together represent the central administration function. Central administration expenses decreased by US$7.2 million from US$22.9 million in H1 2014 to US$15.7 million in H1 2015, primarily reflecting cost cutting measures undertaken by the Group.

This period, other operations contributed US$1.4 million to the underlying EBITDA vs. US$(3.3) million in H1 2014.

Interest income and expense

Six months to

30 June 2015

Six months to

30 June 2014

US$ million

Investment income

0.6

0.9

The Group earned US$0.6 million interest income on the cash deposits with banks.

	Six months to 30 June 2015	Six months to 30 June 2014
	US$ million	US$ million
Interest expense	37.2	42.8
Less interest capitalised	-	(6.4)
Other	0.1	0.3
	37.3	36.6

Interest expense for the period was comprised of US$7.7 million effective interest on the Convertible Bonds and US$29.5 million interest on bank facilities (H1 2014: US$12.6 million and US$30.2 million, respectively). There were no interest expense was capitalised as part of mine development costs within property, plant and equipment (H1 2014: US$6.4 million).

Other finance gains/ (losses)

	Six months to 30 June 2015	Six months to 30 June 2014
	US$ million	US$ million
Gain on settlement of the Existing Bonds	0.5	-
Fair value losses on derivative financial instruments ^(a)	(4.2)	-
	(3.8)	-

(a) The conversion option of the New Bonds represents the fair value of the embedded option for the bondholders to convert into the equity of the Company ("the Conversion Right"). As the Company can elect to pay the cash value in lieu of delivering the Ordinary Shares following the exercise of the Conversion Right, the conversion option is a derivative liability. Accordingly, the conversion option is measured at fair value and is presented separately within derivative financial liabilities.

Taxation

Six months to

30 June 2015

Six months to

30 June 2014

US$ million

Tax charge

2.9

25.1

The Group is subject to corporation tax under the UK, Russia and Cyprus tax legislation. The average statutory tax rate for H1 2015 was 20.5% in the UK and 20% in Russia.

The tax charge for this period primarily relates to the Group's precious metals operations and is represented by the current tax of US$16.2 million (H1 2014: US$12.4 million) and by the deferred tax credit, which is a non-cash item, of US$13.3 million (H1 2014: deferred tax charge of US$12.6 million). Included in the deferred tax charge is a US$2.8 million foreign exchange effect. This arises primarily 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 Roubles whilst the future depreciation charges associated with these assets will be based on their US Dollar carrying value and reflects the significant depreciation of the Rouble against the US Dollar in H1 2015.

This period, the Group made corporation tax payments in aggregate of US$26.2 million in Russia (H1 2014: corporation tax payments in aggregate of US$19.0 million in Russia).

Net result from continuing operations

This period net loss from continuing operations amounted to US$28.9 million, compared to net loss of US$16.8 million in H1 2014.

Loss per share

	Six months to 30 June 2015	Six months to 30 June 2014
Loss for the period from continuing operations attributable to equity holders of Petropavlovsk PLC	US$27.7 million	US$17.8 million
Weighted average number of Ordinary Shares	2,001,412,516	196,423,244
Basic loss per ordinary share from continuing operations	US$0.02	US$0.10

Basic loss per share from continuing operations for H1 2015 was US$0.02 compared to US$0.10 basic loss per share for H1 2014. The key factor affecting the basic loss per share was the increase in the weighted average number of Ordinary Shares in issue during the period from 196,423,244 in H1 2014 to 2,001,412,516 in H1 2015. This increase in weighted average number of shares was due the total 3,102,923,272 Ordinary Shares issued in March 2015 as part of the Refinancing.

The total number of Ordinary Shares in issue as at 30 June 2015 was 3,300,561,697 (30 June 2014: 197,638,425).

The Group has a number of potentially dilutive instruments which were anti-dilutive in the H1 2014 and H1 2015 and, accordingly, diluted loss per share was not different from the basic loss per share.

Discontinued operations - IRC

IRC continues to be classified as 'held for sale' and presented separately in the balance sheet as well as presented as a discontinued operation in the income statement.

This period IRC generated US$8.3 million operating losses.

As at 30 June 2015, IRC management concluded that impairment charge was necessary for the K&S Project as its recoverable amount is lower that its carrying amount. Due to falling spot iron ore prices and forecast inflation, the carrying amount of the K&S Project has been impaired by approximately US$189.5 million. This impairment of the carrying amount of the K&S Project was recognised by the Group in prior periods through write-downs of IRC's net assets to fair value less costs to sell based on IRC's share price and, accordingly, had no impact the operating results of IRC in the Group's consolidated financial statements for H1 2015.

The Group recorded a further US$44.9 million write-down to adjust the carrying value of IRC's net assets to fair value less costs to sell based on IRC's share price of HK$0.44 as at 30 June 2015 and reflect the change in the market share price of IRC shares.

On 7 August 2015, IRC completed the Open Offer resulting in the issue of 1,295,976,080 shares. The Group did not subscribe for the Offer Shares it was entitled to and the Group's interest in the share capital of IRC was diluted to 35.83%. With other significant shareholder blocks in place following the completion of the Open Offer and despite the Group's continuing guarantee of IRC's facility with ICBC, the Group is no longer considered to be exercising de facto control over IRC and, accordingly, IRC ceased being a subsidiary to the Group and is recognised as an associate to the Group from 7 August 2015.

The result from disposal of IRC has not been finalised by the date of approval of the 2015 Half-Year Report and will be disclosed in the 2015 Annual Report. Subsequent to 30 June 2015, the IRC share price decreased to HK$0.35 as at the date of disposal, 7 August 2015. Whilst this will not impact the Group's annual EBITDA, this further decline in the value of IRC is expected to have a material impact on the Group's results in H2 2015.

The Group will account for IRC as an associate under the equity accounting method as required by IAS 28 "Investments in Associates and Joint Ventures". Under this method, the fair value of the Group's interest in IRC on 7 August 2015 of c.US$100 million will become the deemed historical cost of the associate. This will be recognised within the investments in associate line as a single amount following de-recognition of the separate "asset held for sale", "liability held for sale" and NCI balance at that date. Subsequently, this investment in associate will be tested for impairment, if there are any impairment indicators, and the Group will recognise its 35.8% share of IRC profit/ loss for period as income / loss from an associate.

Financial position and cash flows

	30 June 2015	30 June 2014
	US$ million	US$ million
Cash and cash equivalents	31.1	63.8
Loans	(643.0)	(681.1)
Convertible bonds ^(a)	(84.2)	(306.7)
Net Debt	(696.1)	(924.0)

(a) US$100.0 million convertible bonds due on 18 March 2020 (31 December 2014: $310.5 million convertible bonds due on 18 March 2015).

	30 June 2015	30 June 2014
	US$ million	US$ million
Net cash from operating activities:
Continuing operations	19.8	104.0
Discontinued operations	(8.3)	(23.2)
	11.5	80.8
Net cash used in investing activities:
Continuing operations	(9.2)	(66.1)
Discontinued operations	(42.4)	(55.9)
	(51.6)	(122.0)
Net cash (used in)/from financing activities:
Continuing operations	(35.6)	(142.7)
Discontinued operations	23.7	65.9
	(11.9)	(76.8)

Key movements in cash and net debt from continuing operations

	Cash	Debt	Net Debt
	US$ million	US$ million	US$ million
As at 1 January 2015	48.1	(977.8)	(929.7)
Net cash generated by operating activities before working capital changes	88.2
Increase in working capital	(6.5)
Income tax paid	(26.2)
Capital expenditure on Gold Division projects and in-house service companies	(8.1)
Exploration expenditure on Gold Division projects	(9.7)
Proceeds from Rights issue	156.2
Amounts repaid under bank facilities	(21.3)	21.3
Settlement of the Existing Bonds	(135.5)	225.1
Interest accrued		(37.2)
Interest paid	(35.7)	35.7
Refinancing costs	(34.3)	5.1
Proceeds from disposal of subsidiaries, net of cash disposed and net of liabilities settled	6.4
Foreign exchange	0.3
Other	9.2	0.6
As at 30 June 2015	31.1	(727.2)	(696.1)

As at 30 June 2015 there were no undrawn facilities available to the continuing operations.

Capital expenditure

The Group spent an aggregate of US$17.8 million on its gold projects in H1 2015 compared to US$70.2 million invested in H1 2014. The key areas of focus in H1 2015 were on fulfilling existing contractual commitments relating to POX, expansion of tailing dams at Pioneer and Albyn and ongoing exploration related to the areas adjacent to the ore bodies of the main mining operations.

	Exploration expenditure	Development expenditure and other CAPEX ^(a)	Total
	US$ million	US$ million	US$ million
POX	-	0.9	0.9
Pokrovskiy and Pioneer	4.5	1.5	6.0
Malomir	2.6	0.6	3.2
Albyn	2.6	4.6	7.2
Upgrade of in-house service companies	-	0.5	0.5
	9.7	8.1	17.8

(a) Including US$1.4 million of development expenditure in relation to POX and flotation line at Malomir that is considered to be non-sustaining capital expenditure for the purposes of calculating the all-in sustaining costs and all-in costs.

Foreign currency exchange differences

The Group's principal subsidiaries have a US Dollar functional currency. Foreign exchange differences arise on translation of monetary assets and liabilities denominated in foreign currencies, which for the principal subsidiaries of the Group are Russian Rouble and GB Pounds Sterling.

The average -on-year depreciation of Rouble against the US Dollar was approximately 66%, with the average exchange rate for H1 2015 being RUB58.06/USD compared to RUB35.03/USD for H1 2014.

Whilst the Rouble slightly recovered during H1 2015, from RUB56.26/USD as at 31 December 2014 to RUB55.52/USD as at 30 June 2015, it remained volatile during H1 2015.

As a result of the significant volatility the Russian Rouble, the Group recognised foreign exchange losses of US$7.4 million in H1 2015 (H1 2014: US$5.4 million) arising primarily on the Rouble denominated net monetary assets.

The Refinancing

On 2 February 2015, the Group announced a proposed Refinancing which was completed on 18 March 2015. The Refinancing consisted of the following:

§ Rights issue pursuant to which 3,102,923,272 new Ordinary Shares were issued at subscription price of £0.05 per Ordinary Share as set out below:

- 2,114,460,594 Ordinary Shares were issued for cash consideration raising £105.7 million (equivalent to US$156.2 million) gross cash proceeds; and

- 988,462,678 Ordinary Shares were issued in exchange for the Existing Bonds as part of settlement of the Existing Bonds (please refer to the details set out below).

§ Issue of the new convertible bonds:

On 18 March 2015, the Group issued US$100 million convertible bonds due on 18 March 2020 (the 'New Bonds'). The New Bonds were issued pursuant to the completion of the exchange offer of the Existing Bonds as set out below.

The New Bonds were issued by the Group's wholly owned subsidiary Petropavlovsk 2010 Limited and are guaranteed by the Company. The New Bonds carry a coupon of 9.00% payable quarterly in arrears and are convertible into redeemable preference shares of Petropavlovsk 2010 Limited which are guaranteed by and will be exchangeable immediately upon issuance for Ordinary Shares in the Company.

The conversion price has been set at £0.0826 per Ordinary Share, subject to adjustment for certain events, and the conversion exchange rate has been fixed at US$1.5171: £1. The New Bonds were admitted to listing on the Official List of the UK Listing Authority and admitted to trading on the Professional Securities Market of the London Stock Exchange on 18 March 2015.

§ Settlement of the Existing Bonds:

The Existing Bonds with a par value of US$310.5 million as at 31 December 2014 (note 16) were settled as follows:

	Par value
	US$ million
Portion settled in cash from the net cash proceeds of the Rights Issue	135.5
Portion settled in equity through the debt-for-equity exchange commitments	75.0
Portion settled through the issuance of the New Bonds	100.0
Par value of the Existing Bonds	310.5

§ Bank Waivers:

The Group obtained waivers and relaxation of certain financial covenants for the period until 31 December 2015, inclusive.

The aggregate transaction costs of US$42.8 million, out of which US$7.8 million were paid as at 31 December 2014, were primarily allocated to equity (US$33.4 million), the New Bonds (US$5.1 million).

Disposal of alluvial operations

On 16 April 2015, the Group entered into a conditional SPA relating to the sale of its 95.7% interest in OJSC ZDP Koboldo ('Koboldo'). The disposal was completed on 22 April 2015.

Koboldo is an alluvial operation located in the Amur region in the Far East of Russia and represents an alluvial operations segment. Net assets of Koboldo were written down to fair value based on indicative cash consideration as at 31 December 2014. Accordingly, the disposal did not result in significant gains or losses on disposal in 2015.

Disposal of investments in associates

On 7 April 2015, the Group entered into a Share Purchase Agreement to sell its 25% interest in CJSC ZRK Omchak ("Omchak") for a total cash consideration of US$1 million.

H2 2015 Outlook

As the Group's operating cash expenses are substantially Rouble denominated, the Group expects that the impact of Rouble price inflation will be mitigated by the depreciation of the Rouble against the US Dollar. The current Rouble exchange rate is RUB69.31/US$ compared to RUB55.52/USD as at 30 June 2015.

The Group re-iterates a significant decrease in its total average cash costs of production in 2015 to lower than US$600/oz at current exchange rate due to its cost optimization programme, the devaluation of the Rouble and processing higher grade ore. In line with the Group's strategy of debt reduction, net debt is expected to decrease below US$600 million by the end of 2015 assuming an average gold price of US$1,100/oz for the rest of the year 2015.

Going concern

The Group monitors and manages its liquidity risk on an ongoing basis. Cash forecasts are regularly produced and sensitivities run for different scenarios including, but not limited to, changes in commodity prices, different production rates from the Group's producing assets and the timing of expenditure on development projects. The Group meets its capital requirements through a combination of sources including cash generated from operations and external debt.

As a separate listed group, IRC is required to perform an assessment of their going concern position. In their condensed consolidated financial statements for the six months ended 30 June 2015 they have identified a material uncertainty in relation to their ability to continue to operate as a going concern, and accordingly their auditor, Deloitte Hong Kong, referenced this in an emphasis of matter in their report on review of the condensed consolidated financial statements for the six months ended 30 June 2015. The main uncertainties in relation to the ability of IRC to continue to operate as a going concern are the timing of the completion of the commissioning of the K&S project and the substantial drop in the iron ore price.

As the Group has guaranteed the outstanding amounts IRC owes to ICBC, which outstanding loan principal was US$297.5 million as at 30 June 2015, the assessment of whether there is any material uncertainty that IRC will be able to repay this facility as it falls due is a key element of the Group's overall going concern assessment.

The Group performed an assessment of the forecast cash flows for its gold division. Following the successful completion of the Refinancing and receipt of covenant relaxation and waivers, the Group is satisfied that it has sufficient headroom under a reasonable downside scenario for the period to August 2016 to cover both its own cash flow requirements together with any potential deficit in IRC, subject to a mechanism for providing this funding being established. The Directors are confident that, should it be required, such a mechanism could be established.

Accordingly, the Directors have a reasonable expectation that the Group has 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 2015 Half-Year Report and the condensed consolidated interim financial statements. Thus, they continue to adopt the going concern basis of accounting in preparing the condensed consolidated interim financial statements.

OPERATIONS REPORT

Operational highlights:

Production:

· H1 2015 gold production of 240.2koz (H1 2014: 306.4koz)

· H2 2015 production forecast to be significantly higher than H1 2015, especially at Pioneer

· The Group re-iterates that it has the capacity to produce 680koz however its mine plans will remain under constant review. In order to optimize cash generation, the Group maintains the flexibility to revise its mine plans in line with the Group's strategy

Total cash costs:

· A c.9% year-on-year ("yoy") decrease in TCC/oz for the Group's four mines to US$767/oz (H1 2014: US$847/oz)

· FY 2015 TCC/oz forecast to be c.US$600/oz

Summary of gold production and total cash costs

	Six months to 30 June 2015	Six months to 30 June 2014	Year ended 31 December 2014
Hard-rock mines
Pioneer
Gold production ('000oz)	99.1	124.3	263.0
Total cash costs (US$/oz)	598	793	818
Albyn
Gold production ('000oz)	81.7	97.3	186.0
Total cash costs (US$/oz)	765	843	830
Malomir
Gold production ('000oz)	32.6	46.8	82.2
Total cash costs (US$/oz)	1,098	1,032	1,031
Pokrovskiy
Gold production ('000oz)	26.8	30.3	64.2
Total cash costs (US$/oz)	1,011	795	885
Total production for hard-rock mines ('000oz)	240.2	298.7	595.4
Total average cash costs for the Group's hard-rock mines (US$/oz)	767	847	860
Alluvial operations¹
Gold production ('000oz)	n/a	7.7	29.1
Total gold production ('000oz)	240.2	306.4	624.5

Note: Figures may not add up due to rounding.

¹The Group disposed of Koboldo, an entity which held licences to mine alluvial gold, in April 2015.

PIONEER

Additional core drilling of the north-east part of the Andreevskaya zone and the analysis of grade control data indicated that this high-grade orebody, which was previously mined by the Group, is not only open in depth, but also is stretching horizontally along the strike, into the wall of the existing pit, and plunging in a south-east direction. This data resulted in an increase in Pioneer's high-grade ores reserves. As these reserves are accessible for open-pit extraction in 2015/16, the Group reviewed its near-term development plans for this pit.

The availability of new high-grade reserves for the 2015-2016 mining schedules has given the Group the ability to continuously review its mine planning, not only at Pioneer, but at the Malomir and Albyn mines, optimising cash costs, sustaining capital expenditure and efficiency of usage of fleet and machinery.

In practice, this means that the main task of the Group - maximising cash flows - can be achieved not only via an increase in absolute production levels, but also through the minimisation of operational expenses and sustaining capital expenditure, taking into account the schedule of preparation of the reserves for extraction in 2016 and further years.

The new high-grade reserves have enabled the Group to vary production levels at Pioneer in H2 2015. Compared with H1 2015, between a two to three fold increase in production is scheduled at Pioneer in H2 2015. A tactical decision on absolute levels of production will be taken during the next six months to achieve the targeted cash flow generation and net debt repayment.

In line with this decision, large-scale expansion of the Andreevskaya pit was carried out in H1 2015, moving c.4.5 million m³ of material from its north-east part in order to expose high-grade reserves for extraction in H2 2015. In addition, the planned expansion of the central part of the pit was carried out in order to prepare rich ore reserves for extraction in Q4 2015.

In H1 2015, the main sources of feed for the plant were average grade ores from Alexandra and Vostochnaya, with some additions from the high-grade ore zones, NE Bakhmut and Nikolaevskaya.

The heap-leach operation commenced in Q2 and will continue until the end of Q3. Low-grade ore from stockpile 8, pit 7 and Alexandra (less than 0.8g/t) is being used to feed the heap leach.

Head grades through the Pioneer plant averaged 1.1g/t in H1 and this is expected to rise significantly in H2. Plant recovery in H1 was 82%, in line with the plan.

Pioneer mining operations
	Units	Six months to 30 June 2015	Six months to 30 June 2014	Year ended 31 December 2014
Total material moved	'000m³	12,868	13,120	26,226
Ore mined	t '000	3,146	3,240	7,104
Average grade	g/t	1.05	1.5	1.4
Gold content	'000oz	106.6	153.2	319.9
Pioneer processing operations
Resin-in-pulp ("RIP") plant
Total milled	'000t	3,392	3,152	6,626
Average grade	g/t	1.1	1.5	1.49
Gold content	'000oz	118.5	152.3	316.6
Recovery rate	%	82	80	81.1
Gold recovered	'000oz	97.6	122.0	257
Heap leach operations
Ore stacked	'000t	371	354	791
Average grade	g/t	0.6	0.6	0.6
Gold content	'000oz	7.2	6.9	15.8
Recovery rate	%	22	34	39.6
Gold recovered	'000oz	1.6	2.3	6.2
Total gold recovered	'000oz	99.1	124.3	263.0

Costs

TCC/oz at Pioneer for H1 2015 were US$598/oz, a decrease of 25% compared with the same period in 2014 (US$793/oz). TCC/oz in Q2 2015 stood at US$567/oz.

All-in sustaining costs ("AISC") at Pioneer for H1 2015 were approximately 45% higher than TCC/oz and were largely driven by stripping at Andreevskaya, undertaken in order to prepare material for extraction in H2 2015. Due to the tight control of capital expenses, All-in-costs ("AIC") were kept at 6% higher than AISC.

In H2 2015, the planned 2.5x increase in head grades at Pioneer and the absence of large volumes of stripping indicate TCC/oz at Pioneer in H2 2015 will be less than US$600/oz and AISC and AIC will not be more than 20% higher than TCC/oz.

In H2 2015 the recovery rate for the RIP plant is expected to increase up to approximately 87 - 88%.

ALBYN

In H1 2015, mining was mainly concentrated in the Central Pit with some stripping taking place in the East Pit.

In Q1 2015, the Albyn plant treated a blend of ore from the main Albyn deposit and from the nearby Unglichikan deposit, the latter containing some higher-grade ore. However, technical and economic analysis of the treatment of this blend indicated that this approach was not optimal, despite leading to an increase in gold output. When blended with the ore from the main Albyn deposit, the recovery rate from the Unglichikan ore was c.70% however technical work has indicated that the separate treatment of Unglichikan ore should result in recovery rates of more than 90%.

Analysis discovered that Unglichikan ores require different technological parameters to provide optimal recovery rates. These parameters include: the fineness of the grind, the leaching time and, potentially, some flow sheet adjustments, which, though not very expensive, would require considerable time to be undertaken. It is also evident that, in order to avoid dilution, mining of ore from Unglichikan requires a more considered approach. Such an approach, although very well known in global practice, has not been used by the Group before, thus personnel would need training and significant managerial time would be required.

In addition, in order to cut the cost of transporting large volumes of ore from the Unglichikan deposit to the Albyn plant, the quality of some 13km of roads would need to be improved. Furthermore, the deposit has very strong potential to increase its reserves and resources. This could affect its mining schedule.

Taking into account all of the above factors, it was decided to postpone the treatment of Unglichikan ores at the Albyn plant. This substantially improved operational costs at the mine. Ores from Afanasevskaya, a new satellite pit which is at an advanced stage of development, are expected to be tested at the Albyn plant in H2 2015.

Forecast gold production for Albyn in H2 2015 is expected to be slightly higher than in H1.

Albyn mining operations
	Units	Six months to 30 June 2015	Six months to 30 June 2014	Year ended 31 December 2014
Total material moved	'000 m³	18,729	13,972	29,821
Ore mined	'000t	2,557	2,152	4,510
Average grade	g/t	1.2	1.4	1.29
Gold content	'000oz	98.9	98.6	187.4
Albyn processing operations
Resin-in-pulp ("RIP") plant
Total milled	'000t	2,274	2,300	4,609
Average grade	g/t	1.2	1.4	1.33
Gold content	'000oz	88.5	102.1	197.6
Recovery rate	%	92	95	94.1
Gold recovered	'000oz	81.7	97.3	186.0
Total gold recovered	'000oz	81.7	97.3	186.0

Costs

TCC/oz at Albyn for H1 2015 were US$765/oz (H1 2014: US$843/oz). As a result of the efficiency measures undertaken during the Period, TCC/oz decreased by 34% from US$928/oz in Q1 2015 to US$611/oz in Q2 2015.

AISC at Albyn for H1 2015 were approximately 21% higher than TCC/oz, in line with the Group's forecast. AIC were 3.6% higher than AISC.

In H2 2015, the Group intends to continue to explore methods for processing the new material from the Afanasevskaya deposit in order to not negatively impact on Albyn's TCC/oz. Test work on Afanasevskaya ores is expected to be finalised by the end of Q3. The results of this work will form the basis of a decision whether to include Afanasevskaya ores in the mine's Q4 production plan, or whether to continue to defer the processing of this ore. Based on the current mine plan, the Group is projecting average head grades for H2 2015 at Albyn to be approximately 1.5-1.6g/t and average recovery rates are expected to slightly improve and to be approximately 92-93%. These factors, together with planned cost-optimisation measures, will benefit costs in H2 2015, with TCC/oz forecast to be less than US$600/oz and the ratio of TCC/oz, AISC and AIC to be at the same levels as in H1 2015.

MALOMIR

Although the vast majority of non-refractory reserves and resources at the Malomir mine are confined within the Quartzitovoye and Magnetitovoye deposits, during H1 2015 mining was also carried out at some of the mine's smaller ore zones, namely Osennaya, Bazoviy, Sukhanir and Ozhidaemoye.

Originally this mine plan was justified by the fact that Magnetitovoye's best quality reserves in terms of continuity, grade and thickness are located at a substantial depth under a thick barren sill. In H1 2015, stripping was carried out at Magnetitovoye by a contractor which also resulted in some small quantities of ore being produced from this pit.

Mining from a number of small pits located at substantial distances from the plant resulted in an increase in operating expenses and sustaining capital costs in relation to the mining fleet and an increase in the mine's overall gold output.

New data from the Pioneer mine has given the Group the flexibility to revise Malomir's plan for H2 2015. In order to optimise operating and sustaining capital costs and also to increase the efficiency of usage of the mining fleet, production at Malomir in H2 2015 will be limited to the Quartzitovoye 2 and Magnetitovoye pits. Total H2 2015 production from Malomir is expected to remain the same or slightly exceed the H1 output.

Malomir mining operations
	Units	Six months to 30 June 2015	Six months to 30 June 2014	Year ended 31 December 2014
Total material moved	'000m³	4,483	3,876	7,433
Ore mined	'000t	1,038	1,154	2,164
Average grade	g/t	1.1	1.4	1.32
Gold content	'000oz	36.6	52.5	92.2
Malomir processing operations
Resin-in-pulp ("RIP") plant
Total milled	'000t	1,451	1,416	2,594
Average grade	g/t	1.0	1.4	1.36
Gold content	'000oz	47.7	64.4	113.8
Recovery rate	%	68	73	72.2
Gold recovered	'000oz	32.6	46.8	82.2
Total gold recovered	'000oz	32.6	46.8	82.2

Costs

TCC/oz at Malomir in H1 2015 were US$1,098/oz. The high level of ТСС/oz at Malomir in H1 2015 reflects some drawbacks of the original mining schedule alongside large volumes of stripping works carried out at the Magnetitovoye ore body in Q2, although the majority of the material accessed as a result of this stripping is scheduled to be processed in Q4 2015 and in 2016, this stripping was not capitalised due to small by-side production during the Period.

The main difference between AISC and TCC/oz in H1 2015 was the non-cash impairment of stockpiles due to the decrease in the price of gold in Q2 2015.

In H2 2015, the Group is forecasting TCC/oz to decrease to US$800/oz and levels of both AISC and AIC to be 10-15% over TCC/oz. This reduction in costs will be achieved by switching from expensive production from multiple satellite deposits, which are located some distances from the Malomir RIP plant, to production from the mine's main non-refractory deposits, Quartzitovoye-2 and Magnetitovoye. The majority of H2 production is scheduled to come from the former due to its close proximity to the plant and its lower stripping coefficient. The Magnetitovoye production schedule is currently under review in order to optimise the cost of transportation of the ore to the plant (the Magnetitovoye deposit being situated further from the plant than the Quartzitovoye deposit). The higher cost of transportation, however, is expected to be offset by higher recovery rates and higher grades.

H2 average head grades at Malomir are expected to be approximately 1.1-1.3g/t and average recovery rates are expected to increase up to approximately 79-80%.

POKROVSKIY

The expansion to the upper benches of the north-western part of the Pokrovka-1 pit continued throughout H1 2015 and this was the source of medium-grade ore. This work is scheduled to continue throughout H2. In H1 2015, a small amount of ore came from an extension to the northern pit wall at Pokrovka-3 and low-grade ore was fed to the processing plant from existing stockpiles.

During the period, higher-grade ores (c.2g/t) were discovered at deeper levels of the Pokrovka 3 pit. These ores were prepared for treatment in Q3 2015.

In Q1 2015, high-grade ore for processing through the Pokrovskiy plant was sourced from the Burinda satellite pit. This pit was completed in March. The mining of medium-grade ore recommenced at the Zeltunak satellite pit in April and is scheduled to continue through H2.

Head grades through the Pokrovskiy plant averaged 1.1g/t in H1 and are expected to remain constant in H2.

Pokrovskiy mining operations
	Units	Six months to 30 June 2015	Six months to 30 June 2014	Year ended 31 December 2014
Total material moved	'000m³	2,660	2,139	4,665
Ore mined	'000t	294	240	623
Average grade	g/t	1.6	1.9	1.79
Gold content	'000oz	15.2	14.7	35.9
Pokrovskiy processing operations
Resin-in-pulp ("RIP") plant
Total milled	'000t	866	912	1,864
Average grade	g/t	1.1	1.1	1.15
Gold content	'000oz	31	32.7	68.8
Recovery rate	%	82	86	84.2
Gold recovered	'000oz	25.4	27.9	57.9
Heap leach operations
Ore stacked	'000t	246	239	533
Average grade	g/t	0.5	0.6	0.6
Gold content	'000oz	4.2	4.3	9.7
Recovery rate	%	34	55	65.5
Gold recovered	'000oz	1.4	2.4	6.3
Total gold recovered	'000oz	26.8	30.3	64.2

Costs

TCC/oz at Pokrovskiy for H1 2015 were US$1,011/oz. Costs were impacted by a high stripping ratio at the mine of 1:9 and the blending of ore from the pit with low-grade stockpiles. These factors were a function of the Group's change of strategy for the development of Pokrovskiy: initially, the Group planned to convert the Pokrovskiy plant into the POX Hub in 2014 however, after this project was put on hold, the Group carried out extensive and successful exploration for oxide ores at the flanks of the mine. Although this work substantially lengthened the life of mine, not all reserves were prepared for exploitation at the beginning of 2015.

The main difference between AISC and ТСС in H1 2015 was the non-cash impairment of lower-grade stockpiles due to the decrease in gold price in Q2 2015.

In H2 2015, the Group is forecasting TCC/oz at Pokrovskiy to be less than US$800/oz and both AISC and AIC levels to be approximately 10% over TCC/oz. Positive exploration results, which includes the discovery of new ore bodies at Pokrovka 3; new, high-grade ores at Zheltunak; and additions to reserves to the north-west of Pokrovka-1, led to a review of H2 mining schedules with a view to optimising cash costs at the mine. This resulted in the inclusion of material from Pokrovka-3 and Zheltunak into H2 production schedules instead of the material from Pokrovka 2 which was scheduled previously.

This optimisation of the mining plan took into account the following factors: average grade, the stripping coefficient the distance to transport the ore to the plant and the amount of drilling and blasting required for its production.

The average head grades at Pokrovskiy for H2 are forecasted to be 1.1-1.3g/t and the average recovery rate is forecasted to increase up to approximately 84-87%.

PROJECT DEVELOPMENT

Underground mining

The Group has identified two areas at Pioneer potentially suitable for underground mining: Andreevskaya and NE Bakhmut. In addition, the Group has also identified the Quartzitovoye deposit at Malomir and the Pokrovka 1 deposit at Pokrovskiy as potentially suitable.

At Pioneer, deep drill holes completed during H1 2015 successfully confirmed the anticipated continuation of Pioneer high-grade mineralization to the depth of 100 to 240m below the open pits.

Resources potentially suitable for underground mining have been identified at Pioneer's Bakhmut and Andreevskaya trends. At the Bakhmut trend, there are 3 proven pay shoots: one under North East Bakhmut pit 6.3 (mined from open pit to a depth of 230m), pay shoot No 1 at the Bakhmut Zone itself and another high- grade shoot at the Pormezhutochnaya Zone.

At NE Bakhmut pit 6.3, high-grade mineralisation remained at the bottom of the pit with the strike length of 60m and a thickness of 15m at an average grade of 25.0g/t. This mineralisation was traced 125m below the existing pit to an elevation of -50m by 12 drill holes. The best intersections from this area include 19.8m at 7.92g/t and 9.4m at 86.26g/t. The known high-grade mineralization is open in a down dip direction and the Group anticipates that continued drilling is expected to extend this further down.

Pay shoot No 1 (Bakhmut) was intersected by 11 drill holes and traced to an elevation of +40, approximately 160m below the existing pit. The thickness of drill intersections varies between 5.2 and 22.4m at a grade between 2.0 and 19.46g/t. The strike length of the pay shoot is up to 70m and, similar to the NE Bakhmut pay shoot, it is open in depth.

The Promezhutochnaya pay shoot is also located within the Bakhmut trend, close to conjunction with Yuzhnaya zone. It is not as well explored as the first two pay shoots; nonetheless, it has been intersected by drilling c.240m below the existing open pit with an intersection width of 1.5m at 47.8g/t.

At Andreevskaya, which has historically been a source of exceptionally high-grade ore, Group geologists identified 3 pay shoots which they consider warrant further exploration. The Andreevskaya East shoot has been explored by 20*20m drilling (40 drill holes) to an elevation of -10m some 130m below the planned open pit. The main high-grade zone has a thickness between 1.5 and 4.8m with the grade varying between 34.7 and 90.6g/t. A secondary smaller zone, which is believed to be an apophysis to the main zone, has a thickness between 1.1 and 2.8m with intersection grade varying between 12.35 and 20.5g/t. Both zones are surrounded by a lower-grade halo with thickness of 2.0-2.5m and grades of 1.86-4.38g/t. The exploration results are being evaluated by Group specialists and expected to be included in the next JORC mineral resource update. At least two higher grade shoots are anticipated at Andreevskaya central and western sections. These require further drilling to be confirmed which is budgeted for H2 2015 and 2016.

The Group is in preliminary talks with a mining subcontractor who has undertaken a site visit to assess the project.

Pressure oxidation (POX) Hub

In order to conserve capital expenditure following the decline in the gold price in Q2 2013, the Group decided to slow down the pace of development of the POX Hub and in December 2013, work on the POX Hub was put on hold. Consequently, only essential maintenance work was conducted on the POX Hub in H1 2015.

OUTLOOK

H2 2015 gold production is scheduled to be significantly higher than H1 2015, mainly due to a significant scheduled increase in production from the Group's flagship mine, Pioneer.

The Company stated that it will focus on optimising 2015 production from a cash generation point of view.

Due to the introduction of this optimization process and the Rouble devaluation, the Company decreases its guidance for Total Cash Costs of production from below US$700/oz to c.US$600/oz

The Company reiterates its 2015 year-end Net Debt guidance to c.US$600 million.

IRC

IRC is a producer and developer of industrial commodities with its shares quoted on the Hong Kong Stock Exchange (Stock Code 1029).

On 29 June 2015, IRC announced that it proposed to raise approximately HK$408 million (approximately US$52.6 million (before expenses)) by way of an Open Offer involving the issue of 1,295,976,080 Offer Shares at the Subscription Price of HK$0.315 per Offer Share on the basis of 4 Offer Shares for every 15 Shares in issue held on the Record Date and payable in full on application. Subsequent to this announcement, on 17 July 2015, IRC published a prospectus in relation to the Open Offer which is available to view on the website of IRC, www.ircgroup.com.hk.

On 5 August 2015, IRC announced that the Open Offer had completed and all funds had been received.

Cayiron Limited, a wholly-owned subsidiary of Petropavlovsk PLC, did not subscribe to its Offer Shares. Consequently, the Group's holding in IRC was reduced from 45.39% to 35.83%. As a result, IRC is no longer considered a subsidiary of the Petropavlovsk Group and, going forward, will be accounted for as an associate.

On 27 August 2015, IRC issued its Half-Year Report, the full text of which is available to view on the website of IRC, www.ircgroup.com.hk.

Given the significant reduction in the iron ore price over the period, IRC recorded a one-off, non-cash impairment provision of US$189.5 million for its K&S mine in order to partially write down the carrying value of the project.

CORPORATE UPDATE

Refinancing

On 2 February 2015, the Group announced a proposed Refinancing which was completed on 18 March 2015. The Refinancing consisted of the following:

· A rights issue pursuant to which 3,102,923,272 new Ordinary Shares were issued at a subscription price of £0.05 per Ordinary Share as set out below:

- 2,114,460,594 Ordinary Shares were issued for cash consideration raising £105.7 million (equivalent to US$156.2 million) gross cash proceeds; and

- 988,462,678 Ordinary Shares were issued in exchange for the Existing Bonds as part of settlement of the Existing Bonds (please refer to the details set out below).

· Issue of the new convertible bonds:

- On 18 March 2015, the Group's wholly owned subsidiary, Petropavlovsk 2010 Limited, issued US$100 million convertible bonds due on 18 March 2020 ("the New Bonds").

- The New Bonds are guaranteed by the Company, carry a coupon of 9.00% payable quarterly in arrears and are convertible into redeemable preference shares of Petropavlovsk 2010 Limited which are guaranteed by, and will be exchangeable immediately upon issuance, for Ordinary Shares in the Company. The Company has an option to settle in cash at the prevailing share price at the time of conversion.

- The conversion price has been set at £0.0826 per Ordinary Share, subject to adjustment for certain events, and the conversion exchange rate has been fixed at US$1.5171:£1.

- The New Bonds were admitted to listing on the Official List of the UK Listing Authority and admitted to trading on the Professional Securities Market of the London Stock Exchange on 18 March 2015.

· Settlement of the US$310.5 million 4.00% convertible bonds due 2015

· Bank Waivers:

- The Group obtained waivers and relaxation of certain financial covenants for the period to 31 December 2015, inclusive.

Disposal of non-core assets

In April 2015, a conditional Share Purchase Agreement was concluded to sell the Group's interest in a non-core, high-cost alluvial gold deposits company, Joint-stock gold-mining company Koboldo ("Koboldo"), for RUB 942 million plus reimbursement of VAT for the Q4 2014.

On 7 April 2015, the Group entered into a Share Purchase Agreement to sell its 25% interest in CJSC ZRK Omchak for a total cash consideration of US$1 million.

Board Changes

With effect from 27 August 2015, Alex Green has been appointed, as an independent Non-Executive Director of the Company. Mr Green has two decades of experience in the resources industry. From 2003 to 2012, he was a Marketing Director at BHP Billiton, a leading global resources company, and he has recently retired as a non-executive director of Torm A/S Copenhagen a Danish shipping company, listed on the Nasdaq Copenhagen Stock Exchange, following its financial restructuring. Mr Green also focuses on angel investing, academic study and mentoring to young entrepreneurs, social enterprises and charities. He has a wealth of experience including risk management, development of business strategy and corporate governance. Mr Green's appointment is also supported by representatives of the former holders of the Group's 4% Convertible Bond 2015, who recommended him as a suitable candidate to be considered for this role. The process to appoint the second new independent Non-Executive Director in accordance with the terms agreed with the former Bondholders is continuing with their support and an announcement will be made in due course.

The Company confirms that there are no further details to be disclosed in relation to Mr Green in accordance with Listing Rule 9.6.13.

PRINCIPAL RISKS AND UNCERTAINTIES

The Group is exposed to a variety of risks and uncertainties which could significantly affect its business and financial results. A detailed review of the key risks facing the Group is set out in the Risks to Our Performance section on pages 26 to 37 of the 2014 Annual Report, which is available on the Group's website, www.petropavlovsk.net. This also includes a description of the potential impact of such risks on the Group together with measures in place to manage or mitigate against each specific risk where this is within the Group's control.

The Group's view of the principal risks that could impact it for the remainder of the current financial year remain largely unchanged from those set out in the 2014 Annual Report with the exception of the factors detailed below relating to the open offer of new IRC shares, completed on 5 August 2015. In addition, since the publication of the 2014 Annual Report there has been volatility in the gold price and weakness in global commodity markets including iron ore.

Changes in principal risks since the publication of the 2014 Annual Report

Since the publication of the 2014 Annual Report, in April 2015, IRC has raised approximately HK$408 million (approximately US$52.6 million) before expenses by way of an open offer to investors involving the issue of 1,295,976,080 new IRC shares (the 'Open Offer'). Petropavlovsk's wholly-owned subsidiary, Cayiron Limited, did not subscribe for the new shares to which it was entitled under the Open Offer. Upon the issue of new shares by IRC on 7 August 2015 under the Open Offer, Petropavlovsk's interest in IRC reduced to 35.8%. Consequently IRC is now an associate of Petropavlovsk and not a subsidiary. The risk that IRC would be re-consolidated on the balance sheet on a line-by-line basis, as detailed on page 33 of the 2014 Annual Report has been extinguished.

However, Petropavlovsk continues to provide a guarantee to the Industrial and Commercial Bank of China ("ICBC") in respect of the US$340 million loan facility provided to Kimkano-Sutarsky Mining and Beneficiation Plant LLC ("K&S") by ICBC to fund the construction of IRC's mining operations at K&S ("ICBC Guarantee"), as detailed on page 32 of the 2014 Annual Report.

A summary of the Group's key risks is set out below:

Operational risks:

· Factors which impact the level of production including: i) weather and ii) availability and failure of equipment or services;

· The Group's activities are reliant on the quantity and quality of the Mineral Resources and Ore Reserves available to it; and

· The Group's Mineral Reserves and Ore Resources are estimates based on a range of assumptions.

Financial risks:

· Lack of funding and liquidity to:

i) Support the Group's existing operations;

ii) Invest in and develop the Group's exploration projects;

iii) Extend the life and capacity of the Group's existing mining operations; and

iv) Refinance/repay the Group's debt as it falls due.

· If the operational performance of the business declines significantly the Company will breach one or more of the financial covenants as set out in various financing arrangements

· The Group's results of operations may be affected by changes in the gold price. Since the publication of the 2014 Annual Report on 30 April 2015 there has been significant volatility in the gold price. In response and, as detailed above, the Group continues to maximise cost benefits and has revised its production plan.

· Currency fluctuations may affect the Group. Since the publication of the 2014 Annual Report on 30 April 2015 there has been significant volatility in the Russian Rouble to US Dollar exchange rate. The Russian Rouble resumed depreciation against the US Dollar, principally as a result of falling oil prices. Lower oil prices and the weaker Russian Rouble are beneficial for the Group as 75% of its operating cash expenses are Russian Rouble denominated.

Risks related to IRC:

· Funding may be demanded from Petropavlovsk under a guarantee in favour of ICBC.

· IRC's operations may be affected by changes in the iron ore price. Due to the weakness in global bulk commodity markets, including iron-ore, IRC has taken a partial impairment provision of approximately US$190 million for the K&S mine.

· There are certain covenants associated with the guarantee, some of which are in relation to the Petropavlovsk Group. A breach in the covenants may result in an event of default.

Health, safety and environmental risks:

· There could be failures in the Group's health and safety processes and/or breach of Occupational, Health and Safety legislation.

· The Group's operations require the use of hazardous substances including cyanide and other reagents.

Legal and regulatory risks:

· The Group requires various licences and permits in order to operate.

· The Group is subject to risks associated with operating in Russia.

· The Group is subject to risks that may arise from the political uncertainty within Russia

Human Resources

· The Group depends on attracting and retaining key personnel who have the requisite skills and experience to satisfy the specific requirements for the business.

Directors' responsibilities statement

We confirm that to the best of our knowledge:

· the condensed set of financial statements, which has been prepared in accordance with IAS 34 "Interim Financial Reporting" as endorsed and adopted by the European Union, gives a true and fair view of the assets, liabilities, financial position and profit or loss of the company, or the undertakings included in the consolidation as a whole as required by DTR 4.2.4R;

· the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events and their impact, and description of principal risks and uncertainties for the remaining six months of the financial year); and

· the interim management report includes a fair review of the information required on related party transactions (as required by DTR 4.2.8R).

By order of the Board,

Peter Hambro Andrey Maruta

Chairman Chief Financial Officer

26 August 2015

INDEPENDENT REVIEW REPORT TO PETROPAVLOVSK PLC

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2015 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement and related notes 1 to 25. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

DIRECTORS' RESPONSIBILITIES

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2015 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Deloitte LLP

Chartered Accountants and Statutory Auditor

London, UK

26 August 2015

Note: Figures throughout this release may not add up due to rounding.

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 Group's results of operations, financial position, liquidity, prospects, growth, strategies and expectations of the industry.

By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. 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 developments to differ materially from those expressed or implied by the forward-looking statements including, without limitation, general economic and business conditions, industry trends, competition, commodity prices, changes in law or regulation, currency fluctuations (including the US dollar and Rouble), the Group's ability to recover its reserves or develop new reserves, changes in its business strategy, political and economic uncertainty. Save as required by the Listing and Disclosure and Transparency Rules, the Company is under no obligation to update the information contained in this release.

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.

PETROPAVLOVSK PLC

Condensed Consolidated Income Statement

Six months ended 30 June 2015

		Six months ended 30 June 2015 (unaudited)	Six months ended 30 June 2014 (unaudited)	Year ended 31 December 2014
	note	US$'000	US$ '000	US$'000
Continuing operations
Group revenue		297,277	453,038	864,960
Operating expenses	5	(282,772)	(408,964)	(816,211)
		14,505	44,074	48,749
Share of results of associates		-	(115)	2,990
Operating profit		14,505	43,959	51,739
Investment income	6	572	944	1,680
Interest expense	6	(37,335)	(36,626)	(67,705)
Other finance gains/(losses)	6	(3,757)	-	-
(Loss)/profit before taxation		(26,015)	8,277	(14,286)
Taxation	7	(2,898)	(25,073)	(167,871)
Loss for the period from continuing operations		(28,913)	(16,796)	(182,157)
Discontinued operations
Loss for the period from discontinued operations	20	(52,715)	(78,518)	(165,535)
Loss for the period		(81,628)	(95,314)	(347,692)
Attributable to:
Equity shareholders of Petropavlovsk PLC		(51,787)	(54,043)	(260,664)
Continuing operations		(27,704)	(17,836)	(184,296)
Discontinued operations		(24,083)	(36,207)	(76,368)
Non-controlling interests		(29,841)	(41,271)	(87,028)
Continuing operations		(1,209)	1,040	2,139
Discontinued operations		(28,632)	(42,311)	(89,167)


Loss per share

Basic loss per share	8
From continuing operations		(US$0.02)	(US$0.10)	(US$0.94)
From discontinued operations		(US$0.01)	(US$0.18)	(US$0.39)
		(US$0.03)	(US$0.28)	(US$1.33)
Diluted loss per share	8
From continuing operations		(US$0.02)	(US$0.10)	(US$0.94)
From discontinued operations		(US$0.01)	(US$0.18)	(US$0.39)
		(US$0.03)	(US$0.28)	(US$1.33)

PETROPAVLOVSK PLC

Condensed Consolidated Statement of Comprehensive Income

Six months ended 30 June 2015

	Six months ended 30 June 2015 (unaudited) US$'000	Six months ended 30 June 2014 (unaudited) US$' 000	Year ended 31 December 2014 US$'000
Loss for the period	(81,628)	(95,314)	(347,692)
Items that may be reclassified subsequently to profit or loss:
Revaluation of available-for-sale investments	-	57	(10)
Exchange differences on translating foreign operations	237	(1,917)	(17,928)
Cash flow hedges:
Fair value losses	(1,716)	(33,192)	(14,239)
Tax thereon	343	6,638	2,848
Transfer to revenue	(2,428)	(28,779)	(42,328)
Tax thereon	486	5,756	8,466
Other comprehensive loss for the period net of tax	(3,078)	(51,437)	(63,191)
Total comprehensive loss for the period	(84,706)	(146,751)	(410,883)
Attributable to:
Equity shareholders of Petropavlovsk PLC	(54,925)	(104,864)	(318,146)
Non-controlling interests	(29,781)	(41,887)	(92,737)
	(84,706)	(146,751)	(410,883)
Total comprehensive loss for the period attributable to equity shareholders of Petropavlovsk PLC arises from:
Continuing operations	(30,738)	(68,300)	(239,120)
Discontinued operations	(24,187)	(36,564)	(79,026)
	(54,925)	(104,864)	(318,146)

PETROPAVLOVSK PLC

Condensed Consolidated Balance Sheet

At 30 June 2015

	note	30 June 2015 (unaudited) US$'000	30 June 2014 (unaudited) US$'000	31 December 2014 US$'000
Assets
Non-current assets
Exploration and evaluation assets	9	100,986	117,181	97,533
Property, plant and equipment	10	1,103,487	1,167,927	1,143,032
Prepayments for property, plant and equipment		4,183	24,607	10,671
Investments in associates		231	7,823	1,231
Available-for-sale investments		111	181	112
Inventories	11	38,354	45,365	42,436
Other non-current assets		122	256	274
Deferred tax assets		-	284	40
		1,247,474	1,363,624	1,295,329
Current assets
Inventories	11	219,296	237,205	206,498
Trade and other receivables	12	72,472	85,326	74,892
Derivative financial instruments	14	2,128	6,704	9,430
Cash and cash equivalents	13	31,099	63,797	48,080
		324,995	393,032	338,900
Assets of disposal groups classified as held for sale	20	583,266	694,371	629,853
		908,261	1,087,403	968,753
Total assets		2,155,735	2,451,027	2,264,082
Liabilities
Current liabilities
Trade and other payables	15	(81,820)	(98,299)	(66,713)
Current income tax payable		(715)	(1,229)	(6,277)
Borrowings	16	(188,554)	(331,994)	(415,161)
Derivative financial instruments	14	-	(5,838)	-
		(271,089)	(437,360)	(488,151)
Liabilities of disposal groups associated with assets classified as held for sale	20	(310,206)	(274,030)	(289,846)
		(581,295)	(711,390)	(777,997)
Net current assets		326,966	376,013	190,756
Non-current liabilities
Borrowings	16	(538,667)	(655,781)	(562,643)
Derivative financial instruments	14	(25,335)	-	-
Deferred tax liabilities		(142,685)	(37,956)	(156,854)
Provision for close down and restoration costs		(21,323)	(36,424)	(21,217)
		(728,010)	(730,161)	(740,714)
Total liabilities		(1,309,305)	(1,441,551)	(1,518,711)
Net assets		846,430	1,009,476	745,371
Equity
Share capital	17	48,874	3,041	3,041
Share premium		518,142	376,991	376,991
Merger reserve		-	19,265	-
Own shares		(8,933)	(8,925)	(8,925)
Hedging reserve		1,678	694	4,947
Convertible bond reserve		-	48,235	48,235
Share based payments reserve		3,369	3,790	3,283
Other reserves		(16,578)	(1,797)	(16,709)
Retained earnings		134,152	320,012	137,704
Equity attributable to the shareholders of Petropavlovsk PLC		680,704	761,306	548,567
Non-controlling interests ^(a)		165,726	248,170	196,804
Total equity		846,430	1,009,476	745,371

(a) IRC Limited ('IRC') is the only non-wholly owned subsidiary of the Group that has a material non-controlling interest (note 20).

This condensed consolidated interim financial information was approved by the Directors on 26 August 2015.

Peter Hambro	Andrey Maruta
Director	Director

PETROPAVLOVSK PLC

Condensed Consolidated Statement of Changes in Equity

Six months ended 30 June 2015

			Total attributable to equity holders of Petropavlovsk PLC
		Share capital	Share premium	Merger reserve	Own shares	Convertible bonds reserve	Share based payments reserve	Hedging reserve	Other reserves^(a)	Retained earnings	Total	Non-controlling interests	Total equity
	note	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Balance at 1 January 2014		3,041	376,991	19,265	(8,925)	48,235	11,096	49,807	(89)	360,999	860,420	251,917	1,112,337
Total comprehensive loss		-	-	-	-	-	-	(49,113)	(1,708)	(54,043)	(104,864)	(41,887)	(146,751)
Loss for the period		-	-	-	-	-	-	-	-	(54,043)	(54,043)	(41,271)	(95,314)
Other comprehensive loss		-	-	-	-	-	-	(49,113)	(1,708)	-	(50,821)	(616)	(51,437)
Share based payments		-	-	-	-	-	(7,306)	-	-	12,152	4,846	-	4,846
Issue of ordinary shares by subsidiary		-	-	-	-	-	-	-	-	904	904	38,486	39,390
Other transaction with non- controlling interests		-	-	-	-	-	-	-	-	-	-	(346)	(346)
Balance at 30 June 2014 (Unaudited)		3,041	376,991	19,265	(8,925)	48,235	3,790	694	(1,797)	320,012	761,306	248,170	1,009,476
Total comprehensive income/(loss)		-	-	-	-	-	-	4,253	(10,914)	(206,621)	(213,282)	(50,850)	(264,132)
Loss for the period		-	-	-	-	-	-	-	-	(206,621)	(206,621)	(45,757)	(252,378)
Other comprehensive income/(loss)		-	-	-	-	-	-	4,253	(10,914)	-	(6,661)	(5,093)	(11,754)
Share based payments		-	-	-	-	-	26	-	-	1	27	-	27
Vesting of awards within Petropavlovsk PLC LTIP		-	-	-	-	-	(533)	-	-	533	-	-	-
Issue of ordinary shares by subsidiary		-	-	-	-	-	-	-	-	410	410	(410)	-
Other transaction with non- controlling interests		-	-	-	-	-	-	-	-	106	106	(106)	-
Transfer to retained earnings ^(b)		-	-	(19,265)	-	-	-	-	(3,998)	23,263	-	-	-
Balance at 31 December 2014		3,041	376,991	-	(8,925)	48,235	3,283	4,947	(16,709)	137,704	548,567	196,804	745,371
Total comprehensive (loss)/income		-	-	-	-	-	-	(3,269)	131	(51,787)	(54,925)	(29,781)	(84,706)
Loss for the period		-	-	-	-	-	-	-	-	(51,787)	(51,787)	(29,841)	(81,628)
Other comprehensive (loss)/income		-	-	-	-	-	-	(3,269)	131	-	(3,138)	60	(3,078)
Share based payments		-					17	-	-	-	17	-	17
Deferred share awards		-	-	-	-	-	69	-	-	-	69	-	69
Rights issue and settlement of the Existing Bonds ^{(c), (d)}		45,833	141,151	-	(8)	(48,235)	-	-	-	48,235	186,976	-	186,976
Disposal of subsidiaries ^(e)		-	-	-	-	-	-	-	-	-	-	(761)	(761)
Other transaction with non- controlling interests		-	-	-	-	-	-	-	-	-	-	(536)	(536)
Balance at 30 June 2015 (Unaudited)		48,874	518,142	-	(8,933)	-	3,369	1,678	(16,578)	134,152	680,704	165,726	846,430

(a) Including translation reserve of US$(16.6) million (30 June 2014: US$(5.9) million, 31 December 2014: US$(16.7) million).

(b) Arises from an adjustment to the book value of the investment in the Company financial statements to reflect changes in the value of the Group's investment in IRC (note 20).

(d) Upon settlement of the Existing Bonds, the associated US$48 million convertible bond reserve was transferred to retained earnings.

(e) Note 21.

PETROPAVLOVSK PLC

Condensed Consolidated Cash Flow Statement

Six months ended 30 June 2015

	note	Six months ended 30 June 2015 (unaudited) US$'000	Six months ended 30 June 2014 (unaudited) US$'000	Year ended 31 December 2014 US$'000
Cash flows from operating activities
Cash generated from operations	18	79,150	136,903	245,407
Interest paid		(41,078)	(36,727)	(77,615)
Income tax paid		(26,568)	(19,341)	(34,641)
Net cash from operating activities		11,504	80,835	133,151
Cash flows from investing activities
Proceeds from disposal of subsidiaries, net of cash disposed and liabilities settled	21	6,433	(450)	2,699
Proceeds from disposal of the Group's interests in associates		1,000	-	-
Purchase of property, plant and equipment ^(a)		(52,464)	(109,106)	(164,223)
Exploration expenditure ^(a)		(9,716)	(18,871)	(34,726)
Proceeds from disposal of property, plant and equipment		535	4,580	5,141
Loans granted		(29)	(67)	(89)
Repayment of amounts loaned to other parties		37	434	586
Interest received		1,678	1,485	3,351
Dividends received from joint venture		917	-	-
Net cash used in investing activities		(51,609)	(121,995)	(187,261)
Cash flows from financing activities
Proceeds from issue of ordinary share capital		156,163	-	-
Proceeds from issue of ordinary shares by IRC, net of transaction costs		-	39,390	38,870
Proceeds from borrowings ^(b)		61,194	91,081	154,007
Repayments of borrowings ^(b)		(192,758)	(184,700)	(235,050)
Debt transaction costs paid in connection with ICBC facility		(72)	(278)	(467)
Debt transaction costs paid in connection with bank loans		(574)	-	-
Restricted bank deposit placed in connection with ICBC facility		(1,000)	(21,250)	(21,250)
Refinancing costs	2	(34,307)	(651)	(7,760)
Dividends paid to non-controlling interests		(536)	(346)	(346)
Purchase of own shares		(8)	-	-
Net cash used in financing activities		(11,898)	(76,754)	(71,996)
Net decrease in cash and cash equivalents in the period		(52,003)	(117,914)	(126,106)
Effect of exchange rates on cash and cash equivalents		11	(2,718)	(33,092)
Cash and cash equivalents at beginning of period	13	48,080	170,595	170,595
Cash and cash equivalents re-classified as assets held for sale at beginning of the period	20	55,459	92,142	92,142
Cash and cash equivalents re-classified as assets held for sale at end of the period	20	(20,448)	(78,308)	(55,459)
Cash and cash equivalents at end of period	13	31,099	63,797	48,080

(a) Including US$44.4 million related to discontinued operations (six months ended 30 June 2014: US$57.8 million, year ended 31 December 2014: US$102.1 million) (note 20).

(b) Including US$61.2 million proceeds from borrowings (six months ended 30 June 2014: US$91.1 million, year ended 31 December 2014: US$154.0 million) and US$35.9 million repayments of borrowings (six months ended 30 June 2014: US$42.7 million, year ended 31 December 2014: US$81.1 million) related to discontinued operations (note 20).

PETROPAVLOVSK PLC

Notes to the condensed consolidated interim financial statements

Six months ended 30 June 2015

1. General information

Petropavlovsk PLC (the 'Company') is a company incorporated and registered in England and Wales. The address of the registered office is 11 Grosvenor Place, London SW1X 7HH.

These condensed consolidated interim financial statements are for the six months ended 30 June 2015. The interim financial statements are unaudited.

The information for the year ended 31 December 2014 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. This information was derived from the statutory accounts for the year ended 31 December 2014, a copy of which has been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified.

The auditor's report did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006.

2. Basis of preparation and presentation

The annual financial statements of the Company and its subsidiaries (the "Group") for the year ended 31 December 2014 were prepared in accordance with International Financial Reporting Standards ("IFRS"s) as adopted by the European Union.

The condensed set of financial statements has been prepared using accounting policies consistent with those set out in the annual financial statements for the year ended 31 December 2014, with adoption of new and revised standards and interpretations as set out below, and in accordance with IAS 34 "Interim Financial Reporting", as adopted by the European Union.

Going concern

The Refinancing

On 2 February 2015, the Group announced a proposed Refinancing which was completed on 18 March 2015. The Refinancing consisted of the following:

§ Rights issue pursuant to which 3,102,923,272 new Ordinary Shares were issued at subscription price of £0.05 per Ordinary Share as set out below:

- 2,114,460,594 Ordinary Shares were issued for cash consideration raising £105.7 million (equivalent to US$156.2 million) gross cash proceeds; and

- 988,462,678 Ordinary Shares were issued in exchange for the Existing Bonds as part of settlement of the Existing Bonds (please refer to the details set out below).

§ Issue of the new convertible bonds:

§ Settlement of the Existing Bonds:

The Existing Bonds with a par value of US$310.5 million as at 31 December 2014 (note 16) were settled as follows:

	Par value
	US$ million
Portion settled in cash from the net cash proceeds of the Rights Issue	135.5
Portion settled in equity through the debt-for-equity exchange commitments	75.0
Portion settled through the issuance of the New Bonds	100.0
Par value of the Existing Bonds	310.5

§ Bank Waivers:

The Group obtained waivers and relaxation of certain financial covenants for the period until 31 December 2015, inclusive.

The aggregate transaction costs of US$42.8 million, out of which US$7.8 million were paid as at 31 December 2014, were primarily allocated to equity (US$33.4 million) and the New Bonds (US$5.1 million).

Changes in accounting policies and estimates

Exceptional items

The Group is no longer disclosing exceptional items separately. Comparative information for the six months ended 30 June 2014 has been represented accordingly. In making this decision the Group has considered the following:

- This presentation enhances the simplicity of the disclosures in the consolidated financial statements;

- Due to significance, nature and the expected infrequency of occurrence, exceptional items are usually accompanied by relevant detailed disclosures within the notes to the consolidated financial statements; and

- The classification of exceptional items is a non-GAAP measure.

Adoption of new and revised standards and interpretations

During the period the Group adopted all standards, amendments and interpretations that were effective for annual periods beginning on or after 1 January 2015 (such standards, amendments and interpretations were disclosed in note 2 to the Group's consolidated financial statements for the year ended 31 December 2014). These standards, amendments and interpretations adopted include amendments to IAS 19 "Employee Benefits: Defined Benefit Plans - Employee Contributions" and annual improvements to IFRSs: 2010-2012 and 2011-2013.

These standards, amendments, and interpretations have not had a significant impact on the presentation or disclosure in Group's condensed consolidated financial statements for the interim period ended 30 June 2015. No other changes have been made to the Group's accounting policies in the period ended 30 June 2015. Additional disclosures with respect to the annual period requirements will be included in the Group's consolidated financial statements for the year ending 31 December 2015.

The Company intends to apply FRS 101 in the Company financial statements for the financial year ending 31 December 2015. A shareholder or shareholders holding in aggregate 5% of more of the total issued ordinary share capital may object to this proposal. Any such objections should be notified to the Company Secretary by 30 September 2015.

3. Foreign currency translation

The following exchange rates to the US dollar have been applied to translate balances and transactions in foreign currencies:

As at

30 June

2015

Average

six months ended

30 June 2015

As at

30 June
2014

Average

six months ended

30 June 2014

As at

31 December
2014

Average

year ended

31 December 2014

GB Pounds Sterling (GBP: US$)

0.64

0.66

0.58

0.60

0.64

0.61

Russian Rouble (RUR: US$)

55.52

58.06

33.63

35.03

56.26

38.44

4. Segment information

The Group's reportable segments under IFRS 8, which are aligned with its operating locations, were determined to be as set out below:

- Pokrovskiy, Pioneer, Malomir and Albyn hard-rock gold mines which are engaged in gold and silver production as well as field exploration and mine development; and

- Alluvial operations segment comprising an alluvial gold operation which is engaged in gold production and field exploration. This operation was disposed on 22 April 2015 (note 21) and, accordingly, alluvial operations will not be a reportable segment going forward.

Corporate and Other segment amalgamates corporate administration, in-house geological exploration and construction and engineering expertise, engineering and scientific operations and other supporting in-house functions as well as various gold projects and other activities that do not meet the reportable segment criteria.

Reportable operating segments are based on the internal reports provided to the Chief Operating Decision Maker ('CODM') to evaluate segment performance, decide how to allocate resources and make other operating decisions and reflect the way the Group's businesses are managed and reported.

The financial performance of the segments is principally evaluated with reference to operating profit less foreign exchange impacts.

Six months ended 30 June 2015	Pioneer	Pokrovskiy	Malomir	Albyn	Alluvial operations	Corporate and other	Consolidated
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Revenue
Gold ^(a)^,^(b)	118,104	29,774	38,774	93,724	-	-	280,376
Silver	383	96	57	101	-		637
Other external revenue	-	-	-	-	-	16,264	16,264
Inter-segment revenue	-	-	791	236	-	73,309	74,336
Intra-group eliminations	-	-	(791)	(236)	-	(73,309)	(74,336)
Total Group revenue from external customers	118,487	29,870	38,831	93,825	-	16,264	297,277

Operating expenses and income
Operating cash costs	(58,254)	(24,657)	(34,779)	(59,001)	1,006	(15,515)	(191,200)
Depreciation	(18,424)	(4,496)	(8,716)	(26,092)	(1,388)	(241)	(59,357)
Central administration expenses	-	-	-	-	-	(15,667)	(15,667)
Impairment of ore stockpiles	(777)	(2,090)	(5,106)	(798)	-	-	(8,771)
Loss on disposal of subsidiaries	-	-	-	-	(384)	-	(384)
Total operating expenses ⁽^c⁾	(77,455)	(31,243)	(48,601)	(85,891)	(766)	(31,423)	(275,379)

Segment result	41,032	(1,373)	(9,770)	7,934	(766)	(15,159)	21,898

Foreign exchange losses							(7,393)
Operating profit							14,505
Investment income							572
Interest expense							(37,335)
Other finance gains/(losses)							(3,757)
Taxation							(2,898)
Loss for the period from continuing operations							(28,913)


Segment assets	469,380	55,612	443,413	458,707	-	140,255	1,567,367
Unallocated cash							4,241
Loans given							861
Assets classified as held for sale							583,266
Consolidated total assets							2,155,735

(a) Including US$2.4 million contribution from the cash flow hedge.

(b) Heap leach operations at Pioneer and Pokrovskiy are seasonal with production skewed towards the second half of the year.

Six months ended 30 June 2014	Pioneer	Pokrovskiy	Malomir	Albyn	Alluvial operations	Corporate and other	Consolidated
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$' 000
Revenue
Gold ^{(d), (e)}	173,100	48,176	67,765	132,480	8,986	-	430,507
Silver	1,668	527	195	208	38	-	2,636
Other external revenue	-	-	-	-	-	19,895	19,895
Inter-segment revenue	-	-	3,403	-	-	107,924	111,327
Intra-group eliminations	-	-	(3,403)	-	-	(107,924)	(111,327)
Total Group revenue from external customers	174,768	48,703	67,960	132,688	9,024	19,895	453,038

Operating expenses and income
Operating cash costs	(100,788)	(28,200)	(50,623)	(80,764)	(7,378)	(23,074)	(290,827)
Depreciation	(19,545)	(11,744)	(10,217)	(26,677)	(2,570)	(442)	(71,195)
Central administration expenses	-	-	-	-	-	(22,853)	(22,853)
Impairment of exploration and evaluation assets	-	(3,463)	-	-	(390)	-	(3,853)
Impairment of ore stockpiles	(16,826)	(863)	2,853	18	-	-	(14,818)
Total operating expenses ⁽^f⁾	(137,159)	(44,270)	(57,987)	(107,423)	(10,338)	(46,369)	(403,546)

Share of results of associates	-	-	-	-	-	(115)	(115)
Segment result	37,609	4,433	9,973	25,265	(1,314)	(26,589)	49,377

Foreign exchange losses							(5,418)
Operating profit							43,959
Investment income							944
Interest expense							(36,626)
Taxation							(25,073)
Loss for the period from continuing operations							(16,796)


Segment assets	511,669	72,824	475,492	458,158	40,188	182,125	1,740,456
Deferred tax assets							284
Unallocated cash							14,450
Loans given							1,466
Assets classified as held for sale							694,371
Consolidated total assets							2,451,027

(d) Including US$28.8 million contribution from the cash flow hedge.

(e) Alluvial operations and heap leach operations at Pioneer and Pokrovskiy are seasonal with production skewed towards the second half of the year.

(f) Operating expenses less foreign exchange losses.

Year ended 31 December 2014	Pioneer	Pokrovskiy	Malomir	Albyn	Alluvial operations	Corporate and other	Consolidated
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$' 000
Revenue
Gold ^(g)	341,445	89,059	112,988	239,750	38,500	-	821,742
Silver	2,438	680	255	277	105	-	3,755
Other external revenue	-	-	-	-	-	39,463	39,463
Inter-segment revenue	658	-	4,117	1,016	-	196,603	202,394
Intra-group eliminations	(658)	-	(4,117)	(1,016)	-	(196,603)	(202,394)
Total Group revenue from external customers	343,883	89,739	113,243	240,027	38,605	39,463	864,960

Operating expenses and income
Operating cash costs	(212,393)	(60,205)	(87,551)	(149,199)	(28,555)	(40,078)	(577,981)
Depreciation	(40,081)	(21,790)	(18,450)	(57,863)	(4,883)	(901)	(143,968)
Central administration expenses	-	-	-	-	-	(38,185)	(38,185)
Reversal of impairment of mining assets	-	-	-	28,935	-	-	28,935
Impairment of exploration and evaluation assets	-	(3,463)	(128)	-	(390)	(18,053)	(22,034)
Impairment of ore stockpiles	(7,144)	3,401	3,186	(9,587)	-	-	(10,144)
Impairment of investments in associates	-	-	-	-	-	(9,697)	(9,697)
Write-down to adjust the carrying value of Koboldo's net assets to fair value less costs to sell	-	-	-	-	(11,867)	-	(11,867)
Total operating expenses ⁽^h⁾	(259,618)	(82,057)	(102,943)	(187,714)	(45,695)	(106,914)	(784,941)

Share of results of associates	-	-	-	-	-	2,990	2,990
Segment result	84,265	7,682	10,300	52,313	(7,090)	(64,461)	83,009

Foreign exchange losses							(31,270)
Operating profit							51,739
Investment income							1,680
Interest expense							(67,705)
Taxation							(167,871)
Loss for the period from continuing operations							(182,157)


Segment assets	484,141	62,564	450,545	462,947	14,652	154,868	1,629,717
Deferred tax assets							40
Unallocated cash							18,262
Loans given							862
Assets classified as held for sale							615,201
Consolidated total assets							2,264,082

(g) Including US$42.3 million contribution from the cash flow hedge.

(h) Operating expenses less foreign exchange losses.

5. Operating expenses and income

	Six months ended 30 June 2015 US$'000	Six months ended 30 June 2014 US$' 000	Year ended 31 December 2014 US$'000
Net operating expenses ^(a)	250,557	362,022	721,949
Impairment of exploration and evaluation assets	-	3,853	22,034
Reversal of impairment of mining assets	-	-	(28,935)
Impairment of ore stockpiles ^(a)	8,771	14,818	10,144
Impairment of investments in associates	-	-	9,697
Write-down to adjust the carrying value of Koboldo's net assets to fair value less costs to sell	-	-	11,867
Central administration expenses ^(a)	15,667	22,853	38,185
Foreign exchange losses	7,393	5,418	31,270
Loss on disposal of subsidiaries ^(b)	384	-	-
	282,772	408,964	816,211

(a) As set out below.

(b) Note 21.

Net operating expenses

	Six months ended 30 June 2015 US$'000	Six months ended 30 June 2014 US$' 000	Year ended 31 December 2014 US$'000
Depreciation	59,357	71,195	143,968
Staff costs	38,063	59,326	109,341
Materials	72,283	84,639	154,099
Fuel	30,143	43,540	78,798
External services	15,140	14,643	22,608
Mining tax	16,553	23,977	47,711
Electricity	14,294	19,970	35,839
Smelting and transportation costs	629	1,862	3,012
Movement in ore stockpiles, deferred stripping, work in progress and bullion in process attributable to gold production	(26,821)	(2,488)	46,223
Taxes other than on income	4,389	8,144	14,113
Insurance	3,383	2,408	6,528
Professional fees	564	711	958
Office costs	130	293	674
Operating lease rentals	281	392	914
Business travel expenses	724	1,113	2,199
Provision for impairment of trade and other receivables	1,273	867	(1,056)
Bank charges	235	325	550
Goods for resale	8,246	10,547	17,300
Other operating expenses	11,856	19,891	40,134
Other (income)/ expenses	(165)	667	(1,964)
	250,557	362,022	721,949

Central administration expenses

	Six months ended 30 June 2015 US$'000	Six months ended 30 June 2014 US$' 000	Year ended 31 December 2014 US$'000
Staff costs	9,756	13,296	22,278
Professional fees	1,241	2,573	3,616
Insurance	615	532	1,048
Operating lease rentals	894	989	1,772
Business travel expenses	543	714	1,598
Office costs	291	452	838
Other	2,327	4,297	7,035
	15,667	22,853	38,185

Impairment charges

Impairment of mining assets

The Group undertook an impairment review of the tangible assets attributable to the gold mining projects and the supporting in-house service companies and concluded no impairment was required as at 30 June 2015.

Impairment of ore stockpiles

The Group assessed the recoverability of the carrying value of ore stockpiles and recorded impairment charges/ reversals of impairment as set out below:

	Six months ended 30 June 2015			Six months ended 30 June 2014
	Pre-tax impairment charge	Taxation	Post-tax impairment charge	Pre-tax impairment charge/ (reversal of impairment)	Taxation	Post-tax impairment charge/ (reversal of impairment)
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Pokrovskiy	2,090	(418)	1,672	863	(173)	690
Pioneer	777	(155)	622	16,826	(3,365)	13,461
Malomir	5,106	(1,021)	4,085	(2,853)	571	(2,282)
Albyn	798	(160)	638	(18)	4	(14)
	8,771	(1,754)	7,017	14,818	(2,963)	11,855

6. Financial income and expenses


	Six months ended 30 June 2015 US$'000	Six months ended 30 June 2014 US$' 000	Year ended 31 December 2014 US$'000
Investment income
Interest income	572	944	1,680
	572	944	1,680
Interest expense
Interest on bank loans	(29,481)	(30,161)	(55,165)
Interest on convertible bonds	(7,748)	(12,630)	(25,424)
	(37,229)	(42,791)	(80,589)
Interest capitalised	-	6,420	13,372
Unwinding of discount on environmental obligation	(106)	(255)	(488)
	(37,335)	(36,626)	(67,705)
Other finance gains/(losses)
Gain on settlement of the Existing Bonds ^(a)	478	-	-
Fair value losses on derivative financial instruments ^(b)	(4,235)	-	-
	(3,757)	-	-

(a) Note 2.

(b) Result from re-measurement of the conversion option of the New Bonds to fair value (note 16).

7. Taxation


	Six months ended 30 June 2015	Six months ended 30 June 2014	Year ended 31 December 2014
	US$'000	US$'000	US$'000
Current tax
UK current tax	-	-	1,601 ^(a)
Russian current tax	16,231	12,425	32,849
	16,231	12,425	34,450
Deferred tax
(Reversal)/origination of timing differences ^(b)	(13,333)	12,648	133,421
Total tax charge	2,898	25,073	167,871

(a) Being adjustment in relation to prior years.

(b) Including effect of foreign exchange movements in respect of deductible temporary differences of US$(2.8) million (six months ended 30 June 2014: US$9.7 million, year ended 31 December 2014: US$128.8 million) which primarily arises as the tax base for a significant portion of the future taxable deductions in relation to the Group's property, plant and equipment are denominated in Russian Rouble whilst the future depreciation charges associated with these assets will be based on their US$ carrying value and reflects the movements in the Russian Rouble to the US Dollar exchange rate.

8. Earnings per share


	Six months ended 30 June 2015	Six months ended 30 June 2014	Year ended 31 December 2014
	US$'000	US$'000	US$'000
Loss for the period attributable to equity holders of Petropavlovsk PLC	(51,787)	(54,043)	(260,664)
From continuing operations	(27,704)	(17,836)	(184,296)
From discontinued operations	(24,083)	(36,207)	(76,368)
Interest expense on convertible bonds, net of tax ^(a)	-	-	-
Loss used to determine diluted earnings per share	(51,787)	(54,043)	(260,664)
From continuing operations	(27,704)	(17,836)	(184,296)
From discontinued operations	(24,083)	(36,207)	(76,368)
	No of shares	No of shares	No of shares
Weighted average number of Ordinary Shares	2,001,412,516	196,423,244	196,423,244
Adjustments for dilutive potential Ordinary Shares ^{(a), (b)}	-	-	-
Weighted average number of Ordinary Shares for diluted earnings per share	2,001,412,516	196,423,244	196,423,244
	US$	US$	US$
Basic loss per share	(0.03)	(0.28)	(1.33)
From continuing operations	(0.02)	(0.10)	(0.94)
From discontinued operations	(0.01)	(0.18)	(0.39)

Diluted loss per share	(0.03)	(0.28)	(1.33)
From continuing operations	(0.02)	(0.10)	(0.94)
From discontinued operations	(0.01)	(0.18)	(0.39)

(a) Convertible bonds which could potentially dilute basic loss per ordinary share in the future are not included in the calculation of diluted loss per share because they were anti-dilutive for the six months ended 30 June 2015 and 30 June 2014 and the year ended 31 December 2014.

(b) The Group had a potentially dilutive option issued to International Finance Corporation ('IFC') to subscribe for 1,067,273 Ordinary Shares (note 17) which was anti-dilutive and therefore was not included in the calculation of diluted loss per share for the six months ended 30 June 2015 and 2014 and the year ended 31 December 2014.

9. Exploration and evaluation assets

	Visokoe	Flanks of Pokrovskiy	Flanks of Albyn	Other ^(a)	Total
	US$'000	US$'000	US$'000	US$'000	US$'000
At 1 January 2015	48,293	4,385	35,639	9,216	97,533
Additions	236	234	476	2,651	3,597
Reallocation and other transfers	-	(144)	-	-	(144)
At 30 June 2015	48,529	4,475	36,115	11,867	100,986

(a) Represent amounts capitalised in respect of a number of projects in the Amur region.

10. Property, plant and equipment

	Mine development costs	Mining assets	Non-mining assets	Capital construction in progress	Total
	US$'000	US$'000	US$'000	US$'000	US$'000
Cost
At 1 January 2015	5,683	1,841,070	206,171	338,564	2,391,488
Additions	-	11,790	157	8,126	20,073
Transfers from capital construction in progress ^(a)	-	2,360	291	(2,651)	-
Disposals	-	(3,824)	(1,881)	(4)	(5,709)
Reallocation and other transfers	-	25	280	-	305
Foreign exchange differences	-	-	142	-	142
At 30 June 2015	5,683	1,851,421	205,160	344,035	2,406,299

Accumulated depreciation and impairment
At 1 January 2015	5,683	1,060,367	175,923	6,483	1,248,456
Charge for the year	-	55,256	3,227	-	58,483
Disposals	-	(2,760)	(1,758)	-	(4,518)
Reallocation and other transfers	-	29	276	-	305
Foreign exchange differences	-	-	86	-	86
At 30 June 2015	5,683	1,112,892	177,754	6,483	1,302,812
Net book value
At 1 January 2015^(b)	-	780,703	30,248	332,081	1,143,032
At 30 June 2015 ^(b)	-	738,529	27,406	337,552	1,103,487

(a) Being costs primarily associated with continuous development of Pioneer and Albyn projects.

(b) Property, plant and equipment with a net book value of US$134.2 million (30 June 2014: US$124.3 million, 31 December 2014: US$143 million) have been pledged to secure borrowings of the Group.

11. Inventories

	30 June 2015	30 June 2014	31 December 2014
	US$'000	US$' 000	US$'000
Current
Construction materials	8,031	14,160	9,746
Stores and spares	75,506	92,641	87,968
Ore in stockpiles ^{(a), (c)}	26,959	39,823	46,789
Work in progress	69,451	61,035	39,633
Deferred stripping costs	26,586	13,224	8,428
Bullion in process	1,852	3,469	1,529
Other	10,911	12,853	12,405
	219,296	237,205	206,498
Non-current
Ore in stockpiles ^{(a), (b), (c)}	38,354	41,190	42,436
Deferred stripping costs ^(d)	-	4,175	-
	38,354	45,365	42,436

(a) Note 5.

(b) Ore in stockpiles that is not planned to be processed within twelve months after the reporting period.

(c) As at 30 June 2015, ore in stockpiles include balances in the aggregate of US$54.6 million carried at net realisable value (30 June 2014: US$75 million, 31 December 2014: US$11.5 million).

(d) Production stripping related to the ore extraction which is to be undertaken within more than twelve months after the reporting period.

12. Trade and other receivables

	30 June 2015	30 June 2014	31 December 2014
	US$'000	US$' 000	US$'000
VAT recoverable	37,892	50,330	35,430
Advances to suppliers	8,027	11,766	10,492
Trade receivables	10,877	3,492	12,314
Other debtors	15,676	19,738	16,656
	72,472	85,326	74,892

13. Cash and cash equivalents

	30 June 2015	30 June 2014	31 December 2014
	US$'000	US$' 000	US$'000
Cash at bank and in hand	30,018	62,311	45,787
Short-term bank deposits	1,081	1,486	2,293
	31,099	63,797	48,080

14. Derivative financial instruments

	30 June 2015		30 June 2014		31 December 2014
	Assets	Liabilities	Assets	Liabilities	Assets	Liabilities
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Forward gold contracts - cash flow hedge ^{(a), (b), (e)}	2,128	-	6,704	(5,838)	6,272	-
Gold put option contracts ^{(c), (d), (e)}		-	-	-	3,158	-
Conversion option of the New Bonds ^{(f), (g)}	-	(25,335)	-	-	-	-
	2,128	(25,335)	6,704	(5,838)	9,430	-

(a) Forward contracts to sell an aggregate of 75,000 ounces of gold at an average price of US$1,201 per ounce are outstanding as at 30 June 2015 (30 June 2014: 225,446 ounces at an average price of US$1,326 per ounce, 31 December 2014: 50,000 ounces of gold at an average price of US$1,310 per ounce).

(b) Measured at fair value and considered as Level 2 of the fair value hierarchy which valuation incorporates the following inputs:

- gold forward curves observable at quoted intervals; and

- observable credit spreads.

(c) Option contracts to sell an aggregate of nil ounces of gold are outstanding as at 30 June 2015 (30 June 2014: nil, 31 December 2014: 150,000 ounces of gold with a strike price of US$1,150 per ounce). The intrinsic value of the option contracts is designated as a cash flow hedge and the time value of the option contracts is designated at fair value through profit or loss.

(d) Measured at fair value and considered as Level 2 of the fair value hierarchy which valuation incorporates the following inputs:

- historic gold price volatility;

- the option strike price;

- time to maturity; and

- risk free rate.

(e) The hedged forecast transactions are expected to occur at various dates during the next 12 months.

Gain and losses recognised in the hedging reserve in equity as at the reporting date will be recognised in the income statement in the periods during which the hedged gold sale transactions affect the income statement.

There was no ineffectiveness to be recorded from the cash flow hedge during the six months ended 30 June 2015 and 2014 and the year ended 31 December 2014.

(f) Note 16.

(g) Measured at fair value and considered as Level 2 of the fair value hierarchy which valuation incorporates the following inputs:

- the Group's credit risk;

- historic share price volatility;

- the conversion price;

- time to maturity; and

- risk free rate.

15. Trade and other payables

	30 June 2015	30 June 2014	31 December 2014
	US$' 000	US$'000	US$'000
Trade payables	26,176	29,348	16,027
Advances from customers	6,216	2,166	6,146
Advances received on resale and commission contracts ^(a)	19,490	14,078	16,714
Accruals and other payables	29,938	52,707	27,826
	81,820	98,299	66,713

(a) Amounts included in advances received on resale and commission contracts at 30 June 2015 and 30 June 2014 and 31 December 2014 relate to services performed by the Group's subsidiary, Irgiredmet, in its activity to procure materials such as reagents, consumables and equipment for third parties.

16. Borrowings

	30 June 2015	30 June 2014	31 December 2014
	US$' 000	US$'000	US$'000
Borrowings at amortised cost
Convertible bonds ^{(a), (b), (c)}	84,180	306,674	313,257
Bank loans ^(c)	643,041	681,101	664,547
	727,221	987,775	977,804

Amount due for settlement within 12 months	188,554	331,994	415,161
Amount due for settlement after 12 months	538,667	655,781	562,643
	727,221	987,775	977,804

(a) Liability component of the US$100 million convertible bonds due on 18 March 2020 (30 June 2014 and 31 December 2014: outstanding $310.5 million principal of US$380 million convertible bonds issued in 2010 and due on 18 March 2015 (following the extension of the original maturity date of 18 February 2015)). Note 2.

(b) The liability component of the New Bonds was arrived at as set out below.

	18 March 2015
	US$' 000
Par value of the New Bonds	100,000
Fair value uplift of the New Bonds	9,400
Less: Refinancing costs ^{(note 2)}	(5,130)
Less: Conversion option of the New Bonds recognised separately	(21,100)
Liability component of the New Bonds	83,170

The liability component of the New Bonds is measured at amortised cost. The interest charged was calculated by applying an effective interest rate of 13.89% to the liability component.

The conversion option of the New Bonds represents the fair value of the embedded option for the bondholders to convert into the equity of the Company ("the Conversion Right"). As the Company can elect to pay the cash value in lieu of delivering the Ordinary Shares following the exercise of the Conversion Right, the conversion option is a derivative liability. Accordingly, the conversion option is measured at fair value and is presented separately within derivative financial liabilities.

(c) As at 30 June 2015, the fair value of the convertible bonds, considered as Level 1 of the fair value hierarchy and calculated by applying the market traded price to the convertible bonds outstanding, amounted to US$111 million (30 June 2014: US$245 million , 31 December 2014: US$271 million).

17. Share capital

	30 June 2015		30 June 2014		31 December 2014
	No of shares	US$'000	No of shares	US$'000	No of shares	US$'000
Allotted, called up and fully paid
At the beginning of the period	197,638,425	3,041	197,638,425	3,041	197,638,425	3,041
Issued during the period ^(a)	3,102,923,272	45,833	-	-	-	-
At the end of the period	3,300,561,697	48,874	197,638,425	3,041	197,638,425	3,041

(a) Note 2.

The Company has one class of ordinary shares which carry no right to fixed income.

The Company had an option issued to the IFC on 20 April 2009 to subscribe for 1,067,273 Ordinary Shares at an exercise price of £11.84 per share, subject to adjustments. The option expired unexercised on 25 May 2015.

18. Notes to the cash flow statement

Reconciliation of loss before tax to operating cash flow

	Six months ended 30 June 2015	Six months ended 30 June 2014	Year ended 31 December 2014
	US$' 000	US$'000	US$'000
Loss before tax including discontinued operations	(79,177)	(70,413)	(173,801)
Adjustments for:
Share of results of joint venture	(430)	(2,278)	(2,900)
Share of results of associates	-	115	(2,990)
Investment income	(3,182)	(1,492)	(3,347)
Other finance (gains)/losses	3,757	-	-
Interest expense	38,355	38,006	70,248
Share based payments	86	4,846	4,873
Depreciation	56,116	82,700	150,482
Reversal of impairment of mining assets and goodwill	-	-	(28,935)
Impairment of IRC assets	-	18,137	18,810
Impairment of exploration and evaluation assets	-	3,853	22,034
Impairment of ore stockpiles	8,771	14,818	10,144
Impairment of investments in associates	-	-	9,697
Effect of processing previously impaired stockpiles	(4,454)	(20,773)	(41,834)
Provision for impairment of trade and other receivables	1,276	866	(1,017)
Write-down to adjust the carrying value of IRC's net assets to fair value less costs to sell	44,865	34,491	89,570
Write-down to adjust the carrying value of Koboldo's net assets to fair value less costs to sell	-	-	11,867
Loss on disposals of property, plant and equipment	402	584	1,917
Loss/(gain) on disposal of subsidiaries	384	-	(3,127)
Foreign exchange losses	10,008	2,470	44,677
Other non-cash items	4,343	4,895	4,093
Changes in working capital:
(Increase)/decrease in trade and other receivables	(7,560)	12,465	(17,943)
(Increase)/decrease in inventories	(4,744)	10,736	67,628
Increase in trade and other payables	10,334	2,877	15,261
Net cash generated from operations	79,150	136,903	245,407

Non-cash transactions

Except for the issue of the Ordinary Shares in exchange for the Existing Bonds (note 2), there have been no significant non-cash transactions during the six months ended 30 June 2015.

There were no significant non-cash transactions during the six months ended 30 June 2014 and the year ended 31 December 2013.

19. Related parties

Related parties the Group entered into transactions with during the reporting period

OJSC Asian-Pacific Bank ('Asian-Pacific Bank') and LLC Insurance Company Helios Reserve ('Helios') are considered to be related parties as members of key management have an interest in and collectively exercise significant influence over these entities.

The Petropavlovsk Foundation for Social Investment (the 'Petropavlovsk Foundation') is considered to be a related party due to the participation of the key management of the Group in the governing board of the Petropavlovsk Foundation and their presence in its board of guardians.

CJSC Verkhnetisskaya Ore Mining Company ('Verkhnetisskaya') is an associate to the Group and hence is a related party.

CJSC ZRK Omchak and its wholly owned subsidiary LLC Kaurchak ('Omchak') are associates to the Group and hence were related parties until 29 April 2015 when the Group disposed its interest in Omchak.

Transactions with related parties the Group entered into during the six months ended 30 June 2015 and 30 June 2014 and the year ended 31 December 2014 are set out below.

Trading Transactions

Related party transactions the Group entered into that relate to the day-to-day operation of the business are set out below.

	Sales to related parties				Purchases from related parties
	Six months ended 30 June 2015 US$'000	Six months ended 30 June 2014 US$'000	Year ended 31 December 2014 US$'000	Six months ended 30 June 2015 US$'000		Six months ended 30 June 2014 US$'000	Year ended 31 December 2014 US$'000
Asian-Pacific Bank
Other	435	236	503	44		94	201
	435	236	503	44		94	201
Trading transactions with other related parties
Insurance arrangements with Helios, rent and other transactions with other entities in which key management have interest and exercises a significant influence or control	52	52	294	3,772		4,015	10,317
Associates	2	41	80	-		-	-
	54	93	374	3,772		4,015	10,317

During the six months ended 30 June 2015, the Group made US$0.3 million charitable donations to the Petropavlovsk Foundation (six months ended 30 June 2014: US$0.3 million and year ended 31 December 2014: US$0.5 million).

The outstanding balances with related parties at 30 June 2015, 30 June 2014 and 31 December 2014 are set out below.

	Amounts owed by related parties			Amounts owed to related parties
	30 June 2015	30 June 2014	31 December 2014	30 June 2015	30 June 2014	31 December 2014
	US$' 000	US$' 000	US$' 000	US$' 000	US$' 000	US$' 000
Helios and other entities in which key management have interest and exercises a significant influence or control	2,873	2,477	2,864	-	111	151
Associates	-	115	85	-	-	-
Asian-Pacific Bank	-	9	6	-	-	-
	2,873	2,601	2,955	-	111	151

Banking arrangements

The Group has current and deposit bank accounts with Asian-Pacific Bank.

The bank balances at 30 June 2015, 30 June 2014 and 31 December 2014 are set out below.

30 June

2015 ^(a)

30 June

2014^(a)

31 December

2014^(a)

US$' 000

Asian-Pacific Bank

19,342

29,606

52,253

(a) Including US$16 million presented within assets classified as held for sale as at 30 June 2015 (30 June 2014: US$24 million, 31 December 2014: US$31.9 million) (note 20).

Financing transactions

The Group had an interest-free unsecured loan issued to Verkhnetisskaya. Loan principal outstanding as at 30 June 2015 amounted to an equivalent of US$3.6 million (30 June 2014: US$6 million, 31 December 2014: US$3.6 million).

As at 30 June 2014 and 31 December 2014, the Group had an interest-free unsecured loan issued to LLC Kaurchak. Loan principal outstanding amounted to an equivalent of US$1 million and US$0.6 million as at 30 June 2014 and 31 December 2014, respectively.

Financing transactions between IRC and Asian-Pacific Bank are disclosed in note 20.

Key management compensation

Key management personnel, comprising a group of 22 (30 June 2014: 20 and 31 December 2014: 21) individuals, including Executive and Non-Executive Directors of the Company and members of senior management, are those having authority and responsibility for planning, directing and controlling the activities of the Group.

	Six months ended 30 June 2015	Six months ended 30 June 2014	Year ended 31 December 2014
	US$'000	US$' 000	US$'000
Wages and salaries	4,175	4,526	9,453
Pension costs	238	295	586
Share-based compensation	69	2,346	2,346
	4,482	7,167	12,385

20. Asset held for sale and discontinued operation - IRC

On 7 August 2015, IRC ceased being a subsidiary to the Group (note 24). Accordingly, IRC continues to be classified as 'held for sale' and presented separately in the balance sheet as well as presented as a discontinued operation in the income statement.

The main categories of assets and liabilities classified as held for sale are set out below.

	30 June 2015		31 December 2014
	Carrying amount	Fair value less costs to sell^{(a), (b)}	Carrying amount	Fair value less costs to sell^{(a), (b)}
	US$'000	US$'000	US$'000	US$'000
Exploration and evaluation assets	54,997	15,827	54,790	17,664
Property, plant and equipment ^(c)	779,014	273,870	702,050	239,975
Prepayments for property, plant and equipment	176,815	176,815	203,387	203,387
Interests in joint ventures	6,365	6,365	7,294	7,294
Other non-current assets	28,439	28,439	32,298	32,298
Inventories	43,187	43,187	51,181	51,181
Trade and other receivables	18,315	18,315	15,662	15,662
Cash and cash equivalents	20,448	20,448	47,740	47,740
Total assets classified as held for sale	1,127,580 ^(d)	583,266	1,114,402 ^(d)	615,201

Trade and other payables	10,479	10,479	11,683	11,683
Current income tax payable	270	270	478	478
Borrowings ^(e)	291,447	291,447	268,891	268,891
Deferred tax liabilities	64,111	3,675	64,204	4,016
Provision for close down and restoration costs	4,335	4,335	4,021	4,021
Total liabilities associated with assets classified as held for sale	370,642	310,206	349,277	289,089
Net assets of IRC	756,938	273,060	765,125	326,112
Write-down to adjust the carrying value of IRC's net assets to fair value less costs to sell:
as at 31 December 2013	(349,443)		(349,443)
as at 31 December 2014	(89,570)		(89,570)
as at 30 June 2015	(44,865)
Fair value less costs to sell ^{(a), (b)}	273,060		326,112
Attributable to:
Equity shareholders of Petropavlovsk PLC	124,824		148,814
Non-controlling interests	148,236		177,298

(a) Based on market share price of HK$0.44 per IRC share as at 30 June 2015 (31 December 2014: HK$0.52) less transaction costs.

(b) Non-recurring fair value measurement treated as Level 1 of the fair value hierarchy.

(c) At 30 June 2015, IRC had entered into contractual commitments for the acquisition of property, plant and equipment and mine development costs amounting to US$24 million (31 December 2014: US$68 million). These amounts are not included in the capital commitments stated in note 23, as such amounts therein represent commitments from continuing operations.

(d) Pre-impairment charges of US$432 million (31 December 2014: US$242 million), in aggregate, recorded in IRC's consolidated financial statements.

(e) Including borrowings from Asian-Pacific Bank of US$15.5 million (31 December 2014: US$21 million). As at 30 June 2015, the amounts undrawn under the facilities with Asian-Pacific Bank were US$9.5 million (31 December 2014: US$4 million).

Analysis of the result of discontinued operations and the results recognised on the re-measurement of IRC is set out below.

	Six month ended 30 June 2015 US$'000	Six months ended 30 June 2014 US$' 000	Year ended 31 December 2014 US$'000
Revenue	43,045	67,475	122,414
Net expenses	(51,342)	(111,674)	(192,359)
Loss before tax from discontinued operations	(8,297)	(44,199)	(69,945)
Taxation	447	172	(6,020)
Loss after tax from discontinued operations	(7,850)	(44,027)	(75,965)
Write-down to adjust the carrying value of IRC's net assets to fair value less costs to sell	(44,865)	(34,491)	(89,570)
Loss for the period from discontinued operations	(52,715)	(78,518)	(165,535)
Attributable to:
Equity shareholders of Petropavlovsk PLC	(24,083)	(36,207)	(76,368)
Non-controlling interests	(28,632)	(42,311)	(89,167)

Analysis of cash flows attributable to discontinued operations is set out below.

	Six month ended 30 June 2015 US$'000	Six months ended 30 June 2014 US$' 000	Year ended 31 December 2014 US$'000
Operating cash flows	(8,326)	(23,154)	(35,610)
Investing cash flows	(42,368)	(55,863)	(95,936)
Financing cash flows	23,666	65,897	89,764
Total cash flows	(27,028)	(13,120)	(41,782)

21. Disposal of subsidiaries - Koboldo

On 16 April 2015, the Group entered into a conditional SPA relating to the sale of its 95.7% interest in OJSC ZDP Koboldo ('Koboldo'). The disposal was completed on 22 April 2015.

Koboldo is an alluvial operation located in the Amur region in the Far East of Russia and represents an alluvial operations segment (note 4). As at 31 December 2014, Koboldo was classified as 'held for sale'.

The net assets of Koboldo at the date of disposal are set out below.

	22 April 2015 US$'000
Exploration and evaluation assets	475
Property, plant and equipment	3,822
Inventories	3,320
Trade and other receivables	1,708
Cash and cash equivalents	11,161
Trade and other payables	(1,242)
Deferred tax liabilities	(603)
Net assets disposed	18,641
Non-controlling interests	(761)
Group's share of net assets disposed	17,880

Consideration ⁽^a⁾	17,496
Loss on disposal	384

Net cash outflow arising on disposal:
Consideration received in cash and cash equivalents ⁽^a⁾	17,594
Less: cash and cash equivalents disposed of	(11,161)
	6,433

(a) Net of transaction costs.

22. Analysis of net debt

	At 1 January 2015	Net cash movement	Exchange movement	Non-cash changes	At 30 June 2015
	US$'000	US$'000	US$'000	US$'000	US$'000
Cash and cash equivalents	48,080	(17,256) ^(a)	275	-	31,099
Borrowings	(977,804)	193,066	-	57,517	(727,221)
Net debt	(929,724)	175,810	275	57,517^(b)	(696,122)

(a) Excluding operations classified as held-for-sale (notes 20 and 21).

(b) Being amortisation of borrowings and the effect of the Refinancing.

	At 1 January 2014	Net cash movement	Transferred to assets classified as held for sale	Exchange movement	Non-cash changes	At 31 December 2014
	US$'000	US$'000	US$' 000	US$'000	US$'000	US$'000
Cash and cash equivalents	170,595	(84,325)	(7,719)	(30,471)	-	48,080
Borrowings	(1,119,012)	221,798	-	-	(80,590)	(977,804)
Net debt	(948,417)	137,473	(7,719)	(30,471)	(80,590)^(c)	(929,724)

23. Capital commitments

At 30 June 2015, the Group had entered into contractual commitments in relation to its continuing operations for the acquisition of property, plant and equipment and mine development costs amounting to US$1.1 million (30 June 2014: US$3.8 million and 31 December 2014: US$1.2 million), including US$1.1 million in relation to the POX Hub (30 June 2014: US$1.6 million and 31 December 2014: US$1.2 million).

24. Subsequent events

Disposal of IRC

The result from disposal of IRC has not been finalised by the date of approval of the 2015 Half-Year Report and will be disclosed in the 2015 Annual Report. IRC share price was HK$0.35 as at 7 August 2015.

25. Reconciliation of loss for the period to underlying EBITDA (supplemental non-IFRS information)

	Six months ended 30 June 2015 US$'000	Six months ended 30 June 2014 US$'000	Year ended 31 December 2014 US$'000
Loss for the period from continuing operations	(28,913)	(16,796)	(182,157)
Add/(less):
Interest expense	37,335	36,626	67,705
Investment income	(572)	(944)	(1,680)
Other finance (gains)/losses	3,757	-	-
Foreign exchange losses	7,393	5,418	31,270
Taxation	2,898	25,073	167,871
Depreciation	59,357	71,195	143,968
Reversal of impairment of mining assets	-	-	(28,935)
Impairment of exploration and evaluation assets	-	3,853	22,034
Impairment of ore stockpiles	8,771	14,818	10,144
Impairment of investments in associates	-	-	9,697
Write-down to adjust the carrying value of Koboldo's net assets to fair value less cost to sell	-	-	11,867
Underlying EBITDA	90,026	139,243	251,784

This information is provided by RNS

The company news service from the London Stock Exchange

END

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