Company Announcements
Petropavlovsk 2016 Results
Related Companies
By LSE RNS
26 April 2017
Petropavlovsk PLC
Annual Results for the Year Ended 31 December 2016
Petropavlovsk PLC ("Petropavlovsk" or the "Company" or, together with its subsidiaries, the "Group") today issued its audited annual results for the year ended 31 December 2016.
Peter Hambro, Chairman, comments: "2016 has been a transformative year for Petropavlovsk as we returned to profitability, refinanced our debt with our Russian lenders and proceeded with several major production initiatives, including our POX Hub and underground mining at Pioneer and Malomir. Looking ahead the Group is well positioned to execute on its long term corporate strategy and to create value through organic growth and delivering sustainable cash flow."
Financial Highlights
§ Underlying EBITDA of US$200.1m, a 16% improvement on 2015 primarily due to contribution from mines as a result of higher realised gold price achieved and improvement in TCC.
§ Group total cash costs (TCC) of US$660/oz, outperformed guidance and was a 12% improvement on 2015, due to cost optimisation measures and positive effect of Rouble depreciation.
§ Group all in sustaining cash costs (AISC) were in line with guidance at US$807/oz, an 8% improvement on 2015.
§ Average realised gold price of US$1,222/oz (including US$(21)/oz effect from hedging), an increase of 4% on 2015. Gold sales of c.400,000oz, 17% lower than 2015.
§ The Group had forward contracts to sell 50Koz of gold at an average price of US$1,303/oz and 547Koz of gold at an average price of US$1,253/oz as at 31 December 2016 and 26 April 2017, respectively.
§ Net profit of US$31.7m (EPS: US$0.01), compared to a net loss of US$297.5 million for 2015, which reflects improvement in underlying EBITDA, substantially lower losses from IRC Limited (IRC) and deferred tax credit (mostly due to Rouble devaluation).
§ Capital expenditure of US$29.4m, a reduction of 10% from 2015.
§ Successful refinancing of c.US$430 million of the Group's bank debt, including a revised maturity profile until September 2022 subject to certain conditions being satisfied. US$100m commodity linked loan facility remains on schedule for completion of final documentation, effective May 2017.
§ Reduction in the year end Net Debt to US$598.6m vs US$610m as at 31 December 2015. Bringing a 15% improvement in the Net Debt/ EBITDA ratio to 3:1 in comparison with the full year 2015.
Operational Highlights
§ Gold production of 416,300oz in line with revised 2016 guidance, a 17% reduction from 2015. This was predominantly due to a strategic focus on production of profitable ounces and the impact of extreme weather conditions on the mining schedule.
§ Commenced development of our maiden underground mine at Pioneer's high grade NE Bakhmut in Q2 2016. First production scheduled for Q2 2017.
§ Total of 20.2Moz Mineral Resource, including 8Moz Ore Reserves. Ore Reserves primarily impacted by mining depletion and the strategic disposal of non-core assets, while partially offset by additions of 1Moz reserves from Albyn's Elginskoye deposit and 370koz maiden underground reserve.
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|
units |
Year ended 31 Dec 2016 |
Year ended 31 Dec 2015 |
|
Total gold produced (koz) |
koz |
416.3 |
504.1 |
|
Gold sold (oz) |
oz |
399.9 |
481.9 |
|
TCC (US$/oz) |
US$/oz |
660 |
749 |
|
AISC (US$/oz) |
US$/oz |
807 |
874 |
|
Average realised gold price (US$/oz) |
US$/oz |
1,222 |
1,178 |
|
|
|
|
|
|
Revenue |
US$m |
540.7 |
599.9 |
|
Underlying EBITDA(1) |
US$m |
200.1 |
172.8 |
|
Profit/ (loss) |
US$m |
31.7 |
(297.5) |
|
Basic earnings/ (loss) per share |
US$/share |
0.01 |
(0.09) |
|
Capital expenditure |
US$m |
29.4 |
32.6 |
|
Net debt(2) |
US$m |
(598.6) |
(610.0) |
Notes
(1) Note 34 to the Consolidated Financial Statements
(2) Note 29 to the Consolidated Financial Statements
Development Highlights
§ Pressure Oxidation Hub (POX Hub)
o US$430m debt refinancing allows 100% self-funding of the POX Hub from internal cash flow generated by the Group's current non-refractory operations assuming an average US$1250/oz gold price throughout the construction and ramp up phase.
o Updated project economics (assuming US$1,200/oz gold and USD:RUR 60)
§ NPV: US$603m (post tax 10%)
§ IRR: 65%
o In 2016, key contracts were executed, namely industry leader, Outotec, were reinitiated as the project managers. All orders for long lead items were placed.
o POX Hub 65% construction complete, as at 31 December 2016. Full scale construction was resumed in January 2017. Staged commissioning from Q4 2108.
o Malomir Flotation Plant (Stage 1: 3.6Mtpa) 90% construction complete. Scheduled to complete and commission from Q4 2017. Production, trucking and stockpiling throughout 2018 ensuring a steady autoclave staged ramp up.
§ Pioneer Underground
o Increased underground Mineral Resource and defined first underground Ore Reserve
§ Total 460koz Resource, an increase of 194% from 2015.
§ Including 165koz Reserve @ 4.46 g/t.
o NE Bakhmut Underground
§ 100% of the defined 165koz Reserve is within NE Bakhmut, sustaining a viable 6 year life of mine.
§ 2016 drill programme results in a 300% uplift in Mineral Resource to 299Koz
§ Underground potential remains open in multiple directions, offering further potential for high grade mine life expansion.
§ Appointed underground contractor for immediate mobilisation of personnel and equipment.
§ Development and ventilation portals completed in H2 2016, with development decline progressing well, totalling 675m at 31 December 2016. First production schedule for Q2 2017.
§ Malomir (Quartzitovoye) Underground
o Increased underground Mineral Resource and defined first underground Ore Reserve
§ Total 283koz @ 6.58 g/t resource including 207koz @ 5.85 g/t reserve, sustaining a viable 6 year life of mine.
§ Orebody remains open in multiple directions, offering further potential for high grade mine life expansion.
o Appointed underground contractor for mobilisation of personnel and equipment in Q1 2017. First production scheduled for H2 2017.
2017 Targets
§ Gold production for 2017 is forecast between 420,000-460,000oz per annum, predominantly from open pit operations as underground production is scheduled to commence at Pioneer and Malomir in Q2 and H2, respectively, and ramp up gradually.
§ Total cash cost (TCC/oz) guidance of US$600-700/oz and all in sustaining cash costs (AISC/oz) of US$800-900/oz
§ Commence and ramp up underground production at Pioneer's high grade NE Bakhmut, with ongoing development. Further enhance understanding of high grade underground zones with reserve and resource infill and exploration underground drill programme.
§ Commence and ramp up underground production at Malomir's high grade Quartzitovoye, with ongoing development.
§ Complete construction of Malomir flotation plant (Stage 1) in preparation for refractory concentrate production and stockpiling at the POX Hub throughout 2018, ahead of commissioning in Q4 2018.
§ Capital expenditure for 2017 is expected to be c.US$100m-US$110m including c.US$15-20mln exploration capex and US$85-90mln development and maintenance capex. Development capex is predominantly comprised of POX Hub and Malomir flotation plant expenditures.
Corporate Strategy
Petropavlovsk remains focused on optimising its current asset base. The Company continues to maximise cash generation from its four operating mines, Pioneer, Albyn, Malomir and Pokrovskiy, while creating value for equity investors by growing sustainable cash flows via expansion due to successful exploration and development of the POX Hub and underground operations at Pioneer and Malomir. It is based on the quality of our assets, our focus on operational and development excellence, and our experience, demonstrated by management's track record of driving meaningful organic growth.
IRC Limited (POG 31.10% equity shareholder)
Petropavlovsk is a shareholder (31.1%) of IRC and is the guarantor of the US$340m project finance facility (US$234m principal outstanding, as at 31 December 2016). IRC is a vertically integrated iron ore producer and developer in the Russian Far East and North Eastern China. IRC is listed on the Hong Kong Stock Exchange (Ticker: 1029.HK).
IRC Annual Results for the year ended 31 December 2016:
§ Financials
o Net loss reduced by 96% to US$18.2 million (31 December 2015: US$509.0 million)
o Underlying results excluding impairment charges reduced by 37% to US$18.2 million (31 December 2015: US$28.9 million)
o Overall cost reduced by 67% to US$35.2 million (31 December 2015: US$106.7 million)
§ Corporate
o Successfully completed equity fundraising of US$25 million with a core investor
o Amicable settlement with CNEEC, received cash compensation of US$4.5 million and outstanding construction payment liability reduced by US$3.9 million
§ Operations
o K&S began shipments to customers in China - products well received with good market demand
o Care and maintenance process satisfactory in Kuranakh, assessing feasibility of re-opening and other options
IRC Q1 for the three months ended 31 March 2017:
§ Produced 316,770 tonnes of iron ore concentrates (Up 120% compared to Q4 2016)
§ Sold 321,886 tonnes of iron ore concentrates (Up 168% compared to Q4 2016)
§ Cash flow positive operations from K&S for the first full quarter
§ Operated at peak of c. 75% plant capacity in March, after repair of ball mill, with steady c.50% capacity achieved
§ Full processing operations now estimated to reach full capacity in 2H 2017.
Q1 2017 Production Results and Conference Call
Petropavlovsk will be publishing their Q1 2017 Production Results tomorrow, Thursday 27 April 2017, at 0700 BST.
There will be a conference call hosted after the results at 09.00 BST. Please find details below:
Call Details
UK toll free number 0800 368 0649
UK Local number 020 3059 8125
International participant + 44 20 3059 8125
To join the call, please use:
Participant Password: Petropavlovsk
About Petropavlovsk
Petropavlovsk is one of Russia's leading gold mining companies, operating some of the largest gold mines in Russia in terms of gold production, processing capacity and resource base. As at 31 December 2016, the Company had produced approximately 6.3Moz of gold.
Petropavlovsk is in the construction phase of a state of the art pressure oxidation facility to process the Company's substantial refractory resource base. The Company's combined 3,600km2 license holding has untapped resource potential. The Company is a leading employer and contributor to the development of the local economy in the Amur region, Russian Far East, where it has operated since 1994.
Petropavlovsk is a shareholder (31.1%) of IRC Limited and is the guarantor of the US$340m project finance facility (US$234m principal outstanding, as at 31 December 2016). IRC is a vertically integrated iron ore producer and developer in the Russian Far East and North Eastern China. IRC is listed on the Hong Kong Stock Exchange (Ticker: 1029.HK).
Petropavlovsk is listed on the Main Market of the London Stock Exchange (Ticker POG.LN)
Enquiries
For more information, please visit www.petropavlovsk.net and www.ircgroup.com.hk or contact:
Petropavlovsk plc
Alexandra Carse
Grace Hanratty
+44 (0) 20 7201 8900
Maitland
Neil Bennett
James Isola
+44 (0) 20 7379 5151
Petropavlovsk-Maitland@maitland.co.uk
Chairman's Statement
At the end of another busy year, it is a pleasure to be able to say that Petropavlovsk has achieved in 2016 many of the goals that I set out in my Chairman's Statement for 2015, and a pleasure to introduce you to our 2016 Annual Report and Accounts. It was, indeed, a transformative year, not least because the Group returned to profitability. Our net profit increased by 111%, much of which was accomplished thanks to a 4th consecutive year of cost reduction in addition to reduction in impairment losses in IRC, and, with IRC becoming an associate to the Group, limiting exposure to their results to our ownership. We must thank the efforts of all concerned to maintain a disciplined focus on cost control, in turn enabling us to maximise the margin on which our success depends, though cost control by itself will not deliver profit. I am pleased to note that production from our established open pit operations was in line with our revised guidance, delivering the sustainable cash flow that my 2015 statement hoped for.
Following the 2015 capital restructure, our team began the refinancing process with our Russian lenders. In this task, we needed to get the banks to extend the maturity profile of their loans to us so that the new maturity profile would match our production. I am pleased to say that this was achieved successfully and that the banks, understanding the importance of our plans to restart the POX Hub project for the treatment of refractory ore, agreed to encompass the capital expenditure that this would involve in nearby years. This allows us to unlock 100% of the value otherwise encapsulated in the c.4 million ounces of gold reserves in the quartz/sulphur matrix that is refractory ore. We continue to expect that the cost per ounce to produce this will not be significantly different from those we have seen in our non-refractory operations.
The POX Hub remains our core organic growth development project and key value driver for the business. The bank refinancing, while increasing near term capex for the Company, means that we no longer needed to give away part of the value in the POX Hub. Construction is 65% complete and scheduled for commissioning in Q4 2018. In 2016, we also took our first steps underground, a natural progression for us as a hitherto open pit operation with a vast refractory reserve and resource base. Both Pioneer and Malomir licenses host sources of high grade ore and the feasibility work supported operations.
Our corporate strategy is to create value for equity investors by growing our sustainable cash flows and to do this by continuing our efficient and successful exploration and development programmes. It remains our intention to deliver a meaningful share of the cash flow to shareholders as soon as the debt burden is substantially reduced. The advent of our underground operations in the nearest future and that of our production from the refractory ores is scheduled to do this. The team needs us to maximise the benefits inherent in our high quality assets - both material and personal, using the excellence and experience that is demonstrated by management's track record.
Reserves and Resources, tonnes and grade are the watchwords of the gold mining industry and we have updated you accordingly. 2016 exploration has brought considerable infill success, including a 340% increase in Reserves at the Elginskoye/Albyn complex, approximately a 200% increase in underground Resource at Pioneer, as well as a brand new greenfield discovery between Pokrovskiy and Pioneer.
2016 was also a significant year for IRC, the iron ore producer on the Chinese border in which our company holds a 31% stake, and whose borrowings from ICBC we guarantee. Following a challenging period, I am delighted to say that, as of its first quarter's results, it is now a cash generative operation and our shareholding in IRC is, in my view, is of significant potential value to the Company. I am very grateful to our team, the financiers at ICBC and Sinosure, and the contractor CNEEC, for the way in which the issues were finally resolved.
With the refinancing and rescheduling of our bank debt behind us and the excellent prospects for underground mining, the pressure oxidation of refractory ore and the new discoveries of gold ahead of us, I feel confident about our long term plans; particularly so at today's higher gold prices, even though we have protected ourselves by some 600,000 ounces of price hedging. Indeed so confident am I that the Board and I have felt it appropriate now to address the succession planning issues that our Board Review has highlighted.
Petropavlovsk is unique in being a British company with a London Board and with all its assets located in the Russian Federation and managed and operated by local people. Having managed the London end of this business for 23 years, with Pavel Maslovskiy running the Russian end, in good times and in bad, I have a clear understanding of what is involved and realise that passing on the baton will not be an easy task. As is usual in such matters, the Board has decided that the task of advancing succession matters should be undertaken by the Nomination Committee. This is in progress: Alex Green has joined Andrew Vickerman and Robert Jenkins on this Committee and I will retire from the committee and as its Chairman.
I should like to thank Robert Jenkins for taking over the role of Senior Independent Director from Sir Roderic Lyne and also to thank my other colleagues on the Board for the time and effort they have devoted to the company during the year. In addition, and on behalf of my colleagues, I want to thank the executives, the managers and all the teams that have contributed to the success of 2016.
Peter Hambro,
Chairman
CEO Statement
2016 was a transformational year for Petropavlovsk shaped by the refinancing of our bank debt, enabling the construction ramp up of our landmark POX Hub. The business returned to profitability as supported by a fourth consecutive year of cost reductions, and the operational progression into underground mining as we access the high grade reserve and resource potential that extends below our existing pits, further sustaining our long life of mine.
Solid Foundation
Our established, bulk tonnage, open pit non-refractory operations enabled us to deliver total annual production of 416koz, in line with revised guidance. Unexpected weather conditions experienced throughout the year intermittently impaired mining and in particular access to scheduled high grade ore at Andreevskaya. These ounces were deferred to the 2017 mine plan and require increased blending of lower grade stockpile material. This resulted in a 20% reduction in average processed grade from 2015. Cost control and operational efficiencies remain critical to our strategy. Without these we would not have been able to deliver another year of reduced costs:
· TCC of US$660/oz, a 12% reduction on 2015 and below our US$700/oz 2016 guidance
· AISC of US$807/oz, an 8% reduction on 2015 and in line with 2016 guidance.
This marked the fourth consecutive annual reduction in TCC and AISC representing a 35% reduction since 2013, due to cost optimisation measures and positive effect of Rouble depreciation.
In 2016, the Resin-in-Pulp (RIP) plants operated at full capacity with Group throughput of 16.2Mt, a 2% increase on 2015. The responsible optimisation of productivity and operational efficiency remains central to our way of working. As such, following extensive research and testing throughout the year, we implemented a dedicated resin treatment facility at Pokrovskiy designed to improve the processing efficiency of the resin sorption at the Group "RIP" plants. We expect this to significantly reduce the impact of gold in circuit, thereby increasing productivity.
In 2016, our solid and stable asset base and operational excellence have allowed us to generate positive operational cash flows and return to profitability. We achieved net profit of US$31.7m, resulted to a large extent from higher profitability of our operations and the reduced impact from IRC. Underlying EBITDA was US$200.1 million, an improvement of 16% on 2015 due to maximised margins.
Underpinning our business model is our exploration success in unlocking the abundant gold potential within our 3,600km2 license holding. Our current 20.2Moz Resource, supporting greater than a 15 year life of mine, demonstrates our value in investing our long term sustainability.
Targeted exploration on replenishing depleted ounces, resource to reserve conversion and exploring brownfield near term non-refractory potential was very successful in 2016. We converted 1.6Moz of Resources to Reserves of which the majority were at our 100% non-refractory Albyn mine, Elginskoye deposit. Instrumental to our strategic growth objectives, we defined our first underground Reserve of 370koz, underpinning an initial 6 year life of mine at both Pioneer and Malomir.
Building for the Future
It is important to remember that Petropavlovsk's foundations lie at Pokrovskiy, acquired in the early stages of exploration in 1994 and which subsequently became the backbone of the Group. As the mine nears the end of its reserve life, we made the strategic decision to develop it into the base for the POX Hub. Its excellent operational infrastructure, skilled labour, proximity to regional infrastructure and access to naturally occurring limestone drove our decision.
The refinancing of our bank debt was paramount to the achievements of 2016 and has opened up our future opportunities. With the agreement that Petropavlovsk retained 100% of the value of our core growth project, the POX Hub, my colleagues and our partners, Sberbank and VTB, successfully extended the debt maturity profile, in line with our production profile, thereby enabling us to fund development out of free cash flows (assuming a prevailing gold price of $1,250/oz).
Unlocking 4Moz refractory Reserves embedded within our existing asset base, equivalent to approximately 50% of our current Ore Reserves, represents meaningful value to Petropavlovsk. Following the refinancing, together with independent consultants, we updated our project economics, giving an IRR of 65% and NPV10 of US$603 million, adding a minimum of 200koz per annum to our production profile at a steady rate.
At Malomir, currently producing 57koz in 2016 completing the POX Hub will grow its production profile to make it the largest contributing Group asset by 2019 with a falling cost trajectory in-line with current group operating costs of c.US$700/oz.
Development progresses at full scale and is currently under budget. In 2016, Outotec contracts were reinitiated and orders for long lead items placed. Flotation concentrate production is scheduled to commence at Malomir from H1 2018 for trucking and stockpiling ahead of the POX Hub commissioning from Q4 2018.
Expanding our Expertise
Prior to 2016, Petropavlovsk was an exclusively open pit operation. Following successful feasibility studies development of our first underground mine at Pioneer began in 2016, with development at Malomir scheduled to commence early 2017. First production is scheduled for H2 2017. We have appointed contractors and development is underway, with 675m of decline development completed at Pioneer by year end.
By and large, Petropavlovsk has utilised an owner-operator business model. However, given underground is a new mining method, with start-up execution risk, we have utilised well respected local contractors to mitigate this risk during this development growth phase. Notwithstanding, the long history of underground mining in the Amur region, access to highly skilled labour and existing expertise within the Group, we intend to bring the underground operational function in house over time.
Our extensive regional experience in gold mining not only within Russia but specifically the Amur region, gives us a competitive edge in a complex marketplace. We have established our presence as a leading employer and contributor to the local economy, nurturing the talent of its people, who in turn have built Petropavlovsk into the business it is today. Senior management, a number of whom have worked for Petropavlovsk for more than a decade, have extensive technical expertise. Together within the larger in house exploration, construction, research, engineering capabilities we have established, our strategic vision of being a fully integrated operating gold miner.
Positioning for Growth
With the development of our POX Hub and underground firmly underway, as we emerge from a period of introspection and optimistically look ahead, 2017 is set to be another pivotal building block towards achieving our vision of being a mid-tier producer of refractory and non-refractory ore from 2019.
I would like to thank the Board and our stakeholders for their guidance in 2016. Further, I would like to thank the management team for their commitment, strength of character and ability to effectively navigate the challenges of the last few years enabling us to reach this juncture.
We look forward to sharing our key milestones throughout this next phase of growth, while maintaining our devoted commitment to maximising sustainable margins, in 2017.
Pavel Maslovskiy,
Chief Executive Officer
Operational Review
Pioneer Mine
Pioneer is one of the Group's most prospective assets, providing near term growth from its underground non-refractory exploration and development potential, and its regional exploration potential (Pioneer flanks). Long term growth includes bringing forward the flotation plant (6.0Mtpa) development, currently scheduled for 2021, and the untapped greenfield exploration potential within its 1,375km2 total license area.
2016 Progress
§ Maintained total cash costs below US$650/oz.
§ Commenced development of our maiden underground mine at NE Bakhmut in Q3.
§ First ore scheduled to be mined from underground in Q2 2017.
§ Significantly increased existing underground Mineral Resource and defined first Ore Reserve at NE Bakhmut
§ Enhanced understanding of high grade underground zones and continuity of mineralisation at depth
2017 Targets
§ Commence mining from underground, ramping up to 200ktpa throughout the year
§ Progress underground development into the deeper NE Bakhmut 3 higher grade main area
§ Ongoing underground reserve and resource drilling
§ Maintain open pit mining and operating excellence.
§ Reduce Lost Time Injury Frequency Rate (LTIFR)
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Pioneer mining operations |
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Year ended 31-Dec-16 |
Year ended 31-Dec-15 |
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Total material moved |
m3 '000 |
17,360 |
23,980 |
|
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Ore mined |
t '000 |
3,266 |
6,016 |
|
|
Average grade |
g/t |
0.95 |
1.28 |
|
|
Gold content |
koz |
99.4 |
248.4 |
|
|
Processing operations (Resin-in-pulp plant) |
|
|
|
|
|
Total milled |
t '000 |
6,700 |
6,582 |
|
|
Average grade |
g/t |
0.74 |
1.25 |
|
|
Gold content |
koz |
159.8 |
264.5 |
|
|
Recovery rate |
% |
85.5% |
85.0% |
|
|
Gold recovered |
koz |
136.6 |
224.7 |
|
|
Heap leach operations |
|
|
|
|
|
Ore stacked |
t '000 |
701 |
800 |
|
|
Average grade |
g/t |
0.53 |
0.56 |
|
|
Gold content |
koz |
12.0 |
14.5 |
|
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Recovery rate |
% |
44.1 % |
46.2% |
|
|
Gold recovered |
koz |
5.3 |
6.7 |
|
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Total gold recovered |
koz |
141.9 |
231.4 |
Operational Performance
Pioneer open pits produced 141.9koz (2015: 231.4koz), representing 34% of the Group consolidated annual gold production. Ore was mined from Alexandra, Bakhmut, Vostochnaya and taken from stockpiles. Following extensive waste stripping throughout the year, high grade ore was expected from Andreevskaya East pit in Q4 2016. However, unusual weather conditions resulted in disruptions and ultimately deferred access to the high grade zone (into 2017) resulting in average grade mined of 0.95g/t, 35% lower than 2015.
Underground development has commenced, with stope mining scheduled to start in Q2 2017. Including the ventilation decline, a total of 675m of decline development was completed in 2016.
The RIP plant processed 6.7Mtpa of ore, a 2% increase on 2015. Metallurgical recovery averaged 85.5%, inline with 2015.
The heap leach operation produced 5.3koz.
The plant performed as expected, delivering on all technological performance indicators.
Total cash costs were US$631/oz, in line with 2015. All-in sustaining costs were US$789/oz, a 5% increase from 2015.
2017 Outlook
The 2017 Pioneer production profile is expected to be in line with 2016, underpinned by open pit operations at Alexandra, Yuzhnaya, Promezhutochnaya and NE Bakhmut 4 and 5, in addition to deferred high grade material from Andreevskaya East, as a result of the mining disruptions late in 2016.
Operations are due to begin in 2017 at the maiden underground mine at NE Bakhmut, which is set to provide production upside. High grade underground mining is scheduled to commence in H2 2017. In addition, the underground exploration drilling programme is to begin at the deeper extensions below the defined Resource, where deep surface drilling has intersected high grade mineralisation.
Albyn Mine
Albyn is currently the Company's largest producing mine with a 100% non-refractory defined resource base. The highly prospective 1,100km2 license area is largely under explored, presenting potential near term upside from high grade, non-refractory resources to be discovered. The main orebodies at Albyn are open in a down dip direction beyond of the feasible depth of open pit mining, offering longer term growth potential to establish mineral resource and ore reserves for underground mining.
2016 Progress
§ Reduced total cash costs and all-in sustaining costs by greater than 20%
§ Significantly increased Ore Reserves at Elginskoye, demonstrating sustainable production and extended life of mine potential.
§ Encouraging initial results showing 3km strike extension at Yasnoye.
§ Completed infill drill programme on the southern end of Unglichikan deposit in preparation for mining to commence in 2017.
2017 Targets
§ Commence mining at Unglichikan to provide additional high grade ore for Albyn plant.
§ Drill deeper targets below Albyn pit to model and assess underground potential.
§ Exploration programme at Unglichikan and Afanasevskoye to further expand Albyn's non-refractory reserve and resource base and subsequent life of mine.
§ Sustain open pit mining and operating excellence.
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Albyn mining operations |
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|
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|
|
Year ended 31-Dec-16 |
Year ended 31-Dec-15 |
|
|
|
||
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Total material moved |
m3 '000 |
31,763 |
36,722 |
|
Ore mined |
t '000 |
4,970 |
4,906 |
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Average grade |
g/t |
1.25 |
1.15 |
|
Gold content |
koz |
199.5 |
181.5 |
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Processing operations (Resin-in-pulp plant) |
|
|
|
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Total milled |
t '000 |
4,675 |
4,600 |
|
Average grade |
g/t |
1.28 |
0.89 |
|
Gold content |
koz |
192.5 |
168.8 |
|
Recovery rate |
% |
93.5% |
93.3% |
|
Gold recovered |
koz |
180.0 |
157.6 |
Operational Performance
Albyn produced 180.0koz, representing 43% of the Group's consolidated annual gold production. This was a 14% increase on 2015. Ore was mined throughout the year from Eastern and Northern sections of the pit and processed from stockpiles. The average annual mined grade was 1.25 g/t, a 9% increase on 2015, due to reduction in dilution and mining from the thicker main zone.
The RIP plant processed 4.68Mtpa of ore, a 2% increase on 2015. Metallurgical recovery averaged 93.5%, a marginal improvement on 2015.
The plant performed as expected, delivering on all technological performance indicators.
Now the Group's largest producing mine, Albyn has successfully been a key target for cost reduction. Total cash costs of US$581/oz, a 22% improvement on 2015 and all-in sustaining costs of US$719/oz, a 21% improvement on 2015. This was primarily due to higher processed grades and higher operational recoveries.
2017 Outlook
The 2017 Albyn production profile continues to be underpinned by open pit operations at Albyn, with a moderate contribution from the Unglichikan deposit, as a new pit.
Based on recent successes extending mine life at Albyn with Elginskoye, the key focus for 2017 is on further exploration at Unglichikan and Afanasevskoye, to expand the non-refractory reserve and resource base and subsequent life of mine.
Malomir
Malomir is the Group's largest asset by Reserve and Resource with approximately 90% of the reserve base categorised as refractory ore. Completing the POX Hub, which is scheduled for the end of 2018, will unlock material value embedded with the existing defined asset base and extend the expected life of mine to greater than 16 years, with untapped resource potential within the 964km2 license area.
2016 Progress
§ Reduced total cash cost by 25%
§ Completed underground feasibility study at Quartzitovoye and appointed underground contractor
§ Increased existing underground Mineral Resource and defined first Ore Reserve at Quartzitovoye.
§ Enhanced understanding of high grade underground zones and continuity of mineralisation at depth.
2017 Targets
§ Complete and commission the 3.6Mtpa (Stage 1) flotation plant, with production and stockpiling of refractory concentrate from early 2018 ahead of the POX Hub commissioning.
§ Commenced underground development at Quartzitovoye. Mining scheduled to start from H2 2017.
§ Prepare underground drill chambers ahead of exploration drill programme to delineate the extent and continuity of the high grade mineralisation
§ Sustain open pit mining and operating excellence.
§ Reduce LTIFR
|
Malomir mining operations |
|
|
|
|
|
|
|
Year ended 31-Dec-16 |
Year ended 31-Dec-15 |
|
|
Total material moved |
m3 '000 |
8,115 |
8,904 |
|
|
Ore mined |
t '000 |
1,535 |
2,105 |
|
|
Average grade |
g/t |
1.11 |
1.01 |
|
|
Gold content |
koz |
54.9 |
68.5 |
|
|
Processing operations (Resin-in-pulp plant) |
|
|
|
|
|
Total milled |
t '000 |
3,000 |
2,937 |
|
|
Average grade |
g/t |
0.86 |
0.93 |
|
|
Gold content |
koz |
82.5 |
88 |
|
|
Recovery rate |
% |
68.9% |
67.2% |
|
|
Gold recovered |
koz |
56.8 |
59.1 |
Operational Performance
Malomir produced 56.8koz (2015: 59.1koz), representing 14% of the Group consolidated annual gold production. This was 4% lower than 2015. Ore was mined throughout the year from Quartzitovoye 2, Magnetitovoye, and stockpiles. The average annual mined grade was 1.11g/t, a 10% improvement on 2015. This takes into account waste stripping at Quartzitovoye 1 throughout most of the year, in order to prepare access to ore for 2017.
The RIP plant processed 3.0Mtpa of ore, a 2% increase on 2015. Metallurgical recovery averaged 68.9%, a 3% improvement on 2015. The plant performed as expected in 2016, delivering on all technological performance indicators.
Total cash costs of US$824/oz, a 25% improvement on 2015. All-in sustaining costs of US$1004/oz, a 15% improvement on 2015.
2017 Outlook
The 2017 Malomir production profile is expected to be in line with 2016, with sustainable production upside from underground mining operations commencing in H2 2017.
In Q4 2017, Malomir will begin to transition into the Group's flagship asset in line with the scheduled completion and commissioning of Stage 1 3.6Mtpa flotation plant to process refractory ore. From 2018, Malomir concentrate production and stockpiling will be continue to ensure the POX Hub commissioning, scheduled for Q4 2018, runs smoothly.
Pokrovskiy
Pokrovskiy was the license and subsequently the mine which the Group was built. Today, as it nears the end of its mine life having produced c.2.01Moz since 1999, the mine will transition into the POX Hub, currently under full scale construction. The POX Hub is an integral part of the Group's future plans and Pokrovskiy provides the ideal strategic location, not only due to the excellent onsite and regional infrastructure, but also its close proximity to Pioneer's limestone deposit, lime being a key ingredient for the pressure oxidation process.
2016 Progress
§ Maintained total cash costs
§ In line with our development strategy to transition Pokrovskiy mine into the POX Hub, there was no material exploration in 2016.
§ Completed and implemented resin cleansing facility
2017 Targets
§ Mining at Pokrovka 1 pit
§ Begin transition to the POX Hub
o Adapt infrastructure, where appropriate
o Staged conversion of the RIP plant.
|
Pokrovskiy mining operations |
|
|
|
|
|
|
|
Year ended 31-Dec-16 |
Year ended 31-Dec-15 |
|
|
Total material moved |
m3 '000 |
4,709 |
5,169 |
|
|
Ore mined |
t '000 |
1,027 |
933 |
|
|
Average grade |
g/t |
0.79 |
1.41 |
|
|
Gold content |
koz |
26.0 |
42.2 |
|
|
Processing operations (Resin-in-pulp plant) |
|
|
|
|
|
Total milled |
t '000 |
1,791 |
1,791 |
|
|
Average grade |
g/t |
0.65 |
1.04 |
|
|
Gold content |
koz |
37.1 |
59.7 |
|
|
Recovery rate |
% |
90.1% |
84.3% |
|
|
Gold recovered |
koz |
33.5 |
50.4 |
|
|
Heap leach operations |
|
|
|
|
|
Ore stacked |
t '000 |
440 |
541 |
|
|
Average grade |
g/t |
0.45 |
0.53 |
|
|
Gold content |
koz |
6.3 |
9.2 |
|
|
Recovery rate |
% |
64.8% |
60.6% |
|
|
Gold recovered |
koz |
4.1 |
5.6 |
|
|
Total gold recovered |
koz |
37.6 |
56 |
Operational Performance
Pokrovskiy produced 37.6koz (56koz) representing 9% of the Group's consolidated annual gold production. Ore was mined from Pokrovka 1, Pokrovka 2, satellite deposit Zheltunak and from stockpiles.
Despite the unusual weather conditions causing some delays to the heap leach operations, successful scheduling adjustments meant target stacking and production were achieved as planned. The heap leach operation produced 4.1koz.
The RIP plant processed 1.79Mtpa of ore, unchanged from 2015. Metallurgical recovery at the plant averaged 90.1%, a 7% improvement on 2015, despite 38% decrease in head grade from 1.04 to 0.65 g/t.
The plant performed as expected, delivering on all technological performance indicators.
Total cash costs of US$878/oz, in line with 2015. All-in sustaining costs of US$988/oz, an 8% increase on 2015.
Outlook
As Pokrovskiy is coming to the end of its reserves, RIP production is scheduled to stop at the end of 2017. The heap leach will remain operational throughout the 2018, processing remaining stockpiles. The Group is actively developing the POX Hub, which is scheduled to commence producing refractory concentrate from Q4 2018. Pokrovskiy will continue its life as the POX Hub, Petropavlovsk's strategic processing centre for refractory concentrates.
Following the successful debt restructuring in 2016, the Group resumed development of the Pressure Oxidation Facility (POX Hub) at Pokrovskiy. Utilising and adapting existing infrastructure (including the 1.8Mtpa RIP plant) has a beneficial impact on capital costs, with US$90million gross value of for buildings and equipment being incorporated directly into the POX Hub facility.
Financial Review
FINANCIAL HIGHLIGHTS
|
|
2016 |
2015 |
|
|
US$ million |
US$ million |
|
Continuing operations |
|
|
|
Total attributable gold production ('000oz) |
416.3 |
504.1 |
|
Gold sold ('000oz) |
399.9 |
481.9 |
|
Group revenue |
540.7 |
599.9 |
|
Average realised gold price (US$/oz) |
1,222 |
1,178 |
|
Average LBMA gold price afternoon fixing (US$/oz) |
1,250 |
1,160 |
|
Total average cash costs (US$/oz) (a) |
660 |
749 |
|
All-in sustaining costs (b) |
807 |
874 |
|
Underlying EBITDA(c) |
200.1 |
172.8 |
|
|
|
|
|
Profit/(loss) for the period |
31.7 |
(297.5) |
|
From continuing operations |
31.7 |
(190.5) |
|
From discontinued operations |
- |
(107.0) |
|
|
|
|
|
Basic profit/(loss) per share |
US$0.01 |
(US$0.09) |
|
From continuing operations |
US$0.01 |
(US$0.07) |
|
From discontinued operations |
- |
(US$0.02) |
|
|
|
|
|
Net cash from operating activities |
37.0 |
103.4 |
|
From continuing operations |
37.0 |
111.0 |
|
From discontinued operations |
- |
(7.6) |
(a) Calculation of total cash costs ("TCC") is set out in the section Hard-rock mines operations below.
(b) All-in sustaining costs ("AISC") and all-in costs ("AIC") are calculated in accordance with guidelines for reporting all-in sustaining costs and all-in costs published by the World Gold Council. Calculation is set out in the section All-in sustaining costs and all-in costs below.
(c) Reconciliation of profit/(loss) for the period and underlying EBITDA is set out in note 34 to the consolidated financial statements.
|
|
31 December 2016 |
31 December 2015 |
|
|
US$ million |
US$ million |
|
Cash and cash equivalents |
12.6 |
28.2 (d) |
|
Loans |
(522.8) |
(552.8) |
|
Convertible bonds (e) |
(88.4) |
(85.5) |
|
Net Debt |
(598.6) |
(610.0) |
(d) Including US$15.1 million received under investment agreement with the Russian Ministry of Far East Development.
(e) US$100.0 million convertible bonds due on 18 March 2020 at amortised cost.
Note: Figures may not add up due to rounding
Revenue
|
|
|
2016 |
2015 |
|
|
|
US$ million |
US$ million |
|
Revenue from hard-rock mines |
|
490.0 |
568.7 |
|
Revenue from other operations |
|
50.7 |
31.2 |
|
|
|
540.7 |
599.9 |
Physical volumes of gold production and sales
|
|
|
2016 |
2015 |
|
|
|
oz |
oz |
|
Gold sold from hard-rock mines |
|
399,858 |
481,884 |
|
Movement in gold in circuit and doré-bars |
|
16,442 |
22,216 |
|
Total attributable production |
|
416,300 |
504,100 |
Group revenue during the period was US$540.7 million, 10% lower than the US$599.9 million achieved in 2015.
Revenue from hard-rock mines was US$490.0 million, 14% lower than the US$568.7 million achieved in 2015. Gold remains the key commodity produced and sold by the Group, comprising 90% of total revenue generated in 2016. The physical volume of gold sold from hard-rock mines decreased by 17% from 481,884 ounces in 2015 to 399,858 ounces in 2016. The average realised gold price increased by 4% from US$1,178/oz in 2015 to US$1,222/oz in 2016. Average realised gold price includes US$(21)/oz effect from hedge arrangements (2015: US$20/oz).
Hard-rock mines sold 98,231 ounces of silver in 2016 at an average price of US$16/oz, compared to 68,075 ounces in 2015 at an average price of US$15/oz.
Revenue generated as a result of third-party work by the Group's in-house service companies was US$50.7 million in 2016, a US$19.5 million increase compared to US$31.2 million in 2015. This revenue is substantially attributable to sales generated by 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$44.8 million in 2016 compared to US$28.6 million in 2015.
Cash flow hedge arrangements
In order to increase certainty in respect of a significant proportion of its cash flows, the Group has entered into a number of gold forward contracts.
Forward contracts to sell an aggregate of 134,545 ounces of gold matured during the year and resulted in US$(8.5) million net cash settlement paid by the Group (2015: US$12.6 million contribution to cash revenue from forward contracts to sell an aggregate of 178,449 ounces of gold).
The Group constantly monitors gold price and hedges some portion of production as considered necessary. Forward contracts to sell an aggregate of 50,006 ounces of gold at an average price of US$1,303 per ounce were outstanding as at 31 December 2016. In February - March 2017, the Group entered into forward contracts to sell an aggregate of 549,994 ounces of gold during the years 2017 - 2019 at an average price of US$1,252/oz, thus, satisfying bank debt refinancing conditions. Forward contracts to sell an aggregate of 546,968 ounces of gold at an average price of US$1,253 per ounce are outstanding as at 26 April 2017.
Underlying EBITDA and analysis of operating costs
|
|
|
|
||
|
|
2016 |
|
2015 |
|
|
|
US$ million |
|
US$ million |
|
|
Profit/(loss) for the period from continuing operations |
31.7 |
|
(190.5) |
|
|
Add/(less): |
|
|
|
|
|
Interest expense |
61.0 |
|
71.5 |
|
|
Investment income |
(0.6) |
|
(1.0) |
|
|
Other finance gains |
(11.9) |
|
(9.1) |
|
|
Other finance losses |
1.5 |
|
- |
|
|
Foreign exchange losses |
5.2 |
|
12.0 |
|
|
Taxation |
(4.7) |
|
48.9 |
|
|
Depreciation |
105.3 |
|
129.1 |
|
|
Impairment of exploration and evaluation assets |
9.2 |
|
37.4 |
|
|
Impairment of ore stockpiles |
1.2 |
|
17.4 |
|
|
Share of results of associates (a) |
2.4 |
|
57.0 |
|
|
Underlying EBITDA |
200.1 |
|
172.8 |
|
(a) Group's share of interest expense, investment income, other finance gains and losses, foreign exchange losses, taxation, depreciation and impairment recognised by an associate (IRC)
Underlying EBITDA as contributed by business segments is set out below.
|
|
|
|
||
|
|
2016 |
|
2015 |
|
|
|
US$ million |
|
US$ million |
|
|
Pioneer |
79.2 |
|
118.6 |
|
|
Pokrovskiy |
13.2 |
|
16.1 |
|
|
Malomir |
22.0 |
|
5.7 |
|
|
Albyn |
110.4 |
|
66.5 |
|
|
Total Hard-rock mines |
224.7 |
|
206.9 |
|
|
Corporate and other |
(24.6) |
|
(34.1) |
|
|
Underlying EBITDA |
200.1 |
|
172.8 |
|
Hard-rock mines
This period, hard-rock mines generated underlying EBITDA of US$224.7 million compared to US$206.9 million underlying EBITDA in 2015.
Total cash costs for hard-rock mines decreased from US$749/oz in 2015 to US$660/oz in 2016, primarily reflecting the effect of cost optimisation measures undertaken by the Group in response to the lower gold price environment as well as the positive effect of Rouble depreciation. The increase in the average realised gold price from US$1,178/oz in 2015 to US$1,222/oz in 2016 and the improved total cash costs had US$53.2 million positive contribution to underlying EBITDA in 2016. This effect was offset by the decrease in physical ounces sold which resulted in a US$35.2 million decrease in underlying EBITDA.
The key components of the operating cash expenses are wages, electricity, diesel, chemical reagents and consumables, as set out in the table below. The key cost drivers affecting the operating cash expenses are stripping ratios, production volumes of ore mined and processed, grades of ore processed, recovery rates, cost inflation and fluctuations in the Rouble to US Dollar exchange rate.
Compared with 2015 there was no significant inflation of Rouble denominated costs, in particular, electricity costs increased by up to 3% in Rouble terms (decreased by up to 6% in US Dollar terms) while the cost of diesel remained at the same level (decreased by up to 9% in US Dollar terms). The impact of Rouble price inflation was mitigated by the 10% average depreciation of the Rouble against the US Dollar, with the average exchange rate for the period increasing from 61.30 Roubles per US Dollar in 2015 to 67.18 Roubles per US Dollar in 2016.
Refinery and transportation costs are variable costs dependent on the production volume. Mining tax is also a variable cost dependent on production volume and the gold price realised. The mining tax rate is 6%. Since the second half of 2016, the Group applies two-year mining tax concession.
|
|
|
2016 |
|
2015 |
|||
|
|
|
US$ million |
% |
|
US$ million |
% |
|
|
Staff cost |
|
54.7 |
21 |
|
61.8 |
19 |
|
|
Materials |
|
97.4 |
37 |
|
129.9 |
39 |
|
|
Fuel |
|
40.3 |
15 |
|
55.3 |
17 |
|
|
Electricity |
|
23.3 |
9 |
|
25.0 |
8 |
|
|
Other external services |
|
22.1 |
8 |
|
27.4 |
8 |
|
|
Other operating expenses |
|
28.2 |
10 |
|
29.8 |
9 |
|
|
|
|
266.0 |
100 |
|
329.2 |
100 |
|
|
Movement in ore stockpiles, work in progress and bullion in process attributable to gold production (a) |
|
(40.5) |
|
|
(17.8) |
|
|
|
Total operating cash expenses |
|
225.6 |
|
|
311.4 |
|
|
(a) Excluding deferred stripping
|
|
Hard-rock mines |
2016 |
2015 |
|||
|
|
Pioneer |
Pokrovskiy |
Malomir |
Albyn |
Total |
Total |
|
|
US$ million |
US$ million |
US$ million |
US$ million |
US$ million |
US$ million |
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
Gold |
163.5 |
46.7 |
67.1 |
211.2 |
488.5 |
567.6 |
|
Silver |
1.0 |
0.3 |
0.1 |
0.2 |
1.5 |
1.0 |
|
|
164.5 |
47.0 |
67.2 |
211.4 |
490.0 |
568.7 |
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
Operating cash expenses |
77.9 |
31.9 |
41.6 |
74.2 |
225.6 |
311.4 |
|
Refinery and transportation |
0.2 |
0.1 |
0.1 |
0.3 |
0.7 |
1.1 |
|
Other taxes |
1.9 |
0.5 |
1.6 |
2.2 |
6.3 |
7.7 |
|
Mining tax |
5.2 |
1.3 |
1.9 |
6.3 |
14.7 |
33.1 |
|
Deferred stripping costs |
- |
- |
- |
18.0 |
18.0 |
8.4 |
|
Depreciation |
38.8 |
6.6 |
13.6 |
45.7 |
104.7 |
127.2 |
|
Impairment of exploration and evaluation assets |
- |
- |
- |
9.2 |
9.2 |
2.5 |
|
Impairment/(reversal of impairment) of ore stockpiles |
6.1 |
1.0 |
(5.8) |
(0.1) |
1.2 |
17.4 |
|
Operating expenses |
130.2 |
41.4 |
53.0 |
155.7 |
380.3 |
508.9 |
|
Result of precious metals operations |
34.3 |
5.6 |
14.2 |
55.6 |
109.7 |
59.8 |
|
|
|
|
|
|
|
|
|
Add/(less): |
|
|
|
|
|
|
|
Depreciation |
38.8 |
6.6 |
13.6 |
45.7 |
104.7 |
127.2 |
|
Impairment of exploration and evaluation assets |
- |
- |
- |
9.2 |
9.2 |
2.5 |
|
Impairment/(reversal of impairment) of ore stockpiles |
6.1 |
1.0 |
(5.8) |
(0.1) |
1.2 |
17.4 |
|
Segment EBITDA |
79.2 |
13.2 |
22.0 |
110.4 |
224.7 |
206.9 |
|
|
|
|
|
|
|
|
|
Physical volume of gold sold, oz |
133,605 |
38,151 |
54,760 |
173,342 |
399,858 |
481,884 |
|
|
|
|
|
|
|
|
|
Cash costs
|
|
|
|
|
|
|
|
Operating cash expenses |
77.9 |
31.9 |
41.6 |
74.2 |
225.6 |
311.4 |
|
Refinery and transportation |
0.2 |
0.1 |
0.1 |
0.3 |
0.7 |
1.1 |
|
Other taxes |
1.9 |
0.5 |
1.6 |
2.2 |
6.3 |
7.7 |
|
Mining tax |
5.2 |
1.3 |
1.9 |
6.3 |
14.7 |
33.1 |
|
Deferred stripping costs |
- |
- |
- |
18.0 |
18.0 |
8.4 |
|
Operating cash costs |
85.3 |
33.8 |
45.2 |
101.0 |
265.3 |
361.8 |
|
Deduct: co-product revenue |
(1.0) |
(0.3) |
(0.1) |
(0.2) |
(1.5) |
(1.0) |
|
Total cash costs |
84.3 |
33.5 |
45.1 |
100.8 |
263.7 |
360.7 |
|
|
|
|
|
|
|
|
|
Average TCC/oz, US$/oz |
631 |
878 |
824 |
581 |
660 |
749 |
|
|
|
|
|
|
|
|
All-in sustaining costs and all-in costs
AISC decreased from US$874/oz in 2015 to US$807/oz in 2016, reflecting the reduction in TCC as well as lower sustaining capital expenditure related to the existing mining operations.
AIC decreased from US$932/oz in 2015 to US$838/oz in 2016, reflecting the decrease in AISC explained above, reversal of impairment of refractory ore stockpiles due a higher gold price and decrease in exploration expenditure.
|
|
Hard-rock mines |
2016
|
2015
|
|||
|
|
Pioneer |
Pokrovskiy |
Malomir |
Albyn |
Total |
Total |
|
|
US$ million |
US$ million |
US$ million |
US$ million |
US$ million |
US$ million |
|
|
|
|
|
|
|
|
|
Physical volume of gold sold, oz |
133,605 |
38,151 |
54,760 |
173,342 |
399,858 |
481,884 |
|
|
|
|
|
|
|
|
|
Total cash costs |
84.3 |
33.5 |
45.1 |
100.8 |
263.7 |
360.7 |
|
|
|
|
|
|
|
|
|
Average TCC/oz, US$/oz |
631 |
878 |
824 |
581 |
660 |
749 |
|
|
|
|
|
|
|
|
|
Impairment/(reversal of impairment) of ore stockpiles |
6.3 |
1.0 |
(0.0) |
(0.1) |
7.2 |
9.2
|
|
Adjusted operating costs |
90.6 |
34.5 |
45.1 |
100.6 |
270.9 |
369.9 |
|
|
|
|
|
|
|
|
|
Central administration expenses |
10.9 |
3.1 |
4.5 |
14.1 |
32.6 |
30.4 |
|
Capitalised stripping at end of the period |
- |
- |
3.6 |
22.6 |
26.2 |
18.0 |
|
Capitalised stripping at beginning of the period |
- |
- |
- |
(18.0) |
(18.0) |
(8.4) |
|
Close-down and site restoration |
0.1 |
- |
- |
0.1 |
0.2 |
(1.7) |
|
Sustaining capital expenditure |
3.9 |
0.1 |
1.7 |
5.2 |
10.9 |
12.7 |
|
All-in sustaining costs |
105.5 |
37.7 |
55.0 |
124.7 |
322.8 |
420.9 |
|
|
|
|
|
|
|
|
|
All-in sustaining costs, US$/oz |
789 |
988 |
1,004 |
719 |
807 |
874 |
|
|
|
|
|
|
|
|
|
Exploration expenditure |
8.5 |
0.1 |
1.9 |
6.2 |
16.6 |
18.9 |
|
Capital expenditure |
1.0 |
- |
0.8 |
- |
1.9 |
1.0 |
|
(Reversal of impairment)/impairment of ore stockpiles (a) |
(0.2) |
- |
(5.8) |
- |
(6.0) |
8.2 |
|
All-in costs |
114.8 |
37.8 |
51.9 |
130.8 |
335.3 |
449.0 |
|
|
|
|
|
|
|
|
|
All-in costs, US$/oz |
859 |
990 |
948 |
755 |
838 |
932 |
|
|
|
|
|
|
|
|
(a) Refractory ore stockpiles to be processed at the POX Hub.
Corporate and other
The Group has corporate offices in London, Moscow and Blagoveschensk which together represent the central administration function. Central administration expenses increased by US$2.2 million from US$30.4 million in 2015 to US$32.6 million in 2016.
During 2016, other operations contributed US$(24.6) million to underlying EBITDA vs. US$(34.1) million in 2015. Included in result of corporate in other operations in 2016 is a US$3.6 million share in losses generated by IRC.
Impairment review
The Group undertook an impairment review of the tangible assets attributable to its gold mining projects, exploration assets adjacent to the existing mines and supporting in-house service companies and concluded no impairment was required as at 31 December 2016, with exception of an individual licence impairment referred to below.
The forecast future cash flows are based on the Group's current mining plan that assumes POX Hub completion in the year 2018. The other key assumptions which formed the basis of forecasting future cash flows and the value in use calculation are set out below:
|
|
Year ended 31 December 2016 |
Year ended 31 December 2015 |
|
Long-term gold price |
US$1,200/oz |
US$1,150/oz |
|
Discount rate (a) |
8% |
8% |
|
RUB/US$ exchange rate |
RUB60.0/US$ |
RUB65.0/US$ |
(a) Being the post-tax real weighted average cost of capital, equivalent to a nominal pre-tax discount rate of 10.1% (2015: 10.1%)
Following the decision to suspend exploration at Kharginskoye ore field, an immediate extension of the Albyn deposit, and to surrender the license, a US$9.2 million impairment charges were recorded against associated exploration and evaluation costs previously capitalised within exploration and evaluation assets.
As at 31 December 2016, all exploration and evaluation assets on the balance sheet related to the areas adjacent to the existing mines.
Impairment of ore stockpiles
The Group assessed the recoverability of the carrying value of ore stockpiles and recorded impairment charges/(reversals) of impairment as set out below:
|
|
Year ended 31 December 2016 |
|
Year ended 31 December 2015 |
||||
|
|
Pre-tax impairment charge/ (reversal of impairment) |
Taxation |
Post-tax impairment charge/ (reversal of impairment) |
|
Pre-tax impairment charge/ (reversal of impairment) |
Taxation |
Post-tax impairment charge/ (reversal of impairment) |
|
|
US$ million |
US$ million |
US$ million |
|
US$ million |
US$ million |
US$ million |
|
Pokrovskiy |
1.0 |
(0.2) |
0.8 |
|
(0.9) |
0.2 |
(0.7) |
|
Pioneer |
6.1 |
(1.2) |
4.9 |
|
11.9 |
(2.4) |
9.6 |
|
Malomir |
(5.8) |
1.2 |
(4.7) |
|
6.1 |
(1.2) |
4.9 |
|
Albyn |
(0.1) |
- |
(0.1) |
|
0.3 |
(0.1) |
0.2 |
|
|
1.2 |
(0.2) |
0.9 |
|
17.4 |
(3.5) |
13.9 |
Interest income and expense
|
|
|
2016 |
2015 |
|
|
|
US$ million |
US$ million |
|
Investment income |
|
0.6 |
1.0 |
The Group earned US$0.6 million interest income on its cash deposits with banks.
|
|
|
2016 |
2015 |
|
|
|
US$ million |
US$ million |
|
Interest expense |
|
60.8 |
71.3 |
|
Other |
|
0.2 |
0.2 |
|
|
|
61.0 |
71.5 |
Interest expense for the period was comprised of US$11.9 million effective interest on the Convertible Bonds and US$48.9 million interest on bank facilities (2015: US$13.6 million and US$57.7 million, respectively). There no interest expense was capitalised as part of mine development costs within property, plant and equipment
Other finance gains and losses
Other finance gains for the period comprised US$11.9 million compared to US$9.1 million in 2015. Included in other finance gains is financial guarantee fee of US$4.5 million (2015: US$2.2 million) charged in connection with the ICBC facility and US$7.4 million (2015: US$6.4 million) fair value gain on revaluation of the embedded option for the bondholders to convert into the equity of the Company. The Group also recognised US$1.5 million loss on bank debt refinancing.
Taxation
|
|
|
2016 |
2015 |
|
|
|
US$ million |
US$ million |
|
Tax (credit)/charge |
|
(4.7) |
48.9 |
The Group is subject to corporation tax under UK, Russia and Cyprus tax legislation. The average statutory tax rate for 2016 was 20% in the UK and 20% in Russia.
The tax charge for the period arises primarily in relation to the Group's gold mining operations and is represented by a current tax charge of US$29.8 million in 2016 (2015: US$31.8 million) and a deferred tax credit, which is a non-cash item, of US$34.5 million (2015: deferred tax charge of US$17.1 million). Included in the deferred tax credit in 2016 is a US$26.0 million foreign exchange effect which primarily arises because the tax base for a significant portion of the future taxable deductions in relation to the Group's property, plant and equipment are denominated in Russian Rouble whilst the future depreciation charges associated with these assets will be based on their US Dollar carrying value.
During the period, the Group made corporation tax payments in aggregate of US$35.3 million in Russia (2015: corporation tax payments in aggregate of US$32.9 million in Russia).
Profit/(loss) per share
|
|
2016
|
2015
|
|
Profit/(loss) for the period from continuing operations attributable to equity holders of Petropavlovsk PLC |
US$33.7 million |
(US$190.2 million) |
|
Weighted average number of Ordinary Shares |
3,302,148,536 |
2,657,332,030 |
|
Basic profit/(loss) per ordinary share from continuing operations |
US$0.01 |
(US$0.07) |
Basic profit per share for 2016 was US$0.01 compared to US$0.07 basic loss per share for 2015. The key factor affecting the basic profit/(loss) per share was the increase of net profit for the period attributable to equity holders of Petropavlovsk PLC from the net loss of US$190.2 million for 2015 to US$33.7 million net profit for 2016.
The total number of Ordinary Shares in issue as at 31 December 2016 was 3,303,768,532 (31 December 2015: 3,300,561,697).
The Group has a number of potentially dilutive instruments which were anti-dilutive in the 2015 and 2016 and, accordingly, diluted profit/(loss) per share was not different from the basic profit/(loss) per share.
Financial position and cash flows
|
|
31 December 2016 |
31 December 2015 |
|
|
US$ million |
US$ million |
|
Cash and cash equivalents |
12.6 |
28.2 |
|
Loans |
(522.8) |
(552.8) |
|
Convertible bonds (a) |
(88.4) |
(85.5) |
|
Net Debt |
(598.6) |
(610.0) |
|
(a) US$100.0 million convertible bonds due on 18 March 2020 at amortised cost.
|
||
|
|
2016 30 June 2013
|
2015 30 June 2013
|
|
|
US$ million |
US$ million |
|
Net cash from operating activities: |
|
|
|
Continuing operations |
37.0 |
111.0 |
|
Discontinued operations |
- |
(7.6) |
|
|
37.0 |
103.4 |
|
Net cash used in investing activities: |
|
|
|
Continuing operations |
(8.7)(b) |
(23.2) |
|
Discontinued operations |
- |
(43.0) |
|
|
(8.7)(b) |
(66.2) |
|
Net cash used in financing activities: |
|
|
|
Continuing operations |
(46.8) |
(110.6) |
|
Discontinued operations |
- |
74.2 |
|
|
(46.8) |
(36.4) |
(b) Including US$29.4 million cash CAPEX and US$19.2 million proceeds from disposal of subsidiaries
Key movements in cash and net debt from continuing operations
|
|
Cash |
Debt |
Net Debt |
|
|
US$ million |
US$ million |
US$ million |
|
As at 1 January 2016 |
28.2 (a) |
(638.3) |
(610.0) |
|
Net cash generated by operating activities before working capital changes |
189.3 |
|
|
|
Increase in working capital |
(63.3) |
|
|
|
Income tax paid |
(35.3) |
|
|
|
Capital expenditure |
(12.8) |
|
|
|
Exploration expenditure |
(16.6) |
|
|
|
Amounts repaid under bank loans, net |
(27.0) |
27.0 |
|
|
Interest accrued |
|
(60.8) |
|
|
Interest paid |
(53.7) |
53.7 |
|
|
Transaction costs in connection with bank loans |
(4.0) |
5.5 |
|
|
Bank debt refinancing |
|
1.5 |
|
|
Proceeds from disposal of subsidiaries, net of cash disposed and net of liabilities settled |
19.2 |
|
|
|
Funds advanced to the Group under investment agreement with the Russian Ministry of Far East Development |
30.8 |
|
|
|
Funds transferred under investment agreement with the Russian Ministry of Far East Development |
(47.7)
|
|
|
|
Foreign exchange |
2.8 |
0.2 |
|
|
Other |
2.7 |
|
|
|
As at 31 December 2016 |
12.6 |
(611.2) |
(598.6) |
(a) Including US$15.1 million received under investment agreement with the Russian Ministry of Far East Development
The increase in working capital reflects US$25.8 million increase in trade and other receivables and US$37.7 million reduction in trade and other payables.
As at 31 December 2016, there were no undrawn facilities available to the continuing operations.
Capital expenditure
The Group invested an aggregate of US$29.4 million on its gold projects compared to US$32.6 million invested in 2015. The key areas of focus this year were on fulfilling existing contractual commitments in relation to the POX Hub project, exploration to support the underground mining at Pioneer, expansion of tailing dams at Pioneer and Albyn and ongoing exploration related to the areas adjacent to the ore bodies of the Group's main mining operations.
|
|
Exploration expenditure |
Development expenditure and other CAPEX (a) |
Total
|
|
|
US$ million |
US$ million |
US$ million |
|
POX |
- |
1.9 |
1.9 |
|
Pokrovskiy and Pioneer (b) |
8.6 |
3.7 |
12.3 |
|
Malomir |
1.9 |
1.6 |
3.5 |
|
Albyn |
6.1 |
4.9 |
11.0
|
|
Upgrade of in-house service companies |
- |
0.6 |
0.6 |
|
|
16.6 |
12.8 |
29.4 |
(a) Including US$1.9 million of development expenditure in relation to the POX Hub which is considered to be non-sustaining capital expenditure for the purposes of calculating all-in sustaining costs and all-in costs.
(b) Including US$5.5 million of exploration expenditure in relation to the underground mining project at Pioneer to be non-sustaining capital expenditure for the purposes of calculating the all-in sustaining costs and all-in costs.
Foreign currency exchange differences
The Group's principal subsidiaries have a US Dollar functional currency. Foreign exchange differences arise on translation of monetary assets and liabilities denominated in foreign currencies, which for the principal subsidiaries of the Group are the Russian Rouble and GB Pounds Sterling.
The following exchange rates to the US Dollar have been applied to translate monetary assets and liabilities denominated in foreign currencies.
|
|
|
31 December 2016
|
31 December 2015
|
|
GB Pounds Sterling (GBP: US$) |
|
0.81 |
0.68 |
|
Russian Rouble (RUB : US$) |
|
60.66 |
72.88 |
The Rouble recovered by 17% against the US Dollar during 2016, from RUB72.88 : US$1 as at 31 December 2015 to RUB60.66 : US$1 as at 31 December 2016. The average year-on-year depreciation of the Rouble against the US Dollar was approximately 10%, with the average exchange rate for 2016 being RUB67.18 : US$1 compared to RUB61.30 : US$1 for 2015.
As a result of the significant volatility of the Russian Rouble, the Group recognised foreign exchange losses of US$5.2 million in 2016 (2015: US$12 million) arising primarily on Rouble denominated net monetary assets.
Refinancing of the Group's bank debt
In December 2016, the Group refinanced US$430 million outstanding principal of the Group's US$530 million bank debt, including a revised maturity profile and renegotiation of the financial and operational covenants.
Results of the bank debt refinancing are set out below.
|
|
|
December 2016 |
|
|
|
US$ million |
|
Carrying value of liabilities de-recognised |
|
428.2 |
|
Fair value of new liabilities recognised: |
|
|
|
Bank debt |
|
426.7 |
|
Call option over the Company's shares |
|
3.0 |
|
Loss on bank debt refinancing |
|
(1.5) |
Cash settled call option was issued in relation to 3.6 per cent. of the outstanding aggregate ordinary share capital in the Company and is exercisable between December 2019 and March 2023 at strike price of £0.068.
Transaction costs of US$4.9 million were further capitalised.
The Group is currently completing the final documentation to refinance the remaining US$100 million bank debt. Once this has been completed, the Group's entire bank debt of US$530 million has been refinanced.
Disposal of subsidiaries
The Group entered into agreements to sell its wholly owned subsidiary LLC Ilijnskoye and its associate JSC Verkhnetisskaya Ore Mining Company for an aggregate cash consideration of an equivalent to US$20 million, payable in tranches during 2016, out of which US$19.8 million were attributed to the value of Visokoe asset held by LLC Ilijnskoye and the remainder to JSC Verkhnetisskaya Ore Mining Company. The disposal of LLC Ilijnskoye was completed on 11 May 2016. The Group recognised US$0.5 million net loss on this disposal.
Investment agreement with the Russian Ministry of Far East Development
On 14 December 2015, the Group entered into an investment agreement with the Russian Ministry of Far East Development (the 'Investment Agreement'). The Investment Agreement involves provision of RUB5.5 billion (an equivalent to c.US$91 million as at 31 December 2016) funding towards the construction of the electricity power line in the North-East of the Amur Region of Russia, where the Group's Albyn and Malomir mines and adjacent licence areas are operated, during the period 2015 - 2019. The funds are advanced to the Group and then should be transferred to the joint-stock company Far East Grid Distribution Company ('DRSK'), who is to engage a contractor to build the relevant power supply infrastructure. The Group's responsibility under the Investment Agreement will be to monitor the progress and to report to the Russian Ministry of Far East Development. The Group will be taking ultimate responsibility for the construction of the power line. Upon completion, the Group will get access to the enhanced capacity of the power supply infrastructure in the region. Under the terms of the Investment Agreement, the Group has certain capital commitments, including further development of Albyn and Malomir mines.
As at 31 December 2015, the Group received RUB1.1billion (an equivalent to US$15.1 million) funds under the Investment Agreement. During 2016, the Group received further RUB2.0 billion (an equivalent to US$30.8 million) under the Investment Agreement and transferred an aggregate RUB3.1 billion (an equivalent to US$47.7 million) to DRSK.
Going concern
The Group monitors and manages its liquidity risk on an ongoing basis to ensure that it has access to sufficient funds to meet its obligations. Cash forecasts are prepared regularly based on a number of inputs including, but not limited to, forecast commodity prices and impact of hedging arrangements, the Group's mining plan, forecast expenditure and debt repayment schedules. Sensitivities are run for different scenarios including, but not limited to, changes in commodity prices, cost inflation, different production rates from the Group's producing assets and the timing of expenditure on development projects. This is done to identify risks to liquidity and covenant compliance and enable management to develop appropriate and timely mitigation strategies. The Group meets its capital requirements through a combination of sources including cash generated from operations and external debt.
The Group performed an assessment of the forecast cash flows and covenant compliance in relation to bank facilities for the period of 12 months from the date of approval of the 2016 Annual Report and Accounts. As at 31 December 2016, the Group had sufficient liquidity headroom and complied with related financial covenants. Following the successful completion of the bank debt refinancing, the Group is also satisfied that it has sufficient headroom under a base case scenario for the period to May 2018 and expects to comply with related financial covenants. In the meantime, the Group's projections under a reasonable downside scenario indicate that, unless mitigating actions can be taken including accessing deposits not currently in the Group's mining plan, there will be insufficient liquidity and non-compliance with certain financial covenants under a reasonable downside scenario for the relevant period to May 2018. If a missed debt repayment occurs or financial covenant requirements are not met, this would result in events of default which, through cross-defaults and cross-accelerations, could cause all other Group's debt arrangements to become repayable on demand. The Directors are confident that, should it be required, relevant mitigating actions could be successfully implemented.
The Group has guaranteed the outstanding amounts IRC owes to ICBC. The outstanding loan principal was US$234 million as at 31 December 2016. The assessment of whether there is any material uncertainty that IRC will be able to repay this facility as it falls due is another key element of the Group's overall going concern assessment. IRC has agreed with ICBC to restructure and reschedule two repayment instalments under the ICBC Facility Agreement, which are originally due for payment on 20 June 2017 and 20 December 2017, with next repayment instalment due on 20 June 2018. IRC also obtained waivers from ICBC in respect of obligations to maintain certain cash deposits with ICBC until 30 June 2018 and obligations to comply with certain financial covenants until 31 December 2017 (inclusive).
Having taken into account the aforementioned factors, and after making enquiries and considering the uncertainties described above, the Directors have a reasonable expectation that the Group will have adequate resources to continue in operational existence for the foreseeable future, being at least the next 12 months from the date of approval of the 2016 Annual Report and Accounts. Accordingly, they continue to adopt the going concern basis of accounting in preparing these consolidated financial statements.
2017 Outlook
The Group is confident to achieve 2017 production guidance of 460Koz. The Group's operating cash expenses are substantially Rouble denominated. The Group expects its total average cash costs of production in 2017 to be c.US$700/oz at current exchange rate. Net debt is expected to decrease to c.US$550 million by the end of 2017, assuming an average gold price of US$1,200/oz for the remainder of 2017.
Risk Review
Petropavlovsk's principal risks and uncertainties continue to fall with four main categories: operational, financial, health and safety and legal risk.
The 2016 review was supported by the robust risk management and internal control systems and procedures outlined within our Annual Report and Accounts. Broadly our principal risks have remained unchanged or improved.
The below list should not be regarded as complete of comprehensive list of all potential risk and uncertainties that the Group may face:
§ Production related risk
§ Exploration related risk
§ Project related risks
§ Financial risks
§ Gold price risk
§ Currency risk
§ IRC related risks
§ Health, safety and environmental risk
§ Legal and regulatory risks
Further details on the Risks to Our Performance, including internal processes around Risk Management can be found in our 2016 Annual Report and Accounts
Reserve & Resources
Since 2008 and in accordance with best industry practices, Petropavlovsk has been reporting its Mineral Resources and Ore Reserves in accordance with JORC Code. Following the strategic disposal of the non core projects Visokoye, Yamal and Nimanskaya in 2016, all the Group's remaining mining assets are located in the Amur Region.
Total Mineral Resource ounces (including Reserves) as of 31 December 2016 amounted to 20.2Moz, compared to 23.3Moz in 2015, with a total reserve of 7.95Moz compared to 8.41Moz the previous year. The decrease was mainly driven by the disposals of capital intensive non-core assets and to a lesser extent by mine depletion.
A total of 1.22Moz of Ore Reserves were disposed of with Visokoye, whilst 3.55Moz of Mineral Resources (including Ore Reserves) were disposed of with the Visokoye and Yamal projects. Full Mineral Resource and Ore Reserve statements for Visokoye and Yamal can be found in the Petropavlovsk Annual Report and Accounts 2015.
During 2016, the Group made exceptionally good progress developing reserves at Elginskoye, one of the significant satellite orebodies within the Albyn project area. Successful exploration and a feasibility study resulted in an increase in JORC Ore Reserves at Elginskoye from 0.28 to 1.24Moz (a 340% increase), providing a solid foundation for Albyn's long term production. We also achieved a remarkable 76% increase in Mineral Resources for underground mining from 0.42 to 0.74Moz, and received our first maiden underground Ore Reserve estimate amounted to 0.37Moz.
This includes a new Pioneer NE Bakhmut underground Ore Reserve of 0.17Moz @ 4.46g/t, and 0.21Moz @ 5.85g/t at Malomir Quartzitovoe 1. The new Ore Reserve will support 6 year life of mine for both mines with strong potential for resource, reserve and consequent life of mine expansion.
Overall, we successfully converted c.1.55Moz of Resources into Reserves during 2016.
Pioneer, Albyn, Malomir and Pokrovskiy Mineral Resource and Ore Reserve statements were prepared by Wardell Armstrong International in April 2017 in accordance with JORC Code (2012). A summary of their technical audit can be found on the company web site.
The tables below provide a summary and an asset-by-asset breakdown of Mineral Resources and Ore Reserves.
Total Ore Reserves for open pit and underground extraction (as at 31 December 2016, in accordance with JORC Code)
|
|
Category |
Tonnage (kt) |
Grade |
Gold (Moz) |
|
Total |
Proven |
32,032 |
0.82 |
0.84 |
|
Probable |
229,667 |
0.96 |
7.11 |
|
|
Proven+Probable |
261,699 |
0.95 |
7.95 |
|
|
Non-Refractory |
Proven |
22,177 |
0.69 |
0.49 |
|
Probable |
95,632 |
1.10 |
3.39 |
|
|
Proven+Probable |
117,809 |
1.03 |
3.88 |
|
|
Refractory |
Proven |
9,854 |
1.11 |
0.35 |
|
Probable |
134,036 |
0.86 |
3.72 |
|
|
Proven+Probable |
143,890 |
0.88 |
4.07 |
Note: Figures may not add up due to rounding.
Total Ore Reserves for open pit extraction (as at 31 December 2016, in accordance with JORC Code)
|
|
Category |
Tonnage (kt) |
Grade |
Gold (Moz) |
|
Total |
Proven |
32,032 |
0.82 |
0.84 |
|
Probable |
227,415 |
0.92 |
6.74 |
|
|
Proven+Probable |
259,446 |
0.91 |
7.58 |
|
|
Non-Refractory |
Proven |
22,177 |
0.69 |
0.49 |
|
Probable |
93,379 |
1.01 |
3.02 |
|
|
Proven+Probable |
115,557 |
0.95 |
3.51 |
|
|
Refractory |
Proven |
9,854 |
1.11 |
0.35 |
|
Probable |
134,036 |
0.86 |
3.72 |
|
|
Proven+Probable |
143,890 |
0.88 |
4.07 |
Note: Figures may not add up due to rounding.
Total Ore Reserves for underground extraction (as at 31 December 2016) (WAI April 2017, in accordance with JORC Code 2012)
|
|
Category |
Tonnage (kt) |
Grade |
Gold (Moz) |
|
Total |
Proven |
- |
- |
- |
|
Probable |
2,253 |
5.14 |
0.37 |
|
|
Proven+Probable |
2,253 |
5.14 |
0.37 |
|
|
Non-Refractory |
Proven |
- |
- |
- |
|
Probable |
2,253 |
5.14 |
0.37 |
|
|
Proven+Probable |
2,253 |
5.14 |
0.37 |
|
|
Refractory |
Proven |
- |
- |
- |
|
Probable |
- |
- |
- |
|
|
Proven+Probable |
- |
- |
- |
Note: Figures may not add up due to rounding.
Total Mineral Resource for potential open pit and underground extraction (as at 31 December 2016) (in accordance with JORC Code)
|
|
Category |
Tonnage (kt) |
Grade (g/t Au) |
Metal (Moz) |
|
|
Total |
Measured |
51,859 |
0.94 |
1.57 |
|
|
Indicated |
418,167 |
0.89 |
11.96 |
||
|
Measured + Indicated |
470,026 |
0.90 |
13.53 |
||
|
Inferred |
257,409 |
0.80 |
6.63 |
||
|
Non-Refractory |
Measured |
33,654 |
0.91 |
0.99 |
|
|
Indicated |
207,117 |
0.96 |
6.36 |
||
|
Measured + Indicated |
240,771 |
0.95 |
7.35 |
||
|
Inferred |
115,328 |
0.96 |
3.55 |
||
|
Refractory |
Measured |
18,205 |
0.99 |
0.58 |
|
|
Indicated |
211,050 |
0.82 |
5.60 |
||
|
Measured + Indicated |
229,255 |
0.84 |
6.18 |
||
|
Inferred |
142,081 |
0.67 |
3.08 |
||
|
Note: Mineral Resources are reported inclusive of Ore Reserves. Figures may not add up due to rounding. |
|
||||
Total Mineral Resource for potential open pit extraction (as at 31 December 2016) (in accordance with JORC Code)
|
|
Category |
Tonnage (kt) |
Grade (g/t Au) |
Metal (Moz) |
|
|
Total |
Measured |
51,859 |
0.94 |
1.57 |
|
|
Indicated |
415,393 |
0.85 |
11.37 |
||
|
Measured + Indicated |
467,252 |
0.86 |
12.94 |
||
|
Inferred |
256,155 |
0.79 |
6.48 |
||
|
Non-Refractory |
Measured |
33,654 |
0.91 |
0.99 |
|
|
Indicated |
204,343 |
0.88 |
5.78 |
||
|
Measured + Indicated |
237,997 |
0.88 |
6.76 |
||
|
Inferred |
114,074 |
0.93 |
3.40 |
||
|
Refractory |
Measured |
18,205 |
0.99 |
0.58 |
|
|
Indicated |
211,050 |
0.82 |
5.60 |
||
|
Measured + Indicated |
229,255 |
0.84 |
6.18 |
||
|
Inferred |
142,081 |
0.67 |
3.08 |
||
|
Note: Mineral Resources are reported inclusive of Ore Reserves. Figures may not add up due to rounding. |
|
||||
Total Mineral Resource for potential underground extraction (WAI April 2017, as at 31 December 2016) (in accordance with JORC Code 2012)
|
|
Category |
Tonnage (kt) |
Grade (g/t Au) |
Metal (Moz) |
|
Total |
Measured |
- |
- |
- |
|
Indicated |
2,774 |
6.56 |
0.59 |
|
|
Measured + Indicated |
2,774 |
6.56 |
0.59 |
|
|
Inferred |
1,254 |
3.92 |
0.16 |
|
|
Non-Refractory |
Measured |
- |
- |
- |
|
Indicated |
2,774 |
6.56 |
0.59 |
|
|
Measured + Indicated |
2,774 |
6.56 |
0.59 |
|
|
Inferred |
1,254 |
3.92 |
0.16 |
|
|
Refractory |
Measured |
- |
- |
- |
|
Indicated |
- |
- |
- |
|
|
Measured + Indicated |
- |
- |
- |
|
|
Inferred |
- |
- |
- |
Note: Mineral Resources are reported inclusive of Ore Reserves. Figures may not add up due to rounding.
Summary of Ore Reserves by asset (as at 31 December 2016)
Pioneer
(WAI, April 2017, in accordance with JORC Code 2012)
|
|
Category |
Tonnage (kt) |
Grade |
Gold (Moz) |
|
Total |
Proven |
15,585 |
0.68 |
0.34 |
|
Probable |
86,876 |
0.82 |
2.29 |
|
|
Proven+Probable |
102,460 |
0.80 |
2.63 |
|
|
Non-Refractory Open Pit |
Proven |
14,122 |
0.65 |
0.30 |
|
Probable |
30,243 |
0.73 |
0.71 |
|
|
Proven+Probable |
44,366 |
0.70 |
1.00 |
|
|
Non-Refractory Underground |
Proven |
- |
- |
- |
|
Probable |
1,154 |
4.46 |
0.17 |
|
|
Proven+Probable |
1,154 |
4.46 |
0.17 |
|
|
Subtotal Non-Refractory Open Pit and Underground |
Proven |
14,122 |
0.65 |
0.30 |
|
Probable |
31,398 |
0.86 |
0.87 |
|
|
Proven+Probable |
45,520 |
0.80 |
1.17 |
|
|
Refractory Open Pit |
Proven |
1,462 |
0.87 |
0.04 |
|
Probable |
55,478 |
0.80 |
1.42 |
|
|
Proven+Probable |
56,940 |
0.80 |
1.46 |
|
|
Subtotal Non-Refractory and Refractory Open Pit |
Proven |
15,585 |
0.68 |
0.34 |
|
Probable |
85,721 |
0.77 |
2.13 |
|
|
Proven+Probable |
101,306 |
0.76 |
2.46 |
Albyn
(WAI, April 2017, in accordance with JORC Code 2012)
|
|
Category |
Tonnage (kt) |
Grade |
Gold (Moz) |
|
Total |
Proven |
4,952 |
0.51 |
0.08 |
|
Probable |
52,302 |
1.18 |
1.98 |
|
|
Proven+Probable |
57,254 |
1.12 |
2.06 |
|
|
Non-Refractory Open Pit |
Proven |
4,952 |
0.51 |
0.08 |
|
Probable |
52,302 |
1.18 |
1.98 |
|
|
Proven+Probable |
57,254 |
1.12 |
2.06 |
|
|
Refractory Open Pit |
Proven |
- |
- |
- |
|
Probable |
- |
- |
- |
|
|
Proven+Probable |
- |
- |
- |
Note: All Albyn Ore Reserve is for open pit extraction.
Malomir
(WAI, April 2017, in accordance with JORC Code 2012)
|
|
Category |
Tonnage (kt) |
Grade |
Gold (Moz) |
|
Total |
Proven |
8,416 |
1.15 |
0.31 |
|
Probable |
86,755 |
0.97 |
2.70 |
|
|
Proven+Probable |
95,171 |
0.98 |
3.01 |
|
|
Non-Refractory Open Pit |
Proven |
24 |
1.16 |
0.001 |
|
Probable |
7,100 |
0.83 |
0.19 |
|
|
Proven+Probable |
7,124 |
0.83 |
0.19 |
|
|
Non-Refractory Underground |
Proven |
- |
- |
- |
|
Probable |
1,098 |
5.85 |
0.21 |
|
|
Proven+Probable |
1,098 |
5.85 |
0.21 |
|
|
Subtotal Non-Refractory Open Pit and Underground |
Proven |
24 |
1.16 |
0.001 |
|
Probable |
8,198 |
1.50 |
0.40 |
|
|
Proven+Probable |
8,222 |
1.50 |
0.40 |
|
|
Refractory Open Pit |
Proven |
8,392 |
1.15 |
0.31 |
|
Probable |
78,557 |
0.91 |
2.30 |
|
|
Proven+Probable |
86,949 |
0.93 |
2.61 |
|
|
Subtotal Non-Refractory and Refractory Open Pit |
Proven |
8,416 |
1.15 |
0.31 |
|
Probable |
85,657 |
0.90 |
2.49 |
|
|
Proven+Probable |
94,073 |
0.93 |
2.80 |
Pokrovskiy & Burinda
(WAI, April 2017, in accordance with JORC Code 2012)
|
|
Category |
Tonnage (kt) |
Grade |
Gold (Moz) |
|
Total |
Proven |
1,051 |
0.55 |
0.02 |
|
Probable |
1,540 |
0.74 |
0.04 |
|
|
Proven+Probable |
2,590 |
0.66 |
0.06 |
|
|
Non-Refractory Open Pit |
Proven |
1,051 |
0.55 |
0.02 |
|
Probable |
1,540 |
0.74 |
0.04 |
|
|
Proven+Probable |
2,590 |
0.66 |
0.06 |
|
|
Refractory Open Pit |
Proven |
- |
- |
- |
|
Probable |
- |
- |
- |
|
|
Proven+Probable |
- |
- |
- |
Note: All Pokrovskiy&Burinda Ore Reserve is for open pit extraction.
Tokur
(WAI, 2010, in accordance with JORC Code 2004)
|
|
Category |
Tonnage (kt) |
Grade |
Gold (Moz) |
|
Total |
Proven |
2,028 |
1.47 |
0.10 |
|
Probable |
2,195 |
1.44 |
0.10 |
|
|
Proven+Probable |
4,223 |
1.45 |
0.20 |
|
|
Non-Refractory Open Pit |
Proven |
2,028 |
1.47 |
0.10 |
|
Probable |
2,195 |
1.44 |
0.10 |
|
|
Proven+Probable |
4,223 |
1.45 |
0.20 |
|
|
Refractory Open Pit |
Proven |
- |
- |
- |
|
Probable |
- |
- |
- |
|
|
Proven+Probable |
- |
- |
- |
Note: All Tokur Ore Reserve is for open pit extraction
Notes on Ore Reserve statement:
(1) Group Ore Reserves statements are prepared by WAI; Pokrovskiy, Pioneer, Malomir and Albyn reserves are prepared in April 2017 in accordance with JORC Code 2012; Tokur Reserves are prepared in 2010 in accordance with JORC Code 2004
(2) Pioneer, Malomir Albyn and Pokrovskiy Ore Reserves for open pit extraction are estimated within economical pit shells using a $1,200/oz gold price assumption and applying other modifying factors based on projected performance of these operating mines. Tokur reserves have been based on a $1,000/oz gold price assumption, together with the operating costs assumptions relevant at the time of the estimate.
(3) Open Pit Reserve cut-off grade for reporting varies from 0.3 to 0.5g/t Au, depending on the asset and processing method.
(4) Underground Ore Reserve estimates use mine design with decline access and trackless mining equipment; variants of open stoping with predominantly uncemented back fill are used; Ore Reserve figures have been adjusted for anticipated dilution and mine recovery.
(5) Underground Reserve cut-off grade for reporting is 1.5g/t Au for Pioneer and 1.7g/t Au for Malomir.
(6) Figures may not add up due to rounding.
Summary of Mineral Resources by asset (as at 31 December 2016)
Pioneer
(WAI, April 2017, in accordance with JORC Code 2012)
|
|
Category |
Tonnage (kt) |
Grade (g/t Au) |
Metal (Moz) |
|
Total |
Measured |
19,520 |
0.68 |
0.43 |
|
Indicated |
160,670 |
0.75 |
3.89 |
|
|
Measured + Indicated |
180,190 |
0.74 |
4.32 |
|
|
Inferred |
57,058 |
0.66 |
1.20 |
|
|
Non-Refractory Open Pit |
Measured |
9,842 |
0.58 |
0.18 |
|
Indicated |
64,520 |
0.63 |
1.30 |
|
|
Measured + Indicated |
74,362 |
0.62 |
1.48 |
|
|
Inferred |
21,883 |
0.66 |
0.46 |
|
|
Non-Refractory Underground |
Measured |
- |
- |
- |
|
Indicated |
1,924 |
5.82 |
0.36 |
|
|
Measured + Indicated |
1,924 |
5.82 |
0.36 |
|
|
Inferred |
765 |
4.05 |
0.10 |
|
|
Sub-total Non-Refractory (Open Pit and Underground) |
Measured |
9,842 |
0.58 |
0.18 |
|
Indicated |
66,444 |
0.78 |
1.66 |
|
|
Measured + Indicated |
76,286 |
0.75 |
1.84 |
|
|
Inferred |
22,648 |
0.77 |
0.56 |
|
|
Refractory Open Pit |
Measured |
9,678 |
0.79 |
0.25 |
|
Indicated |
94,226 |
0.74 |
2.23 |
|
|
Measured + Indicated |
103,904 |
0.74 |
2.48 |
|
|
Inferred |
34,410 |
0.58 |
0.64 |
|
|
Sub-total Open Pit (Refractory and Non-Refractory) |
Measured |
19,520 |
0.68 |
0.43 |
|
Indicated |
158,746 |
0.69 |
3.53 |
|
|
Measured + Indicated |
178,266 |
0.69 |
3.95 |
|
|
Inferred |
56,293 |
0.61 |
1.10 |
Albyn
(WAI, April 2017, in accordance with JORC Code 2012)
|
|
Category |
Tonnage (kt) |
Grade (g/t Au) |
Metal (Moz) |
|
Total |
Measured |
5,049 |
0.52 |
0.09 |
|
Indicated |
74,025 |
1.13 |
2.69 |
|
|
Measured + Indicated |
79,074 |
1.09 |
2.78 |
|
|
Inferred |
60,442 |
1.02 |
1.99 |
|
|
Non-Refractory |
Measured |
5,049 |
0.52 |
0.09 |
|
Indicated |
74,025 |
1.13 |
2.69 |
|
|
Measured + Indicated |
79,074 |
1.09 |
2.78 |
|
|
Inferred |
60,442 |
1.02 |
1.99 |
|
|
Refractory |
Measured |
- |
- |
- |
|
Indicated |
- |
- |
- |
|
|
Measured + Indicated |
- |
- |
- |
|
|
Inferred |
- |
- |
- |
Note: All Albyn Mineral Resources is for open pit extraction
Malomir
(WAI, April 2017, in accordance with JORC Code 2012)
|
|
Category |
Tonnage (kt) |
Grade (g/t Au) |
Metal (Moz) |
|
Total |
Measured |
8,558 |
1.21 |
0.33 |
|
Indicated |
135,865 |
0.91 |
3.99 |
|
|
Measured + Indicated |
144,423 |
0.93 |
4.33 |
|
|
Inferred |
118,944 |
0.71 |
2.73 |
|
|
Non-Refractory Open Pit |
Measured |
31 |
1.19 |
0.001 |
|
Indicated |
18,191 |
0.68 |
0.40 |
|
|
Measured + Indicated |
18,222 |
0.68 |
0.40 |
|
|
Inferred |
10,784 |
0.68 |
0.24 |
|
|
Non-Refractory Underground |
Measured |
- |
- |
- |
|
Indicated |
850 |
8.23 |
0.23 |
|
|
Measured + Indicated |
850 |
8.23 |
0.23 |
|
|
Inferred |
489 |
3.72 |
0.06 |
|
|
Sub-total Non-Refractory (Open Pit and Underground) |
Measured |
31 |
1.20 |
0.001 |
|
Indicated |
19,041 |
1.02 |
0.62 |
|
|
Measured + Indicated |
19,072 |
1.02 |
0.63 |
|
|
Inferred |
11,273 |
0.81 |
0.29 |
|
|
Refractory Open Pit |
Measured |
8,527 |
1.21 |
0.33 |
|
Indicated |
116,824 |
0.90 |
3.37 |
|
|
Measured + Indicated |
125,351 |
0.92 |
3.70 |
|
|
Inferred |
107,671 |
0.70 |
2.44 |
|
|
Sub-total Open Pit (Refractory and Non-Refractory) |
Measured |
8,558 |
1.21 |
0.33 |
|
Indicated |
135,015 |
0.87 |
3.77 |
|
|
Measured + Indicated |
143,573 |
0.89 |
4.10 |
|
|
Inferred |
118,455 |
0.70 |
2.68 |
Pokrovka & Burinda
(WAI, April 2017, in accordance with JORC Code 2012)
|
|
Category |
Tonnage (kt) |
Grade (g/t Au) |
Metal (Moz) |
|
Total |
Measured |
6,780 |
1.01 |
0.22 |
|
Indicated |
31,511 |
0.83 |
0.84 |
|
|
Measured + Indicated |
38,291 |
0.86 |
1.06 |
|
|
Inferred |
10,259 |
0.99 |
0.33 |
|
|
Non-Refractory |
Measured |
6,780 |
1.01 |
0.22 |
|
Indicated |
31,511 |
0.83 |
0.84 |
|
|
Measured + Indicated |
38,291 |
0.86 |
1.06 |
|
|
Inferred |
10,259 |
0.99 |
0.33 |
|
|
Refractory |
Measured |
- |
- |
- |
|
Indicated |
- |
- |
- |
|
|
Measured + Indicated |
- |
- |
- |
|
|
Inferred |
- |
- |
- |
Note: All Pokrovka & Burinda Mineral Resources is for open pit extraction
Tokur
(WAI, 2010, in accordance with JORC Code 2004)
|
|
Category |
Tonnage (kt) |
Grade (g/t Au) |
Metal (Moz) |
|
Total |
Measured |
11,952 |
1.30 |
0.50 |
|
Indicated |
16,096 |
1.06 |
0.55 |
|
|
Measured + Indicated |
28,048 |
1.16 |
1.05 |
|
|
Inferred |
10,706 |
1.09 |
0.38 |
|
|
Non-Refractory |
Measured |
11,952 |
1.30 |
0.50 |
|
Indicated |
16,096 |
1.06 |
0.55 |
|
|
Measured + Indicated |
28,048 |
1.16 |
1.05 |
|
|
Inferred |
10,706 |
1.09 |
0.38 |
|
|
Refractory |
Measured |
- |
- |
- |
|
Indicated |
- |
- |
- |
|
|
Measured + Indicated |
- |
- |
- |
|
|
Inferred |
- |
- |
- |
Note: All Tokur Mineral Resources is for open pit extraction
Notes to Mineral Resource Statement:
(1) Mineral Resources include Ore Reserves.
(2) Mineral Resources for Pokrovskiy, Pioneer, Malomir and Albyn are audited by WAI in accordance with JORC Code 2012 in April 2015 with a further review of changes in April 2016 and April 2017; Mineral Resources for Tokur reviewed by WAI in 2010 in accordance with JORC Code 2004.
(3) Open Pit Mineral Resources for Pokrovskiy, Pioneer, Malomir and Albyn are constrained by conceptual open-pit shells at a US$1,500/oz long term gold price.; Tokur Mineral Resources have no open pit constraints.
(4) The cut-off grade for the Mineral Resource for open pit mining varies from 0.30 to 0.4g/t depending on the type of mineralisation and proposed processing method.
(5) Minimum mining widths dependant on reconciliation have been applied to the open pit Mineral Resource.
(6) Mineral Resources for potential underground extraction were audited by WAI in accordance with JORC Code 2012 in April 2017.
(7) Cut-off grade is 1.5g/t is used to report Mineral Resource for potential underground mining.
(8) Mineral resources are not reserves until they have demonstrated economic viability based on a feasibility or pre-feasibility study.
(9) Grade represents estimated contained metal in the ground and has not been adjusted for metallurgical recovery.
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.
The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2016 or 2015, but is derived from those accounts. Statutory accounts for 2015 have been delivered to the Registrar of Companies and those for 2016 will be delivered following the company's annual general meeting. The auditors have reported on those accounts: their reports were unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under s498(2) or (3) of the Companies Act 2006.
PETROPAVLOVSK PLC
Consolidated Income Statement
For the year ended 31 December 2016
|
|
|
2016 |
2015 |
|
|
note |
US$'000 |
US$'000 |
|
Continuing operations |
|
|
|
|
Group revenue |
5 |
540,684 |
599,914 |
|
Operating expenses |
6 |
(460,103) |
(619,635) |
|
|
|
80,581 |
(19,721) |
|
Share of results of associates |
14 |
(3,581) |
(60,422) |
|
Operating profit/(loss) |
|
77,000 |
(80,143) |
|
Investment income |
9 |
556 |
1,018 |
|
Interest expense |
9 |
(60,976) |
(71,514) |
|
Other finance gains |
9 |
11,976 |
9,064 |
|
Other finance losses |
9 |
(1,548) |
- |
|
Profit/(loss) before taxation |
|
27,008 |
(141,575) |
|
Taxation |
10 |
4,698 |
(48,879) |
|
Profit/(loss) for the period from continuing operations |
|
31,706 |
(190,454) |
|
Discontinued operations (a) |
|
|
|
|
Loss for the period from discontinued operations |
|
- |
(107,023) |
|
Profit/(loss) for the period |
|
31,706 |
(297,477) |
|
Attributable to: |
|
|
|
|
Equity shareholders of Petropavlovsk PLC |
|
33,719 |
(238,759) |
|
Continuing operations |
|
33,719 |
(190,155) |
|
Discontinued operations |
|
- |
(48,604) |
|
Non-controlling interests |
|
(2,013) |
(58,718) |
|
Continuing operations |
|
(2,013) |
(299) |
|
Discontinued operations |
|
- |
(58,419) |
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) per share |
|
|
|
|
|
|
|
|
|
Basic profit/(loss) per share |
11 |
|
|
|
From continuing operations |
|
US$0.01 |
(US$0.07) |
|
From discontinued operations |
|
- |
(US$0.02) |
|
|
|
US$0.01 |
(US$0.09) |
|
Diluted profit/(loss) per share |
11 |
|
|
|
From continuing operations |
|
US$0.01 |
(US$0.07) |
|
From discontinued operations |
|
- |
(US$0.02) |
|
|
|
US$0.01 |
(US$0.09) |
(a) IRC was presented as a discontinued operation in the income statement for the period from 1 January until 7 August 2015, when it ceased being a subsidiary and became an associate to the Group.
PETROPAVLOVSK PLC
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2016
|
|
|
2016 US$'000 |
2015 US$'000 |
|
Profit/(loss) for the period |
|
31,706 |
(297,477) |
|
Items that may be reclassified subsequently to profit or loss: |
|
|
|
|
Revaluation of available-for-sale investments |
|
834 |
161 |
|
Exchange differences: |
|
|
|
|
Exchange differences on translating foreign operations |
|
2,577 |
(4,121) |
|
Transfer of foreign currency translation reserve to profit or loss on disposal of a foreign operation |
|
- |
2,601 |
|
Share of other comprehensive income of associate |
|
560 |
- |
|
Cash flow hedges: |
|
|
|
|
Fair value (losses)/gains |
|
(4,940) |
7,090 |
|
Tax thereon |
|
988 |
(1,418) |
|
Transfer to revenue |
|
8,494 |
(9,436) |
|
Tax thereon |
|
(1,699) |
1,888 |
|
Other comprehensive profit/(loss) for the period net of tax |
|
6,814 |
(3,235) |
|
Total comprehensive profit/(loss) for the period |
|
38,520 |
(300,712) |
|
Attributable to: |
|
|
|
|
Equity shareholders of Petropavlovsk PLC |
|
40,494 |
(241,916) |
|
Non-controlling interests |
|
(1,974) |
(58,796) |
|
|
|
38,520 |
(300,712) |
|
Total comprehensive profit/(loss) for the period attributable to equity shareholders of Petropavlovsk PLC arises from: |
|
|
|
|
Continuing operations |
|
40,494 |
(195,360) |
|
Discontinued operations (a) |
|
- |
(46,556) |
|
|
|
40,494 |
(241,916) |
(a) IRC was presented as a discontinued operation in the income statement for the period from 1 January 2015 until 7 August 2015, when it ceased being a subsidiary and became an associate to the Group.
PETROPAVLOVSK PLC
Consolidated Balance Sheet
At 31 December 2016
|
|
note |
2016 US$'000 |
2015 US$'000 |
|
Assets |
|
|
|
|
Non-current assets |
|
|
|
|
Exploration and evaluation assets |
12 |
49,270 |
68,993 |
|
Property, plant and equipment |
13 |
953,794 |
1,038,343 |
|
Prepayments for property, plant and equipment |
|
694 |
1,841 |
|
Investments in associates |
14 |
36,140 |
39,394 |
|
Available-for-sale investments |
|
1,105 |
271 |
|
Inventories |
15 |
51,686 |
51,434 |
|
Other non-current assets |
|
2,154 |
175 |
|
|
|
1,094,843
|
1,200,451 |
|
Current assets |
|
|
|
|
Inventories |
15 |
183,266 |
175,222 |
|
Trade and other receivables |
16 |
89,736 |
48,096 |
|
Derivative financial instruments |
18 |
7,478 |
3,925 |
|
Cash and cash equivalents |
17 |
12,642 |
28,239 |
|
|
|
293,122 |
255,482 |
|
Total assets |
|
1,387,965
|
1,455,933 |
|
Liabilities |
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
19 |
(55,638) |
(96,567) |
|
Current income tax payable |
|
(2,288) |
(4,748) |
|
Borrowings |
20 |
(85,306) |
(260,248) |
|
|
|
(143,232) |
(361,563) |
|
Net current assets/(liabilities) |
|
149,890 |
(106,081) |
|
Non-current liabilities |
|
|
|
|
Borrowings |
20 |
(525,906) |
(378,030) |
|
Derivative financial instruments |
18 |
(10,314) |
(14,684) |
|
Deferred tax liabilities |
21 |
(139,728) |
(173,499) |
|
Provision for close down and restoration costs |
22 |
(19,152) |
(17,184) |
|
|
|
(695,100) |
(583,397) |
|
Total liabilities |
|
(838,332) |
(944,960) |
|
Net assets |
|
549,633 |
510,973 |
|
Equity |
|
|
|
|
Share capital |
23 |
48,920 |
48,874 |
|
Share premium |
|
518,142 |
518,142 |
|
Own shares |
24 |
- |
(8,933) |
|
Hedging reserve |
|
5,900
|
3,096 |
|
Share based payments reserve |
|
- |
280 |
|
Other reserves |
|
(17,574) |
(20,985) |
|
Retained losses |
|
(22,202) |
(47,922) |
|
Equity attributable to the shareholders of Petropavlovsk PLC |
|
533,186 |
492,552 |
|
Non-controlling interests |
|
16,447 |
18,421 |
|
Total equity |
|
549,633 |
510,973 |
These consolidated financial statements for Petropavlovsk PLC, registered number 4343841, were approved by the Directors on 26 April 2017 and signed on their behalf by
Peter Hambro Andrey Maruta
Director Director
PETROPAVLOVSK PLC
Consolidated Statement of Changes in Equity
For the year ended 31 December 2016
|
|
|
Total attributable to equity holders of Petropavlovsk PLC |
|
|
||||||||
|
|
|
Share capital |
Share premium |
Own shares(a) |
Convertible bond Reserve |
Share based payments reserve |
Hedging reserve |
Other reserves(b) |
Retained earnings/(losses) |
Total |
Non-controlling interests |
Total equity |
|
|
|
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 2015 |
|
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 |
|
- |
- |
- |
- |
- |
(1,851) |
(1,306) |
(238,759) |
(241,916) |
(58,796) |
(300,712) |
|
Loss for the period |
|
- |
- |
- |
- |
- |
- |
- |
(238,759) |
(238,759) |
(58,718) |
(297,477) |
|
Other comprehensive (loss)/income |
|
- |
- |
- |
- |
- |
(1,851) |
(1,306) |
- |
(3,157) |
(78) |
(3,235) |
|
Share based payments |
|
- |
- |
- |
- |
17 |
- |
- |
- |
17 |
- |
17 |
|
Deferred share awards |
|
- |
- |
- |
- |
280 |
- |
- |
- |
280 |
- |
280 |
|
Right issue and settlement of the Existing Bonds |
|
- 45,833 |
141,151 |
(8) |
(48,235) |
- |
- |
- |
48,235 |
186,976 |
- |
186,976 |
|
Issue of ordinary shares by subsidiaries |
|
- |
- |
- |
- |
- |
- |
- |
(2,487) |
(2,487) |
51,921 |
49,434 |
|
Other transaction with non- controlling interests |
|
- |
- |
- |
- |
- |
- |
866 |
249 |
1,115 |
243 |
1,358 |
|
Disposal of subsidiaries (c) |
|
- |
- |
- |
- |
(3,300) |
- |
(866) |
4,166 |
- |
(171,751) |
(171,751) |
|
Transfer to retained earnings |
|
- |
- |
- |
- |
- |
- |
(2,970) |
2,970 |
- |
- |
- |
|
Balance at 31 December 2015 |
|
48,874 |
518,142 |
(8,933) |
- |
280 |
3,096 |
(20,985) |
(47,922) |
492,552 |
18,421 (d) |
510,973 |
|
Total comprehensive income/(loss) |
|
- |
- |
- |
- |
- |
2,804 |
3,411 |
34,279 |
40,494 |
(1,974) |
38,520 |
|
Profit/(loss) for the period |
|
- |
- |
- |
- |
- |
- |
- |
33,719 |
33,719 |
(2,013) |
31,706 |
|
Other comprehensive income/(loss) |
|
- |
- |
- |
- |
- |
2,804 |
3,411 |
560 |
6,775 |
39 |
6,814 |
|
Deferred share awards |
|
46 |
- |
8,933 |
- |
(280) |
- |
- |
(8,559) |
140 |
- |
140 |
|
Balance at 31 December 2016 |
|
48,920 |
518,142 |
- |
- |
- |
5,900 |
(17,574) |
(22,202) |
533,186 |
16,447 |
549,633 |
(a) Own shares represented 1,441,406 Ordinary Shares held by the Company's EBT until they were transferred upon vesting of the Deferred Share Award on 1 May 2016.
(b) Including translation reserve of US$(15.6) million, 31 December 2015: US$(18.2) million.
(c) IRC Limited ('IRC') (note 14).
(d) IRC was the only non-wholly owned subsidiary of the Group that had a material non-controlling interest (note 14).
PETROPAVLOVSK PLC
Consolidated Cash Flow Statement
For the year ended 31 December 2016
|
|
note
|
2016 US$'000 |
2015 (a) US$'000 |
|
Cash flows from operating activities |
|
|
|
|
Cash generated from operations |
25 |
126,013 |
208,841 |
|
Interest paid |
|
(53,708) |
(72,174) |
|
Income tax paid |
|
(35,305) |
(33,287) |
|
Net cash from operating activities |
|
37,000 |
103,380 |
|
Cash flows from investing activities |
|
|
|
|
Proceeds from disposal of subsidiaries, net of cash disposed and liabilities settled |
27 |
19,188 |
6,485 |
|
Proceeds from disposal of the Group's interests in associates |
14 |
231 |
1,000 |
|
Purchase of property, plant and equipment |
|
(12,770) |
(58,804) (b) |
|
Exploration expenditure |
|
(16,590) |
(18,854) (b) |
|
Proceeds from disposal of property, plant and equipment |
|
742 |
847 |
|
Loans granted |
|
- |
(47) |
|
Repayment of amounts loaned to other parties |
|
1 |
42 |
|
Interest received |
|
540 |
2,183 |
|
Dividends received from joint venture |
|
- |
917 |
|
Net cash used in investing activities |
|
(8,658) |
(66,231) |
|
Cash flows from financing activities |
|
|
|
|
Proceeds from issue of ordinary shares capital, net of transaction costs |
|
- |
156,163 |
|
Proceeds from issue of ordinary shares by IRC, net of transaction costs |
|
- |
49,434 |
|
Proceeds from borrowings |
|
295,250(c) |
82,885(d) |
|
Repayments of borrowings |
|
(322,221)(c) |
(304,178)(d) |
|
Debt transaction costs paid in connection with bank loans |
|
(4,031) |
(1,896) |
|
Debt transaction costs paid in connection with ICBC facility |
|
- |
(72) |
|
Restricted bank deposit placed in connection with ICBC facility |
|
- |
(1,000) |
|
Refinancing costs |
|
- |
(34,418) |
|
Funds advanced to the Group under investment agreement with the Russian Ministry of Far East Development |
32 |
30,771 |
15,093 |
|
Funds transferred under investment agreement with the Russian Ministry of Far East Development |
32 |
(47,665) |
- |
|
Guarantee fee in connection with ICBC facility |
|
1,126 |
2,169 |
|
Dividends paid to non-controlling interests |
|
- |
(536) |
|
Purchase of own shares |
|
- |
(8) |
|
Net cash used in financing activities |
|
(46,770) |
(36,364) |
|
Net (decrease)/increase in cash and cash equivalents in the period |
|
(18,428) |
785 |
|
Effect of exchange rates on cash and cash equivalents |
|
2,831 |
(5,270) |
|
Cash and cash equivalents at beginning of period |
17 |
28,239 |
48,080 |
|
Cash and cash equivalents re-classified as assets held for sale at beginning of the period |
|
- |
55,459 |
|
Cash and cash equivalents re-classified as assets held for sale at disposal |
|
- |
(70,815) |
|
Cash and cash equivalents at end of period |
17 |
12,642 |
28,239 |
(a) IRC was presented as a discontinued operation in the income statement for the period from 1 January until 7 August 2015, when it ceased being a subsidiary and became an associate to the Group.
(b) Including US$45.1 million related to discontinued operations for the year ended 31 December 2015.
(c) Including US$295.25 million in conenction to bank debt refinancing (note 20).
(d) Including US$62.5 million proceeds from borrowings and US$36.2 million repayments of borrowings for the year ended 31 December 2015 related to discontinued operations.
PETROPAVLOVSK PLC
Notes to the Consolidated Financial Statements
For the year ended 31 December 2016
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.
2. Significant accounting policies
2.1. Basis of preparation and presentation
The consolidated financial statements of Petropavlovsk PLC and its subsidiaries (the 'Group') have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union, IFRIC Interpretations and the Companies Act 2006. The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial investments, financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss. The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.
Going concern
The Group monitors and manages its liquidity risk on an ongoing basis to ensure that it has access to sufficient funds to meet its obligations. Cash forecasts are prepared regularly based on a number of inputs including, but not limited to, forecast commodity prices and impact of hedging arrangements, the Group's mining plan, forecast expenditure and debt repayment schedules. Sensitivities are run for different scenarios including, but not limited to, changes in commodity prices, cost inflation, different production rates from the Group's producing assets and the timing of expenditure on development projects. This is done to identify risks to liquidity and covenant compliance and enable management to develop appropriate and timely mitigation strategies. The Group meets its capital requirements through a combination of sources including cash generated from operations and external debt.
The Group performed an assessment of the forecast cash flows and covenant compliance in relation to bank facilities for the period of 12 months from the date of approval of the 2016 Annual Report and Accounts. As at 31 December 2016, the Group had sufficient liquidity headroom and complied with related financial covenants. Following the successful completion of the Bank Debt Refinancing, the Group is also satisfied that it has sufficient headroom under a base case scenario for the period to May 2018 and expects to comply with related financial covenants. In the meantime, the Group's projections under a reasonable downside scenario indicate that, unless mitigating actions can be taken including accessing deposits not currently in the Group's mining plan, there will be insufficient liquidity and non-compliance with certain financial covenants under a reasonable downside scenario for the relevant period to May 2018. If a missed debt repayment occurs or financial covenant requirements are not met, this would result in events of default which, through cross-defaults and cross-accelerations, could cause all other Group's debt arrangements to become repayable on demand. The Directors are confident that, should it be required, relevant mitigating actions could be successfully implemented.
The Group has guaranteed the outstanding amounts IRC owes to ICBC. The outstanding loan principal was US$234 million as at 31 December 2016. The assessment of whether there is any material uncertainty that IRC will be able to repay this facility as it falls due is another key element of the Group's overall going concern assessment. IRC has agreed with ICBC to restructure and reschedule two repayment instalments under the ICBC Facility Agreement, which are originally due for payment on 20 June 2017 and 20 December 2017, with next repayment instalment due on 20 June 2018. IRC also obtained waivers from ICBC in respect of obligations to maintain certain cash deposits with ICBC until 30 June 2018 and obligations to comply with certain financial covenants until 31 December 2017 (inclusive).
Having taken into account the aforementioned factors, and after making enquiries and considering the uncertainties described above, the Directors have a reasonable expectation that the Group will have adequate resources to continue in operational existence for the foreseeable future, being at least the next 12 months from the date of approval of the 2016 Annual Report and Accounts. Accordingly, they continue to adopt the going concern basis of accounting in preparing these consolidated financial statements.
2.2. Adoption of new and revised standards and interpretations
New and revised standards and interpretations adopted for the current reporting period
The following new and revised Standards and Interpretations that were effective for annual periods beginning on or after 1 January 2016 and applicable to the Group have been adopted:
- Amendments to IAS 1 'Presentation of Financial Statements';
- Amendments to IAS 16 and IAS 38 'Clarification of Acceptable Methods of Depreciation and Amortisation';
- Amendments to IFRS 10 and IAS 28 'Sale or Contribution of Assets between an Investor and its Associate or Joint Venture';
- Annual improvements to IFRSs: 2012-2014 Cycle
These standards, amendments, and interpretations have not had a significant impact on amounts reported, presentation or disclosure in these consolidated financial statements.
New standards, amendments and interpretations that are applicable to the Group, issued but not yet effective for the reporting period beginning 1 January 2016 and not early adopted
At the date of approval of these financial statements, the following Standards and Interpretations which have not been applied in these consolidated financial statements were in issue but not yet effective (and in some cases had not yet been adopted by the EU):
- IFRS 9 'Financial instruments':
The standard addresses the classification, measurement and recognition of financial assets and financial liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets. The standard is effective for annual periods beginning in or after 1 January 2018.
Classification and measurement: IFRS 9 establishes a principles-based approach to determining whether a financial asset should be measured at amortised cost or fair value, based on the cash flow characteristics of the asset and the business model in which the asset is held. The Group anticipates that the classification and measurement basis for its financial assets will be largely unchanged under this model.
Impairment: The new impairment model requires the recognition of impairment provision based on expected credit losses rather than only incurred credit losses. While the Group has not yet undertaken a detailed assessment of how its impairment provision will be affected by the new model, it may result in an earlier recognition of credit losses.
Hedge accounting: The adoption of the new standard would not materially change the amounts recognised in relation to existing hedging arrangements but could provide scope to apply hedge accounting to a broader range of transactions in the future.
- IFRS 15 'Revenue from contracts with customers'
The standard replaces IAS 18 'Revenue' and IAS 11 'Construction Contracts' and related interpretations and is effective for annual periods beginning in or after 1 January 2018.
The new standard is based on the principal that revenue is recognised when control of a good or service is transferred to a customer.
The Group's revenue is predominantly derived from gold sales, where the point of recognition is dependent on the contract sales terms. As the transfer of risks and rewards generally coincides with the transfer of control at a point in time, the timing and amount of revenue recognised for the sale of gold is unlikely to be materially affected.
- IFRS 16 'Leases'
The standard replaces IAS 17 'Accounting for Leases' and related interpretations and is effective for annual periods beginning in or after 1 January 2019.
The standard will affect primarily the change the accounting treatment by lessees of leases currently classified as operating leases. Lease agreements will give rise to the recognition by the lessee of an asset, representing the right to use the leased item, and a related liability for future lease payments. Lease costs will be recognised in the income statement in the form of depreciation of the right-of-use asset over the lease term, and finance charges representing the unwind of the discount on the lease liability. The accounting for lessors will not significantly change.
As at the reporting date, the Group has non-cancellable operating lease commitments (note 31). However, the Group has not yet determined to what extent these commitments will result in the recognition of an asset and a liability for future payments and how this will affect the Group's profit and classification of cash flows. Some of the commitments may be covered by the exception for short-term and low-value leases and some commitments may relate to arrangements that will not qualify as leases under IFRS 16. Based on the volume of lease arrangements, the Group's assets and liabilities and profit are unlikely to be materially affected.
There are no other standards and amendments that are not yet effective and would be expected to have a significant impact on the Group's financial statements.
2.3. Basis of consolidation
These consolidated financial statements consist of the financial statements of the Company and its subsidiaries as at the balance sheet date. Subsidiaries are all entities over which the Group has control.
Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. Specifically, the Group controls a subsidiary if, and only if, it has all of the following:
- power over the subsidiary (i.e. existing rights that give it the current ability to direct the relevant activities of the subsidiary);
- exposure, or rights, to variable returns from its involvement with the subsidiary; and
- the ability to use its power over the subsidiary to affect its returns.
When the Group has less than a majority of the voting rights of a subsidiary or similar rights of a subsidiary, it considers all relevant facts and circumstances in assessing whether it has power over the subsidiary including:
- the size of the Group's holding of voting rights relative to the size and dispersion of holdings of the other vote holders;
- potential voting rights held by the Group, other vote holders or other parties;
- rights arising from other contractual arrangements; and
- any additional facts and circumstances that indicate that the Group has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders' meetings.
The Company reassesses whether or not it controls a subsidiary if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.
Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of income and other comprehensive income from the date the Group gains control until the date when the Group ceases to control the subsidiary.
Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Where necessary, adjustments are made to the financial statements of subsidiaries to ensure consistency of accounting policies with the policies adopted by the Group.
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group's equity therein. The interests of non-controlling shareholders may be initially measured at fair value or at the non-controlling interests' proportionate share of the fair value of the acquiree's identifiable net assets. The choice of measurement is made on an acquisition-by-acquisition basis. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests' share of subsequent changes in equity. The recognised income and expense are attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.
2.4. Non-controlling interests
The Group treats transactions with non-controlling interests as transactions with equity owners. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
2.5. Investments in associates
An associate is an entity over which the Group is in a position to exercise significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.
Investments in associates are accounted for using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Investments in associates are carried in the balance sheet at cost as adjusted by post-acquisition changes in the Group's share of the net assets of the associate, less any impairment in the value of individual investments. Losses of an associate in excess of the Group's interest in that associate (which includes any long-term interests that, in substance, form part of the Group's net investment in the associate) are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.
Any excess of the cost of acquisition over the Group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of that investment. Any excess of the Group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.
When a Group entity transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group's interest in the relevant associate. Losses may provide evidence of an impairment of the asset transferred in which case appropriate provision is made for the impairment.
2.6. Foreign currency translation
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group company are expressed in US Dollars, which is the Group's presentation currency. The functional currency of the Company is the US Dollar.
The rates of exchange used to translate balances from other currencies into US Dollars were as follows (currency per US Dollar):
|
|
As at |
Average year ended |
As at |
Average year ended |
|
GB Pounds Sterling (GBP : US$) |
0.81 |
0.74 |
0.68 |
0.65 |
|
Russian Rouble (RUB : US$) |
60.66 |
67.18 |
72.88 |
61.30 |
In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at the year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations which have a functional currency other than US Dollars are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the year, unless exchange rates fluctuate significantly during that year, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and expenses and accumulated in equity, with share attributed to non-controlling interests as appropriate. On the disposal of a foreign operation, all of the accumulated exchange differences in respect of that operation attributable to the shareholders of the Company are reclassified to profit or loss.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation.
2.7. Intangible assets
Exploration and evaluation expenditure and mineral rights acquired
Exploration and evaluation expenditure incurred in relation to those projects where such expenditure is considered likely to be recoverable through future extraction activity or sale, or where the exploration activities have not reached a stage which permits a reasonable assessment of the existence of reserves, are capitalised and recorded on the balance sheet within intangible assets for mining projects at the exploration stage.
Exploration and evaluation expenditure comprise costs directly attributable to:
- researching and analysing existing exploration data;
- conducting geological studies, exploratory drilling and sampling;
- examining and testing extraction and treatment methods;
- compiling pre-feasibility and feasibility studies; and
- costs incurred in acquiring mineral rights, the entry premiums paid to gain access to areas of interest and amounts payable to third parties to acquire interests in existing projects.
Mineral rights acquired through a business combination or an asset acquisition are capitalised separately from goodwill if the asset is separable or arises from contractual or legal rights and the fair value can be measured reliably on initial recognition.
Exploration and evaluation expenditure capitalised and mining rights acquired are subsequently valued at cost less impairment. In circumstances where a project is abandoned, the cumulative capitalised costs related to the project are written off in the period when such decision is made.
Exploration and evaluation expenditure capitalised and mining rights within intangible assets are not depreciated. These assets are transferred to mine development costs within property, plant and equipment when a decision is taken to proceed with the development of the project.
2.8. Property, plant and equipment
Mine development costs
Development expenditure incurred by or on behalf of the Group is accumulated separately for each area of interest in which economically recoverable resources have been identified. Such expenditure includes costs directly attributable to the construction of a mine and the related infrastructure. Once a development decision has been taken, the carrying amount of the exploration and evaluation expenditure in respect of the area of interest is aggregated with the development expenditure and classified under non-current assets as 'mine development costs'. Mine development costs are reclassified as 'mining assets' at the end of the commissioning phase, when the mine is capable of operating in the manner intended by management.
Mine development costs are not depreciated, except for property plant and equipment used in the development of a mine. Such property, plant and equipment are depreciated on a straight-line basis based on estimated useful lives and depreciation is capitalised as part of mine development costs.
Mining assets
Mining assets are stated at cost less accumulated depreciation. Mining assets include the cost of acquiring and developing mining assets and mineral rights, buildings, vehicles, plant and machinery and other equipment located on mine sites and used in the mining operations.
Mining assets, where economic benefits from the asset are consumed in a pattern which is linked to the production level, are depreciated using a units of production method based on the volume of ore reserves. This results in a depreciation charge proportional to the depletion of reserves. The basis for determining ore reserve estimates is set out in note 3.2. Where the mining plan anticipates future capital expenditure to support the mining activity over the life of the mine, the depreciable amount is adjusted for such estimated future expenditure.
Certain property, plant and equipment within mining assets are depreciated based on estimated useful lives, if shorter than the remaining life of the mine or if such property, plant and equipment can be moved to another site subsequent to the mine closure.
Mining assets related to alluvial gold operations are depreciated on a straight-line basis based on estimated useful lives.
Non-mining assets
Non-mining assets are stated at cost less accumulated depreciation. Non-mining assets are depreciated on a straight-line basis based on estimated useful lives.
Capital construction in progress
Capital construction in progress is stated at cost. On completion, the cost of construction is transferred to the appropriate category of property, plant and equipment. Capital construction in progress is not depreciated.
Depreciation
Property, plant and equipment are depreciated using a units of production method as set out above or on a straight-line basis based on estimated useful lives. Estimated useful lives normally vary as set out below.
|
|
Average life Number of years |
|
Buildings |
15-50 |
|
Plant and machinery |
3-20 |
|
Vehicles |
5-7 |
|
Office equipment |
5-10 |
|
Computer equipment |
3-5 |
Residual values and useful lives are reviewed and adjusted if appropriate, at each balance sheet date. Changes to the estimated residual values or useful lives are accounted for prospectively.
2.9. Impairment of non-financial assets
Property, plant and equipment and finite life intangible assets are reviewed by management for impairment if there is any indication that the carrying amount may not be recoverable. This applies to the Group's share of the assets held by the joint ventures as well as the assets held by the Group itself.
When a review for impairment is conducted, the recoverable amount is assessed by reference to the higher of 'value in use' (being the net present value of expected future cash flows of the relevant cash generating unit) or 'fair value less costs to sell'. Where there is no binding sale agreement or active market, fair value less costs to sell is based on the best information available to reflect the amount the Group could receive for the cash generating unit in an arm's length transaction. Future cash flows are based on:
- estimates of the quantities of the reserves and mineral resources for which there is a high degree of confidence of economic extraction;
- future production levels;
- future commodity prices (assuming the current market prices will revert to the Group's assessment of the long-term average price, generally over a period of up to five years); and
- future cash costs of production, capital expenditure, environment protection, rehabilitation and closure.
IAS 36 'Impairment of assets' includes a number of restrictions on the future cash flows that can be recognised in respect of future restructurings and improvement related capital expenditure. When calculating 'value in use', it also requires that calculations should be based on exchange rates current at the time of the assessment.
For operations with a functional currency other than the US Dollar, the impairment review is undertaken in the relevant functional currency. These estimates are based on detailed mine plans and operating budgets, modified as appropriate to meet the requirements of IAS 36 'Impairment of assets'.
The discount rate applied is based upon a post-tax discount rate that reflects current market assessments of the time value of money and the risks associated with the relevant cash flows, to the extent that such risks are not reflected in the forecast cash flows.
If the carrying amount of the asset exceeds its recoverable amount, the asset is impaired and an impairment loss is charged to the income statement so as to reduce the carrying amount in the balance sheet to its recoverable amount. A previously recognised impairment loss is reversed if the recoverable amount increases as a result of a reversal of the conditions that originally resulted in the impairment. This reversal is recognised in the income statement and is limited to the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised in prior years.
2.10. Deferred stripping costs
In open pit mining operations, removal of overburden and other waste materials, referred to as stripping, is required to obtain access to the ore body.
Stripping costs incurred during the development of the mine are capitalised as part of mine development costs and are subsequently depreciated over the life of a mine on a units of production basis.
Stripping costs incurred during the production phase of a mine are deferred as part of cost of inventory and are written off to the income statement in the period over which economic benefits related to the stripping activity are realised where this is the most appropriate basis for matching the costs against the related economic benefits.
Where, during the production phase, further development of the mine requires a phase of unusually high overburden removal activity that is similar in nature to pre-production mine development, such stripping costs are considered in a manner consistent with stripping costs incurred during the development of the mine before the commercial production commences.
In gold alluvial operations, stripping activity is sometimes undertaken in preparation for the next season. Stripping costs are then deferred as part of cost of inventory and are written off to the income statement in the following year to match related production.
2.11. Provisions for close down and restoration costs
Close down and restoration costs include the dismantling and demolition of infrastructure and the removal of residual materials and remediation of disturbed areas. Close down and restoration costs are provided for in the accounting period when the legal or constructive obligation arising from the related disturbance occurs, whether this occurs during the mine development or during the production phase, based on the net present value of estimated future costs. Provisions for close down and restoration costs do not include any additional obligations which are expected to arise from future disturbance. The costs are estimated on the basis of a closure plan. The cost estimates are calculated annually during the life of the operation to reflect known developments and are subject to formal review at regular intervals.
The amortisation or unwinding of the discount applied in establishing the net present value of provisions is charged to the income statement in each accounting period. The amortisation of the discount is shown as a financing cost, rather than as an operating cost. Other movements in the provisions for close down and restoration costs, including those resulting from new disturbance, updated cost estimates, changes to the lives of operations and revisions to discount rates are capitalised within property, plant and equipment. These costs are then depreciated over the lives of the assets to which they relate.
Where rehabilitation is conducted systematically over the life of the operation, rather than at the time of closure, provision is made for the outstanding continuous rehabilitation work at each balance sheet date. All other costs of continuous rehabilitation are charged to the income statement as incurred.
Changes in the measurement of a liability relating to the decommissioning of plant or other site preparation work (that result from changes in the estimated timing or amount of the cash flow or a change in the discount rate), are added to or deducted from the cost of the related asset in the current period. If a decrease in the liability exceeds the carrying amount of the asset, the excess is recognised immediately in the income statement. If the asset value is increased and there is an indication that the revised carrying value is not recoverable, an impairment test is performed in accordance with the accounting policy set out above.
2.12. Financial instruments
Financial instruments recognised in the balance sheet include cash and cash equivalents, other investments, trade and other receivables, borrowings, derivatives, and trade and other payables.
Financial instruments are initially measured at fair value when the Group becomes a party to their contractual arrangements. Transaction costs are included in the initial measurement of financial instruments, except financial instruments classified as at fair value through profit or loss. The subsequent measurement of financial instruments is dealt with below.
Financial assets
Financial assets are classified into the following specified categories: 'financial assets at fair value through profit or loss', 'held-to-maturity investments', 'available-for-sale financial assets' and 'loans and receivables'. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Financial assets are recognised at trade-date, the date on which the Group commits to purchase the asset. The Group does not hold any financial assets which meet the definition of 'held-to-maturity investments'.
Financial assets at fair value through profit or loss
This category has two sub-categories: financial assets held for trading, and those designated at fair value through profit or loss at inception. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current if they are either held for trading or are expected to be realised within 12 months of the balance sheet date.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are either designated in this category or not classified in any of the other categories. They are included within non-current assets unless the investment matures or management intends to dispose of them within 12 months of the balance sheet date. Available-for-sale financial assets are initially measured at cost and subsequently carried at fair value. Changes in the carrying amount of available-for-sale financial assets are recognised in other comprehensive income and accumulated under the heading of other reserve in equity. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in equity is reclassified to the income statement.
Loans and receivables
Loans and receivables are non-derivative financial assets fixed or determinable payments that are not quoted on an active market. Loans and receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.
Effective interest method
The effective interest rate method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or where appropriate, a shorter period, to the net carrying amount on initial recognition.
Cash and cash equivalents
Cash and cash equivalents are defined as cash on hand, demand deposits and short-term, highly liquid investments readily convertible to known amounts of cash and subject to insignificant risk of changes in value and are measured at cost which is deemed to be fair value as they have a short-term maturity.
Trade receivables
Trade receivables are measured on initial recognition at fair value and are subsequently measured at amortised cost using the effective interest rate method. Impairment of trade receivables is established when there is objective evidence as a result of a loss event that the Group will not be able to collect all amounts due according to the original terms of the receivables. The amount of the impairment is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The impairment is recognised in the income statement.
Other investments
Listed investments and unlisted equity investments, other than investments in subsidiaries, joint ventures and associates, are classified as available-for-sale financial assets and subsequently measured at fair value. Fair values for unlisted equity investments are estimated using methods reflecting the economic circumstances of the investee. Equity investments for which fair value cannot be measured reliably are recognised at cost less impairment. Changes in the carrying amount of available-for-sale financial assets are recognised in other comprehensive income and accumulated under within Other reserves in equity. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investments revaluation reserve is reclassified to the income statement as 'gains and losses from investment securities'.
Financial liabilities
Financial liabilities, other than derivatives, are measured on initial recognition at fair value and are subsequently measured at amortised cost, using the effective interest rate method.
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.
Derivative financial instruments
In accordance with IAS 39 the fair value of all derivatives is separately recorded on the balance sheet. Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the balance sheet date. The resulting gain or loss is recognised in the income statement immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in the income statement depends on the nature of the hedge relationship.
Derivatives embedded in other financial instruments or non-financial host contracts are treated as separate derivatives when their risks and characteristics are not closely related to their host-contract and the host contract is not carried at fair value. Embedded derivatives are recognised at fair value at inception. Any change to the fair value of the embedded derivatives is recognised in other finance gains or losses within the income statement. Embedded derivatives which are settled net are disclosed in line with the maturity of their host contracts.
The fair value of embedded derivatives is determined by using market prices where available. In other cases, fair value will be calculated using quotations from independent financial institutions, or by using appropriate valuation techniques.
Hedge accounting
The Group designates certain derivative financial instruments as hedging relationships. For the purposes of hedge accounting, hedging relationships may be of three types:
- Fair value hedges are hedges of particular risks that may change the fair value of a recognised asset or liability;
- Cash flow hedges are hedges of particular risks that may change the amount or timing of future cash flows; and
- Hedges of net investment in a foreign entity are hedges of particular risks that may change the carrying value of the net assets of a foreign entity.
Currently the Group only has cash flow hedge relationships.
To qualify for hedge accounting the hedging relationship must meet several strict conditions on documentation, probability of occurrence, hedge effectiveness and reliability of measurement. If these conditions are not met, then the relationship does not qualify for hedge accounting. In this case the hedging instrument and the hedged item are reported independently as if there were no hedging relationship.
The effective portion of changes in fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income. The fair value gain or loss relating to the ineffective portion is recognised immediately in profit or loss.
Amounts previously recognised in other comprehensive income and accumulated in hedging reserve in equity are reclassified to profit or loss in the periods when the hedged item is recognised in profit or loss, in the same line of the income statement as the recognised hedged item.
Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. Any gain or loss recognised in other comprehensive income at that time is accumulated in equity and is reclassified to profit or loss when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognised immediately in profit or loss.
Trade payables
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued are recorded at the proceeds received, net of direct issue cost.
Impairment of financial assets
The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss - is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed.
2.13. Provisions
Provisions are recognised when the Group has a present obligation, whether legal or constructive, as a result of a past event for which it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
Provisions are measured at the present value of management's best estimate of the expenditure required to settle the obligation at the balance sheet date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability.
2.14. Inventories
Inventories include the following major categories:
- stores and spares represent raw materials consumed in the production process as well as spare parts and other maintenance supplies.
- construction materials represent materials for use in capital construction and mine development.
- ore in stockpiles represent material that, at the time of extraction, is expected to be processed into a saleable form and sold at a profit. Ore in stockpiles is valued at the average cost per tonne of mining and stockpiling the ore. Quantities of ore in stockpiles ore are assessed through surveys and assays. Ore in stockpiles is classified between current and non-current inventory based on the expected processing schedule in accordance with the Group's mining plan.
- work in progress inventory primarily represents gold in processing circuit that has not completed the production process. Work in progress inventory is valued at the average production costs.
- deferred stripping costs are included in inventories where appropriate, as set out in note 2.10.
Inventories are valued at the lower of cost and net realisable value, with cost being determined primarily on a weighted average cost basis.
Provisions are recorded to reduce ore in stockpiles, work in process and finished goods inventory to net realisable value where the net realisable value is lower than relevant inventory cost at the balance sheet date. Net realisable value is determined with reference to relevant market prices less estimated costs to complete production and bring the inventory into its saleable form. Provisions are also recorded to reduce mine operating supplies to net realisable value, which is generally determined with reference to salvage or scrap value, when it is determined that the supplies are obsolete. Provisions are reversed to reflect subsequent recoveries in net realisable value where the inventory is still on hand at the balance sheet date.
2.15. Leases
Leases where the lessor retains substantially all the risks and rewards of ownership are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.
2.16. Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable, stated at the invoiced value net of discounts and value added tax.
Sales of gold and silver
The majority of the Group's revenue is derived from the sale of refined gold and silver, the latter being a by-product of gold production. Revenue from the sale of gold and silver is recognised when:
- the risks and rewards of ownership as specified in individual contracts are transferred to the buyer;
- the Group retains neither a continuing involvement nor control over the goods sold;
- the amount of revenue can be measured reliably; and
- it is probable that the economic benefits associated with the transaction will flow to the Group.
Other revenue
Other revenue is recognised as follows:
- Engineering and construction contracts: When the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the balance sheet date. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred where it is probable they will be recoverable. When it is probable that contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.
- Revenue from sales of goods is recognised when the goods are delivered to the buyer and the risks and benefits associated with ownership are transferred to the buyer.
- Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease
2.17. Borrowing costs
Borrowing costs are generally expensed as incurred except where they relate to the financing of acquisition, construction or development of qualifying assets, which are mining projects under development that necessarily take a substantial period of time to get prepared for their intended use. Such borrowing costs are capitalised and added to mine development costs of the mining project when the decision is made to proceed with the development of the project and until such time when the project is substantially ready for its intended use (which is when commercial production is ready to commence) or if active development is suspended or ceases.
To the extent that funds are borrowed to finance a specific mining project, borrowing costs capitalised represent the actual borrowing costs incurred. To the extent that funds are borrowed for the general purpose, borrowing costs capitalised are determined by applying the interest rate applicable to appropriate borrowings outstanding during the period to the average amount of capital expenditure incurred to develop the relevant mining project during the period.
2.18. Taxation
Tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in the statement of comprehensive income or directly in equity. In this case, the tax is also recognised in the statement of comprehensive income or directly in equity, respectively.
Current tax is the tax expected to be payable on the taxable income for the year calculated using rates that have been enacted or substantively enacted by the balance sheet date. It includes adjustments for tax expected to be payable or recoverable in respect of previous periods.
Full provision is made for deferred taxation on all temporary differences existing at the balance sheet date with certain limited exceptions. Temporary differences are the difference between the carrying value of an asset or liability and its tax base. The main exceptions to this principle are as follows:
- tax payable on the future remittance of the past earnings of subsidiaries, associates and jointly controlled entities is provided for except where the Company is able to control the remittance of profits and it is probable that there will be no remittance in the foreseeable future;
- deferred tax is not provided on the initial recognition of goodwill or from the initial recognition of an asset or liability in a transaction that does not affect accounting profit or taxable profit and is not a business combination, such as on the recognition of a provision for close down and restoration costs and the related asset or on the inception of finance lease; and
- deferred tax assets are recognised only to the extent that it is more likely than not that they will be recovered.
Deferred tax is provided in respect of fair value adjustments on acquisitions. These adjustments may relate to assets such as mining rights that, in general, are not eligible for income tax allowances. In such cases, the provision for deferred tax is based on the difference between the carrying value of the asset and its nil income tax base.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised using tax rates that have been enacted, or substantively enacted. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt within equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set-off current tax assets against current tax liabilities, when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
3. Areas of judgement in applying accounting policies and key sources of estimation uncertainty
When preparing the consolidated financial statements in accordance with the accounting policies as set out in note 2, management necessarily makes judgements and estimates that can have a significant impact on the financial statements. These judgements and estimates are based on management's best knowledge of the relevant facts and circumstances and previous experience. Actual results may differ from these estimates under different assumptions and conditions.
3.1. Critical accounting judgements
Taxation
The Group is subject to income tax in the UK, Russian Federation and Cyprus. Assessing the outcome of uncertain tax positions requires judgements to be made. The Group recognises liabilities for anticipated tax issues based on estimates of whether additional taxes will be due, such estimates are based on the status of ongoing discussions with the relevant tax authorities and advice from independent tax advisers. Details of tax charge for the year are set out in note 10.
Deferred tax assets, including those arising from tax losses carried forward for the future tax periods, capital losses and temporary differences, are recognised only where it is considered more likely than not that they will be recovered. The likelihood of such recoverability is dependent on the generation of sufficient future taxable profits which a relevant deferred tax asset can be utilised to offset.
Assumptions about the generation of future taxable profits depend on management's estimates of future cash flows. Judgements are also required about the application of income tax legislation. These judgements and assumptions are subject to risk and uncertainty and there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets recognised on the balance sheet and the amount of other tax losses and temporary differences not yet recognised. In such circumstances, the carrying amount of recognised deferred tax assets may require adjustment, resulting in a corresponding charge or credit to the income statement.
Details of deferred tax disclosures out in note 21.
3.2. Key sources of estimation uncertainty
Ore reserve estimates
The Group estimates its ore reserves and mineral resources based on the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code) and the internally used Russian Classification System, adjusted to conform with the mining activity to be undertaken under the Group mining plan. Both the JORC Code and the Russian Classification System require the use of reasonable investment assumptions when reporting reserves, including future production estimates, expected future commodity prices and production cash costs.
Ore reserve estimates are used in the calculation of depreciation of mining assets using a units of production method (note 13), impairment charges (note 6) and for forecasting the timing of the payment of close down and restoration costs (note 22). Also, for the purposes of impairment reviews and the assessment of life of mine for forecasting the timing of the payment of close down and restoration costs, the Group may take into account mineral resources in addition to ore reserves where there is a high degree of confidence that such resources will be extracted.
Ore reserve estimates may change from period to period as additional geological data becomes available during the course of operations or economic assumptions used to estimate reserves change. Such changes in estimated reserves may affect the Group's financial results and financial position in a number of ways, including the following:
- asset carrying values due to changes in estimated future cash flows (note 6);
- depreciation charged in the income statement where such charges are determined by using a units of production method or where the useful economic lives of assets are determined with reference to the life of the mine;
- provisions for close down and restoration costs where changes in estimated reserves affect expectations about the timing of the payment of such costs (note 22); and
- carrying value of deferred tax assets and liabilities (note 21) where changes in estimated reserves affect the carrying value of the relevant assets and liabilities.
Exploration and evaluation costs
The Group's accounting policy for exploration and evaluation expenditure results in exploration and evaluation expenditure being capitalised for those projects where such expenditure is considered likely to be recoverable through future extraction activity or sale or where the exploration activities have not reached a stage which permits a reasonable assessment of the existence of reserves. This policy requires management to make certain estimates and assumptions as to future events and circumstances, in particular whether the Group will proceed with development based on existence of reserves or whether an economically viable extraction operation can be established. Such estimates and assumptions may change from period to period as new information becomes available. If, subsequent to the exploration and evaluation expenditure being capitalised, a judgement is made that recovery of the expenditure is unlikely or the project is to be abandoned, the relevant capitalised amount will be written off to the income statement. Details of exploration and evaluation assets are set out in note 12.
Deferred stripping costs
The calculation of deferred stripping costs requires the use of estimates to assess the improved access to the ore to be mined in future periods. Changes to the Group's mining plan and pit design may result in changes to the timing of realisation of the stripping activity. As a result, there could be significant adjustments to the amounts of deferred stripping costs capitalised and their classification between current and non-current assets. Details of deferred stripping costs capitalised are set out in note 15.
Impairment and impairment reversals
The Group reviews the carrying values of its tangible and exploration and evaluation assets to determine whether there is any indication that those assets are impaired.
The recoverable amount of an asset, or cash-generating unit ('CGU'), is measured as the higher of fair value less costs to sell and value in use.
Management necessarily apply their judgement in allocating assets to CGUs as well as in making assumptions to be applied within the value in use calculation. The key assumptions which formed the basis of forecasting future cash flows and the value in use calculation are set out in note 6.
Subsequent changes to CGU allocation or estimates and assumptions in the value in use calculation could impact the carrying value of the respective assets. The impairment assessments are sensitive to changes in commodity prices and discount rates. Changes to these assumptions would result in changes to impairment and/or impairment reversal conclusions, which could have a significant effect on the consolidated financial statements. Details of impairment and/or impairment reversals are set out in note 6.
Close down and restoration costs
Costs associated with restoration and rehabilitation of mining sites are typical for extractive industries and are normally incurred at the end of the life of the mine. Provision is recognised for each mining site for such costs discounted to their net present value, as soon as the obligation to incur such costs arises. The costs are estimated on the basis of the scope of site restoration and rehabilitation activity in accordance with the mine closure plan and represent management's best estimate of the expenditure that will be incurred. Estimates are reviewed annually as new information becomes available.
The initial provision for close down and restoration costs together with other movements in the provision, including those resulting from updated cost estimates, changes to the estimated lives of the mines, and revisions to discount rates are capitalised within 'mine development costs' or 'mining assets' of property, plant and equipment. Capitalised costs are depreciated over the life of the mine they relate to and the provision is increased each period via unwinding the discount on the provision. Changes to the estimated future costs are recognised in the balance sheet by adjusting both the asset and the provision.
The actual costs may be different from those estimated due to changes in relevant laws and regulations, changes in prices as well as changes to the restoration techniques. The actual timing of cash outflows may be also different from those estimated due to changes in the life of the mine as a result of changes in ore reserves or processing levels. As a result, there could be significant adjustments to the provision for close down and restoration costs established which would affect future financial results.
Details of provision for close down and restoration costs are set out in note 22.
4. Segment information
The Group's reportable segments under IFRS 8, which are aligned with its operating locations, were determined to be Pokrovskiy, Pioneer, Malomir and Albyn hard-rock gold mines which are engaged in gold and silver production as well as field exploration and mine development.
Alluvial operations segment comprised an alluvial gold operation which was engaged in gold production and field exploration. This operation was disposed of on 22 April 2015 and, accordingly, alluvial operations are no longer a reportable segment.
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.
|
2016 |
Pioneer |
Pokrovskiy |
Malomir |
Albyn |
Corporate and other |
Consolidated |
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$' 000 |
|
Revenue |
|
|
|
|
|
|
|
Gold (a) |
163,514 |
46,692 |
67,107 |
211,155 |
- |
488,468 |
|
Silver |
958 |
275 |
101 |
207 |
- |
1,541 |
|
Other external revenue |
- |
- |
- |
- |
50,675 |
50,675 |
|
Inter-segment revenue |
- |
- |
1,233 |
390 |
101,032 |
102,655 |
|
Intra-group eliminations |
- |
- |
(1,233) |
(390) |
(101,032) |
(102,655) |
|
Total Group revenue from external customers |
164,472 |
46,967 |
67,208 |
211,362 |
50,675 |
540,684 |
|
|
|
|
|
|
|
|
|
Operating expenses and income |
|
|
|
|
|
|
|
Operating cash costs |
(85,273) |
(33,777) |
(45,243) |
(100,979) |
(48,995) |
(314,267) |
|
Depreciation |
(38,776) |
(6,586) |
(13,632) |
(45,729) |
(529) |
(105,252) |
|
Central administration expenses |
- |
- |
- |
- |
(32,623) |
(32,623) |
|
Impairment of exploration and evaluation assets |
- |
- |
- |
(9,155) |
- |
(9,155) |
|
(Impairment/)reversal of impairment of ore stockpiles |
(6,110) |
(1,002) |
5,826 |
123 |
- |
(1,163) |
|
Gain on disposal of non-trading loans |
- |
- |
- |
- |
6,724 |
6,724 |
|
Gain on disposal of subsidiaries |
- |
- |
- |
- |
791 |
791 |
|
Total operating expenses (b) |
(130,159) |
(41,365) |
(53,049) |
(155,740) |
(74,632) |
(454,945) |
|
|
|
|
|
|
|
|
|
Share of results of associates |
- |
- |
- |
- |
(3,581) |
(3,581) |
|
Segment result |
34,313 |
5,602 |
14,159 |
55,622 |
(27,538) |
82,158 |
|
|
|
|
|
|
|
|
|
Foreign exchange losses |
|
|
|
|
|
(5,158) |
|
Operating profit |
|
|
|
|
|
77,000 |
|
Investment income |
|
|
|
|
|
556 |
|
Interest expense |
|
|
|
|
|
(60,976) |
|
Other finance gains |
|
|
|
|
|
11,976 |
|
Other finance losses |
|
|
|
|
|
(1,548) |
|
Taxation |
|
|
|
|
|
4,698 |
|
Profit for the period from continuing operations |
|
|
|
|
|
31,706 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
444,611 |
19,724 |
402,878 |
390,646 |
124,665 |
1,382,524 |
|
Segment liabilities |
(13,387) |
(4,034) |
(8,963) |
(15,975) |
(45,033) |
(87,392) |
|
Deferred tax - net |
|
|
|
|
|
(139,728) |
|
Unallocated cash |
|
|
|
|
|
4,843 |
|
Loans given |
|
|
|
|
|
598 |
|
Borrowings |
|
|
|
|
|
(611,212) |
|
Net assets |
|
|
|
|
|
549,633 |
|
|
|
|
|
|
|
|
|
Other segment information |
|
|
|
|
|
|
|
Additions to non-current assets: |
|
|
|
|
|
|
|
Exploration and evaluation expenditure capitalised within intangible assets |
2,219 |
- |
838 |
4,082 |
217 |
7,356 |
|
Other additions to intangible assets |
- |
- |
- |
- |
- |
- |
|
Capital expenditure |
14,052 |
96 |
2,765 |
7,488 |
1,380 |
25,781 |
|
Other items capitalised (c) |
349 |
177 |
389 |
1,262 |
- |
2,177 |
|
|
|
|
|
|
|
|
|
Average number of employees |
1,658 |
964 |
926 |
1,450 |
3,066 |
8,064 |
(a) Including US$(8.5) million net cash settlement paid by the Group under the cash flow hedge.
(b) Operating expenses less foreign exchange losses (note 6).
(c) Close down and restoration costs (note 13).
|
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 (d) |
253,914 |
61,002 |
71,044 |
181,687 |
- |
- |
567,647 |
|
Silver |
641 |
168 |
84 |
149 |
- |
- |
1,042 |
|
Other external revenue |
- |
- |
- |
- |
- |
31,225 |
31,225 |
|
Inter-segment revenue |
- |
- |
1,284 |
433 |
- |
130,042 |
131,759 |
|
Intra-group eliminations |
- |
- |
(1,284) |
(433) |
- |
(130,042) |
(131,759) |
|
Total Group revenue from external customers |
254,555 |
61,170 |
71,128 |
181,836 |
- |
31,225 |
599,914 |
|
|
|
|
|
|
|
|
|
|
Operating expenses and income |
|
|
|
|
|
|
|
|
Operating cash costs |
(135,926) |
(45,082) |
(65,434) |
(115,314) |
1,006 |
(32,159) |
(392,909) |
|
Depreciation |
(45,864) |
(12,344) |
(18,195) |
(50,819) |
(1,388) |
(494) |
(129,104) |
|
Central administration expenses |
- |
- |
- |
- |
- |
(30,419) |
(30,419) |
|
Impairment of exploration and evaluation assets |
- |
(2,324) |
(140) |
- |
- |
(34,978) |
(37,442) |
|
Impairment of ore stockpiles |
(11,945) |
884 |
(6,065) |
(299) |
- |
- |
(17,425) |
|
Loss on disposal of subsidiaries |
- |
- |
- |
- |
(384) |
- |
(384) |
|
Total operating expenses (e) |
(193,735) |
(58,866) |
(89,834) |
(166,432) |
(766) |
(98,050) |
(607,683) |
|
|
|
|
|
|
|
|
|
|
Share of net profit of associates |
- |
- |
- |
- |
- |
(60,422) |
(60,422) |
|
Segment result |
60,820 |
2,304 |
(18,706) |
15,404 |
(766) |
(127,247) |
(68,191) |
|
|
|
|
|
|
|
|
|
|
Foreign exchange losses |
|
|
|
|
|
|
(11,952) |
|
Operating loss |
|
|
|
|
|
|
(80,143) |
|
Investment income |
|
|
|
|
|
|
1,018 |
|
Interest expense |
|
|
|
|
|
|
(71,514) |
|
Other finance gains |
|
|
|
|
|
|
9,064 |
|
Taxation |
|
|
|
|
|
|
(48,879) |
|
Loss for the period from continuing operations |
|
|
|
|
|
|
(190,454) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
407,004 |
40,357 |
425,029 |
447,161 |
- |
130,690 |
1,450,241 |
|
Segment liabilities |
(21,005) |
(6,632) |
(10,136) |
(36,459) |
- |
(58,951) |
(133,183) |
|
Deferred tax - net |
|
|
|
|
|
|
(173,499) |
|
Unallocated cash |
|
|
|
|
|
|
5,193 |
|
Loans given |
|
|
|
|
|
|
499 |
|
Borrowings |
|
|
|
|
|
|
(638,278) |
|
Net assets |
|
|
|
|
|
|
510,973 |
|
|
|
|
|
|
|
|
|
|
Other segment information |
|
|
|
|
|
|
|
|
Additions to non-current assets: |
|
|
|
|
|
|
|
|
Exploration and evaluation expenditure capitalised within intangible assets |
450 |
44 |
3,711 |
3,441 |
- |
1,530 |
9,176 |
|
Other additions to intangible assets |
- |
- |
- |
- |
- |
- |
- |
|
Capital expenditure |
15,171 |
816 |
4,520 |
9,611 |
- |
962 |
31,080 |
|
Other items capitalised (f) |
(1,350) |
(61) |
(836) |
(1,999) |
- |
- |
(4,246) |
|
|
|
|
|
|
|
|
|
|
Average number of employees |
1,760 |
989 |
937 |
1,510 |
- |
3,273 |
8,469 |
(d) Including US$9.4 million contribution from the cash flow hedge.
(e) Operating expenses less foreign exchange losses (note 6).
(f) Close down and restoration costs (note 13).
Entity wide disclosures
Revenue by geographical location (a)
|
|
2016 |
2015 |
|
|
US$'000 |
US$'000 |
|
Russia and CIS |
540,606 |
599,686 |
|
Other |
78 |
228 |
|
|
540,684 |
599,914 |
(a) Based on the location to which the product is shipped or in which the services are provided.
Non-current assets by location of asset (b)
|
|
2016 |
2015 |
|
|
US$'000 |
US$'000 |
|
Russia |
1,091,541 |
1,199,941 |
|
Other |
43 |
64 |
|
|
1,091,584 |
1,200,005 |
(b) Excluding financial instruments and deferred tax assets.
Information about major customers
During the years ended 31 December 2016 and 2015, the Group generated revenues from the sales of gold to Russian banks for Russian domestic sales of gold. Included in gold sales revenue for the year ended 31 December 2016 are revenues of US$488 million which arose from sales of gold to two banks that individually accounted for more than 10% of the Group's revenue, namely US$292 million to Sberbank of Russia and US$197 million to VTB (2015: US$571 million which arose from sales of gold to two banks that individually accounted for more than 10% of the Group's revenue, namely US$366 million to Sberbank of Russia and US$205 million to VTB). The proportion of Group revenue of each bank may vary from year to year depending on commercial terms agreed with each bank. Management considers there is no major customer concentration risk due to high liquidity inherent to gold as a commodity.
5. Revenue
Continuing operations
|
|
2016 |
2015 |
|
|
US$'000 |
US$'000 |
|
Sales of goods |
522,491 |
585,643 |
|
Engineering and construction contracts |
17,531 |
13,515 |
|
Rental income |
662 |
756 |
|
|
540,684 |
599,914 |
|
Investment income |
556 |
1,018 |
|
|
541,240 |
600,932 |
Discontinued operations
|
|
2016 |
Period to 7 August 2015 |
|
|
US$'000 |
US$'000 |
|
Sales of goods |
- |
49,180 |
|
Engineering contracts |
- |
1,102 |
|
|
|
50,282 |
|
Investment income |
- |
1,163 |
|
|
|
51,445 |
6. Operating expenses and income
|
|
2016 |
2015 |
|
|
US$'000 |
US$'000 |
|
Net operating expenses (a) |
419,519 |
522,013 |
|
Impairment of exploration and evaluation assets |
9,155 |
37,442 |
|
Impairment of ore stockpiles (a) |
1,163 |
17,425 |
|
Central administration expenses (a) |
32,623 |
30,419 |
|
Foreign exchange losses |
5,158 |
11,952 |
|
Gain on disposal of non-trading loans |
(6,724) |
- |
|
(Gain)/loss on disposal of subsidiaries (b) |
(791) |
384 |
|
|
460,103 |
619,635 |
(a) As set out below.
(b) Note 27.
Net operating expenses
|
|
2016 |
|
2015 |
|
|
US$'000 |
|
US$'000 |
|
Depreciation |
105,252 |
|
129,104 |
|
Staff costs |
63,022 |
|
70,632 |
|
Materials |
100,638 |
|
131,914 |
|
Fuel |
40,621 |
|
55,835 |
|
External services |
25,619 |
|
29,004 |
|
Mining tax |
14,713 |
|
33,138 |
|
Electricity |
23,305 |
|
25,008 |
|
Smelting and transportation costs |
699 |
|
1,079 |
|
Movement in ore stockpiles, deferred stripping, work in progress and bullion in process attributable to gold production |
(22,475) |
|
(11,777) |
|
Taxes other than income |
6,352 |
|
7,928 |
|
Insurance |
6,409 |
|
7,244 |
|
Professional fees |
877 |
|
554 |
|
Office costs |
324 |
|
304 |
|
Operating lease rentals |
3,173 |
|
645 |
|
Business travel expenses |
1,434 |
|
1,541 |
|
Provision for impairment of trade and other receivables |
282 |
|
1,261 |
|
Bank charges |
205 |
|
855 |
|
Goods for resale |
24,186 |
|
12,816 |
|
Other operating expenses |
25,231 |
|
24,514 |
|
Other (income) / expenses |
(348) |
|
414 |
|
|
419,519 |
|
522,013 |
Central administration expenses
|
|
2016 |
2015 |
|
|
US$'000 |
US$'000 |
|
Staff costs |
17,067 |
18,908 |
|
Professional fees |
8,214 |
2,040 |
|
Insurance |
789 |
1,191 |
|
Operating lease rentals |
1,893 |
1,900 |
|
Business travel expenses |
881 |
1,611 |
|
Office costs |
489 |
544 |
|
Other |
3,290 |
4,225 |
|
|
32,623 |
30,419 |
Impairment charges
Impairment of mining assets and exploration and evaluation assets
The Group undertook an impairment review of the tangible assets attributable to its gold mining projects, exploration assets adjacent to the existing mines and supporting in-house service companies and concluded no impairment was required as at 31 December 2016, with exception of an individual licence impairment referred to below.
The forecast future cash flows are based on the Group's mining plan that assumes POX Hub completion in the year 2018. The other key assumptions which formed the basis of forecasting future cash flows and the value in use calculation are set out below:
|
|
Year ended 31 December 2016 |
Year ended 31 December 2015 |
|
Long-term gold price |
US$1,200/oz |
US$1,150/oz |
|
Discount rate (a) |
8% |
8% |
|
RUB/US$ exchange rate |
RUB60.0/US$ |
RUB65.0/US$ |
(a) Being the post-tax real weighted average cost of capital, equivalent to a nominal pre-tax discount rate of 10.1% (2015: 10.1%)
Following the decision to suspend exploration on the Kharginskoye ore field, an immediate extension of the Albyn deposit, and to surrender the license, a US$9.2 million impairment charges were recorded against associated exploration and evaluation costs previously capitalised within exploration and evaluation assets.
As at 31 December 2016, all exploration and evaluation assets on the balance sheet related to the areas adjacent to the existing mines.
Impairment of ore stockpiles
The Group assessed the recoverability of the carrying value of ore stockpiles and recorded impairment charges/reversals of impairment as set out below:
|
|
Year ended 31 December 2016 |
|
Year ended 31 December 2015 |
||||
|
|
Pre-tax impairment charge/ (reversal of impairment) |
Taxation |
Post-tax impairment charge/ (reversal of impairment) |
|
Pre-tax impairment charge/ (reversal of impairment) |
Taxation |
Post-tax impairment charge/ (reversal of impairment) |
|
|
US$'000 |
US$'000 |
US$'000 |
|
US$'000 |
US$'000 |
US$'000 |
|
Pokrovskiy |
1,002 |
(200) |
802 |
|
(884) |
177 |
(707) |
|
Pioneer |
6,110 |
(1,223) |
4,887 |
|
11,945 |
(2,390) |
9,555 |
|
Malomir |
(5,826) |
1,165 |
(4,661) |
|
6,065 |
(1,213) |
4,852 |
|
Albyn |
(123) |
25 |
(98) |
|
299 |
(60) |
239 |
|
|
1,163 |
(233) |
930 |
|
17,425 |
(3,486) |
13,939 |
7. Auditor's remuneration
The Group, including its overseas subsidiaries, obtained the following services from the Company's auditor and their associates:
|
|
2016 |
2015 |
|
|
US$'000 |
US$'000 |
|
Audit fees and related fees |
|
|
|
Fees payable to the Company's auditor for the annual audit of the parent company and consolidated financial statements |
577 |
611 |
|
Fees payable to the Company's auditor and their associates for other services to the Group: |
|
|
|
For the audit of the Company's subsidiaries as part of the audit of the consolidated financial statements |
285 |
269 |
|
For the audit of subsidiary statutory accounts pursuant to legislation (a) |
55 |
77 |
|
|
917 |
957 |
|
Non-audit fees |
|
|
|
Other services pursuant to legislation - interim review |
185 |
342 |
|
Fees for reporting accountants services (b) |
1,153 |
231 |
|
Tax services |
- |
45 |
|
|
1,338 |
618 |
(a) Including the statutory audit of subsidiaries in the UK and Cyprus.
(b) Fees payable in relation to the Proposed Acquisition announced on 28 April 2016 (2015: Fees payable in relation to the Refinancing).
8. Staff costs
Continuing operations
|
|
|
2016 |
2015 |
|
|
|
US$'000 |
US$'000 |
|
Wages and salaries |
|
61,996 |
69,806 |
|
Social security costs |
|
17,732 |
19,235 |
|
Pension costs |
|
221 |
219 |
|
Share-based compensation |
|
140 |
280 |
|
|
|
80,089 |
89,540 |
|
|
|
|
|
|
Average number of employees |
|
8,064 |
8,469 |
Discontinued operations
|
|
|
2016 |
Period to 7 August 2015 |
|
|
|
US$'000 |
US$'000 |
|
Wages and salaries |
|
- |
12,613 |
|
Social security costs |
|
- |
3,287 |
|
Pension costs |
|
- |
158 |
|
Share-based compensation |
|
- |
17 |
|
|
|
- |
16,075 |
|
|
|
|
|
|
Average number of employees |
|
- |
1,752 |
9. Financial income and expenses
|
|
|
||
|
|
2016 |
|
2015 |
|
|
US$'000 |
|
US$'000 |
|
Investment income |
|
|
|
|
Interest income |
556 |
|
1,018 |
|
|
556 |
|
1,018 |
|
Interest expense |
|
|
|
|
Interest on bank loans |
(48,934) |
|
(57,731) |
|
Interest on convertible bonds |
(11,867) |
|
(13,570) |
|
|
(60,801) |
|
(71,301) |
|
Unwinding of discount on environmental obligation |
(175) |
|
(213) |
|
|
(60,976) |
|
(71,514) |
|
Other finance gains |
|
|
|
|
Gain on settlement of the Existing Bonds |
- |
|
478 |
|
Fair value gain on derivative financial instruments (a) |
7,434 |
|
6,417 |
|
Financial guarantee fee (b) |
4,542 |
|
2,169 |
|
|
11,976 |
|
9,064 |
|
Other finance losses |
|
|
|
|
Loss on bank debt refinancing (c) |
(1,548) |
|
- |
|
|
(1,548) |
|
- |
(a) Result from re-measurement of the conversion option of the New Bonds to fair value (note 20).
(b) Note 26.
(c) Note 20.
10. Taxation
|
|
|
|
|
|
2016 |
2015 |
|
|
US$'000 |
US$'000 |
|
Current tax |
|
|
|
Russian current tax |
29,788 |
31,752 |
|
|
29,788 |
31,752 |
|
Deferred tax |
|
|
|
(Reversal)/origination of timing differences (a) |
(34,486) |
17,127 |
|
Total tax (credit)/charge |
(4,698) |
48,879 |
(a) Including effect of foreign exchange movements in respect of deductible temporary differences of US$(26.0) million (year ended 31 December 2015: US$40.3 million) which primarily arises as the tax base for a significant portion of the future taxable deductions in relation to the Group's property, plant and equipment are denominated in Russian Rouble whilst the future depreciation charges associated with these assets will be based on their US Dollar carrying value and reflects the movements in the Russian Rouble to the US Dollar exchange rate.
The charge for the year can be reconciled to the loss before tax per the income statement as follows:
|
|
2016 |
2015 |
|
|
US$'000 |
US$'000 |
|
Profit/(loss) before tax from continuing operations |
27,008 |
(141,575) |
|
Less: share of results of associates |
3,581 |
60,422 |
|
Profit/(loss) before tax from continuing operations (excluding associates) |
30,589 |
(81,153) |
|
|
|
|
|
Tax on profit/loss from continuing operations (excluding associates) at the Russian corporation tax rate of 20% (2015: 20%) |
6,118 |
(16,231) |
|
Effect of different tax rates of subsidiaries operating in other jurisdictions |
36 |
(1,446) |
|
Tax effect of expenses that are not deductible for tax purposes |
1,765 |
9,674 |
|
Tax effect of tax losses for which no deferred income tax asset was recognised (b) |
14,778 |
26,583 |
|
Utilisation of previously unrecognised tax losses |
(2,574) |
(767) |
|
Foreign exchange movements in respect of deductible temporary differences (c) |
(26,025) |
40,305 |
|
Other adjustments |
1,204 |
(9,239) |
|
Tax (credit)/charge for the period |
(4,698) |
48,879 |
(b) Primarily relate to central administration expenses and interest expense incurred in the UK.
(c) Foreign exchange movements arise as the tax base for a significant portion of the future taxable deductions in relation to the Group's property, plant and equipment are denominated in Russian Rouble whilst the future depreciation charges associated with these assets will be based on their US Dollar carrying value and reflects the movements in the Russian Rouble to the US Dollar exchange rate.
Tax legislation is subject to varying interpretations. In addition, there is a risk of tax authorities making arbitrary judgements of business activities. If a particular treatment, based on management's judgement of the Group's business activities, was to be challenged by the tax authorities, the Group may be subject to tax claims and exposures. The Directors do not anticipate that these exposures will have a material adverse effect upon the Group's financial position.
11. Earnings per share
|
|
2016 US$'000 |
2015 US$'000 |
|
Profit/(loss) for the period attributable to equity holders of Petropavlovsk PLC |
33,719 |
(238,759) |
|
From continuing operations |
33,719 |
(190,155) |
|
From discontinued operations |
- |
(48,604) |
|
Interest expense on convertible bonds, net of tax (a) |
- |
- |
|
Profit/(loss) used to determine diluted earnings per share |
33,719 |
(238,759) |
|
From continuing operations |
33,719 |
(190,155) |
|
From discontinued operations |
- |
(48,604) |
|
|
No of shares |
No of shares |
|
Weighted average number of Ordinary Shares |
3,302,148,536 |
2,657,332,030 |
|
Adjustments for dilutive potential Ordinary Shares (a) |
- |
-(b) |
|
Weighted average number of Ordinary Shares for diluted earnings per share |
3,302,148,536 |
2,657,332,030 |
|
|
US$ |
US$ |
|
Basic profit/(loss) per share |
0.01 |
(0.09) |
|
From continuing operations |
0.01 |
(0.07) |
|
From discontinued operations |
- |
(0.02) |
|
|
|
|
|
Diluted profit/(loss) per share |
0.01 |
(0.09) |
|
From continuing operations |
0.01 |
(0.07) |
|
From discontinued operations |
- |
(0.02) |
(a) Convertible bonds which could potentially dilute basic profit/(loss) per ordinary share in the future are not included in the calculation of diluted profit/(loss) per share because they were anti-dilutive for the year ended 31 December 2016 and 2015.
(b) The Group had a potentially dilutive option issued to International Finance Corporation ('IFC') to subscribe for 1,067,273 Ordinary Shares (note 23) which was anti-dilutive and therefore was not included in the calculation of diluted loss per share for the year ended 31 December 2015.
12. Exploration and evaluation assets
|
|
|
Visokoe |
Flanks of Pokrovskiy |
Flanks of Albyn |
Other (a) |
Total |
|
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
At 1 January 2016 |
|
16,251 |
2,287 |
39,080 |
11,375 |
68,993 |
|
Additions |
|
213 |
2,285 |
4,082 |
776 |
7,356 |
|
Impairment (b) |
|
- |
- |
(9,155) |
- |
(9,155) |
|
Reallocation and other transfers |
|
- |
(269) |
(58) |
(3) |
(330) |
|
Disposal of subsidiary (c) |
|
(16,464) |
- |
- |
- |
(16,464) |
|
Disposal |
|
- |
(1,130) |
- |
- |
(1,130) |
|
At 31 December 2016 |
|
- |
3,173 |
33,949 |
12,148 |
49,270 |
(a) Represent amounts capitalised in respect of a number of projects in the Amur Region.
(b) Note 6.
(c) Note 27.
|
|
|
|
Visokoe |
Flanks of Pokrovskiy |
Flanks of Albyn |
Other (d) |
Total |
||
|
|
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
||
|
At 1 January 2015 |
|
|
48,293 |
4,385 |
35,639 |
9,216 |
97,533 |
||
|
Additions |
|
|
458 |
500 |
3,441 |
4,777 |
9,176 |
||
|
Impairment (e) |
|
|
(32,500) |
(2,324) |
- |
(2,618) |
(37,442) |
||
|
Reallocation and other transfers |
|
|
- |
(274) |
- |
- |
(274) |
||
|
At 31 December 2015 |
|
|
16,251 |
2,287 |
39,080 |
11,375 |
68,993 |
||
(d) Represent amounts capitalised in respect of a number of projects in the Amur Region and Guyana.
(e) Note 6.
13. Property, plant and equipment
|
|
Mining assets |
Non-mining assets |
Capital construction in progress (b) |
Total |
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
Cost |
|
|
|
|
|
At 1 January 2015 |
1,846,753 |
206,171 |
338,564 |
2,391,488 |
|
Additions |
20,203 |
1,012 |
9,865 |
31,080 |
|
Close down and restoration cost capitalised (note 22) |
(4,246) |
- |
- |
(4,246) |
|
Transfers from capital construction in progress (a) |
5,779 |
961 |
(6,740) |
- |
|
Disposals |
(7,091) |
(4,633) |
(56) |
(11,780) |
|
Reallocation and other transfers |
493 |
(141) |
(46) |
306 |
|
Foreign exchange differences |
- |
(5,672) |
- |
(5,672) |
|
At 31 December 2015 |
1,861,891 |
197,698 |
341,587 |
2,401,176 |
|
Additions |
19,470 |
885 |
5,426 |
25,781 |
|
Close down and restoration cost capitalised (note 22) |
2,177 |
- |
- |
2,177 |
|
Transfers from capital construction in progress (a) |
2,523 |
159 |
(2,682) |
- |
|
Disposals |
(19,645) |
(6,235) |
(77) |
(25,957) |
|
Disposal of subsidiaries |
(919) |
(2,052) |
(2,436) |
(5,407) |
|
Reallocation and other transfers |
9,844 |
(808) |
(8,856) |
180 |
|
Foreign exchange differences |
- |
3,907 |
- |
3,907 |
|
At 31 December 2016 |
1,875,341 |
193,554 |
332,962 |
2,401,857 |
|
|
|
|
|
|
|
Accumulated depreciation and impairment |
|
|
|
|
|
At 1 January 2015 |
1,066,050 |
175,923 |
6,483 |
1,248,456 |
|
Charge for the year |
122,328 |
6,165 |
- |
128,493 |
|
Disposals |
(5,680) |
(4,183) |
- |
(9,863) |
|
Reallocation and other transfers |
276 |
28 |
1 |
305 |
|
Foreign exchange differences |
- |
(4,558) |
- |
(4,558) |
|
At 31 December 2015 |
1,182,974 |
173,375 |
6,484 |
1,362,833 |
|
Charge for the year |
100,934 |
5,034 |
- |
105,968 |
|
Disposals |
(16,748) |
(6,036) |
- |
(22,784) |
|
Disposal of subsidiaries |
- |
(1,127) |
- |
(1,127) |
|
Reallocation and other transfers |
662 |
(662) |
- |
- |
|
Foreign exchange differences |
- |
3,173 |
- |
3,173 |
|
At 31 December 2016 |
1,267,822 |
173,757 |
6,484 |
1,448,063 |
|
Net book value |
|
|
|
|
|
At 31 December 2015 (c) |
678,917 |
24,323 |
335,103 |
1,038,343 |
|
At 31 December 2016 (c) |
607,519 |
19,797 |
326,478 |
953,794 |
(a) Being costs primarily associated with continuous development of Malomir, Albyn and Pioneer projects.
(b) Including US$200.3 million costs associated with the POX Hub project (31 December 2015: US$197.4 million)
(c) Property, plant and equipment with a net book value of US$110.0million (31 December 2015: US$125.6 million) have been pledged to secure borrowings of the Group.
14. Investments in associates
|
|
|
|
2016 |
2015 |
|
|
|
|
US$'000 |
US$'000 |
|
IRC Limited ('IRC') |
|
|
36,140 |
39,163 |
|
JSC Verkhnetisskaya Ore Mining Company (a) |
|
|
- |
231 |
|
|
|
|
36,140 |
39,394 |
(a) On 27 May 2016 the Group sold its 49% interest in CJSC Verkhnetisskaya Ore Mining Company (note 27).
Summarised financial information for those associates that are material to the Group is set out below.
|
|
IRC |
IRC |
|
|
Year ended 31 December 2016 |
Year ended 31 December 2015 |
|
|
US$'000 |
US$'000 |
|
Non-current assets |
|
|
|
Exploration and evaluation assets |
6,966 |
6,717 |
|
Property, plant and equipment |
246,191 |
199,714 |
|
Prepayments for property, plant and equipment |
87,499 |
88,859 |
|
Other non-current assets |
4,773 |
2,277 |
|
|
345,429 |
297,567 |
|
Current assets |
|
|
|
Cash and cash equivalents |
31,342 |
56,144 |
|
Other current assets |
44,184 |
55,038 |
|
|
75,526 |
111,182 |
|
Current liabilities |
|
|
|
Borrowings (a) |
66,147 |
53,050 |
|
Other current liabilities |
21,414 |
18,398 |
|
|
87,561 |
71,448 |
|
Non-current liabilities |
|
|
|
Borrowings (a) |
177,239 |
215,238 |
|
Other non-current liabilities |
34,431 |
12,773 |
|
|
211,670 |
228,011 |
|
Net assets |
121,724 |
109,290 |
(a) On 6 December 2010, KS GOK LLC ('K&S'), a subsidiary of IRC, entered into a US$400 million Engineering Procurement and Construction Contract with China National Electric Engineering Corporation for the construction of the Group's mining operations at K&S. On 13 December 2010, K&S entered into a project finance facility agreement with the Industrial and Commercial Bank of China Limited ('ICBC') (the 'ICBC Facility Agreement') pursuant to which ICBC would lend US$340 million to K&S to be used to fund the construction of the Group's mining operations at K&S in time for the start of major construction works in early 2011. Interest under the facility was charged at 2.80% above London Interbank Offering rate ('LIBOR') per annum. The facility is guaranteed by the Company (note 26) and originally was repayable semi-annually in 16 instalments US$21.25 million each, starting from December 2014 and is fully repayable by June 2022. ICBC has agreed to restructure two repayment instalments originally due for payment on 20 June 2017 and 20 December 2017 in an aggregate amount of US$42.5 million evenly into five subsequent semi-annual repayment instalments as such each of the repayment instalment due on 20 June 2018, 20 December 2018, 20 June 2019, 20 December 2019 and 20 June 2020 is increased by US$8.5 million to an amount equal to US$42.5 million. The outstanding loan principal was US$233.75 million as at 31 December 2016 (31 December 2015: US$276.25 million).The loan is carried at amortised cost with effective interest rate at 6.13% per annum (2015: 5.91%). As at 31 December 2015, US$2.1 million was deposited in a debt service reserve accounts ('DSRA') with ICBC under a security deposit agreement related to the ICBC Facility Agreement. In January 2016, IRC placed US$28.3 million in order to replenish the DSRA level pursuant to the security deposit agreement. In accordance with the waiver and consent letter dated 19 April 2016, which conditions precedent were satisfied on 21 June 2016, ICBC waived the restriction on withdrawing from the DSRA for the repayment of the ICBC loan and related interest and the requirement of IRC to maintain the DSRA until 30 June 2018. Accordingly, balance of US$1.98 million remained in the DSRA as at 31 December 2016 without replenishment. ICBC Facility Agreement contains certain financial covenants to which ICBC has agreed to grant a waiver until 31 December 2017, inclusive. As at 30 June 2016, The Group's entire 31.1% ownership in the issued capital of IRC was pledged to ICBC as security for the obligations of the Company as guarantor and in consideration for the waiver of financial covenants under the ICBC facility (31 December 2015: 521,376,470 ordinary shares (approximately 8.47%) in the issued capital of IRC were pledged to ICBC).
|
|
IRC |
IRC |
|
|
Year ended 31 December 2016 US$'000 |
Period from 7 August to 31 December 2015 |
|
Revenue |
16,467 |
31,627 |
|
Net operating expenses |
(34,503) |
(199,081) |
|
including |
|
|
|
Depreciation |
(1,155) |
(371) |
|
Impairment of mining assets |
- |
(138,623) |
|
Impairment of exploration and evaluation assets |
- |
(4,475) |
|
Impairment of ore stockpiles |
(841) |
(7,492) |
|
Impairment of investments in joint ventures |
(47) |
(5,895) |
|
Foreign exchange losses |
(3,440) |
(1,075) |
|
Investment income |
413 |
295 |
|
Interest expense |
(1,189) |
(683) |
|
Taxation |
(315) |
(774) |
|
Loss for the period |
(19,127) |
(168,616) |
|
Other comprehensive profit/(loss) |
1,555 |
(1,740) |
|
Total comprehensive loss |
(17,572) |
(170,356) |
Following issue of shares by IRC in December 2016 and dilution of Group's interest in IRC (note 35), the Group recognised US$3.3 million gain on deemed disposal on 4.73% interest in IRC.
15. Inventories
|
|
|
|
2016 |
2015 |
|
|
|
|
US$'000 |
US$'000 |
|
Current |
|
|
|
|
|
Construction materials |
|
|
5,072 |
6,952 |
|
Stores and spares |
|
|
57,699 |
66,534 |
|
Ore in stockpiles (a), (c) |
|
|
17,104 |
17,249 |
|
Work in progress |
|
|
72,782 |
53,579 |
|
Deferred stripping costs |
|
|
26,187 |
17,981 |
|
Bullion in process |
|
|
1,189 |
1,212 |
|
Other |
|
|
3,233 |
11,715 |
|
|
|
|
183,266 |
175,222 |
|
Non-current |
|
|
|
|
|
Ore in stockpiles (a), (b), (c) |
|
|
51,686 |
51,434 |
|
|
|
|
51,686 |
51,434 |
(a) Note 6.
(b) Ore in stockpiles that is not planned to be processed within twelve months after the reporting period.
(c) As at 31 December 2016, ore in stockpiles include balances in the aggregate of US$45.5 million carried at net realisable value (2015: US$63.1 million).
16. Trade and other receivables
|
|
|
|
2016 |
2015 |
|
|
|
|
US$'000 |
US$'000 |
|
Current |
|
|
|
|
|
VAT recoverable |
|
|
30,265 |
31,489 |
|
Advances to suppliers |
|
|
11,394 |
3,320 |
|
Trade receivables (a) |
|
|
6,160 |
4,018 |
|
Other debtors (b) |
|
|
41,917 |
9,269 |
|
|
|
|
89,736 |
48,096 |
(a) Net of provision for impairment of US$0.2 million (2015: US$0.4 million). Trade receivables are generally due for settlement between three and twelve months.
(b) Net of provision for impairment of US$1.3 million (2015: US$1.2 million).
There is no significant concentration of credit risk with respect to trade and other receivables. The Group has implemented policies that require appropriate credit checks on potential customers before granting credit. The Group has adopted a policy of only dealing with creditworthy counterparties. The Group's exposure and credit ratings of its counterparties are monitored by the Board of Directors. The maximum credit risk of such financial assets is represented by the carrying value of the asset.
The Directors consider that the carrying amount of trade and other receivables approximates their fair value.
17. Cash and cash equivalents
|
|
|
|
2016 |
2015 |
|
|
|
|
US$'000 |
US$'000 |
|
Cash at bank and in hand |
|
|
10,284 |
22,144 (a) |
|
Short-term bank deposits |
|
|
2,358 |
6,095 |
|
|
|
|
12,642 |
28,239 |
(a) Including US$15.1 million received under investment agreement with the Russian Ministry of Far East Development (note 32).
18. Derivative financial instruments
|
|
31 December 2016 |
|
|
31 December 2015 |
||
|
|
Assets |
Liabilities |
|
|
Assets |
Liabilities |
|
|
US$'000 |
US$'000 |
|
|
US$'000 |
US$'000 |
|
Forward gold contracts - cash flow hedge (a), (b), (c) |
7,478 |
- |
|
|
3,925 |
- |
|
Call Option over the Company's shares |
- |
(3,064) |
|
|
- |
- |
|
Conversion option (d), (e) |
- |
(7,250) |
|
|
- |
(14,684) |
|
|
7,478 |
(10,314) |
|
|
3,925 |
(14,684) |
(a) Forward contracts to sell an aggregate of 50,006 ounces of gold at an average price of US$1,303 per ounce are outstanding as at 31 December 2016 (31 December 2015: 71,551 ounces of gold at an average price of US$1,116 per ounce).
(b) Measured at fair value and considered as Level 2 of the fair value hierarchy which valuation incorporates the following inputs:
- gold forward curves observable at quoted intervals; and
- observable credit spreads.
(c) The hedged forecast transactions are expected to occur at various dates during the next 12 months.
Gain and losses recognised in the hedging reserve in equity as at the reporting date will be recognised in the income statement in the periods during which the hedged gold sale transactions affect the income statement.
There was no ineffectiveness to be recorded from the cash flow hedge during the years ended 31 December 2016 and 2015.
(d) Note 20.
(e) Measured at fair value and considered as Level 2 of the fair value hierarchy which valuation incorporates the following inputs:
- the Group's credit risk;
- historic share price volatility;
- the conversion price;
- time to maturity; and
- risk free rate.
19. Trade and other payables
|
|
|
|
2016 |
2015 |
|
|
|
|
US$'000 |
US$'000 |
|
Trade payables |
|
|
25,068 |
44,263 |
|
Advances from customers |
|
|
2,148 |
569 |
|
Advances received on resale and commission contracts (a) |
|
|
1,847 |
12,770 |
|
Accruals and other payables |
|
|
26,575 |
38,965(b) |
|
|
|
|
55,638 |
96,567 |
(a) Amounts included in advances received on resale and commission contracts at 31 December 2016 and 31 December 2015 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.
(b) Including US$15.1 million liability under an investment agreement with the Russian Ministry of Far East Development (note 32).
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
20. Borrowings
|
|
|
2016 |
2015 |
|
|
|
US$'000 |
US$'000 |
|
Borrowings at amortised cost |
|
|
|
|
Convertible bonds (a),(b) |
|
88,369 |
85,503 |
|
Bank loans (c), (d) |
|
522,843 |
552,775 |
|
|
|
611,212 |
638,278 |
|
|
|
|
|
|
Amount due for settlement within 12 months |
|
85,306 (c) |
260,248 |
|
Amount due for settlement after 12 months |
|
525,906 |
378,030 |
|
|
|
611,212 |
638,278 |
(a) Liability component of the US$100 million Convertible Bonds due on 18 March 2020, measured at amortised cost. The interest charged was calculated by applying an effective interest rate of 13.89% to the liability component.
The conversion option of the US$100 million Convertible Bonds represents the fair value of the embedded option for the bondholders to convert into the equity of the Company ("the Conversion Right"). As the Company can elect to pay the cash value in lieu of delivering the Ordinary Shares following the exercise of the Conversion Right, the conversion option is a derivative liability. Accordingly, the conversion option is measured at fair value and is presented separately within derivative financial liabilities.
(b) The liability component of the New Bonds was arrived at as set out below.
|
|
18 March 2015 |
|
|
US$' 000 |
|
Par value of the New Bonds |
100,000 |
|
Fair value uplift of the New Bonds |
9,400 |
|
Less: Refinancing costs |
(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.
As at 31 December 2016, the fair value of debt component of the convertible bonds, considered as Level 2 of the fair value hierarchy, amounted to US$97.3 million (31 December 2015: US$92.8 million). Valuation incorporates the following inputs: the Group's credit risk, time to maturity and risk free rate.
As at 31 December 2016, 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$103.9 million (31 December 2015: US$106.3 million).
(c) In December 2016, the Group refinanced US$430 million outstanding principal of the Group's US$530 million bank debt, including a revised maturity profile from May 2018 to September 2022 and renegotiation of the financial and operational covenants:
|
|
|
December 2016 |
|
|
|
US$' 000 |
|
Carrying value of liabilities de-recognised |
|
428,246 |
|
Fair value of new liabilities recognised: |
|
|
|
Bank debt |
|
426,730 |
|
Call option over the Company's shares |
|
3,064 |
|
Loss on bank debt refinancing |
|
(1,548) |
Cash settled call option was issued in relation to 3.6 per cent. of the outstanding aggregate ordinary share capital in the Company and is exercisable between December 2019 and March 2023 at strike price of £0.068.
Transaction costs of US$4.9 million were further capitalised.
(d) As at 31 December 2016, US$233.1 million (2015: US$540.0 million) bank loans are secured against certain items of property, plant and equipment of the Group (note 13) and shares in subsidiaries held by Petropavlovsk PLC: 100% of LLC Albynskiy Rudnik; 89.73% of LLC Malomirskiy Rudnik; 100% of LLC Temi.
The weighted average interest rate paid during the year ended 31 December 2016 was 9.0% (2015: 9.1%).
The carrying value of the bank loans approximated their fair value at each period end.
As at 31 December 2016, bank loans with an aggregate carrying value of US$522.8 million (2015: US$552.8 million) contain certain financial covenants.
As at 31 December 2016, the amounts undrawn under the bank loans were US$ nil (2015: US$ nil).
The Group is currently completing the final documentation for the remaining US$100 million bank debt. Included in the amounts due for settlement within 12 months are US$75 million, based on facility terms that existed as at 31 December 2017.
21. Deferred taxation
|
|
|
2016 |
2015 |
|
|
|
|
US$'000 |
US$'000 |
|
|
At 1 January |
|
173,499 |
156,814 |
|
|
Deferred tax (credited)/charged to income statement(a) |
|
(34,486) |
17,127 |
|
|
Deferred tax charged/(credited) to equity |
|
711 |
(469) |
|
|
Transfer to liabilities associated with assets classified as held for sale |
|
- |
28 |
|
|
Exchange differences |
|
4 |
(1) |
|
|
At 31 December |
|
139,728 |
173,499 |
|
|
|
|
|
|
|
|
Deferred tax assets |
|
- |
- |
|
|
Deferred tax liabilities |
|
(139,728) |
(173,499) |
|
|
Net deferred tax liability |
|
(139,728) |
(173,499) |
|
(a) Note 10.
|
|
At 1 January |
Charged/ (credited) to the income statement |
Credited directly to equity |
|
Exchange differences |
At 31 December |
|
US$'000 |
US$'000 |
US$'000 |
|
US$'000 |
US$'000 |
|
|
Property, plant and equipment |
143,374 |
(24,979) |
- |
|
45 |
118,440 |
|
Inventory |
16,451 |
(6,477) |
- |
|
- |
9,974 |
|
Exploration and evaluation assets |
2,996 |
(215) |
- |
|
- |
2,781 |
|
Fair value adjustments |
246 |
(117) |
- |
|
- |
129 |
|
Other temporary differences |
10,432 |
(2,698) |
711 |
|
(41) |
8,404 |
|
|
173,499 |
(34,486) |
711 |
|
4 |
139,728 |
|
|
At 1 January |
Charged/ (credited) to the income statement |
Charged directly to equity |
Transfer to liabilities associated with assets classified as held for sale |
Exchange differences |
At 31 December |
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
|
Property, plant and equipment |
123,344 |
19,957 |
- |
147 |
(74) |
143,374 |
|
Inventory |
21,906 |
(5,367) |
- |
(88) |
- |
16,451 |
|
Exploration and evaluation assets |
3,529 |
(515) |
- |
(18) |
- |
2,996 |
|
Fair value adjustments |
409 |
(120) |
- |
(43) |
- |
246 |
|
Other temporary differences |
7,626 |
3,172 |
(469) |
30 |
73 |
10,432 |
|
|
156,814 |
17,127 |
(469) |
28 |
(1) |
173,499 |
As at 31 December 2016, the Group did not recognise deferred tax assets in respect of the accumulated tax losses from continuing operations comprising US$620.2 million that can be carried forward against future taxable income (2015: US$528.9 million). Tax losses of US$484.0 million arise primarily in the UK and can be carried forward indefinitely and tax losses of US$136.2million arise in Russia and expire primarily between 2020 and 2026.
As at 31 December 2016, the Group did not recognise deferred tax assets of US$0.01 million (2015: US$3.1 million) in respect of temporary differences arising on certain capitalised development costs attributable to continuing operations.
The Group has not recorded a deferred tax liability in respect of withholding tax and other taxes that would be payable on the unremitted earnings associated with investments in its subsidiaries and associates and interests in joint ventures as the Group is able to control the timing of the reversal of those temporary differences and does not intend to reverse them in the foreseeable future. As at 31 December 2016, statutory unremitted earnings from continuing operations comprised in aggregate US$839.4 million (2015: US$597.0 million).
22. Provision for close down and restoration costs
|
|
2016 |
2015 |
|
|
US$'000 |
US$'000 |
|
At 1 January |
17,184 |
21,217 |
|
Unwinding of discount |
175 |
213 |
|
Change in estimates(a) |
2,177 |
(4,246) |
|
Disposal of subsidiary |
(384) |
- |
|
At 31 December |
19,152 |
17,184 |
(a) Primarily reflects the effect of change in the forecast the Russian Rouble to the US Dollar exchange rate following a significant depreciation of the Russian Rouble against the US Dollar during the year ended 31 December 2015 and subsequent appreciation the Russian Rouble during the year ended 31 December 2016.
The Group recognised provisions in relation to close down and restoration costs for the following mining operations:
|
|
2016 |
2015 |
|
|
US$'000 |
US$'000 |
|
Pokrovskiy |
2,842 |
2,646 |
|
Pioneer |
3,155 |
2,754 |
|
Malomir |
6,049 |
5,610 |
|
Albyn |
7,106 |
5,790 |
|
Yamal |
- |
384 |
|
|
19,152 |
17,184 |
The provision recognised represents the present value of the estimated expenditure that will be incurred, which has been arrived at using the long-term risk-free pre-tax cost of borrowing. The expenditure arises at different times over the life of mine. The expected timing of significant cash outflows is between years 2018 and 2032, varying from mine site to mine site.
23. Share capital
|
|
2016 |
|
2015 |
||
|
|
No of shares |
US$'000 |
|
No of shares |
US$'000 |
|
Allotted, called up and fully paid |
|
|
|
|
|
|
At 1 January |
3,300,561,697 |
48,874 |
|
197,638,425 |
3,041 |
|
Issued during the period |
3,206,835 |
46 |
|
3,102,923,272 |
45,833 |
|
At 31 December |
3,303,768,532 |
48,920 |
|
3,300,561,697 |
48,874 |
The Company has one class of ordinary shares which carry no right to fixed income.
The Company had an option issued to the IFC on 20 April 2009 to subscribe for 1,067,273 Ordinary Shares at an exercise price of £11.84 per share, subject to adjustments. The option expired unexercised on 25 May 2015.
24. Own shares
|
|
|
2016 |
2015 |
|
At 1 January |
|
8,933 |
8,925 |
|
New shares transferred to the EBT |
|
46 |
- |
|
Vesting Deferred shares award |
|
(8,979) |
- |
|
Rights issue |
|
- |
8 |
|
At 31 December |
|
- |
8,933 (a) |
(a) 1,441,406 Ordinary Shares held by the Company's EBT.
25. Notes to the cash flow statement
Reconciliation of profit/(loss) before tax to operating cash flow
|
|
|
2016 |
2015 |
|
|
|
US$'000 |
US$'000 |
|
Profit/(loss) before tax including discontinued operations |
|
27,008 |
(248,179) |
|
Adjustments for: |
|
|
|
|
Share of results of joint ventures |
|
- |
(588) |
|
Share of results of associate |
|
3,581 |
60,422 |
|
Investment income |
|
(556) |
(4,351) |
|
Other finance gains |
|
(11,976) |
(6,894) |
|
Other finance losses |
|
1,548 |
- |
|
Interest expense |
|
60,976 |
72,703 |
|
Share based payments |
|
140 |
297 |
|
Depreciation |
|
105,252 |
121,599 |
|
Impairment of exploration and evaluation assets |
|
9,155 |
37,442 |
|
Impairment of ore stockpiles |
|
1,163 |
17,425 |
|
Effect of processing previously impaired stockpiles |
|
(7,536) |
(8,535) |
|
Provision for impairment of trade and other receivables |
|
282 |
1,264 |
|
Write-down to adjust the carrying value of IRC's net assets to fair value less costs to sell |
|
- |
96,639 |
|
Loss on disposals of property, plant and equipment |
|
2,431 |
1,090 |
|
(Gain)/loss on disposal of subsidiaries |
|
(791) |
384 |
|
Foreign exchange losses |
|
5,158 |
15,237 |
|
Gain on disposal of non-trading loans |
|
(6,724) |
- |
|
Other non-cash items |
|
177 |
5,337 |
|
Changes in working capital: |
|
|
|
|
(Increase)/ decrease in trade and other receivables |
|
(25,828) |
3,621 |
|
Decrease in inventories |
|
298 |
22,675 |
|
(Increase)/ decrease in trade and other payables |
|
(37,745) |
21,253 |
|
Net cash generated from operations |
|
126,013 |
208,841 |
Non-cash transactions
Except for the issue of the Ordinary Shares in exchange for the Existing Bonds, there have been no significant non-cash transactions during the year ended 31 December 2015.
There were no significant non-cash transactions during the year ended 31 December 2016.
26. Related parties
Related parties the Group entered into transactions with during the reporting period
PJSC 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.
JSC Verkhnetisskaya Ore Mining Company ('Verkhnetisskaya') is an associate to the Group and hence was a related party until 27 May 2016 when the Group disposed its interest in Verkhnetisskaya.
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.
IRC Limited and its subsidiaries (Note 35) are associates to the Group and hence are related parties since 7 August 2015.
Transactions with related parties which the Group entered into during the years ended 31 December 2016 and 2015 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 |
|
||
|
|
2016 US$'000 |
2015 US$'000 |
2016 US$'000 |
2015 US$'000 |
|
|
Asian-Pacific Bank |
|
|
|
|
|
|
Other |
22 |
575 |
102 |
113 |
|
|
|
22 |
575 |
102 |
113 |
|
|
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 |
66 |
1,182 |
3,514 |
5,716 |
|
|
Associates |
|
|
|
|
|
|
IRC Limited and its subsidiaries |
69 |
49 |
1,996 |
1,152 |
|
|
CJSC ZRK Omchak and its wholly owned subsidiary LLC Kaurchak |
- |
2 |
- |
- |
|
|
|
135 |
1,233 |
5,510 |
6,868 |
|
During the year ended 31 December 2016, the Group made US$0.2 million charitable donations to the Petropavlovsk Foundation (2015: US$0.4 million).
The outstanding balances with related parties at 31 December 2016 and 2015 are set out below.
|
|
Amounts owed by related parties at 31 December |
Amounts owed to related parties at 31 December |
|
|||
|
|
2016 US$'000 |
2015 US$'000 |
2016 US$'000 |
2015 US$'000 |
||
|
Helios and other entities in which key management have interest and exercises a significant influence or control |
1,383 |
1,328 |
1 |
450 |
||
|
Asian-Pacific Bank |
1 |
|
- |
|
||
|
IRC Limited and its subsidiaries |
14,502(a) |
2,023 |
1,704 |
1,233 |
||
|
|
15,886 |
3,351 |
1,705 |
1,683 |
||
(a) Including US$12.5 million advanced to IRC in December 2016. This balance was fully repaid in January 2017.
Banking arrangements
The Group has current and deposit bank accounts with Asian-Pacific Bank.
The bank balances at 31 December 2016 and 2015 are set out below.
|
|
|
2016 US$'000 |
2015 US$'000 |
|
Asian-Pacific Bank |
|
629 |
3,208 |
-
Financing transactions
The Group has charged a fee for the provision of the guarantee to IRC (note 14), equal to 1.75% on the outstanding loan amount under the ICBC Facility Agreement and which amounted to US$4.5 million during the year ended 31 December 2016 (31 December 2015: US$2.2 million). The Guarantee fee principal outstanding amounted to an equivalent of US$3.4 million (31 December 2015:US$nil).
The Group had an interest-free unsecured loan issued to Verkhnetisskaya. Loan principal outstanding amounted to an equivalent of US$2.8 million as at 31 December 2015.
During the year ended 31 December 2015, the Group received a number of loans from Asian-Pacific Bank. Loan principal outstanding as at 31 December 2016 was US$nil (31 December 2015: an equivalent of US$2.7 million). During the year ended 31 December 2016, interest charged on loans received from Asian-Pacific Bank comprised US$0.03 million (31 December 2015: US$0.5 million).
Key management compensation
Key management personnel, comprising a group of 15 (2015: 18) individuals, including Executive and Non-Executive Directors of the Company and members of senior management, are those having authority and responsibility for planning, directing and controlling the activities of the Group.
|
|
2016 |
2015 |
|
|
US$'000 |
US$'000 |
|
Wages and salaries |
6,103 |
7,231 |
|
Pension costs |
182 |
357 |
|
Share-based compensation |
610 |
280 |
|
|
6,895 |
7,868 |
27. Disposal of subsidiaries
During the year ended 31 December 2016, the Group entered into agreements to sell its wholly owned subsidiary LLC Ilijnskoye and its associate JSC Verkhnetisskaya Ore Mining Company for an aggregate cash consideration of an equivalent to US$20 million, payable in tranches during 2016, out of which US$19.8 million were attributed to the value of Visokoe asset held by LLC Ilijnskoye and the remainder to JSC Verkhnetisskaya Ore Mining Company.The disposal of LLC Ilijnskoye was completed on 11 May 2016.
The net assets of LLC Ilijnskoye at the date of disposal are set out below.
|
|
11 May 2016 |
|
Exploration and evaluation assets |
16,464 |
|
Property, plant and equipment |
3,361 |
|
Inventories |
21 |
|
Trade and other receivables |
80 |
|
Cash and cash equivalents |
9 |
|
Trade and other payables |
(156) |
|
Net assets disposed |
19,779 |
|
|
|
|
Consideration (a) |
19,269 |
|
Loss on disposal |
510 |
|
|
|
|
Net cash inflow arising on disposal: |
|
|
Consideration received in cash and cash equivalents (a) |
19,269 |
|
Less: cash and cash equivalents disposed of |
(9) |
|
|
19,260 |
(a) Net of transaction costs.
During the year ended 31 December 2016, the Group disposed its interests in a number of non-core investments. Aggregate cash outflows arising from the aforementioned disposals was US$72 thousand and aggregate gain was US$1.3 million representing net liabilities disposed of.
28. Share based payments
On 31 March 2015, the Remuneration Committee approved a bonus of £555,000 to the Chief Executive Officer, of which 50% is payable in cash and 50% in the form of a Deferred Share Award. The number of shares awarded will be based on the market share price at the date of award, being 1 May 2015. The vesting of this award will be subject to Chief Executive Officer's continued service for a 12-month period from the date of award unless he departs the Company as a 'good' leaver.
29. Analysis of net debt
|
|
At 1 January 2016 |
Disposal of subsidiaries |
Net cash Movement |
Exchange movement |
Non-cash changes |
At 31 December 2016 |
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
Cash and cash equivalents |
28,239 (a) |
(99) |
(18,329) |
2,831 |
- |
12,642 |
|
Borrowings |
(638,278) |
- |
84,710 |
173 |
(57,817) |
(611,212) |
|
Net debt |
(610,039) |
(99) |
66,381 |
3,004 |
(57,817) (b) |
(598,570) |
(a) Including US$15.1 million received under investment agreement with the Russian Ministry of Far East Development (note 32).
(b) Being amortisation of borrowings and the effect of the bank debt refinancing (note 20).
|
|
|
At 1 January 2015 |
Net cash movement |
Exchange movement |
Non-cash changes |
At 31 December 2015 |
|
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
Cash and cash equivalents |
|
48,080 |
(15,173) |
(4,668) |
- |
28,239 (c) |
|
Borrowings |
|
(977,804) |
316,188 |
(105) |
23,443 |
(638,278) |
|
Net debt |
|
(929,724) |
301,015 |
(4,773) |
23,443 (d) |
(610,039) |
(c) Including US$15.1 million received under investment agreement with the Russian Ministry of Far East Development (note 32).
(d) Being amortisation of borrowings and the effect of the Refinancing.
30. Financial instruments and financial risk management
Capital risk management
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to optimise the weighted average cost of capital and tax efficiency subject to maintaining sufficient financial flexibility to undertake its investment plans.
The capital structure of the Group consists of net debt (as detailed in note 29) and equity (comprising issued capital, reserves and retained earnings). As at 31 December 2016, the capital comprised US$1.2 billion (2015: US$1.2 billion).
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group adopts a modular approach in developing its projects in order to minimise upfront capital expenditure and related funding requirements. The Group manages in detail its funding requirements on a 12 month rolling basis and maintains a five year forecast in order to identify medium-term funding needs.
The Group is not subject to any externally imposed capital requirements.
Significant accounting policies
Details of significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 2 to the consolidated financial statements.
Categories of financial instruments
|
|
2016 |
2015 |
|
Financial assets |
|
|
|
Cash and cash equivalents |
12,642 |
28,239 |
|
Derivative financial instruments |
7,478 |
3,925 |
|
Loans and receivables |
41,102 |
12,473 |
|
Available-for-sale investments |
1,105 |
271 |
|
Financial liabilities |
|
|
|
Trade and other payables - at amortised cost |
43,688 |
60,642 |
|
Borrowings - at amortised cost |
611,212 |
638,278 |
|
Derivative financial instruments |
10,314 |
14,684 |
Financial risk management
The Group's activities expose it to interest rate risk, foreign currency risk, risk of change in the commodity prices, credit risk and liquidity risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.
Risk management is carried out by a central finance department and all key risk management decisions are approved by the Board of Directors. The Group identifies and evaluates financial risks in close cooperation with the Group's operating units. The Board provides written principles for overall risk management, as well as guidance covering specific areas, such as foreign exchange risk, interest rate risk, gold price risk, credit risk and investment of excess liquidity.
Interest rate risk
The Group's fixed rate borrowings and are carried at amortised cost. They are therefore not subject to interest rate risk as defined in IFRS 7, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates. The Group does not have borrowings with variable interest rates.
Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from fluctuations in currencies the Group transacts, primarily US Dollars, GB Pounds Sterling and Russian Roubles.
Exchange rate risks are mitigated to the extent considered necessary by the Board of Directors, through holding the relevant currencies. At present, the Group does not undertake any foreign currency transaction hedging.
The carrying amounts of the Group's foreign currency denominated monetary assets and monetary liabilities at period end are set out below.
|
|
Assets |
|
Liabilities |
||
|
|
2016 |
2015 |
|
2016 |
2015 |
|
Russian Roubles |
39,404 |
56,795 |
|
35,675 |
56,817 |
|
US Dollars (a) |
5,355 |
2,875 |
|
4,700 |
7,278 |
|
GB Pounds Sterling |
2,444 |
357 |
|
813 |
943 |
|
EUR |
54 |
80 |
|
18 |
42 |
|
Other currencies |
49 |
92 |
|
288 |
220 |
(a) US Dollar denominated monetary assets and liabilities in Group companies with Rouble functional currency.
The table set out below illustrates the Group's profit sensitivity to changes in exchange rates by 25% (2015: 25%), representing management's assessment of a reasonably possible change in foreign exchange currency rates. The analysis was applied to monetary assets and liabilities at the reporting dates denominated in respective currencies.
|
|
2016 |
2015 |
|
|
US$'000 |
US$'000 |
|
Russian Rouble currency impact |
932 |
5 |
|
US Dollar currency impact |
164 |
1,101 |
|
GB Pounds Sterling currency impact |
408 |
146 |
|
EUR currency impact |
9 |
10 |
|
Other currencies |
60 |
32 |
Credit risk
The Group's principal financial assets are cash and cash equivalents, comprising current accounts, amounts held on deposit with financial institutions and investments in money market and liquidity funds. In the case of deposits and investments in money market and liquidity funds, the Group is exposed to a credit risk, which results from the non-performance of contractual agreements on the part of the contract party. The Group is also exposed to a credit risk in relation to the amounts guaranteed under the ICBC facility (note 14).
The credit risk on liquid funds held in current accounts and available on demand is limited because the main counterparties are banks with high credit-ratings assigned by international credit-rating agencies. Having performed a high level due diligence, management does not consider the credit risk associated with Asian-Pacific Bank and other banks without international credit rating to be high. Asian-Pacific Bank has a wide network of branches in the Amur region and, therefore, is extensively used by the entities of the precious metals segment (note 26).
The Group's maximum exposure to credit risk is limited to the carrying amounts of the financial assets recorded in the consolidated financial statements and the outstanding principal and interest under the ICBC facility (note 14).
The major financial assets at the balance sheet date are cash and cash equivalents held with the counterparties as set out below.
|
Counterparty |
Credit rating |
Carrying amount at 31 December 2016 |
Carrying amount at 31 December 2015 |
|
Barclays |
A |
4,056 |
- |
|
Sberbank |
BBB- |
3,936 |
512 |
|
VTB |
BB+ |
1,067 |
3,760 |
|
Alfa-Bank |
BB+ |
846 |
- |
|
Asian-Pacific Bank |
CCC |
629 |
3,208 |
|
Bank of Cyprus |
B- |
365 |
- |
|
UBS |
A |
212 |
173 |
|
Royal Bank of Scotland |
BBB+ |
5 |
4,835 |
|
Treasury of Russian Federation (a) |
- |
- |
15,093 |
(a) Funds received under investment agreement with the Russian Ministry of Far East Development (note 32).
Commodity price risk
The Group generates most of its revenue from the sale of gold and iron ore concentrate. The Group's policy is to sell its products at the prevailing market price. In 2016 and 2015, the Group has entered into gold forward contracts to protect cash flows from the volatility in the gold price (note 18).
Liquidity risk
Liquidity risk is the risk that suitable sources of funding for the Group's business activities may not be available. The Group constantly monitors the level of funding required to meet its short, medium and long term obligations. The Group also monitors compliance with restrictive covenants set out in various loan agreements (note 20) to ensure there is no breach of covenants resulting in associated loans become payable immediately.
Effective management of liquidity risk has the objective of ensuring the availability of adequate funding to meet short-term requirements and due obligations as well as the objective of ensuring a sufficient level of flexibility in order to fund the development plans of the Group's businesses.
The table below details the Group's remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The amounts disclosed are the contractual undiscounted cash flows and so these balances will not necessarily agree with the amounts disclosed in the balance sheet. The contractual maturity is based on the earliest date on which the Group may be required to pay.
|
|
|
|
3 months - 1 year |
1 - 2 years |
2 - 3 years |
3 - 6 years US$'000 |
|
2016 |
|
|
|
|
|
|
|
Borrowings |
|
|
|
|
|
|
|
- Convertible bonds |
|
- |
- |
- |
|
100,000 |
|
- Loans |
|
1,524 |
83,782 (a) |
46,255 |
86,475 |
311,759 |
|
Future interest payments (b) |
|
13,257 |
38,670 |
44,589 |
40,322 |
74,730 |
|
Trade and other payables |
|
34,658 |
9,030 |
- |
- |
- |
|
|
|
49,439 |
131,482 |
90,844 |
126,797 |
486,489 |
|
2015 |
|
|
|
|
|
|
|
Borrowings |
|
|
|
|
|
|
|
- Convertible bonds |
|
- |
- |
- |
- |
100,000 |
|
- Loans |
|
41,744 |
210,105 |
288,274 |
16,817 |
- |
|
Future interest payments (b) |
|
10,952 |
34,911 |
22,786 |
9,354 |
11,250 |
|
Trade and other payables |
|
28,070 |
32,572 |
- |
- |
- |
|
|
|
80,766 |
277,588 |
311,060 |
26,171 |
111,250 |
(a) Including US$75 million based on facility contractual terms existing as at 31 December 2016 (note 20).
(b) Future interest payments have been estimated using interest rates applicable at 31 December. There are no borrowings that are subject to variable interest rates and, therefore, subject to change in line with the market rates.
31. Operating lease arrangements
The Group as a Lessee
|
|
2016 |
2015 |
|
Minimum lease payments under operating leases recognised as an expense in the year |
5,057 |
2,535 |
At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under a non-cancellable operating lease for office premises, which fall due as follows:
|
|
2016 |
2015 |
|
|
US$'000 |
US$'000 |
|
Expiring: |
|
|
|
Within one year |
319 |
383 |
|
In two to five years |
531 |
1,148 |
|
|
850 |
1,531 |
The Group as a Lessor
The Group earned property rental income from continuing operations during the year of US$0.7 million (2015: US$0.8million) on buildings owned by its subsidiary Irgiredmet.
32. Capital commitments
At 31 December 2016, 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 in relation to POX Hub project amounting to US$3.8 million (31 December 2015: US$1.0 million).
Investment agreement with the Russian Ministry of Far East Development
On 14 December 2015, the Group entered into an investment agreement with the Russian Ministry of Far East Development (the 'Investment Agreement'). The Investment Agreement involves provision of RUB5.5billion (an equivalent to c.US$91 million as at 31 December 2016) funding towards the construction of the electricity power line in the North-East of the Amur Region of Russia, where the Group's Albyn and Malomir mines and adjacent licence areas are operated, during the period 2015 - 2019. The funds are advanced to the Group and then should be transferred to the joint-stock company Far East Grid Distribution Company ('DRSK'), who is to engage a contractor to build the relevant power supply infrastructure. The Group's responsibility under the Investment Agreement will be to monitor the progress and to report to the Russian Ministry of Far East Development. The Group will be taking ultimate responsibility for the construction of the power line. Upon completion, the Group will get access to the enhanced capacity of the power supply infrastructure in the region. Under the terms of the Investment Agreement, the Group has certain capital commitments, including further development of Albyn and Malomir mines.
As at 31 December 2015, the Group received RUB1.1billion (an equivalent to US$15.1 million) funds under the Investment Agreement. During 2016, the Group received further RUB2.0 billion (an equivalent to US$30.8 million) under the Investment Agreement and transferred an aggregate RUB3.1 billion (an equivalent to US$47.7 million) to DRSK.
33. Subsequent events
Hedging agreements
In February - March 2017, the Group has entered into forward contracts to sell an aggregate of 549,994oz of gold during the years 2017 - 2019 at an average price of US$1,252/oz.
34. Reconciliation of non-GAAP measures (unaudited)
|
|
|
2016 US$'000 |
2015 US$'000 |
|
Profit/(loss) for the period from continuing operations |
|
31,706 |
(190,454) |
|
Add/(less): |
|
|
|
|
Interest expense |
|
60,976 |
71,514 |
|
Investment income |
|
(556) |
(1,018) |
|
Other finance gains |
|
(11,976) |
(9,064) |
|
Other finance losses |
|
1,548 |
- |
|
Foreign exchange losses |
|
5,158 |
11,952 |
|
Taxation |
|
(4,698) |
48,879 |
|
Depreciation |
|
105,252 |
129,104 |
|
Impairment of exploration and evaluation assets |
|
9,155 |
37,442 |
|
Impairment of ore stockpiles |
|
1,163 |
17,425 |
|
Share of results of associates (a) |
|
2,356 |
57,009 |
|
Underlying EBITDA |
|
200,084 |
172,789 |
(a) Group's share of interest expense, investment income, other finance gains and losses, foreign exchange losses, taxation, depreciation and impairment recognised by an associate (note 14).
35. Principal subsidiaries and other significant investments
The Group has the following principal subsidiaries and other significant investments, which were consolidated in this financial information.
|
Principal subsidiary, joint venture and associate undertakings |
Country of incorporation |
Principal activity |
Proportion of shares held by Petropavlovsk PLC |
|
Proportion of shares held by the Group |
||
|
31 December 2016 |
31 December 2015 |
|
31 December 2016 |
31 December 2015 |
|||
|
Subsidiary |
|
|
|
|
|
|
|
|
CJSC Management Company Petropavlovsk |
Russia |
Management company |
100% |
100% |
|
100%
|
100%
|
|
Petropavlovsk 2010 Limited |
Jersey |
Finance company |
100% |
100% |
|
100% |
100% |
|
JSC Pokrovskiy Rudnik |
Russia |
Gold exploration and production |
43.5% |
43.5% |
|
98.61% |
98.61% |
|
LLC Malomirskiy Rudnik |
Russia |
Gold exploration and production |
- |
- |
|
99.86% |
99.86% |
|
LLC Albynskiy Rudnik |
Russia |
Gold exploration and production |
- |
- |
|
100% |
100% |
|
LLC Osipkan |
Russia |
Gold exploration and production |
- |
- |
|
100% |
100% |
|
LLC Tokurskiy Rudnik |
Russia |
Gold exploration and production |
- |
- |
|
100% |
100% |
|
LLC Rudoperspektiva |
Russia |
Gold exploration and production |
- |
- |
|
100% |
100% |
|
JSC YamalZoloto |
Russia |
Gold exploration and production |
- |
- |
|
- |
100% |
|
LLC Iljinskoye |
Russia |
Gold exploration and production |
- |
- |
|
- |
100% |
|
LLC Potok |
Russia |
Gold exploration and production |
- |
- |
|
- |
100% |
|
LLC Temi |
Russia |
Gold exploration and production |
- |
- |
|
75% |
75% |
|
LLC AGPK |
Russia |
Gold exploration and production |
- |
- |
|
98.61% |
98.61% |
|
LLC PPOP |
Russia |
Gold exploration and production |
- |
- |
|
98.61% |
- |
|
Major Miners Inc. |
Guyana |
Gold exploration and production |
- |
- |
|
- |
100% |
|
Universal Mining Inc. |
Guyana |
Gold exploration and production |
- |
- |
|
100% |
100% |
|
Cuyuni River Ventures Inc. |
Guyana |
Gold exploration and production |
- |
- |
|
- |
100% |
|
LLC Kapstroi |
Russia |
Construction services |
- |
- |
|
100% |
100% |
|
LLC NPGF Regis |
Russia |
Exploration services |
- |
- |
|
100% |
100% |
|
CJSC ZRK Dalgeologiya |
Russia |
Exploration services |
- |
- |
|
98.61% |
98.61% |
|
JSC PHM Engineering |
Russia |
Project and engineering services |
- |
- |
|
94% |
94% |
|
JSC Irgiredmet |
Russia |
Research services |
- |
- |
|
99.69% |
99.69% |
|
LLC NIC Gydrometallurgia |
Russia |
Research services |
- |
- |
|
100% |
100% |
|
LLC BMRP |
Russia |
Repair and maintenance |
- |
- |
|
100% |
100% |
|
LLC AVT-Amur |
Russia |
Production of explosive materials |
- |
- |
|
49% |
49% |
|
LLC Transit |
Russia |
Transportation services |
- |
- |
|
100% |
100% |
|
Pokrovskiy Mining College |
Russia |
Educational institute |
- |
- |
|
98.61% |
98.61% |
|
Associate |
|
|
|
|
|
|
|
|
JSC Verkhnetisskaya Ore Mining Company |
Russia |
Gold exploration and production |
- |
- |
|
- |
49% |
|
IRC Limited (a) |
HK |
Management and holding company |
- |
- |
|
31.10% |
35.83% |
|
IRC and its principal subsidiary and joint venture undertakings ('IRC') |
|||||||
|
IRC Limited |
HK |
Management and holding company |
- |
- |
|
31.10% |
35.83% |
|
Principal subsidiaries of IRC |
|
|
|
|
|
|
|
|
LLC Petropavlovsk-Iron Ore |
Russia |
Management company |
- |
- |
|
31.10% |
35.83% |
|
LLC Olekminsky Rudnik |
Russia |
Iron ore exploration and production |
- |
- |
|
31.10% |
35.83% |
|
LLC KS GOK |
Russia |
Iron ore exploration and production |
- |
- |
|
31.10% |
35.83% |
|
LLC Garinsky Mining & Metallurgical Complex |
Russia |
Iron ore exploration and production |
- |
- |
|
30.97% |
35.83% |
|
LLC Kostenginskiy GOK |
Russia |
Iron ore exploration and production |
- |
- |
|
31.10% |
35.83% |
|
LLC Orlovo-Sokhatinsky Rudnik |
Russia |
Iron ore exploration and production |
- |
- |
|
31.10% |
35.83% |
|
JSC Giproruda |
Russia |
Engineering services |
- |
- |
|
21.86% |
25.18% |
|
LLC SHMTP |
Russia |
Infrastructure project |
- |
- |
|
31.10% |
35.83% |
|
LLC Amursnab |
Russia |
Procurement services |
- |
- |
|
31.07% |
35.83% |
|
Heilongjiang Jiatal Titanium Co., Limited |
China |
Titanium sponge project |
- |
- |
|
31.10% |
35.83% |
|
LLC Uralmining |
Russia |
Iron ore exploration and production |
- |
- |
|
31.10% |
35.83% |
|
LLC Gorniy Park |
Russia |
Molybdenym project |
- |
- |
|
18.75% |
17.95% |
|
|
|
|
|
|
|
|
|
|
Joint ventures of IRC |
|
|
|
|
|
|
|
|
Heilongjiang Jianlong Vanadium Industries Co., Limited |
China |
Vanadium project |
- |
- |
|
14.31% |
16.48% |
(a) IRC Limited and its principal subsidiary and joint venture undertakings.
36. Related undertakings of the Group
The Group consists of the parent company, Petropavlovsk PLC, incorporated in the United Kingdom and its subsidiaries, associates and joint ventures. In accordance with Section 409 of the Companies Act 2006 a full list of related undertakings, the country of incorporation and the effective percentage of equity owned as at 31 December 2016 is disclosed below. The Group's principal subsidiaries and other significant investments are set out in note 35.
|
Name of undertaking |
Country of incorporation |
Proportion of shares held by the Group |
Registered address |
|
Subsidiaries |
|
|
|
|
Aricom B Finance Plc |
UK |
100% |
11 Grosvenor Place, London, SW1X 7HH |
|
Aricom Finance UK Limited |
UK |
100% |
11 Grosvenor Place, London, SW1X 7HH |
|
Aricom Treasury UK Limited |
UK |
100% |
11 Grosvenor Place, London, SW1X 7HH |
|
Aricom Services Limited |
UK |
100% |
11 Grosvenor Place, London, SW1X 7HH |
|
Aricom Roubles Treasury UK Limited |
UK |
100% |
11 Grosvenor Place, London, SW1X 7HH |
|
Aricom B Limited |
UK |
100% |
11 Grosvenor Place, London, SW1X 7HH |
|
Aricom B Roubles Treasury Limited |
UK |
100% |
11 Grosvenor Place, London, SW1X 7HH |
|
Petropavlovsk Rouble UK Limited |
UK |
98.61% |
11 Grosvenor Place, London, SW1X 7HH |
|
Eponymousco Limited |
UK |
100% |
11 Grosvenor Place, London, SW1X 7HH |
|
Victoria Resources Limited |
UK |
100% |
11 Grosvenor Place, London, SW1X 7HH |
|
Peter Hambro Mining Treasury UK Limited |
UK |
100% |
11 Grosvenor Place, London, SW1X 7HH |
|
Peter Hambro Mining Rouble Treasury Limited |
UK |
100% |
11 Grosvenor Place, London, SW1X 7HH |
|
Petropavlovsk 2010 Limited |
Jersey |
100% |
13-14 Esplanade, St. Helier, JE1 1EE |
|
|
|
|
|
|
Petropavlovsk (Jersey) Limited |
Jersey |
100% |
13-14 Esplanade, St. Helier, JE1 1EE |
|
Peter Hambro Mining Group Finance Limited |
Guernsey |
100% |
PO Box 409, Elizabeth House, Ruette Braye, St. Peter Port, GY1 3WA |
|
CJSC Management Company Petropavlovsk |
Russia |
100% |
675000, Amur Region, Blagoveshchensk, Lenina Street, 140/1 |
|
JSC Pokrovskiy Rudnik |
Russia |
98.61% |
676150, Amur Region, Magdagachinskiy District, Tygda Village, Sovetskaya Street, 17 |
|
LLC Malomirskiy Rudnik |
Russia |
99.86% |
675000, Amur Region, Blagoveshchensk, Lenina Street, 140/1 |
|
LLC Albynskiy Rudnik |
Russia |
100% |
675000, Amur Region, Blagoveshchensk, Lenina Street, 140/1 |
|
LLC Osipkan |
Russia |
100% |
675000, Amur Region, Blagoveshchensk, Lenina Street, 140/1 |
|
LLC Tokurskiy Rudnik |
Russia |
100% |
676581, Amur Region, Selemdzhinskiy District, Tokur Village, Vorozhejkina Street, 16 |
|
LLC Rudoperspektiva |
Russia |
100% |
675000, Amur Region, Blagoveshchensk, Lenina Street, 140/1 |
|
LLC Temi |
Russia |
75% |
675000, Amur Region, Blagoveshchensk, Lenina Street, 140/1 |
|
LLC AGPK |
Russia |
98.61% |
675000, Amur Region, Blagoveshchensk, Lenina Street, 140/1 |
|
LLC PPOP |
Russia |
98.61% |
675002, Amur Region, Blagoveshchensk, Amurskaya Street, 17 |
|
LLC Kapstroi |
Russia |
100% |
675002, Amur Region, Blagoveshchensk, Amurskaya Street, 17 |
|
LLC NPGF Regis |
Russia |
100% |
675027, Amur Region, Blagoveshchensk, Western Industrial Hub |
|
CJSC ZRK Dalgeologiya |
Russia |
98.61% |
680041, Khabarovskiy Region, Khabarovsk, Balashovskaya Street, 15 |
|
JSC PHM Engineering |
Russia |
94% |
105082, Moscow, Rubtsov Pereulok, 13 |
|
JSC Irgiredmet |
Russia |
99.69% |
664025, Irkutsk, Gagarina Boulevard, 38 |
|
LLC NIC Gydrometallurgia |
Russia |
100% |
196247, St. Petersburg, Leninskiy Prospekt, 151 |
|
LLC BMRP |
Russia |
100% |
675016, Amur Region, Blagoveshchensk, Kalinina Street, 137 |
|
LLC AVT-Amur |
Russia |
49% |
675000, Amur Region, Blagoveshchensk, Lenina Street, 140/1 |
|
LLC Transit
|
Russia
|
100% |
676572, Amur Region, Selemdzhinskiy District, Fevralsk Urban Village, Vysotskogo Street, 1 |
|
Pokrovskiy Mining College |
Russia |
98.61% |
676244, Amur Region, Zeya, Zolotogorskoe Shosse, 6 |
|
Universal Mining Inc. |
Guyana |
100% |
Lot 8 Pere Street, Kitty, Georgetown |
|
Peter Hambro Mining (Cyprus) Limited |
Cyprus |
100% |
14 Souliou Street, Aglantzia, Nicosia, 2102 |
|
Malomyrskiy Rudnik (Cyprus) Ltd |
Cyprus |
100% |
14 Souliou Street, Aglantzia, Nicosia, 2102 |
|
Voltimand Limited |
Cyprus |
100% |
14 Souliou Street, Aglantzia, Nicosia, 2102 |
|
Horatio Limited |
Cyprus |
100% |
14 Souliou Street, Aglantzia, Nicosia, 2102 |
|
Sicinius Limited |
Cyprus |
100% |
14 Souliou Street, Aglantzia, Nicosia, 2102 |
|
Syncrom High Corporation Ltd |
Cyprus |
100% |
14 Souliou Street, Aglantzia, Nicosia, 2102 |
|
Cayiron Limited |
Cayman Islands |
100% |
Clifton House, 75 Fort Street, PO Box 1350, Grand Cayman, KY1-1108 |
|
|
|
|
|
|
Associates |
|
|
|
|
|
|
|
|
|
IRC Limited |
HK |
31.10% |
6H, 9 Queen's Road Central, Central, Hong Kong |
|
Subsidiaries of IRC |
|
|
|
|
LLC Petropavlovsk- Iron Ore |
Russia |
31.10% |
127055, Moscow, Lesnaya Street, 43, Office 313 |
|
LLC Olekminsky Rudnik |
Russia |
31.10% |
676253, Amur Region, Tyndinskiy District, Village Olekma |
|
LLC KS GOK |
Russia |
31.10% |
679000, The Jewish Autonomous Region, Birobidzhan, 60-Letiya SSSR Street, Building 22B |
|
LLC Garinsky Mining & Metallurgical Complex |
Russia |
30.97% |
675027, Amur Region, Blagoveshchensk, Ignatievskaya Road, 19 |
|
LLC Kostenginskiy GOK |
Russia |
31.10% |
679000, The Jewish Autonomous Region, Birobidzhan, 60-Letiya SSSR Street, Building 22B. |
|
LLC Orlovo-Sokhatinsky Rudnik |
Russia |
31.10% |
675027, Amur Region, Blagoveshchensk, Ignatievskaya Road, 19 |
|
JSC Giproruda |
Russia |
21.86% |
St. Petersburg, Leninskiy Avenue,151 |
|
LLC SHMTP |
Russia |
31.10% |
682818, RF, Khabarovsk Territory, Town Sovetskaya Gavan, Pervomayskaya Street, 48A |
|
LLC Amursnab |
Russia |
31.07% |
127055, Moscow, Lesnaya Street, 43, Office 313 |
|
LLC Uralmining |
Russia |
31.10% |
105082, Moscow, Spartakovskaya Square, 14, Building 1 |
|
LLC Gorniy Park |
Russia |
18.75% |
101000, Moscow, Pokrovka Street,1/13/6 Building 2, Office 35 |
|
LLC Garinskaya Infrastructure |
Russia |
31.10% |
675027, Amur Region, Blagoveshchensk, Ignatievskaya Road, 19 |
|
LLC TOK |
Russia |
31.10% |
676282, Amur Region, Tynda, Sovetskaya Street,1A |
|
Lucilius Investments Limited |
Cyprus |
31.10% |
Souliou 14, Aglantzia, 2102 Nicosia |
|
Kapucius Services Limited |
Cyprus |
31.10% |
Souliou 14, Aglantzia, 2102 Nicosia |
|
Lapwing Limited |
Cyprus |
30.97% |
Themistokli Dervi 12, Palais D' Ivoire, 2nd Floor, 1066 Nicosia |
|
Russian Titan Company Limited |
Cyprus |
31.10% |
Souliou 14, Aglantzia, 2102 Nicosia |
|
Brasenose Services Limited |
Cyprus |
31.10% |
Souliou 14, Aglantzia, 2102 Nicosia |
|
Tenaviva Limited |
Cyprus |
31.10% |
Souliou 14, Aglantzia, 2102 Nicosia |
|
Esimanor Limited |
Cyprus |
31.10% |
Souliou 14, Aglantzia, 2102 Nicosia |
|
Metellus Limited |
Cyprus |
31.10% |
Souliou 14, Aglantzia, 2102 Nicosia |
|
Dardanius Limited |
Cyprus |
31.10% |
Souliou 14, Aglantzia, 2102 Nicosia |
|
Rumier Holdings Limited |
Cyprus |
31.10% |
Souliou 14, Aglantzia, 2102 Nicosia |
|
Guiner Enterprises Limited |
Cyprus |
31.10% |
Souliou 14, Aglantzia, 2102 Nicosia |
|
Expokom Limited |
Cyprus |
31.10% |
Souliou 14, Aglantzia, 2102 Nicosia |
|
Arfin Limited |
Cyprus |
31.10% |
Souliou 14, Aglantzia, 2102 Nicosia |
|
Caedmon Limited |
Cyprus |
18.75% |
Souliou 14, Aglantzia, 2102 Nicosia |
|
Thorholdco (Cyprus) Limited |
Cyprus |
31.10% |
Souliou 14, Aglantzia, 2102 Nicosia |
|
Heilongjiang Jiatal Titanium Co., Limited |
China |
31.10% |
668, Songxing Street, Jiamusi, Heilongjiang Province |
|
Ariti HK Limited |
Hong Kong |
31.10% |
6H, 9 Queen's Road Central, Central, Hong Kong |
|
Ariva HK Limited |
Hong Kong |
31.10% |
6H, 9 Queen's Road Central, Central, Hong Kong |
|
Thorrouble Limited
|
Cayman Islands |
31.10% |
P.O. Box 31119 Grand Pavilion, Hibiscus Way, 802 West Bay Road, Grand Cayman, KY1-1205 |
|
Thordollar Limited
|
Cayman Islands |
31.10% |
P.O. Box 31119 Grand Pavilion, Hibiscus Way, 802 West Bay Road, Grand Cayman, KY1-1205 |
|
Thorholdco Limited
|
Cayman Islands |
31.10% |
P.O. Box 31119 Grand Pavilion, Hibiscus Way, 802 West Bay Road, Grand Cayman, KY1-1205 |
|
Aricom UK Limited |
UK |
31.10% |
11 Grosvenor Place, London, SW1X 7HH |
|
Aricom Limited |
UK |
31.10% |
11 Grosvenor Place, London, SW1X 7HH |
|
Joint ventures of IRC |
|
|
|
|
Heilongjiang Jianlong Vanadium Industries Co., Limited |
China |
14.31% |
Building 50, Block12, Advanced Business Park, No. 188.West Road, South Ring 4, Fengtai District, Bejing |
This information is provided by RNS
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