Company Announcements
Half-year Report
Related Companies
By LSE RNS
12 September 2017
Petropavlovsk PLC
Half Year Report for the Period Ended 30 June 2017
Petropavlovsk PLC ("Petropavlovsk" or the "Company" or, together with its subsidiaries, the "Group") today issues its Half Year Report for the period from 1 January 2017 to 30 June 2017 ("H1 2017" or the "Period").
Chairman's Comments
Ian Ashby, Independent Non-Executive Chairman, comments:
"This is a strong set of half year results that demonstrates the Company is making good progress with its ambitious development plans whilst achieving solid operational results and maintaining continued financial discipline.
During H1, management remained focused on optimising production plans to ensure the most efficient use of our existing asset base, whilst maximising profitability. This strategy, together with the continued excellent work of our experienced operational team, has contributed to a 91% increase in operating profit for H1 compared with the same period in 2016 - US$65 million from US$34 million.
A more than twofold increase in net cash from operating activities to US$74.6 million gives us further confidence to proceed with our capital expenditure program to ensure the timely delivery of our development projects. The recent gold price environment has assisted with cash generation and helped to de-risk the delivery of our key development assets. Our management team constantly monitors the gold price and maintains the Group's hedging positon to ensure levels of cash generation that meet development budget needs, as a downturn in the gold price could stress the company's liquidity position.
We achieved Total Cash Costs (TCC¨) of US$675/oz, slightly up from US$663/oz in H1 2016 but within our original forecast range for 2017 of US$600 - 700/oz. Costs for the year are now expected to be c.US$700/oz at current exchange rates, at the upper end of original guidance. The increases in the Company's All-in-Sustaining Costs ("AISC"u) to US$965/oz and All-in Costs ("AIC"u) to US$1,044/oz primarily reflect sustaining capital expenditure relating to underground developments and tailing dam expansion, exploration, stripping and greater central administration expenses. AIC was also affected by capital expenditure in relation to the POX project.
Both development projects progressed well during the period. The delay with the underground development of Malomir caused by the late mobilization of equipment by the mining subcontractors was partially offset by the steady work of our team. The wide range in our full year production forecast reflects our conservative approach to the commissioning of scalable production from underground mining. We are currently on schedule for first production from POX to begin in Q4 2018.
We continue to look for ways to de-risk our development plans, including focusing on securing free cash from the operating business and improving the Company's capital structure. Additionally, we are assessing the best way to realise value for IRC.
The non-executive directors, myself included, are still relatively new to their roles within the Company following the recent changes to the Board at the June AGM. As such, we continue to develop and deepen our understanding of the business, its substantial potential and the work we must do to realise the best returns for all stakeholders. However, I have been impressed by what I have seen and heard so far, particularly during a recent visit with Vladislav Egorov, Non-Executive Director, to the Group's operations in the Amur region. We visited all the operational sites including the underground developments and the POX construction. Additionally, we visited key support facilities and the regional office in Blagoveschensk, where we met with employees to discuss the business. I was very impressed with the level of diligence and enthusiasm that our people apply in executing the Company's strategy.
Mr Sergey Ermolenko, the Acting CEO of the Group who previously held this position from December 2011 to November 2014, has been instrumental in guiding our operations since his appointment on 18 July 2017. The
Board is confident that Mr Ermolenko is well positioned to manage the Company during the transition to new leadership. In the meantime, the Board has engaged an agency to facilitate the search for a permanent CEO candidate, and we will update the market on further progress in due course."
¨Throughout this document, when discussing the Group's financial performance, reference is made to a number of financial measures, known as Alternative Performance Measures (APM), which are not defined or calculated in accordance with IFRS. Please refer to Section "The Use and Application of APMs" of this report for further information on APMs, their definition, how they are calculated and their relevance to Petropavlovsk.
Financial Highlights
■ 20% increase in Group Revenue to US$304 million (compared to US$254million in 2016) due to 19% increase in production and 5% increase in average realised gold price
■ Profit for the period increased by 166% at US$24.5 million (compared to US$9.2 million in 2016) benefited from higher revenues and only a modest increase in costs
■ 91% increase in Operating Profit to US$65 million (H1 2016: US$34 million)
■ 30% increase in EBITDA¨ to US$114 million (H1 2016: US$88 million)
■ 150% increase in Net Cash from Operating Activitiesu to US$74.6 million
■ 5% increase in average realised gold priceu of US$1,255/oz (H1 2016: US$1,194/oz) somewhat benefited from US$2.8 million contribution from cash flow hedge
■ Total Cash Costsu increased by only 2% from H1 2016:
- TCCu US$675/oz within the original forecast range for the full year of US$600 - 700/oz (H1 2016: US$663/oz)
- AISCu up 27% to US$965/oz (H1 2016: US$762/oz) primarily reflecting sustaining capital expenditure relating to underground developments and tailing dam expansion, exploration, stripping and greater central administration expenses
- AICu up 37% to US$1,044/oz (H1 2016: US$761/oz), reflecting the increase in AISCu and capital expenditureu in relation to the POX Hub
■ 5% reduction in Net Debtu to US$570 million (FY 2016: US$599 million)
■ Capital expenditureu of US$41.8 million includes US$10.9 million of exploration spend and US$31 million of development capex, u the majority of which related to the POX and underground projects, expansion of tailing dams and ongoing exploration (H1 2016: US$11.9 million)
The Group continues to adopt the going concern position, however, under a layered stress scenario, the Group would be required to take mitigating actions in order to avoid any liquidity or covenant compliance issues.
H1 Production Highlights
■ 19% yoy increase in H1 total gold production - c.232,400oz (H1 2016: 195,600oz)
|
Gold production - Dore (incl. GIC movement), '000oz |
||||
|
|
Q2 2017 |
Q2 2016 |
H1 2017 |
H1 2016 |
|
Pioneer |
47.9 |
34.7 |
96.4 |
71.0 |
|
Pokrovskiy |
8.4 |
9.1 |
14.2 |
17.2 |
|
Malomir |
12.3 |
12.2 |
28.7 |
24.8 |
|
Albyn |
45.7 |
38.8 |
93.1 |
82.6 |
|
Total |
114.3 |
94.8 |
232.4 |
195.6 |
Note: from the beginning of 2017, the Company moved to using gold poured as the definition for production. Comparable 2016 gold production numbers are adjusted accordingly.
FY 2017 Outlook
■ Production forecast for full year of c.420,000 - 460,000oz reconfirmed
■ TCCu guidance for full year 2017 at c.US$700/oz, at upper end of original guidance (US$600 - 700/oz)
■ Forward contracts to sell an aggregate of 500Koz of gold over a period from July 2017 to December 2019 at an average price of US$1,252/oz were outstanding as at 30 June 2017
■ Year-end Net Debtu is expected to decrease to c.US$560 million, assuming an average gold price of US$1,265/oz for the remainder of the year
Development Update
■ POX construction progressing well - on time and on budget for commissioning in Q4 2018
■ Malomir flotation plant (Stage 1) being prepared for production of flotation concentrate in H1 2018
■ After delays at Malomir in the beginning of the year, underground development at both Pioneer and Malomir mines is moving ahead for full scale high grade ore production by the end of 2017
Exploration Update
■ Two new zones of non-refractory mineralisation suitable for open pit mining discovered at Pioneer:
▪ High grade pay shoot at NE Bakhmut - 2 proven to a depth of 140m below the pit floor and remains open; the best deep intersection (19.6m @ 10.90g/t) indicates strong exploration upside
▪ New non-refractory satellite deposit Katrin (near Pioneer) confirmed offering immediate production upside
■ New continuation of Unglichikan deposit identified; the discovery confirms strong exploration potential near the Albyn mine
■ Exploration at Ulgen, an early stage exploration target c.30km southwest from the Albyn plant, suggests there are many similarities with the 2.8Moz Elginskoye deposit
■ New high grade pay shoot discovered at Quartzitovoye, Malomir, with preparations under way to mine it from underground
IRC Update
IRC Ltd. is a producer and developer of industrial commodities with its shares quoted on the Hong Kong Stock Exchange (Stock Code 1029). IRC released its interim results for the six months ended 30 June 2017 on 31 August 2017. The results are available to view on the IRC website at http://www.ircgroup.com.hk.
Key highlights from this report are as follows:
■ K&S is operating at c.50% capacity as at June and ramp-up continues for near full capacity at the year end
■ Threefold revenue increase to US$51.2 million (30 June 2016: US$16.1 million)
■ K&S generated EBITDAu of US$14 million
■ Production and sales volumes of iron ore concentrate more than tripled
- Production volume up 271% to 697,431 tonnes (30 June 2016: 188,111 tonnes)
- Sales volume up 218% to 698,632 tonnes (30 June 2016: 219,352 tonnes)
■ Net operating gain of US$2.3 million (30 June 2016: loss of US$11.4 million)
■ Loss for the period reduced to US$9.7 million (30 June 2016: loss of US$9.9 million)
■ ICBC agreed to restructure loan repayment schedule, including full principal repayment holiday in 2017
CEO Comments
Commenting on the announcement, Sergey Ermolenko, Acting Chief Executive Officer, said:
Operationally, the Company had a positive first half of the year with a 19% year on year increase in total gold production for the period of c.232,400oz, compared to 195,600oz in H1 2016. As indicated in the H1 Update on 18 July 2017, these results were to plan and are the outcome of operational efficiencies and a strong performance in all operational areas across our mines.
The production results are especially encouraging given that the first half of the year is usually weaker than the second half for Petropavlovsk, due to the scheduling of heap leach operations and extensive stripping works in the first half of the year. The decision to introduce underground operations for the mining of high grade material will allow us to plan our mining operations in a smoother manner.
In line with this success, we reiterate our full year forecast for gold production of c.420,000 - 460,000oz, reflecting mainly our conservative approach to planned underground developments.
At the beginning of the year, a dedicated resin treatment facility was established to cost effectively improve the processing efficiency of resin at the Group's Resin in Pulp plants. The implementation of these upgrades has been successful as measured by the positive contribution towards gold production throughout the first half of the year. Following these improvements, the Company moved to using gold poured as the definition for production, bringing production reported in line with production sold and thereby reducing the impact of GIC. In our results, comparable 2016 gold production numbers are adjusted accordingly.
Regarding the POX hub, the oxygen plant and other key construction works are progressing well and in places nearing completion as scheduled for 2017, with some outstanding construction at an early stage. More than 80% of the project equipment is on site, including all critical and long lead items. The four 15m x 4m autoclaves are installed and lined with acid resistant lining. All core supporting structures are complete, including the oxygen, autoclave and filtration plants. An independent technical consultancy is monitoring our progress and considers that a one year time frame to complete remaining work is achievable.
We are targeting commissioning of the Malomir flotation plant (Stage 1) in Q4 2017 with flotation concentrate production in H1 2018. This is to be followed by oxygen plant commissioning in Q2 2018 and POX Hub commissioning in Q4 2018; the ramp up to commercial production is due to occur throughout 2019.
Underground developments progressed well during the period, advancing 1,446.1m at Pioneer, and 696.9m at Malomir despite delays with contractor mobilisation. We expect scalable production from underground operations by the end of the year.
Following a 1.55Moz increase in JORC non-refractory reserves in 2016, reinforcing our belief in the strong exploration potential of our existing assets, exploration work during 2017 continued to deliver positive results, including the discovery of a new non-refractory deposit Katrin, near Pioneer, and a new high grade pay shoot discovered in May at Quartzitovoye, Malomir. We are preparing to start production from both these new discoveries in the near future.
I am committed to driving operational stability during the transition to new management in my tenure as acting CEO. I will be focusing particularly on the successful implementation of our POX hub and underground development projects, underpinned by smooth and stable work at our producing mines, generating substantial cash flows for further developments. I am very happy to be supported by our team of specialists, whose commitment was clearly demonstrated during the recent Board visit to the mines."
Conference Call
There will be a presentation and conference call with management today at 09.00am and there will be an opportunity for callers to ask questions. The presentation itself will be available via the Petropavlovsk website, http://www.petropavlovsk.net.
Please use the following numbers to dial in to the call, quoting the word 'Petropavlovsk' to the operator:
From the UK 020 3059 8125 or toll free 0800 368 0649
All other locations +4420 3059 8125
Enquiries
For more information, please visit www.petropavlovsk.net and www.ircgroup.com.hk or contact:
Petropavlovsk PLC
Alya Samokhvalova
Grace Hanratty
+44 (0) 20 7201 8900
Maitland
Neil Bennett
James Isola
+44 (0) 20 7379 5151
Petropavlovsk-Maitland@maitland.co.uk
About Petropavlovsk
Petropavlovsk is one of Russia's leading gold mining companies. As at 30 June 2017, the Company had produced approximately 6.5Moz of gold.
At this time, 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$340 million project finance facility (US$234 million principal outstanding as at 31 December 2016). IRC is a vertically integrated iron ore producer and developer in the Russian Far East and Northeastern China. IRC is listed on the Hong Kong Stock Exchange (ticker: 1029.HK).
Petropavlovsk is listed on the Main Market of the London Stock Exchange (ticker POG:LN).
Financial Review
Note: Figures may not add up due to rounding
|
|
|
H1 2017 |
H1 2016 |
|
Gold produced |
'000oz |
232.4 |
195.6 |
|
Gold sold |
'000oz |
231.8 |
195.4 |
|
Group revenue |
US$ million |
304.0 |
254.0 |
|
Average realised gold price¨ |
US$/oz |
1,255 |
1,194 |
|
Average LBMA gold price afternoon fixing |
US$/oz |
1,238 |
1,221 |
|
Total average cash costsu (a) |
US$/oz |
675 |
663 |
|
All-in sustaining costsu (b) |
US$/oz |
965 |
762 |
|
All-in costsu (b) |
US$/oz |
1,044 |
761 |
|
Underlying EBITDAu |
US$ million |
114.1 |
88.0 |
|
Operating profit |
US$ million |
64.9 |
34.2 |
|
Profit before tax |
US$ million |
46.8 |
4.8 |
|
Profit for the period |
US$ million |
24.5 |
9.2 |
|
Profit for the period attributable to equity shareholders of Petropavlovsk PLC |
US$ million |
23.3 |
9.2 |
|
Basic profit per share |
US$ |
0.01 |
0.00 |
|
Net cash from operating activities |
US$ million |
74.6 |
29.9 |
(a) Calculation of total cash costs ("TCC") is set out in the section Hard-rock mines 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.
|
|
|
30 June 2017 |
31 December 2016 |
|
Cash and cash equivalents |
US$ million |
32.7 |
12.6 |
|
Loans |
US$ million |
(512.9) |
(522.8) |
|
Convertible bonds (c) |
US$ million |
(89.9) |
(88.4) |
|
Net Debtu |
US$ million |
(570.1) |
(598.6) |
(c) US$100 million convertible bonds due on 18 March 2020 at amortised cost.
Revenue
|
|
|
H1 2017 |
H1 2016 |
|
|
|
US$ million |
US$ million |
|
Revenue from hard-rock mines |
|
291.7 |
234.2 |
|
Revenue from other operations |
|
12.4 |
19.8 |
|
|
|
304.0 |
254.0 |
Group revenue during the period was US$304.0 million, 20% higher than the US$254.0 million achieved in H1 2016.
Revenue from hard-rock mines was US$291.7 million, 25% higher than the US$234.2 million achieved in H1 2016. Gold remains the key commodity produced and sold by the Group, comprising 96% of total revenue generated in H1 2017. The physical volume of gold sold from hard-rock mines increased by 19% from 195,434 ounces in H1 2016 to 231,760 ounces in H1 2017. The average realised gold priceu increased by 5% from US$1,194/oz in H1 2016 to US$1,255/oz in H1 2017. The average realised gold priceu includes a US$12/oz effect from hedge arrangements (H1 2016: US$(28)/oz).
Hard-rock mines sold 48,182 ounces of silver in H1 2017 at an average price of US$17/oz, compared to 48,124 ounces in H1 2016 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$12.4 million in H1 2017, a US$7.4 million decrease compared to US$19.8 million in H1 2016. This revenue is substantially attributable to sales generated by the Group's engineering and research institute, Irgiredmet, primarily through engineering services and the procurement of materials, consumables and equipment for third parties, which comprised US$11.4 million in H1 2017 compared to US$17.5 million in H1 2016.
Cash flow hedge arrangements
In order to increase certainty in respect of a significant proportion of its cash flows, the Group has entered into a number of gold forward contracts.
Forward contracts to sell an aggregate of 99,998 ounces of gold matured during the H1 2017 and contributed US$2.8 million to cash revenue (H1 2016: US$(5.5) million net cash settlement paid by the Group from forward contracts to sell an aggregate of 65,828 ounces of gold).
The Group constantly monitors the gold price and hedges some portion of production as considered necessary. Forward contracts to sell an aggregate of 500Koz of gold at an average price of US$1,252 per ounce were outstanding as at 30 June 2017. Forward contracts to sell an aggregate of 479Koz of gold at an average price of US$1,253 per ounce are outstanding as at 11 September 2017.
Underlying EBITDA¨ and analysis of operating costs
|
|
|
|
|
|
|
H1 2017 |
H1 2016 |
|
|
|
US$ million |
US$ million |
|
|
Profit for the period |
24.5 |
9.2 |
|
|
Add/(less): |
|
|
|
|
Investment income |
(0.4) |
(0.2) |
|
|
Interest expense |
14.4 |
30.5 |
|
|
Other finance gains |
(2.0) |
(2.3) |
|
|
Other finance losses |
6.1 |
1.5 |
|
|
Foreign exchange losses |
0.5 |
5.9 |
|
|
Taxation |
22.3 |
(4.4) |
|
|
Depreciation |
48.0 |
59.3 |
|
|
Reversal of impairment of ore stockpiles |
(6.3) |
(12.3) |
|
|
Impairment of gold in circuit |
1.4 |
- |
|
|
Impairment of non-trading loans |
0.5 |
- |
|
|
Share of results of associates (a) |
5.1 |
0.9 |
|
|
Underlying EBITDAu |
114.1 |
88.0 |
|
(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 EBITDAu as contributed by business segments is set out below.
|
|
|
|
|
|
|
H1 2017 |
H1 2016 |
|
|
|
US$ million |
US$ million |
|
|
Pioneer |
52.9 |
43.5 |
|
|
Pokrovskiy |
(0.5) |
6.6 |
|
|
Malomir |
3.2 |
7.0 |
|
|
Albyn |
78.8 |
46.7 |
|
|
Total Hard-rock mines |
134.5 |
103.8 |
|
|
Corporate and other |
(20.3) |
(15.8) |
|
|
Underlying EBITDAu |
114.1 |
88.0 |
|
Hard-rock mines
During this period, hard-rock mines generated underlying EBITDAu of US$134.5 million compared to US$103.8 million underlying EBITDA in H1 2016.
Total cash costs¨ for hard-rock mines increased from US$663/oz in H1 2016 to US$675/oz in H1 2017. The increase in TCC primarily reflects the effect of Rouble appreciation, inflation of certain Rouble denominated costs and lower recoveries at Pioneer and Malomir, which was compensated by a mining tax concession the Group continued to apply in H1 2017. The increase in the average realised gold priceu from US$1,194/oz in H1 2016 to US$1,255/oz in H1 2017 and the increase in physical ounces sold had a US$33.3million positive contribution to underlying EBITDAu in H1 2017. This effect was offset by the increase in total cash costsu, which had a US$2.6 million impact on the underlying EBITDA¨.
The key components of the operating cash expenses are wages, electricity, diesel, chemical reagents and consumables, as set out in the table below. The key cost drivers affecting the operating cash expenses are stripping ratios, production volumes of ore mined and processed, grades of ore processed, recovery rates, cost inflation and fluctuations in the Rouble to US Dollar exchange rate.
Compared with H1 2016 there was ongoing inflation of certain Rouble denominated costs, in particular, electricity costs increased by up to 12% in Rouble terms (increased by up to 37% in US Dollar terms) and the cost of diesel increased by up to 9% in Rouble terms (increased by up to 33% in US Dollar terms). An 18% appreciation of the Rouble against the US Dollar has occurred during H1 2017 compared to H1 2016, with the average exchange rate for the period going from 70.54 Roubles per US Dollar in H1 2016 to 57.93 Roubles per US Dollar in H1 2017.
Refinery and transportation costs are variable costs dependent on production volume. Mining tax is also a variable cost dependent on production volume and the gold price realised. The mining tax rate is 6%. The Group continued applying a two-year mining tax concession.
|
|
|
H1 2017 |
|
H1 2016 |
|||
|
|
|
US$ million |
% |
|
US$ million |
% |
|
|
Staff cost |
|
34.4 |
23 |
|
25.6 |
21 |
|
|
Materials |
|
50.7 |
33 |
|
44.1 |
35 |
|
|
Fuel |
|
21.0 |
14 |
|
19.1 |
15 |
|
|
Electricity |
|
15.0 |
10 |
|
10.6 |
9 |
|
|
Other external services |
|
16.7 |
11 |
|
12.1 |
10 |
|
|
Other operating expenses |
|
12.8 |
9 |
|
11.9 |
10 |
|
|
|
|
150.6 |
100 |
|
123.4 |
100 |
|
|
Movement in ore stockpiles, work in progress and bullion in process attributable to gold production (a) |
|
(5.5) |
|
|
(19.8) |
|
|
|
Total operating cash expenses |
|
145.1 |
|
|
103.6 |
|
|
(a) Excluding deferred stripping
|
|
Hard-rock mines |
H1 2017 |
H1 2016 |
|||
|
|
Pioneer |
Pokrovskiy |
Malomir |
Albyn |
Total |
Total |
|
|
US$ million |
US$ million |
US$ million |
US$ million |
US$ million |
US$ million |
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
Gold |
119.0 |
19.3 |
35.9 |
116.6 |
290.8 |
233.4 |
|
Silver |
0.5 |
0.1 |
0.0 |
0.1 |
0.8 |
0.7 |
|
|
119.5 |
19.4 |
36.0 |
116.7 |
291.7 |
234.2 |
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
Operating cash expenses |
65.5 |
19.7 |
30.0 |
29.9 |
145.1 |
103.6 |
|
Refinery and transportation |
0.2 |
0.0 |
0.0 |
0.2 |
0.4 |
0.3 |
|
Other taxes |
1.0 |
0.2 |
0.9 |
1.0 |
3.1 |
3.2 |
|
Mining tax |
- |
- |
- |
- |
- |
14.2 |
|
Deferred stripping costs |
- |
- |
1.8 |
6.8 |
8.6 |
9.0 |
|
Depreciation |
14.9 |
3.4 |
7.5 |
22.2 |
47.9 |
59.0 |
|
Impairment/(reversal of impairment) of ore stockpiles |
(3.1) |
0.1 |
0.3 |
(3.6) |
(6.3) |
(12.3) |
|
Impairment of gold in circuit |
- |
0.8 |
0.6 |
- |
1.4 |
- |
|
Operating expenses |
78.5 |
24.2 |
41.1 |
56.4 |
200.2 |
177.2 |
|
Result of precious metals operations |
41.0 |
(4.7) |
(5.1) |
60.3 |
91.5 |
57.0 |
|
|
|
|
|
|
|
|
|
Add/(less): |
|
|
|
|
|
|
|
Depreciation |
14.9 |
3.4 |
7.5 |
22.2 |
47.9 |
59.0 |
|
Impairment/(reversal of impairment) of ore stockpiles |
(3.1) |
0.1 |
0.3 |
(3.6) |
(6.3) |
(12.3) |
|
Impairment of gold in circuit |
- |
0.8 |
0.6 |
- |
1.4 |
- |
|
Segment EBITDA¨ |
52.9 |
(0.5) |
3.2 |
78.8 |
134.5 |
103.8 |
|
|
|
|
|
|
|
|
|
Physical volume of gold sold, oz |
94,690 |
15,402 |
28,700 |
92,967 |
231,760 |
195,434 |
|
|
|
|
|
|
|
|
|
Cash costs
|
|
|
|
|
|
|
|
Operating cash expenses |
65.5 |
19.7 |
30.0 |
29.9 |
145.1 |
103.6 |
|
Refinery and transportation |
0.2 |
0.0 |
0.0 |
0.2 |
0.4 |
0.3 |
|
Other taxes |
1.0 |
0.2 |
0.9 |
1.1 |
3.1 |
3.2 |
|
Mining tax |
- |
- |
- |
- |
- |
14.2 |
|
Deferred stripping costs |
- |
- |
1.8 |
6.8 |
8.6 |
9.0 |
|
Operating cash costs |
66.6 |
19.9 |
32.8 |
37.9 |
157.2 |
130.4 |
|
Deduct: co-product revenue |
(0.5) |
(0.1) |
(0.0) |
(0.1) |
(0.8) |
(0.7) |
|
Total cash costsu |
66.1 |
19.8 |
32.7 |
37.8 |
156.4 |
129.7 |
|
|
|
|
|
|
|
|
|
Average TCCu, US$/oz |
698 |
1,286 |
1,140 |
406 |
675 |
663 |
|
|
|
|
|
|
|
|
All-in sustaining costs¨ and all-in costsu
AISCu increased from US$762/oz in H1 2016 to US$965/oz in H1 2017. The increase in AISCu reflects the sustaining capital expenditure, primarily in relation to Pioneer and Malomir underground projects and expansion of tailing dams at Pioneer and Albyn, ongoing exploration focused on near mine resource expansion, prospective stripping at Albyn in advance of the mining in 2018 and the increase in central administration expenses.
AICu increased from US$761/oz in H1 2016 to US$1,044/oz in H1 2017, primarily reflecting the increase in AISCu explained above and capital expenditure in relation to the POX project.
|
|
Hard-rock mines |
H1 2017 |
H1 2016 |
|||
|
|
Pioneer |
Pokrovskiy |
Malomir |
Albyn |
Total |
Total |
|
|
US$ million |
US$ million |
US$ million |
US$ million |
US$ million |
US$ million |
|
|
|
|
|
|
|
|
|
Physical volume of gold sold, oz |
94,690 |
15,402 |
28,700 |
92,967 |
231,760 |
195,434 |
|
|
|
|
|
|
|
|
|
Total cash costsu |
66.1 |
19.8 |
32.7 |
37.8 |
156.4 |
129.7 |
|
|
|
|
|
|
|
|
|
Average TCCu, US$/oz |
698 |
1,286 |
1,140 |
406 |
675 |
663 |
|
|
|
|
|
|
|
|
|
Impairment/(reversal of impairment) of ore stockpiles |
(0.8) |
0.1 |
0.3 |
(3.6) |
(4.1) |
(4.1) |
|
Impairment of gold in circuit |
- |
0.8 |
0.6 |
- |
1.4 |
- |
|
Adjusted operating costs |
65.3 |
20.7 |
33.6 |
34.1 |
153.7 |
125.6 |
|
|
|
|
|
|
|
|
|
Central administration expenses |
9.4 |
1.5 |
2.9 |
9.3 |
23.1 |
13.1 |
|
Capitalised stripping at end of the period |
- |
- |
6.8 |
44.1 |
50.9 |
24.2 |
|
Capitalised stripping at beginning of the period |
- |
- |
(3.6) |
(22.6) |
(26.2) |
(18.0) |
|
Close-down and site restoration |
0.1 |
0.1 |
0.2 |
0.4 |
0.7 |
0.1 |
|
Sustaining exploration expenditures |
1.9 |
- |
2.4 |
2.9 |
7.2 |
- |
|
Sustaining capital expenditure |
10.0 |
0.1 |
1.4 |
2.6 |
14.1 |
3.9 |
|
All-in sustaining costsu |
86.6 |
22.4 |
43.7 |
70.9 |
223.6 |
148.9 |
|
|
|
|
|
|
|
|
|
All-in sustaining costsu, US$/oz |
915 |
1,454 |
1,523 |
762 |
965 |
762 |
|
|
|
|
|
|
|
|
|
Exploration expenditure |
3.2 |
- |
0.0 |
0.4 |
3.6 |
7.6 |
|
Capital expenditure |
8.5 |
- |
8.3 |
- |
16.8 |
0.4 |
|
Reversal of impairment of ore stockpiles (a) |
(2.2) |
- |
- |
- |
(2.2) |
(8.2) |
|
All-in costsu |
96.1 |
22.4 |
52.1 |
71.3 |
241.8 |
148.7 |
|
|
|
|
|
|
|
|
|
All-in costsu, US$/oz |
1,015 |
1,454 |
1,814 |
766 |
1,044 |
761 |
|
|
|
|
|
|
|
|
(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$10.0 million from US$13.1 million in H1 2016 to US$23.1 million in H1 2017. The increase in central administration expenses is primarily attributed to a US$5.2 million increase in staff costs, mainly as a result of the proposed key management bonus accrual, an increase in Russian staff costs due to the appreciation of RUB against US Dollar and general increase in Russian salaries, and US$4 million professional fees incurred in relation to corporate projects.
During H1 2017, other operations contributed US$(20.3) million to underlying EBITDA vs. US$(15.8) million in H1 2016. Included in result of corporate and other operations in H1 2017 is a US$3.0 million share in losses generated by IRC.
Interest income and expense
|
|
|
H1 2017 |
H1 2016 |
|
|
|
US$ million |
US$ million |
|
Investment income |
|
0.4 |
0.2 |
The Group earned US$0.4 million interest income on its cash deposits with banks.
|
|
|
H1 2017 |
H1 2016 |
|
|
|
US$ million |
US$ million |
|
Interest expense |
|
30.4 |
30.4 |
|
Interest capitalised |
|
(16.0) |
- |
|
Other |
|
0.1 |
0.1 |
|
|
|
14.4 |
30.5 |
Interest expense for the period was comprised of US$6.0 million effective interest on the Convertible Bonds and US$24.3 million interest on bank facilities (H1 2016: US$5.9 million and US$24.5 million, respectively). A further US$16.0 million of this interest expense was capitalised as part of mine development costs within property, plant and equipment (H1 2016: US$nil).
Other finance gains and losses
-
Other finance gains for the period comprised US$2.0 million compared to US$2.3 million in H1 2016. Included in other finance gains is a financial guarantee fee of US$2.0 million (H1 2016: US$2.3 million) charged in connection with the ICBC facility.
Other finance losses for the period comprised US$6.1 million compared to US$1.5 million in H1 2016. Included in other finance losses are US$5.8 million (H1 2016: US$1.5 million) fair value losses on the revaluation of the embedded option for the bondholders to convert into the equity of the Company and a US$0.4 million (H1 2016: US$nil) loss on bank debt refinancing.
Taxation
|
|
|
H1 2017 |
H1 2016 |
|
|
|
US$ million |
US$ million |
|
Tax charge/(credit) |
|
22.3 |
(4.4) |
The Group is subject to corporation tax under UK, Russia and Cyprus tax legislation. The average statutory tax rate for H1 2017 was 19.5% 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$19.9 million (H1 2016: US$15.0 million) and a deferred tax charge, which is a non-cash item, of US$2.4 million (H1 2016: deferred tax credit of US$19.5 million). Included in the deferred tax is a US$4.5 million credit (H1 2016: US$17.6 million credit) arising foreign exchange effect which primarily arises because the tax base for a significant portion of the future taxable deductions in relation to the Group's property, plant and equipment are denominated in Russian Roubles, whilst the future depreciation charges associated with these assets will be based on their US Dollar carrying value.
During the period, the Group made corporation tax payments in aggregate of US$14.4 million in Russia (H1 2016: corporation tax payments in aggregate of US$19.3 million in Russia).
Earnings per share
|
|
H1 2017
|
H1 2016
|
|
Profit for the period attributable to equity holders of Petropavlovsk PLC |
US$23.3 million |
US$9.2 million |
|
Weighted average number of Ordinary Shares |
3,303,768,532 |
3,300,501,688 |
|
Basic profit per ordinary share |
US$0.01 |
US$0.00 |
Basic profit per share for H1 2017 was US$0.01 compared to US$0.00 basic profit per share for H1 2016. The key factor affecting the basic profit per share was the increase of net profit for the period attributable to equity holders of Petropavlovsk PLC from the net profit of US$9.2 million for the first half of 2016 to US$23.3 million net profit for the first half of 2017.
The total number of Ordinary Shares in issue as at 30 June 2017 was 3,303,768,532 (30 June 2016: 3,303,768,532).
Financial position and cash flows
|
|
30 June 2017 |
30 June 2016 |
|
|
US$ million |
US$ million |
|
Cash and cash equivalents |
32.7 |
18.3 |
|
Loans |
(512.9) |
(529.1) |
|
Convertible bonds (a) |
(89.9) |
(86.9) |
|
Net Debt¨ |
(570.1) |
(597.6) |
|
(a) US$100.0 million convertible bonds due on 18 March 2020 at amortised cost.
|
||
|
|
H1 2017 |
H1 2016 |
|
|
US$ million |
US$ million |
|
Net cash from operating activities
|
74.6 |
29.9 |
|
Net cash (used in)/ from investing activities |
(41.3)(b) |
3.9 |
|
Net cash used in financing activities |
(13.3) |
(45.9) |
(b) Including US$41.8 million cash CAPEX
Key movements in cash and net debt
|
|
Cash |
Debt |
Net Debtu |
|
|
|
US$ million |
US$ million |
US$ million |
|
|
As at 1 January 2017 |
12.6 |
(611.2) |
(598.6) |
|
|
Net cash generated by operating activities before working capital changes |
102.3 |
|
|
|
|
Decrease in working capital |
13.5 |
|
|
|
|
Income tax paid |
(14.4) |
|
|
|
|
Capital expenditure |
(31.0) |
|
|
|
|
Exploration expenditure |
(10.9) |
|
|
|
|
Amounts repaid under bank loans, net |
(11.6) |
11.6 |
|
|
|
Interest accrued |
|
(30.4) |
|
|
|
Interest paid |
(26.8) |
26.8 |
|
|
|
Transaction costs in connection with bank loans |
(1.7) |
0.8 |
|
|
|
Bank debt refinancing |
|
(0.4) |
|
|
|
Other |
0.7 |
|
|
|
|
As at 30 June 2017 |
32.7 |
(602.8) |
(570.1) |
|
As at 30 June 2017, there were no undrawn facilities available to the Group.
Capital expenditure ¨
The Group invested an aggregate of US$41.8 million in H1 2017 compared to US$11.9 million in H1 2016. The key areas of focus this year were on the POX project, for which active development was recommenced ahead of scheduled commissioning in 2018, exploration and development to support the underground mining at Pioneer and Malomir, expansion of tailing dams at Pioneer and Albyn and ongoing exploration related to the areas adjacent to the ore bodies of the Group's main mining operations.
Following the recommencement of active development of the POX project and the development of Pioneer and Malomir underground mining operations, the Group capitalised US$16 million of interest expense incurred in relation to the Group's debt into the cost of the aforementioned assets.
|
|
Exploration expenditure |
Development expenditure and other CAPEX |
Total CAPEX
|
|
|
US$ million |
US$ million |
US$ million |
|
POX (a) |
- |
15.5 |
15.5 |
|
Pokrovskiy and Pioneer (b) |
5.1 |
9.5 |
14.5 |
|
Malomir(c), (d) |
2.5 |
2.6 |
5.1 |
|
Albyn |
3.3 |
2.0 |
5.4 |
|
Upgrade of in-house service companies |
- |
1.3 |
1.3 |
|
|
10.9 |
31.0 |
41.8 |
(a) Including US$15.5 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$7.5 million of expenditure in relation to the underground mining project at Pioneer to be sustaining capital expenditure for the purposes of calculating the all-in sustaining costs and all-in costs.
(c) Including US$2.2 million of expenditure in relation to the underground mining project at Malomir to be sustaining capital expenditure for the purposes of calculating the all-in sustaining costs and all-in costs.
(d) Including US$1.3 million of expenditure in relation to Malomir flotation (including tailing dams), which is considered to be non-sustaining capital expenditure for the purposes of calculating all-in sustaining costs and all-in costs.
Foreign currency exchange differences
The Group's principal subsidiaries have a US Dollar functional currency. Foreign exchange differences arise on the translation of monetary assets and liabilities denominated in foreign currencies, which for the principal subsidiaries of the Group are the Russian Rouble and GB Pounds Sterling.
The following exchange rates to the US Dollar have been applied to translate monetary assets and liabilities denominated in foreign currencies.
|
|
|
30 June 2017 |
31 December 2016 |
|
GB Pounds Sterling (GBP: US$) |
|
0.77 |
0.81 |
|
Russian Rouble (RUB: US$) |
|
59.09 |
60.66 |
The Rouble recovered by 3% against the US Dollar during H1 2017, from RUB60.66 : US$1 as at 31 December 2016 to RUB59.09 : US$1 as at 30 June 2017. The average year-on-year appreciation of the Rouble against the US Dollar was approximately 18%, with the average exchange rate for H1 2017 being RUB57.93 : US$1 compared to RUB70.54 : US$1 for H1 2016. The Group recognised foreign exchange losses of US$0.5 million in H1 2017 (H1 2016: US$5.9 million) arising primarily on Rouble denominated net monetary assets.
- Contingent liabilities
The Group applies a two years mining tax concession since 1 July 2016 in its capacity of a participant to the Regional investment project in accordance with the Russian Federal Law 144-FZ dated 25 May 2016. The position of the Russian tax authorities is that the effective date for the aforementioned concession should be 1 January 2017 and, accordingly, the Group should be liable for the mining tax of approximately RUB1 billion (an equivalent of approximately US$16.9 million as at 30 June 2017) for the six month period to 31 December 2016. The matter is currently being considered by the courts. To date decisions made by the Tribunal which took place in May 2017 and the Court of Appeal which took place in August 2017 have not been in favour of the Group. The Group continues to consider its interpretation of relevant tax legislation and tax filing position are appropriate and has filed an appeal to the Cassation Court accordingly.
- 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 produced regularly based on a number of inputs including, but not limited to, forecast commodity prices and impact of hedging arrangements, Group 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 Half Year Report for the period ended 30 June 2017. As at 30 June 2017, 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 September 2018 and expects to comply with related financial covenants. In the meantime, the Group's projections under a layered stressed case that is based on US$1,125/oz gold price, which is at the bottom end of market consensus forecasts, indicate that unless mitigating actions can be taken, there will be insufficient liquidity and non-compliance with certain covenants under a layered stressed case for the relevant period to September 2018. These mitigating actions include items within the control of the management, such as accessing deposits not currently in the Group's mining plan, cost cutting and reduction of capital expenditure subject to receipt of necessary consents. These actions would account for approximately 50% of the forecast shortfall under the layered stressed case. Furthermore, management would also pursue raising additional equity, refinancing the existing debt and/or divesting the shares in IRC including an immediate settlement of any amounts of the guarantee fee outstanding to fully mitigate any shortfalls. Management is also reasonably confident that necessary waivers or consents could be obtained from the senior lenders if necessary. 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 Group has guaranteed the outstanding amounts IRC owes to ICBC. The outstanding loan principal was US$234 million as at 30 June 2017. 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 were originally due for payment on 20 June 2017 and 20 December 2017, with the 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). Following the ramp up and commercial production at K&S, IRC management are forecasting that IRC will have sufficient capital through working capital to pay its financial obligations as and when they fall due in the foreseeable future and throughout the going concern period. However, if scheduled full commercial production of the K&S project is not achieved or the market conditions turn out to be significantly less favorable than predicted IRC's financial liquidity may be adversely impacted. IRC would then need to carry out contingency plans including entering into negotiations with banks or other investors for additional debt or equity financing.
Having taken into account the aforementioned factors and after making enquiries and considering the uncertainties described above, the Directors have a reasonable expectation that the Group will have adequate resources to continue in operational existence for the foreseeable future, being at least the next 12 months from the date of approval of the Half Year Report for the period ended 30 June 2017. Accordingly, they continue to adopt the going concern basis of accounting in preparing the interim consolidated financial statements for the period ended 30 June 2017.
2017 Outlook
The Group is confident it can achieve 2017 production guidance of 420 - 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 rates. Net debt is expected to decrease to c.US$560 million by the end of 2017, assuming an average gold price of US$1,265/oz for the remainder of 2017.
Operations Report
Pioneer
|
Pioneer mining operations |
|||||
|
|
Units |
Q2 2017 |
Q2 2016 |
H1 2017 |
H1 2016 |
|
Total material moved |
m3 '000 |
3, 812 |
4, 754 |
7, 206 |
9, 597 |
|
Ore mined |
t '000 |
1, 895 |
788 |
2, 935 |
1, 656 |
|
Average grade |
g/t |
0.78 |
1.05 |
0.90 |
0.94 |
|
Gold content |
oz. '000 |
47.5 |
26.5 |
85.1 |
49.9 |
|
Pioneer processing operations |
|||||
|
Resin-in-pulp (RIP) plant |
|||||
|
Total milled |
t '000 |
1, 707 |
1, 775 |
3, 349 |
3,372 |
|
Average grade |
g/t |
0.78 |
0.69 |
0.79 |
0.74 |
|
Gold content |
oz. '000 |
42.7 |
39.5 |
85.4 |
80.2 |
|
Recovery |
% |
82.4 |
85.8 |
76.8 |
82.6 |
|
Gold recovered |
oz. '000 |
35.2 |
33.8 |
65.6 |
66.3 |
|
Heap leach operations |
|||||
|
Total stacked |
t '000 |
359 |
281 |
359 |
281 |
|
Average grade |
g/t |
0.51 |
0.53 |
0.51 |
0.53 |
|
Gold content |
oz. '000 |
5.9 |
4.8 |
5.9 |
4.8 |
|
Recovery |
% |
39.6 |
30.2 |
39.6 |
30.2 |
|
Gold recovered |
oz. '000 |
2.3 |
1.5 |
2.3 |
1.5 |
|
|
|
|
|
|
|
|
Pioneer gold production - Dore |
oz. '000 |
47.9 |
34.7 |
96.4 |
71.0 |
Note: from the beginning of 2017, the Company moved to using gold poured as the definition for production
The main sources of low grade ore were pits of the Alexandra, Yuzhnaya and Promezhutachnaya zones. This ore was blended with lower grade material from stockpiles.
Heap leach operations commenced on schedule in April.
The development of the North East Bakhmut underground mine progressed as planned. Underground work during H1 totaled c.1,446m. The first ore was mined in June - c.3.5kt with an average gold content of c.2.7 g/t. As per the mine plan, production began at a low grade 'bridge' area between North East Bakhmut 2 and 3. Ore grades are expected to improve as mining moves into the higher grade North East Bakhmut 3 zone.
The significant increase in doré gold production in relation to gold recovered is mainly due to the successful implementation of measures for cleaning resin, and the resulting reduction in gold in circuit.
In H2, the main sources of low grade ore are expected to be Alexandra, Yuzhnaya and Andreevskaya West, with high grade ore to be mined from NE Bahkmut via underground.
The H2 gold production forecast for Pioneer is c.73,000-98,000oz.
Pokrovskiy
|
Pokrovskiy mining operations |
|||||
|
|
Units |
Q2 2017 |
Q2 2016 |
H1 2017 |
H1 2016 |
|
Total material moved |
m3 '000 |
1 ,036 |
1,223 |
2 ,073 |
2,253 |
|
Ore mined |
t '000 |
392 |
134 |
520 |
332 |
|
Average grade |
g/t |
0.51 |
1.14 |
0.50 |
0.98 |
|
Gold content |
oz. '000 |
6.4 |
4.9 |
8.4 |
10.5 |
|
Pokrovskiy processing operations |
|||||
|
Resin-in-pulp (RIP) plant |
|||||
|
Total milled |
t '000 |
450 |
451 |
888 |
899 |
|
Average grade |
g/t |
0.47 |
0.65 |
0.44 |
0.62 |
|
Gold content |
oz. '000 |
6.8 |
9.5 |
12.4 |
17.9 |
|
Recovery |
% |
84.8 |
91.7 |
78.3 |
91 |
|
Gold recovered |
oz. '000 |
5.8 |
8.7 |
9.7 |
16.2 |
|
Heap leach operations |
|||||
|
Total stacked |
t '000 |
246 |
193 |
246 |
193 |
|
Average grade |
g/t |
0.40 |
0.4 |
0.40 |
0.4 |
|
Gold content |
oz. '000 |
3.2 |
2.7 |
3.2 |
2.7 |
|
Recovery |
% |
22.4 |
46 |
22.4 |
46 |
|
Gold recovered |
oz. '000 |
0.7 |
1.2 |
0.7 |
1.2 |
|
|
|
|
|
|
|
|
Pokrovsky gold production - Dore |
oz. '000 |
8.4 |
9.1 |
14.2 |
17.2 |
Note: from the beginning of 2017, the Company moved to using gold poured as the definition for production
The Zeyskaya and Vodorazdelnaya zones were the main sources of low grade ore, which was blended with ore from stockpiles. This contributed to the decrease in processing recovery at the plant compared to H1 2016, due to the technological qualities of ores from stockpiles (initially scheduled), which were worse than expected.
Heap leaching began in April in line with the mining plan.
In H2, the main sources of low grade ore (c.15,000oz) are again expected to be Zeyskaya and Vodorazdelnaya.
Malomir
|
Malomir mining operations |
|||||
|
|
Units |
Q2 2017 |
Q2 2016 |
H1 2017 |
H1 2016 |
|
Total material moved |
m3 '000 |
2, 772 |
1,957 |
5, 126 |
3,721 |
|
Ore mined |
t '000 |
675 |
253 |
1, 434 |
390 |
|
Average grade |
g/t |
0.68 |
1.2 |
0.78 |
1.2 |
|
Gold content |
oz. '000 |
14.9 |
9.5 |
36.0 |
15.1 |
|
Malomir processing operations |
|||||
|
Resin-in-pulp (RIP) plant |
|||||
|
Total milled |
t '000 |
858 |
771 |
1, 652 |
1,554 |
|
Average grade |
g/t |
0.71 |
0.8 |
0.78 |
0.7 |
|
Gold content |
oz. '000 |
19.6 |
19.4 |
41.7 |
37.1 |
|
Recovery |
% |
58.9 |
66.8 |
59.8 |
67.3 |
|
Gold recovered |
oz. '000 |
11.5 |
13.0 |
24.9 |
25.0 |
|
|
|
|
|
|
|
|
Malomir gold production - Dore |
oz. '000 |
12.3 |
12.2 |
28.7 |
24.8 |
Note: from the beginning of 2017, the Company moved to using gold poured as the definition for production
The main sources of low grade ore were pits at the Quartzitovoye and Magnetitovoye zones. Ore from stockpiles also contributed to production.
Construction of an underground mine at Quartzitovoye 1 began in January 2017, after delays due to the late mobilization of equipment by the mining contractor. Since May, the contractor has worked at the scheduled capacity in accordance with the mining plan. In the first half of the year, c.697m of underground workings had been completed. In spite of the delay, the first ore was mined in June - a total of c.4.2kt with an average gold content of c.5.4 g/t.
The volumes of ore treated through the plant were in line with the plan. Recovery rates were lower than planned for H1 2016 due to ore from the Quartzitovoye 2 pit being more refractory than expected. This pit was completed in H1.
In H2, the main sources of low grade ore will be Quartzitovoye 1 and Magnetitovoye. High grade ore will be mined from underground at Quartzitovoye 1.
The Malomir production forecast for the second half of the year is c.20,000-30,000oz.
Albyn
|
Albyn mining operations |
|||||
|
|
Units |
Q2 2017 |
Q2 2016 |
H1 2017 |
H1 2016 |
|
Total material moved |
m3 '000 |
7, 426 |
7,775 |
14, 942 |
16,009 |
|
Ore mined |
t '000 |
1, 258 |
867 |
2, 633 |
2,530 |
|
Average grade |
g/t |
1.19 |
1.1 |
1.14 |
1.1 |
|
Gold content |
oz. '000 |
48.1 |
29.7 |
96.4 |
88.0 |
|
Albyn processing operations |
|||||
|
Resin-in-pulp (RIP) plant |
|||||
|
Total milled |
t '000 |
1, 152 |
1,177 |
2, 290 |
2,341 |
|
Average grade |
g/t |
1.23 |
1.1 |
1.14 |
1.1 |
|
Gold content |
oz. '000 |
45.6 |
41.2 |
84.3 |
83.9 |
|
Recovery |
% |
93.6 |
90.1 |
93.0 |
92.0 |
|
Gold recovered |
oz. '000 |
42.6 |
37.1 |
78.4 |
77.2 |
|
|
|
|
|
|
|
|
Albyn gold production - Dore |
oz. '000 |
45.7 |
38.8 |
93.1 |
82.6 |
Note: from the beginning of 2017, the Company moved to using gold poured as the definition for production
The main sources of ore were the Central and Eastern zones of the Albyn main pit, with a small amount of ore supplied from stockpiles. The plant operated as normal throughout the year.
In H2, the main source of ore will be the Central zone of the Albyn main pit, with some ore from stockpiles. The gold production forecast for the second half of the year is c.80,000-85,000oz.
Note: figures in this release may not add up due to rounding
Development Projects
POX
POG Refractory Mineral Resource Base
Defined within Petropavlovsk's substantial 20.2Moz JORC resources (including 7.2Moz JORC reserves) are 9.3Moz refractory gold resources (including 4Moz refractory reserves), with underexplored resource upside within the highly prospective 3,600km2 license holding. Unlocking the 9.3Moz refractory resources supports Petropavlovsk's long term growth objectives in doubling the average life of mine and sustaining the production profile.
All Petropavlovsk's defined economic refractory ounces are within the Malomir license area (964km2) and Pioneer license areas (1,375km2). Both areas sit along or above the Mongolo-Okhotskiy mineralised belt. This same belt also hosts a number of large deposits, including Sukhoi Log and Taseevskoe-Baley to the west of the Amur region.
■ Malomir is the only large known refractory deposit within the north east part of the Amur Region and remains largely under explored. 62% of Malomir's JORC reserves are refractory. The area is highly prospective for further resource growth due to favorable geology and alluvial gold deposits, for many of which the hard rock sources are yet to be found
■ In addition to Pioneer's significant non refractory reserves, further refractory resource potential exists within the Pioneer licenses, particularly along the contact between granitoid and Jurassic host rocks, south and south west of the Pioneer RIP plant. 56% of Pioneer's Mineral Resources are refractory.
Construction
In 2010, the POX Hub and the Malomir flotation plant were fully permitted for construction, and in 2011 construction began. It was put on hold in 2013 following the decline in the gold price. The plant (including equipment) was carefully put on care and maintenance to allow active construction to restart in 2017.
Malomir Flotation Plant (nameplate capacity 5.4Mtpa)
The Malomir flotation facility is a staged build plant largely utilising existing crushing and grinding capacities and infrastructure.
■ Stage 1 capacity is 3.6Mtpa across two parallel 1.8Mtpa lines. Stage 1 utilises existing crushers and mills currently used for non-refractory processing. Flotation concentrate production is scheduled for H1 2018. Initially the concentrate will be stockpiled before being transported to the POX Hub ahead of the staged autoclave commissioning from Q4 2018
■ Stage 2 expands the flotation plant to 5.4Mtpa by adding a third 1.8Mtpa line. This will fully calibrate the flotation plant capacity with the existing 6Mtpa crushing and grinding capacity. Stage 2 expansion is scheduled for completion and commissioning in 2019
■ Non-refractory processing will continue using a smaller existing crushing and grinding line and the RIP plant
■ Stage 1 of the Malomir flotation plant is more than 90% complete. During H1 2017, work concentrated on piping, ventilation, and the interior of the flotation building, including fittings, and also work on auxiliary facilities
Pioneer Flotation Plant (nameplate capacity 6.0Mtpa)
The Pioneer flotation plant is scheduled for construction in 2021, ahead of concentrate production from 2023. Like Malomir it will utilise existing crushing and grinding circuits, reducing capital requirements.
POX Hub (nameplate capacity c.500ktpa)
Construction of the POX Hub is now approximately 75% complete. Greater than 80% of the project equipment is on site, including all critical path items and long lead items. The four 15m x 4m autoclaves, each with a volume of 66m3, were received on site, installed and lined in 2013. All core structures are complete including the oxygen, autoclave and filtration plant buildings.
During 2016, the Company renewed key contracts with Outotec. Outotec is responsible for the design and development of the plant. All assembling, installation and commissioning works are carried out under Outotec installation and technical supervision.
In January 2017, the contract was awarded to commence all the piping, welding and assembly works, which are now well under way.
POX Construction Progress
During 2017, the oxygen plant, supporting POX Hub infrastructure and all piping, welding and assembly works are scheduled for completion. The oxygen plant is now very close to overall mechanical completion with only electrical and control/instrumentation construction less than 90% complete. Commissioning of the oxygen plant is scheduled for Q2 2018.
At the autoclave section the civil and structural construction is now 85 to 90% complete. Mechanical construction is 70% complete and progressing well, with all large mechanical equipment, including four autoclave vessels, in place. The major outstanding construction includes piping, electrical construction and control & instrumentation, which is at an early stage but remains on schedule for POX plant commissioning in Q4 2018.
Construction of the filtration building is rapidly progressing with piping, civil and structural construction now 80% complete. The mechanical construction is 45% complete and the installation of the first press-filter is in progress. Piping work, electrical construction and the installation of control & instrumentation is yet to start as per the construction schedule.
The outside construction including thickeners, diesel generators and the steam plant are progressing fast in order to complete the principal outside work before winter. Civil construction is now 80% complete whilst structural construction is 60% complete. The latter mainly relates to large structures and access platforms with piping support - other minor structures are still outstanding. Platework on thickeners is 75% complete and mechanical construction is 50% complete with significant equipment in the steam and diesel generator plant scheduled be installed. Piping, electrical construction and control & instrumentation is yet to be completed.
Construction progress has been monitored by an independent technical consultancy, which considers that a one year time frame to complete the remaining work is very achievable.
During Q4 2017, the Malomir flotation plant (Stage 1) is scheduled for commissioning, whilst flotation concentrate production is due to commence from Q1 2018. In Q4 2018, the POX Hub is scheduled to commence a staged dry and wet commissioning, one autoclave at a time. The ramp up to commercial production is due to occur throughout 2019.
POX Capital Cost
The budget for the POX Hub and flotation plant at Malomir remains unchanged. Of the c.US$120 million outstanding capital estimated as of the beginning of 2017, c.US$16.8 million has been spent during the first six months of 2017. The independent technical consultants who monitor the project noted that based on the current average spend and remaining budget, there is sufficient capital for 20 months; the project is to be completed in eighteen months.
Underground
During H1 2017, development of the underground mines at Pioneer and Malomir progressed towards planned full scale production. The Group is finalising works and establishing safety permits and certifications to start full scale mining in H2 2017.
In H1 2017, development of Pioneer's underground mine declines advanced by 1446.1m. The main ventilation fan has been delivered to the site and is now being installed by a reputable Russian contractor. It is expected to be commissioned by the end of September 2017. The first ore was already mined from the sublevel development in June 2017. At the end of July, a total of 3.5kt of ore at 2.7g/t of gold had been produced from the lower grade zone. Full scale production from the high grade NE Bakhmut No 3 zone is expected to start by the end of 2017.
Despite a slow start at Malomir due to delays with contractor mobilisation, the underground developments advanced 696.9m in the first six months of the year and in July 2017, developments reached the main Quartzitovoye ore body 55. Work on a sublevel drift on level +390m began in August. The first development ore was produced in June 2017 with total production of 4.2kt of ore at 5.4g/t of gold at the end of July 2017.
The first stope mining from ore body 55 will require the lower sublevel at an elevation of +375 to be completed. In addition, a pumping station would need to be constructed and commissioned at the +375m level, as well as a main ventilation facility. An agreement with a reputable Russian contractor has been signed to deliver, install and commission the main ventilation facility before the end of September 2017. Completion of this work and first stope mining is currently expected to commence in Q4 2017.
As reported, a new high grade pay shoot was discovered at Quartzitovoye (zone 49, west of ore body 55). Sublevels +390 and +375 have already been developed here in preparation for mining the first stope. The decision to start mining here will depend on the result of geotechnical assessment into how this may affect declines located nearby.
Because of the conservative approach taken to production guidance, the delays in underground production are currently not expected to impact the Group's 2017 production target.
Exploration
Pioneer
Pioneer's 1,375km2 area offers a number of exploration opportunities for both non-refractory and refractory resources, including potentially high grade exploration targets. As previously reported, the Pioneer exploration program for 2016 was successful, leading to the expansion of Pioneer's non-refractory resources and reserves and the identification of promising new exploration targets. Significant 2016 results include:
■ First NE Bakhmut JORC reserve for underground mining
■ First JORC resource for potential underground mining at Bakhmut-Promezhutochnaya
■ New high grade pay shoot at Andreevskaya
■ Identification of Sosnovaya, a large (9km long) gold-arsenic anomaly, south of Pioneer
■ Discovery of Katrin, a new satellite non-refractory deposit
■ Discovery of extensions at the Brekchievaya and Shirokaya zones in the Alexandra area, north of Pioneer
In the first six months of 2017 the Group continued exploration, focusing mainly on near mine resource expansion. The most notable results of this work include:
■ Discovery of two new zones of non-refractory mineralisation suitable for open pit mining, north of NE Bakhmut No 2
■ Identification of further down dip extensions of the high grade pay shoot at NE Bakhmut No 2, which remains open at depth offering further potential for underground resource and reserve expansion
■ First JORC mineral resources and ore reserves (unaudited) for the Katrin satellite deposit, suggesting it offers an immediate opportunity to provide high grade open pit ore
Drilling and trenching also confirmed the presence of large scale refractory gold mineralisation at the Sosnovaya anomaly, although the grade of the intersections is too low to represent an immediate interest.
Katrin
Katrin is a high grade non-refractory satellite deposit situated south of Pioneer within the same geological setting to the Zheltunak deposit, which has been mined since 2011 producing 926kt of ore at an average grade of 1.91g/t Au (57koz of contained gold). To date, five individual ore bodies were discovered and explored. Three out of the five orebodies have sufficient exploration to support a JORC resource estimate. These three have a JORC resource of 32koz including c.26koz of Indicated resource, at a grade of 2.53g/t and c.6koz of Inferred at a grade of 1.29g/t. This estimate is yet to undergo an independent technical audit.
Katrin is hosted within a 1km long silification zone within Cretaceous volcanites. The zone is open in both strike directions as well as down-dip, offering the opportunity for further discoveries. Two ore bodies, which are yet to be explored and included in the resource estimate, have already been identified. One of them is located 200m south from Ore Body 1 and another north-west from Ore Body 3. Furthermore, drilling in August 2017 discovered extensions to the Ore Body No 3 that are yet to be included in the estimate. Significant high-grade drill intersections from these new discoveries include:
■ 8.5m @ 2.9g/t (drill hole C-511-5, interval 73.5-82.0m)
■ 2.0m @ 4.12g/t (drill hole C-515-29, interval 8.0-12.0m)
■ 4.0m @ 3.97g/t (drill hole C-515-32, interval 76.0-80.0m)
■ 3.7m @ 5.38g/t (drill hole C-519-21, interval 113.0-116.7m)
■ 7.0m @ 2.52g/t (drill hole C-518-17, interval 60.8-67.8m)
NE Bakhmut
Underground resource and reserve exploration took place at NE Bakhmut (surface and underground drilling and underground development). In 2017, the most significant results were in the NE Bakhmut No 2 area. Two new zones of mineralisation potentially suitable for open pit mining were discovered north from the depleted pit at NE Bakhmut No 2. The Oblomochnaya zone, which has been extensively explored, is being prepared for open pit mining and should contribute to the 2017 and 2018 production profile. It is a shallow, sub-horizontal mineralised zone only 30-35m below the surface. Geological interpretations suggest this zone was formed as a result of the NE Bakhmut hard rock orebody being eroded and material being deposited, forming a soft oxide mineralised seam which later was buried under a layer of Neogenic sand formation. The unaudited resource estimate suggests Oblomochnaya contains c.23koz of JORC gold resources, of which c.19koz at 0.98g/t is Indicated and 4.5koz at 1.05g/t is Inferred. Metallurgical tests have confirmed that the material is suitable for RIP processing. It is expected that both the overburden and the ore will be amenable to free digging, making it a low cost open pit mining target.
In the course of Oblomochnaya exploration, a second new zone was identified directly below Oblomochnaya. To date, it has been intersected by only three drill holes, with the best intersections including 5.3m at 1.64g/t and 5.2m at 7.56g/t. It remains open in a down dip direction and in both strike directions.
Surface drilling proved a high grade pay shoot mined from open pit at NE Bakhmut No 2 to a depth of 140m below the pit floor. The best deep intersection is 19.6m @ 10.90g/t. The pay shoot is 145m long and remains open in a down dip direction. There are several further high grade intersections including 1.1m@8.10g/t and 1.0m@19.30g/t, which belong to smaller parallel zones and/or apophysis; these await follow up exploration and inclusion in the resource model.
In-fill underground drilling continued at a 'bridge' area between pay shoots at NE Bakhmut No 2 and 3. It did not result in changes to the overall resources or reserves - the results are in line with earlier exploration.
Alexandra Area
In 2017, drilling discovered additional low grade mineralisation at the Shirokaya zone (profile 976) with the following drill intersections:
■ 135.2m @ 0.48g/t (drill hole C-9244)
■ 122.0m @ 0.71g/t (drill hole C-9245)
■ 136.0m @ 0.50g/t (drill hole C-9246)
■ 30.0 @ 0.42g/t (drill hole C-9247)
These drill holes did not exit from the mineralisation, which appears to be a bulk stockwork potentially suitable for open pit mining. Mineralisation is expected to be refractory, which is typical for Shirokaya.
Nikolaevskaya
Exploration continued at south west extensions of the Nikolaevskaya zone with eight drill holes and seven trenches completed in H1 2017. A strike extension exceeding 1,200m in length has been proven. The gold mineralisation discovered is relatively narrow, not particularly high grade and refractory, which is typical for Nikolaevskaya.
The best drill intersections for 2017 include:
■ 1.9m @ 4.02g/t (drill hole C-9355, interval 36.2 - 38.1m)
■ 2.9m @ 1.41g/t (drill hole C-9354, interval 29.3 - 32.2m)
■ 1.6m @ 2.35g/t (drill hole C-9386, interval 44.7 - 46.3m)
This mineralisation is yet to be modelled and included in JORC resource estimates.
Sosnovaya
Trenching and drilling completed in late 2016 at a 9km long geochemical anomaly at Sosnovaya confirmed the presence of low grade gold mineralisation with selected intersections including:
■ 14.2m @ 0.80g/t (drill hole C-182-4, interval 26.7 - 40.9m)
■ 42.6m @ 0.31g/t (drill hole C-599-11, interval 36.4 - 79.0m)
■ 1.3m @ 1.14g/t (trench K-622-3, interval 227.5 - 228.8m)
Mineralisation discovered so far is too low grade to represent an immediate economic interest. However, since almost every drill hole completed intersected bulk gold grade halos (0.1 - 0.3g/t) indicating extensive hydrothermal processes, these results are still considered encouraging. Group geologists are analysing results, updating their exploration model and intend to continue exploring this target in the future.
Geochemical surveys and geological traversing started at two other early stage exploration targets, Aprelskiy and Talali (Sosnovaya). Aprelskiy is located c.10km west from the Pioneer RIP plant within an area of extensive historical alluvial mining. Talali is located west from the Alexandra deposit and c.20km north west from the Pioneer plant on the same tectonic structure that hosts Alexandra, and also within an area of historical alluvial production. The results of this work are expected to be available in H1 2018.
Albyn
Ulgen
In 2017, exploration also continued at Ulgen, located c.30km south west from the Albyn plant in an area of extensive historical alluvial gold production. The best new trench intersections include 7.0m@5.11g/t, 5.0m@3.58g/t and 2.0m@2.84g/t. Exploration completed to date, which includes 80m to 350m spaced trenches and six drill holes, proved gold mineralisation extends along the strike for 3km. It remains open in both strike directions as well as in a down dip direction. Exploration results at Ulgen are very encouraging as there are many similarities with Elginskoye, where JORC Resources and Reserves currently stand at 2.8Moz. No further exploration is planned at Ulgen in 2017 as due to its remote location and lack of local infrastructure it is unlikely to offer an immediate production upside. Ulgen remains a significant exploration target and work is expected to continue in the future.
Unglichikan
In 2017, exploration at Unglichikan continued with drilling at the south group of the mineralised zones over a strike length of 1,200m. The 2017 drilling results confirmed known mineralisation and extended it down dip to a depth of 90 to 130m from the surface. The last down dip intersections include 4.7m at 5.34g/t, 14.7m at 2.97g/t, and 0.8m at 26.9g/t where both grade and thickness appear to increase with depth, suggesting there may also be potential for underground mining at Unglichikan. The 2017 drilling results are yet to be incorporated into the JORC resource model.
Malomir
Following successful exploration drilling at Quartzitovoye in 2016, a maiden non-refractory reserve of 207koz @ 5.85g/t was defined in 2017, underpinning an initial six year production plan for high grade underground mining. 2016 drilling confirmed that high grade mineralisation remains open at depth, with the deepest holes greater than 440m below the surface (245m below the open pit floor), intersecting attractive grades and thicknesses.
In May 2017, underground developments at Quartzitovoye led to the discovery of a previously unknown high grade pay shoot producing three intersections: 5.32m @ 69.9g/t, 1.8m @ 42.9 g/t and 1.01m @ 12.2 g/t. The pay shoot is steep dipping and hosted within low grade zone No 49 and mined from the open pit, which stopped approximately 90m above. It appears this high grade shoot is controlled by an intersection between the structure of zone No 49, striking north south, and a steep east west contact between plagiogranites and schists.
In preparation for the trial mining, the pay shoot has now been explored by underground workings on 390m and 375m levels. It now has a proven strike length of c.55m, an average thickness of c.3m with an average grade of c.14g/t and grades of up to 458g/t in selected samples. It remains open in both up and down directions. It is also considered possible that other similar pay shoots could be discovered within zone 49, which has a total strike length of 280m.
Underground development has now reached the main high grade Quartzitovoye orebody 55, intersecting it in two points on a 390m level at the north and in the centre. Underground sampling results are in agreement with the drill hole data and the resource model.
FY17 Outlook
The Company reconfirms its full year production forecast of c.420,000 - 460,000oz, maintaining this range in case of possible delays in scalable production from underground, whilst the first production from POX is expected as planned.
Total cash costs for the year are expected to be c.US$700/oz at current exchange rates, at the upper end of original guidance (US$600 - 700/oz). Net debt is expected to decrease to c.US$560 million, assuming an average gold price of US$1,265/oz for the rest of the period.
Forward contracts to sell an aggregate of 500Koz of gold over a period from July 2017 to December 2019 at an average price of US$1,252/oz were outstanding as at 30 June 2017.
IRC
IRC Ltd. is a producer and developer of industrial commodities with its shares quoted on the Hong Kong Stock Exchange (Stock Code 1029). IRC released its interim results for the six months ended 30 June 2017 on 31 August 2017, highlights from which are described below.
During the period, satisfactory progress was made with the ramp up of K&S, IRC's key development project, which is now producing significant volumes of concentrate (over one million tonnes since inception). The plant was operating at c.50% capacity as at June 2017. IRC remains confident in resolving the outstanding issues and aims at operating the plant at close to full capacity by the end of 2017.
IRC enjoyed a threefold increase in revenue for the period to US$51.2 million (30 June 2016: US$16.1 million), whilst K&S generated EBITDAu of US$14 million. Overall, IRC made a net operating gain of US$2.3 million (30 June 2016: loss of US$11.4 million), and the loss for the period fell to US$9.7 million (30 June 2016: loss of US$9.9 million).
The production and sales volumes of iron ore concentrate more than tripled, with production volume up 271% to 697,431 tonnes (30 June 2016: 188,111 tonnes), and sales volume up 218% to 698,632 tonnes (30 June 2016: 219,352 tonnes).
Finally, ICBC agreed to restructure the loan repayment schedule, including a full principal repayment holiday in 2017.
The full report is available to view on the IRC website at http://www.ircgroup.com.hk
Principal Risks and Uncertainties
The Group is exposed to a variety of risks and uncertainties which could significantly affect its business and financial results. A detailed review of the key risks facing the Group is set out in the Risks to Our Performance section on pages 22 to 33 of the 2016 Annual Report, which is available on the Group's website, www.petropavlovsk.net. This also includes a description of the potential impact of such risks on the Group together with measures in place to manage or mitigate against each specific risk where this is within the Group's control.
The Board's view of the principal risks that could impact the Group for the remainder of the current financial year remain largely unchanged from those set out in the 2016 Annual Report, with the exception of the matter detailed below under 'Funding and liquidity'.
The principal risks relate to the following:
Operational risks
■ Production
■ Exploration
■ The quality and quantity of the Group's Mineral Resources and Ore Reserves
■ Projects, specifically in relation to the POX and underground mining projects
Financial risks
■ Funding and liquidity: The Group is satisfied that it has sufficient headroom under a base case scenario for the period to September 2018 and expects to comply with related financial covenants. However, under a layered stress case the Group's projections indicate that there will be insufficient headroom and non-compliance with certain covenants unless certain mitigating actions are taken. Further details are provided in the 'going concern' section of this interim announcement.
■ Gold price
■ Foreign exchange
■ IRC
Health, safety and environmental risks
■ Safety of our employees and third parties
Legal and regulatory risks
■ The various licences and permits which are needed by the Group in order to operate
■ Operating in Russia
Directors' Responsibilities Statement
We confirm that to the best of our knowledge:
■ The condensed set of financial statements, which has been prepared in accordance with IAS34 "Interim Financial Reporting" as endorsed and adopted by the European Union, gives a true and fair view of the assets, liabilities, financial position and profit or loss of the company, or the undertakings included in the consolidation as a whole as required by DTR4.2.4R;
■ The interim management report includes a fair review of the information required by DTR4.2.7R (indication of important events and their impact, and description of principal risks and uncertainties for the remaining six months of the financial year); and
■ The interim management report includes a fair review of the information required on related party transactions as required by DTR4.2.8R.
By order of the Board,
Ian Ashby Andrey Maruta
Chairman Chief Financial Officer
11 September 2017
Independent Review Report (Auditors)
INDEPENDENT REVIEW REPORT TO PETROPAVLOVSK PLC
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 which comprises the income statement, the balance sheet, the statement of changes in equity, the cash flow statement and related notes 1 to 24. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
London, United Kingdom
11 September 2017
Consolidated Financial Statements
PETROPAVLOVSK PLC
Condensed Consolidated Income Statement
Six months ended 30 June 2017
|
|
|
Six months ended 30 June 2017 (unaudited) |
Six months ended 30 June 2016 (unaudited) |
Year ended 31 December 2016
|
|
|
note |
US$'000 |
US$'000 |
US$'000 |
|
Group revenue |
|
304,049 |
253,953 |
540,684 |
|
Operating expenses |
5 |
(236,165) |
(216,154) |
(460,103) |
|
|
|
67,884 |
37,799 |
80,581 |
|
Share of results of associates |
11 |
(2,965) |
(3,563) |
(3,581) |
- Operating profit |
|
64,919 |
34,236 |
77,000 |
|
Investment income |
6 |
386 |
200 |
556 |
|
Interest expense |
6 |
(14,448) |
(30,479) |
(60,976) |
|
Other finance gains |
6 |
2,045 |
2,334 |
11,976 |
|
Other finance losses |
6 |
(6,138) |
(1,506) |
(1,548) |
|
Profit before taxation |
|
46,764 |
4,785 |
27,008 |
|
Taxation |
7 |
(22,305) |
4,438 |
4,698 |
|
Profit for the period |
|
24,459 |
9,223 |
31,706 |
|
Attributable to: |
|
|
|
|
|
Equity shareholders of Petropavlovsk PLC |
|
23,332 |
9,203 |
33,719 |
|
Non-controlling interests |
|
1,127 |
20 |
(2,013) |
|
|
|
|
|
|
|
Profit per share |
|
|
|
|
|
Basic profit per share |
8 |
US$0.01 |
US$0.00 |
US$0.01 |
|
Diluted profit per share |
8 |
US$0.01 |
US$0.00 |
US$0.01 |
PETROPAVLOVSK PLC
Condensed Consolidated Statement of Comprehensive Income
Six months ended 30 June 2017
|
|
|
Six months ended 30 June 2017 (unaudited) US$'000 |
Six months ended 30 June 2016 (unaudited) US$'000 |
Year ended 31 December 2016
US$'000 |
|
Profit for the period |
|
24,459 |
9,223 |
31,706 |
- Items that may be reclassified subsequently to profit or loss: |
|
|
|
|
|
Revaluation of available-for-sale investments |
|
(294) |
307 |
834 |
|
Exchange differences: |
|
|
|
|
|
Exchange differences on translating foreign operations |
|
2,597 |
1,781 |
2,577 |
|
Share of other comprehensive income of associate |
|
110 |
- |
560 |
|
Cash flow hedges: |
|
|
|
|
|
Fair value losses |
|
(11,909) |
(16,313) |
(4,940) |
|
Tax thereon |
|
2,382 |
3,263 |
988 |
|
Transfer to revenue |
|
(2,781) |
5,504 |
8,494 |
|
Tax thereon |
|
556 |
(1,101) |
(1,699) |
|
Other comprehensive (loss)/profit for the period net of tax |
|
(9,339) |
(6,559) |
6,814 |
|
Total comprehensive profit for the period |
|
15,120 |
2,664 |
38,520 |
|
Attributable to: |
|
|
|
|
|
Equity shareholders of Petropavlovsk PLC |
|
14,117 |
2,764 |
40,494 |
|
Non-controlling interests |
|
1,003 |
(100) |
(1,974) |
|
|
|
15,120 |
2,664 |
38,520 |
PETROPAVLOVSK PLC
Condensed Consolidated Balance Sheet
At 30 June 2017
|
|
note |
30 June 2017
(unaudited) US$'000 |
30 June 2016 (restated) (a) (unaudited) US$'000 |
31 December 2016 (restated) (a)
US$'000 |
- Assets |
|
|
|
|
|
Non-current assets |
|
|
|
|
|
Exploration and evaluation assets |
9 |
52,889 |
56,163 |
49,270 |
|
Property, plant and equipment |
10 |
952,133 |
982,953 |
953,794 |
|
Prepayments for property, plant and equipment |
|
10,979 |
187 |
694 |
|
Investments in associates |
11 |
33,285 |
35,600 |
36,140 |
|
Available-for-sale investments |
|
812 |
578 |
1,105 |
|
Inventories |
12 |
68,489 |
54,459 |
51,686 |
|
Other non-current assets |
|
10,938 |
10,437 |
11,383 |
|
|
|
1,129,525 |
1,140,377 |
1,104,072 |
|
Current assets |
|
|
|
|
|
Inventories |
12 |
180,769 |
186,959 |
183,266 |
|
Trade and other receivables |
13 |
75,129 |
62,804 |
89,736 |
|
Derivative financial instruments |
15 |
661 |
- |
7,478 |
|
Cash and cash equivalents |
14 |
32,671 |
18,311 |
12,642 |
|
|
|
289,230 |
268,074 |
293,122 |
|
Total assets |
|
1,418,755 |
1,408,451 |
1,397,194 |
|
Liabilities |
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Trade and other payables |
16 |
(58,770) |
(75,500) |
(55,638) |
|
Current income tax payable |
|
(4,478) |
(794) |
(2,288) |
|
Borrowings |
17 |
(53,713) |
(344,159) |
(85,306) |
|
Derivative financial instruments |
15 |
(397) |
(6,885) |
- |
|
Provision for close down and restoration costs |
|
(3,563) |
- |
- |
|
|
|
(120,921) |
(427,338) |
(143,232) |
|
Net current assets/(liabilities) |
|
168,309 |
(159,264) |
149,890 |
|
Non-current liabilities |
|
|
|
|
|
Borrowings |
17 |
(549,072) |
(271,783) |
(525,906) |
|
Derivative financial instruments |
15 |
(23,541) |
(16,190) |
(10,314) |
|
Deferred tax liabilities |
|
(116,289) |
(131,186) |
(119,028) |
|
Provision for close down and restoration costs |
|
(15,863) |
(17,271) |
(19,152) |
|
Financial liabilities |
20 |
(7,616) |
(10,206) |
(9,229) |
|
|
|
(712,381) |
(446,636) |
(683,629) |
|
Total liabilities |
|
(833,302) |
(873,974) |
(826,861) |
|
Net assets |
|
585,453 |
534,477 |
570,333 |
|
Equity |
|
|
|
|
|
Share capital |
18 |
48,920 |
48,920 |
48,920 |
|
Share premium |
|
518,142 |
518,142 |
518,142 |
|
Hedging reserve |
|
(5,728) |
(5,431) |
5,900
|
|
Other reserves |
|
(15,271) |
(18,897) |
(17,574) |
|
Retained earnings/(losses) |
|
21,940 |
(26,578) |
(1,502) |
|
Equity attributable to the shareholders of Petropavlovsk PLC |
|
568,003 |
516,156 |
553,886 |
|
Non-controlling interests |
|
17,450 |
18,321 |
16,447 |
|
Total equity |
|
585,453 |
534,477 |
570,333 |
(a) See note 2 for details regarding the restatement.
This condensed consolidated interim financial information was approved by the Directors on 11 September 2017.
Ian Ashby Andrey Maruta
Director Director
PETROPAVLOVSK PLC
Condensed Consolidated Statement of Changes in Equity
Six months ended 30 June 2017
|
|
|
|
|
|
|
||||||||
|
|
|
Total attributable to equity holders of Petropavlovsk PLC |
|
|
|||||||||
|
|
|
Share capital |
Share premium |
Own shares(a) |
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 |
||
|
Balance at 1 January 2016 |
|
48,874 |
518,142 |
(8,933) |
280 |
3,096 |
(20,985) |
(47,922) |
492,552 |
18,421 |
510,973 |
||
|
Correction of error in accounting for deferred tax liabilities (c) |
|
- |
- |
- |
- |
- |
- |
20,700 |
20,700 |
- |
20,700 |
||
|
Balance at 1 January 2016 (restated) |
|
48,874 |
518,142 |
(8,933) |
280 |
3,096 |
(20,985) |
(27,222) |
513,252 |
18,421 |
531,673 |
||
|
Total comprehensive (loss)/income |
|
- |
- |
- |
- |
(8,527) |
2,088 |
9,203 |
2,764 |
(100) |
2,664 |
||
|
Profit for the period |
|
- |
- |
- |
- |
- |
- |
9,203 |
9,203 |
20 |
9,223 |
||
|
Other comprehensive (loss)/income |
|
- |
- |
- |
- |
(8,527) |
2,088 |
- |
(6,439) |
(120) |
(6,559) |
||
|
Deferred share awards |
|
46 |
- |
8,933 |
(280) |
- |
- |
(8,559) |
140 |
- |
140 |
||
|
Balance at 30 June 2016 (unaudited) |
|
48,920 |
518,142 |
- |
- |
(5,431) |
(18,897) |
(26,578) |
516,156 |
18,321 |
534,477 |
||
|
Total comprehensive income/(loss) |
|
- |
- |
- |
- |
11,331 |
1,323 |
25,076 |
37,730 |
(1,874) |
35,856 |
||
|
Profit/ (loss) for the period |
|
- |
- |
- |
- |
- |
- |
24,516 |
24,516 |
(2,033) |
22,483 |
||
|
Other comprehensive income |
|
- |
- |
- |
- |
11,331 |
1,323 |
560 |
13,214 |
159 |
13,373 |
||
|
Balance at 31 December 2016 (restated) |
|
48,920 |
518,142 |
- |
- |
5,900 |
(17,574) |
(1,502) |
553,886 |
16,447 |
570,333 |
||
|
Total comprehensive (loss)/income |
|
- |
- |
- |
- |
(11,628) |
2,303 |
23,442 |
14,117 |
1,003 |
15,120 |
||
|
Profit for the period |
|
- |
- |
- |
- |
- |
- |
23,332 |
23,332 |
1,127 |
24,459 |
||
|
Other comprehensive (loss)/income |
|
- |
- |
- |
- |
(11,628) |
2,303 |
110 |
(9,215) |
(124) |
(9,339) |
||
|
Balance at 30 June 2017 (Unaudited) |
|
48,920 |
518,142 |
- |
- |
(5,728) |
(15,271) |
21,940 |
568,003 |
17,450 |
585,453 |
||
(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$(13.0) million (30 June 2016: US$(16.4) million, 31 December 2016: US$(15.6) million).
(c) See note 2 for details regarding the restatement
PETROPAVLOVSK PLC
Condensed Consolidated Cash Flow Statement
Six months ended 30 June 2017
|
|
note |
Six months ended 30 June 2017 (unaudited) US$'000 |
Six months ended 30 June 2016 (unaudited) US$'000 |
Year ended 31 December 2016
US$'000 |
- Cash flows from operating activities |
|
|
|
|
|
Cash generated from operations |
19 |
115,793 |
74,350 |
126,013 |
|
Interest paid |
|
(26,771) |
(25,136) |
(53,708) |
|
Income tax paid |
|
(14,420) |
(19,295) |
(35,305) |
|
Net cash from operating activities |
|
74,602 |
29,919 |
37,000 |
|
Cash flows from investing activities |
|
|
|
|
|
Proceeds from disposal of subsidiaries, net of cash disposed and liabilities settled |
|
- |
14,790 |
19,188 |
|
Proceeds from disposal of the Group's interests in associates |
|
- |
231 |
231 |
|
Purchase of property, plant and equipment |
|
(30,965) |
(4,331) |
(12,770) |
|
Exploration expenditure |
|
(10,867) |
(7,556) |
(16,590) |
|
Proceeds from disposal of property, plant and equipment |
|
155 |
561 |
742 |
|
Repayment of amounts loaned to other parties |
|
- |
1 |
1 |
|
Interest received |
|
383 |
193 |
540 |
|
Net cash used in investing activities |
|
(41,294) |
3,889 |
(8,658) |
|
Cash flows from financing activities |
|
|
|
|
|
Proceeds from borrowings |
|
- |
- |
295,250(a) |
|
Repayments of borrowings |
|
(11,630) |
(26,971) |
(322,221)(a) |
|
Debt transaction costs paid in connection with bank loans |
|
(1,674) |
(447) |
(4,031) |
|
Transaction costs |
|
- |
(2,695) |
- |
|
Funds advanced to the Group under investment agreement with the Russian Ministry of Far East Development |
22 |
- |
- |
30,771 |
|
Funds transferred under investment agreement with the Russian Ministry of Far East Development |
22 |
- |
(16,894) |
(47,665) |
|
Guarantee fee in connection with ICBC facility |
|
- |
1,126 |
1,126 |
|
Net cash used in financing activities |
|
(13,304) |
(45,881) |
(46,770) |
|
Net increase/(decrease) in cash and cash equivalents in the period |
|
20,004 |
(12,073) |
(18,428) |
|
Effect of exchange rates on cash and cash equivalents |
|
25 |
2,145 |
2,831 |
|
Cash and cash equivalents at beginning of period |
14 |
12,642 |
28,239 |
28,239 |
|
Cash and cash equivalents at end of period |
14 |
32,671 |
18,311 |
12,642 |
(a) Including US$295.25 million in connection to bank debt refinancing.
PETROPAVLOVSK PLC
Notes to the condensed consolidated interim financial statements
Six months ended 30 June 2017
- 1. General information
Petropavlovsk PLC (the 'Company') is a company incorporated and registered in England and Wales. The address of the registered office is 11 Grosvenor Place, London SW1X 7HH.
These condensed consolidated interim financial statements are for the six months ended 30 June 2017. The interim financial statements are unaudited.
The information for the year ended 31 December 2016 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. This information was derived from the statutory accounts for the year ended 31 December 2016, a copy of which has been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified.
The auditor's report did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006.
- 2. Basis of preparation and presentation
The annual financial statements of the Company and its subsidiaries (the "Group") for the year ended 31 December 2016 were prepared in accordance with International Financial Reporting Standards ("IFRS"s) as adopted by the European Union.
The condensed set of financial statements has been prepared using accounting policies consistent with those set out in the annual financial statements for the year ended 31 December 2016, with adoption of new and revised standards and interpretations as set out below, and in accordance with IAS 34 "Interim Financial Reporting", as adopted by the European Union.
Going concern
The Group monitors and manages its liquidity risk on an ongoing basis to ensure that it has access to sufficient funds to meet its obligations. Cash forecasts are produced regularly based on a number of inputs including, but not limited to, forecast commodity prices and impact of hedging arrangements, Group 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 Half Year Report for the period ended 30 June 2017. As at 30 June 2017, 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 September 2018 and expects to comply with related financial covenants. In the meantime, the Group's projections under a layered stressed case that is based on US$1,125/oz gold price, which is at the bottom end of market consensus forecasts, indicate that unless mitigating actions can be taken, there will be insufficient liquidity and non-compliance with certain covenants under a layered stressed case for the relevant period to September 2018. These mitigating actions include items within the control of the management, such as accessing deposits not currently in the Group's mining plan, cost cutting and reduction of capital expenditure subject to receipt of necessary consents. These actions would account for approximately 50% of the forecast shortfall under the layered stressed case. Furthermore, management would also pursue raising additional equity, refinancing the existing debt and/or divesting the shares in IRC including an immediate settlement of any amounts of the guarantee fee outstanding to fully mitigate any shortfalls. Management is also reasonably confident that necessary waivers or consents could be obtained from the senior lenders if necessary. 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 Group has guaranteed the outstanding amounts IRC owes to ICBC. The outstanding loan principal was US$234 million as at 30 June 2017. 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 were originally due for payment on 20 June 2017 and 20 December 2017, with the 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). Following the ramp up and commercial production at K&S, IRC management are forecasting that IRC will have sufficient capital through working capital to pay its financial obligations as and when they fall due in the foreseeable future and throughout the going concern period. However, if scheduled full commercial production of the K&S project is not achieved or the market conditions turn out to be significantly less favorable than predicted IRC's financial liquidity may be adversely impacted. IRC would then need to carry out contingency plans including entering into negotiations with banks or other investors for additional debt or equity financing.
Having taken into account the aforementioned factors and after making enquiries and considering the uncertainties described above, the Directors have a reasonable expectation that the Group will have adequate resources to continue in operational existence for the foreseeable future, being at least the next 12 months from the date of approval of the Half Year Report for the period ended 30 June 2017. Accordingly, they continue to adopt the going concern basis of accounting in preparing these consolidated financial statements.
Adoption of new and revised standards and interpretations
During the period the Group adopted all standards, amendments and interpretations that were effective for annual periods beginning on or after 1 January 2017 (such standards, amendments and interpretations were disclosed in note 2 to the Group's consolidated financial statements for the year ended 31 December 2016). These standards, amendments, and interpretations have not had a significant impact on the presentation or disclosure in Group's condensed consolidated financial statements for the interim period ended 30 June 2017. No other changes have been made to the Group's accounting policies in the period ended 30 June 2017. Additional disclosures with respect to the annual period requirements will be included in the Group's consolidated financial statements for the year ending 31 December 2017.
Areas of judgement in applying accounting policies and key sources of estimation uncertainty
When preparing the consolidated financial statements, management necessarily makes judgements and estimates that can have a significant impact on the financial statements. Areas of judgement in applying accounting policies and key sources of estimation uncertainty are consistent with those set out in the annual financial statements for the year ended 31 December 2016, with the addition of recognition of a contingent liability regarding mining tax concessions which is discussed further in note 23.
Correction of error in accounting for deferred tax liabilities
In 2017, the Group undertook a detailed review of implications of impairment provision recognised in relation to property, plant and equipment in prior periods on deferred taxation and concluded that deferred tax liability has been overstated. The error has been corrected by restating each of the affected financial statement line items for the prior periods as follows:
|
|
31 December 2016 |
(Decrease)/ increase |
31 December 2016 Restated |
1 January 2016 |
(Decrease)/ increase |
1 January 2016 Restated |
|
|
US$' 000 |
US$' 000 |
US$'000 |
US$'000 |
US$' 000 |
US$'000 |
|
Deferred tax liabilities |
139,728 |
(20,700) |
119,028 |
173,499 |
(20,700) |
152,799 |
|
Net assets |
549,633 |
20,700 |
570,333 |
510,973 |
20,700 |
531,673 |
|
Retained losses |
22,202 |
(20,700) |
1,502 |
47,922 |
(20,700) |
27,222 |
|
Total equity |
549,633 |
20,700 |
570,333 |
510,973 |
20,700 |
531,673 |
|
|
30 June 2016 |
(Decrease)/ increase |
30 June 2016 Restated |
1 January 2016 |
(Decrease)/ increase |
1 January 2016 Restated |
|
|
US$' 000 |
US$' 000 |
US$'000 |
US$'000 |
US$' 000 |
US$'000 |
|
Deferred tax liabilities |
151,886 |
(20,700) |
131,186 |
173,499 |
(20,700) |
152,799 |
|
Net assets |
513,777 |
20,700 |
534,477 |
510,973 |
20,700 |
531,673 |
|
Retained losses |
47,278 |
(20,700) |
26,578 |
47,922 |
(20,700) |
27,222 |
|
Total equity |
513,777 |
20,700 |
534,477 |
510,973 |
20,700 |
531,673 |
Presentation of the ICBC guarantee arrangements
As at 30 June 2017, the Group reviewed arrangements under the ICBC guarantee (note 20) and concluded it would be more appropriate to disclose associated receivable from IRC and financial liability under the ICBC guarantee contract on a gross basis. Assets and liabilities as at 31 December 2016 and 30 June 2016 have been re-presented accordingly as set out below. This re-presentation did not have any impact on the net assets, retained losses or total equity.
|
|
31 December 2016 |
Increase |
31 December 2016 Restated |
30 June 2016 |
Increase |
30 June 2016 Restated |
|
|
US$' 000 |
US$' 000 |
US$'000 |
US$'000 |
US$' 000 |
US$'000 |
|
Other non-current assets |
2,154 |
9,229 |
11,383 |
231 |
10,206 |
10,437 |
|
Financial liabilities |
- |
9,229 |
9,229 |
- |
10,206 |
10,206 |
- 3. Foreign currency translation
The following exchange rates to the US dollar have been applied to translate balances and transactions in foreign currencies:
|
|
As at 30 June 2017 |
Average six months ended 30 June 2017 |
As at 30 June |
Average six months ended 30 June 2016 |
As at 31 December |
Average year ended 31 December 2016 |
|
GB Pounds Sterling (GBP: US$) |
0.77 |
0.79 |
0.75 |
0.70 |
0.81 |
0.74 |
|
Russian Rouble (RUB: US$) |
59.09 |
57.93 |
64.26 |
70.54 |
60.66 |
67.18 |
- 4. Segment information
The Group's reportable segments under IFRS 8, which are aligned with its operating locations, were determined to be Pokrovskiy, Pioneer, Malomir and Albyn hard-rock gold mines which are engaged in gold and silver production as well as field exploration and mine development.
Corporate and Other segment amalgamates corporate administration, in-house geological exploration and construction and engineering expertise, engineering and scientific operations and other supporting in-house functions as well as various gold projects and other activities that do not meet the reportable segment criteria.
Reportable operating segments are based on the internal reports provided to the Chief Operating Decision Maker ('CODM') to evaluate segment performance, decide how to allocate resources and make other operating decisions and reflect the way the Group's businesses are managed and reported.
The financial performance of the segments is principally evaluated with reference to operating profit less foreign exchange impacts.
|
Six months ended 30 June 2017 |
Pioneer |
Pokrovskiy |
Malomir |
Albyn |
Corporate and other |
Consolidated |
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
Revenue |
|
|
|
|
|
|
|
Gold (a), (b) |
118,956 |
19,350 |
35,937 |
116,603 |
- |
290,846 |
|
Silver |
548 |
89 |
35 |
134 |
- |
806 |
|
Other external revenue |
- |
- |
- |
- |
12,397 |
12,397 |
|
Inter-segment revenue |
- |
- |
783 |
172 |
70,843 |
71,798 |
|
Intra-group eliminations |
- |
- |
(783) |
(172) |
(70,843) |
(71,798) |
|
Total Group revenue from external customers |
119,504 |
19,439 |
35,972 |
116,737 |
12,397 |
304,049 |
|
|
|
|
|
|
|
|
|
Operating expenses and income |
|
|
|
|
|
|
|
Operating cash costs |
(66,632) |
(19,897) |
(32,762) |
(37,897) |
(11,780) |
(168,968) |
|
Depreciation |
(14,933) |
(3,394) |
(7,450) |
(22,158) |
(32) |
(47,967) |
|
Central administration expenses |
- |
- |
- |
- |
(23,095) |
(23,095) |
|
Reversal of impairment/ (impairment) of ore stockpiles |
3,069 |
(63) |
(275) |
3,616 |
- |
6,347 |
|
Impairment of gold in circuit |
- |
(807) |
(633) |
- |
- |
(1,440) |
|
Impairment of non-trading loans |
- |
- |
- |
- |
(538) |
(538) |
|
Total operating expenses (c) |
(78,496) |
(24,161) |
(41,120) |
(56,439) |
(35,445) |
(235,661) |
|
Share of results of associates |
- |
- |
- |
- |
(2,965) |
(2,965) |
|
Segment result |
41,008 |
(4,722) |
(5,148) |
60,298 |
(26,013) |
65,423 |
|
|
|
|
|
|
|
|
|
Foreign exchange losses |
|
|
|
|
|
(504) |
|
Operating profit |
|
|
|
|
|
64,919 |
|
Investment income |
|
|
|
|
|
386 |
|
Interest expense |
|
|
|
|
|
(14,448) |
|
Other finance gains |
|
|
|
|
|
2,045 |
|
Other finance losses |
|
|
|
|
|
(6,138) |
|
Taxation |
|
|
|
|
|
(22,305) |
|
Profit for the period |
|
|
|
|
|
24,459 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
457,427 |
18,961 |
410,625 |
406,028 |
116,636 |
1,409,677 |
|
Unallocated cash |
|
|
|
|
|
9,003 |
|
Loans given |
|
|
|
|
|
75 |
|
Consolidated total assets |
|
|
|
|
|
1,418,755 |
(a) Including US$2.8 million contribution from the cash flow hedge.
(b) Heap leach operations at Pioneer and Pokrovskiy are seasonal with production skewed towards the second half of the year.
(c) Operating expenses less foreign exchange losses (note 5).
|
Six months ended 30 June 2016 |
Pioneer |
Pokrovskiy |
Malomir |
Albyn |
Corporate and other |
Consolidated |
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
Revenue |
|
|
|
|
|
|
|
Gold (d), (e) |
84,836 |
20,506 |
29,616 |
98,466 |
- |
233,424 |
|
Silver |
459 |
105 |
56 |
124 |
- |
744 |
|
Other external revenue |
- |
- |
- |
- |
19,785 |
19,785 |
|
Inter-segment revenue |
- |
- |
572 |
181 |
44,788 |
45,541 |
|
Intra-group eliminations |
- |
- |
(572) |
(181) |
(44,788) |
(45,541) |
|
Total Group revenue from external customers |
85,295 |
20,611 |
29,672 |
98,590 |
19,785 |
253,953 |
|
|
|
|
|
|
|
|
|
Operating expenses and income |
|
|
|
|
|
|
|
Operating cash costs |
(41,809) |
(14,038) |
(22,687) |
(51,860) |
(18,968) |
(149,362) |
|
Depreciation |
(21,899) |
(3,136) |
(8,414) |
(25,599) |
(241) |
(59,289) |
|
Central administration expenses |
- |
- |
- |
- |
(13,096) |
(13,096) |
|
Reversal of impairment of ore stockpiles |
4,730 |
631 |
5,903 |
1,003 |
- |
12,267 |
|
Loss on disposal of subsidiaries |
- |
- |
- |
- |
(791) |
(791) |
|
Total operating expenses (f) |
(58,978) |
(16,543) |
(25,198) |
(76,456) |
(33,096) |
(210,271) |
|
Share of results of associates |
- |
- |
- |
- |
(3,563) |
(3,563) |
|
Segment result |
26,317 |
4,068 |
4,474 |
22,134 |
(16,874) |
40,119 |
|
|
|
|
|
|
|
|
|
Foreign exchange losses |
|
|
|
|
|
(5,883) |
|
Operating profit |
|
|
|
|
|
34,236 |
|
Investment income |
|
|
|
|
|
200 |
|
Interest expense |
|
|
|
|
|
(30,479) |
|
Other finance gains |
|
|
|
|
|
2,334 |
|
Other finance losses |
|
|
|
|
|
(1,506) |
|
Taxation |
|
|
|
|
|
4,438 |
|
Profit for the period |
|
|
|
|
|
9,223 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
435,925 |
45,600 |
386,592 |
409,662 |
122,128 |
1,399,907 |
|
Unallocated cash |
|
|
|
|
|
7,980 |
|
Loans given |
|
|
|
|
|
564 |
|
Consolidated total assets |
|
|
|
|
|
1,408,451 |
(d) Including US$(5.5) million net cash settlement paid by the Group under the cash flow hedge.
(e) Heap leach operations at Pioneer and Pokrovskiy are seasonal with production skewed towards the second half of the year.
(f) Operating expenses less foreign exchange losses (note 5).
|
Year ended 31 December 2016 |
Pioneer |
Pokrovskiy |
Malomir |
Albyn |
Corporate and other |
Consolidated |
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
Revenue |
|
|
|
|
|
|
|
Gold (g) |
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 (h) |
(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 |
|
|
|
|
|
31,706 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
444,611 |
19,724 |
402,878 |
390,646 |
133,894 |
1,391,753 |
|
Unallocated cash |
|
|
|
|
|
4,843 |
|
Loans given |
|
|
|
|
|
598 |
|
Consolidated total assets |
|
|
|
|
|
1,397,194 |
(g) Including US$(8.5) million net cash settlement paid by the Group under the cash flow hedge.
(h) Operating expenses less foreign exchange losses (note 5).
- 5. Operating expenses and income
|
|
Six months ended 30 June 2017 US$'000 |
Six months ended 30 June 2016 US$'000 |
Year ended 31 December 2016 US$'000 |
|
Net operating expenses (a) |
216,935 |
208,651 |
419,519 |
|
Impairment of exploration and evaluation assets |
- |
- |
9,155 |
|
(Reversal of impairment)/ impairment of ore stockpiles (a) |
(6,347) |
(12,267) |
1,163 |
|
Impairment of gold in circuit |
1,440 |
- |
- |
|
Central administration expenses (a) |
23,095 |
13,096 |
32,623 |
|
Foreign exchange losses |
504 |
5,883 |
5,158 |
|
Impairment of non-trading loans |
538 |
- |
- |
|
Gain on disposal of non-trading loans |
- |
- |
(6,724) |
|
Loss/(gain) on disposal of subsidiaries |
- |
791 |
(791) |
|
|
236,165 |
216,154 |
460,103 |
(a) As set out below.
Net operating expenses
|
|
Six months ended 30 June 2017 US$'000 |
Six months ended 30 June 2016 US$'000 |
Year ended 31 December 2016 US$'000 |
|
Depreciation |
47,967 |
59,289 |
105,252 |
|
Staff costs |
38,196 |
29,009 |
63,022 |
|
Materials |
50,984 |
44,424 |
100,638 |
|
Fuel |
20,950 |
19,224 |
40,621 |
|
External services |
17,571 |
13,516 |
25,619 |
|
Mining tax |
- |
14,226 |
14,713 |
|
Electricity |
14,958 |
10,651 |
23,305 |
|
Smelting and transportation costs |
434 |
332 |
699 |
|
Movement in ore stockpiles, deferred stripping, work in progress and bullion in process attributable to gold production |
3,098 |
(10,808) |
(22,475) |
|
Taxes other than on income |
3,156 |
3,187 |
6,352 |
|
Insurance |
4,309 |
2,937 |
6,409 |
|
Professional fees |
855 |
456 |
877 |
|
Office costs |
142 |
139 |
324 |
|
Operating lease rentals |
1,933 |
477 |
3,173 |
|
Business travel expenses |
540 |
617 |
1,434 |
|
Provision for impairment of trade and other receivables |
348 |
141 |
282 |
|
Bank charges |
122 |
87 |
205 |
|
Goods for resale |
4,303 |
8,980 |
24,186 |
|
Other operating expenses |
10,210 |
11,343 |
25,231 |
|
Other (income)/ expenses |
(3,141) |
424 |
(348) |
|
|
216,935 |
208,651 |
419,519 |
Central administration expenses
|
|
Six months ended 30 June 2017 US$'000 |
Six months ended 30 June 2016 US$'000 |
Year ended 31 December 2016 US$'000 |
|
Staff costs |
13,946 |
8,744 |
17,067 |
|
Professional fees |
4,674 |
616 |
8,214 |
|
Insurance |
393 |
412 |
789 |
|
Operating lease rentals |
965 |
926 |
1,893 |
|
Business travel expenses |
605 |
419 |
881 |
|
Office costs |
268 |
246 |
489 |
|
Other |
2,244 |
1,733 |
3,290 |
|
|
23,095 |
13,096 |
32,623 |
- Impairment charges
Impairment of mining assets
The Group undertook an impairment review of the tangible assets attributable to the gold mining projects and the supporting in-house service companies and concluded no impairment was required as at 30 June 2017.
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:
|
|
Six months ended 30 June 2017 |
Year ended 31 December 2016 |
|
Long-term gold price |
US$1,265/oz |
US$1,200/oz |
|
Discount rate (a) |
8% |
8% |
|
RUB/US$ exchange rate |
RUB60.0/US$ |
RUB60.0/US$ |
(a) Being the post-tax real weighted average cost of capital
Impairment of ore stockpiles
The Group assessed the recoverability of the carrying value of ore stockpiles and recorded reversals of impairment/ impairment charges as set out below:
|
|
Six months ended 30 June 2017 |
|
Six months ended 30 June 2016 |
||||
|
|
Pre-tax (reversal of impairment)/ impairment charge |
Taxation |
Post-tax (reversal of impairment)/ impairment charge |
|
Pre-tax reversal of impairment |
Taxation |
Post-tax reversal of impairment |
|
|
US$'000 |
US$'000 |
US$'000 |
|
US$'000 |
US$'000 |
US$'000 |
|
Pokrovskiy |
63 |
(13) |
50 |
|
(631) |
126 |
(505) |
|
Pioneer |
(3,069) |
613 |
(2,456) |
|
(4,730) |
945 |
(3,785) |
|
Malomir |
275 |
(55) |
220 |
|
(5,903) |
1,181 |
(4,722) |
|
Albyn |
(3,616) |
723 |
(2,893) |
|
(1,003) |
201 |
(802) |
|
|
(6,347) |
1,268 |
(5,079) |
|
(12,267) |
2,453 |
(9,814) |
- 6. Financial income and expenses
|
|
|
|
||
|
|
Six months ended 30 June 2017 US$'000 |
Six months ended 30 June 2016 US$'000 |
Year ended 31 December 2016 US$'000 |
|
|
Investment income |
|
|
|
|
|
Interest income |
386 |
200 |
556 |
|
|
|
386 |
200 |
556 |
|
|
Interest expense |
|
|
|
|
|
Interest on bank loans |
(24,338) |
(24,527) |
(48,934) |
|
|
Interest on convertible bonds |
(6,015) |
(5,865) |
(11,867) |
|
|
|
(30,353) |
(30,392) |
(60,801) |
|
|
Interest capitalised |
16,037 |
- |
- |
|
|
Unwinding of discount on environmental obligation |
(132) |
(87) |
(175) |
|
|
|
(14,448) |
(30,479) |
(60,976) |
|
|
Other finance gains |
|
|
|
|
|
Fair value gain on derivative financial instruments (a) |
- |
- |
7,434 |
|
|
Financial guarantee fee (b) |
2,045 |
2,334 |
4,542 |
|
|
|
2,045 |
2,334 |
11,976 |
|
|
Other finance losses |
|
|
|
|
|
Loss on bank debt refinancing |
(388) |
- |
(1,548) |
|
|
Fair value loss on derivative financial instruments (a) |
(5,750) |
(1,506) |
- |
|
|
|
(6,138) |
(1,506) |
(1,548) |
|
(a) Result from re-measurement of the conversion option of the Convertible Bonds to fair value (note 17).
(b) Note 20.
- 7. Taxation
|
|
|
|
|
|
|
Six months ended 30 June 2017 |
Six months ended 30 June 2016 |
Year ended 31 December 2016 |
|
|
US$'000 |
US$'000 |
US$'000 |
|
Current tax |
|
|
|
|
Russian current tax |
19,918 |
15,021 |
29,788 |
|
|
19,918 |
15,021 |
29,788 |
|
Deferred tax |
|
|
|
|
Origination/(reversal) of timing differences (a) |
2,387 |
(19,459) |
(34,486) |
|
Total tax charge/(credit) |
22,305 |
(4,438) |
(4,698) |
(a) Including effect of foreign exchange movements in respect of deductible temporary differences of US$(4.5) million (six months ended 30 June 2016: US$(17.6) million, year ended 31 December 2016: US$(26.0) million) which primarily arises as the tax base for a significant portion of the future taxable deductions in relation to the Group's property, plant and equipment are denominated in Russian Rouble whilst the future depreciation charges associated with these assets will be based on their US Dollar carrying value and reflects the movements in the Russian Rouble to the US Dollar exchange rate.
- 8. Earnings per share
|
|
|
|
||
|
|
Six months ended 30 June 2017 |
Six months ended 30 June 2016 |
Year ended 31 December 2016 |
|
|
|
US$'000 |
US$'000 |
US$'000 |
|
|
Profit for the period attributable to equity holders of Petropavlovsk PLC |
23,332 |
9,203 |
33,719 |
|
|
Interest expense on convertible bonds |
6,015 |
-(a) |
-(a) |
|
|
Profit used to determine diluted earnings per share |
29,347 |
9,203 |
33,719 |
|
|
|
No of shares |
No of shares |
No of shares |
|
|
Weighted average number of Ordinary Shares |
3,303,768,532 |
3,300,501,688 |
3,302,148,536 |
|
|
Adjustments for dilutive potential Ordinary Shares |
798,005,000 |
-(a) |
-(a) |
|
|
Weighted average number of Ordinary Shares for diluted earnings per share |
4,101,773,532 |
3,300,501,688 |
3,302,148,536 |
|
|
|
US$ |
US$ |
US$ |
|
|
Basic profit per share |
0.01 |
0.00 |
0.01 |
|
|
Diluted profit per share |
0.01 |
0.00 |
0.01 |
|
(a) Convertible bonds which could potentially dilute basic profit per ordinary share in the future are not included in the calculation of diluted profit per share because they were anti-dilutive for the six months ended 30 June 2016 and the year ended 31 December 2016.
- 9. Exploration and evaluation assets
|
|
|
Flanks of Pokrovskiy |
Flanks of Albyn |
Malomir |
Total |
|
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
At 1 January 2017 |
|
3,173 |
33,949 |
12,148 |
49,270 |
|
Additions |
|
3,196 |
388 |
35 |
3,619 |
|
At 30 June 2017 |
|
6,369 |
34,337 |
12,183 |
52,889 |
- 10. Property, plant and equipment
|
|
|
Mining assets |
Non-mining assets |
Capital construction in progress (a) |
Total |
|
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
Cost |
|
|
|
|
|
|
At 1 January 2017 |
|
1,875,341 |
193,554 |
332,962 |
2,401,857 |
|
Additions |
|
18,972 |
750 |
10,436 |
30,158 |
|
Interest capitalised |
|
- |
- |
16,037 |
16,037 |
|
Close down and restoration cost capitalised |
|
143 |
- |
- |
143 |
|
Transfers from capital construction in progress |
|
15,425 |
345 |
(15,770) |
- |
|
Disposals |
|
(3,641) |
(1,854) |
(39) |
(5,534) |
|
Reallocation and other transfers |
|
1,685 |
(2,251) |
566 |
- |
|
Foreign exchange differences |
|
- |
616 |
- |
616 |
|
At 30 June 2017 |
|
1,907,925 |
191,160 |
344,192 |
2,443,277 |
|
|
|
|
|
|
|
|
Accumulated depreciation and impairment |
|
|
|
|
|
|
At 1 January 2017 |
|
1,267,822 |
173,757 |
6,484 |
1,448,063 |
|
Charge for the year |
|
46,582 |
1,751 |
- |
48,333 |
|
Disposals |
|
(3,401) |
(2,356) |
(2) |
(5,759) |
|
Reallocation and other transfers |
|
150 |
(150) |
- |
- |
|
Foreign exchange differences |
|
- |
507 |
- |
507 |
|
At 30 June 2017 |
|
1,311,153 |
173,509 |
6,482 |
1,491,144 |
|
Net book value |
|
|
|
|
|
|
At 1 January 2017 (b) |
|
607,519 |
19,797 |
326,478 |
953,794 |
|
At 30 June 2017 (b) |
|
596,772 |
17,651 |
337,710 |
952,133 |
(a) Including US$241.3 million costs associated with the POX Hub project (31 December 2016: US$224.1 million).
(b) Property, plant and equipment with a net book value of US$103.5 million (30 June 2016: US$117.2 million, 31 December 2016: US$110.0 million) have been pledged to secure borrowings of the Group.
- 11. Investments in associates
|
|
Six months ended 30 June 2017 |
Six months ended 30 June 2016 |
Year ended 31 December 2016 |
|
|
US$'000 |
US$'000 |
US$'000 |
|
IRC Limited ('IRC') |
33,285 |
35,600 |
36,140 |
|
|
33,285 |
35,600 |
36,140 |
Summarised financial information for those associates that are material to the Group is set out below.
|
|
IRC |
IRC |
IRC |
|
|
Six months ended 30 June 2017 |
Six months ended 30 June 2016 |
Year ended 31 December 2016 |
|
|
US$'000 |
US$'000 |
US$'000 |
|
Non-current assets |
|
|
|
|
Exploration and evaluation assets |
7,130 |
6,811 |
6,966 |
|
Property, plant and equipment |
245,229 |
215,979 |
246,191 |
|
Prepayments for property, plant and equipment |
87,879 |
88,377 |
87,499 |
|
Other non-current assets |
4,872 |
2,117 |
4,773 |
|
|
345,110 |
313,284 |
345,429 |
|
Current assets |
|
|
|
|
Cash and cash equivalents |
15,612 |
24,578 |
31,342 |
|
Other current assets |
41,864 |
35,631 |
44,184 |
|
|
57,476 |
60,209 |
75,526 |
|
Current liabilities |
|
|
|
|
Borrowings (a) |
31,689 |
42,790 |
66,147 |
|
Other current liabilities |
32,163 |
18,211 |
21,414 |
|
|
63,852 |
61,001 |
87,561 |
|
Non-current liabilities |
|
|
|
|
Borrowings (a) |
191,496 |
196,434 |
177,239 |
|
Other non-current liabilities |
31,854 |
13,098 |
34,431 |
|
|
223,350 |
209,532 |
211,670 |
|
Net assets |
115,384 |
102,960 |
121,724 |
(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 (notes 20) and is repayable semi-annually in 16 instalments US$21.25 thousand 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 30 June 2017 (30 June 2016: US$255 million and 31 December 2016: US$233.75 million). The loan is carried at amortised cost with effective interest rate at 6.3% per annum. 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$1.98 million remained in the DSRA as at 30 June 2017 without replenishment. ICBC Facility Agreement contains certain financial covenants to which ICBC has agreed to grant a waiver until 31 December 2017, inclusive. As at 30 June 2017 and 31 December 2016, the Group's entire 31.1% ownership in the issued capital of IRC was pledged to ICBC as security for the obligations of the Company as guarantor and in consideration for the waiver of financial covenants under the ICBC facility.
|
|
IRC |
IRC |
IRC |
|
|
Six months ended 30 June 2017 |
Six months ended 30 June 2016 |
Year ended 31 December 2016 |
|
Revenue |
51,253 |
16,147 |
16,467 |
|
Net operating expenses |
(51,048) |
(26,734) |
(34,503) |
|
including |
|
|
|
|
Depreciation |
(4,017) |
(433) |
(1,155) |
|
Impairment of mining assets |
(243) |
- |
- |
|
Impairment of ore stockpiles |
- |
- |
(841) |
|
Impairment of investments in joint ventures |
(4) |
(147) |
(47) |
|
Foreign exchange losses |
(306) |
(2,300) |
(3,440) |
|
Investment income |
65 |
276 |
413 |
|
Interest expense |
(9,739) |
(635) |
(1,189) |
|
Taxation |
(64) |
1,002 |
(315) |
|
Loss for the period |
(9,533) |
(9,944) |
(19,127) |
|
Other comprehensive profit |
355 |
1,254 |
1,555 |
|
Total comprehensive loss |
(9,178) |
(8,690) |
(17,572) |
- 12. Inventories
|
|
30 June 2017 |
30 June 2016 |
31 December 2016 |
|
|
US$'000 |
US$'000 |
US$'000 |
|
Current |
|
|
|
|
Construction materials |
6,031 |
5,923 |
5,072 |
|
Stores and spares |
59,303 |
51,984 |
57,699 |
|
Ore in stockpiles (a), (c) |
33,175 |
22,475 |
17,104 |
|
Gold in circuit |
40,887 |
66,583 |
70,996 |
|
Deferred stripping costs |
34,250 |
24,177 |
26,187 |
|
Bullion in process |
1,861 |
1,530 |
1,189 |
|
Other |
5,262 |
14,287 |
5,019 |
|
|
180,769 |
186,959 |
183,266 |
|
Non-current |
|
|
|
|
Ore in stockpiles (a), (b), (c) |
51,857 |
54,459 |
51,686 |
|
Deferred stripping costs |
16,632 |
- |
- |
|
|
68,489 |
54,459 |
51,686 |
(a) Note 5.
(b) Ore in stockpiles that is not planned to be processed within twelve months after the reporting period.
(c) As at 30 June 2017, ore in stockpiles include balances in the aggregate of US$17.8 million carried at net realisable value (31 December 2016: US$45.5 million, 30 June 2016: US$16.0 million).
- 13. Trade and other receivables
|
|
30 June 2017 |
30 June 2016 |
31 December 2016 |
|
|
US$'000 |
US$'000 |
US$'000 |
|
VAT recoverable |
32,596 |
30,812 |
30,265 |
|
Advances to suppliers |
14,478 |
8,959 |
11,394 |
|
Trade receivables |
5,109 |
5,942 |
6,160 |
|
Other debtors |
22,946 |
17,091 |
41,917 |
|
|
75,129 |
62,804 |
89,736 |
- 14. Cash and cash equivalents
|
|
30 June 2017 |
30 June 2016 |
31 December 2016 |
|
|
US$'000 |
US$'000 |
US$'000 |
|
Cash at bank and in hand |
32,512 |
18,155 |
10,284 |
|
Short-term bank deposits |
159 |
156 |
2,358 |
|
|
32,671 |
18,311 |
12,642 |
- 15. Derivative financial instruments
|
|
30 June 2017 |
|
30 June 2016 |
|
31 December 2016 |
|||
|
|
Assets |
Liabilities |
|
Assets |
Liabilities |
|
Assets |
Liabilities |
|
|
US$'000 |
US$'000 |
|
US$'000 |
US$'000 |
|
US$'000 |
US$'000 |
|
Forward gold contracts - cash flow hedge (a), (b), (c) |
661 |
(7,873) |
|
- |
(6,885) |
|
7,478 |
- |
|
Call Option over the Company's shares (d) |
- |
(2,965) |
|
- |
- |
|
- |
(3,064) |
|
Conversion option (e), (f) |
- |
(13,100) |
|
- |
(16,190) |
|
- |
(7,250) |
|
|
661 |
(23,938) |
|
- |
(23,075) |
|
7,478 |
(10,314) |
(a) Forward contracts to sell an aggregate of 500,002 ounces of gold at an average price of US$1,252 per ounce are outstanding as at 30 June 2017 (30 June 2016: 118,723 ounces at an average price of US$1,269 per ounce, 31 December 2016: 50,006 ounces of gold at an average price of US$1,303 per ounce).
(b) Measured at fair value and considered as Level 2 of the fair value hierarchy which valuation incorporates the following inputs:
- gold forward curves observable at quoted intervals; and
- observable credit spreads.
(c) The hedged forecast transactions are expected to occur at various dates during the period to December 2019.
Gain and losses recognised in the hedging reserve in equity as at the reporting date will be recognised in the income statement in the periods during which the hedged gold sale transactions affect the income statement.
There was no ineffectiveness to be recorded from the cash flow hedge during the six months ended 30 June 2017 and 2016 and the year ended 31 December 2016.
(d) Cash settled call option issued in relation to 3.6 per cent. of the outstanding aggregate ordinary share capital in the Company exercisable between December 2019 and March 2023 at strike price of £0.068.
(e) Note 17.
(f) Measured at fair value and considered as Level 2 of the fair value hierarchy which valuation incorporates the following inputs:
- the Group's credit risk;
- historic share price volatility;
- the conversion price;
- time to maturity; and
- risk free rate.
- 16. Trade and other payables
|
|
|
30 June 2017 |
30 June 2016 |
31 December 2016 |
|
|
|
US$'000 |
US$'000 |
US$'000 |
|
Trade payables |
|
22,656 |
36,014 |
25,068 |
|
Advances from customers |
|
511 |
1,847 |
2,148 |
|
Advances received on resale and commission contracts (a) |
|
2,363 |
9,715 |
1,847 |
|
Accruals and other payables |
|
33,240 |
27,924 |
26,575 |
|
|
|
58,770 |
75,500 |
55,638 |
(a) Amounts included in advances received on resale and commission contracts at 30 June 2017, 30 June 2016 and 31 December 2016 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.
The Directors consider that the carrying amount of trade and other payables approximates their fair value.
- 17. Borrowings
|
|
30 June 2017 |
30 June 2016 |
31 December 2016 |
|
|
US$'000 |
US$'000 |
US$'000 |
|
Borrowings at amortised cost |
|
|
|
|
Convertible Bonds (a), (b) |
89,885 |
86,867 |
88,369 |
|
Bank loans (c) |
512,900 |
529,075 |
522,843 |
|
|
602,785 |
615,942 |
611,212 |
|
|
|
|
|
|
Amount due for settlement within 12 months |
53,713 |
344,159 |
85,306 (c) |
|
Amount due for settlement after 12 months |
549,072 |
271,783 |
525,906 |
|
|
602,785 |
615,942 |
611,212 |
(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. [If the Company's share price exceeds 150% of the strike price then the Company will have the right to repay the Convertible Bonds early, therefore the fair value of the conversion option is capped.]
(b) As at 30 June 2017, the fair value of debt component of the convertible bonds, considered as Level 2 of the fair value hierarchy, amounted to US$100.4 million (30 June 2016: US$95.2 million, 31 December 2016: US$97.3 million). Valuation incorporates the following inputs: the Group's credit risk, time to maturity and risk free rate.
As at 30 June 2017, 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$113.5 million (30 June 2016: US$110.0 million, 31 December 2016: US$103.9 million).
(c) The carrying value of the bank loans approximated their fair value at each period end.
- 18. Share capital
|
|
30 June 2017 |
|
30 June 2016 |
|
31 December 2016 |
|||
|
|
No of shares |
US$'000 |
|
No of shares |
US$'000 |
|
No of shares |
US$'000 |
|
Allotted, called up and fully paid |
|
|
|
|
|
|
|
|
|
At the beginning of the period |
3,303,768,532 |
48,920 |
|
3,300,561,697 |
48,874 |
|
3,300,561,697 |
48,874 |
|
Issued during the period |
- |
- |
|
3,206,835 |
46 |
|
3,206,835 |
46 |
|
At the end of the period |
3,303,768,532 |
48,920 |
|
3,303,768,532 |
48,920 |
|
3,303,768,532 |
48,920 |
The Company has one class of ordinary shares which carry no right to fixed income.
- 19. Notes to the cash flow statement
Reconciliation of profit before tax to operating cash flow
|
|
Six months ended 30 June 2017 |
Six months ended 30 June 2016 |
Year ended 31 December 2016 |
|
|
US$'000 |
US$'000 |
US$'000 |
|
Profit before tax |
46,764 |
4,785 |
27,008 |
|
Adjustments for: |
|
|
|
|
Share of results of associates |
2,965 |
3,563 |
3,581 |
|
Investment income |
(386) |
(200) |
(556) |
|
Interest expense |
14,448 |
30,479 |
60,976 |
|
Other finance gains |
(2,045) |
(2,334) |
(11,976) |
|
Other finance losses |
6,138 |
1,506 |
1,548 |
|
Share based payments |
- |
140 |
140 |
|
Depreciation |
47,967 |
59,289 |
105,252 |
|
Impairment of exploration and evaluation assets |
- |
- |
9,155 |
|
(Reversal of impairment)/ impairment of ore stockpiles |
(6,347) |
(12,267) |
1,163 |
|
Impairment of gold in circuit |
1,440 |
- |
- |
|
Effect of processing previously impaired stockpiles |
(9,900) |
(7,536) |
(7,536) |
|
Provision for impairment of trade and other receivables |
348 |
141 |
282 |
|
(Gain)/loss on disposals of property, plant and equipment |
(380) |
2,148 |
2,431 |
|
Loss/(gain) on disposal of subsidiaries |
- |
791 |
(791) |
|
Foreign exchange losses |
504 |
5,883 |
5,158 |
|
Impairment of non-trading loans |
538 |
- |
- |
|
Gain on disposal of non-trading loans |
- |
- |
(6,724) |
|
Other non-cash items |
246 |
(1,223) |
177 |
|
Changes in working capital: |
|
|
|
|
Decrease/(increase) in trade and other receivables |
11,493 |
(2,066) |
(25,828) |
|
Decrease in inventories |
415 |
7,922 |
298 |
|
Increase/(decrease) in trade and other payables |
1,585 |
(16,671) |
(37,745) |
|
Net cash generated from operations |
115,793 |
74,350 |
126,013 |
Non-cash transactions
There were no significant non-cash transactions during the six months ended 30 June 2017 and 30 June 2016 and the year ended 31 December 2016.
- 20. Related parties
Related parties the Group entered into transactions with during the reporting period
PJSC Asian-Pacific Bank ('Asian-Pacific Bank'), LLC Insurance Company Helios Reserve ('Helios') and Peter Hambro Limited are considered to be related parties as members of key management have an interest in and collectively exercise significant influence over these entities until 22 June 2017 when the Group lost significant influence over these companies.
The Petropavlovsk Foundation for Social Investment (the 'Petropavlovsk Foundation') is considered to be a related party due to the participation of the key management of the Group in the governing board of the Petropavlovsk Foundation and their presence in its board of guardians.
IRC Limited and its subsidiaries are associates to the Group and hence are related parties since 7 August 2015.
Transactions with related parties the Group entered into during the six months ended 30 June 2017 and 30 June 2016 and the year ended 31 December 2016 are set out below.
Trading Transactions
Related party transactions the Group entered into that relate to the day-to-day operation of the business are set out below.
|
|
Sales to related parties |
|
Purchases from related parties |
||||||
|
|
Six months ended 30 June 2017 US$'000 |
Six months ended 30 June 2016 US$'000 |
Year ended 31 December 2016 US$'000 |
|
Six months ended 30 June 2017 US$'000 |
Six months ended 30 June 2016 US$'000 |
Year ended 31 December 2016 US$'000 |
|
|
|
Asian-Pacific Bank |
|
|
|
|
|
|
|
|
|
|
Other |
3 |
12 |
22 |
|
35 |
39 |
102 |
|
|
|
|
3 |
12 |
22 |
|
35 |
39 |
102 |
|
|
|
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 |
- |
98 |
66 |
|
836 |
1,786 |
3,514 |
|
|
|
Associates |
|
|
|
|
|
|
|
|
|
|
IRC Limited and its subsidiaries |
43 |
24 |
69 |
|
1,559 |
950 |
1,996 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43 |
122 |
135 |
|
2,395 |
2,736 |
5,510 |
|
|
During the six months ended 30 June 2017, the Group made US$0.1 million charitable donations to the Petropavlovsk Foundation (six months ended 30 June 2016: US$0.1 million and year ended 31 December 2016: US$0.2 million).
The outstanding balances with related parties at 30 June 2017, 30 June 2016 and 31 December 2016 are set out below.
|
|
Amounts owed by related parties |
|
Amounts owed to related parties |
||||
|
|
30 June 2017 |
30 June 2016 |
31 December 2016 |
|
30 June 2017 |
30 June 2016 |
31 December 2016 |
|
|
US$'000 |
US$'000 |
US$'000 |
|
US$'000 |
US$'000 |
US$'000 |
|
Helios and other entities in which key management have interest and exercises a significant influence or control (b) |
233 |
1,318 |
1,383 |
|
- |
- |
1 |
|
Asian-Pacific Bank (b) |
- |
- |
1 |
|
- |
- |
- |
|
IRC Limited and its subsidiaries |
2,072 |
2,073 |
14,502(a) |
|
1,626 |
1,320 |
1,704 |
|
|
2,305 |
3,391 |
15,886 |
|
1,626 |
1,320 |
1,705 |
(a) Including US$12.5 million advanced to IRC in December 2016. This balance was fully repaid in January 2017.
(b) PJSC Asian-Pacific Bank ("Asian-Pacific Bank"), LLC Insurance Company Helios Reserve ("Helios") and Peter Hambro Limited ceased being related parties to the Group from 22 June 2017.
Banking arrangements
The Group has current and deposit bank accounts with Asian-Pacific Bank.
The bank balances at 30 June 2017, 30 June 2016 and 31 December 2016 are set out below.
|
|
30 June 2017 |
30 June 2016 |
31 December 2016 |
|
|
US$'000 |
US$'000 |
US$'000 |
|
Asian-Pacific Bank |
-(c) |
2,739 |
629 |
(c) PJSC Asian-Pacific Bank ("Asian-Pacific Bank") ceased being related party to the Group from 22 June 2017.
Financing transactions
The Group has charged a fee for the provision of the guarantee to IRC (note 11), equal to 1.75% on the outstanding loan amount under the ICBC Facility Agreement and which amounted to US$2.0 million during the six months ended 30 June 2017 (six months ended 30 June 2016: US$2.3 million; year ended 31 December 2016: US$4.5 million). The Guarantee fee outstanding amounted to US$5.5 million (31 December 2016: US$3.4 million).
Key management compensation
Key management personnel, comprising a group of 14 (30 June 2016: 15 and 31 December 2016: 15) individuals, including Executive and Non-Executive Directors of the Company and members of senior management, are those having authority and responsibility for planning, directing and controlling the activities of the Group.
|
|
Six months ended 30 June 2017 |
Six months ended 30 June 2016 |
Year ended 31 December 2016 |
|
|
US$'000 |
US$'000 |
US$'000 |
|
Wages and salaries |
4,872 |
2,744 |
6,103 |
|
Pension costs |
86 |
96 |
182 |
|
Share-based compensation |
- |
140 |
610 |
|
|
4,958 |
2,980 |
6,895 |
- 21. Analysis of net debt
|
|
At 1 January 2017 |
Net cash movement |
Exchange movement |
Non-cash changes |
At 30 June 2017 |
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
Cash and cash equivalents |
12,642 |
20,004 |
25 |
- |
32,671 |
|
Borrowings |
(611,212) |
38,607 |
- |
(30,180) |
(602,785) |
|
Net debt |
(598,570) |
58,611 |
25 |
(30,180) (a) |
(570,114) |
(a) Being amortisation of borrowings and the effect of the bank debt refinancing (note 17).
|
|
At 1 January 2016 |
Disposal of subsidiaries |
Net cash Movement |
Exchange movement |
Non-cash changes |
At 31 December 2016 |
|
|
US$'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 22).
(b) Being amortisation of borrowings and the effect of the bank debt refinancing (note 17).
- 22. Capital commitments
At 30 June 2017, the Group had entered into contractual commitments for the acquisition of property, plant and equipment and mine development costs in relation to POX Hub project amounting to US$12.7 million (30 June 2016: US$1.0 million, 31 December 2016: US$3.8 million).
Investment agreement with the Russian Ministry of Far East Development
On 14 December 2015, the Group entered into an investment agreement with the Russian Ministry of Far East Development (the 'Investment Agreement'). The Investment Agreement involves provision of RUB5.5 billion (an equivalent to c.US$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 RUB1.1 billion (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. During the six months ended 30 June 2017 the Group did not receive and made no transfers of funds under the Investment Agreement.
23. Contingent liabilities
The Group applies a two years mining tax concession since 1 July 2016 in its capacity of a participant to the Regional investment project in accordance with the Russian Federal Law 144-FZ dated 25 May 2016. The position of the Russian tax authorities is that the effective date for the aforementioned concession should be 1 January 2017 and, accordingly, the Group should be liable for the mining tax of approximately RUB1 billion (an equivalent of approximately US$16.9 million as at 30 June 2017) for the six month period to 31 December 2016. The matter is currently being considered by the courts. To date decisions made by the Tribunal which took place in May 2017 and the Court of Appeal which took place in August 2017 have not been in favour of the Group. The Group continues to consider its interpretation of relevant tax legislation and tax filing position are appropriate and has filed an appeal to the Cassation Court accordingly.
- 24. Reconciliation of non-GAAP measures (unaudited)
|
|
Six months ended 30 June 2017 US$'000 |
Six months ended 30 June 2016 US$'000 |
Year ended 31 December 2016 US$'000 |
|
Profit for the period |
24,459 |
9,223 |
31,706 |
|
Add/(less): |
|
|
|
|
Investment income |
(386) |
(200) |
(556) |
|
Interest expense |
14,448 |
30,479 |
60,976 |
|
Other finance gains |
(2,045) |
(2,334) |
(11,976) |
|
Other finance losses |
6,138 |
1,506 |
1,548 |
|
Foreign exchange losses |
504 |
5,883 |
5,158 |
|
Taxation |
22,305 |
(4,438) |
(4,698) |
|
Depreciation |
47,967 |
59,289 |
105,252 |
|
Impairment of exploration and evaluation assets |
- |
- |
9,155 |
|
(Reversal of impairment)/ impairment of ore stockpiles |
(6,347) |
(12,267) |
1,163 |
|
Impairment of gold in circuit |
1,440 |
- |
- |
|
Impairment of non-trading loans |
538 |
- |
- |
|
Share in results of associates (a) |
5,096 |
894 |
2,356 |
|
Underlying EBITDA |
114,117 |
88,035 |
200,084 |
(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 11).
Note: figures in this release may not add up due to rounding
The Use and Application of Alternative Performance Measures (APMs)
Throughout this release, when discussing the Group's financial performance, reference is made to APMs.
Each of the APMs is defined and calculated by the Group and as such they are non-IFRS measures because they may include or exclude certain items that an IFRS measure ordinarily would or would not take into account. APMs should not be regarded as an alternative or substitute for the equivalent measures calculated and presented in accordance with IFRS but instead should be seen as additional information provided to investors to enable the comparison of information between different reporting periods of the Group.
Although the APMs used by the Group may be calculated in a different manner and defined differently by other peers in the precious metals mining sector (despite being similar in title), they are nonetheless relevant and commonly used measures for the industry in which Petropavlovsk operates. These and similar measures are used widely by certain investors, analysts and other interested parties as supplemental measures of financial performance.
Some of the APMs form part of the Group's Key Performance Indicators (KPIs), which are used to monitor progress and performance against strategic objectives and to benchmark the performance of the business each year.
A discussion of the relevance of each APM as well as a description of how they are calculated is set out below, with reconciliation to IFRS equivalents from the consolidated IFRS financial statements (Consolidated Income Statement (IS), Consolidated Balance Sheet (BS), Consolidated Cash Flows Statement (CF) and the notes to the consolidated IFRS financial statements).
Total Cash Costs (TCC)
Definition
The total cash cost per ounce is the cost of producing and selling an ounce of gold from the Group's four hard-rock operations.
Calculation
TCC are calculated by the Group as operating cash costs less co-product revenue. TCC per oz are calculated as total cash costs divided by the ounces of gold sold. TCC per oz are presented on a segment basis.
Operating cash costs are defined by the Group as operating cash expenses plus refinery and transportation costs, other taxes, mining tax and the amortisation of deferred stripping costs. This also equates to the Group's segment result as reported under IFRS plus each segment's share of results of associates, loss/gain on disposal of subsidiaries, impairment of ore stockpiles and gold in circuit, impairment of exploration and evaluation assets, impairment of mining assets, impairment of non-trading loans, central administration expenses and depreciation, minus each segment's revenue from external customers. Operating cash costs are presented on a segment basis.
Operating cash expenses are defined by the Group as the total of staff costs, materials, fuel, electricity, other external services, other operating expenses, and the movement in ore stockpiles, work in progress and bullion in process attributable to gold production (excluding deferred stripping costs). The main cost drivers affecting operating cash expenses are stripping ratios, production volumes of ore mined / processed, recovery rates, cost inflation and fluctuations in the rouble to US dollar exchange rate.
Other companies may calculate this measure differently.
Relevance
The Group closely monitors its current and projected costs to track and benchmark the ongoing efficiency and effectiveness of its operations. This monitoring includes analysing fluctuations in the components that operating cash costs and cost per tonne mined and processed to identify where and how efficiencies may be made.
Reconciliation
The tables below provide a reconciliation between operating expenses and total cash costs to calculate the cash cost per ounce sold for relevant periods.
|
H1 2017 |
Ref |
Pioneer |
Pokrovskiy |
Malomir |
Albyn |
Corporate and other |
Total |
|
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$' 000 |
US$'000 |
|
Operating expenses |
IS |
|
|
|
|
|
236,165 |
|
Deduct: |
|
|
|
|
|
|
|
|
Foreign exchange losses |
note 5 |
|
|
|
|
|
(504) |
|
Depreciation |
note 5 |
|
|
|
|
|
(47,967) |
|
Reversal of impairment of ore stockpiles |
note 5 |
|
|
|
|
|
6,347 |
|
Impairment of gold in circuit |
note 5 |
|
|
|
|
|
(1,440) |
|
Impairment of non-trading loans |
note 5 |
|
|
|
|
|
(538) |
|
Central administration expenses |
note 5 |
|
|
|
|
|
(23,095) |
|
Operating cash costs |
note 4 |
66,632 |
19,897 |
32,762 |
37,897 |
11,780 |
168,968 |
|
Deduct: |
|
|
|
|
|
|
|
|
Corporate and other segment |
note 4 |
- |
- |
- |
- |
(11,780) |
(11,780) |
|
Deduct: silver revenue |
note 4 |
(548) |
(89) |
(35) |
(134) |
- |
(806) |
|
Total cash costs |
|
66,084 |
19,808 |
32,727 |
37,763 |
- |
156,382 |
|
|
|
|
|
|
|
|
|
|
Total ounces sold |
oz |
94,690 |
15,402 |
28,700 |
92,967 |
|
231,760 |
|
Total cash cost per ounce sold |
US$/oz |
698 |
1,286 |
1,140 |
406 |
|
675 |
|
H1 2016 |
Ref |
Pioneer |
Pokrovskiy |
Malomir |
Albyn |
Corporate and other |
Total |
|
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$' 000 |
US$'000 |
|
Operating expenses |
IS |
|
|
|
|
|
216,154 |
|
Deduct: |
|
|
|
|
|
|
|
|
Foreign exchange losses |
note 5 |
|
|
|
|
|
(5,883) |
|
Depreciation |
note 5 |
|
|
|
|
|
(59,289) |
|
Reversal of impairment of ore stockpiles |
note 5 |
|
|
|
|
|
12,267 |
|
Loss on disposal of subsidiaries |
note 5 |
|
|
|
|
|
(791) |
|
Central administration expenses |
note 5 |
|
|
|
|
|
(13,096) |
|
Operating cash costs |
note 4 |
41,809 |
14,038 |
22,687 |
51,860 |
18,968 |
149,362 |
|
Deduct: |
|
|
|
|
|
|
|
|
Corporate and other segment |
note 4 |
- |
- |
- |
- |
(18,968) |
(18,968) |
|
Deduct: silver revenue |
note 4 |
(459) |
(105) |
(56) |
(124) |
- |
(744) |
|
Total cash costs |
|
41,350 |
13,933 |
22,631 |
51,736 |
- |
129,650 |
|
|
|
|
|
|
|
|
|
|
Total ounces sold |
oz |
71,095 |
17,200 |
24,693 |
82,447 |
|
195,434 |
|
Total cash cost per ounce sold |
US$/oz |
582 |
810 |
917 |
628 |
|
663 |
|
FY2016 |
Ref |
Pioneer |
Pokrovskiy |
Malomir |
Albyn |
Corporate and other |
Total |
|
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$' 000 |
US$'000 |
|
Operating expenses |
IS |
|
|
|
|
|
460,103 |
|
Deduct: |
|
|
|
|
|
|
|
|
Foreign exchange losses |
note 5 |
|
|
|
|
|
(5,158) |
|
Depreciation |
note 5 |
|
|
|
|
|
(105,252) |
|
Impairment of ore stockpiles |
note 5 |
|
|
|
|
|
(1,163) |
|
Impairment of exploration and evaluation assets |
note 5 |
|
|
|
|
|
(9,155) |
|
Gain on disposal of non-trading loans |
note 5 |
|
|
|
|
|
6,724 |
|
Gain on disposal of subsidiaries |
note 5 |
|
|
|
|
|
791 |
|
Central administration expenses |
note 5 |
|
|
|
|
|
(32,623) |
|
Operating cash costs |
note 4 |
85,273 |
33,777 |
45,243 |
100,979 |
48,995 |
314,267 |
|
Deduct: |
|
|
|
|
|
|
|
|
Corporate and other segment |
note 4 |
- |
- |
- |
- |
(48,995) |
(48,995) |
|
Deduct: silver revenue |
note 4 |
(958) |
(275) |
(101) |
(207) |
- |
(1,541) |
|
Total cash costs |
|
84,315 |
33,502 |
45,142 |
100,772 |
- |
263,731 |
|
|
|
|
|
|
|
|
|
|
Total ounces sold |
oz |
133,605 |
38,151 |
54,760 |
173,342 |
|
399,858 |
|
Total cash cost per ounce sold |
US$/oz |
631 |
878 |
824 |
581 |
|
660 |
All in Sustaining Costs (AISC)
Definition
AISC includes both operating and capital costs required to sustain gold production on an ongoing basis, over and above the direct mining and selling costs shown by TCC.
Calculation
AISC are calculated by the Group as TCC plus/(minus) impairment/(reversal of impairment) of ore stockpiles and gold in circuit, central administration expenses, plus capitalised stripping at end of the period, less capitalised stripping at beginning of the period, plus close-down and site restoration and sustaining capital and exploration expenditure. This is then divided by the ounces of gold sold. AISC are presented on a segment basis.
AISC are calculated in accordance with guidelines for reporting AISC as published by the World Gold Council in June 2013. Other companies may calculate this measure differently.
Relevance
AISC allows for a better understanding of the true cost of producing gold once key components such as central admin costs and the cost of sustaining capital and exploration expenditure are taken into account. Management uses this measure to monitor the performance of our assets and their ability to generate positive cash flows.
Reconciliation
The tables below provide a reconciliation between total cash costs and all-in sustaining costs to calculate all-in sustaining cost per ounce sold for relevant periods.
|
H1 2017 |
Ref |
Pioneer |
Pokrovskiy |
Malomir |
Albyn |
Corporate and other |
Total |
|
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$' 000 |
US$'000 |
|
Total cash costs |
|
66,084 |
19,808 |
32,727 |
37,763 |
- |
156,382 |
|
Add: (Reversal of impairment)/ impairment of ore stockpiles |
note 5 |
(828) |
63 |
275 |
(3,616) |
- |
(4,106) |
|
Impairment of gold in circuit |
note 5 |
- |
807 |
633 |
- |
- |
1,440 |
|
Central administration expenses |
note 5 |
9,436 |
1,535 |
2,860 |
9,264 |
- |
23,095 |
|
Net capitalised stripping |
note 12 |
- |
- |
3,185 |
21,510 |
- |
24,695 |
|
Site restoration costs |
|
50 |
101 |
163 |
432 |
- |
746 |
|
Sustaining exploration expenditures |
|
1,874 |
- |
2,427 |
2,947 |
- |
7,248 |
|
Sustaining capital expenditures |
|
10,019 |
89 |
1,442 |
2,568 |
- |
14,118 |
|
All-in sustaining costs |
|
86,635 |
22,403 |
43,712 |
70,868 |
- |
223,618 |
|
|
|
|
|
|
|
|
|
|
Total ounces sold |
oz |
94,690 |
15,402 |
28,700 |
92,967 |
|
231,760 |
|
All-in sustaining costs per ounce sold |
US$/oz |
915 |
1,454 |
1,523 |
762 |
|
965 |
|
H1 2016 |
Ref |
Pioneer |
Pokrovskiy |
Malomir |
Albyn |
Corporate and other |
Total |
|
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$' 000 |
US$'000 |
|
Total cash costs |
|
41,350 |
13,933 |
22,631 |
51,736 |
- |
129,650 |
|
Add: Reversal of impairment of ore stockpiles |
note 5 |
(2,298) |
(631) |
(106) |
(1,003) |
- |
(4,038) |
|
Central administration expenses |
note 5 |
4,764 |
1,153 |
1,655 |
5,524 |
- |
13,096 |
|
Net capitalised stripping |
note 12 |
5,161 |
- |
1,199 |
(164) |
- |
6,196 |
|
Site restoration costs |
|
27 |
9 |
24 |
27 |
- |
87 |
|
Sustaining capital expenditures |
|
1,234 |
32 |
645 |
2,011 |
- |
3,922 |
|
All-in sustaining costs |
|
50,238 |
14,496 |
26,048 |
58,131 |
- |
148,913 |
|
|
|
|
|
|
|
|
|
|
Total ounces sold |
oz |
71,095 |
17,200 |
24,693 |
82,447 |
|
195,434 |
|
All-in sustaining costs per ounce sold |
US$/oz |
707 |
843 |
1,055 |
705 |
|
762 |
|
FY2016 |
Ref |
Pioneer |
Pokrovskiy |
Malomir |
Albyn |
Corporate and other |
Total |
|
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$' 000 |
US$'000 |
|
Total cash costs |
|
84,315 |
33,502 |
45,142 |
100,772 |
- |
263,731 |
|
Add: Impairment/ (reversal of impairment) of ore stockpiles |
note 5 |
6,301 |
1,002 |
(30) |
(123) |
- |
7,150 |
|
Central administration expenses |
note 5 |
10,900 |
3,113 |
4,468 |
14,142 |
- |
32,623 |
|
Net capitalised stripping |
note 12 |
- |
- |
3,610 |
4,596 |
- |
8,206 |
|
Site restoration costs |
|
54 |
19 |
48 |
54 |
- |
175 |
|
Sustaining capital expenditures |
|
3,902 |
61 |
1,724 |
5,209 |
- |
10,896 |
|
All-in sustaining costs |
|
105,472 |
37,697 |
54,962 |
124,650 |
- |
322,781 |
|
|
|
|
|
|
|
|
|
|
Total ounces sold |
oz |
133,605 |
38,151 |
54,760 |
173,342 |
|
399,858 |
|
All-in sustaining costs per ounce sold |
US$/oz |
789 |
988 |
1,004 |
719 |
|
807 |
All in Costs (AIC)
Definition
AIC comprises of AISC as well as capital expenditures for major growth projects or enhancement capital for significant improvements at existing operations.
Calculation
AIC are calculated by the Group as AISC plus non-sustaining exploration and capital expenditure and (reversal of impairment)/impairment of refractory ore stockpiles. This is then divided by the ounces of gold sold. AIC are presented on a segment basis.
AIC is calculated in accordance with guidelines for reporting AIC as published by the World Gold Council in June 2013. Other companies may calculate this measure differently.
Relevance
AIC reflect the costs of producing gold over the life-cycle of a mine.
Reconciliation
The tables below provide a reconciliation between all-in sustaining costs and all-in costs to calculate all-in cost per ounce sold for relevant periods.
|
H1 2017 |
Ref |
Pioneer |
Pokrovskiy |
Malomir |
Albyn |
Corporate and other |
Total |
|
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$' 000 |
US$'000 |
|
All-in sustaining costs |
|
86,635 |
22,403 |
43,712 |
70,868 |
- |
223,618 |
|
Add: Reversal of impairment of ore stockpiles |
note 5 |
(2,241) |
- |
- |
- |
- |
(2,241) |
|
Exploration expenditure |
|
3,196 |
- |
35 |
388 |
- |
3,619 |
|
Capital expenditure |
|
8,535 |
- |
8,312 |
- |
- |
16,847 |
|
All-in costs |
|
96,125 |
22,403 |
52,059 |
71,256 |
- |
241,843 |
|
|
|
|
|
|
|
|
|
|
Total ounces sold |
oz |
94,690 |
15,402 |
28,700 |
92,967 |
|
231,760 |
|
All-in costs per ounce sold |
US$/oz |
1,015 |
1,454 |
1,814 |
766 |
|
1,044 |
|
H1 2016 |
Ref |
Pioneer |
Pokrovskiy |
Malomir |
Albyn |
Corporate and other |
Total |
|
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$' 000 |
US$'000 |
|
All-in sustaining costs |
|
50,238 |
14,496 |
26,048 |
58,131 |
- |
148,913 |
|
Add: Reversal of impairment of ore stockpiles |
note 5 |
(2,432) |
- |
(5,797) |
- |
- |
(8,229) |
|
Exploration expenditure |
|
3,292 |
31 |
1,201 |
3,032 |
- |
7,556 |
|
Capital expenditure |
|
226 |
- |
182 |
1 |
- |
409 |
|
All-in costs |
|
51,324 |
14,527 |
21,634 |
61,164 |
- |
148,649 |
|
|
|
|
|
|
|
|
|
|
Total ounces sold |
oz |
71,095 |
17,200 |
24,693 |
82,447 |
|
195,434 |
|
All-in costs per ounce sold |
US$/oz |
722 |
845 |
876 |
742 |
|
761 |
|
FY2016 |
Ref |
Pioneer |
Pokrovskiy |
Malomir |
Albyn |
Corporate and other |
Total |
|
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$' 000 |
US$'000 |
|
All-in sustaining costs |
|
105,472 |
37,697 |
54,962 |
124,650 |
- |
322,781 |
|
Add: Reversal of impairment of ore stockpiles |
note 5 |
(191) |
- |
(5,796) |
- |
- |
(5,987) |
|
Exploration expenditure |
|
8,455 |
76 |
1,887 |
6,172 |
- |
16,590 |
|
Capital expenditure |
|
1,037 |
- |
836 |
1 |
- |
1,874 |
|
All-in costs |
|
114,773 |
37,773 |
51,889 |
130,823 |
- |
335,258 |
|
|
|
|
|
|
|
|
|
|
Total ounces sold |
oz |
133,605 |
38,151 |
54,760 |
173,342 |
|
399,858 |
|
All-in costs per ounce sold |
US$/oz |
859 |
990 |
948 |
755 |
|
838 |
Average Realised Gold Sales Price
Definition
The average realised gold sales price is the mean price at which the Group sold its gold production output throughout the reporting period, including the realised effect of cash flow hedge contracts during the period.
Calculation
The average realised gold sales price is calculated by dividing total revenue received from gold sales (including the realised effect of any hedging contracts) by the total quantity of gold sold during the period. Other companies may calculate this measure differently.
Relevance
As gold is the key commodity produced and sold by the Group, the average realised gold sales price is a key driver behind the Group's revenues and profitability.
Reconciliation
The average realised gold price has been calculated as set out in the table below.
|
|
Ref |
|
H1 2017 |
H1 2016 |
FY2016 |
|
Gold revenue |
note 4 |
US$' 000 |
290,846 |
233,424 |
488,468 |
|
Gold sold |
|
ounces |
231,760 |
195,434 |
399,858 |
|
Average realised gold price |
|
US$/oz |
1,255 |
1,194 |
1,222 |
Capital Expenditure (CAPEX)
Definition
CAPEX is the investment required by the Group to explore and develop its gold assets and keep current plants and other equipment at its gold mines in good working order.
Calculation
CAPEX represents cash flows used in investing activities, namely Purchases of property, plant and equipment and Exploration expenditure.
Relevance
Capital expenditure is necessary in order not only to maintain but also to develop and grow the business. Capex requirements need to be balanced in line with the Group's strategy and provide an optimal allocation of the Group's funds.
Reconciliation
The table below provides a reconciliation between capital expenditure and cash flows used in investing activities.
|
|
Ref |
|
H1 2017 US$' 000 |
H1 2016 US$' 000 |
FY2016 US$' 000 |
|
Purchase of property, plant and equipment |
CF |
|
30,965 |
4,331 |
12,770 |
|
Exploration expenditure |
CF |
|
10,867 |
7,556 |
16,590 |
|
Total capital expenditure |
|
|
41,832 |
11,887 |
29,360 |
Net Debt
Definition
Net Debt shows how indebted a company is after total debt and any cash (or its equivalent) are netted off against each other.
Calculation
Net Debt is calculated as the sum of current borrowings and non-current borrowings less cash and cash equivalents. Other companies may calculate this measure differently.
Relevance
Management considers Net Debt a key measure of the Company's leverage and its ability to repay debt as well showing what progress is being made in strengthening the balance sheet. The measure is also used by investors and the Group's lenders in calculating financial covenants, including Net Debt / EBITDA.
Reconciliation
The table below provides calculation of net debt at relevant reporting dates.
|
|
Ref |
30 June 2017 US$' 000 |
31 December 2016 US$' 000 |
|
Cash and cash equivalents |
BS |
32,671 |
12,642 |
|
Borrowings |
BS |
(602,785) |
(611,212) |
|
Net debt |
|
(570,114) |
(598,570) |
Underlying EBITDA
Definition
EBITDA is a common measure used to assess profitability without the impact of different financing methods, tax, asset depreciation and amortisation of intangibles and items of an exceptional / non-recurring nature, or those that could make comparison of results from prior periods less meaningful.
Calculation
Underlying EBITDA is calculated as profit/(loss) for the period before financial income, financial expenses, foreign exchange gains and losses, fair value changes, taxation, depreciation and impairment charges. Other companies may calculate this measure differently.
Relevance
Underlying EBITDA is an indicator of the Group's ability to generate operating cash flows, which are the source of funding for the Group's working capital requirements, capital expenditure and debt service obligations. The measure is also used by investors and the Group's lenders in calculating financial covenants, including Net Debt / EBITDA and EBITDA / Finance Costs.
Reconciliation
The tables below provide reconciliations between net profit and Underlying EBITDA as well as reconciliation between operating profit and Underlying EBITDA for relevant periods.
|
|
Ref |
H1 2017 US$'000 |
H1 2016 US$'000 |
FY2016 US$'000 |
|
Profit for the period |
IS |
24,459 |
9,223 |
31,706 |
|
Add/(less): |
|
|
|
|
|
Investment income |
IS |
(386) |
(200) |
(556) |
|
Interest expense |
IS |
14,448 |
30,479 |
60,976 |
|
Other finance gains |
IS |
(2,045) |
(2,334) |
(11,976) |
|
Other finance losses |
IS |
6,138 |
1,506 |
1,548 |
|
Foreign exchange losses |
note 5 |
504 |
5,883 |
5,158 |
|
Taxation |
IS |
22,305 |
(4,438) |
(4,698) |
|
Depreciation |
note 5 |
47,967 |
59,289 |
105,252 |
|
Impairment of exploration and evaluation assets |
note 5 |
- |
- |
9,155 |
|
(Reversal of impairment)/ impairment of ore stockpiles |
note 5 |
(6,347) |
(12,267) |
1,163 |
|
Impairment of gold in circuit |
note 5 |
1,440 |
- |
- |
|
Impairment of non-trading loans |
note 5 |
538 |
- |
- |
|
Share in results of associates (a) |
note 11 |
5,096 |
894 |
2,356 |
|
Underlying EBITDA |
|
114,117 |
88,035 |
200,084 |
|
H1 2017 |
|
Pioneer |
Pokrovskiy |
Malomir |
Albyn |
Corporate and other |
Consolidated |
|
|
Ref |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
Operating profit |
IS |
|
|
|
|
|
64,919 |
|
Foreign exchange losses |
note 5 |
|
|
|
|
|
504 |
|
Segment result |
note 4 |
41,008 |
(4,722) |
(5,148) |
60,298 |
(26,013) |
65,423 |
|
Add/ (less): |
|
|
|
|
|
|
|
|
Depreciation |
notes 4,5 |
14,933 |
3,394 |
7,450 |
22,158 |
32 |
47,967 |
|
(Reversal of impairment) / impairment of ore stockpiles |
notes 4,5 |
(3,069) |
63 |
275 |
(3,616) |
- |
(6,347) |
|
Impairment of gold in circuit |
notes 4,5 |
- |
807 |
633 |
- |
- |
1,440 |
|
Impairment of non-trading loans |
notes 4,5 |
- |
- |
- |
- |
538 |
538 |
|
Share in results of associates (a) |
note 11 |
|
|
|
|
5,096 |
5,096 |
|
Underlying EBITDA |
|
52,872 |
(458) |
3,210 |
78,840 |
(20,347) |
114,117 |
|
H1 2016 |
|
Pioneer |
Pokrovskiy |
Malomir |
Albyn |
Corporate and other |
Consolidated |
|
|
Ref |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
Operating profit |
IS |
|
|
|
|
|
34,236 |
|
Foreign exchange losses |
note 5 |
|
|
|
|
|
5,883 |
|
Segment result |
note 4 |
26,317 |
4,068 |
4,474 |
22,134 |
(16,874) |
40,119 |
|
Add/ (less): |
|
|
|
|
|
|
|
|
Depreciation |
notes 4,5 |
21,899 |
3,136 |
8,414 |
25,599 |
241 |
59,289 |
|
Reversal of impairment of ore stockpiles |
notes 4,5 |
(4,730) |
(631) |
(5,903) |
(1,003) |
- |
(12,267) |
|
Share in results of associates (a) |
note 11 |
|
|
|
|
894 |
894 |
|
Underlying EBITDA |
|
43,486 |
6,573 |
6,985 |
46,730 |
(15,739) |
88,035 |
|
FY2016 |
|
Pioneer |
Pokrovskiy |
Malomir |
Albyn |
Corporate and other |
Consolidated |
|
|
Ref |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
Operating profit |
IS |
|
|
|
|
|
77,000 |
|
Foreign exchange losses |
note 5 |
|
|
|
|
|
5,158 |
|
Segment result |
note 4 |
34,313 |
5,602 |
14,159 |
55,622 |
(27,538) |
82,158 |
|
Add/ (less): |
|
|
|
|
|
|
|
|
Depreciation |
notes 4,5 |
38,776 |
6,586 |
13,632 |
45,729 |
529 |
105,252 |
|
Impairment of exploration and evaluation assets |
notes 4,5 |
- |
- |
- |
9,155 |
- |
9,155 |
|
Impairment/ (reversal of impairment) of ore stockpiles |
notes 4,5 |
6,110 |
1,002 |
(5,826) |
(123) |
- |
1,163 |
|
Share in results of associates (a) |
note 11 |
|
|
|
|
2,356 |
2,356 |
|
Underlying EBITDA |
|
79,199 |
13,190 |
21,965 |
110,383 |
(24,653) |
200,084 |
(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
-------------------------------------------------------------------------------------------------------------------------------------------------------
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.
Cautionary note on forward-looking statements
This release may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward- looking statements include all matters that are not historical facts. They appear in a number of places throughout this release and include, but are not limited to, statements regarding the Group's intentions, beliefs or current expectations concerning, among other things, the future price of gold, the Group's results of operations, financial position, liquidity, prospects, growth, estimation of mineral reserves and resources and strategies, and exchange rates and the expectations of the industry.
By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances [outside the control of the Group. Forward-looking statements are not guarantees of future performance and the development of the markets and the industry in which the Group operates may differ materially from those described in, or suggested by, any forward- looking statements contained in this release. In addition, even if the development of the markets and the industry in which the Group operates are consistent with the forward looking statements contained in this release, those developments may not be indicative of developments in subsequent periods. A number of factors could cause results and/or developments to differ materially from those expressed or implied by the forward-looking statements including, without limitation, general economic and business conditions, demand, supply and prices for gold and other long-term commodity price assumptions (and their effect on the timing and feasibility of future projects and developments), trends in the gold mining industry and conditions of the international gold markets, competition, actions and activities of governmental authorities (including changes in laws, regulations or taxation), currency fluctuations (including as between the US Dollar and Rouble), the Group's ability to recover its reserves or develop new reserves, changes in its business strategy, any litigation, and political and economic uncertainty. Except as required by applicable law, rule or regulation (including the Listing and Disclosure Guidance and Transparency Rules), the Group does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Past performance cannot be relied on as a guide to future performance.
The content of websites referred to in this announcement does not form part of this announcement.
This information is provided by RNS
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