Petropavlovsk posts $55 mln H1 loss, to pay interim div
MOSCOW. Aug 26 (Interfax) - Gold miner Petropavlovsk plc closed H1 2010 with net losses of $55.4 million to International Financial Reporting Standards (IFRS) compared with profit of $76.6 million a year previously, the company said.
The losses are worse than the most pessimistic forecasts given by analysts. They were driven by $33.1 million attributable to impairment against the amounts invested in the Titanium Sponge Joint Venture and related assets due to its joint venture partner, Chinalco, advising that it no longer wishes to proceed with the project as a consequence the building of the plant has been postponed and thus there is uncertainty as to the eventual outcome of the project; and by $2.4 million listing costs incurred in relation to the proposed listing of the Non-precious Metals Division in Hong Kong.
Earnings before taxes, depreciation and amortization (EBITDA) before these exceptional items was $50 million - a little lower than the consensus and more than half last year's amount. Operating profit before exceptional items was $10.7 million.
Sales revenue was $195.7 million, including $181.3 million from precious metal sales.
The Group spent an aggregate of $210.9 million on its gold and iron projects compared to $81.7 million invested in the first half of 2009. The key areas of focus during the period were on the development of Malomir and completion of the third stage of the Pioneer and Kuranakh projects and ongoing exploration related to the Pokrovskiy, Pioneer, Malomir and Albyn projects.
Net debt was $125.5 million, cash and cash equivalents - $255.1 million and aggregate borrowing - $380.6 million.
The Precious Metals Division's operating income before exceptional items was $65.5 million, compared with $124 million a year previously.
Total cash costs were $538/oz, or 112% more than in H1 2009, mainly due to processing significantly lower grades at the Pokrovskiy and Pioneer mines.
Cash costs per tonne of ore processed at the Pioneer deposit decreased by 59% due to economies of scale which partially offset the effect of lower grade material processed through the mine. Pioneer's third production line successfully commissioned on time and on budget in April 2010, increasing the capacity of the Pioneer plant by 80% to 420,000t/month.
The Malomir mine and plant successfully commissioned on time and on budget on August 25, 2010. The new plant is expected to achieve capacity of 55,000t/month by the end of September.
The Albyn gold deposit's development is on schedule for the project's commissioning in H2 2011; the main equipment has been ordered and significant progress has been made in constructing the camp accommodation and the power line.
In July 2010 the Group increased its total holding in ZAO ZRK Omchak to 90% after the acquisition of 32.5% and 7.5% of the issued capital of the Joint Venture from OAO Susumanzoloto and OAO Shkolnoye respectively. Accordingly Omchak has become a subsidiary of the Group. The deal cost $27 million.
Also in July 2010, the Group entered into an agreement to acquire and completed the acquisition of 100% of the share capital of LLC Iljinskoye, holder of exploration and mining rights for Vysokoye gold deposit, for the total cash consideration of $35 million.
The H2 2010 production schedule for the remainder of the year is very challenging and the Group continues to work to reach the lower end of the 2010 gold production target of 670,000oz set out in the last production update, Petropavlovsk said. The principal risks involve maintaining continued success in the operation of Malomir and successful scheduling of Pioneer's mining capacity.
"Looking forward to the remainder of 2010, at the present time we are not expecting a material shortfall, more than 5%, in achieving our base case annual production target of 670,000oz," said Peter Hambro, the group's chairman.
Capex in the Non-Precious Metals Division was $60.5 million in H1 2010, including $34 million in the Kuranakh project and $20.9 million in the Kimkan & Sutara mine construction.
Kuranakh's first commercial shipment of titanomagnetite concentrate and ilmenite expected to be dispatched from the plant on September 2, 2010.
The Non-Precious Metals Division and other operations in total generated a loss before exceptional items of $15.8 million compared to a $6.6 million loss in the first half of 2009. The company said $3.5 million was attributable to operating expenses following commencement of operations at Kuranakh and a further $1.4 million was attributable to an impairment charge against the amounts invested in the Group's associate, Uralmining through loans advanced due to uncertainty as to the eventual outcome of the Bolshoi Seym project undertaken by Uralmining.
The company also said its directors had approved an interim dividend of 0.03 pence per share or a total of GBP5.6 million ($8.7 million). The dividend will be paid on October 29, 2010 to the company's shareholders on the register at the close of business on October 1, 2010. Going forward, the Board will continue to evaluate the possibility of paying both interim and final dividends to shareholders.
Petropavlovsk's shareholders include BlackRock Investment Management (UK) Limited, which increased its stake to 16.06% as of the middle of August; company management; and other investment companies and funds.
Petropavlovsk plc was set up through a merger between gold producer Peter Hambro Mining plc and minerals company Aricom plc in April 2009. The merger created one of the leading mining companies in Russia's Far East. The Group is the third largest gold producer in Russia. It also has a number of precious metals and iron ore assets at various stages of development in a number of regions across Russia.