Petropavlovsk PLC (LON:POG) Q1 2022 Production and Sales Report

Petropavlovsk PLC (“Petropavlovsk” or the “Company” or, together with its subsidiaries, the “Group”) today issues its sales and production results and corporate update for the quarter ending 31 March 2022 (the “Period” or “Q1 2022”).

Mr Denis Alexandrov, CEO, said:

“Petropavlovsk achieved its production targets in the first quarter of this year, with higher output from Pioneer, aided by its new flotation plant, and 3rd-party concentrate offsetting expected lower production at Albyn and Malomir due to lower grades. Despite the conflict in Ukraine and related sanctions that have led to various challenges at the corporate level, our mines operated without disruption throughout the period. In this rapidly changing environment, we continue to monitor the situation to take all necessary steps to ensure the continuity of our business and compliance with sanctions, and to plan for contingencies that may adversely impact our operations.”

Operational Highlights

Gold Production

  • Total Q1 2022 gold production was 103.0koz, an 8% increase versus Q1 2021 (95.6koz) on higher volumes from Pioneer and 3rd-party concentrate § Own-mined gold production during the period was 80.2koz, a 3% decrease vs. Q1 2021 (82.4koz) due to lower production at Albyn and Malomir § 3rd-party concentrate gold production increased 73% to 22.8koz (Q1 2021: 13.2koz) on higher throughput volumes as compared to the same period last year
    Gold production (koz)

Gold Sales

  • Gold sales totalled 89.8koz in Q1 2022 (Q1 2021: 95.6koz) § The average realised gold price during the period was US$1,871/oz, a 5% increase on Q1 2021 (US$1,789/oz)
    Pokrovskiy Pressure Oxidation (POX) Hub
  • The POX Hub processed c.99kt of refractory gold concentrate in Q1 2022, almost twice the throughput in the same period in 2021 (52kt), essentially operating at near full capacity for concentrates with the sulphur and carbon content mix treated during the quarter § Total Q1 2022 throughput included 37kt from Pioneer at a grade of 21.1g/t, 35kt from Malomir at 28.4g/t and 28kt of 3rd-party concentrate at 26.2g/t (all average grades), meaning 72% of the concentrate processed during the period was from our own mines (Q1 2021: 64%)
    2022 Guidance
  • Guidance for own gold production for the year remains unchanged in the range of 345-365koz. Guidance for production from 3rd-party concentrate is lowered to 30-40koz (previously 35-55koz) due to expected supply chain disruptions. Total gold production is therefore expected to be in the range of 375-405koz (previous guidance: 380-420koz)

Debt Principal and Cash

  • Cash (unaudited) as of 31 March 2022 was US$71.8m (31 December 2021: US$25.5m) § Debt principal outstanding as of 31 March 2022 was US$624.4m (31 December 2021: US$590m)
    Hedging
  • Following the expiry of zero cost collar option contracts for gold and currency on 31 December 2021, the Company has not entered into any new zero cost collar contracts § The Company hedges purchases of 3rd-party concentrate from the time of purchase until gold is produced and is ready for sale. The amount and timing of hedging corresponds to the volume of gold the Company expects to produce and the timing of the expected sale. As of 31 March 2021, no gold was hedged using forward contracts
    Sanctions Impact
  • Petropavlovsk continues to monitor the adoption of sanctions against Russia due to the conflict in Ukraine , and countermeasures introduced by the Russian government , to ensure compliance and assess the possible direct or indirect impact these may have on its business
  • At the time of publishing, there are no direct sanctions on the Company or any of its subsidiaries, directors or employees, and mining operations continue uninterrupted
  • Potential disruptions to the supply chain were flagged as a key risk to future mine performance, and the Group initiated contingency planning on day one of the crisis
  • As per the Company’s announcements on 25 and 30 March and 14 and 20 April 2022. sanctions enacted in relation to the Company’s largest creditor, Gazprombank (“GPB”), prohibited the Group from making interest and principal repayments under a US$200m committed term loan and US$86.7m in revolving credit facilities (“RCFs”). GPB has notified the Group of demands for early repayment of the term loan and RCFs and of the assignment of the term loan to JSC UMMC-INVEST
  • Petropavlovsk is also prohibited by sanctions from selling gold to GPB, which had acted as the main off-taker for the Group’s production. The Group continues to explore options for the sale of its gold, including to other potential buyers, and has applied for a new licence to export gold
  • In light of the above, as well as legal restrictions that limit the Group’s ability to transfer cash out of Russia, and keeping in mind the US$500 million 8.125% guaranteed notes 2022 issued by Petropavlovsk 2016 Limited (of which US$304 million remains outstanding) maturing November 2022, the Company has appointed AlixPartners UK LLP to assist the Board of Directors as it explores its options and determines the Company’s course of action in the best interest of all stakeholders, including creditors and shareholders.
  • Please refer to the Company’s announcements on 25 and 30 March and 14 and 20 April 2022 for more detail

Responsible Business

  • No fatal accidents occurred at the Group’s operations during the period
  • The Group recorded a Lost Time Injury Frequency Rate (“LTIFR”) of 1.0 in Q1 2022, less than half the rate recorded during the same period last year
  • The improved safety performance follows the implementation in 2021 of better personnel training, new standards for safe work practices, stricter controls on the application of fundamental safety rules, and broad information campaigns designed to highlight key occupational and seasonal risks
  • Zero major environmental incidents were recorded during the quarter

Note: Environmental incidents defined as moderate or serious
  • Despite an uptick in reported, mostly mild COVID -19 cases among Group employees during the Omicron wave in January-February, the Company avoided major outbreaks at its production sites, where strict protocols remain in place
  • As of 4 April 2022, 85% of the Group’s employees were fully vaccinated against COVID -19

Development Update

Malomir expansion

  • The construction of a third line at the Malomir flotation plant is progressing. The project is due for completion in Q3 2022, although supply chain issues could potentially cause some delay
  • When launched, the expansion will add an additional 1.8Mtpa of flotation processing capacity, increasing the Group’s total combined refractory ore processing capacity to 9.0Mtpa

Corporate News

  • On 24 January 2022, the Board of Directors (the “Board”) appointed Mr Stanislav Ploshchenko as the Group’s chief financial officer. Mr Ploshchenko has over two decades of experience in finance including CFO positions at several major publicly listed companies
  • On 11 April 2022, the Board appointed Mr Roman Deniskin as independent non-executive director. Mr Deniskin has over 20 years of operational and strategic experience in the mining, metals and minerals industries in Russia and Kazakhstan. His appointment followed the departure of independent director Natalia Yakovleva, who resigned on 4 April 2022

Operations Report

Read More

For more information

Please visit www.petropavlovskplc.com or contact:

Petropavlovsk PLC

John Mann / Max Zaltsman

+44 (0) 20 7201 8900

TeamIR@petropavlovskplc.com


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