POG.L Regulatory News (POG)

20 October 2015

Production Report for Q3 2015

Petropavlovsk PLC ("Petropavlovsk" or the "Company", or together with its subsidiaries "the Group") today issues its production results for the period from 1 July 2015 to the date of this release (the "Period"). 

Q3 Highlights

· The Group successfully achieved its Q3 production levels as called for by the previously announced change in strategy designed to meet the Group's challenging debt repayment profile. This calls for the Group to concentrate on the mining and production of ounces with the highest possible profit margin, even at the expense of those ounces that are only marginally profitable

· Q3 gold production of 114,500oz (Q3 2014: 150,100oz), with total gold production for the first nine months of the year of 354,700oz (nine months 2014: 456,500oz)

· Sales for the first nine months of the year of 343,500oz (460,900oz during the same period in 2014)

· Q3 average realised gold price of US$1,153/oz (including a US$27/oz contribution from the hedging programme) and US$1,198/oz, (including a US$16/oz contribution from the hedging programme) for the first nine months of the year

· c.US$255m reduction in Net Debt as at 30 September 2015 to c.US$675m, compared with c.US$930m as at 31 December 2014

· Underground potential at Pioneer: budgeting discussions and dialogue with contractors to carry out detailed mine design and further underground exploration is underway

Operational Update

· Q3 works at the majority of the Group's mines in line with the Group's plan

· At the high-grade section of Andreevskaya (Pioneer), the presence of enriched zones with free gold particles and grades in the hundreds of grams per tonne required an adjustment to the plant's flow sheet to prevent losses of high-grade material to the tailings dam

· Data from blast-hole drilling confirmed that average grades in these areas exceed JORC model estimates

· To treat this high-grade material, a different set of technological parameters was adopted:

- Blending with large volumes of low-grade material

- Extending the leaching time at the plant up to 22 hours, compared to the usual period of 10-12 hours

· In October, the Pioneer plant achieved an increase in head grades from 1.1g/t to 2-3g/t. Due to the extended leach-time, there is currently an increased volume of gold in circuit

· The Group expects that c.150,000oz of gold (455,000 tonnes of ore) can be recovered from this high-grade area at Pioneer by the end of the year, although total production for the year will depend on processing speed and recovery

FY 2015 Outlook

· The Group reiterates its year-end Net Debt guidance of c.US$600m at a cash cost of c.US$600/oz

· All-in Sustaining Costs ("AISC") are expected to be c.15% above TCC/oz with All-in Costs ("AIC") only c.5% above AISC

· The Group is confidently following its repayment schedule and expects to stay within its financial covenants at the year-end results

· The Group reiterates its capex guidance for the year of c.US$35 million

Commenting on operating results, Pavel Maslovskiy, Chief Executive Officer, said:

"I am pleased to report that the Company is progressing well with our target for 2015 to decrease Net Debt to c.US$600 million by the end of the year, focusing on the mining and production of ounces with the highest possible profit margin. This allows us to fulfil our deleveraging programme targets and to deliver on our highest priority - returning value to our shareholders.

Operationally, Q3 works were carried out in line with the Group's plan across all our mines with the exception of Pioneer, as explained in today's statement.

In order to ensure minimal losses during treatment of high-grade ore, a new set of technological parameters was developed and we expect that c.150,000oz of gold can be recovered from this high-grade area by the end of the year, although the total production for the year will depend on the speed of processing and recovery.

Work on the Group's underground development potential is ongoing. At Pioneer, drilling work has confirmed extensions suitable for underground mining at Andreevskaya, NE Bakhmut and Quartzitovoye (Malomir). The main ore body at Pokrovka I is also being evaluated. Mineralisation is open at depth in most instances. Discussions with contractors regarding budgeting, detailed mine design and further underground exploration is currently underway.

The Group is confident in meeting its repayment schedule and expects to stay within its financial covenants at the year-end."

Enquiries 

This release may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward looking statements include all matters that are not historical facts. They appear in a number of places throughout this release and include, but are not limited to, statements regarding the Group's intentions, beliefs or current expectations concerning, among other things, the Group's results of operations, financial position, liquidity, prospects, growth, strategies and expectations of the industry. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Forward-looking statements are not guarantees of future performance and the development of the markets and the industry in which the Group operates may differ materially from those described in, or suggested by, any forward-looking statements contained in this release. In addition, even if the development of the markets and the industry in which the Group operates are consistent with the forward-looking statements contained in this release, those developments may not be indicative of developments in subsequent periods. A number of factors could cause developments to differ materially from those expressed or implied by the forward-looking statements including, without limitation, general economic and business conditions, industry trends, competition, commodity prices, changes in law or regulation, currency fluctuations (including the US dollar and Rouble), the Group's ability to recover its reserves or develop new reserves, changes in its business strategy, political and economic uncertainty. Save as required by the Listing and Disclosure and Transparency Rules, the Company is under no obligation to update the information contained in this release.

Past performance is not a guide to future performance.

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