POG.L Regulatory News (POG)

23 September 2019

Petropavlovsk PLC

Smaller Related Party Transaction

In accordance with Listing Rule 11.1.10R(c), Petropavlovsk PLC ("Petropavlovsk" or the "Company") announces that as disclosed in the Company's Half Year Report issued on 10 September 2019, it has entered into an option agreement with Agestinia Trading Limited ("Agestinia"). Agestinia holds a 25 per cent. interest in TEMI LLC ("TEMI"), a 75 per cent. owned subsidiary of Petropavlovsk which in turn holds licences for the Elginskoye Ore Field and Afanasievskaya Prospective Ore Area. Whilst there is currently no production occurring on the licences at the Elginskoye and Unglichikanskoye deposits they hold a substantial amount of non-refractory reserves and resources which are suitable for processing at the Company's resin-in-pulp plant at Albyn.

The option agreement entitles Petropavlovsk to purchase, at the Company's discretion, Agestinia's 25 per cent. interest in TEMI. The option price is US$13.0 million to be paid by 18 November 2019 (the 'Option Price') and upon payment of the Option Price Petropavlovsk will have the option to acquire Agestinia's interest, conditional upon any regulatory consents or approvals being received (the 'Option'). US$7.0 million of the Option Price was paid to Agestinia on 29 May 2019. At Petropavlovsk's election, the remainder of the Option Price (US$6 million) may be paid in cash or Petropavlovsk Ordinary Shares at a fixed price of 8.26 pence per Ordinary Share.

Subject to payment of the Option Price, the exercise period for the Option is 730 days from 22 May 2019.

The exercise price of the Option will be:

• US$60.0 million; or

• US$53.5 million if the Company exercises its Option on or before 20 May 2020.

The exercise price for the Option may be paid in whole or in part in Petropavlovsk Ordinary Shares using a monthly average price.

As Agestinia is a substantial shareholder in a subsidiary undertaking of Petropavlovsk, it is considered a related party of the Company for the purposes of Listing Rule 11.1. The entry into the option agreement is a transaction which falls within Listing Rule 11.1.10R (modified requirements for smaller related party transactions) and this announcement is made in accordance with Listing Rule 11.1.10R(c). Should Petropavlovsk determine to exercise the option, it is likely that the transaction would constitute a Related Party Transaction under Listing Rule 11.1 and, if it does, it would require, inter alia, shareholder approval.

As at 30 June 2019, the Company recognised a US$9.2 million fair value gain on the Option, based on a valuation undertaken by an Independent Expert.

The combined TEMI licences cover an area of 1,013km2 where extensive alluvial gold deposits have historically been exploited. As at 31 December 2018, TEMI's JORC Measured, Indicated and Inferred Mineral Resources amounted to 4.00Moz of gold contained in hard rock. This includes 1.95Moz of JORC Proved and Probable Ore Reserves, of which 1.53Moz are classed as non-refractory. The Company expects production to commence at Elginskoye in 2020 to coincide with the depletion of ore currently mined from the main pit at Albyn. Ore mined at Elginskoye will be transported by truck along a recently completed c.30km all-season road to the existing processing facilities at Albyn. As announced in the Company's Half Year Report, an in-fill drilling programme has been completed which focussed on the Phase 1 pit to increase the accuracy of near and mid-term mining plans. Waste stripping followed by initial ore mining is expected to commence in Q4 2019 and the Company anticipates that gold production from Elginskoye will reach 156koz in 2020, benefitting from the shallow nature of the orebody and low stripping ratio.

Longer term, Elginskoye is considered highly prospective with recent drilling on the periphery of the known JORC resource model hitting attractive intersections and the orebody remains open in all directions. Unglichikanskoye accounts for 0.58Moz of the total TEMI JORC Resources and 0.46Moz of total non-refractory Reserves and is also considered highly prospective, comprising of a series of sub-parallel, relatively narrow, steeply dipping zones, which are proven over a strike length in excess of 5.2km. Unglichikanskoye is also amenable to rapid development and the Company considers that it could be in production from 2022.

In addition, there are number of promising prospects of which Afanasevskoye, Ulgen, Yasnoye, Leniskoye and Pridorozhnoye are the most significant.

About Petropavlovsk

With a Premium Listing on the London Stock Exchange, Petropavlovsk (LSE: POG) is a major integrated Russian gold producer with JORC Resources of 20.52Moz Au which include Reserves of 8.21Moz Au.

The Company's key operating mines (Pioneer, Malomir and Albyn) are in the Amur Region in the Russian Far East and the Company has produced a total of c.7.3Moz of gold since operations began in 1994. Petropavlovsk has a strong track record of mine development, expansion and asset optimisation.

The Group recently entered a new era of growth following the successful commissioning and start-up of its flagship asset, the Pressure Oxidation (POX) Hub at Pokrovskiy, which enables the processing of the Company's abundant refractory reserves and resources.

Petropavlovsk is one of the region's largest employers and one of the largest contributors to the sustainable development of the local economy.

For more information

Please visit www.petropavlovsk.net or contact:

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.