Petropavlovsk lowers guidance as it sorts out previous management mess

The London-listed firm said that revealed recent disruptions to mining operations, with measures to mitigate those currently being developed and implemented to optimise mining and maximise margins.

However, the company still adjusted its full year production guidance conservatively.

It did report a 13% year-on-year decrease in first half total gold production due to lower grades processed and a decrease in the contribution from gold in circuit, to 201,400 ounces.

The firm saw mixed performance at its underground operations, with the production of development ore at the Quartzitovoye underground mine contributing “significantly” to Malomir's overall production, while the development of NE Bakhmut at Pioneer was behind schedule.

Petropavlovsk said measures had been introduced in order to increase the contribution of underground operations to overall production by the end of the second half.

An optimisation plan for the current mining schedule was also being developed.

On the gold sales front, Petropavlovsk said it saw a 13% year-on-year decrease in physical volumes of gold sold to 201,400 ounces.

It did, however, see a 2% improvement in the average realised gold price to $1,285 per ounce.

As at 30 June, the group said it had outstanding hedging contracts for around 300 koz of gold at an average price of $1,252 per ounce.

Looking at its development work, Petropavlovsk said Malomir flotation plant operations had now commenced following delays in their scheduled commissioning, due to what the board called a lack of strategic leadership in the first half.

A programme had been developed to accelerate the ramp-up of the flotation plant to its designed capacity.

POX commissioning was expected in December, compared to previous guidance of the fourth quarter, which was again due to disruptions and instability in the first half.

POX production was excluded from the firm’s full year estimates as a result.

Dry commissioning was scheduled for August, following a number of measures introduced to improve the timeline.

Looking at its guidance, Petropavlovsk said full-year production was expected to be within its revised range of 400-410 koz, down from 420-460 koz, due to the exclusion of POX production from full year estimates.

Cash costs of production were currently expected to be 15-20% higher than guidance given at the beginning of the year of $700-750 per ounce, due to the suboptimal organisation of mining works in the first half.

Capital expenditure for the year was expected to be around $105m, as guided.

“Following our election in June and the return of Pavel Maslovskiy as chief executive officer, the Board and I would like to reiterate our commitment to the strategic objective - that Petropavlovsk should be at the forefront of Russian gold mining, delivering sustainable and profitable growth through experienced management, technological development and exploration success,” said non-executive chairman Sir Roderic Lyne.

“We have worked hard over the past four weeks to stabilise and restore momentum to the group after a difficult year.”

Lyne said that on 29 June, the board initiated a review of all of the group's activities, and had since commenced a formal process with a leading recruitment agency to bring in new independent non-executive directors with relevant experience in order to establish a diverse and fully compliant board.

“I hope to have further news on this front within a few weeks.

“The Board wishes to develop clear lines of communication with all stakeholders.

“I believe that a productive and transparent dialogue with our stakeholders will benefit Petropavlovsk,” Lyne added.

“It is our common aim to realise the company's undoubted potential and unlock its value.”