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Petropavlovsk targeting increased gold production in 2019

23rd January 2019

By: Simone Liedtke

Creamer Media Social Media Editor & Senior Writer

     

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While subject to further plant development success at its pressure oxidation (POX) hub, Russian miner Petropavlovsk is eyeing gold production of between 450 000 oz and 500 000 oz for 2019, with capital expenditure figures expected to reach levels of between $45-million and $50-million during the year.

This compares with output of 422 300 oz in 2018, 118 800 oz of which was produced in the fourth quarter. The production was less than the 439 600 oz of 2017, but was in line with its guidance of 420 000 oz to 450 000 oz.

In a statement announcing the production results and corporate update, CEO Dr Pavel Maslovskiy said on Wednesday that the POX hub would not only allow the miner to unlock refractory ore reserves of about 9.6-million ounces, but that it would also create a processing platform for refractory gold concentrate.

As a result, this will provide the miner with a sustainable cash flow in the coming years.

The company further anticipates that the next two lines of the POX facility will be commissioned, as scheduled, in June 2019, which will create spare processing capacity of about 250 000 t/y at the plant.

“By that time, we aim to have secured a suitable supply of third-party refractory ore concentrate to be processed at Autoclaves 3 and 4,” Maslovskiy highlighted.

During the first week of December, Autoclave 1 successfully started processing refractory ore concentrate, reaching stage gold recovery of between 93% and 94%, which Petropavlovsk said was “in line with expected design parameters for double refractory Malomir concentrate”.

This, the miner added, demonstrated the ability of the POX facility to effectively process the metallurgically challenging refractory material from Malomir.

Following the successful commissioning of Autoclave 1, Autoclave 2 was commissioned on December 27, 2018. Autoclave 2 also reached design capacity ahead of schedule.

Currently, both autoclave lines were operating in automatic mode through the process control system. Up until January 15, about 12 000 t of refractory concentrate had been successfully processed by the POX hub, with about 4 500 oz of gold sold to date.

For the second half of 2019, the company was actively seeking to purchase refractory concentrate from third parties. In the future, the expansion of the Malomir flotation plant and bringing into production a flotation plant at Pioneer would help to produce enough concentrate to fill the POX hub.

Once fully commissioned, the POX plant would have capacity to process between 400 000 t/y to 500 000 t/y in its current configuration, depending on the properties of concentrate.

On Wednesday, the miner said that its board was also reviewing the possibility of bringing forward the construction of the Pioneer flotation plant, which would allow refractory ore from Pioneer to be processed, as well as the expansion of the flotation facility at Malomir.

FINANCING

Meanwhile, Petropavlovsk reported that the refinancing of the ICBC project finance facility and renegotiation of its guarantee, had resulted in a new facility that was on “more favourable terms” than the existing ICBC facility and provided IRC with an extended period to repay its debt with maturity through to 2026.

The Gazprombank facility is expected to alleviate the cash flow position of IRC and provide it with a more manageable repayment schedule in comparison to the current ICBC facility.

In the interim, the company provided IRC with a further bridge loan of $27-million (at an interest rate of 16% a year) to enable its subsidiary K&S to pay the interest and principal due under the ICBC facility on December 20, 2018.

The bridge loan will be repaid to Petropavlovsk upon completion of the new facility, expected to be in late February 2019.

The company also agreed to extend the existing bridge loan of about $30-million, advanced to IRC in June 2018 (at an interest rate of 12% a year) to the later of utilisation of the new facility or March 21, 2019.

Together, the two bridge loans due for repayment will amount to about $57-million.

Further, Petropavlovsk's liquidity position has been significantly strengthened after entering into a number of gold sales contracts with Gazprombank, for a total of 5.5 t of gold.

These arrangements allow the company to receive advance payments for 70% of gold with shipment to Gazprombank over a period starting six months following receipt of an advance by the company and ending no later than December 2020, Petropavlovsk said.

The sales contracts provide the group with flexibility during the POX plant ramp up period, the company added.

Forward contracts to sell an aggregate of about 200 000 oz of gold at an average price of about $1 252/oz remained outstanding as at December 31, 2018.

Edited by Mariaan Webb
Creamer Media Senior Deputy Editor Online

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