Petropavlovsk first half production drops 22pc

Petropavlovsk published a trading update for the six months to 30 June on Tuesday, in advance of its half-year interim results, which are due on 28 September.

The London-listed firm said first half total gold production was 187,400 ounces, a 22% decrease on 2015, mainly due to the scheduled processing of lower-grade material and the impact of severe flooding.

In gold sales, the company sold 195,400 ounces of gold, down from 229,700 ounces in 2015.

The company’s board said gold sales were higher than production due to a reduction in gold in circuit in the first quarter of 2016.

Petropavlovsk achieved an average realised gold price of $1,194 per ounce, including the effect of hedging.

As at 30 June, the group had outstanding hedging contracts for 119,000 ounces of gold at an average price of $1,296 per ounce.

“We have made progress on our core strategy of debt reduction and managing our financial flexibility through reducing costs and managing capital expenditures to ensure solid free cash flow generation and through making progress on our negotiations with our lenders,” said CEO Pavel Maslovskiy.

“Lower total cash costs of $690/oz were achieved despite the substantial decrease in grades of processed ore, via consistent optimisation of our unit costs, both at the mining and processing stages of the operations.”

Petropavlovsk said that in terms of its future production profile, the flagship Pioneer deposit consists of a number of bulk tonnage low grade ore bodies, which contain columns of high grade material.

“That is why in 2016, as in previous years, the production output during the year will be distributed unevenly, with stripping carried out throughout the year to access high grade material and the bulk of production is expected in Q4 when the higher grade material is accessed,” said Maslovskiy.

“Going forward, accessing the high grade reserves will require underground mining and hence the Pioneer mine is scheduled to start underground production this year.”