Polyus Gold International Limited
Trading update for 3 months ended 31 March 2013
Polyus Gold International Limited (LSE - PGIL, OTC (US) - PLZLY, “PGIL”, “Polyus Gold” or the “Company”), the largest gold producer in Russia, today releases its operating results for the first quarter of 2013.
Highlights
- Gold production from continuing operations up by 6% year-on-year to 320 thousand ounces (first quarter of 2012: 302 thousand ounces)
- Gold production including divested Kazakhstan assets totaled 337 thousand ounces (first quarter of 2012: 328 thousand ounces)
- Significant increase in gold production at Titimukhta (+56%) and Verninskoye (+71%)
- On track to meet 2013 production target of between 1.59 and 1.68 million ounces
- Gold sales from continuing operations estimated to be USD 524 million1 (first quarter of 2012: USD 545 million) reflecting a 5% fall in the weighted-average gold selling price year-on-year
- Estimated net cash position at period end of USD 699 million.
German Pikhoya, Chief Executive Officer of Polyus Gold, commented:
“Polyus Gold has delivered another strong set of results. In the first three months of 2013 we achieved higher gold production on flat processing volumes reflecting our focus on operational efficiency which has resulted in improved recovery rates. Our new generation of mines increased their contribution to the Company’s overall production as Titimukhta delivered outstanding production growth rates, the ramp up of Verninskoye continued and Blagodatnoye production was higher than planned.”
Health and safety update
Seven lost time incidents were reported in the first quarter of 2013. The LTI frequency rate was 0.17, in line with the first quarter of 2012 (0.17).
With regret, the Company has to report one work related fatality at its alluvial operations in the first quarter of 2013 as a result of a dozer overturning. The Company considers any fatality completely unacceptable and an action plan based on the root-cause analysis will be rolled out during the second quarter of 2013 to prevent any similar incidents occurring.
Polyus Gold has introduced a number of measures to improve employee health and safety awareness across its operations in recent months. As a priority, the Company is focusing on the prevention of serious potential incidents through the implementation of an incident root-cause analysis procedure and instilling field level risk assessment within its operations.
__________________________1 Excluding USD 29 million of sales from divested Kazakhstan operations in January and February 2013.
Operating results
In the first quarter of 2013, the Company produced 320 thousand ounces of refined gold from continuing operations, compared to 302 thousand ounces a year ago. The growth in production was achieved as a result of significant increases in gold output at Titimukhta (+56%) and Verninskoye (+71%), as well as higher than planned production at Blagodatnoye (+3% year-on-year).
Polyus Gold moved 16.7 million cubic meters of rock in total during the first quarter of 2013, which is 4% more than in the same period in 2012. This was due to increased mining works at Verninskoe and Kuranakh, in line with the respective mine plans.
A total of 6.4 million tonnes of ore was mined in the first quarter of 2013, a decrease of 6% compared to the first quarter of 2012 (6.8 million tonnes). The decrease was mainly associated with lower volumes of ore mining at Olimpiada, in line with the mine plan.
The average stripping ratio for the Company in the first quarter of 2013 increased by 13% year-on-year due to a higher stripping ratio at Olimpiada. The increase was in line with the mine plan and resulted from the mining in the first quarter of 2012 an area of the pit with large additional ore volumes.
In the first quarter of 2013, the Company processed 5.3 million tonnes of ore, which is in line with the first quarter of 2012 (5.2 million tonnes).
|
Refined gold production, 000 oz
|
Q1 2013
|
Q1 2012
|
Change
|
|---|---|---|---|
| Olimpiada | 156.6 | 156.6 | - |
| Blagodatnoye | 86.5 | 83.6 | 3% |
| Titimukhta | 34.0 | 21.8 | 56% |
| Verninskoye | 11.0 | 6.4 | 71% |
| Alluvials | 0.7 | 1.0 | -30% |
| Kuranakh | 31.8 | 33.1 | -4% |
| Total refined gold production from continuing operations2 | 320.5 | 302.4 | 6% |
|
Mining works and ore processing
|
Q1 2013
|
Q1 2012
|
Change
|
|---|---|---|---|
| Total rock moved, 000 m3 | 16 713 | 16 052 | 4% |
| Total ore mining, mln tonnes | 6 382 | 6 768 | -6% |
| Average stripping ratio | 2.24 | 1.97 | 13% |
| Ore processed total, mln tonnes | 5 279 | 5 249 | 1% |
2 Calculation may not be precise due to rounding.
Operating results by mine
Olimpiada
Gold production at Olimpiada was flat year-on-year (157 thousand ounces of refined gold) on lower volumes of ore processing (1.8 million tonnes in the first quarter of 2013 compared to 2.1 million tonnes a year ago). The lower processing volumes were due to scheduled mill maintenance undertaken during the quarter. Recovery rates at the mine reached 74.6% in the first quarter of 2013, compared to 73.7% a year ago. The improvement was due to on-going optimisation of the bio oxidation process.
Automation of both Olimpiada plants is well underway. The equipment for the automation of the bio oxidation facility is nearly 80% procured and has begun to arrive onsite. Manufacturing of custom items and partial installation of incoming equipment has progressed as planned.
Five dormitories for 2,000 staff are being constructed to improve living conditions on site and are expected to be completed during the summer of 2013.
|
Olimpiada
|
Q1 2013
|
Q1 2012
|
Change
|
|---|---|---|---|
| Total rock moved, 000 m3 | 6 660 | 5 993 | 11% |
including stripping | 5 928 | 4 879 | 22% |
| Stripping ratio (m3/t) | 3.0 | 1.6 | 85% |
| Ore mined, 000 tonnes | 1 974 | 3 006 | -34% |
| Average grade in ore mined (g/t) | 3.6 | 3.2 | 10% |
| Ore processed, 000 tonnes | 1 845 | 2 082 | -11% |
| Average grade in ore (g/t) | 3.6 | 3.4 | 5% |
| Recovery (%) | 74.6 | 73.7 | 1% |
| Refined gold production, 000 oz | 156.6 | 156.6 | - |
Blagodatnoye
Blagodatnoye produced 86 thousand ounces of gold in the first quarter of 2013 (first quarter of 2012: 84 thousand ounces). The 3% increase in production was primarily a result of improvement in recovery rates (87.5% in the first quarter of 2013 compared to 85.5% in the first quarter of 2012).
The feasibility study for the expansion of the mill throughput to 8 million tonnes of ore per year from 6 million tonnes has been completed and is currently being reviewed by regulators. Upon the receipt of regulatory approvals and certain updates to the project, the Board is expected to review the expansion in the summer of 2013.
Three additional dormitories able to accommodate over 2,000 staff are being constructed to improve living conditions on site. Concrete works have been completed at the foundation of one of these facilities, and metal frames are currently being installed. Earthworks at the site of the other two new dormitories have been completed, and construction of the foundations is underway.
|
Blagodatnoye
|
Q1 2013
|
Q1 2012
|
Change
|
|---|---|---|---|
| Total rock moved, 000 m3 | 3 247 | 3 815 | -15% |
including stripping | 2 663 | 3 252 | -18% |
| Stripping ratio (m3/t) | 1.6 | 2.1 | -20% |
| Ore mined, 000 tonnes | 1 622 | 1 578 | 3% |
| Average grade in ore mined (g/t) | 2.1 | 2.1 | 1% |
| Ore processed, 000 tonnes | 1 616 | 1 596 | 1% |
| Average grade in ore (g/t) | 2.1 | 2.1 | 0% |
| Recovery (%) | 87.5 | 85.5 | 2% |
| Refined gold production, 000 oz | 86.5 | 83.6 | 3% |
Titimukhta
Gold production at Titimukhta increased by 56% year-on-year to 34 thousand ounces in the first quarter of 2013. The increase was mainly due to improved recovery rates (84.0% compared to 80.6% a year ago) and the significantly higher volumes of ore processed following the expansion of the mill throughput from 2.2 to 2.4 million tonnes per year completed in May 2012.
The installation of an additional hydro cyclone was completed in January 2013. Installation works at the thickener are currently in progress and are expected to be completed in the spring of 2013.
|
Titimukhta
|
Q1 2013
|
Q1 2012
|
Change
|
|---|---|---|---|
| Total rock moved, 000 m3 | 2 482 | 2 531 | -2% |
including stripping | 2 370 | 2 301 | 3% |
| Stripping ratio (m3/t) | 3.9 | 3.6 | 6% |
| Ore mined, 000 tonnes | 611 | 631 | -3% |
| Average grade in ore mined (g/t) | 2.1 | 2.1 | 1% |
| Ore processed, 000 tonnes | 616 | 470 | 31% |
| Average grade in ore (g/t) | 2.0 | 2.1 | -5% |
| Recovery (%) | 84.0 | 80.6 | 4% |
| Refined gold production, 000 oz | 34.0 | 21.8 | 56% |
Verninskoye
Verninskoye produced 11 thousand ounces of gold in the first quarter of 2013, a 71% increase over the first quarter of 2012 which was the mine’s first quarter in production whilst operating on a partial flowsheet.
As a temporary measure, a mobile crusher has been procured to replace the damaged primary crusher, whilst the permanent solution is being redesigned.
As the ramp up of Verninskoye continues, all identified bottlenecks are being eliminated. The automation system has been installed and a systematic process has been initiated to achieve full process automatic control during the second quarter of 2013.
A dormitory for 285 staff has been commissioned and cyanide and sulphuric acid storage facilities have been finished. The first stage of the solid waste landfill also has been completed.
The design of the Peleduy-Mamakan grid construction is progressing as planned. The Board is expected to review the project in the summer of 2013.
|
Verninskoye
|
Q1 2013
|
Q1 2012
|
Change
|
|---|---|---|---|
| Total rock moved, 000 m3 | 955 | 526 | 82% |
including stripping | 545 | 332 | 64% |
| Stripping ratio (m3/t) | 0.5 | 0.6 | -22% |
| Ore mined, 000 tonnes | 1 106 | 524 | 111% |
| Average grade in ore mined (g/t) | 1.9 | 1.9 | -2% |
| Ore processed, 000 tonnes | 267 | 219 | 22% |
| Average grade in ore (g/t) | 2.5 | 2.4 | 7% |
| Recovery (%) | 64.1 | 86.83 | -26% |
| Refined gold production, 000 oz | 11.0 | 6.4 | 71% |
Alluvials (Irkutsk region)
The Company’s seasonal alluvial operations started production in late March, focusing on preparatory mining works.
|
Alluvials
|
Q1 2013
|
Q1 2012
|
Change
|
|---|---|---|---|
| Sands washed (thousand m3) | 9 | 30 | -70% |
| Average grade (g/m3) | 0.6 | 0.3 | 118% |
| Refined gold production, 000 oz | 0.7 | 1.0 | -30% |
3 High recovery rates in the first quarter of 2012 were due to stockpiling gravity tailings as Work in Progress for later processing as the mine operated on the partial flowsheet.
Kuranakh
Kuranakh produced 32 thousand ounces of gold in the first quarter of 2013 compared to 33 thousand ounces a year ago. The slight decrease in gold output was due to lower recovery rates resulting from increased zinc content in the ore. The problem is being addressed through more intensive blending of ore and the introduction of a different resin in the sorption process.
A mobile crusher has been installed to improve the quality of ore feed by averaging it by composition and gold content. Start-up works at the facility are currently underway.
|
Kuranakh
|
Q1 2013
|
Q1 2012
|
Change
|
|---|---|---|---|
| Total rock moved, 000 m3 | 3 369 | 3 188 | 6% |
including stripping | 2 764 | 2 589 | 7% |
| Stripping ratio (m3/t) | 2.6 | 2.5 | 3% |
| Ore mined, 000 tonnes | 1 068 | 1 029 | 4% |
| Average grade in ore mined (g/t) | 1.3 | 1.4 | -3% |
| Ore processed, 000 tonnes | 935 | 882 | 6% |
| Average grade in ore (g/t) | 1.3 | 1.4 | -3% |
| Recovery (%) | 81.7 | 86.9 | -6% |
| Refined gold production, 000 oz | 31.8 | 33.1 | -4% |
Development projects
Natalka
To date, earthworks totaling 6.1 million cubic meters, including 1.4 million cubic meters in the first quarter of 2013, have been completed across 15 sites including the mill, car depot, fuel storage facility, logistics base, boilers 1 and 2, and power substations 2 and 3. Earthworks remain in progress at the central repair workshop and solid waste landfill sites and on various roads.
Key components of the new plant, SAG mill and ball mill, are expected to arrive in the port of Magadan in mid-April and be delivered to the site in May 2013. Construction of foundations and concrete works, and the reinforcement and pre-assembly of columns at the mill site are all well underway.
The installation of bored piles at the desorption section and gold cash room sites is 69% complete.
Mining equipment including six additional Komatsu trucks and three DML drilling rigs have been delivered on site. 13 additional drilling rigs have been installed.
Construction equipment and machinery including 41 trucks, 21 Komatsu loaders, six Volvo cars with side platforms and cranes have been delivered on site.
In addition to the two dormitories for construction personnel commissioned last year, a further accommodation facility for 275 staff was completed in the first quarter of 2013.
Construction staff headcount remained steady at 1,400 personnel while the composition of the workforce changed significantly to reflect the completion of earthworks and the shift to concrete works and the installation of metal frames.
During the second quarter of 2013, the Company will review an option to start production at Natalka in winter 2013/2014 using a partial flowsheet and the already installed pilot plant.
Financial update
In the first quarter of 2013, the Company sold 322 thousand ounces of gold from continuing operations, a 1% increase compared to 320 thousand ounces a year ago.
The Company estimates its first quarter of 2013 gold sales from continuing operations will reach USD 524 million, which is 4% less than in the first quarter of 2012 (USD 545 million). The estimated weighted-average gold selling price was USD 1,6244 per ounce, a 5% decrease compared to USD 1,705 in the first quarter of 2012.
At 31 March 2013, the Company’s estimated net cash position was USD 699 million compared to net debt of USD 27 million at the end of the first quarter of 2012.
__________________________4 Excluding sales from divested Kazakhstan operations.
Corporate update
On 28 February 2013, Polyus Gold completed the sale of its assets in Kazakhstan and Kyrgyzstan to a consortium consisting of Institute Project B.V., Financial Services B.V. and Folkstand Consortium Limited.
On 7 March 2013, Global Reporting Initiative confirmed that Polyus Gold’s Sustainability Report for 2012 fulfils the requirements of GRI Level A+.
On 18 March 2013, Polyus Gold International Limited was included into the FTSE Global Equity Index Series and the FTSE All World Equity Index Series.
During April 2013, Polyus Gold’s Board of Directors expects to decide on the dividend for the financial year 2012 taking into account the Company's dividend policy and will propose this to shareholders for their consideration at the Annual General Meeting.
2013 Outlook
Gold production guidance for 2013 is reconfirmed at between 1.59 and 1.68 million ounces excluding assets in Kazakhstan.
It is expected that the increase will be driven by further improvement in recovery rates at Olimpiada, Titimukhta and Verninskoye, along with the increase in processing volumes at Titimukhta and Verninskoye.
Conference call information
Polyus Gold will host an analyst conference call today at 3:30 pm London time to present and discuss the first quarter of 2013 operating results.
To join the conference call, please dial:
UK toll free 0808 237 0035
UK International +44 (0) 20 3426 2886
USA toll free 1866 928 6048
Russia toll free 8108 00206 85011
A live webcast of the presentation will be available at:
https://arkadin-event.webex.com/arkadin-event/onstage/g.php?t=a&d=708693453
Event passcode: 638316
A replay of the conference call will be available from 6 pm London time on 11 April 2013, for the duration of 7 days.
To access the replay, please dial:
UK toll free 0808 237 0026
UK International +44 (0) 20 3426 2807
Access number: 638316#
Enquiries:
Investor contact
Mikhail Seleznev, Director Investor Relations and Capital Markets
+44 (0) 203 585 35 37 ir@polyusgold.com
Media contact
Sergey Lavrinenko, Director Communications
+44 (0) 203 585 35 37 lavrinenkosn@polyusgold.com
Forward looking statements
This announcement may contain “forward-looking statements” concerning PGIL. Generally, the words “will”, “may”, “should”, “could”, “would”, “can”, “continue”, “opportunity”, “believes”, “expects”, “intends”, “anticipates”, “estimates” or similar expressions identify forward-looking statements. The forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Forward-looking statements include statements relating to future capital expenditures and business and management strategies and the expansion and growth of PGIL’s operations. Many of these risks and uncertainties relate to factors that are beyond PGIL’s ability to control or estimate precisely and therefore undue reliance should not be placed on such statements which speak only as at the date of this announcement. PGIL assumes no obligation in respect of, and does not intend to update, these forward-looking statements, except as required pursuant to applicable law.