Production Update

 
TIDMHMB 
 
 

16 January 2012

Hambledon Mining Plc

("Hambledon" or the "Company")

Activities Report for the Quarter Ended 31 December 2011

Hambledon Mining plc (AIM: HMB), the Kazakhstan gold mining and development company, today reports on its operations and corporate highlights for the three months from 1 October to 31 December 2011. A copy of this report will be available on the Company's website, www.hambledon-mining.com.

Operational and Corporate Highlights:

 
 
    -- Initial contribution from underground ore increased overall Au grade 

by 22 per cent. compared to quarterly results in Q3 2011; Crushing and

screening plant performing exceptionally well during winter period;

 
    -- Excess waste ore removal to be completed by beginning of Q2 2012; 
 
    -- Senior on-site Project Manager recruited; 
 
    -- Fines for tailings dam 3 appealed against, hearing now set for end 

January;

 
    -- Akmola Gold: Antimonopoly commission consent received, acquisition 

nearing completion

 
    -- EBRD negotiations being finalised 
 

Tim Daffern, CEO of Hambledon said "The on-going extraction and infrastructure development for the underground mine at Sekisovskoye position the Group to become a growing gold producer with production from Sekisovskoye rising progressively to over 100,000 ounces per year with Akmola Gold potentially adding a further 50,000 ounces per year.

The appointment of an on-site project manager puts in place the senior level skills needed for the management of our expansion plans."

Operational results for the three months from 1 October to 31 December 2012:

 
                               October    November    December    Total 
Milled tonnes (dry)            68,420     41,120      57,394      166,934 
Gold grade (g/t)               1.24       1.38        1.25        1.28 
Contained gold (gms)           84,678     56,807      71,742      213,229 
Contained gold (oz)            2,722      1,826       2,306       6,854 
Gold recovery %                80.02 %    79.80%      78.55%      79.5% 
Recovered gold (oz)            2,178      1,457       1,811       5,446 
Recovered silver (oz)          3,269      2,467       2,083       7,819 
Underground mining (t)         Nil        4,021       4,159       8,180 
Underground grade Au (g/t)     Nil        4.00        3.36        3.13 
Underground grade Ag (g/t)     Nil        6.38        4.63        5.49 
 
 

PROCESSING

During the final quarter of 2011 higher ore grades from the open pit (reaching up to 2.49 g/t Au) and from the underground mine were fed to the plant. With an increasing open pit grade and ongoing production from the underground mine, Sekisovskoye is now well positioned to increase gold production significantly over the course of this year.

Gold recovery was slightly lower than in previous quarters, not helped by the plant shutdown in early November, which also constrained production levels. There were also changes in the cyanide quality with commensurate consumption of lime and oxygen. Additional control equipment is currently being installed to improve the control of the process chemistry. The Company expects to return to previous levels of recovery once all the equipment has been installed.

The crushing and screening plant continuously exceeded internal performance targets of 120tph for the quarter and highlighted the positive effect of the infrastructure refurbishment of the jaw crusher, conveyors systems and cone crushers completed in Q2 and Q3 2011. Despite the plant stoppage in November 2011, the 2011 tonnage processed of approximately 744,000t exceeded 2010 by approximately five per cent., highlighting the improved efficiency and performance of the metallurgical plant.

OPEN PIT MINING

Mining activities were primarily centred on the main open pit where most of the remaining excess waste ore was removed. There remains a small quantity to be excavated in Q1 2012. The result of the removal of the excess waste has been higher operating costs in 2011, which will reduce in 2012 as the waste to ore ratio decreases.

UNDERGROUND

Underground mining continues to progress ahead of schedule and under budget. Three operating levels are now in place with an expansion to five scheduled for the end of Q1, 2012. This will allow the underground mine to reach its targeted production level of 100,000t ore in 2012.

The contractor continues to perform well. Infrastructure work has included a large underground workshop, a substantial underground pumping station, first aid and welfare rooms, offices and large explosive magazines. This infrastructure will enable more efficient and lower cost underground mining once completed in mid-2012.

The mining engineering and pre-feasibility studies conducted by Golder Associates (UK and Canada) have been completed and the results are being used to guide the trial mining in the upper levels using modified room and pillar extraction techniques. The first trial bulk mining extraction stopes will commence in Q2 2012 so that a phased development towards bulk tonnage low cost mining is made.

The diamond drilling programme was briefly suspended at the end of 2011 to allow for annual machinery maintenance. The work has re-started and results from the next phase of drilling are expected to be released shortly.

Geological modeling of the underground resource continues and results will be released prior to publication of the Company's annual report.

TAILINGS DAM NO.3 (TD3)

A small leak from TD3 occurred in late October 2011 when the liner failed resulting in a release of low level cyanide-containing effluent to a stream which flows across the mine site. The Company informed the competent authorities and was requested to add a cyanide neutralising agent to the watercourse. The Company provided an alternative water supply for local residents until the authorities declared that the stream no longer presented a risk to water users. In addition, the Company has entered into an agreement with the local communities to contribute to local social infrastructure, including provision of municipal water supply, recreational facilities for communities, road surfacing, etc.

The Company appointed an international mining engineering consultant to undertake a root cause analysis of the failure and to design remedial measures. In addition, an independent third party consulting firm was then mandated to review the incident analysis and proposed remedial works.

On the basis of the above, Hambledon is satisfied that the cause of the recent failure is understood and a feasible engineering solution to TD3 remediation and re-commissioning has been developed.

Fines / penalties

 
 
    -- Hambledon has received notice that it is to be fined GBP1.17m for an 

administrative offence arising from environmental damage. An appeal

against the level of the fine has been lodged.

 
    -- A court hearing was due on 5 January 2012 but after reviewing the 

appeal documentation the courts decided to postpone the hearing until

late January 2012.

 
    -- It is normal in Kazakhstan for a fine to be imposed and for the amount 

of the fine to be reduced in court according to the arguments for and

against the level of the fine.

The imposition and contesting of fines in Kazakhstan is considered to be normal practice in Kazakhstan and previous experience suggests that the fine will be significantly reduced.

SITE MANAGEMENT

Mr. Mike Grummit, a senior Project Manager, has been recruited by the Company. Mike is a UK Chartered Mining Engineer of some 40 years' experience, most recently with African Barrick, and will join Hambledon at the end of Q1 2012.

Mike's role will be to manage the execution of the Company's projects in Kazakhstan. Mike has extensive underground gold mine construction and operational expertise.

AKMOLA GOLD LLP

As previously notified, the sale and purchase agreement for Akmola Gold was signed at the beginning of Q4, 2011. The applications to the Anti-Monopoly Commission and the Ministry of New Industry and New Technology (MINT) were made to allow the conditions required for closing to be met.

Since then, the Anti-Monopoly commission waiver has been received and staff in Kazakhstan have responded to all government queries regarding the proposed development of the Akmola Gold LLP properties.

It is hoped that the acquisition completion will take place around the end of Q1 2012, with the commencement of site establishment and development of the underground infrastructure. It is envisaged that the first ores from the Tellur project will be mined in mid-2013 for processing at the Sekisovskoye project.

ENQUIRIES:

HAMBLEDON MINING:

Telephone [phone]

Charles Zorab

FAIRFAX I.S. PLC (NOMAD AND BROKER):

Telephone [phone]

Ewan Leggat/Katy Birkin

TAVISTOCK COMMUNICATIONS:

Telephone [phone]

Ed Portman/Jos Simson