Petropavlovsk PLC IRC Update (8870X)

TIDMPOG

RNS Number : 8870X

Petropavlovsk PLC

27 February 2017

27 February 2017

Petropavlovsk PLC

IRC Update

Petropavlovsk PLC ("Petropavlovsk" or the "Company" or, together with its subsidiaries, the "Group") is a significant shareholder in IRC Limited ("IRC"), the iron ore producer and developer, which today announced a repayment restructuring of IRC's US$340 million Project Finance Facility with Industrial and Commercial Bank of China Ltd ("ICBC").

IRC Corporate Highlights

ICBC Repayment Restructure, subject to fulfilment of certain conditions precedent:

-- Project Finance Facility: US$234 million principal outstanding.

-- 2017 deferral of both principal repayment instalments, originally due 20 June 2017 and 20 December 2017 for an aggregate amount of US$42,500,000 (approximately HK$330 million).

-- The five subsequent repayment instalments are rebalanced to account for the deferred 2017 payments. Each principal repayment instalment to be increased by US$8,500,000 (approximately HK$65.9 million) to US$29,750,000 (approximately HK$231 million), with the aggregate amount of the increase equal to US$42,500,000 (approximately HK$330 million).

-- The repayment restructure will be effective upon fulfilment of the conditions precedent and will continue to be effective until 20 June 2020, subject to the ongoing satisfaction of certain conditions. Thereafter, the principal repayment schedule will return to the original bi-annual payments of US$21,250,000. The 2022 maturity of the Project Finance Facility remains unchanged.

Commissioning

-- K&S is in the final stages of production testing. The plant continues to make solid progress, currently operating at close to 50% of capacity. For the month of January 2017, K&S produced 100kt of iron ore products.

-- Despite a technical incident with the ball mill lubrication system, K&S plant engineers have adapted the technological process to operate three out of four ball mills, allowing K&S to continue its commissioning program. Spare parts necessary for all ball mills to be operational are expected to be delivered to site soon.

-- Full commercial production remains scheduled for H1 2017.

Strategic Investor

-- Secured a new core investor, Tiger Capital Fund, with a member appointed to the Board.

-- Tiger Capital Fund invested US$25 million for 13.22% of the issued share capital.

Legal Settlement

-- Amicable settlement of legal and technical dispute with lead construction contractor at K&S, resulting in cash compensation to IRC of US$4.5 million in Dec 2016.

-- Outstanding construction payment liability reduced by US$3.9 million while reserving the rights to claim for further penalties from the contractor.

Peter Hambro, Chairman of Petropavlovsk, comments: "We congratulate IRC on its recent operational progress and improved financial stability. It is encouraging to note the strength of relations between IRC, its debt provider, ICBC, and its insurer, Sinosure. The 2017 debt repayment deferral in turn defers Petropavlovsk's 2017 contingent liability as the guarantor. This represents a significant reduction of our risk profile and comes as Petropavlovsk enters a phase of transformational growth. Furthermore, it allows the IRC team to remain focused on successfully delivering the ramp up of the K&S plant.

Throughout the current phase of commissioning IRC has continued to create shareholder value. This has been further supported by an improving iron ore market, with current spot iron ore of $90/t (62% Fe). With IRC projected cash costs of US$34/t, margins are robust even against the 2017 iron ore consensus of US$80/t.

Once the K&S plant reaches full commercial production and thereby becomes cash flow positive, the strategy remains for IRC to assess competitive refinancing alternatives, including retiring the Petropavlovsk guarantee.

As at market close on 24 February 2017, Petropavlovsk's 31.10% equity holding has a market value of HK$927 million (US$119 million, assuming a foreign exchange rate of HKD:USD 0.13)."

About Petropavlovsk

Petropavlovsk is one of Russia's leading fully integrated gold mining companies, operating some of the largest gold mines in Russia in terms of gold production, processing capacity and resource base. As at 31 December 2016, the Company had produced approximately 6.4Moz of gold.

Petropavlovsk is in the construction phase of a state of the art pressure oxidation facility to process the Company's substantial refractory resource base. The Company's combined 3,600km(2) license holding has untapped resource potential. The Company is a leading employer and contributor to the development of the local economy in the Amur region, Russian Far East, where it has operated since 1994.

Petropavlovsk is a shareholder (31.10%) of IRC Limited and is the guarantor of the US$340 million project finance facility (US$234 million principal outstanding, as at 31 December 2016). IRC is an iron ore producer and developer in the Russian Far East and North Eastern China. IRC is listed on the Hong Kong Stock Exchange (Ticker: 1029.HK).

Petropavlovsk is listed on the Main Market of the London Stock Exchange (Ticker POG:LN)

Enquiries

For more information, please visit www.petropavlovsk.net and www.ircgroup.com.hk or contact:

 
 Petropavlovsk PLC          Maitland 
 Alexandra Carse            Neil Bennett 
 Grace Hanratty             James Isola 
 [phone]       [phone] 
 [e-mail]   [e-mail] 
 

This information is provided by RNS

The company news service from the London Stock Exchange

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February 27, 2017 02:01 ET (07:01 GMT)