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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Petropavlovsk Plc | LSE:POG | London | Ordinary Share | GB0031544546 | ORD 1P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 1.20 | 1.20 | 1.25 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMPOG
RNS Number : 7646D
Petropavlovsk PLC
28 April 2017
28 April 2017
Petropavlovsk PLC (the "Company" or, together with its subsidiaries, the "Group")
Notice of Publication of Annual Report
The Annual Report for the year ended 31 December 2016 (the "Annual Report 2016") is available to view and download from the Company's website at www.petropavlovsk.net . A copy of the Annual Report 2016 has also been submitted to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/nsm
The information contained in the Appendix to this announcement, which is extracted from the Annual Report 2016, is included solely for the purposes of complying with the Disclosure Guidance and Transparency Rules (the "DTR") 6.3.5 and the requirements it imposes on how to make public annual financial reports. The Appendix should be read in conjunction with the Company's Annual Results for the year ended 31 December 2016 issued on 26 April 2017 (the "Annual Results Announcement"). Together, these constitute the material required by DTR 6.3.5 to be communicated to the media in unedited full text through a Regulatory Information Service. This material should be read in conjunction with, and is not a substitute for reading, the Annual Report 2016.
References to page numbers and notes to the financial statement made in the Appendix refer to page numbers and notes to the financial statements in the Annual Report 2016. The information contained in this announcement does not constitute the Company's statutory accounts as defined in section 434 of the Companies Act 2006 (the "Act") for 2016 or 2015 but is derived from those accounts. The auditors have reported on those accounts and their report was unqualified, and did not contain statements under section 498(2) of the Act (regarding adequacy of accounting records and returns) or under section 498(3) of the Act (regarding provision of necessary information and explanations). The statutory accounts for the year ended 31 December 2016 have been approved by the Board and will be delivered to the Registrar of Companies. A copy of the statutory accounts for the year ended 31 December 2015 was delivered to the Registrar of Companies.
Neither the content of the Company's website, nor the content of any other website accessible from hyperlinks on the Company's website is incorporated into, or forms part of, this announcement.
APPIX
1. Directors' responsibility statement
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole;
-- the strategic report includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face
-- the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the company's position and performance, business model and strategy.
2. Principal risks relating to the Group
The most significant risks that may have an adverse impact on the Group's ability to meet its strategic objectives and to deliver shareholder value are set out below. The Group seeks to mitigate these risk wherever possible, although some, such as political risks, are largely beyond the Group's control. Summarised alongside each risk is a description of its potential impact on the Group. Measures in place to manage or mitigate against each specific risk, where it is within the Group's control, are also described.
26. Related parties
Related parties the Group entered into transactions with during the reporting period
PJSC Asian-Pacific Bank ('Asian-Pacific Bank') and LLC Insurance Company Helios Reserve ('Helios') are considered to be related parties as members of key management have an interest in and collectively exercise significant influence over these entities.
The Petropavlovsk Foundation for Social Investment (the 'Petropavlovsk Foundation') is considered to be a related party due to the participation of the key management of the Group in the governing board of the Petropavlovsk Foundation and their presence in its board of guardians.
JSC Verkhnetisskaya Ore Mining Company ('Verkhnetisskaya') is an associate to the Group and hence was a related party until 27 May 2016 when the Group disposed its interest in Verkhnetisskaya.
CJSC ZRK Omchak and its wholly owned subsidiary LLC Kaurchak ('Omchak') are associates to the Group and hence were related parties until 29 April 2015 when the Group disposed its interest in Omchak.
IRC Limited and its subsidiaries (Note 35) are associates to the Group and hence are related parties since 7 August 2015.
Transactions with related parties which the Group entered into during the years ended 31 December 2016 and 2015 are set out below.
OPERATIONAL RISKS ----------------------------------------------------------------------------------------------------- PRODUCTION RELATED RISK - Failure to achieve the Group's production plan ----------------------------------------------------------------------------------------------------- Risk Description and Mitigation/comments 2016 Progress potential impact -------------------- --------------------------- ----------------------- ------------------------- Risk to The Group's assets Preventative Flooding and production are located in maintenance unusually cold from: the Russian Far procedures weather prevented - Severe East, a remote are undertaken the Group delivering weather area that can on a regular on the original conditions. be subject to and periodic 2016 mine schedule - The availability severe climatic basis to ensure resulting in of suitable conditions. Severe that machines a lower average machinery, weather conditions, will function processed grade equipment such as cold properly under for 2016 and and consumables. temperatures extreme cold lower production. - Logistics in winter and weather conditions; However with for the torrential rain, heating plants strong capital delivery potentially causing at operational discipline and of equipment flooding in the bases are dedicated cost and services region could regularly control the have an adverse maintained Group achieved impact on operations, and operational TCC of US$660oz, including the equipment improving the delivery of supplies, is fitted Group margin equipment and with cold per ounce. fuel; and exploration weather options and extraction which could The Executive levels may fall assist in team and operational as a result of ensuring that management responded such climatic equipment well to the factors. does not fail bad weather as a result at Pioneer's The Group relies of adverse Andreevskaya on the supply weather conditions. deposit. A full and availability impact assessment of various services Pumping systems including detailed and equipment are in place mapping, recording in order to successfully and tested and monitoring run its operations. periodically of rock fractures For example, to ensure was carried timely delivery that they out. Whilst of mining equipment are functioning. any available and jaw crushers mining fleet and their availability Management was temporarily is essential monitor natural utilised at to the Group's conditions Pioneer's other ability to extract in order to operating pits. ore from the pre-empt any Group's assets disaster and However the and to crush in order that Company's overriding
the mined ore appropriate commitment to prior to production. mitigating the safety of Delay in the action can its employees delivery or the be taken expediently. meant that delays failure of mining The Group in production equipment could aims to maintain at Pioneer were significantly several months inevitable. delay production of essential and impact the supplies at Potential impact Group's profitability. each site. - High Equipment The Group is is ordered Change since dependent on with adequate 2015 - No change production from lead time its operating in order to mines in order prevent delays to generate revenue in their delivery. and cash flow and comply with The Group the production has a number and sales covenants of contingency in certain of plans in place its borrowing to address facilities. any disruption to services. -------------------- --------------------------- ----------------------- ------------------------- EXPLORATION RELATED RISK -------------------- --------------------------- ----------------------- ------------------------- Risk Description and Mitigation/comments 2016 Progress potential impact -------------------- --------------------------- ----------------------- ------------------------- The Group's Exploration activities The Group Defined within activities are high risk, uses modern Petropavlovsk's are reliant time-consuming geophysical substantial on the and can be unproductive. and geochemical 20.16Moz JORC quantity In addition, exploration Resource (7.95Moz and quality these activities and surveying JORC Reserve) of the often require techniques. is a 9.26Moz Mineral substantial expenditure The Group refractory gold Resources to establish employs a Resource (4.07Moz and Ore Reserves through world class refractory Ore Reserves drilling and team of geologists Reserve), with available metallurgical with considerable under explored to it. and other testing, regional expertise resource upside determine appropriate and experience. within the highly recovery processes They are supported prospective to extract gold by a network 3,600km2 licence from the ore of fully accredited areas. and construct laboratories or expand mining capable of The completion and processing performing of the POX Hub facilities. Once a range of will unlock deposits are assay work the 9.26Moz discovered it to high standards. refractory Resource can take several which supports years to determine The Group's Petropavlovsk's whether Reserves exploration long term growth exist. During budget is objectives in this time, the fixed for doubling the economic viability each asset average life of production at the start of mine and may change. As of each financial sustaining its a result of these year depending production profile. uncertainties, upon previous the exploration results. During 2016 programmes in the Group continued which the Group to explore the is engaged in potential for may not result further mine in the expansion life extension or replacement and production of current production expansion. with new Reserves or mining operations. - At Malomir, exploration work has identified several highly prospective satellite refractory targets for further exploration work, including Ozhidaemoe. - At Pioneer, refractory targets have been identified south of the main Pioneer orebody zone. The Alexandra zone and Sosnovaya licence are also expected to provide further refractory resource upside. Potential impact - High Change since 2015 - Decreased risk -------------------- --------------------------- ----------------------- ------------------------- PROJECT RELATED RISKS - Failure to deliver various construction and development projects The Group's long-term strategy relies on the successful commissioning of the POX Hub and the delivery of the underground mining project. ----------------------------------------------------------------------------------------------------- Risk Description and Mitigation/comments 2016 Progress potential impact -------------------- --------------------------- ----------------------- ------------------------- 1. Pressure If the Group The Group - During 2016 Oxidation is unable to has entered the Company (POX) Hub. commission POX into a management renewed key within the projected contract with contracts with budget and timeframes Outotec a Outotec. this may have world leader an adverse impact in the design - As part of
on the Group's and construction the recommencing growth plans of pressure of the POX Hub and its future oxidation development profitability. and flotation Outotec (alongside plants. Outotec the Company) will oversee ran checks on the manufacture, the major equipment installation in situ and and commissioning commenced work of the equipment on the automation and has guaranteed and control certain operating systems. parameters. - Tests at the The Group's pilot plant pilot plant continued. in Blagoveshchensk during 2013-2015 Under the refinancing confirmed agreements with the feasibility VTB and Sberbank of POX processing (see page [--]), for Malomir the Group is and Pioneer required to concentrates. complete the construction POX has a of POX out of special procurement its free cash process with flow. a separate budget and Potential impact expenditure - High schedule, monitored Change since and signed-off 2015 - No change by the CEO, COO and CFO based on the approved budget. -------------------- --------------------------- ----------------------- ------------------------- Risk Description and Mitigation/comments 2016 Progress potential impact -------------------- --------------------------- ----------------------- ------------------------- 2. The If the Group The Group - An experienced underground is unable to employed a firm of contractors mining deliver underground Russian engineering commenced the project. mining production firm to undertake underground within the agreed a pre-feasibility mining works budget and timeframes study and at Pioneer working this may have mine design closely with an adverse impact on underground the Group's on the Group's mining. The in-house underground growth plans study concluded operations team. and its future that underground profitability. mining should The Executive be technically Committee and feasible and the Board closely economically monitor both viable. the POX and underground mining projects. Potential impact - high Change since 2015 - No change -------------------- --------------------------- ----------------------- ------------------------- FINANCIAL RISKS ----------------------------------------------------------------------------------------------------- FUNDING AND LIQUIDITY RELATED RISKS ----------------------------------------------------------------------------------------------------- Risk Description and Mitigation/comments 2016 Progress potential impact -------------------- --------------------------- ----------------------- ------------------------- Lack of The Group needs Detailed annual On 20 December funding ongoing access budgets are 2016 the Group and liquidity to liquidity approved by completed the to allow and funding in the Board refinancing the Group order to (i) and monthly of US$430 million to: refinance its forecasts of its debt existing debt provided. with its lending i. Support as required, A successful banks Sberbank its existing (ii) support cost reduction and VTB. operations; its existing programme ii. Invest operations and was undertaken The approved in and (iii) invest to offset terms include develop in new projects the effect a revised maturity its exploration and exploration. of a reduction profile from and underground There is a risk in the gold May 2018 to mining that the Group price. September 2022 projects; may be unable (inclusive of iii. Complete to obtain the The Group an option to the construction necessary funds continues extend the 2019 of the when required to progress maturity payment POX Hub; or that such its internal to 2022 subject iv. Extend funds will only KPI to reduce to certain conditions the life be available total cash being satisfied) and capacity on unfavourable costs by 50% and an effective of its terms. The Group during the average interest existing may therefore period 2013-2018. rate of c.8%. mining be unable to operations; develop and/or The Group is v. Refinance/repay meet its operational currently completing the Group's or financial the final documentation debt as commitments. for the Sberbank it falls US$100m commodity due; and The Group's borrowing linked loan vi. Complete facilities include facility. Once the construction a requirement this has been of the to comply with completed the POX Hub certain specified Group's entire out of covenants in bank debt of its free relation to the c. US$530m will cash flow. level of net have been refinanced. debt and interest If the cover. A breach The financial
operational of these covenants and operational performance could result covenants were of the in a significant renegotiated business proportion of during 2016 declines the Group's borrowings as part of the significantly becoming repayable refinancing the Company immediately. of the Group's may breach total debt. one or more of Potential impact the financial - High and production covenants Changes since as set 2015 - Decreased out in risk various financing arrangements. -------------------- --------------------------- ----------------------- ------------------------- GOLD PRICE RISK ----------------------------------------------------------------------------------------------------- Risk Description and Mitigation/comments 2016 Progress potential impact -------------------- --------------------------- ----------------------- ------------------------- The Group's The Group's financial The Executive In order to operational performance is Committee increase certainty results highly dependent constantly in respect of may be on the price monitors the a significant affected of gold. A sustained gold price proportion of by changes downward movement and influencing its cash flows, in the in the market factors on the Group entered gold price. price for gold a daily basis into a number may negatively and consults of gold forward affect the Group's with the Board contracts during profitability as appropriate. 2016. Forward and cash flow contracts to and consequently The Group sell an aggregate its ability to has a hedging of 134,545oz fund the construction policy and of gold matured of the POX Hub. hedges a portion during the year The market price of production and resulted of gold is volatile as the Executive in US$(8.5) and is affected Committee million net by numerous factors and Board settlement paid which are beyond deem appropriate. by the Group. the Company's control. Forward contracts to sell an aggregate of 50,006oz of gold at an average price of US$1,303 per oz were outstanding as at 31 December 2016. During 2017 the Company has continued to hedge a portion of its gold production in order to protect itself from volatility in the price. Potential impact - High Changes since 2015 - Decreased risk -------------------- --------------------------- ----------------------- ------------------------- FX RISK ----------------------------------------------------------------------------------------------------- Risk Description and Mitigation/comments 2016 Progress potential impact -------------------- --------------------------- ----------------------- ------------------------- Currency The Company reports The Group The Group does fluctuations its results in has adopted not undertake may affect US Dollars, which a policy of any foreign the Group. is the currency holding a currency transaction in which gold minimum amount hedging although is principally of cash and this is kept traded and therefore monetary assets under review. in which most or liabilities of the Group's in non US The Russian revenue is generated. Dollar currencies Rouble depreciated Significant costs and operates against the are incurred an internal US dollar during in and/or influenced funding structure 2016, with an by the local which seeks average exchange currencies in to minimise rate for 2016 which the Group foreign exchange of 67.18 Rouble operates, principally risk exposure. per US dollar Russian Roubles. compared with The appreciation 61.30 Roubles of the Russian per US dollar Rouble against during 2015. the US Dollar tends to result Potential impact in an increase - High in the Group's costs relative Change since to its revenues, 2015 - No change whereas the depreciation of the Russian Rouble against the US Dollar tends to result in lower Group costs relative to its revenues. In addition, a portion of the Group corporate overhead is denominated in Sterling. Therefore, adverse currency movements may materially affect the Group's financial condition and results of operations. In addition, if inflation in Russia were to increase without a corresponding devaluation of the Russian Rouble relative to the US Dollar, the Group's business, results of operations
and financial condition may be adversely affected. -------------------- --------------------------- ----------------------- ------------------------- IRC Related RISKS - The Company has a 31.10% interest in IRC, a Hong Kong Listed iron ore producer ----------------------------------------------------------------------------------------------------- Risk Description and Mitigation/comments 2016 Progress potential impact -------------------- --------------------------- ----------------------- ------------------------- Currency Description and The Group The Group does fluctuations potential impact has adopted not undertake may affect The Company reports a policy of any foreign the Group. its results in holding a currency transaction US Dollars, which minimum amount hedging although is the currency of cash and this is kept in which gold monetary assets under review. is principally or liabilities traded and therefore in non US The Russian in which most Dollar currencies Rouble depreciated of the Group's and operates against the revenue is generated. an internal US dollar during Significant costs funding structure 2016, with an are incurred which seeks average exchange in and/or influenced to minimise rate for 2016 by the local foreign exchange of 67.18 Rouble currencies in risk exposure. per US dollar which the Group compared with operates, principally 61.30 Roubles Russian Roubles. per US dollar The appreciation during 2015. of the Russian Rouble against Potential impact the US Dollar - High tends to result in an increase Change since in the Group's 2015 - No change costs relative to its revenues, whereas the depreciation of the Russian Rouble against the US Dollar tends to result in lower Group costs relative to its revenues. In addition, a portion of the Group corporate overhead is denominated in Sterling. Therefore, adverse currency movements may materially affect the Group's financial condition and results of operations. In addition, if inflation in Russia were to increase without a corresponding devaluation of the Russian Rouble relative to the US Dollar, the Group's business, results of operations and financial condition may be adversely affected. -------------------- --------------------------- ----------------------- ------------------------- RC Related RISKS - The Company has a 31.10% interest in IRC, a Hong Kong Listed iron ore producer ----------------------------------------------------------------------------------------------------- Risk Description and Mitigation/comments 2016 Progress potential impact -------------------- --------------------------- ----------------------- ------------------------- Risk that Petropavlovsk Mitigation/comments On 31 March funding has provided The Board 2017, IRC announced may be a guarantee against and the Executive that ICBC has demanded a US$340 million Committee waived the obligation from Petropavlovsk project loan maintain close of K&S to repay under a facility provided communication all loan principal guarantee to K&S by ICBC with instalments in favour to fund the construction IRC's Executive. due in 2017 of ICBC of IRC's iron totalling arising ore mining operation IRC and the US$42.5million. from: at K&S, of which Company continue This amount c.US$234million to consider will be spread Inability is outstanding various options equally between of K&S (2015: c.US$276million). available the five subsequent to service This loan is to them, both repayment instalments the interest supported by separately due under the and meet Sinosure, the and jointly, project finance the repayments Chinese export regarding facility. due on credit agency. the restructuring the ICBC In the event of IRC's debt In addition loan due that K&S was and the potential K&S is successfully to insufficient to default on removal of operating at funds arising its loan, Petropavlovsk the guarantee. 75% production from: may be liable capacity and to repayment the iron ore - Late of the outstanding price has increased commissioning loan under the considerably of K&S terms of the during 2017, guarantee and rising to US$100 - Decrease other Group indebtedness per tonne in in iron may become repayable March 2017. ore price under cross-default Based on IRC's provisions cost optimisation A further analysis the delay in Under the terms estimated unit the commissioning of the Company's cash cost of of K&S banking facilities K&S is c.US$34 and/or with Sberbank per tonne for a decrease and VTB, the product delivered in the Company is unable to the Chinese iron ore to provide any border. price could funds to IRC result without the prior The above factors in a decrease consent of these represent a in the lenders. significant value of reduction in the Company's the risk that shareholding there will be in IRC. a claim on the Company's guarantee in the immediate future and hence represents a significant
reduction in the Company's risk profile. The Company's interest in IRC was valued at US$36.140 million as at 31 December 2016 (2015: US$39.163 million). Potential impact - High Change since 2015 - Decreased risk -------------------- --------------------------- ----------------------- ------------------------- HEALTH, SAFETY AND ENVIRONMENTAL RISK ----------------------------------------------------------------------------------------------------- Risk that our employees or those visiting our operations may be injured ----------------------------------------------------------------------------------------------------- Risk Description and Mitigation/comments 2016 Progress potential impact -------------------- --------------------------- ----------------------- ------------------------- Mining: The Group's employees Board level The Group operates are one of its oversight a prompt incident - is subject most valuable of health reporting system to a number assets. The Group and safety to the Executive of hazards recognises that issues occurs Committee and and risks it has an obligation through the the Board. There in the to protect the work of the were 34 lost workplace health of its Health, Safety time accidents employees and and Environmental during 2016 - requires that they have Committee with a Lost the use the right to ('HSE') which Time Injury of hazardous operate in a is chaired Frequency Rate substances safe working by Mr Alexander ('LTIFR') for including environment. Green, Independent 2016 of 2.64 cyanide Certain of the Non-Executive accidents per and other Group's operations Director. 1 million manhours reagents. are carried out Health and worked compared under potentially Safety management with 36 accidents hazardous conditions. systems are in 2015 and Group employees in place across a LTIFR of 2.63. may become exposed the Group to health and to ensure There was one safety risks that the operations fatality during which may lead are managed 2016 (2015: to the occurrence in accordance 1). This fatality of work-related with the relevant was reported accidents and health and immediately harm to the Group's safety regulations to the Chairman employees. These and requirements. of the HSE Committee. could also result A full investigation in production The Group of this incident delays and financial continually was conducted loss. reviews and by the Russian updates its authorities Accidental spillages health and which concluded of cyanide and safety procedures that the Company other chemicals in order was not at fault may result in to minimise for the accident. damage to the the risk of Records confirmed environment, accidents that the individual personnel and and improve concerned had individuals within accident response, received all the local community. including relevant training additional from the Company. and enhanced The HSE Committee technical discussed this measures at matter in detail all sites, to identify improved first whether any aid response actions should and the provision be taken or of further further training occupational, provided to health and mitigate against safety training. any reoccurrence of a similar Cyanide and accident. Action other dangerous was taken by substances the Group's are kept in management and secure storages H&S officers with limited to reinforce access only correct behaviour to qualified to employees. personnel, with access At the request closely monitored of the HSE Committee by security the Group commenced staff. a new 'health and safety' H&S targets campaign specifically are included aimed at preventing in the annual accidents involving bonus scheme vehicles. for Executive Directors There were no and the Executive accidents involving Committee. cyanide or other dangerous substances during 2016. Potential impact - Medium/High Change since 2015 - No change -------------------- --------------------------- ----------------------- -------------------------
LEGAL AND REGULATORY RISKS ----------------------------------------------------------------------------------------------------- Risks that legal or regulatory issues may impact the ability of the Group to operate ----------------------------------------------------------------------------------------------------- Risk Description and Mitigation/comments 2016 Progress potential impact -------------------- --------------------------- ----------------------- ------------------------- The Group The Group's principal There are Potential impact requires activity is the established - Medium/High various mining of precious processes licences and non-precious in place to Change since and permits metals which monitor the 2015 - No change in order require it to required and to operate. hold licences existing licences which permit and permits it to explore on an on-going and mine in particular basis and areas in Russia. processes These licences are also in are regulated place to ensure by Russian governmental compliance agencies and with the requirements if a material of the licences licence was challenged and permits. or terminated, Schedules this would have are presented a material adverse to the Executive impact on the Committee Group. In addition, detailing various government compliance regulations require with the Group's the Group to licences and obtain permits permits. to implement new projects or to renew existing permits. Failure to comply with the requirements and terms of these licences may result in the subsequent termination of licences crucial to operations and cause reputational damage. Alternatively, financial or legal sanctions could be imposed on the Group. Failure to secure new licences or renew existing ones could lead to the cessation of mining at the Group's operations or an inability to expand operations. -------------------- --------------------------- ----------------------- ------------------------- Risks that legal or regulatory issues may impact the ability of the Group to operate ----------------------------------------------------------------------------------------------------- Risk Description and Mitigation/comments 2016 Progress potential impact -------------------- --------------------------- ----------------------- ------------------------- The Group Actions by governments To mitigate This risk cannot is subject or changes in the Russian be influenced to risks economic, political, economic and by the management associated judicial, administrative, banking risk of the Company. with operating taxation or other the Group However, the in Russia. regulatory factors strives to Group continues or foreign policy use the banking to monitor changes in the countries services of in the political in which the several financial environment Group operates institutions and reviews or holds its and not keep changes to the major assets disproportionately relevant legislation, could have an large sums policies and adverse impact on deposit practices. on the Group's with a single business or its bank. Potential impact future performance. - High Most of the Group's The Group assets and operations seeks to mitigate Change since are based in the political 2015 - No change Russia. and legal risk by constant Russian foreign monitoring investment legislation of the proposed imposes restrictions and newly on the acquisition adopted legislation by foreign investors to adapt to of direct or the changing indirect interests regulatory in strategic environment sectors of the in the countries Russian economy, in which it including in operates and respect of gold specifically reserves in excess in Russia. of a specified It also relies amount or any on the advice occurrences of of external platinum group counsel in metals. relation to the interpretation The Group's Pioneer and implementation and Malomir licences within the have been included Group of new on the list of legislation. subsoil assets of federal significance, The Group maintained by closely monitors the Russian Government its assets ("Strategic Assets"). and the probability The impact of of their inclusion this classification into the Strategic is that changes Assets lists to the direct published or indirect ownership by the Russian of these licences Government. may require obtaining clearance in The Company's accordance with Articles of the Foreign Strategic Association Investment law include a of the Russian provision Federation. which allows the Board to impose such restrictions as the Directors may think necessary for the purpose of ensuring that no ordinary shares in the Company are acquired or held or transferred to any person in breach of Russian legislation, including any person having acquired
(or who would as a result of any transfer acquire) ordinary shares or an interest in ordinary shares which, together with any other shares in which that person or members of their group is deemed to have an interest for the purposes of the Strategic Asset Laws, carry voting rights, exceeding 50 per cent. (or such lower number as the Board may determine in the context of the Strategic Asset Laws) of the total voting rights attributable to the issued ordinary shares without such acquisition having been approved, where such approval is required, pursuant to the Strategic Asset Laws. -------------------- --------------------------- ----------------------- -------------------------
Trading Transactions
Related party transactions the Group entered into that relate to the day-to-day operation of the business are set out below.
Sales to Purchases from related parties related parties -------------------------------------- -------------------- ----------------- --------- 2016 2015 2016 2015 US$'000 US$'000 US$'000 US$'000 -------------------------------------- --------- --------- ----------------- --------- Asian-Pacific Bank Other 22 575 102 113 -------------------------------------- --------- --------- ----------------- --------- 22 575 102 113 -------------------------------------- --------- --------- ----------------- --------- Trading transactions with other related parties Insurance arrangements with Helios, rent and other transactions with other entities in which key management have interest and exercises a significant influence or control 66 1,182 3,514 5,716 Associates IRC Limited and its subsidiaries 69 49 1,996 1,152 CJSC ZRK Omchak and its wholly 2 - owned subsidiary LLC Kaurchak - - 135 1,233 5,510 6,868 -------------------------------------- --------- --------- ----------------- ---------
During the year ended 31 December 2016, the Group made US$0.2 million charitable donations to the Petropavlovsk Foundation (2015: US$0.4 million).
The outstanding balances with related parties at 31 December 2016 and 2015 are set out below.
Amounts owed Amounts owed by related to related parties parties at 31 December at 31 December ------------------------------------- --------------------- ---------------- --------- 2016 2015 2016 2015 US$'000 US$'000 US$'000 US$'000 Helios and other entities in which key management have interest and exercises a significant influence or control 1,383 1,328 1 450 Asian-Pacific Bank 1 - IRC Limited and its subsidiaries 14,502(a) 2,023 1,704 1,233 15,886 3,351 1,705 1,683 ------------------------------------- ---------- --------- ---------------- ---------
(a) Including US$12.5 million advanced to IRC in December 2016. This balance was fully repaid in January 2017.
Banking arrangements
The Group has current and deposit bank accounts with Asian-Pacific Bank.
The bank balances at 31 December 2016 and 2015 are set out below.
2016 2015 US$'000 US$'000 --------------- --------- --------- Asian-Pacific Bank 629 3,208 ---------------- --------- ---------
-
Financing transactions
The Group has charged a fee for the provision of the guarantee to IRC (note 14), equal to 1.75% on the outstanding loan amount under the ICBC Facility Agreement and which amounted to US$4.5 million during the year ended 31 December 2016 (31 December 2015: US$2.2 million). The Guarantee fee principal outstanding amounted to an equivalent of US$3.4 million (31 December 2015:US$nil).
The Group had an interest-free unsecured loan issued to Verkhnetisskaya. Loan principal outstanding amounted to an equivalent of US$2.8 million as at 31 December 2015.
During the year ended 31 December 2015, the Group received a number of loans from Asian-Pacific Bank. Loan principal outstanding as at 31 December 2016 was US$nil (31 December 2015: an equivalent of US$2.7 million). During the year ended 31 December 2016, interest charged on loans received from Asian-Pacific Bank comprised US$0.03 million (31 December 2015: US$0.5 million).
Key management compensation
Key management personnel, comprising a group of 15 (2015: 18) individuals, including Executive and Non-Executive Directors of the Company and members of senior management, are those having authority and responsibility for planning, directing and controlling the activities of the Group.
2016 2015 US$'000 US$'000 -------------------------- -------- -------- Wages and salaries 6,103 7,231 Pension costs 182 357 Share-based compensation 610 280 6,895 7,868 -------------------------- -------- -------- 33. Subsequent events
In February - March 2017, the Group has entered into forward contracts to sell an aggregate of 549,994oz of gold during the years 2017 - 2019 at an average price of US$1,252/oz.
About Petropavlovsk
Petropavlovsk is one of Russia's leading gold mining companies. As at 31 December 2016, the Company had produced approximately 6.3Moz 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 3,605km(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 (31.1%) 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 a vertically integrated 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
Alexandra Carse
Grace Hanratty
+44 (0) 20 7201 8900
TeamIR@petropavlovsk.net
Maitland
Neil Bennett
James Isola
+44 (0) 20 7379 5151
Petropavlovsk-Maitland@maitland.co.uk
The company news service from the London Stock Exchange
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