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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 : 3057X
Petropavlovsk PLC
26 April 2019
26 April 2019
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 2018 (the "Annual Report 2018") is available to view and download from the Company's website at www.petropavlovsk.net . A copy of the Annual Report 2018 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 2018, 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 2018 issued on 24 April 2019 (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 2018.
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 2018. 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 2018 or 2017 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 2018 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 2017 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.
Nominations Committee
The Company also confirms that Mr Damien Hackett, Independent Non-Executive Director was appointed as a member of the Company's Nominations Committee on 24 April 2019. The Committee now comprises of Sir Roderic Lyne, Chairman, Mr Robert Jenkins, Mr Harry Kenyon-Slaney and Mr Damien Hackett, Independent Non-Executive Directors and Dr Pavel Maslovskiy, Chief Executive Officer.
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; and
-- 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
A table summarising Principal Risks is provided below. The risks set out in the table should not be
regarded as a complete or comprehensive list of all potential risks and uncertainties facing the Group which could have an adverse impact on its performance. Additional risks which are currently believed to be immaterial could turn out to be material and significantly affect the Group's business and financial results.
OPERATIONAL RISKS PRODUCTION RELATED RISK - Failure to achieve the Group's production plan Risk Description and potential Mitigation/comments/ Potential impact 2018 Progress impact/ change since 2017 Risk to production The Group's assets Preventative maintenance procedures Potential from: are located in the are undertaken on a regular and impact i) Weather Russian Far East, periodic basis to ensure that - High ii) Delivery a remote area that machines will function properly of equipment can be subject to in extreme cold weather conditions; Change iii) Stripping severe climatic conditions. heating plants at operational since 2017 ratios Severe weather conditions, bases are regularly maintained - No change such as cold temperatures and operational equipment is in winter and torrential fitted with cold weather protection rain, potentially to assist in ensuring that equipment causing flooding does not fail as a result of in the region could adverse weather conditions. have an adverse impact on operations, including Pumping systems are in place the delivery of supplies, and tested periodically to ensure equipment and fuel; that they are functioning. and exploration and extraction levels Management monitor natural conditions may fall as a result in order to pre-empt any disaster of such climatic and in order that appropriate factors. mitigating action can be taken expediently. The Group aims to The Group relies maintain several months of essential on the supply and supplies at each site. availability of various Equipment is ordered with adequate services and equipment lead times in order to ensure in order to successfully timely delivery of equipment. run its operations. The Group has a number of contingency Delay in the delivery plans in place to address any or the failure of disruption to services mining equipment In October 2018, mining in the could significantly first underground stopes of the delay production main high-grade orebody at -5m and impact the Group's MSL level caused unusually high profitability. water inflow into the +55m MSL
sublevel and all work in the The Group is dependent North East Bakhmut 3 area at on production from Pioneer's underground mining its operating mines operations had to be stopped (both open pits and until the flooding was under underground) and control. Ore mining at North from POX in order East Bakhmut resumed in January to generate revenue 2019. and cash flow. The successful commissioning of the POX Hub commenced in November 2018. POX is a proven technology facilitating large scale, long life projects and with a reasonable cost profile. During 2018 the Group delivered production in line with its revised guidance. EXPLORATION RELATED RISK Risk Description and potential Mitigation/comments/ Potential impact 2018 Progress impact/ change since 2017 The Group's Exploration activities The Group uses modern geophysical Potential activities are speculative, and geochemical exploration and impact are reliant time-consuming and surveying techniques. The Group - High on the quantity can be unproductive. employs a highly qualified team Change and quality In addition, these of geologists with considerable - Reduced of the Mineral activities often regional expertise and experience. Resources require substantial They are supported by a network and Ore Reserves expenditure to establish of fully accredited laboratories available Reserves through experienced in performing a range to it. drilling and metallurgical of assay work to high standards. and other testing, determine appropriate Group Mineral Resource and Ore recovery processes Reserve estimates are prepared to extract gold from by a team of qualified specialists the ore and construct following guidelines of JORC or expand mining Code 2012, which is one of the and processing facilities. most recognised reporting codes. Once deposits are Mineral Resource and Ore Reserve discovered it can estimates are subject to regular take several years independent reviews and audits. to determine whether The last full audit was completed Reserves exist. During in April 2017 by Wardell Armstrong this time, the economic International. viability of production may change. As a In addition, as a part of compliance result of these uncertainties, with The Subsoil Law Group legislation, the exploration programmes the Group also prepares reserve in which the Group estimates following Russian GKZ is engaged may not guidelines. These estimates are result in their replacement subject to GKZ audits. Where or expansion with possible, the Group reconciles new Reserves after GKZ and JORC estimates which their depletion from provides additional assurance current production. about the Company's Reserve estimates. The Group employs a team of qualified mining engineers to undertake mine planning, complete open pit and underground mine design and production scheduling. The success of the POX Hub has unlocked the Group's access to the 12.33Moz refractory Resources which support the Group's long-term growth objectives in doubling the average life of mine and sustaining its production profile. The Group continues to explore the potential for further mine
life extension and production expansion. Exploration work has identified several prospective satellite refractory targets for further work at Malomir and Pioneer. A successful exploration campaign in 2018 yielded a 2% increase (before depletion and disposals) in JORC Mineral Resources across the Group's assets. This maintained the total Mineral Resource at 20.52Moz despite depletion of 0.49Moz due to mining and the disposal or surrender of several licences containing 0.3Moz JORC resources during the year. The increase is mainly attributable to additions at open pit and underground targets at Pioneer, Malomir and Albyn, including a 26% increase in resources potentially suitable for underground mining, from c.0.94Moz to c.1.19Moz. Potential resources for underground mining have been identified at Pokrovskiy and Albyn. Successful near mine exploration identified a number of promising targets that warrant further exploration, which may result in an increase in Mineral Resources and possibly new Ore Reserves. PROCESSING Risk Description and potential Mitigation/comments/ Potential impact 2018 Progress impact/change since 2017 A mechanical POX is a new and complex The first two autoclaves NEW RISK or metallurgical metallurgical facility which are the principal failure of which brings added challenges. components of the POX the POX Hub, Hub were successfully including If there is a failure commissioned in December failure to in the POX process this 2018, within the revised reach expected could lead to lower production timeframe and have now recovery rates and/or higher costs which been operational at or high levels may have a detrimental design processing and of preg-robbing impact on the Group's gold recovery. could result operating performance in lower production and financial condition. The Group's expertise and/or higher in pressure oxidation costs. The monitoring equipment is represented by RDC used at the POX plant Hydrometallurgy, a uses radioactive isotopes scientific to monitor the processing. research centre based A failure to use the equipment in St Petersburg with correctly could result a POX pilot plant located in contamination. in Blagoveshchensk. In early 2018, a decision was made for RDC Hydrometallurgy to develop an advanced engineering course 'Autoclave Oxidative Leaching of Gold-bearing Sulphide Flotation Concentrates' for the Group's engineering and technical personnel and to install the only pilot autoclave
installation in Russia. This simulation of the operator's workplace allowed trainees to learn to monitor and regulate all POX parameters. For six months, the engineers and technicians from Pokrovskiy, studied the theoretical section of the course at the training centre of Pokrovskiy Mining College. They then practised on the simulator to be fully prepared for the real-life commissioning. Safety requirements for the use of nuclear isotopes are exceeded only by the space industry. Therefore, for successful commissioning, it was necessary to fulfil a number of stringent requirements and conditions. The Group had to obtain a license to operate radiation sources in the POX Hub and appropriate training was organised for employees. FINANCIAL RISKS Risk Description and potential Mitigation/comments Potential impact impact/change since 2017 Liquidity The Group may need ongoing In the event that the Potential Risk access to liquidity and Group requires additional impact funding in order to: finance for shorter - High (i) Refinance or repay term liquidity purposes, Change - its existing debt as required; including for capital Reduced (ii) Support its existing expenditure purposes, operations and extend the Group may have access their life and capacity; to forward gold sales and funding. This may be (iii) Invest to develop advantageous, depending its refractory ore concentrate upon the Group's access production and underground otherwise to debt or mining projects and exploration. equity finance and the terms on which these There is a risk that the may be available. Group may be unable to obtain necessary funding In December 2018, when required or that Petropavlovsk's such funding will only liquidity position was be available on unfavourable significantly strengthened terms. after entering into a number of gold sales The Group may therefore contracts with be unable to meet its Gazprombank, business development objectives for sales of c.175Koz or financial commitments. in 2019-2020. These
arrangements allow the Company to receive advance payments for 70% of gold with shipment to Gazprombank over a period commencing six months following receipt of an advance by the Company and ending no later than December 2020. Theses sale contracts have provided the Group with flexibility during the POX plant ramp up period. Risk Description and potential Mitigation/comments/ Potential impact 2018 Progress impact/ change since 2017 The Group's The Group's financial The Chief Financial Potential result of performance is highly Officer constantly impact operations dependent on the price monitors - High may be affected of gold. A sustained downward the gold price and Change - no by changes movement in the market influencing change in the gold price for gold would negatively factors on a daily basis price affect the Group's profitability and consults with the and cash flow and consequently Board as appropriate. its ability to develop its business. The market The Group has a hedging price of gold is volatile policy and hedges a and is affected by numerous portion of production factors which are beyond as the Chief Financial the Group's control. Officer and Board deem necessary. In order to increase certainty in respect of a significant proportion of its cash flows, the Group entered into a number of gold forward contracts during 2018. Forward contracts to sell an aggregate of 200,000oz of gold at an average price of US$1,252oz were outstanding as at 31 December 2018. A higher gold price environment may allow the Group to consider other hedging arrangement options in 2019. Exchange rate The Company reports its The average year-on-year Potential fluctuations results in US Dollars, depreciation of the impact which is Russian Rouble against - High the currency in which the US Dollar was Change - no gold is principally traded approximately change and therefore in which 7%, with the average most of the Group's revenues exchange rate for 2018 are generated. being RUB62.68:US$1 Significant costs are compared to RUB58.32 incurred in and/or influenced : US$1 for 2017. by the local currencies in which the Group operates, The Group's policy is principally Russian Roubles. to keep under review
An appreciation of the possible options for Russian Rouble against exchange rate hedging, the US Dollar tends to although it currently result in an increase has not entered into in the group's costs relative any such transactions 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 exchange rate movements may materially affect the Group's financial condition and results of operations. * 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. FINANCIAL RISKS FUNDING AND LIQUIDITY RELATED RISKS Risk Description and potential Mitigation/comments Potential impact impact/change since 2017 Risk that: As at 31 December 2018, -In June and December Potential * Funding may be demanded from Petropavlovsk under a Petropavlovsk had provided 2018, the Group provided impact guarantee provided in relation to a project finance a guarantee against a IRC with bridge loans - High facility provided to K&S a wholly owned subsidiary of US$340 million project totalling c.US$57m. Change - IRC. loan facility provided These funds were used Reduced to K&S by ICBC to fund by IRC to pay two schedule the construction of IRC's payments to ICBC. * K&S will not be able to service the interest and meet iron ore mining operation -On 19 December 2018, the repayments due on its loan due to insufficient at K&S, of which c.US$169m K&S signed two new broadly funds arising from a decrease in the iron ore price was outstanding as at identical facility or operational issues at the K&S site 31 December 2018 (2017: agreements cUS$234m). with Gazprombank (the 'Facility Agreements') * Risk that further issues delaying the ramping up of In the event that K&S whereby Gazprombank the K&S facility and/or a decrease in the iron price defaulted on its loan, would provide K&S with could result in a decrease in the value of the Petropavlovsk may have a US$240m facility for Group's shareholding in IRC. been liable to repayment the purposes of repaying of the outstanding loan in full the outstanding under the terms of the project finance facility guarantee and other Group K&S had with ICBC and indebtedness may have repaying the two bridge become repayable under loans provided by cross-default provisions. Petropavlovsk to IRC (the 'Gazprombank Due to actions taken by Facility'). IRC and the Company during -Pursuant to the Facility 2018 (see Mitigation/Comments) Agreements, Petropavlovsk this risk has substantially was to guarantee the reduced. obligations of K&S up to an initial amount However due to the guarantees of US$160m through a provided by the Company series of five guarantees to Gazprombank, the Group's over the life of the going concern status remains Gazprombank Facility. sensitive to IRC's ability These guarantees were to comply with covenants entered into by the within the new facilities Company and Gazprombank and generate sufficient on 15 February 2019, cash flows from its with the effectiveness K&S mine. of each of the guarantees being conditional upon shareholder approval being obtained at a General Meeting. Such Shareholder approval was obtained on 12 March
2019. -The Gazprombank Facility has been drawn down and has enabled IRC to: -Repay in full the sum of approximately US$169m outstanding under the ICBC Facility; and -Repay Petropavlovsk the Russian Rouble equivalent of approximately c.US$57m, in addition to any accrued interest and fees, as full repayment of the two bridge loans. -The Gazprombank Facility will also enable IRC to fully pay guarantee fees of c.US$6 million, owing to Petropavlovsk in relation to the guarantee provided for the ICBC facility (c.US$4.5 million of which has been paid to date). -The risk of K&S defaulting on its loan, and hence the risk that Petropavlovsk may be liable to repay the outstanding loan, has been reduced by K&S entering into the Gazprombank Facility and repaying the ICBC Facility because: -The Gazprombank Facility provides for a significantly more relaxed amortisation schedule compared to that under the ICBC Facility; and -Better aligns with the proposed ramp up of K&S and the revenues that are anticipated to be generated by it. -The guarantee provided by the Company has decreased to US$160m as at the date of this Annual Report. However in certain circumstances the Company could have a maximum liability of US$240m under the guarantees. Full details of the guarantees and the associated risks are contained in the Company's Circular to Shareholders dated
15 February 2018, a copy of which can be found on the Company's website at http://www.petropavlovsk.n et/ wp-content/uploads/2019/02 /c114994CCL-pfp.pdf HEALTH, SAFETY AND ENVIRONMENTAL RISK Risk Description and potential Mitigation/comments Potential impact impact/change since 2017 The Group The Group's employees Board level oversight Potential operates potentially are one of its most valuable of health and safety impact hazardous assets. The Group recognises issues occurs through - Medium/High sites such that it has an obligation the work of the Safety, Change - no as open-pits, to protect the health Sustainability and change underground of its employees and that Workforce mines, the they have the right to Committee (SS&W Committee) POX Hub plant, operate in a safe working which was constituted exploration environment. Certain of on 12 November 2018. sites processing the Group's operations The Committee is chaired facilities are carried out under by Mr Harry Kenyon-Slaney, and explosive potentially hazardous Independent Non-Executive storage facilities. conditions. Group employees Director, who is assisted The operation may become exposed to by his colleagues on of these sites health and safety risks the Committee namely, exposes its which may lead to the Dr Pavel Maslovskiy, personnel occurrence of work-related Chief Executive Officer, to a variety accidents and harm to Mr Damien Hackett, of health the Group's employees. Independent and safety These could also result Non-Executive Director, risks in production delays and Mr Bektas Mukazhanov, financial loss. Non-Executive Director and Dr Alya Samokhvalova, Deputy CEO. Mr Kenyon-Slaney's introduction to the Sustainability Report is provided on page 72 of this Annual Report. Members of the SS&W Committee visited the Group's operating mines in April 2019 during which they met with members of the workforce. Health and Safety management systems are in place across the Group to ensure that the operations are managed in accordance with the relevant health and safety regulations and requirements and where possible with international best practice. The Group continually reviews and updates its health and safety procedures in order to minimise the risk of accidents and improve accident response, including
additional and enhanced technical measures at all sites, improved first aid response and the provision of further occupational, health and safety training. The SS&W Committee has sought assurance from management that appropriate health and safety procedures have been enacted throughout the Group's POX Hub, not only to comply with Russian health and safety legislation but to adhere to international best practice, in recognition of the inherent risks within this new technology. The Group has provided extensive safety training to its employees on the operation of the POX process and in relation to its underground mining operations. The Lost-Time Injury Frequency Rate (LTIFR) for 2018 of 2.52 accidents per 1 million man-hours worked compared with a LTIFR of 3.11 in 2017. Regrettably this included one fatality, a road traffic accident involving an employee at Albyn who was being transported to his place of work from his accommodation at the time of the incident. Health & Safety targets are included in the annual bonus scheme for Executive Directors and the Executive Committee. The Remuneration Committee may also consider the Group's health and safety performance during the year when considering bonus plan payments. Risk Description and potential Mitigation/comments Potential impact impact/change since 2017 Major pollution If the Group was involved The Company operates Potential arising from in a major environmental a certified environmental impact operations event, potential impacts management system at - Medium/High include: air could include fines and all of its sites which Change - no
and water penalties, statutory liability meet international change pollution, for environmental remediation standards. land contamination and other financial consequences and deforestation. that might be significant. The Company has implemented Accidental spillages of a number of initiatives cyanide and other chemicals to monitor and limit may result in damage to the impact of its the environment, personnel operations and individuals within on the environment. the local community. Cyanide and other dangerous substances are kept in secure storages with access limited only to qualified personnel, with access closely monitored by security staff. Loss of Personnel Risk Description and potential Mitigation/comments Potential impact impact/change since 2017 The Company The loss of key personnel Succession Planning Potential is dependent to the Company may impact is on the Agenda of impact on Dr Pavel the morale of senior management the Nominations Committee - Medium/High Maslovskiy, and the workforce, the and the Board. The Change - CEO and other result Remuneration reduced long-serving of the Group's operations Committee will ensure members of and a delay in the delivery appropriate remuneration. the senior of projects. executive team. Country and Compliance Risks Risk Description and potential Mitigation/comments Potential impact impact/change since 2017 The Group The Group's principal There are established Potential requires various activity is gold mining processes in place to impact licences and which require it to hold monitor the required - Medium/High permits in licences which permit and existing licences Change - no order to operate it to explore and mine and permits on an on-going change in particular areas in basis and processes Russia. These licences are also in place to are regulated by Russian ensure compliance with governmental agencies the requirements of and if a material licence the licences and permits. was challenged or terminated, this would have a material adverse impact on the Group. In addition, various government regulations require the Group to obtain permits to implement new projects or to renew existing permits. Failure to comply with the requirements and terms of these licenses may result in the subsequent termination of licenses 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. The Group Actions by governments To mitigate the Russian Potential is subject or changes in economic, economic and banking impact to risks associated political, judicial, administrative, risk the Group strives - Medium/High with operating taxation or other regulatory to use the banking Change - no in Russia. factors or foreign policy services change in the countries in which of several financial
the Group operates or institutions and not holds its major assets keep disproportionately could have an adverse large sums on deposit impact on the Group's with a single bank. business or its future performance. Most of the The Group seeks to Group's assets and operations mitigate are based in Russia. the political and legal risk by constant Russian foreign investment monitoring legislation imposes restrictions of the proposed and on the acquisition by newly adopted legislation foreign investors of direct and adapt to the changing or indirect interests regulatory environment in strategic sectors of in the countries in the Russian economy, including which it operates and in respect of gold reserves specifically in Russia. in excess of a specified It also relies on the amount or any occurrences advice of external counsel of platinum group metals. in relation to the interpretation The Group's Pioneer and and implementation within Malomir licences have the Group of new been included on the list legislation. of subsoil assets of federal significance, maintained The Group closely monitors by the Russian Government its assets and the ("Strategic Assets"). probability The impact of their inclusion into of this classification the Strategic Assets is that changes to the lists published by the direct or indirect ownership Russian Government. of these licences may require obtaining clearance The Company's Articles in accordance with the of Association include Foreign Strategic Investment a provision which allows law of the Russian Federation. 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 Law. This risk cannot be influenced by the management of the Company. However, the Group continues to monitor changes in the political environment including the impact of any potential sanctions, and reviews changes to the relevant legislation, policies and practices. 25. Related parties
Related parties the Group entered into transactions with during the reporting period
PJSC Asian-Pacific Bank ('Asian-Pacific Bank'), LLC Insurance Company Helios Reserve ('Helios') and Peter Hambro Limited were considered to be related parties as members of key management had an interest in and collectively exercise significant influence over these entities until 22 June 2017 when the Group lost significant influence over these companies.
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.
IRC Limited and its subsidiaries (Note 32) 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 2018 and 2017 are set out below.
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 related Purchases from parties related parties ------------------------------------------- -------------------- -------------------- 2018 2017 2018 2017 US$'000 US$'000 US$'000 US$'000 ------------------------------------------- --------- --------- --------- --------- Entities in which key management have interest and exercise a significant influence or control - 3 764 1,336 IRC Limited and its subsidiaries 164 85 681 2,062 ------------------------------------------- --------- --------- --------- --------- 164 88 1,445 3,398 ------------------------------------------- --------- --------- --------- ---------
During the year ended 31 December 2018, the Group made US$0.4 million charitable donations to the Petropavlovsk Foundation (2017: US$0.2 million).
The outstanding balances with related parties at 31 December 2018 and 2017 are set out below.
Amounts owed by Amounts owed related parties to related parties ------------------------------------------- ---------------------------- --------------- 2018 2017 2018 2017 US$'000 US$'000 US$'000 US$'000 Entities in which key management have interest and exercise a significant influence or control 1,556 236 - - IRC Limited and its subsidiaries 2,078 2,099 976 527 ------------------------------------------- --------- --------- ------------ --------- 3,634 2,335 976 527 ------------------------------------------- --------- --------- ------------ ---------
In March 2018, the Group entered into a transaction with the member of key management personnel to purchase the office building and land, currently subject to an operating lease arrangement. The aggregate consideration payable is US$3.5 million, of which US$1.5 million of advance payments were paid by the Group as at 31 December 2018.
Financing transactions
The Group has charged a fee for the provision of the guarantee to IRC under ICBC Facility, equal to 1.75% on the ICBC outstanding loan principal (note 14), which amounted to US$4.0 million during the year ended 31 December 2018 (2017: US$4.1 million). The guarantee fee contractual balance outstanding amounted to US$10.3 million (2017: US$6.4 million) which corresponding fair value was US$6.8 million (2017: US$10.5 million).
In June 2018, the Group provided a Rouble denominated unsecured loan to IRC in the amount of RUB1,878 million (an equivalent of US$29.75 million). The loan carried interest of 12% per annum and was repaid on 21 March 2019. The loan was recognised net of lifetime ECL of US$0.5 million at inception. The Group recognised further US$0.8 million impairment based on ECL model.
In December 2018, the Group provided a dollar denominated unsecured loan to IRC in the amount of US$27.0 million. The loan carried interest of 16% per annum and was repaid on 21 March 2019. The loan was recognised net of lifetime ECL of US$1.9 million at inception.
In March 2018, the Group entered into a loan agreement with Dr Pavel Maslovskiy. At 31 December 2018, the loan principal outstanding amounted to an equivalent of US$0.2 million. Interest charged during the year ended 31 December 2018 comprised an equivalent of US$0.01 million.
Key management compensation
Key management personnel, comprising a group of 16 individuals during the period (2017: 13), including Executive and Non-Executive Directors of the Company and members of senior management, are those having authority and responsibility for planning, directing and controlling the activities of the Group.
2018 2017 US$'000 US$'000 -------------------------- -------- -------- Wages and salaries 7,761 6,285 Pension costs 136 176 Share-based compensation 404 136 -------------------------- -------- -------- 8,301 6,597 -------------------------- -------- -------- 30. Subsequent events
Refinancing of the ICBC Facility
Following the approval by the Company shareholders at a General Meeting held on 12 March 2019, to guarantee the obligations of K&S under the Gazprombank Facility, the refinancing of the ICBC Facility has been completed.
IRC entered into a new US$240 million facility with Gazprombank. In March 2019, IRC drew down an aggregate of US$228.9 million on the Gazprombank Facility that were used to repay the amounts outstanding under ICBC Facility of approximately US$169 million in full, the two loans provided by the Group in the equivalent of approximately US$57 million in full and to finance the K&S Project's working capital of approximately US$3 million. The remaining proceeds from the Gazprombank Facility are to be used to repay part of the guarantee fee of US$6 million owed by IRC to the Group in respect of the guarantee of the ICBC Facility with the remaining guarantee fee outstanding of approximately US$5 million payable no later than 31 March 2020. In April 2019, IRC has further drawn down US$4.5 million on the Gazprombank Facility.
A new guarantee was issued by the Group over part of the Gazprombank Facility, the guarantee mechanism is implemented through a series of five guarantees that fluctuate in value through the eight-year life of the loan, with the possibility of the initial US$160 million principal amounts guaranteed reducing to US$40 million within two to three years, subject to certain conditions being met. For the final two years of the Gazprombank Facility, the guaranteed amounts will increase to US$120 million to cover the final principal and interest repayments.
Enquiries
For more information, please visit www.petropavlovsk.net and www.ircgroup.com.hk or contact:
Petropavlovsk PLC Buchanan Patrick Pittaway Bobby Morse Max Zaltsman Ariadna Peretz +44 (0) 20 7201 8900 +44 (0) 207 466 5000 TeamIR@petropavlovsk.net POG@buchanan.uk.com
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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