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Risk Warning
28/01/2011
Reuters - Friday, January 28
* Sees output up 18 percent versus 506,800 in 2010
* "Conservative base case" for 2011 gold output 600,000 oz
* Realised average price $1,253/ounce in 2010, up 29 percent
* Sold 445,000 ounces of gold in 2010
MOSCOW, Jan 27 - Russian gold miner Petropavlovsk PLC <POG.L> forecast a "conservative" 18 percent increase in gold output in 2011 because it wants to avoid disappointing investors with further downgrades, its chairman said.
Petropavlovsk, which plans to produce 600,000 ounces of gold in 2011 delivered slightly less than its final forecast of 510,000-530,000 in 2010, in a trading update issued on Thursday.
"We responded to criticism that we have been in the past insufficiently conservative and left room for contingencies," Chairman Peter Hambro said in a telephone interview.
Petropavlovsk had slashed its forecast twice in 2010 from an original forecast of 670,000-760,000 ounces after a delay in the delivery of major mining equipment, harsh weather as it worked to ramp up production at the Pioneer mine, and lower grades. [ID:nLDE6A114X]
Attributable production rose by about 20,000 tonnes from 486,000 a year earlier, after production at two new mines, Malomir and Omchak, came online.
This year, Hambro said they would exclude production from new mines from forecasts until they were producing, and update shareholders quarterly on output.
Petropavlovsk shares jumped 5.52 percent in London trade to 1,090 pence.
"It is clear that the miner has put these difficulties behind it," said Richard Curr, head of dealing at CFD specialist Prime Markets.
Petropavlovsk expects to commission another new mine, Albyn, on schedule in the fourth quarter of this year and expand the Malomir site.
But the company did not include them in its output forecast, even though Hambro said: "all the equipment we need for 2011 is on site."
The company has "the technical capacity to achieve what we say we are going to achieve," he added.
In its statement, the company said construction works at Albyn were "advancing well" with capacity to process 1.6-2 million tonnes of ore scheduled for the second half of the year.
GOLD PRICES
The company, a loss-maker since the first half of 2010, sold 445,500 ounces of gold at an average price of $1,253 per ounce during 2010. Full year earnings are due out in March.
Hambro said the company had no immediate plan for borrowings at planned capex levels and gold prices <XAU=>, which he said were likely to be flat for the next 3-6 months then rise to a $1,500-$2,000 per ounce range.
He blamed gold price weakness in the early part of the year on plans by France and the new Group of Eight industrialised nations to impose tighter controls on currency and commodity markets, as well as price gains in the final weeks of 2010.
"By the end of the year will remember the real reason to buy gold," he said.
"The only way out of debt problems is to devalue their currencies not against each other but against real assets."
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