A Closer Look at Petropavlovsk's Resource Statement
Issue 126, May 2015
Rumours that a recent resource upgrade by gold miner Petropavlovsk is based on little-to-no drilling are totally untrue, the company chaired by City bigwig Peter Hambro told Global Mining Observer this week.
Petropavlovsk, which closed a fraught refinancing earlier this year, announced a sharp increase in output from its Albyn mine in Russia's Amur Region last month, alongside a drop in costs across its mines and the discovery of 1.3m gold ounces.
The company said in February that an audited resource statement for its hard-rock operations in Russia would be published in the first half of the year, but the statement was lumped-in with full-year results at the end of April to help the company through a reporting backlog, a spokesman for Petropavlovsk explained.
The results show new gold discoveries at its Alexandra, Vostochnaya and Andreevskaya deposits, backed up by drill results from 2014 and in compliance with the JORC code, an industry-wide reporting standard. The rumours seem to have a valid grounding however in an occasional over-egging of unaudited resource estimates, presented alongside audited resource statements, making it easy to confuse the two.
At its Albyn mine for example, Petropavlovsk refers to a 2.3m ounce JORC resource estimate at its Elginskoye deposit, an independently audited figure, but the company also says that “the current resource estimate for the Afanasevskaya deposit is c.40 tonnes (c.1.3Moz) of gold,” which Petropavlovsk confirmed this week is an unaudited figure based on Russian reporting standards.
The company also announced a 3m to 6m ounce exploration target for ore beneath its Pioneer mine, assuming that Pioneer continues at a constantly high “reserve grade” of 7 grams per tonne in a vertical column to a depth of 800m.
The model is based on “geological projection,” the company said in a detailed exchange, though the bulk of drilling at Pioneer to date only runs to depths shallower than 200m and has never tested depths greater than 400m.
A 20,000-ounce inferred resource at its Brekchievaya deposit was meanwhile based on trenching, outcropping and twelve drill holes, the company clarified, whilst a 280m-long extension to its Vostochnaya deposit, which added 353,000 ounces to the group's total gold reserves, was based on a similar amount of drilling.
Petropavlovsk, which was co-founded by Hambro and Russian senator Pavel Maslovskiy, is unusual amongst gold miners in having an in-house services department, which does all of the company's surveying, analysis and lab work, audited by consultant Wardell Armstrong. Petropavlovsk also has a dizzying number of subsidiaries, at least 46, incorporated in Russia, Jersey, Hong Kong and Guyana.
The company's zeal in projecting future ounces has been backed-up by its record: in 2010, Pioneer's resource stood at 2.8m ounces, versus 5.5m ounces currently, despite continuous mining since. Its somewhat jumbled reporting, including ten corrections to its final results, can also be seen as a spill-over from a chaotic period for the group, including a combative debt restructure, which was seen by some investors as preferential to bondholders, and a rights issue that diluted shareholders by 157-to-10.
Its first April filing is no longer available through the London Stock Exchange, but the corrections can be traced back to a “typing error”, the company said, which understated Pioneer's gold ore tonnage by 244,000 tonnes.
Shares have dropped from over £13.00 in 2010, when the company was valued at over £2bn, to 6.2p on Wednesday, valuing the company at £199m ($313m).
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