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Pioneer mine drives Petropavlovsk

Russia-based gold miner Petropavlovsk (formerly Peter Hambro Mining) increased attributable gold production by 21 per cent to 486,800 ounces in 2009 and has set a current-year target of between 670,000 and 760,000 ounces.

Output at the flagship Pioneer mine rose 208 per cent to 224,600 ounces as the second milling processing line began operations in September. With construction of the third line progressing well, its start-up has been brought forward to the first half of 2010.

The Pokrovskiy mine performed better than expected and construction and development progress continues to be made on the Malomir project. Gold extraction at Malomir is expected to commence in the second half of this year with the commissioning of the first milling and grinding line. The gradual phasing of production lines will allow some capital expenditure to be funded from the first line's production.

Proven and probable gold reserves classified to internationally-recognised Joint Ore Reserves Committee standards more than doubled to 6.67m ounces compared with the estimate made in November 2008. Based on these reserves, the group estimates that production will exceed 1m ounces in 2013 and reach 1.15m ounces in 2015. Petropavlovsk remains one of the lowest-cost gold producers, with average costs of just $309 (£208) per ounce.

Alfa Bank is forecasting 2010 EPS of 122¢.

PETROPAVLOVSK (POG)
ORD PRICE:1,191pMARKET VALUE:£2.16bn
TOUCH:1,190-1,191p12-MONTH HIGH:1,343pLOW: 407p
DIVIDEND YIELD:0.4%PE RATIO:18
NET ASSET VALUE:709¢NET DEBT:1%

Year to 31 DecTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (p)
2005911917.0nil
20061584539.8nil
20072265547.67.5
20083824027.17.5
200947219798.07.0
% change+24+389+262-7

Ex-div: 24 Feb

Payment: 30 Mar

£1=$1.486

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More analysis of company results

IC View

Output is growing and the acquisition of Aricom has eased the financial strain, but management still needs to demonstrate it can deliver on a sustained basis. High enough.

Last IC view: High enough, 1,055p, 22 Jan 2010

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