Page 196 - RusRPTMay21

· As previously announced, the commissioning of the Pioneer flotation plant is scheduled for 2Q21, which will double Petropavlovsk’s capacity to process refractory gold ore from its mines to 7.2mt
· Construction of the third line at the Malomir floatation plant is underway and will add an additional 1.8mt to flotation capacity from 3Q22, bringing the company’s total combined capacity to 9mt.
Petropavlovsk’s own-feed gold production in 1Q21 was 24.2koz at Pioneer, 35.9koz at Malomir, 11.2koz at Albyn and 11.1koz at the new Elginskoye mine (82.4koz in total). The company’s 1Q21 production of 82.4koz was 19% below our forecasts and also down 23% YoY (keeping the underperformance from January-February. The main reason for output lagging our forecast was the delayed start to production at the Elginskoye deposit, which was unable to offset the depletion of the Albyn pit. Additionally, we note the lower than we estimated output at Pioneer, offsetting higher production from Malomir. We treat the news as negative, creating downside risks to our 2021F forecast of Petropavlovsk’s own-feed production (391koz). It also creates a slight risk of being below the lower bound of the company’s guidance of 370-390koz for 2021, especially if the ramp-up of the Pioneer flotation plant is delayed into 3Q21 or is not as rapid as planned (start-up is now expected at the end of 2Q21
Petropavlovsk CEO Denis Alexandrov gave an interview on April 14 during the World Gold Forum. The key highlights are provided below.
One of the CEO’s main tasks is to get a sufficient volume of concentrate so that the POX can work at full capacity in 2022. However, Alexandrov anticipates that POX will already be at 100% utilisation in 4Q21. This creates upside risks to our estimates, given that we expect just 56% utilisation of nameplate 450kt capacity, given the gradual ramp-up of Pioneer and the lack of third party feed.
Starting from 2023, Petropavlovsk expects to supply 100% of feed from its own sources to POX facility, following the ramp-up of the Pioneer and Malomir plants. Alexandrov also noted that the company was considering expanding POX as a part of its long-term strategy so as to be able to process additional volumes of external feed (20-25% on top of its own).
The company plans to invest USD 20mn in exploration activities in 2021 in order to convert part of its resources to reserves. This would allow the company to conduct a pre-feasibility study on a flotation plant for the Elginskoye deposit. This might trigger a decision on increasing POX capacities. We note that the exploration capex remains in line with the company’s guidance for 2021 (see our Petropavlovsk –
196 RUSSIA Country Report May 2021 www.intellinews.com