Petropavlovsk rises on increased production targets

Petropavlovsk, a Russia-focused gold group, leapt over 10 per cent on Thursday after the company increased its production target to 700,000oz and reduced its cost expectations.

Gold production has jumped 29%, while the average realised gold sales price has soared 15% and total gold sold during the first five months of the year climbed 12% compared to the same period in 2011.

In addition, the firm commissioned two new processing lines, each with a capacity of 1.8m - 2.0 tonnes per annum (mtpa), and -ahead of schedule- reported positive preliminary exploration results around its existing assets.

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Both lines were commissioned ahead of the scheduled third quarter start-up date and are expected to ramp up to full capacity by July 2012. They are expected to increase plant capacity at Pioneer by around 40% to 6.4mtpa - 6.6mtpa and double plant capacity at Albyn to 3.6mtpa - 4.0mtpa.

The increased capacity at Pioneer and Albyn is expected to have a positive effect on unit costs during the year, while management is continuing its cost cutting programme, rolling out the efficiency measures successfully implemented at Pioneer during 2011 at its other mines.

In addition, the recent weakness of the Russian Rouble against the US Dollar has positively affected the cash cost of production and as a result, the group does not currently expect an increase in 2012 cash costs for its hard-rock mines of more than 15-20% compared to 2011, revised from previous guidance of a 30-45% increase.

The share price rose 10.44% to 453.80p by 13:50.

NR