Petropavlovsk Tumbles to 11-Week Low After Reporting Slumping Gold Output

Petropavlovsk Plc, Russia’s third- largest gold producer, slumped to an 11-week low in London after saying second-quarter output of the metal fell 16 percent and full-year production will be at the “bottom end” of its plans.

Petropavlovsk declined as much as 6.2 percent to the lowest since May 7 after second-quarter attributable production slid to 100,700 ounces, from 120,000 ounces a year earlier. Output was hampered by delayed equipment deliveries and “extreme” cold in the Amur region of Russia’s Far East, it said in a statement.

“The disappointing performance of the gold mines in the first half and lowering of expectations, while within the forecast range, is not good news,” John Meyer, head of research at Fairfax IS in London, wrote in a research note today.

Petropavlovsk fell 3.1 percent to 1,063 pence by 9:02 a.m. in London after touching 1,029 pence.

“We got hampered by things out of our control,” Chairman Peter Hambro said in a telephone interview today in London. “We’ve told the world that we think we will manage to achieve our target, albeit at the bottom end of it.” The company expects full-year output of 670,000 ounces to 760,000 ounces.

Petropavlovsk, which produced 486,800 ounces of gold last year, is targeting annual output of more than 1 million ounces by 2013. The company offered $380 million of convertible bonds in January to fund development projects, including its Malomir mine, due to start production later this year.

First-half attributable output of the metal fell to 166,300 ounces from 224,600 ounces a year earlier.

The company won an auction for gold exploration and mining rights in Amur that extends the license around its Pioneer project by about 420 square kilometers (162 square miles).

“We’ve been sitting looking at the ground over our fence longing to own it,” Hambro said “We’ve finally got that and it’s a great relief.”

OAO Polyus Gold is Russia’s largest producer of the precious metal, while OAO Severstal is the second biggest.

To contact the reporter on this story: Thomas Biesheuvel in London tbiesheuvel@bloomberg.net.

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