CORRECTED - (OFFICIAL)-Petropavlovsk advances K&S iron ore project

Tue Sep 15, 2009 8:41am EDT

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(Company clarifies that investment figure in paragraph five refers to K&S and Garinskoye mining projects, plus DRI plant and Garinskoye transport, not only K&S. In paragraph six, company corrects year to 2010 from 2009 and says dependent on third-party funding)

MOSCOW, Sept 14 (Reuters) - Petropavlovsk, the Russian mining group founded by Peter Hambro and Pavel Maslovsky, has begun construction of the K&S iron ore project in Russia's Far East, a future supplier of raw materials to Chinese steel mills.

Its announcement on Monday came the same day as Peter Hambro Mining (POG.L), Russia's third-largest gold miner, said it would change its name to Petropavlovsk PLC to better reflect the fact the London-traded company's assets are located in Russia.

Petropavlovsk is the Russian company that manages the assets of Peter Hambro Mining, including the Pokrovsky and Pioneer gold mines and the fledgling Kuranakh iron ore and ilmenite deposit.

The K&S, or Kimkan and Sutara, project in the Jewish Autonomous Region will produce 4.18 million tonnes of iron ore concentrate annually when its mining and processing plant reaches capacity in 2012, Petropavlovsk said in a statement.

The total amount of investment required to build K&S and another iron ore project, Garinskoye, plus the related DRI process plant and possible capital expenditure on Garinskoye transport, would be 59.5 billion roubles ($1.93 billion).

Only 1.3 billion roubles of this headline number will be spent in 2010 and it is dependent on third-party funding, the company said.

The project was previously being developed by Aricom, a company spun off several years ago by Peter Hambro Mining before being re-acquired this year.

Petropavlovsk is also involved in constructing the first railway bridge between Russia and China across the Amur river. The Russian part of the project will require investment of 4.2 billion roubles, Petropavlovsk said in the statement.

The bridge could carry 20 million tonnes of goods per year across the Amur by 2020. Metallurgical products will account for only 45 percent of these goods, Petropavlovsk said, with oil products, timber, food and building products also transported. (Reporting by Robin Paxton, editing by Anthony Barker)

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