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UPDATE 1-Petropavlovsk H1 loss narrows, still in talks with bondholders
August 28, 2014 / 9:16 AM / 3 years ago

UPDATE 1-Petropavlovsk H1 loss narrows, still in talks with bondholders

* Petropavlovsk's net debt down to $924 mln at the end of June

* Says on track to produce 625,000 oz of gold in 2014 (Adds details, quotes, context)

MOSCOW, Aug 28 (Reuters) - Russia-focused gold miner Petropavlovsk said on Thursday its first-half net loss had narrowed and it was continuing refinancing talks with bondholders and banks over relaxing debt covenants.

Petropavlovsk, hit by a fall in gold prices in 2013, is talking with senior lenders to avoid breaching covenants in its banking facilities at end 2014 and with holders of its $310.5 million convertible bonds due for repayment in February 2015.

"We now have a better understanding from both our bondholders and the banks on how to achieve a holistic solution to the refinancing," Petropavlovsk said on Thursday.

Its senior creditors are Sberbank and VTB , Russia's largest lenders. Petropavlovsk is also a guarantor on the project debt of its iron ore subsidiary, IRC, to the Industrial and Commercial Bank of China (ICBC).

The company reported a net loss of $95 million in the first half of 2014 after a $742 million net loss for the same period a year ago, when it was hit by one-offs.

"The group produced a profit before tax of $8 million - a welcome change from the $615 million loss before tax recorded in the first half 2013," it added. Revenue fell 10 percent to $453 million due to a 12 percent drop in average gold selling prices.

It also said it was on track to produce 625,000 ounces of gold in 2014, at the lower end of its cost guidance range - $900-950 per ounce - after first-half production reached a record of 306,400 ounces.

Petropavlovsk generated $104 million net operating cash flow in the first half of 2014 together with a reduction in capital expenditure, allowing it to repay $142 million and bring net debt down to $924 million, Citi said in a note.

"This cash flow trend, along with assurances that discussions with convertible bondholders are going well, should provide some re-assurance to the market on top of the decent operating results which have been delivered in the first half," it added.

From 2015, Petropavlovsk expects to reduce costs to $750 per ounce. Excluding the effects of any refinancing, it also plans to reduce net debt to $850 million by the year end.

Petropavlovsk shares were flat in London after the report, but later fell 1.4 percent along with other Russian stocks on fears of escalating tensions in Ukraine.

The FTSE Gold Mines Index was up 0.1 percent. (Reporting by Polina Devitt; editing by Vladimir Soldatkin and David Evans)

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