2009 has proven a landmark year for multi-mine, multi-commodity operator Peter Hambro Mining (LSE, POG).  During the opening 6 months of the year the miner saw revenue soar by 47% to US$214 million of which gold accounted for US$193 million (80% higher than in 2008).  If this was not impressive enough profit for the group climbed 400% to reach US$75 million despite the price of gold realised coming in only 2% higher at US$917 per ounce.   

Whilst the purchase of cash rich iron ore producer Aricom helped strengthen the balance sheet, Hambro’s operational excellence has catapulted the miner onto a higher plane.  The company managed to produce more gold, sell more gold, rein in costs and found time to pocket a cool US$23 million from the repurchase of Gold Exchangeable Bonds.  

Central to the group’s success was the ramp up in production which emanating in large from the group’s Pioneer mine.  Overall group production came in at 223,000 ounces of which 118,000 ounces came from Pioneer, a 203% gain on the mine’s corresponding 2008 performance.  Meanwhile production at Pokrovisky was in line with 2008 at 92,000 ounces with the remainder coming from the group’s alluvial mining operations and joint ventures.       

With group production heading in the right direction we are highly encouraged to hear progress is also being made on another key challenge of the last year costs.  During the period the total cash costs at Pioneer amounted to US$222 per ounce which establishes the mine as one of the lowest cost gold operations in the world.  Pokrovskiy also chimed in with a 17% reduction in costs with US$283 per ounce achieved in the face of rising electricity, chemical reagent and consumables costs and underscores the group’s operational excellence. 

Looking ahead and despite management’s obvious delight and progress thus far, in our view the best is yet to come.   

Exploration efforts at Pokrovskiy and Pioneer continue to yield results whilst reserves were also established at Vostochnaya, another recently identified ore body.  In September Pioneer is expected to crank up a gear whilst investors can look forward to the launch of the Malomir mine, scheduled for late 2010, and Albyn mine which could start contributing to gold production by 2012.

Meanwhile the acquisition of Aricom looks like a shrewd piece of business.  The Chinese pursuit of raw materials in unrelenting and with many of Aricom’s projects…

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