PETROPAVLOVSK PLC PETROPAVLOVSK Overview Corporate highlights 01 Petropavlovsk at a Glance 02 Chairman and • Earnings per share up 263% Chief Executive’s Review Earnings per share of US$0.98 up 263% versus 2008 BUILDING 04 Strategy to Deliver 06 Gold Mining in Russia • Dividend restored 08 The Amur Region Interim dividend of £0.07 per share declared in January 2010 10 Gold and Iron Ore Markets Overview • Net debt reduced by 95% to US$19 million 12 Investing in Expertise Low-cost US$380m convertible bonds issued in February 2010 14 Our Skills and Resources A RUSSIAN • Proven and Probable Reserves Annual 16 Key Performance Indicators 103% increase to 6.75Moz gold compared to November 2008 estimate 18 Operational Structure • Aricom acquisition completed Aricom acquisition completed on 22 April 2009 R Performance eport & Accounts 2009 FAR EAST MINING • Move to Main Market of London Stock Exchange completed 20 Financial Review The Group completed its move from AIM to the Main Market 24 Operations and Development: of the London Stock Exchange and gained inclusion in the . Precious Metals Division FTSE 250 index 36 Operations and Development: CHAMPION Non-precious Metals Division 41 Operations and Development: Operational highlights In-House Divisions Annual Report & Accounts 2009 44 Sustainability Report • Attributable gold production* up 21% 47 Principal Risks Report Total attributable gold production* increased by 21% to 486,800oz • Group total cash costs of US$309/oz Group total cash costs of US$309/oz confirm the Group as one of the lowest-cost gold producers in the world Governance • Pioneer’s second milling line helps to deliver 234,100oz 52 Board of Directors Second line commissioned in September 2009 with third milling line 54 Directors’ Report brought forward to H1 2010 Underlying EBITDA is a profit for the period before financial income, financial expenses, foreign exchange gains and losses, fair losses, and gains is exchange EBITDA foreign underlying expenses, and year financial the for income, profit of financial before Reconciliation period the for impairment. and profit a is amortisation EBITDA Underlying depreciation, taxation, changes, value financial statements 39 of the consolidated set out in note 62 Corporate Governance Statement ** 70 Directors’ Remuneration Report Financial highlights 82 Audit Committee Report 85 Statement of Directors’ Year to Year to 31 December 31 December Responsibilities 2009 2008 86 Independent Auditors’ Report to the US$million US$million Variable % Members of Petropavlovsk PLC Group Revenue 472 382 +24% Underlying EBITDA** 225 136 +65% Earnings per share (US$) 0.98 0.27 +263% Financial statements Net debt (19) (389) (95%) 87 Consolidated Income Statement Group average gold price 88 Consolidated Statement of realised (US$/oz) 975 845 +15% Recognised Income and Expense 89 Consolidated Statement of Group total cash costs per oz Changes in Equity (US$/oz) 309 319 (3%) 90 Consolidated Balance Sheet 91 Consolidated Cash Flow Statement 92 Notes to the Consolidated Precious Metals Division – Summary of Mineral Resources and Ore Reserves Financial Statements 140 Statement of the Directors’ Ore Grade Gold are included in the Group figures. The Company’s direct and indirect interest in interest indirect and direct Company’s The figures. Group the in included are Responsibilities – Company Category (Mt) (g/t) (Moz) PETROPAVLOVSK PLC 141 Independent Auditors’ Report to the Resources Measured 68.76 1.31 2.90 Members of Petropavlovsk PLC 11 Grosvenor Place Other information Indicated 130.70 1.27 5.33 London 142 Company Balance Sheet SW1X 7HH 143 Notes to the Company Measured+Indicated 199.46 1.28 8.23 United Kingdom Financial Statements Inferred 101.70 1.12 3.65 T +44 (0)20 7201 8900 Reserves Proven 54.08 1.33 2.32 F +44 (0)20 7201 8901 150 Appendix Probable 110.06 1.23 4.44 E [email protected] 151 Glossary and Definitions . Cumulative gold production, as stated throughout this Annual Report and Accounts, consists of gold physically recovered and this Annual Report and Accounts, consists of gold physically recovered throughout as stated . Cumulative gold production, 152 Shareholder Information Proven+Probable 164.15 1.26 6.75 % www.petropavlovsk.net Notes • This summary comprises Mineral Resources and Ore Reserves from the Group’s Pokrovskiy, Pioneer, Malomir, Albyn, Tokur and Yamal operations. It excludes other licence areas held by the Group, including joint ventures; • Mineral Resources are reported inclusive of Ore Reserves; • Contained Gold represents estimated contained metal in the ground and in surface stockpiles and has not been adjusted for metallurgical recovery. gold in circuit. Accordingly gold produced in the year consists of gold recovered during the period and adjusted for the movement in gold circuit. during the period and adjusted in the year consists of gold recovered gold produced Accordingly gold in circuit. Total attributable gold production, as stated throughout this document, is comprised of 100% of production from the Group’s subsidiaries and the relevant relevant the and subsidiaries Group’s the from production of 100% of comprised is document, this throughout stated as production, gold attributable Total has held c.1.1% The Group accordingly. restated period are for the comparative and other investments. Figures joint ventures from of production share 2009; no attributable ounces since March Mining Ltd in Rusoro interest Rudnik is 98.61 Pokrovskiy * Our business regions Amur region and EAO Petropavlovsk’s main operations As well as being the third-largest are based in the Amur region and gold-producing region in Russia, the EAO (Evreyskaya Avtonomnaya the Amur region also has other Oblast or Jewish Autonomous significant industries involved in Region) in the far east of Russia, power generation, coal, timber close to the border with China. and agriculture. Petropavlovsk’s London The Amur region has a total area presence in the neighbouring EAO of 361,600km² and a population includes a major iron ore project, of approximately 1 million. K&S. The EAO itself is located to The region boasts excellent the south-east of the Amur region infrastructure and an accessible and covers an area of 36,300km² energy supply. with a population of approximately 200,000. For further details about 08 Amur region potential Krasnoyarsk region Yamal region RUSSIA Magadan region St. Petersburg Krasnoyarsk Moscow Buryatia region Amur region Irkutsk Chita region Blagoveschensk EAO On China’s doorstep Petropavlovsk’s operations are located on China’s doorstep (some as close as 60km to the border). Proximity to this large market for natural resources and Design and production: Radley Yeldar www.ry.com low cost consumables gives the Group Print: Granite Colour are ISO 14001 and FSC accredited. one of its competitive advantages. Paper: The cover and text material used for this report is printed on Cocoon Silk 50 a recycled paper containing 50% recycled waste and 50% virgin fibre and manufactured CHINA at a mill certified with ISO 14001 environmental management standard. The pulp used in this product is bleached using a Elemental Chlorine Free process (ECF) Our business regions Amur region and EAO Petropavlovsk’s main operations As well as being the third-largest are based in the Amur region and gold-producing region in Russia, the EAO (Evreyskaya Avtonomnaya the Amur region also has other Oblast or Jewish Autonomous significant industries involved in Region) in the far east of Russia, power generation, coal, timber close to the border with China. and agriculture. Petropavlovsk’s London The Amur region has a total area presence in the neighbouring EAO of 361,600km² and a population includes a major iron ore project, of approximately 1 million. K&S. The EAO itself is located to The region boasts excellent the south-east of the Amur region infrastructure and an accessible and covers an area of 36,300km² energy supply. with a population of approximately 200,000. For further details about 08 Amur region potential Krasnoyarsk region Yamal region RUSSIA Magadan region St. Petersburg Krasnoyarsk Moscow Buryatia region Amur region Irkutsk Chita region Blagoveschensk EAO On China’s doorstep Petropavlovsk’s operations are located on China’s doorstep (some as close as 60km to the border). Proximity to this large market for natural resources and Design and production: Radley Yeldar www.ry.com low cost consumables gives the Group Print: Granite Colour are ISO 14001 and FSC accredited. one of its competitive advantages. Paper: The cover and text material used for this report is printed on Cocoon Silk 50 a recycled paper containing 50% recycled waste and 50% virgin fibre and manufactured CHINA at a mill certified with ISO 14001 environmental management standard. The pulp used in this product is bleached using a Elemental Chlorine Free process (ECF) PETROPAVLOVSK PLC PETROPAVLOVSK Overview Corporate highlights 01 Petropavlovsk at a Glance 02 Chairman and • Earnings per share up 263% Chief Executive’s Review Earnings per share of US$0.98 up 263% versus 2008 BUILDING 04 Strategy to Deliver 06 Gold Mining in Russia • Dividend restored 08 The Amur Region Interim dividend of £0.07 per share declared in January 2010 10 Gold and Iron Ore Markets Overview • Net debt reduced by 95% to US$19 million 12 Investing in Expertise Low-cost US$380m convertible bonds issued in February 2010 14 Our Skills and Resources A RUSSIAN • Proven and Probable Reserves Annual 16 Key Performance Indicators 103% increase to 6.75Moz gold compared to November 2008 estimate 18 Operational Structure • Aricom acquisition completed Aricom acquisition completed on 22 April 2009 R Performance eport & Accounts 2009 FAR EAST MINING • Move to Main Market of London Stock Exchange completed 20 Financial Review The Group completed its move from AIM to the Main Market 24 Operations and Development: of the London Stock Exchange and gained inclusion in the .