Operations Overview Project Update › media › 1255 › 937d9fa235f...Key Financial Data Unit FY...
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Operations Overview & Project UpdateFebruary 2015
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Disclaimer
Certain statements within this presentation constitute forward looking statements. Such forward looking statements involve risks and other factors which may cause the actual results, achievements or performance of the Group to be materially different from any future results, achievements or performance expressed or implied by such forward looking statements. Such risks and other factors include, but are not limited to, general economic and business conditions, changes in government regulations, currency fluctuations (including the US$/RUR rate), the gold price, the Group’s ability to recover its reserves or develop new reserves, competition, changes in development plans and other risks.
There can be no assurance that the results and events contemplated by the forward looking statements contained in this presentation will, in fact, occur. These forward‐looking statements are correct or represent honestly held views only as at the date of delivery of this presentation.
The Company will not undertake any obligation to release publicly any revisions to these forward looking statements to reflect events, circumstances and unanticipated events occurring after the date of this presentation except as required by law or by regulatory authority.
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Highland Gold’s Key Shareholder Tenets
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Highland Gold’s Investment ThesisHighland Gold presents a unique opportunity to invest in an established, high‐growth gold producer with a proven low‐cost asset base and a strong historical record of value creation.
Established and Profitable Gold Producer
• 6th largest gold producer in Russia with 2014 production of 259 koz• Successful ramp‐up from 163 koz in 2009 (8% CAGR)
• Solid EBITDA margin of 34% in H1 2014
Substantial Near‐Term, Low‐Cost Production
Growth
• Production growth while keeping all‐in sustaining costs in line with top peers• Ramp‐up of Belaya Gora with production of 38 koz in 2014 expected to double in 2015
Medium‐Term GrowthFocused on High Grade Properties in Chukotka
• Kekura has 8.7 g/t resources grade, higher than most of discovered exploration• Kekura expected to begin commercial production in 2018
Large Resource Base Underpins Long Mine Life
• 17.3 Moz resource / 2.3 Moz reserve base conservatively supports mine life of more than 30 years
High Reserve Grades • At 5.2 g/t, one of the highest reserve grades among Russian listed peers
Stable Operating Jurisdiction
• Russia is an established gold producing country with significant exploration potential• Mining‐friendly jurisdiction with a stable regulatory environment• Highland Gold’s assets located in established gold producing regions with long‐standing
presence of several gold producers (including international players)
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Corporate Overview
Shareholder Base• Highland Gold has a free float of 57%.• Primerod International Ltd is an affiliate
of Millhouse LLC, an asset management company that oversees investments in metallurgy, mining, real estate, energy, forest products, technology, and sports.
• Highland Gold’s free float is held by a broad range of major high‐quality UK and European institutional investors.
Corporate Governance• Highland Gold is led by an experienced
Board of Directors and management team.
• The Board currently has nine directors –a non‐executive chairman, five non‐executive directors and three executive directors.
• We are proud of our demonstrated commitment to the very highest standards of corporate governance.
Prosperity Capital Asset Management,
17%
JP Morgan Asset
Management, 6%
Other, 33% Primerod, 32%
Board & Management,
11%
Ownership Structure
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Mines, Reserves and Resources (JORC)*
Bishkek
Moscow
Ulan Bator
Chita
Khabarovsk
Vladivostok
Blagodatnoye
Novoshirokinskoye
MNV
Taseevskoye
Lyubov
Belaya Gora
Astana
Regional office
Exploration project
Development project
Operating mine
Unkurtash
Verkhne‐Krichalskaya
KekuraKlen
Flanks BG
Location Resources, Moz
Resource grade, g/t
Reserves, Moz
Reserve grade, g/t
Production 2013, koz
Production 2014, koz
Ope
ratin
g Mnogovershinnoye Khabarovsk 1.8 3.4 0.4 4.7 145 122
Novoshirokinskoye Zabaikalsky 1.8 7.6 1.5 8.3 81 98
Belaya Gora Khabarovsk 1.0 2.4 0.5 3.5 7 39
Develop
men
t
Kekura Chukotka 2.9 8.7
Klen Chukotka 0.6 5.0
Taseevskoye Zabaikalsky 5.1 5.1
Exploration
Lyubov Zabaikalsky 0.5 1.3
Unkurtash Kyrgyzstan 3.7 1.7
Total 17.4 35.2 2.3 5.2 233 259
* Reserves as of December 31, 20136
Key 2014 Achievements
Highland Gold’s assets remained unimpaired despite significant decline in metal prices, showing the quality of the Group’s asset portfolio.
New near‐site licences acquired at MNV to extend life of mine.
Effective cost saving measures implemented by management mitigated the effects of the gold price drop and inflation. TCC held to approximately US$ 650/oz in 2014.
Belaya Gora reached nameplate processing capacity and second gravity circuit commissioned to improve recovery rates.
Scoping study and advanced exploration stage completed for Kekura.
Interim dividend paid for H1 2014 of £0.025 per share.
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Key Figures
216885 233696 258937
0
50000
100000
150000
200000
250000
300000
2012 2013 2014
Gold Equivalent Production, oz
+11%
125028143706
36429
0
20000
40000
60000
80000
100000
120000
140000
160000
2012 2013 H1 2014
Capex, kUSD
894842
900
700
750
800
850
900
950
2012 2013 H1 2014
All‐In Sustaining Costs, USD/oz
179002
132749
48375
020000400006000080000
100000120000140000160000180000200000
2012 2013 H1 2014
EBITDA, kUSD
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Key Financial Data
Unit FY 2012 FY 2013 H1 2013 H1 2014
Total cash costs USD/oz 671 611 717 689
All‐in sustaining costs USD/oz 894 842 912 900
Revenue kUSD 351,828 304,206 157,033 142,240
Net profit kUSD 126,427 54,697 17,000 20,307
EBITDA kUSD 179,002 132,749 63,278 48,375
Earnings per share USD 0.388 0.167 0.052 0.062
Net cash inflow from operations
kUSD 137,600 94,700 71,640 64,495
Net debt position kUSD 52,596 (251,187) (177,604) (239,242 )
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Peer Comparison
1,6961,430
985624
2590
600
1,200
1,800
Polyus Polymetal Nord Gold Petropavlovsk HGML
Top Russian Gold Miners2014 Gold Equivalent Production, koz
1063 1060 1093849
976 925 852 905 938 899 900
0
200
400
600
800
1000
1200
Newmont AngloGoldAshanti
Gold Fields Barrick Gold Kinross Gold NewcrestMining
Goldcorp Polyus Polymetal Nord Gold HGML
All‐in Sustaining Costs, USD/ozRussian Companies
International Majors
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Mnogovershinnoye (MNV)
Maintaining Stable Production• 122 koz of gold produced at MNV during
FY 2014.
• 92% gold recoveries resulting from major process updates implemented the previous year.
• Independent JORC compliant resource update increases resources by 79% supporting mine life to 2017.
• Additional near‐site licences acquired.
• Exploration programme focused on extending life of mine.
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Mnogovershinnoye (MNV)
Extensive Near‐Mine Exploration Programme• Targeting additional reserves in underexplored areas in‐between and along strike
of known ore zones – surface and u/g exploration drilling .• New resources delineated at three surface targets – mining already commenced at
two targets (Pebble, Watershed).• Over 10000 metres of diamond core
drilling activity for underground resource conversion in 2014.
• Detailed geochemical survey completed over entire MNV Western Flank licence area an area with significantly elevated gold grades.
• New licences acquired for MNV Lower Horizon and MNV Northwestern Flank.
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Novoshirokinskoye (Novo)
Increasing Throughput• A record 583 thousand tonnes of ore
mined and processed in 2014, a 16% increase over 2013.
• 98 koz of gold equivalents produced in 2014, which represent a substantial 20% increase compared to 2013.
• Development amounted to 10,317 m, exceeding the comparable figure for 2013 by 22%.
• Increased efficiencies through major improvements in mining and processing implemented throughout the year.
• Underground expansion underway in order to gain access to new, lower horizons.
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Belaya Gora
Reaching Designed Capacity• Output rose to 38 koz in 2014
(from 7 koz in 2013) following commissioning of stand‐alone process plant.
• Second stage gravity circuit completed in H2 2014 to improve recovery rates, as well as state‐of‐the‐art on‐site assay laboratory.
• Average monthly processing throughput increased to 127,000 tonnes in H2 2014, in line with designed annual capacity of 1,500,000 tonnes.
• Upside exploration potential in surrounding licence area.
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Kekura
Advanced Development Project in Chukotka • JORC compliant resource of 2.9 Moz with 8.7 g/t average grade – significant
exploration upside identified at deposit and greater licence area. • High grade, open pit and underground mining, favourable ore metallurgy and
multiple synergies with Klen project are to make Kekura a low cost operation.• Advanced‐stage development – camp facilities, independent diesel power, pilot
plant and ancillary systems already in place.• Advanced exploration programme completed in H2 2014 and results submitted to
regulators for registration of reserves.• Scoping study by Hatch delivered in December 2014.
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Klen
Development Project in Chukotka • Good development characteristics – well
explored deposit, conventional gravity / CIL processing and open pit mining.
• JORC compliant resource (Indicated & Inferred) of 0.63 Moz with 5.04 g/t average grade.
• Design documentation approved by state examinations board in H2 2014.
• In 2014, 11,000 metres of drilling conducted at targets in Verkhne‐Krichalskaya (VK) property (996 km2) –large area surrounding Klen with high potential to improve the resource base and the economics of the future Klen operation.
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Development Projects
Taseevskoye • Project documentation prepared in
accordance with regulatory requirements.
• The State Examination Board approved the mine design for the 1st and 3rd ore zones of Taseevskoye and issued a construction permit.
• Cut‐off grade study for the Baley ZIF 1 tailings prepared.
Sredne‐Golgotayskoye• Pilot tests on processing ore from the
Sredne‐Golgotayskoye deposit at the Novoshirokinskoye mill currently underway.
TASEEVSKOYE
TAILINGS ZIF-1
SREDNE-GOLGOTAYSKOYE
BALEY TOWN
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Exploration Projects
Lyubov• Targeting bulk‐mineable gold ore for low‐cost
open‐pit operation at two sites.• Project design documentation completed and
approvals received from regulatory agencies. • Project documentation currently under review
by the State Examination Board.
Blagodatnoye• Located 30 kilometres southwest of Belaya Gora.• Targeting a near‐surface bulk mineable gold resource for a potential open‐pit
mining operation.• In H1 2014, regulatory authorities approved report on exploration results to date,
including a calculation of prognostic resources and C2 category reserves with C2 of 18.6 tonnes at ca. 2.0 g/t.
• In H2 2014, regulatory approval received for a new exploration project outlining follow‐up work and technical requirements for future C1+C2 reserve registration.
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Exploration Projects
Unkurtash• 63 km² licence covering 4 km long
mineralisation zone with four distinct prospects, three of which, Unkurtash, Sarytube and Karatube have been the focus of the Company’s extensive exploration activity.
• JORC compliant resource audit in 2013 defines combined 3.7 Moz at ore grade of 1.7 g/t (82% Measured and Indicated) for the three prospects.
Unkurtash
Sarytube
Karatube
Baikonur
• Mining permits in hand for Unkurtash and Karatube prospects – reserve calculation update for entire Unkurtash project in progress in order to update C1+C2 category reserves with Kyrgyz GKZ.
• Geochemical survey and 1,441 metres of exploratory drilling completed in H2 2014 to test the resource potential of the Baikonur prospect, a potential extension of the Unkurtash prospect.
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Key Goals for 2015
Increase production for 2015 (MNV, Novo and Belaya Gora) to 270,000 ‐ 285,000 oz of gold and gold equivalents.
Continue efforts at cost optimization to keep all‐in sustaining costs in line with top Russian and international peers.
Maintain stable production at MNV, boost throughput at Novo, and continue improvements to mining and processing operations at Belaya Gora.
Register Kekura reserves with regulator, develop project design, and continue preparatory supply and logistics work.
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A Compelling Investment Opportunity
High Quality Growth
Competitive Cost Position
Low Geographic Risk
Disciplined Capital Allocation
Commitment to Dividend
The Highland Gold
Investment Proposition
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