Nord Gold SE, the internationally diversified gold producer, announces its unaudited financial and operating results for the second quarter and first half ended 30 June 2017.
Q2 and H1 2017 Highlights
- Refined gold production in Q2 2017 increased by 16% year-on-year (“YoY”) and by 3% quarter-on-quarter (“QoQ”) to 246.8 thousand gold equivalent ounces (“koz”). Bissa-Bouly increased gold production by 84%, Taparko and Suzdal increased YoY production by around 33% each and Berezitovy increased YoY production by 30%. H1 2017 production increased by 15% to 486.2 koz.
- Q2 2017 revenue increased by 15% YoY and by 6% QoQ to US$311.7 million, mainly supported by higher sales volumes. H1 2017 revenue increased by 16% YoY to US$604.9 million
- EBITDA increased by 14% YoY and 4% QoQ to US$135.6 million in Q2 2017. H1 2017 EBITDA increased by 12% to US$266.5 million.
- Net profit for Q2 2017 of US$27.9 million and normalised net profit attributable to shareholders4 of US$54.9 million. In H1 2017, net profit decreased by 28% YoY to US$67.7 million. As previously disclosed, in H1 2016 Nordgold received the net result of the Detour Gold Corporation shares sale of US$51.0 million.
- Operating cash flow of US$118.1 million in Q2 2017 and positive free cash flow5 generation of US$26.8 million.
- Total debt of US$1,002.7 million (including derivative instrument of US$16.8 million) and net debt5 of US$660.4 million at the end of Q2 2017.
- All-in sustaining costs5 (“AISC”) of US$889/oz in Q2 2017, compared with US$930/oz in Q2 2016 and US$840/oz in Q1 2017. H1 2017 AISC was US$865/oz against US$878/oz in H1 2016.
- The Board has declared a dividend of 4.82 US cents per share for Q2 2017, representing a total pay-out of US$16.5 million.
- Lost time injury frequency rate (LTIFR) for Q2 2017 was 0.94, down by 22% YoY and by 45% QoQ.
On 25 August 2017, the Board has approved an interim dividend of 4.82 US cents per share in respect of the three months ended 30 June 2017, representing a total pay-out of US$16.5 million. The dividend record date is set on 31 August 2017 with payment on 8 September 2017. We remain focused on continuing to deliver a dividend to shareholders. In line with our dividend policy, we intend to distribute 30% of normalised net profit attributable to shareholders as dividends on a quarterly basis.
Gross is an all-season open-pit heap leach project, located in southwestern Yakutia, Russia, 4 km east of the Neryungri mine. The Feasibility Study confirmed the economic attractiveness of the project, giving an IRR of almost 40% at a gold price of US$1,250/oz and an IRR of approximately 25% at a gold price of US$1,100/oz.
Nordgold started construction in June 2016, with production expected to start in H1 2018. Construction is progressing well and remains on track. All shipments of equipment and steel structures from TNT and Metso are expected to be on site in Q3 2017. Earthworks are progressing on the heap leach pad and ponds with lining expected to commence in September 2017.
The installation of the Primary Crusher and secondary crusher by contractor, TransUzhStroi, is progressing as planned. The overland conveying, portable conveying and stacking equipment, supplied by Terra Nova Technology, is being installed on site by Akonit.
At full production, Gross is expected to mine and process c. 12 million tonnes (“Mt”) of ore, producing approximately 230 koz of gold per year for 17 years. In Q2 2017, the Gross pilot stage operation by Neryungri continued. During the quarter Gross’ run of mine amounted to 4.9 Mt, with 3.7 Mt of waste mined and 1.2 Mt of ore mined. The mined ore is being processed at the Neryungri mine leach pads.
The Montagne d’Or gold deposit is located in north-west French Guiana. A Bankable Feasibility Study (“BFS”) was completed in Q1 2017, thereby fulfilling all of the requirements of the Option agreement to obtain a 55.01% stake in the project. Proven & Probable Mineral Reserves of 2,745,000 oz of gold (“Au”) (54.1 Mt at 1.58 grams per tonne (“g/t”) Au), a subset of the Measured and Indicated Resources of 3,850,000 oz (85.1 Mt at 1.41 g/t Au, using a cut-off grade (“CoG”) of 0.4 g/t and a US$1,300/oz Au price) were estimated. In addition, pit constrained inferred resources amounted to 0.96 MOz.
According to BFS, after-tax NPV is US$370 million at 5% and IRR is 18.7% at a gold price of US$1,250 per ounce; all-in sustaining costs are US$779/oz. Completion of the Environmental and Social Impact Assessment is expected in Q4 2017, following which the company will apply for construction and mining permits.
The Uryakh project is an advanced exploration project in the Irkutsk region of Russia. The project is located 97 km north of the town of Kuanda on the Baikal–Amur Mainline. A 2017 study of mining options has indicated that a combined underground and open pit development at Uryakh should be viable. Based on that assessment, drilling is ongoing to continue to add confidence to the gold resource estimate and to provide updated information for a pre-feasibility study to be completed in 2018.
The Uryakh resource updated in 2017 is 2.1 Moz at 3.4 g/t gold with an open pit and underground minable resource potential 2-3 Moz. Based on current estimates production at Uryakh could begin as early as 2022.
Pistol Bay is a high-grade gold exploration project located in Nunavut Territory, northern Canada, on the west coast of Hudson Bay. In October 2016, Nordgold completed the acquisition of Northquest Ltd, 100% owner of the Pistol Bay project. The Pistol Bay property consists of 860 square kilometres of mineral rights within the underexplored RankinEnnadai greenstone belt.
Maiden Inferred Resources of 739 koz of gold at 2.95 g/t were estimated for the Vickers deposit, part of the Pistol Bay project on 31 March 2016 (based on the NI 43-101 in-pit gold resource estimate utilising a cut-off grade of 1.25 g/t Au). Pistol Bay exploration activities for 2016 were completed in July-September 2016. A total of 4,007 m were drilled at the Vickers property in an effort to expand the known resource, and 6,863 m at the new Howitzer target 10 km from Vickers to test the potential for economic mineralisation. Howitzer drilling was successful in that many holes encountered highly anomalous gold.
All 2016 data have now been analysed. Following off-season planning, the remote camp was opened and fieldwork is in progress at Pistol Bay. Geochemical coverage of the entire land package is underway as well as geophysical surveys over selected areas and geological mapping. In July 2017, the drilling began on targets already developed, followed by drilling on newly defined areas that emerge from quick-turnaround results from ongoing geochemical sampling. Ongoing work to ensure the continuing validity of all permits and community relations efforts are underway.
- We remain focused on keeping a tight control over capex6 . In H1 2017, capex decreased by 9% YoY to US$145.9 million. YoY capex was down due to the conclusion of the Bouly mine construction along with lower capitalised stripping.
- In H1 2017, Nordgold exploration and evaluation capex was US$13.8 million compared with US$12.3 million in H1 2016.
- H1 2017 maintenance capex decreased to US$73.9 million from US$83.0million in H1 2016 mainly due to lower YoY capitalised stripping.