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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Highland Gold Mining Ld | LSE:HGM | London | Ordinary Share | GB0032360173 | ORD 0.1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 299.60 | 299.80 | 300.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMHGM
RNS Number : 3020S
Highland Gold Mining Limited
23 September 2014
HIGHLAND GOLD MINING LIMITED
23 September 2014 - Highland Gold Mining Limited ("Highland Gold," "Highland" or the "Company") announces its unaudited financial results and production figures for the half year ended 30 June 2014.
FINANCIAL SUMMARY
IFRS, US$000 (unless stated) H1 2014 H1 2013 Production (gold and gold eq.oz) 120,121 105,630 ---------------------------------- -------- -------- Total Group cash costs (US$/oz) 689 717 ---------------------------------- Group all-in sustaining costs (US$/oz) 900 912 ---------------------------------- -------- -------- Revenue 142,240 157,033 ---------------------------------- -------- -------- Operating profit 26,268 35,528 ---------------------------------- -------- -------- Net profit 20,307 17,000 ---------------------------------- -------- -------- EBITDA 48,375 63,278 ---------------------------------- -------- -------- Earnings per share (US$) 0.062 0.052 ---------------------------------- -------- -------- Net cash inflow from operations 64,495 71,640 ---------------------------------- -------- -------- Capital expenditure 36,429 67,929 ---------------------------------- -------- -------- Net debt position 239,242 177,604
The interim condensed consolidated financial statements of Highland Gold for the six months ended 30 June 2014 are set out below.
H1 2014 KEY EVENTS
Financial & Operations
-- Half-year financial results demonstrate the Group's ability to drive performance during a period of weaker gold prices
-- The Belaya Gora plant, operating in ramp-up mode, helped deliver a 14% overall increase in Group production as compared to H1 2013. Total output of gold and gold equivalents was 120,121 oz
-- Total cash costs decreased by 4% and All-in sustaining costs decreased by 1%, to levels near the median of Russian and international peers.
-- Net Debt to EBITDA ratio maintained at the level of 2.0 -- Interim dividend of GBP0.025 per share (H1 2013: Interim dividend of GBP0.025 per share)
Development & Exploration
-- Work on improving production facilities at the Belaya Gora plant continued -- Klen project design documentation was finalised and formally approved
-- International consultants nearing completion of a pre-feasibility study for the Kekura project
POST HALF YEAR EVENTS
-- Acquisition of the North-Western Flank licence in July 2014 with the potential to deliver new resources at MNV
-- New credit facility signed in September 2014 with UniCredit for US$50.0 million as reserve credit line
TARGETS FOR H2 2014
-- Organic production growth is expected at Novo. Annual mill throughput is expected to reach 550,000 tonnes of ore by year end, with preparations for a further production increase next year already underway
-- Updated production guidance for FY 2014 of 280-291 thousand ounces of gold and gold equivalents, representing at least a 20% increase in output year-on-year.
-- Management remains focused on maintaining achieved efficiency, increasing performance, and delivering dividends to shareholders
CONFERENCE CALL DETAILS
The Company will hold a conference call on Tuesday, 23 September 2014, hosted by Valery Oyf, CEO, to discuss the interim results. The conference call will take place at 9 a.m. UK time (12.00 Moscow). To participate in the conference call, please dial one of the following toll-free numbers:
UK Free Call 0800 694 5707
UK Local Call 0844 871 9461
UK Standard International +44 (0) 1452 54 10 03
Russian Federation +7 499 677 1040
USA Free Call 1866 254 0808
Conference ID 8597712
A replay of the presentation will be accessible shortly afterwards on Company's website.
For further information please contact:
Hot Features
Premium
Highland Gold Communications Department
+ 7 495 424 95 21
Duncan Baxter, Non-Executive Director
+ 44 (0) 1534 814 202
Numis Securities Limited John Prior, James Black
(Nominated Adviser and Broker) Paul Gillam
+44 (0) 207 260 1000
Peat & Co Charlie Peat
(Joint Broker) +44 (0) 207 104 2334
INTERIM OPERATIONAL REVIEW
Production
Mnogovershinnoye (MNV) - Khabarovsk region, Russia
Processing plant throughput during the six months ended 30 June 2014 totalled 629,854 tonnes of ore, yielding 61,761 oz of gold. The recovery rate was 92.5%.
Open-pit and underground ore production was 593,446 tonnes. Underground development recorded a 34% increase to 5,151 metres compared with the first half of 2013.
The average grade of the ore mined was 3.42 g/t, which is 5% less than the average for the same period of 2013. This reflected complicated mining conditions at the boundaries of the ore bodies and the greater depth of mining operations.
An increase in production is expected in H2 2014 through mining activities at the Valunistoye, Vodorazdelnoye and Flank, and the commencement of mining at the Tikhoye ore body, which contain higher gold grades. In preparation for mining, necessary waste stripping was carried out during the reporting period.
MNV 100% Units H1 2013 H2 2013 H1 2014
======================== ====== ========= ========= =========
Waste stripping m(3) 1,914,210 2,429,865 1,194,036
======================== ====== ========= ========= =========
Underground development metres 3,833 4,163 5,151
======================== ====== ========= ========= =========
Open pit ore mined tonnes 241,292 459,349 300,569
======================== ====== ========= ========= =========
Open pit ore grade g/t 3.8 3.7 3.71
======================== ====== ========= ========= =========
Underground ore mined tonnes 368,518 352,462 292,877
======================== ====== ========= ========= =========
Underground ore grade g/t 3.5 3.6 3.11
======================== ====== ========= ========= =========
Total ore mined tonnes 609,810 811,811 593,446
======================== ====== ========= ========= =========
Average grade mined g/t 3.6 3.7 3.42
======================== ====== ========= ========= =========
Ore processed tonnes 670,654 657,527 629,854
======================== ====== ========= ========= =========
Average grade processed g/t 3.5 3.9 3.31
======================== ====== ========= ========= =========
Recovery rate % 91.9 92.1 92.5
======================== ====== ========= ========= =========
Gold produced oz 68,996 76,263 61,761
======================== ====== ========= ========= =========
Novoshirokinskoye (Novo) - Zabaikalsky region, Russia
Ore production met planning expectations. Ore mining and processing technology were continually optimised during the reporting period and, in the wake of this, annual ore production is expected to reach 550,000 tonnes by the end of the year. Underground development designed to gain access to new and deeper ore levels was successfully completed. Alongside the anticipated increase in mill throughput, the Company plans to invest in new flotation equipment during the second half of the year in order to maintain the current gold grade and recovery rates.
Novo 100% Unit H1 2013 H2 2013 H1 2014
========================= ====== ======= ======= =======
Underground development metres 4,485 3,993 5,162
========================= ====== ======= ======= =======
Ore mined tonnes 245,775 258,151 280,987
========================= ====== ======= ======= =======
Average grade mined* g/t 5.5 6.4 5.6
========================= ====== ======= ======= =======
Ore processed Tonnes 244,907 260,178 281,137
========================= ====== ======= ======= =======
Average grade processed* g/t 5.5 6.4 5.6
========================= ====== ======= ======= =======
Recovery rate* % 84.3 83.8 84.3
========================= ====== ======= ======= =======
Gold produced (100%)* Oz 36,634 44,727 42,949
========================= ====== ======= ======= =======
*approximate Au equivalent
(mined ore metal content breakdown = Au 3.34 g/t, Ag 59.34 g/t, Pb 1.84%, Zn 0.88%)
Belaya Gora - Khabarovsk region, Russia
Belaya Gora 100% Unit H1 2013 H2 2013 H1 2014
======================== ===== ======= ========= =======
Waste stripping m(3) 963,278 672,562 767,690
======================== ===== ======= ========= =======
Ore mined T 815,585 1,011,095 465,610
======================== ===== ======= ========= =======
Average grade mined g/t 1.4 1.4 1.32
======================== ===== ======= ========= =======
Ore processed T ** 291,962 462,333
======================== ===== ======= ========= =======
Average grade processed g/t ** 1.2 1.81
======================== ===== ======= ========= =======
Recovery rate % ** 64.0 62.79
======================== ===== ======= ========= =======
Gold produced oz ** 7,077 15,411
======================== ===== ======= ========= =======
The Belaya Gora processing plant continued in ramp-up mode during the first half of the year. Nameplate production parameters were achieved at the crushing and grinding facilities.
In order to improve the process flow and recovery rates, activities focused on achieving optimal performance in the gravity separation facility and the sorption and elution plant.
The decrease in mining activities was a direct result of the harsh weather conditions which led to the suspension of operations during the late winter/spring period on the Pologaya ore zone. The average grade in mined ore was 1.32 g/t, or 6% lower than in 2013. Efforts are focused on optimising grade control measures in order to reduce ore dilution and maximise head grade.
Higher production volumes are planned for the second half of the year in line with significant increases in ore throughput and recovery rates. In addition, expectations are that higher grade ore will be mined at the Pologaya ore zone during the period. Efforts to refine and enhance all aspects of production are scheduled for completion by the year-end.
DEVELOPMENT PROJECTS
Klen - Chukotka region, Russia
All project design documentation was finalised and formally approved. Options for optimising the financial and economic model were reviewed in-house, an exercise that is expected to be completed in 2H 2014. Exploration work was carried out at the Verkhne-Krichalskaya licence and at deep levels at Klen, the common aim being to explore the possibility of increasing the mineral reserve base for future development.
Kekura - Chukotka region, Russia
Preparation of a pre-feasibility study compliant with GKZ requirements continued and is expected to be completed in 2H 2014. Site locations for pit, processing plant and mine facilities were established and geodetic, geological and environmental surveys completed. Additional studies on a number of samples from throughout the ore body were carried out for the purpose of defining ore characteristics and developing an optimal processing route.
Taseevskoye - Zabaikalsky region, Russia
Project documentation was prepared in accordance with regulatory requirements. The State Examination Board approved the mine design for the 1st and 3rd ore zones of the Taseevskoye deposit and issued a construction permit.
Lyubov - Zabaikalsky Region, Russia
Work commenced on amendments to the technical design in accordance with the State Examination Board's recommendations. In 2014 the Company expects to receive the results of a project review conducted by government authorities.
EXPLORATION
Mnogovershinnoye - Khabarovsk region, Russia
Near-mine exploration at MNV will remain one of the Company's operational priorities throughout 2014 targeting additional resources in order to enhance the life of the mine.
In H1 2014 an independent consultancy completed a JORC-compliant resource audit at MNV as of 1 January 2013, the results of which are reflected in the updated resource/reserve statement released with the Company's 2013 Annual Report & Accounts.
Diamond core drilling activity for underground resource conversion in H1 2014 totalled 5,500 metres.
At the MNV Western Flank licence, immediately adjacent to mining operations, results from a drilling programme completed in 2013 at the historic Chaynoye prospect define an open-pit mineable resource for which resource modelling is underway. Further exploration works planned for 2014 are designed to evaluate the resource potential of the entire licence area and will include a geochemical survey with a follow-up trenching programme.
On 23 July 2014, the Company acquired the MNV North-Western Flank licence from an open auction at a bid price of ca USD 284,500. This includes a large section of the Medvezhya zone which, with reported prognostic resources (P1 + P2) of circa 35 tonnes of gold, is believed to have the potential to deliver new resources at MNV. It is anticipated that the Medvezhya zone will be explored through a combination of surface drilling and underground activity, utilising MNV's existing underground infrastructure.
Blagodatnoye - Khabarovsk region, Russia
The Blagodatnoye project is located 30 kilometres to the southwest of the Belaya Gora project and is targeting a near-surface bulk mineable gold resource for a potential open-pit mining operation. In H1 2014, regulatory authorities approved the Company's report on exploration results to date including a calculation of prognostic P1 resources and C2 category reserves of P1+C2 18.4 tonnes at ca. 2.0 g/t.
A new Exploration Project outlining future technical requirements for C1+C2 reserve registration with GKZ is being compiled and will be submitted for regulatory approval before year-end 2014.
Verkhne-Krichalskaya - Chukotka region, Russia
The Verkhne-Krichalskaya (VK) exploration and mining licence incorporates the Klen licence and is believed to hold upside potential with regard to the Klen operation.
The Company's previous exploration programme defined several gold anomalies and exploration targets at VK. In H1 2014 the Company completed a total of 7,996 metres of drilling at several targets with the objective of prospecting for new mineralisation zones and defining continuity of gold mineralisation along strike and depth of previously identified zones. Preliminary drilling results indicate several steeply dipping gold mineralised vein zones ranging from 200 to 1,200 metres in length and from 2.0 to 5.0 metres in width which yielded several high-grade intersects.
Additional drilling planned for H2 2014 at VK includes assessment of the resource potential of the deeper levels of the Klen deposit and testing of the potential extension of the deposit to the southeast.
Kekura - Chukotka region, Russia
Exploration work planned for 2014 is focused on fulfilling all technical requirements for an updated pre-feasibility study which is expected to be submitted to regulatory authorities (GKZ) by year-end 2014. The Company completed 4,210 metres of drilling with exploratory, hydrogeological and geotechnical objectives. Metallurgical studies on multi-tonne composite ore samples are underway, with the aim of defining ore characteristics and developing a processing flow sheet. Exploratory prospecting on the greater licence area in H2 2014 will include geochemical surveys at selected targets and the evaluation of several promising near-mine gold prospects.
Unkurtash - Kyrgyzstan
The Unkurtash project holds a total JORC-compliant resource of 3.7 Moz of gold within three distinct prospects, Unkurtash, Sarytube and Karatube, located within the Company's single Kassan licence (63 km(2)). In order to facilitate registration of the entire Unkurtash project's C1+C2 category with the Kyrgyz GKZ, the Company completed a reserve calculation update in 2013. Project economics were further refined during H1 2014 and submission of the necessary documentation for reserve registration to GKZ is targeted for Q4 2014.
In H2 2014 the Company plans to complete a 1,500 metre drilling programme which will test the resource potential of the Baikonur prospect, the potential extension of the Unkurtash prospect.
Valery Oyf
Chief Executive Officer
22 September 2014
INTERIM FINANCIAL REVIEW
CHIEF FINANCIAL OFFICER'S REPORT
Half-year financial results demonstrate Group's ability to drive performance during a period of weaker gold prices. Increased production volumes along with the ongoing focus on improving efficiency should allow us to deliver strong full year results.
Group revenue for the first half of 2014 decreased by 9.4% to US$142.2 million compared to US$157.0 million in H1 2013. This decline reflected the fall in precious and other metals spot market prices during the period, despite higher gold and gold equivalents sales. The Group sold 116,567 ounces of gold and gold equivalents in H1 2014, compared to 110,423 ounces in H1 2013. MNV's share of sales at 63,048 oz decreased by 14.0%, while Novo's share at 43,509 eq. oz showed a significant 18.0% increase compared to H1 2013. Belaya Gora sold 10,010 oz in Q2 2014. Revenues from the sale of 1,916 oz from Belaya Gora in Q1 2014 were netted off with costs of sales and capitalised into the cost of the plant as part of start-up work. The Group did not carry out any hedging activity in the first half of 2014.
The average price of gold realised by MNV and Belaya Gora (net of commission) decreased to US$1,288 per oz in H1 2014, compared with US$1,531 per oz in H1 2013. The average price of gold equivalents realised by Novo was US$1,075 per eq. oz in H1 2014, compared to US$1,080 per eq. oz in H1 2013. The average price at Novo is based on the spot price for metals contained in the concentrates (gold, lead, zinc and silver), net of fixed processing and refining costs at the Kazzinc plant. The Group's average realised price of gold and gold equivalents amounted to US$1,210 per oz in H1 2014, compared with US$1,381 per oz in H1 2014, a decline of 12.5%.
Cost of sales at the principal operating entities, MNV and Novo, were effectively maintained at a low level. The completion of start-up work at Belaya Gora led to the first-time recognition of its costs within the Group's cost of sales in the second quarter of 2014. This resulted in a slight 1.5% increase in costs to US$109.7 million in H1 2014 compared to US$108.0 million in H1 2013.
Total Group cash costs amounted to US$689 per oz, compared to US$717 per oz in H1 2013. Despite depletion and lower grades at MNV, its total cash costs remained at a consistent level to 2013 of US$757 per oz (H1 2013: US$765 per oz) due to the devaluation of the Russian Rouble, a decrease in Royalty payments, and the effect of a cost reduction programme. Total cash costs at Novo decreased to US$511 per eq. oz (H1 2013: US$617 per eq. oz), largely reflecting the rise in production volumes, devaluation of the Russian Rouble, the start-up of a new coal boiler house, and a reduction in tariffs for transportation. Total cash costs at Belaya Gora decreased from US$1,426 per oz in H1 2013 to US$1,031 per oz due to the ramping-up of the BG plant and increased volumes produced.
All-in sustaining costs (AISC) per ounce sold remained well contained and only slightly changed from US$912 per oz in H1 2013 to US$900 per oz in H1 2014 - in line with the AISC of the world's major gold producers.
The Group's EBITDA (defined as operating profit/ (loss) excluding depreciation and amortisation, impairment gain/ (loss), movement in ore stockpiles obsolescence provision and gain on settlement of contingent consideration) decreased by 23.6% in H1 2014 to US$48.4 million, compared with US$63.3 million in H1 2013, due to lower gold prices. The EBITDA margin (defined as EBITDA divided by total revenue) decreased from 40.3% to 34.0%. EBITDA margin was 36.3% at MNV and 44.9% at Novo, in line with industry standards. The EBITDA margin at BG was 12.1% due to the early stage of production.
In July 2014, management finalised the Kekura acquisition and settled the Group's outstanding contingent consideration for US$5.6 million less than the previously-provided amount. This figure was recognised as a gain on settlement of contingent consideration in the interim consolidated statement of comprehensive income.
Net finance income increased to US$4.6 million in H1 2014 from US$0.1 million in H1 2013, primarily due to the positive reassessment of fair value of bonds.
A foreign exchange loss of US$1.5 million (H1 2013: loss of US$2.4 million) resulted from the settlement of foreign currency transactions and the transfer of monetary assets and liabilities denominated in currencies such as Russian Roubles and Pounds Sterling into US Dollars.
The income tax charge amounted to US$9.1 million for the first half of 2014 compared with US$16.2 million in the corresponding period of 2013. The tax charge was comprised of US$10.0 million for current tax expenses (MNV: US$6.9 million and Novo: US$3.1 million), US$2.0 million of tax release from deferred tax, and US$1.1 million of prior year tax adjustment. The effective tax rate decreased from 48.9% in H1 2013 to 31.0% in H1 2014, mainly due to foreign exchange movements and differences in the Russian tax and IFRS depreciation rules.
Net profit after tax increased to US$20.3 million (H1 2013: US$17.0 million) and resulted in earnings per share of US$0.062 (H1 2013: US$0.052).
The Group's cash inflow from operating activities of US$64.5 million in H1 2014 was US$7.1 million lower than the US$71.6 million generated in H1 2013.
During the six months ended June 30 2014, the Group invested US$36.4 million in capital expenditures compared to US$67.9 million in the prior period. H1 2014 capital expenditure comprised US$7.2 million at MNV, including US$4.3 million of developing underground mine, US$2.9 million at Novo, US$11.9 million at Belaya Gora, US$6.4 million at Klen and adjacent Verchne-Krichalskaya area, US$7.2 million at Kekura, and US$0.8 million related to other entities within the Group. The required capital expenditure was funded by operating cash inflow and debt.
The Group's net debt position as of 30 June 2014 was US$239.2 million, compared to a net debt position on 31 December 2013 of US$251.2 million. Net debt is defined as cash in the bank, deposits, and bonds, minus any bank borrowing. The present ratio of net debt to EBITDA is 2.0, which is in line with the Board's policy. This ratio is defined by dividing net debt by the aggregate amount of EBITDA in H1 2014 and H2 2013.
EVENTS AFTER THE REPORTING PERIOD
In September 2014 the Group signed a revolving credit agreement with UniCreditBank for a US$50.0 million facility with the drawdown period set until March 2016. This facility will be drawn down in case of cash deficit if gold prices decline rapidly, and will be used to finance development and operating activities within the Group.
PAYMENT OF DIVIDENDS
The Board has approved an interim Dividend of GBP0.025 per share and intends to pay future dividends bearing in mind the capital requirements necessary to support the expansion of the group. The interim dividend will be paid on 24 October 2014 to shareholders on the register at the close of business on 03 October 2014, the record date, and the ex dividend date will be 01 October 2014.
PRINCIPAL RISKS AND UNCERTAINTIES
The Group is exposed to a number of risks and uncertainties which in most cases are relevant to the entire gold mining industry. These risks and uncertainties could cause actual results to differ materially from expected or historical results.
The principal risks and uncertainties are disclosed in the Group's 2013 Annual Report (Pages 16-21) and have not changed during the first half of 2014. However, the following update is provided with regard to those risks that have proven particularly relevant during the reporting period:
Potential government actions (changes in geopolitical situation)
During the reporting period, the U.S. and E.U. have imposed sanctions and restrictions on certain Russian officials, businessmen, and companies (including Gazprombank and Sberbank, banks that provide financing to the Group). Rating agencies downgraded Russia's sovereign rating and changed its outlook to negative.
The Group has not been subject to any sanctions or restrictions. However, if further extended, these events may adversely affect the Russian economy through reduced access to international capital, restrictions on imports of various goods and services, a weakening Rouble, and other economic consequences.
The Group is monitoring the situation on an ongoing basis, however, future developments and the likelihood of additional sanctions and restrictions are unclear at the moment.
HEALTH, SAFETY AND ENVIRONMENT
The Company is dedicated to ensuring the safety of employees and, accordingly, combines rigorous precautionary measures throughout the production process with comprehensive staff training programmes which place particular emphasis on the importance of encouraging employee responsibility for work safety. As a result of these policies, the Lost Time Incident ("LTI") rate (defined as the number of lost time incidents for every 200,000 man hours worked) fell by 17% to 0.30 in 1H 2014 (representing five LTI's across the Group) compared with 0.36 in 1H 2013. Some 569 employees received a safety induction course (one-day), 359 employees received work safety training on hazardous production risks (3-5 day courses) and 265 employees were trained and tested on industrial safety (7-30 day programmes).
The Company's environmental practices remain fully compliant with regulatory authorities' legal requirements. The ISO 14001 accredited environmental management system is being extended to the Belaya Gora and Novoshirokinskiy mines where final audit inspections, to check compliance with the ISO 14001 standard, are scheduled for September and December 2014 respectively. To this end, 46 employees of the Belaya Gora and Novoshirokinskoye mines received training (developed by an external adviser) in internal environmental audit. Environmental safety training was given to 74 employees of MNV, Belaya Gora and Novo, with two MNV specialists attending a five-day course at Khabarovsk University.
Alla Baranovskaya
Chief Financial Officer
22 September 2014
Interim consolidated statement of comprehensive income
for the six months ended 30 June
2014 2013
unaudited unaudited
Notes US$000 US$000
----------- -----------
Revenue 4 142,240 157,033
Cost of sales 4 (109,711) (108,040)
----------- -----------
Gross profit 32,529 48,993
Administrative expenses (8,194) (8,805)
Other operating income 437 644
Other operating expenses 5 (4,126) (5,304)
Gain on settlement of contingent
consideration 3 5,622 -
----------- -----------
Operating profit 26,268 35,528
Foreign exchange loss (1,473) (2,396)
Finance income 6.1 6,229 569
Finance costs 6.2 (1,583) (460)
----------- -----------
Profit before income tax 29,441 33,241
Income tax expense 7 (9,134) (16,241)
----------- -----------
Profit for the period 20,307 17,000
Total comprehensive income
for the period 20,307 17,000
=========== ===========
Attributable to:
Equity holders of the parent 20,161 16,962
Non-controlling interests 146 38
Earnings per share (US$ per
share)
-- Basic, for the profit for
the period attributable to
ordinary equity holders of
the parent 18 0.062 0.052
-- Diluted, for the profit
for the period attributable
to ordinary equity holders
of the parent 18 0.062 0.052
The Group does not have any items of other comprehensive income or any discontinued operations.
Interim consolidated statement of financial position
as at
30 June 31 December 30 June
2014 2013* 2013*
unaudited audited unaudited
Notes
US$000 US$000 US$000
----------- ------------ -----------
Assets
Non-current assets
Exploration and evaluation
assets 8 287,337 270,287 76,836
Mine properties 8 338,184 338,007 527,804
Property, plant and
equipment 8 363,688 367,486 300,676
Intangible assets 4 97,324 97,324 97,324
Inventories 12 15,602 14,623 9,830
Other non-current
assets 9 8,147 13,272 37,098
Deferred income tax
asset 2,174 826 17
Total non-current
assets 1,112,456 1,101,825 1,049,585
----------- ------------ -----------
Current assets
Inventories 12 62,064 70,678 51,664
Trade and other receivables 44,342 53,111 47,087
Income tax prepaid 993 1,811 4,434
Prepayments 4,687 6,389 5,405
Financial assets 10 55,049 50,199 44,108
Cash and cash equivalents 13 9,755 7,938 2,736
Other current assets 1,173 805 629
----------- ------------ -----------
Total current assets 178,063 190,931 156,063
----------- ------------ -----------
Total assets 1,290,519 1,292,756 1,205,648
=========== ============ ===========
Equity and liabilities
Equity attributable
to equity holders
of the parent
Issued capital 15 585 585 585
Share premium 718,419 718,419 718,419
Assets revaluation
reserve 832 832 832
Retained earnings 105,914 99,444 74,909
----------- ------------ -----------
Total equity attributable
to equity holders
of the parent 825,750 819,280 794,745
----------- ------------ -----------
Non-controlling interests 2,617 2,471 2,275
----------- ------------ -----------
Total equity 828,367 821,751 797,020
----------- ------------ -----------
Non-current liabilities
Interest-bearing loans
and borrowings 14 134,121 185,309 168,948
Provisions 34,929 34,402 33,690
Long-term accounts
payable 500 441 484
Deferred income tax
liability 79,720 80,375 81,651
----------- ------------ -----------
Total non-current
liabilities 249,270 300,527 284,773
----------- ------------ -----------
Current liabilities
Trade and other payables 39,747 46,445 68,330
Interest-bearing loans
and borrowings 14 169,925 124,015 55,500
Income tax payable 3,201 - 16
Provisions 9 18 9
----------- ------------ -----------
Total current liabilities 212,882 170,478 123,855
----------- ------------ -----------
Total liabilities 462,152 471,005 408,628
----------- ------------ -----------
Total equity and liabilities 1,290,519 1,292,756 1,205,648
=========== ============ ===========
* Certain line items have been reclassified in the consolidated statement of financial position as at 31 December 2013 and 30 June 2013. Refer to Note 2 for further details.
Interim consolidated statement of changes in equity
for the six months ended 30 June 2014
Attributable to equity holders
of the parent
----------------------------------------------------------
Issued Share Asset Retained Total Non-controlling Total
capital premium revaluation earnings interest equity
reserve
US$000 US$000 US$000 US$000 US$000 US$000 US$000
--------- --------- ------------- ---------- --------- ---------------- ---------
At 1 January
2014 585 718,419 832 99,444 819,280 2,471 821,751
Total comprehensive
income for
the period - - - 20,161 20,161 146 20,307
Dividends
paid to equity
holders of
the parent - - - (13,691) (13,691) - (13,691)
--------- --------- ------------- ---------- --------- ---------------- ---------
At 30 June
2014 (unaudited) 585 718,419 832 105,914 825,750 2,617 828,367
========= ========= ============= ========== ========= ================ =========
for the six months ended 30 June 2013
Attributable to equity holders
of the parent
-------------------------------------------------------------
Issued Share Asset (Accumulated Total Non-controlling Total
capital premium revaluation losses)/ interest equity
reserve Retained
earnings
US$000 US$000 US$000 US$000 US$000 US$000 US$000
--------- --------- ------------- ------------- --------- ---------------- ---------
At 1 January
2013 585 718,419 832 73,122 792,958 2,237 795,195
Total comprehensive
income for
the period - - - 16,962 16,962 38 17,000
Dividends
paid to equity
holders of
the parent - - - (15,175) (15,175) - (15,175)
At 30 June
2013 (unaudited) 585 718,419 832 74,909 794,745 2,275 797,020
========= ========= ============= ============= ========= ================ =========
Interim consolidated cash flow statement
for the six months ended 30 June
2014 2013
unaudited unaudited
Notes US$000 US$000
----------- -----------
Operating activities
Profit before income tax 29,441 33,241
Adjustments to reconcile
profit before income tax
to net cash flows from operating
activities:
Depreciation of mine properties
and property, plant and equipment 8 27,065 25,604
Movement in ore stockpiles
obsolescence provision 12 664 2,146
Movement in raw materials
and consumables obsolescence
provision 12 (35) -
Write-off of mine properties
and property, plant and equipment 8 152 1,072
Loss/ (gain) on disposal
of property, plant and equipment 304 (55)
Bank interest 6.1 (62) (198)
Bonds and shares fair value
movement 6.1,10 (6,161) (371)
Interest expense on bank
loans 6.2 441 -
Accretion expense on site
restoration provision 6.2 1,142 313
Gain on settlement of contingent
consideration 3 (5,622) -
Unwinding of contingent consideration
liability 6.2 - 93
Net foreign exchange loss 1,473 2,396
Movement in provisions 64 (317)
Other non-cash income and
expenses (6) -
Working capital adjustments:
Decrease/ (increase) in trade
and other receivables and
prepayments 7,524 (1,907)
Decrease in inventories 7,520 13,326
Increase in trade and other
payables 6,056 9,784
Income tax paid (5,465) (13,487)
----------- -----------
Net cash flows from operating
activities 64,495 71,640
Investing activities
Proceeds from sale of property,
plant and equipment 465 431
Purchase of property, plant
and equipment 4 (36,429) (67,929)
Increase in stripping activity
assets 8 (2,189) (7,535)
Interest received from deposits 62 199
Interest received from bonds 10 1,311 1,461
Sale of investments - bonds 10 - 5,253
Sale of investments - shares 10 - 3,644
Acquisition of subsidiaries 3 - (207,000)
----------- -----------
Net cash flows used in investing
activities (36,780) (271,476)
Financing activities
Proceeds from borrowings 52,242 215,698
Repayment of borrowings (57,603) -
Dividends paid to equity
holders of the parent (13,691) (15,175)
Interest paid (6,159) (2,893)
Net cash flows (used in)/
from financing activities (25,211) 197,630
Net increase/ (decrease)
in cash and cash equivalents 2,504 (2,206)
Effects of exchange rate
changes (687) (2,309)
----------- -----------
Cash and cash equivalents
at 1 January 7,938 7,251
----------- -----------
Cash and cash equivalents
at 30 June 9,755 2,736
=========== ===========
1. Corporate information
These interim condensed consolidated financial statements of Highland Gold Mining Limited for the six months ended 30 June 2014 were authorised for issue in accordance with a resolution of the Directors on 22 September 2014.
Highland Gold Mining Limited is a public company incorporated and domiciled in Jersey. The registered office is located at 26 New Street, St Helier, Jersey JE2 3RA. Its ordinary shares are traded on the Alternative Investment Market (AIM).
The principal activity is building a portfolio of gold mining operations within the Russian Federation and Kyrgyzstan.
2. Basis of preparation and accounting policies
Basis of preparation
The interim condensed consolidated financial statements for the six months ended 30 June 2014 have been prepared in accordance with IAS 34 'Interim Financial Reporting'. The annual financial statements of the Group for the year ended 31 December 2013 were prepared in accordance with International Financial Reporting Standards as adopted by the European Union and Companies (Jersey) Law 1991.
The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 31 December 2013.
Having made relevant enquiries, the Directors believe that it is appropriate to adopt the going concern basis in the preparation of the interim condensed consolidated financial statements in view of the fact that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future.
The impact of seasonality or cyclicality on operations is not considered significant to the interim condensed consolidated financial statements.
Reclassifications
Certain line items have been reclassified in the consolidated statement of financial position as at 31 December 2013 and 30 June 2013 to keep the presentation form consistent with 2014 presentation. As a result of the reclassifications, as at 31 December 2013 inventories were decreased by US$0.3 million (30 June 2013: nil), trade and other receivables were decreased by US$0.5 million (30 June 2013: US$0.6 million) and other current assets were increased by US$0.8 million (30 June 2013: US$0.6 million),
Changes in accounting policies and presentation rules
The accounting policies adopted in the preparation of the consolidated interim financial statements are consistent with those applied in the preparation of the consolidated financial statements for the year ended 31 December 2013, except for the adoption of new standards and interpretation as of 1 January 2014, noted below.
Several new standards and amendments apply for the first time in 2014. However, they do not impact the interim condensed consolidated financial statements of the Group. These new standards and amendments are described below.
Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)
These amendments provide an exception to the consolidation requirement for entities that meet the definition of an investment entity under IFRS 10 Consolidated Financial Statements. The exception to consolidation requires investment entities to account for subsidiaries at fair value through profit or loss.
Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32
These amendments clarify the meaning of 'currently has a legally enforceable right to set-off' and the criteria for non-simultaneous settlement mechanisms of clearing houses to qualify for offsetting.
Novation of Derivatives and Continuation of Hedge Accounting - Amendments to IAS 39
These amendments provide relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria.
Recoverable Amount Disclosures for Non-Financial Assets - Amendments to IAS 36
These amendments remove the unintended consequences of IFRS 13 Fair Value Measurement on the disclosures required under IAS 36 Impairment of Assets. In addition, these amendments require disclosure of the recoverable amounts for the assets or cash-generating units (CGUs) for which an impairment loss has been recognised or reversed during the period.
IFRIC 21 Levies
The new interpretation clarifies when to recognise a liability for a levy imposed by governments (including government agencies and similar bodies) in accordance with laws and regulations. The IASB implementation date is for periods beginning on or after 1 January 2014 whereas the interpretation becomes mandatory in the EU only for annual periods beginning on or after 17 June 2014. Income taxes in accordance with IAS 12, fines and other penalties and liabilities arising from trading schemes are not covered by this interpretation.
The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.
3. Business combinations
Acquisition of ZAO Bazovye Metally
On 29 March 2013, the Group acquired from Union Mining Holdings Limited a 100% share in ZAO Bazovye Metally (Kekura) which holds the mining and exploration rights to the Kekura gold deposit and surrounding licence area. Kekura's resource base will contribute to the long-term production profile of the Group and represents a solid foundation for the Group's further growth.
The Group determined that this transaction represents a business combination.
Purchase consideration US$000
--------
Cash paid 189,323
Fair value of loan assigned 17,677
Fair value of contingent consideration 15,820
Total consideration transferred 222,820
========
From total consideration of US$222.8 million, US$189.3 million was paid in cash and US$17.7 million represented the fair value of the loan payable assigned to the Group. This amount of US$207.0 million was funded via a new debt facility with Gazprombank.
The amount of US$17.1 million, representing the carrying value of the loan assigned at the date of acquisition, was paid on 29 March 2013.
The additional payment of US$5.0 million represented the amount of contingent consideration payable in December 2013 as long as there are no third-parties' claims. It was recognised at the fair value of US$4.9 million, a 2.6% discount factor was applied. This part of contingent consideration was settled in full in 2013.
In addition, at the date of acquisition, up to US$11.0 million in contingent consideration was payable upon the completion of various contractual terms. At the acquisition date, the contingent consideration was recognised at a fair value of US$10.9 million applying a 2.2% discount factor. As of 31 December 2013, US$0.5 million was paid in advance and up to US$10.5 million remained outstanding and was expected to be paid in 2014.
In June 2014 management became aware that several contractual terms agreed as part of the acquisition were not met. Therefore, US$5.6 million of the contingent consideration would no longer be payable. This was subsequently formalised in an agreement in July 2014. The release of this provision was recognised as a gain on settlement of contingent consideration in the interim consolidated statement of comprehensive income. US$3.8 million was paid in July 2014, with the remaining US$0.4 million to be paid in November 2014.
Assets acquired and liabilities assumed
The estimated fair value of the identifiable assets and liabilities of Kekura at the date of acquisition were as follows:
Fair value
recognised
on acquisition
US$000
---------------
Assets
Exploration and evaluation assets 161,357
Property, plant and equipment 79,756
Accounts receivable and other debtors 3,415
Total assets acquired 244,528
Liabilities
Borrowings (17,677)
Deferred tax liabilities (37,673)
Trade accounts and notes payable (789)
---------------
Total liabilities assumed (56,139)
---------------
Total identifiable net assets at fair
value 188,389
===============
Goodwill arising on acquisition 16,754
---------------
Purchase price 205,143
===============
Plus: fair value of loan 17,677
---------------
Total consideration transferred 222,820
===============
The goodwill balance of US$16.8 million is the result of the requirement to recognise a deferred tax liability calculated as the difference between the tax effect of the fair value of the assets and liabilities acquired and their tax bases. Goodwill is allocated entirely to the development and exploration company (Kekura). None of the goodwill recognised is expected to be deductable for income tax purposes.
From the date of acquisition, Kekura has contributed US$0.0 million to revenue and loss of US$0.2 million to the profit before tax of the Group in the first half of 2013. If the combination had taken place at the beginning of the year 2013, revenue of the Group in the first half of 2013 would have been US$157.0 million and profit before tax of the Group would have been US$33.2 million.
4. Segment information
For management purposes, the Group is organised into business units based on the nature of their activities, and has four reportable segments as follows:
-- Gold production; -- Polymetallic concentrate production; -- Development and exploration; and -- Other.
The gold production reportable segment comprises two operating segments, namely Mnogovershinnoye (MNV) and Belaya Gora (BG) at which level management monitors its results for the purpose of making decisions about resource allocation and evaluating the effectiveness of its activity.
The polymetallic concentrate production segment, namely Novoshirokinskoye (Novo), is analysed by management separately due to the fact that the nature of its activities differs from the gold production process.
The development and exploration segment contains entities which hold the licenses being in the development and exploration stage: Kekura, Klen, Taseevskoye, Unkurtash, Lubov, and related service entities: Zabaykalzolotoproyekt (ZZP) and BSC. In the interim financial statement as at 30 June 2013 ZZP was shown in the 'other' segment. In the interim financial statements as at 30 June 2014 ZZP has been reclassified from the 'other' segment to the development and exploration segment in the comparative segment information for 2013 to keep the presentation form consistent with 2014 presentation.
The 'other' segment includes head office, management company and other non-operating companies which have been aggregated to form the reportable segment.
Segment performance is evaluated based on EBITDA (defined as operating profit/ (loss) excluding depreciation and amortisation, impairment gain/ (loss), movement in ore stockpiles obsolescence provision and gain on settlement of contingent consideration). The development and exploration segment is evaluated based on the life of mine models in connection with the capital expenditure spent during the reporting period.
The following tables present revenue, EBITDA and assets information for the Group's reportable segments. The segment information is reconciled to the Group's profit for the period.
The Highland Gold finance costs, finance income, income taxes, foreign exchange gains/ (losses), other non-current assets and current assets are managed on a group basis and are not allocated to operating segments.
Revenue from several customers was greater than 10% of total revenues.
In the first half of 2014 the gold and silver revenue reported in the gold production segment was received from sales to Gazprombank (US$94.1 million) and MDM Bank (US$0.9 million) in the territory of the Russian Federation.
In the first half of 2013 the gold and silver revenue reported in the gold production segment was received from sales to Gazprombank (US$112.6 million) and MDM Bank (US$1.1 million) in the territory of the Russian Federation.
In the first half of 2014 the concentrate revenue reported in the polymetallic concentrate production segment in the amount of US$46.8 million was received from sales to Kazzinc (H1 2013: US$39.8 million) in the territory of the Republic of Kazakhstan.
Other third-party revenues in both H1 2014 and H1 2013 were received in the territory of the Russian Federation.
Inter-segment revenues mostly represent management services.
Period ended 30 Polymetallic
June 2014 Gold concentrate
production production Development
segment segment & exploration Other Eliminations Total
US$000 US$000 US$000 US$000 US$000 US$000
------------ ------------- --------------- -------- ------------- ----------
Revenue
Gold revenue 94,110 - - - - 94,110
Silver revenue 858 - - - - 858
Concentrate revenue - 46,755 - - - 46,755
Other third-party 151 122 244 - - 517
Inter-segment 83 - 247 6,687 (7,017) -
Total revenue 95,202 46,877 491 6,687 (7,017) 142,240
============ ============= =============== ======== ============= ==========
Cost of sales 76,257 32,047 1,248 159 - 109,711
EBITDA 31,301 21,054 (2,147) (1,833) - 48,375
------------ ------------- --------------- -------- ------------- ----------
Other segment information
Depreciation (17,213) (9,673) (23) (156) - (27,065)
Movement in ore
stockpiles obsolescence
provision (664) - - - - (664)
Gain on settlement
of contingent consideration 5,622
Finance income 6,229
Finance costs (1,583)
Foreign exchange
loss (1,473)
Profit before income
tax 29,441
------------ ------------- --------------- -------- ------------- ----------
Income tax (9,134)
Profit for the
period 20,307
------------ ------------- --------------- -------- ------------- ----------
Segment assets
at 30 June 2014
Non-current assets
Capital expenditure* 240,960 196,029 551,802 418 - 989,209
Goodwill 22,253 5,134 69,937 - - 97,324
Other non-current
assets 22,741 313 1,904 965 - 25,923
Current assets** 107,512 34,016 18,418 62,368 (44,251) 178,063
Total assets 1,290,519
==========
Capital expenditure
- addition during
the first half
of 2014***, including: 20,832 3,082 14,158 51 - 38,123
------------ ------------- --------------- -------- ------------- ----------
Stripping activity
assets 2,189 - - - - 2,189
Capitalised interest 1,379 - 4,439 - - 5,818
Non-cash capital
expenditure**** (1,057) 128 (5,267) (117) - (6,313)
Cash capital expenditure 18,321 2,954 14,986 168 - 36,429
* Capital expenditure is the sum of exploration and evaluation assets, mine properties and property, plant and equipment.
** Current assets at 30 June 2014 include corporate cash and cash equivalents of US$9.8 million, investments of US$55.0 million, inventories of US$62.1 million, trade and other receivables of US$44.3 million and other assets of US$6.9 million. Eliminations relate to intercompany accounts receivable.
*** Capital expenditure for the first half of 2014 includes additions to property, plant and equipment of US$36.7 million (Note 8) and capitalised interest of US$5.8 million (Note 8), less prepayments previously made for property, plant and equipment of US$4.4 million.
**** Non-cash capital expenditure includes settled accounts payable of US$6.3 million.
Period ended 30 Polymetallic
June 2013 Gold concentrate
production production Development
segment segment & exploration Other Eliminations Total
US$000 US$000 US$000 US$000 US$000 US$000
------------ ------------- --------------- -------- ------------- ----------
Revenue
Gold revenue 112,647 - - - - 112,647
Silver revenue 1,049 - - - - 1,049
Concentrate revenue - 39,810 - - - 39,810
Other third-party 187 156 473 2,711 - 3,527
Inter-segment 66 - 124 7,385 (7,575) -
Total revenue 113,949 39,966 597 10,096 (7,575) 157,033
============ ============= =============== ======== ============= ==========
Cost of sales 73,935 31,856 526 1,723 - 108,040
EBITDA 50,825 13,738 166 (1,451) - 63,278
------------ ------------- --------------- -------- ------------- ----------
Other segment information
Depreciation (16,439) (8,969) (12) (184) - (25,604)
Movement in ore
stockpile obsolescence
provision (2,146) - - - - (2,146)
Finance income 569
Finance costs (460)
Foreign exchange
loss (2,396)
Profit before income
tax 33,241
------------ ------------- --------------- -------- ------------- ----------
Income tax (16,241)
Profit for the
period 17,000
------------ ------------- --------------- -------- ------------- ----------
Segment assets at 31
December 2013
Non-current assets
Capital expenditure* 232,674 204,934 537,652 520 - 975,780
Goodwill 22,253 5,134 69,937 - - 97,324
Other non-current
assets 25,814 198 2,217 492 - 28,721
Current assets** 114,928 29,552 16,748 57,882 (28,179) 190,931
Total assets 1,292,756
==========
Capital expenditure
- addition during
the first half
of 2013***, including: 83,934 3,501 36,589 47 - 124,071
------------ ------------- --------------- -------- ------------- ----------
Stripping activity
assets 7,535 - - - - 7,535
Capitalised interest 234 - 2,672 - - 2,906
Non-cash capital
expenditure**** 36,836 - 8,865 - - 45,701
Cash capital expenditure 39,329 3,501 25,052 47 - 67,929
* Capital expenditure is the sum of exploration and evaluation assets, mine properties and property, plant and equipment.
** Current assets at 31 December 2013 include corporate cash and cash equivalents of US$7.9 million, investments of US$50.2 million, inventories of US$70.7 million, trade and other receivables of US$53.1 million and other assets of US$9.0 million. Eliminations relate to intercompany accounts receivable.
*** Capital expenditure for the first half of 2013 includes additions to property, plant and equipment of US$101.7 million (Note 8), capitalised interest of US$2.9 million (Note 8) and prepayments previously made for property, plant and equipment of US$19.5 million.
**** Non-cash capital expenditure includes reclassification of prepayments to property, plant and equipment of US$30.5 million, unpaid accounts payable of US$12.4 million and inventories of US$2.8 million sold to contractor.
All assets for both 2014 and 2013 are located in the Russian Federation and in the Kyrgyz Republic.
5. Other operating expenses
For the six
months ended
30 June
----------------
2014 2013
US$000 US$000
------- -------
Movement in ore stockpiles obsolescence
provision (Note 12) 664 2,146
Mine properties and property,
plant and equipment write-off 152 1,072
Donations to local communities 868 1,450
Property tax and tax penalties 1,267 -
Loss on disposal of property,
plant and equipment 304 -
Loss on disposal of inventory 303 -
Other operating expenses 568 636
Total other operating expenses 4,126 5,304
======= =======
6. Finance income and costs
6.1 Finance income
For the six
months ended
30 June
----------------
2014 2013
US$000 US$000
------- -------
Bonds and shares fair value movement
(Note 10) 6,161 371
Bank interest 62 198
Other 6 -
Total finance income 6,229 569
======= =======
6.2 Finance costs
For the six
months ended
30 June
----------------
2014 2013
US$000 US$000
------- -------
Accretion expense on site restoration
provision 1,142 313
Interest expense on bank loans 441 -
Unwinding of contingent consideration
liability - 93
Other - 54
Total finance costs 1,583 460
======= =======
7. Income tax
The major components of income tax expense in the interim consolidated statement of comprehensive income are:
For the six
months ended
30 June
-----------------
2014 2013
US$000 US$000
-------- -------
Current income tax
Current income tax charge 10,024 13,606
Adjustments in respect of prior
year current/deferred tax 1,114 -
Deferred income tax
Relating to origination of temporary
differences (2,004) 2,635
Income tax expense 9,134 16,241
======== =======
There are no tax amounts recognised directly in equity during the first half of 2014 (H1 2013: Nil).
Tax for the six months ended 30 June 2014 is charged at 31.0% (H1 2013: 48.9%), representing the best estimate of the average annual effective tax rate expected for the full year, applied to the pre-tax income of the six months period.
The actual tax expense differs from the amount which would have been determined by applying the statutory rate of 20% for the Russian Federation to profit before income tax as a result of the application of relevant jurisdictional tax regulations, which disallow certain deductions which are included in the determination of accounting profit. Among others these deductions include foreign exchange losses recognised in IFRS.
8. Mine properties, exploration and evaluation assets, and property, plant and equipment
Reconciliation of fixed assets on period-by-period basis for the period ending 30 June 2014
Mining Exploration Freehold Plant Construction Stripping Total
assets and building and in progress activity
evaluation equipment assets
assets
US$000 US$000 US$000 US$000 US$000 US$000 US$000
-------- ------------ ---------- ----------- ------------- ---------- ----------
Cost
At 1 January
2014 443,270 270,287 99,736 154,777 197,608 28,701 1,194,379
-------- ------------ ---------- ----------- ------------- ---------- ----------
Additions 6,968 6,767 - 722 20,060 2,189 36,706
Transfers 1,267 261 66,725 62,969 (133,160) - (1,938)
Write-off* - - - (1,856) (48) - (1,904)
Disposals - - (94) (777) (257) - (1,128)
Capitalised
depreciation 739 5,583 - - 3,864 706 10,892
Capitalised
interest 1,379 4,439 - - - - 5,818
Change in
estimation
- site restoration
asset** (595) - - - - - (595)
-------- ------------ ---------- ----------- ------------- ---------- ----------
At 30 June
2014 453,028 287,337 166,367 215,835 88,067 31,596 1,242,230
-------- ------------ ---------- ----------- ------------- ---------- ----------
Depreciation
and impairment
At 1 January
2014 110,516 - 25,171 59,391 73 23,448 218,599
-------- ------------ ---------- ----------- ------------- ---------- ----------
Provided
during the
period 10,865 - 5,505 8,907 - 1,788 27,065
Transfers (1,097) - (269) (572) - - (1,938)
Write-off* - - - (1,752) - - (1,752)
Disposals - - (8) (351) - - (359)
Capitalised
depreciation 611 - 5,802 4,170 - 309 10,892
Capitalised
to inventory - - - 513 - - 513
Other adjustments - - - - 1 - 1
-------- ------------ ---------- ----------- ------------- ---------- ----------
At 30 June
2014 120,895 - 36,201 70,306 74 25,545 253,021
-------- ------------ ---------- ----------- ------------- ---------- ----------
Net book
value:
-------- ------------ ---------- ----------- ------------- ---------- ----------
At 1 January
2014 332,754 270,287 74,565 95,386 197,535 5,253 975,780
-------- ------------ ---------- ----------- ------------- ---------- ----------
At 30 June
2014 332,133 287,337 130,166 145,529 87,993 6,051 989,209
======== ============ ========== =========== ============= ========== ==========
* In the first half of 2014 US$0.2 million (H1 2013: US$1.0 million) write-off relates to retirement of old inefficient equipment.
** During the first half of 2014 there was a change in the rehabilitation estimate associated with the change in volumes of expected site restoration activities, discount and inflation rates. The net present value of the decrease in the cost estimate is US$0.6 million (decrease of US$0.4 million at MNV, decrease of US$1.0 million at Novo, increase of US$0.5 million at BG, increase of US$0.1 million at Klen and increase of US$0.2 million at Kekura) which was booked as a decrease to mining assets and non-current provisions.
Mine properties in the interim consolidated statement of financial position comprise mining assets and stripping activity assets.
Property, plant and equipment in the interim consolidated statement of financial position comprise freehold building, plant and equipment and construction in progress.
Reconciliation of fixed assets on period-by-period basis for the period ending 30 June 2013
Mining Exploration Freehold Plant Construction Stripping Total
assets and building and in progress activity
evaluation equipment assets
assets
US$000 US$000 US$000 US$000 US$000 US$000 US$000
-------- ------------ ---------- ----------- ------------- ---------- ----------
Cost
At 1 January
2013 447,077 72,903 49,075 113,890 45,584 16,875 745,404
-------- ------------ ---------- ----------- ------------- ---------- ----------
Additions 16,566 1,254 - 1 76,347 7,535 101,703
Transfers 473 - 1,772 13,980 (16,225) - -
Write-off* (16) - - (3,057) (45) - (3,118)
Disposals - - - (399) - - (399)
Capitalised
depreciation 2,573 7 - - 285 - 2,865
Capitalised
interest 234 2,672 - - - - 2,906
Change in
estimation
- site restoration
asset (3,888) - - - - - (3,888)
Kekura acquisition 161,357 - 38,273 14,569 26,914 - 241,113
-------- ------------ ---------- ----------- ------------- ---------- ----------
At 30 June
2013 624,376 76,836 89,120 138,984 132,860 24,410 1,086,586
-------- ------------ ---------- ----------- ------------- ---------- ----------
Depreciation
and impairment
At 1 January
2013 91,869 - 8,605 41,198 - 12,890 154,562
-------- ------------ ---------- ----------- ------------- ---------- ----------
Provided during
the period 13,062 - 2,262 7,148 - 3,132 25,604
Write-off* (14) - - (2,032) - - (2,046)
Disposals - - - (23) - - (23)
Capitalised
depreciation 43 - 818 2,004 - - 2,865
Capitalised
to inventory - - - 308 - - 308
-------- ------------ ---------- ----------- ------------- ---------- ----------
At 30 June
2013 104,960 - 11,685 48,603 - 16,022 181,270
-------- ------------ ---------- ----------- ------------- ---------- ----------
Net book value:
-------- ------------ ---------- ----------- ------------- ---------- ----------
At 1 January
2013 355,208 72,903 40,470 72,692 45,584 3,985 590,842
-------- ------------ ---------- ----------- ------------- ---------- ----------
At 30 June
2013 519,416 76,836 77,435 90,381 132,860 8,388 905,316
======== ============ ========== =========== ============= ========== ==========
9. Other non-current assets
30 June 31 December 30 June
2014 2013 2013
unaudited audited unaudited
US$000 US$000 US$000
----------- ------------ -----------
Non-current prepayments* 6,159 11,354 34,715
Non-current portion of accounts
receivable* 1,184 1,447 -
Other non-current assets 804 471 2,383
----------- ------------ -----------
8,147 13,272 37,098
=========== ============ ===========
* The portion of prepayments and accounts receivable that will be realised in a period greater than 12 months from the reporting date is classified as non-current assets. Non-current prepayments include advances given to suppliers for equipment and construction works. Non-current accounts receivable relate to the disposal of an entity.
10. Financial assets and liabilities
Fair values
Set out below is a comparison by category of carrying amounts and fair values of all of the Group's financial instruments.
Carrying amount Fair value
-------------------------------------- --------------------------------------
30 June 31 December 30 June 30 June 31 December 30 June
2014 2013 2013 2014 2013 2013
unaudited audited unaudited unaudited audited unaudited
US$000 US$000 US$000 US$000 US$000 US$000
----------- ------------ ----------- ----------- ------------ -----------
Financial
assets
Cash and
cash equivalents 9,755 7,938 2,736 9,755 7,938 2,736
Financial
instruments
at fair value
through profit
or loss (coupon
bonds) 55,049 50,199 44,108 55,049 50,199 44,108
Trade and
other receivables 5,967 5,945 3,553 5,798 5,708 3,553
Trade receivables
(including
embedded
derivative) 10,839 9,798 3,804 10,839 9,798 3,804
Financial
liabilities
Interest-bearing
loans and
borrowings 304,421 309,782 224,448 304,046 309,324 224,448
Trade and
other payables 33,192 30,743 38,661 33,192 30,743 38,661
Contingent
consideration - 10,504 24,913 - 10,504 24,913
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:
-- Cash and short-term deposits, trade and other receivables, trade payables and other current liabilities approximate their carrying amounts largely due to the short-term maturities of the instruments.
-- Fixed-rate interest-bearing loans and borrowings are evaluated based on current market interest rates.
-- The fair value of the derivative is based on quoted market prices
Coupon bonds and shares
During the first half of 2013 the Group received US$3.6 million as a result of selling the shares and US$5.3 million as a result of selling some bonds purchased in 2009. There were no sales of coupon bonds and shares during the first half of 2014.
The bonds and shares are treated as financial assets at fair value through profit or loss. Fair value of those bonds and shares was determined based on quoted bid prices (source: Bloomberg).
The table below contains bonds and shares fair value movement.
30 June 31 December 30 June
2014 2013 2013
unaudited audited unaudited
US$000 US$000 US$000
---------- ------------ ----------
Fair value of bonds and
shares at the beginning
of the period 50,199 54,095 54,095
Fair value gain 2,441 4,178 1,210
Foreign exchange gain/
(loss) 1,637 1,104 (2,760)
Coupon interest income
accrued 2,083 3,894 1,921
Bonds and shares fair value
movement 6,161 9,176 371
========== ============ ==========
Coupon interest income
received (1,311) (4,176) (1,461)
Bonds sold - (5,252) (5,253)
Shares sold - (3,644) (3,644)
---------- ------------ ----------
Fair value of bonds and
shares at the end of the
period 55,049 50,199 44,108
========== ============ ==========
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
Assets measured at fair 30 June Level Level
value 2014 1 2
US$000 US$000 US$000
-------- ------- -------
Coupon bonds and shares 55,049 55,049 -
Trade receivables (embedded
derivative) 375 - 375
31 Dec Level Level
2013 1 2
US$000 US$000 US$000
-------- ------- -------
Coupon bonds and shares 50,199 50,199 -
Trade receivables (embedded
derivative) 204 - 204
30 June Level Level
2013 1 2
US$000 US$000 US$000
-------- ------- -------
Coupon bonds and shares 44,108 44,108 -
Trade receivables (embedded
derivative) (810) - (810)
Liabilities measured at amortised 30 June Level
cost 2014 3
US$000 US$000
-------- --------
Interest-bearing loans and borrowings 304,046 304,046
31 Dec Level
2013 3
US$000 US$000
-------- --------
Interest-bearing loans and borrowings 309,324 309,324
30 June Level
2013 3
US$000 US$000
-------- --------
Interest-bearing loans and borrowings 224,448 224,448
There have been no transfers between fair value levels during the reporting period.
11. Commitments and contingencies
Capital commitments
At 30 June 2014, the Group had commitments of US$21.9 million (at 31 December 2013: US$21.8 million, at 30 June 2013: US$46.7 million) principally relating to development assets and US$5.1 million (at 31 December 2013: US$1.0 million, at 30 June 2013: US$4.1 million) for the acquisition of new machinery.
Contingent liabilities
Management has identified no possible tax claims within the various jurisdictions in which the Group operates at 30 June 2014 (at 31 December 2013: US$1.3 million, at 30 June 2013: US$1.4 million).
12. Inventories
30 June 31 December 30 June
2014 2013 2013
Non-current* unaudited audited unaudited
US$000 US$000 US$000
----------- ------------ -----------
Ore stockpiles 20,212 18,569 13,536
----------- ------------ -----------
20,212 18,569 13,536
Ore stockpile obsolescence
provision (4,610) (3,946) (3,706)
----------- ------------ -----------
Total inventories 15,602 14,623 9,830
=========== ============ ===========
* The portion of the ore stockpiles that is to be processed in more than 12 months from the reporting date is classified as non-current inventory.
Stockpiled low-grade ore at BG is tested for impairment semi-annually. Movement in ore stockpile obsolescence provision amounted to US$0.7 million in the first half of 2014 (H1 2013: US$2.1 million).
30 June 31 December 30 June
2014 2013 2013
unaudited audited unaudited
Current US$000 US$000 US$000
----------- ------------ -----------
Raw materials and consumables 53,353 58,441 47,300
Ore stockpiles 10,100 15,424 9,038
Gold in progress 8,646 6,799 5,183
Finished goods 89 173 301
----------- ------------ -----------
72,188 80,837 61,822
Raw materials and consumables
obsolescence provision (10,124) (10,159) (10,158)
----------- ------------ -----------
Total inventories 62,064 70,678 51,664
=========== ============ ===========
Movement in raw materials and consumables obsolescence provision amounted to US$0.04 million in the first half of 2014 (H1 2013: no movement).
No inventory has been pledged as security.
13. Cash and cash equivalents
Cash at bank earns interest at fixed rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and several days depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. The deposits are placed with the banks with credit rating BBB/A-2 (Standard & Poor's) or higher. The fair value of cash and cash equivalents is equal to the carrying value.
For the purpose of the interim consolidated cash flow statement, cash and cash equivalents comprise the following:
30 June 31 December 30 June
2014 2013 2013
unaudited audited unaudited
US$000 US$000 US$000
----------- ------------ -----------
Cash in hand and at bank 9,737 5,979 2,736
Short term deposits 18 1,959 -
----------- ------------ -----------
9,755 7,938 2,736
=========== ============ ===========
14. Interest-bearing loans and borrowings
30 June 31 December 30 June
Effective 2014 2013 2013
interest rate unaudited audited unaudited
% Maturity US$000 US$000 US$000
----------------- ---------- ----------- ------------ -----------
Current
Gazprombank 5.6, 5.0 from March
loan* 30 April 2013 2014 - 6,875 3,750
5.17, 5.0
from 30 April
2013, 4.0
Gazprombank from 28 October March
loan** 2013 2016 88,714 88,714 51,750
Gazprombank
loan*** 3.9 May 2015 24,600 - -
Gazprombank
loan**** 5.0 May 2016 19,111 15,926 -
Sberbank September
loan***** 4.2 2016 37,500 12,500 -
169,925 124,015 55,500
=========== ============ ===========
Non-current
Gazprombank 5.6, 5.0 from March
loan* 30 April 2013 2014 - - 5,000
5.17, 5.0
from 30 April
2013, 4.0
Gazprombank from 28 October March
loan** 2013 2016 66,536 110,893 155,250
Gazprombank
loan**** 5.0 May 2016 17,519 27,074 -
Sberbank September
loan***** 4.2 2016 50,066 47,342 -
UniCreditBank LIBOR 1m + November
loan 3.7 2014 - - 8,698
134,121 185,309 168,948
=========== ============ ===========
Total 304,046 309,324 224,448
=========== ============ ===========
* In October 2012 the Group raised financing with Gazprombank at a 5.6% interest rate with the draw period set till 23 January 2013. In April 2013 the rate was changed to 5.0%. The loan was repaid in March 2014.
** In March 2013 the Group raised financing with Gazprombank at a 5.17% interest rate with the draw period set till 21 June 2013. In April 2013 the rate was changed to 5.0%. In October 2013 the rate was changed to 4.0%. The loan is repayable in monthly instalments between December 2013 and March 2016. The loan is secured by future gold sales at market prices at the time of sale. The outstanding amount of funds obtained under the agreement at 30 June 2014 is US$155.2 million. The outstanding bank debt is subject to the following covenant: the ratio of total debt to EBITDA should be equal to or lower than 4.0.
*** In March 2014 the Group raised a revolving facility with Gazprombank with the draw period set till 31 March 2016. The interest rate is set for every instalment separately, with the maximum of 4.0%. Each instalment is repayable in one year with the final repayment in March 2017. The loan is secured by future gold sales at market prices at the time of sale. The outstanding amount of funds obtained under the agreement at 30 June 2014 is US$24.6 million. The outstanding bank debt is subject to the following covenant: the ratio of total debt to EBITDA should be equal to or lower than 4.0.
**** In June 2013 the Group raised financing with Gazprombank at a 5.0% interest rate with the draw period set till 20 October 2013. The loan is repayable in monthly instalments between March 2014 and May 2016. The loan is secured by future gold sales at market prices at the time of sale. The outstanding amount of funds obtained under the agreement at 30 June 2014 is US$36.6 million. The outstanding bank debt is subject to the following covenant: the ratio of total debt to EBITDA should be equal to or lower than 4.0.
***** In September 2013 the Group raised financing with Sberbank at a 4.2% interest rate with the draw period set till 2 September 2016. The loan is repayable in instalments between December 2014 and September 2016. The outstanding amount of funds obtained under the agreement at 30 June 2014 is US$87.6 million. The outstanding bank debt is subject to the following covenant: the ratio of net debt to EBITDA should be equal to or lower than 4.0.
The total outstanding bank debt of the Group at 30 June 2014 is US$304.0 million.
15. Share Capital
30 June 31 December 30 June
Authorised 2014 2013 2013
------------------------ ------------ ------------ ------------
Shares Shares Shares
Ordinary shares of
GBP0.001 each 750,000,000 750,000,000 750,000,000
------------ ------------ ------------
Ordinary shares issued Amount
and fully paid Shares US$000
------------------------ ------------ ------------ ------------
At 30 June 2014 325,222,098 585
At 31 December 2013 325,222,098 585
At 30 June 2013 325,222,098 585
16. Share-based payments
Options for 25,000 shares were forfeited during the first half of 2014 because of the retirement of certain participants. No share options have been exercised.
17. Related party transactions
There were no transactions between the Group and related parties within the period.
18. Earnings per share
Basic earnings per share amounts are calculated by dividing profit for the period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period.
Diluted earnings per share amounts are calculated by dividing the profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on the exercise of share options into ordinary shares.
The following reflects the income and share data used in the basic and diluted earnings per share computations:
For the six months
ended 30 June
----------------------
2014 2013
US$000 US$000
Net profit attributable to
ordinary equity holders of
the parent 20,161 16,962
Thousands Thousands
Weighted average number of
ordinary shares for basic earnings
per share 325,222 325,222
---------- ----------
Weighted average number of
ordinary shares adjusted for
the effect of dilution 325,222 325,222
========== ==========
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements.
19. Impairment of goodwill and non-current assets
In accordance with the Group's accounting policy, goodwill is tested for impairment annually and when circumstances indicate the carrying value may be impaired.
When there is an indicator of impairment of non-current assets within a cash-generating unit (CGU) or a group of CGUs containing goodwill, non-current assets are tested for impairment first at each CGU and any impairment loss on the non-current assets is recognised before testing the groups of CGUs for a potential goodwill impairment. Impairment is recognised when the carrying amount exceeds the recoverable amount.
Non-current assets are tested for impairment when events or changes in circumstances suggest that the carrying amount may not be recoverable. The assessment is done at the CGU level, which is the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets.
Having considered information from both external and internal sources, management determined there were no potential indicators of impairment in the first half of 2014.
In the first half of 2014, no goodwill impairment charge was recorded (H1 2013: Nil) and no impairment charge in respect of non-current assets was recognised (H1 2013: Nil).
20. Events after the reporting period
The Board has approved an interim dividend of GBP0.025 per share (H1 2013: GBP0.025 per share). The interim dividend will be paid on 24 October 2014 to shareholders on the register at the close of business on 3 October 2014. The ex dividend date will be 1 October 2014.
In September 2014 the Group signed a revolving credit agreement with UniCreditBank for a US$50.0 million facility with the draw period set till March 2016. This facility will be drawn down in case of cash deficit if gold price declines rapidly and will be used to finance development and operating activities within the Group.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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