Highland Gold Mining Limited Q1 2019 Operating Results (0598X)

TIDMHGM

RNS Number : 0598X

Highland Gold Mining Limited

25 April 2019

HIGHLAND GOLD MINING LIMITED

25 April 2019

Q1 2019 Operating Results

Highland Gold Mining Limited ("Highland Gold" or the "Company", AIM: HGM) today reports its operating results for the three months ended 31 March 2019 ("Q1 2019").

HIGHLIGHTS

-- Highland Gold produced a total of 71,961 oz of gold and gold equivalent in Q1 2019, an increase of 21% from 59,311 oz in Q1 2018.

-- Mnogovershinnoye (MNV) saw a 58% increase in production compared to Q1 2018, when its processing plant was operating at reduced capacity.

   --     Production at Belaya Gora rose 31% year-on-year due to higher volumes and better recoveries. 

-- Lower grades and recoveries at Novoshirokinskoye (Novo) resulted in a 28% decline in production versus Q1 2018, but was 3% higher than in the preceding quarter (Q4 2018).

-- The production total includes the Valunisty mine, acquired by the Company last December. Excluding Valunisty, Q1 2019 production rose 9% year-on-year.

   --     The average realised gold price during the quarter was US$ 1,307 per ounce. 
   --     The Company affirms its forecast for total production of gold and gold equivalent in 2019 of 290,000-300,000 oz. 

-- Highland Gold regrets to report that, during the quarter, two employees at Novo and one at Belaya Gora died while on assignment. The Company offers sincerest condolences to the families of the deceased and has conducted thorough investigations of these incidents.

FOR FURTHER INFORMATION PLEASE CONTACT:

 
 Highland Gold Mining Ltd.       John Mann, Head of Communications 
                                  + 7 495 424 95 21 
                                  Duncan Baxter, Non-Executive Director 
                                  + 44 (0) 1534 814 202 
 Numis Securities Limited        John Prior, James Black, Paul Gillam 
  (Nominated Adviser and Joint    [phone] 
  Broker) 
 BMO Capital Markets Limited     Jeffrey Couch, Tom Rider, Pascal Lussier 
  (Joint Broker)                  Duquette 
                                  [phone] 
 Peat & Co                       Charlie Peat 
  (Joint Broker)                  [phone] 
 

KHABAROVSK REGION, RUSSIA

Mnogovershinnoye (MNV)

   --     Q1 2019 processing throughput rose 36% year-on-year as the mill operated at full capacity. 
   --     The head grade at the mill rose 14% to 3.18 g/t thanks to higher-grade ore from underground. 

-- The temporary closure of one of the underground mine's entrances following avalanches in the area late last December had a negligible effect on underground mining volume.

 
 MNV                        Units    Q1 2018    Q1 2019 
                           ------- 
 Waste stripping              t      780,915   1,193,985 
                           -------  --------  ---------- 
 Underground development      m        2,930       2,483 
                           -------  --------  ---------- 
 Open-pit ore mined           t       37,079      88,692 
                           -------  --------  ---------- 
 Open-pit ore grade          g/t        2.18        2.34 
                           -------  --------  ---------- 
 Underground ore mined        t      198,465     191,344 
                           -------  --------  ---------- 
 Underground ore grade       g/t        2.90        4.18 
                           -------  --------  ---------- 
 Waste dumps ore mined        t            -      55,802 
                           -------  --------  ---------- 
 Waste dumps ore grade       g/t           -        1.11 
                           -------  --------  ---------- 
 Total ore mined              t      235,544     335,838 
                           -------  --------  ---------- 
 Average grade               g/t        2.78        3.18 
                           -------  --------  ---------- 
 Ore processed                t      249,544     339,872 
                           -------  --------  ---------- 
 Average grade               g/t        2.74        3.18 
                           -------  --------  ---------- 
 Recovery rate                %         92.2        91.9 
                           -------  --------  ---------- 
 Gold produced                oz      19,359      30,589 
                           -------  --------  ---------- 
 

In January 2019, regulatory agency Rosnedra approved updated mining plans for MNV based on new ore reserve estimates completed over the course of the previous year. Also in Q1 2019, the Company received a positive ruling from the state geological expert panel Rosgeolexpertiza on its geological exploration programme for the flanks of MNV's ore bodies and for the deeper horizons of the deposit.

Near-mine exploration efforts at MNV in Q1 2019 focused on preparing an exploration programme for the Vilkinskaya zone, a new adjacent greenfield licence acquired in 2018. The Company expects to submit the plan for expert review in Q2 2019.

Belaya Gora

-- Q1 2019 waste stripping rose by 34% and ore mining increased by 43% versus the same period last year as Belaya Gora reduced the volume of ore from stockpiles taken for processing.

-- Ore processing rose 31% year-on-year as Belaya Gora resolved seasonal problems with water supply that reduced capacity in Q1 2018.

   --    Recoveries rose nearly 2% year-on-year to just over 76% 
 
 Belaya Gora                     Units     Q1 2018     Q1 2019 
                                ------- 
 Waste stripping                   t      1,221,192   1,634,656 
                                -------  ----------  ---------- 
 Ore mined                         t        493,799     705,429 
                                -------  ----------  ---------- 
 Average grade                    g/t          0.80        0.91 
                                -------  ----------  ---------- 
 including: 
                                -------  ----------  ---------- 
 
      *    Ore Au >0.7 g/t         t        233 818     463,901 
                                -------  ----------  ---------- 
 
      *    Average grade          g/t          1.16        1.13 
                                -------  ----------  ---------- 
 
      *    Ore Au 0.3-0.7 g/t      t        259 981     241,527 
                                -------  ----------  ---------- 
 
      *    Average grade          g/t          0.48        0.49 
                                -------  ----------  ---------- 
 Ore processed                     t        320,566     432,801 
                                -------  ----------  ---------- 
 Average grade                    g/t          1.12        1.15 
                                -------  ----------  ---------- 
 Recovery rate                     %           74.7        76.0 
                                -------  ----------  ---------- 
 Gold produced                     oz         8,977      11,775 
                                -------  ----------  ---------- 
 

Following on from last year's exploration drilling at the Kolchansky and Zayachy prospects on the Belaya Gora Flanks licence, the Company worked on a report of estimated reserves for the deposits over the course of Q1 2019. The work continues and is expected to be completed in the third quarter of this year.

Last year, the Company published details of a pre-feasibility study (PFS) covering planned upgrades to the Belaya Gora processing plant designed to improve recoveries to around 90% through the addition of cyanidation capacity. Several steps toward implementing the project were taken in Q1 2019, including:

   --     Kazgiprotsvetmet and SGA Bateman worked on the technical designs for the plant upgrade; 

-- The TOMS Institute produced updated technical regulations for processing Belaya Gora ore; and

   --     A tender was organised for equipment suppliers. 

Blagodatnoye

As per the pre-feasibility study published by Highland Gold last year, the Blagodatnoye deposit is being targeted to supply additional ore to the Belaya Gora processing plant later in the life of the project.

The Company received confirmation early this year that Blagodatnoye's reserves had been registered with regulators as of the end of December. In Q1 2019, the Company began organising a tender to choose a contractor for mine design.

ZABAIKALSKY REGION, RUSSIA

Novoshirokinskoye (Novo)

-- Ore mining at Novo was largely unchanged year-on-year while processing volume increased incrementally, by 3.7%.

-- Average head grade at the mill fell by 28% compared to Q1 2018, although up slightly from 4.07 g/t in Q4 2018.

 
 Novo                       Units    Q1 2018   Q1 2019 
                           ------- 
 Underground development      m        3,034     2,677 
                           -------  --------  -------- 
 Ore mined                    t      223,057   220,098 
                           -------  --------  -------- 
 Average grade*              g/t        5.51      3.98 
                           -------  --------  -------- 
 Ore processed                t      204,732   212,358 
                           -------  --------  -------- 
 Average grade*              g/t        5.80      4.18 
                           -------  --------  -------- 
 Recovery rate*               %         81.2      78.1 
                           -------  --------  -------- 
 Gold produced (100%)*        oz      30,975    22,289 
-------------------------  -------  --------  -------- 
 
   *    In gold equivalent at actual prices 

(Metal grade of mined ore = Au 2.33 g/t, Ag 44.39 g/t, Pb 0.91%, Zn 0.45%, 0.27% Cu).

The Novo 1.3 Mtpa expansion project, which is designed to address the expected fall in grades at the mine, continued in Q1 2019.

Construction during the period focused on the water pumping station at the +637 m level. Contractors are being selected to complete other portions of Stage 1 of the project, which covers expansion of the mine. Work on project documentation for Stage 2 (mill capacity expansion) is ongoing.

Baley Ore Cluster (Taseevskoye, Sredny Golgotay and ZIF-1)

In Q1 2019, the Company continued project design work on a heap leach facility for its Baley ZIF-1 tailings licence, with a projected annual processing capacity of 840k tonnes. A range of geological, environmental, archaeological, and other studies was conducted over the course of 2018, and design documentation was approved by regional mining and environmental regulators in the latter part of the year. The project has now been submitted for review by the State Expert Panel.

At Sredny Golgotay, Wardell Armstrong (WAI-RU) continued work on a trade-off study (Scoping Study level) to aid in considering options for developing the deposit. A preliminary report has been submitted and is currently undergoing review and revision with a view towards completion in Q2 2019.

Meanwhile, Zabaikalzolotoproekt has been retained to work on amendments to the technical project for Sredny Golgotay, with plans for submission to regional mining regulators in Q3 2019.

CHUKOTKA AUTONOMOUS DISTRICT, RUSSIA

In December 2018, a commission of the Ministry for Development of the Russian Far East approved a proposal to expand the Beringovsky Advanced Special Economic Zone (ASEZ), which previously covered only the south-eastern part of Chukotka, to include other parts of the region where Highland Gold's Kekura and Klen licences are located. The Chukotka ASEZ, as it is now known, was approved by the Russian prime minister on January 10, 2019.

The Company learned in Q1 2019 that Kekura and Klen have been included in the list of projects eligible to become 'residents' of the ASEZ, which could provide certain tax breaks and other incentives.

Valunisty

   --     Ore mining and processing rose by 23% and 48% year-on-year, respectively. 

-- Waste stripping fell 28% due to a shortage of machinery for technical reasons as well as severe inclement weather conditions.

-- As expected, head grade at the mill fell by more than half versus Q1 2018, when the processing plant treated higher-grade ore from the Gorny mine on the neighbouring KAS licence. Some mining at Gorny is planned for later this year.

 
 Valunisty          Units     Q1 2018     Q1 2019 
                   ------- 
 Waste stripping      t      1,427,090   1,025,585 
                   -------  ----------  ---------- 
 Ore mined            t         35,025      43,095 
                   -------  ----------  ---------- 
 Average grade*      g/t          4.49        3.07 
                   -------  ----------  ---------- 
 Ore processed        t         42,376      62,608 
                   -------  ----------  ---------- 
 Average grade*      g/t          8.62        3.98 
                   -------  ----------  ---------- 
 Recovery rate        %           96.7        95.0 
                   -------  ----------  ---------- 
 Gold produced*       oz        11,177       7,308 
                   -------  ----------  ---------- 
 
   *    In gold equivalent at actual prices (incl. Ag) 

Q1 2018 data offered solely for comparison

Exploration work at Valunisty and KAS in Q1 2019 focused on the lower horizons and the flanks of the main deposit. Just over 1,300 metres were drilled over 7 holes on the southern part of Novaya zone as follow-up exploration for ore bodies 13 and 17; 2,828 metres of core were logged; 1,153 core samples were extracted (1,023.5 metres); 59 check samples were extracted (51.4 metres); and 942 assay test results were received from the mine's laboratory.

In parallel, the Company is preparing updated Russian-standard reserve estimates for the Valunisty and Gorny deposits for submission to regulators based on drilling results from 2014-2018. Design documentation is also being drafted for an exploration programme at the Zhilny ore cluster on the KAS licence. The Zhilny programme is scheduled for submission to regulators for approval later this month with a view towards commencing drilling in Q3 2019.

Also during the period, engineering studies and project design work continued on the proposed expansion of Valunisty's processing plant capacity from 250k tonnes to 350k tonnes of ore per annum, and for the beginning of underground mining at the site. Laboratory testing of X-Ray separation began during the quarter and is now nearing the completion stage; technical inspections of the existing processing plant's buildings, structures and foundations were completed; and general mining plans were developed covering stripping methods and estimates for mining complexes.

Kekura

Preparations for the next two phases of construction at Kekura continued throughout Q1 2019, including engineering studies, technical audits, site surveys, design work, tenders for contractors, and the preparation and submission of various types of documentation for regulatory approval.

Construction work continued on some first-phase facilities, such as the assay laboratory, fuel storage facility, and communications tower. Start-up and adjustment work was carried out on the power substation, which is expected to be connected to the regional power network later this year.

Technical assignments were prepared for a range of engineering studies in preparation for the next phase of construction, including geodesic, geological, hydrometeorological and environmental. State geological experts approved a programme for hydrogeological work aimed at exploring underground water reserves in the area of the Khrebtovaya river as a source of water supply.

Materials and equipment that were shipped to the port of Pevek during the 2018 sea navigation season were delivered by winter roads to the site over the course of the quarter.

On the exploration front, about 1,300 metres of drilling on the Zapadny prospect on the broader Kekura licence is to be completed this spring, while cores have been sent out for laboratory analysis. Preliminary desktop studies of existing data show a steeply dipping vein and veinlet impregnated zone with intervals reaching 3-5 metres at 5-6 g/t, potentially providing additional resources for the Kekura project.

A re-estimation and booking with regulators of Kekura's Russian-standard reserves is in progress, taking into account 2016-2017 drilling results. Submission of materials for state expert review is scheduled for this spring.

Klen

The development of design documentation for Klen was put on hold pending further exploration and the finalisation of the project's inclusion in the Chukotka ASEZ, which will have a significant effect on the project's economics.

In the meantime, the Company conducted laboratory tests using X-ray ore separation technology on ore from Klen. The XRT test results demonstrated the potential to reject on the order of 30% of plant feed material without significant metal losses. The tests were performed on a Steinert separator, and duplicate bulk samples have now been sent for verification testing on a Tomra separator.

In March, exploration drilling commenced on the northern flank of the Klen deposit. As of the end of Q1 2019, 1,784 metres were drilled and 878 samples were extracted. All of the samples were shipped to Kekura for sample preparation and X-ray spectroscopic analysis, and intervals with gold bearing potential were identified during the core logging. Core samples were extracted and assay results are expected in due course. A total of 11,000 metres of drilling is planned on Klen's flanks and on the surrounding Verkhne-Krichalskaya license area this year.

HEALTH, SAFETY AND ENVIRONMENT

Highland Gold's key health and safety goals include ensuring safe labour conditions, managing operational risks, offering ongoing employee training programmes and encouraging personal accountability for safety at the workplace.

In Q1 2019, the Lost Time Incident Frequency Rate (LTIFR), calculated as the number of incidents for every 1,000,000 man-hours, was 3.6 compared to 5.5 in Q1 2018. Six lost-time incidents were registered during the period - five at Novo and one at Belaya Gora - versus nine during the same period last year (three at MNV and Belaya Gora, five at Novo and one at the Moscow office).

Among the incidents registered in Q1 2019 were three fatalities. On 25 January 2019, two employees at Novo were found unresponsive in the underground mine as a result of gas poisoning. On 21 February 2019, a repairman was found unresponsive in his workshop at Belaya Gora, the apparent victim of an ischemic stroke. Extensive investigations of both incidents were carried out and the Company is taking concrete steps to prevent repeats of these unfortunate incidents.

Training sessions conducted in Q1 2019 included a "Conscious Safety Management" course for 6 people in the Moscow office and 32 at Valunisty. An "Internal Incident Investigation" course was completed by 15 people from Valunisty. At MNV and Belaya Gora, 40 drivers attended a course on "Defensive Driving", while 16 people from Valunisty received training on "Risk Assessment". A total of 222 employees at Novo and 280 from MNV and Belaya Gora attended courses on "Conscious Safety Attitude".

Over the course of 2018, the Company's health & safety team developed and introduced new corporate standards covering a range of safe workplace issues. In Q1 2019, they added to that list new standards for risk assessment and incident damage assessment. These are currently being rolled out across the Company's operations.

The Board of Directors' HSE Committee and the management-level HSE Committee both held meetings during the first quarter. At the latter, targets for the year and plans for achieving them were approved.

The Company's auxiliary mine rescue teams are being kept on alert at each of its operations with a view to ensuring their preparedness to participate in resolving emergency situations.

Highland Gold continues to adhere to its stated policy of protecting the environment and operating in accordance with all relevant regulatory requirements. An environmental monitoring system is in place at each of the Company's operations, and reducing the impact of its operations on the environment remains one of the Company's key priorities.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [e-mail] or visit www.rns.com.

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April 25, 2019 02:01 ET (06:01 GMT)