TIDMHGM
RNS Number : 7808V
Highland Gold Mining Limited
26 July 2018
HIGHLAND GOLD MINING LIMITED
Q2 2018 Operating Results
26 July 2018
Highland Gold Mining Limited ("Highland Gold" or the "Company",
AIM: HGM) today reports its operating results for the three months
ended 30 June 2018 ("Q2 2018").
HIGHLIGHTS
-- Production at Mnogovershinnoye (MNV), Novoshirokinskoye
(Novo) and Belaya Gora in Q2 2018 totalled 69,610 oz of gold and
gold equivalent, an increase of 4.6% from 66,542 oz in Q2 2017 and
an increase of 17.4% from 59,311 oz in Q1 2017.
-- Total production in the first half of 2018 ("H1 2018") was
128,921 oz of gold and gold equivalent, down 2.2% from 131,785 in
H1 2017 due to lower volumes in the first quarter.
-- Increased output at MNV in Q2 2018 helped make up ground on
last year's production level after the processing plant operated at
reduced capacity for much of the first quarter.
-- Belaya Gora achieved improved recoveries as it also returned
to full operating capacity in Q2 2018, with output stable
year-on-year.
-- A general contractor was selected and mobilised for Stage 1
(mine expansion) of the Company's project to boost Novo's mining
and processing capacity to 1.3 Mtpa.
-- Infrastructure preparation and construction work continued at Kekura.
-- Average realised gold price during the quarter of US$ 1300 per ounce
-- The Company affirms its forecast for total production of gold
and gold equivalent of 265,000-275,000 oz for the full year.
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 Broker) +44 (0) 207 260 1000
BMO Capital Markets Jeffrey Couch, Neil Haycock, Pascal Lussier Duquette
(Joint Broker) +44 (0) 207 236 1010
Peat & Co Charlie Peat
(Joint Broker) +44 (0) 207 104 2334
KHABAROVSK REGION, RUSSIA
Mnogovershinnoye (MNV)
-- Processing plant output in Q2 2018 rose 8% year-on-year due to higher grades and recovery.
-- Ore mining declined by 5% year-on-year due to adjustments in
production plans resulting from reduced processing volumes in the
first quarter. Mining volume was rescheduled to Q4 2018.
-- Waste stripping was reduced by 28% year-on-year in accordance with production plans.
MNV Units Q2 2017 Q2 2018 H1 2017 H1 2018
Waste stripping t 1,837,725 1,316,531 3,706,800 2,097,446
------- ---------- --------- --------- ---------
Underground development m 2,827 2,993 5,423 5,923
------- ---------- --------- --------- ---------
Open-pit ore mined t 111,042 103,903 160,900 140,982
------- ---------- --------- --------- ---------
Open-pit ore grade g/t 1.95 2.25 2.00 2.23
------- ---------- --------- --------- ---------
Waste dumps ore mined t 66,737 47,296 181,065 47,296
------- ---------- --------- --------- ---------
Waste dumps ore grade g/t 1.08 1.04 1.10 1.04
------- ---------- --------- --------- ---------
Underground ore mined t 200,295 209,438 388,657 407,903
------- ---------- --------- --------- ---------
Underground ore grade g/t 3.20 3.29 3.10 3.10
------- ---------- --------- --------- ---------
Total ore mined t 378,074 360,637 730,622 596,181
------- ---------- --------- --------- ---------
Average grade g/t 2.46 2.70 2.36 2.73
------- ---------- --------- --------- ---------
Ore processed t 360,326 359,582 720,463 609,226
------- ---------- --------- --------- ---------
Average grade g/t 2.51 2.76 2.43 2.75
------- ---------- --------- --------- ---------
Recovery rate % 91.2 91.9 90.9 92.0
------- ---------- --------- --------- ---------
Gold produced oz 26,564 28,731 50,749 48,090
------- ---------- --------- --------- ---------
An update of Russian regulatory economic parameters and
registered reserves was completed in Q2 2018, and the results
submitted to authorities for review in June. A new JORC-compliant
reserve audit was also initiated and is expected to be completed in
Q3 2018.
Near-mine exploration work at MNV in Q2 2018 included the
initiation of trenching within the boundaries of the neighbouring
Zamanchivaya licence area. In addition, production exploration
continued via surface drilling on the flanks of several ore bodies
(Intermediate, Burlivoye and Helicopter) to identify potential new
resources.
Belaya Gora
-- Q2 2018 waste stripping increased by 70% and ore mining by
132% year-on-year as Belaya Gora continued full mining
operations.
-- Ore processing declined by 7% year-on-year due to planned downtime for SAG mill re-lining.
-- The recovery rate was 76%, up 4% from the same period last year.
Belaya Gora Units Q2 2017 Q2 2018 H1 2017 H1 2018
Waste stripping t 728,931 1,241,719 1,389,963 2,462,911
------- ------- ---------- --------- ----------
Ore mined t 241,696 561,797 695,068 1,055,596
------- ------- ---------- --------- ----------
Average grade g/t 0.75 0.81 0.81 0.81
------- ------- ---------- --------- ----------
Including:
------- ------- ---------- --------- ----------
* Ore Au >0.7 g/t T 97,292 273,442 311,592 507,260
------- ------- ---------- --------- ----------
* Average grade g/t 1.11 1.18 1.14 1.17
------- ------- ---------- --------- ----------
* Ore Au 0.3-0.7 g/t t 144,404 288,355 383,476 548,336
------- ------- ---------- --------- ----------
* Average grade g/t 0.50 0.46 0.53 0.47
------- ------- ---------- --------- ----------
Ore from stockpiles* t 118,515 78,570 633,871 162,900
------- ------- ---------- --------- ----------
Average grade g/t 1.03 0.82 1.01 1.00
------- ------- ---------- --------- ----------
Ore processed t 429,835 398,302 810,549 718,868
------- ------- ---------- --------- ----------
Average grade g/t 1.13 1.09 1.12 1.11
------- ------- ---------- --------- ----------
Recovery rate % 72.8 76.0 71.7 75.4
------- ------- ---------- --------- ----------
Gold produced oz 10,507 10,827 20,034 19,804
------- ------- ---------- --------- ----------
Earlier this year, the Company published details of a
pre-feasibility study (PFS) covering planned Belaya Gora processing
plant upgrades and the nearby Blagodatnoye deposit. The study
included updated reserve figures for Belaya Gora.
In Q2 2018, the Company completed the process of registering the
reserves, which were based on the results of 2017 diamond drilling
on Belaya Gora's deep horizons and northeastern flank, with
regulators.
New exploration drilling in Q2 2018 totalled 3,500 metres and
focussed on the Kolchansky and Zayachy prospects on the adjacent
Belaya Gora Flanks licence. The work is expected to be completed in
Q3 2018.
Blagodatnoye
The Company's first JORC-compliant reserve report for
Blagodatnoye was published earlier this year together with the
Belaya Gora PFS. In Q2 2018, work continued on interpreting data
from previous exploration, preparing a Russian-standard feasibility
study for reserve calculation, and registering those reserves with
state regulators.
The PFS calls for Blagodatnoye ore to be processed at the Belaya
Gora process plant beginning in 2023, thereby extending the life of
the combined project until 2032.
ZABAIKALSKY REGION, RUSSIA
Novoshirokinskoye (Novo)
-- Slight year-on-year increase in Q2 2018 production, mainly due to higher grades.
-- Average processing grade in Q2 2018 rose by 12% compared to
the same period last year and improved slightly from Q1 2018 (5.80
g/t).
-- Recovery rates fell to 79.4% (Q2 2017: 84.9%) due to a shift
in the composition of mined ore, with lower lead content and higher
gold grade. Processing adjustments are underway to account for the
change in ore and improve overall recovery.
Novo Unit Q2 2017 Q2 2018 H1 2017 H1 2018
Underground development m 2,610 3,150 5,720 6,184
------ ------- -------- ------- --------
Ore mined t 207,400 216,373 414,863 439,430
------ ------- -------- ------- --------
Average grade * g/t 5.21 5.70 5.45 5.60
------ ------- -------- ------- --------
Ore processed t 205,589 200,777 404,595 405,509
------ ------- -------- ------- --------
Average grade * g/t 5.25 5.86 5.50 5.83
------ ------- -------- ------- --------
Recovery rate * % 84.9 79.4 85.2 80.3
------ ------- -------- ------- --------
Au production (100%)* Oz. 29,471 30,052 61,002 61,027
------ ------- -------- ------- --------
* Calculated in Au equivalent at actual prices
(Metal grade of mined ore = Au 3.65 g/t, Ag 50.31 g/t, Pb 1.28
%, Zn 0.41 %).
Work on the Novo 1.3 Mtpa expansion project in Q2 2018 included
geotechnical surveys on the site of a planned stormwater treatment
facility. Comprehensive examinations of the mine's existing winding
engine building, headframe, crusher building, QC and main
ventilation fan building were conducted during the period.
Additional inspections of the foundations of other existing
buildings and structures are in progress, as per requirements
determined by the Russian State Expert Board.
Stage 1 of the expansion project (mine upgrades) involves
construction of a new main ventilation fan building, new boiler,
and water treatment plant; upgrades to the main rock hoisting
shaft, including winding engine, headframe, loading boxes, primary
crusher; and modification to associated surface buildings. Design
documentation is being revised based on recommendations received
from the State Expert Board during the quarter.
Also in Q2 2018, a tender was completed and general contractor
selected for construction and installation of Stage 1 facilities.
Preparation work on the construction sites is underway. Additional
tenders were held and delivery contracts signed for key equipment
for the main rock hoisting shaft upgrade.
For Stage 2 of the expansion project (process plant and tailings
storage improvements), the Company is reviewing the potential for
using dense media separation (DMS) or X-ray separation to reduce
capital costs. Studies are in progress on the use of these
technologies on Novo ore, and a financial evaluation is being
conducted together with consultants SGS Bateman.
Novo commenced a new exploration drilling programme from both
surface and underground in Q2 2018 to aid in developing a more
detailed geological model of the deposit with a view towards
optimising mining activities. The work is being supervised by SRK
Consulting.
Baley Ore Cluster (Taseevskoye, Sredny Golgotay and ZIF-1)
Project engineering by general contractor Geotekhproekt for an
840 ktpa heap leach operation on the Baley ZIF-1 tailings licence
got underway in Q2 2018. The first stage included site surveys and
the selection of key technical solutions, which have been
completed. Public hearings on an Environmental Impact Assessment of
the project have been held. Project engineering documentation has
been developed in preparation for submission to the State
Environmental Expert Board and mining regulators for approval in Q3
2018.
Micromine Consulting Services was retained to draft initial
mineral resource estimates for the Sredny Golgotay deposit, which
will be used as the basis for a Scoping Study for the project.
Tenders are underway to select contractors for the study as well as
for development of an exploration and development programme.
At the Taseevskoye deposit, the Company has retained a
contractor to perform experimental methodical geophysical studies
to determine the boundaries of the former mine's underground
workings. The results would be used to inform future exploration at
the site. Work on the study will begin in Q3 2018.
CHUKOTKA AUTONOMOUS DISTRICT, RUSSIA
Kekura
Preparations and construction work on infrastructure and
facilities at the Kekura site continued in Q2 2018. Furthermore, a
technical audit of existing buildings and structures at Kekura was
conducted earlier this year, and repairs carried out where
warranted.
Detailed engineering for an assay laboratory was completed in
the second quarter, with construction work set to begin this month.
Project engineering for technical upgrades to the explosives
storage facility also were undertaken and work on the facility is
scheduled to begin in September.
Earthwork at the site of the planned fuel and lubricant storage
facility was carried out in May and June, including drilling for
cast piles installation. Equipment installation is likewise set to
start in September of this year.
In June, work on a shovel assembly for future open pit mining
was initiated. Also during the month, a road connecting the camp to
the site of a planned communications tower was completed, setting
the stage for foundation work on the tower and related buildings to
begin this summer.
Earthwork, foundations, and grounding installations were
completed for Kekura's 110/6 kV power substation over the course of
Q2 2018. The step-down substation is designed to receive power from
the Bilibino-Kekura-Peschanka-Omsukchan power line currently being
constructed by the government. Electrical equipment installation
will commence in Q3 2018.
The Company held a tender in May for a contractor to identify
groundwater supplies near the Khrebtovaya River to be used for
drinking and household water. NIF Rosnedra Ltd was selected and
commenced hydrogeological work for the project in June. The Company
expects to submit the project for review by the State Geological
Expert Board in Q3 2018.
Klen
Earlier this year, state regulators signed off on changes to the
mining schedule for the Klen deposit. Their decision formed the
basis of an application by the Company to the Chukotka regional
resources agency requesting amendments to the terms of the Klen
licence agreement so as to delay the start of mining. A decision is
expected in Q3 2018.
Also in Q2 2018, the Company selected Giprotsvetmet for project
engineering on the mine and process plant and other major technical
solutions at Klen. Separately, work began on testing Klen ore
properties for preliminary separation by the XRT method and sample
collection for testing is set to begin this summer.
VALUNISTY ACQUISITION
On April 26, 2018, the Company announced its intention to
acquire three companies with assets in the Russian region of
Chukotka, including:
-- Valunisty, an operating gold mine and processing plant with
annual production of 31 koz (2017);
-- The Kanchalano-Amguemskaya Square ("KAS") licence, which
covers territory surrounding Valunisty and hosts several satellite
deposits including the operating Gorny open pit and the Zhilny
deposit; and
-- Kayenmivaam ("Kayen"), an exploration licence with several
promising target deposits, located 130 km to the southeast of
Kinross Gold's Kupol mine.
At an Extraordinary General Meeting held on May 24, Highland
Gold shareholders were asked to vote on a measure granting the
Company's Board of Directors authority to issue shares to complete
the transaction. In addition, because the acquisition is a
related-party transaction, shareholders unaffiliated with the
sellers were asked to vote on a waiver of the obligation that would
otherwise arise under Rule 9 of the Takeover Code to make an offer
for those shares in the Company not already held by the sellers.
Both measures passed.
The transaction is subject to approval by Russia's Federal
Antimonopoly Service (FAS) and Foreign Investment Advisory Council
(FIAC). Completion is expected in Q4 2018.
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.
The Lost Time Incidents Frequency Rate (LTIFR) in Q2 2018 was
3.61, down from 7.21 in the same period last year. There were a
total of five loss-time incidents registered across the group -
three at Novo and two at MNV - compared to nine incidents and a
fatality in the year prior.
Training sessions carried out in Q2 2018 included a course on
Conscious Safety Management for 11 top managers in the Company's
Moscow office as well as 17 managers at MNV and 24 people at
Kekura. Employees at MNV (12) and Kekura (11) also took part in
courses on Internal Accident Investigation. At Novo, work began to
prepare seven in-house trainers/coaches to conduct additional
workshops on Conscious Safety Management.
In an ongoing effort to improve transportation safety, the
Company offered a Defensive Driving course, which was attended by
28 employees at Novo and 17 at MNV.
During the reporting period, the Company drafted and implemented
a corporate standard for Contractors' Safety Management. Tools are
being introduced in each operating unit in accordance with these
standards.
In June, an audit of the work safety management system was
conducted at Novo, MNV, and Kekura. Based on the audit results,
each subsidiary is developing an action plan on continued
implementation of work safety management processes.
Protecting the environment and complying with regulatory
requirements likewise remains a priority for Highland Gold. One of
the Company's key goals this year is to find ways to decrease the
environmental impact of its operations.
Regular internal audits of the Company's environmental
management system were conducted at MNV, Belaya Gora and Novo
during the second quarter, with a focus on compliance with
environmental protection legislation. Each audit is followed by the
drafting of measures to minimise the causes of system failures.
Environmental safety training was provided to 1,138 employees
during the reporting period, while 360 employees completed training
and testing on class I-IV hazard waste management. The Company sent
50 managers and specialists for further career development through
training in outside professional environmental programmes.
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 rns@lseg.com or visit www.rns.com.
END
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