TIDMHGM
RNS Number : 6087N
Highland Gold Mining Limited
21 January 2019
HIGHLAND GOLD MINING LIMITED
21 January 2019
Q4 2018 Operating Results
Highland Gold Mining Limited ("Highland Gold" or the "Company",
AIM: HGM) today reports its operating results for the three months
ended December 31, 2018 ("Q4 2018") and for the full year of
2018.
HIGHLIGHTS
-- Highland Gold produced a total of 269,500 oz of gold and gold
equivalent in 2018, a slight decrease of 1% from 272,274 oz in 2017
and within the guidance range of 265-275k oz.
-- Q4 2018 production at the Company's Mnogovershinnoye (MNV),
Novoshirokinskoye (Novo) and Belaya Gora mines totalled 65,753 oz
of gold and gold equivalent, as compared to 68,722 in Q4 2017.
-- The average realised gold price was 1,230 USD/oz in Q4 2018
and 1,255 USD/oz for the full year.
-- A new MNV JORC-compliant reserve audit, completed in Q4 2018
and published earlier this month, extended the project's life of
mine to 2029 from the previous estimate of 2022.
-- The Company completed the acquisition of the Valunisty mine
and related assets at the end of Q4 2018, which adds over 30 koz of
gold and gold equivalent to Highland Gold's expected production for
2019.
-- Total production of gold and gold equivalent in 2019 is
expected to be in the range of 290,000-300,000 oz.
-- Highland Gold regrets to report that, on 29 December 2018,
two mine rescue team contractors died while responding to an
avalanche at MNV. One Company employee received
non-life-threatening injuries in the incident. Highland Gold offers
sincerest condolences to the families of the deceased and is
providing them with material assistance. A thorough investigation
of the circumstances leading up to the incident is underway.
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 Limited Jeffrey Couch, Tom Rider, 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)
-- Q4 2018 ore mining increased by 11% year-on-year and gold production rose by 34%.
-- Grades from open pit mining during the quarter were 35%
higher y-o-y as grade-control drilling exposed new higher-grade
blocks at the Central ore body.
-- Ore processing increased by 18% y-o-y during the last
quarter, reflecting reduced capacity in late 2017 and early
2018.
-- For the full year, ore processing was down only 4.6% despite
operating at half capacity during much of the first quarter.
-- Production for the full year increased by 9.9% due to higher grades and recoveries.
MNV Units Q4 2017 Q4 2018 2017 2018
-------
Waste stripping t 899,144 997,069 6,514,860 4,255,199
------- -------- -------- ---------- ----------
Underground development m 2,941 2,917 11,357 11,783
------- -------- -------- ---------- ----------
Waste dumps ore mined t 75,181 1,207 327,358 69,469
------- -------- -------- ---------- ----------
Waste dumps ore grade g/t 1.13 0.99 1.12 1.04
------- -------- -------- ---------- ----------
Open-pit ore mined t 36,204 141,913 280,006 426,986
------- -------- -------- ---------- ----------
Open-pit ore grade g/t 1.88 2.54 2.05 2.42
------- -------- -------- ---------- ----------
Underground ore mined t 194,620 197,524 792,740 810,806
------- -------- -------- ---------- ----------
Underground ore grade g/t 3.33 3.59 3.15 3.31
------- -------- -------- ---------- ----------
Total ore mined t 306,005 340,644 1,400,104 1,307,261
------- -------- -------- ---------- ----------
Average grade g/t 2.62 3.14 2.46 2.90
------- -------- -------- ---------- ----------
Ore processed t 288,594 340,153 1,373,130 1,310,393
------- -------- -------- ---------- ----------
Average grade g/t 2.79 3.19 2.55 2.92
------- -------- -------- ---------- ----------
Recovery rate % 91.34 92.6 91.36 92.3
------- -------- -------- ---------- ----------
Gold produced oz 24,377 32,576 102,502 112,607
------- -------- -------- ---------- ----------
The avalanche at MNV in December occurred above Adit #1 of the
underground mine, thereby blocking access to the mine via that
entrance. In order to meet production targets without disruption,
mining operations were shifted to areas accessed via other adits as
well as to the open pit.
An independent resource and reserve audit for MNV was carried
out over the second half of last year and completed in Q4 2018. The
results, which were finalised and announced to the market earlier
this month, extended the project's life of mine by 7 years to 2029.
The audit, which counted reserves as of 01 January 2018, was based
on the results of exploration drilling in 2017.
The Company continued to conduct near-mine exploration over the
course of 2018, as well as continuing to evaluate MNV's historic
rock waste dumps.
In Q4 2018, the Company identified 48.7k tonnes of ore within
the waste dumps, containing an estimated 1,331 oz Au. Since the
programme began in 2016, a total of 1.12M tonnes of ore has been
identified and 675k tonnes processed at an average grade of 1.09
g/t. The appraisal programme will continue in 2019.
Stage 1 of the broad grade-control drilling programme at MNV was
completed in 2018. Exploration was carried out using a combined
method - drilling from the surface to confirm the location of
mineralization zones, and also from the underground workings below
those zones. Based on these drilling results, revised
Russian-standard reserve estimates were developed, submitted to
regulators GKZ, and approved in December 2018.
Diamond exploration drilling in 2018 was performed at the Deep,
Quiet, Intermediate, Northern and Deer ore bodies. Drilling
amounted to 15,355 m, spread over 230 holes. The Company expects to
update MNV's JORC-compliant reserves later this year.
Geochemical prospecting work was completed during the year on
two of the Company's greenfield licences adjacent to MNV,
Kulibinskaya and Zamanchivaya, in 2018. The results formed the
basis of an exploration programme that began during the year and
will continue in 2019.
At Kulibinskaya, 56,245 m3 of trenching and 1,054 m of diamond
drilling were completed during the year. Sample testing and logging
are in progress.
At Zamanchivaya, trenching during the year covered 15,324 m3.
Diamond drilling totalling 2,223 m was carried out in areas with
elevated gold grades as identified by trench sampling.
Priority exploration targets for 2019 include the Deer, Central,
Intermediate, and Deep ore bodies, the Burlivaya zone, the
Kulibinskaya and Zamanchivaya licences, and a third adjacent
greenfield site - Vilkinskaya.
Belaya Gora
-- Ore mining increased by 65% in Q4 2018 and 94% for the full
year 2018, reflecting the focus in 2017 on processing ore from
Belaya Gora's stockpiles.
-- Processing volume in Q4 2018 declined by 4.7% y-o-y as part
of efforts to improve the recovery rate, which rose to 74.8% during
the quarter.
Belaya Gora Units Q4 2017 Q4 2018 2017 2018
------- ----------
Waste stripping t 657,540 536,746 2,935,533 2,325,419
------- -------- -------- ---------- ----------
Ore mined t 276,249 456,494 1,079,793 2,095,329
------- -------- -------- ---------- ----------
Average grade g/t 0.70 0.85 0.77 0.83
------- -------- -------- ---------- ----------
including:
------- -------- -------- ---------- ----------
* Ore Au >0.7 g/t t 90,993 296,201 461,408 1,175,674
------- -------- -------- ---------- ----------
* Average grade g/t 1.22 1.06 1.13 1.13
------- -------- -------- ---------- ----------
* Ore Au 0.3-0.7 g/t t 185,256 160,293 618,385 919,655
------- -------- -------- ---------- ----------
* Average grade g/t 0.45 0.45 0.50 0.46
------- -------- -------- ---------- ----------
Ore processed t 423,127 403,052 1,696,810 1,578,890
------- -------- -------- ---------- ----------
Average grade g/t 1.12 1.17 1.11 1.13
------- -------- -------- ---------- ----------
Recovery rate % 73.59 74.80 72.52 74.78
------- -------- -------- ---------- ----------
Gold produced oz 10,852 11,604 43,166 44,085
------- -------- -------- ---------- ----------
An exploration programme was completed on the Belaya Gora flanks
licence in 2018 with 105 holes and 8,268 m drilled on the promising
Kolchansky and Zayachy prospects. In addition, another six holes
totalling 600 m were drilled in Q4 2018 to study the
hydrogeological environment in the area, with a range of
hydrogeological and geophysical tests performed. A final report
with estimation of reserves is expected in Q2 2019.
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.
In order to satisfy regulatory requirements, the Company
submitted a Russian-standard feasibility study covering exploration
parameters and a reserve estimate for Blagodatnoye to regulators in
Q3 2018. The review process is ongoing and is expected to be
completed in the first quarter of 2019.
ZABAIKALSKY REGION, RUSSIA
Novoshirokinskoye (Novo)
-- Ore mining in Q4 2018 dipped slightly, down 4.35% from the same period in 2017.
-- Ore processing was stable y-o-y both during the quarter and the full year.
-- Lower grades and recoveries resulted in a 35% drop in gold
equivalent output in Q4 2018 and an 11% decrease for the year.
Novo Units Q4 2017 Q4 2018 2017 2018
-------
Underground development m 2,825.5 2,588.5 11,378.5 11,441.5
------- -------- -------- --------- ---------
Ore mined t 222,488 212,799 858,106 865,762
------- -------- -------- --------- ---------
Average grade* g/t 5.80 4.00 5.52 5.13
------- -------- -------- --------- ---------
Ore processed t 207,652 211,443 825,819 833,223
------- -------- -------- --------- ---------
Average grade* g/t 5.97 4.07 5.61 5.26
------- -------- -------- --------- ---------
Recovery rate* % 84.0 78.0 85.0 80.1
------- -------- -------- --------- ---------
Gold produced (100%)* oz 33,493 21,573 126,606 112,808
------------------------- ------- -------- -------- --------- ---------
* In gold equivalent at actual prices
(Metal grade of mined ore = Au 3.12 g/t, Ag 48.20 g/t, Pb 1.24
%, Zn 0.48 %).
Over the course of 2018, Novo saw lower mined ore grades,
particularly in terms of lead content, as mining moved to lower
horizons and expected reserve grades were not confirmed in certain
blocks. The lower lead content, as well as an increase in the
proportion of gold associated with pyrite, had a negative effect on
recovery rates.
To address these issues in the future, in-fill underground
production drilling has been intensified alongside the completion
of a reserve confirmation drilling programme projecting out five
years. To improve recoveries, research is being carried out on two
fronts: 1) spiral flow separation, which would reduce the load on
the gravity section and therefore increase recoveries, has been
included in Novo's investment programme for 2019; and 2) ore
sorting using X-ray transmission (XRT) and/or dense media
separation (DMS), which is being considered as part of the design
of Stage 2 of the Novo 1.3 Mtpa expansion project.
In Q4 2018, work continued on Stage 1 of the Novo 1.3 Mtpa
project, which involves upgrades to the underground mine.
Highlights included:
-- The construction of foundation frames for the main fan unit building was completed.
-- Underground development was carried out in preparation for
reconstruction of the skip hoist (loading boxes).
-- Detailed design was completed for a water pumping station at
the +637 m level. Construction and assembly work are now in
progress.
-- Underground development was completed for the construction of
mud settling ponds at the +637 m level.
Baley Ore Cluster (Taseevskoye, Sredny Golgotay and ZIF-1)
The Company is progressing with a project to design a heap leach
facility with an annual processing capacity of 840k tonnes at its
Baley ZIF-1 tailings licence. Public hearings were conducted in May
2018 as a part of an environmental impact study and attendees
approved the project unanimously. Since then, a wide range of
geological, environmental, archaeological, and other studies was
conducted.
Design documentation was developed and then approved by
Zabaikalsky region supervisory authorities in September 2018. State
environmental experts signed off on the project design in November.
Documentation was subsequently prepared for submission to the main
State Expert Board for review.
At Taseevskoye, geophysical surveys were carried out in Q3 2018
with the aim of delineating the outlines of the old underground
workings present under the site. The work is intended to contribute
to better-quality geological exploration planning in the future.
Interpretation of the results carried out in Q4 2018 showed that
additional study of polarization parameters is necessary to
complete tomographic work. The Company decided to amend the
stage-one mine development plan for Taseevskoye, including
relocation of the processing water pond.
In October 2018, Wardell Armstrong (WAI-RU) was contracted to
draft a trade-off study (Scoping Study level) to aid in considering
options for developing the Sredny Golgotay deposit. A preliminary
report was received at year-end and is currently under internal
review.
Concurrently, contractor Vostokgeologia LLC developed a
geological exploration programme for Sredny Golgotay in Q4 2018.
The programme is now being reviewed by state geological
experts.
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 will now be known, was
approved by the Russian prime minister on January 10, 2019.
The Company plans to apply to register Kekura and Klen as
residents of the ASEZ, which could provide certain tax breaks and
other incentives for the projects.
Kekura
As throughout the year, operations at Kekura in Q4 2018 covered
a broad variety of preparations for construction and mining at the
deposit. Highlights include:
-- The Kekura mine design, developed by GeoSolutions LLC, was
approved by the development commission of regulators Rosnedra in
December.
-- Repair and maintenance was performed on the pilot processing plant located on site.
-- General design contractor SPb-Giproshakht drafted key
packages of detailed designs for construction of the main Kekura
processing plant on the basis of the existing pilot plant.
-- Specifications for construction materials and technical and
processing equipment for construction of Kekura's mining and
processing facilities were developed.
-- Research company EngGeo LLC completed the first stage of
field studies needed for construction of mining and processing
facilities. Desktop studies are currently in progress.
-- Equipment testing was completed for the 110/6 kV Kekura
substation, which is designed to receive electricity from a new
power line being built to the site by the government.
-- Rostekhnadzor inspected the explosives storage facility and
issued a certificate on registration of a hazardous industrial
facility, which is required for it to operate.
-- Assembly of a BS-1 communications tower was completed in November 2018.
Construction of a winter road from Kekura to the town of
Bilibino was completed in December 2018, allowing for delivery in
the coming months of materials and equipment that were stored at
the ports of Zeleny Mys and Pevek during the summer sea navigation
period. On site, the road between the stockpile and processing
plant locations was expanded.
On the exploration front, 19 holes totalling 2,255 m were
drilled at the Zapadny prospect in the broader Kekura licence area
in Q4 2018. The drilling facilitated the outlining of a
steeply-dipping vein and veinlet disseminated zone. Drilling on
this prospect will continue in March 2019.
Klen
Regulators signed and registered amendments to the licence
agreement for Klen in Q4 2018, extending the period for development
of the deposit.
The Company held a tender during the quarter to select a
contractor to study X-ray transmission (XRT) ore pre-concentration
as an option for processing Klen's ore. A contract was signed for
the first stage of laboratory studies and the work is in progress.
Results are expected in Q1 2019.
The development of design documentation for Klen was delayed
until Q2 2019 in order to wait for a decision on residency in the
Chukotka ASEZ and for completion of the ore pre-concentration
tests.
Construction of a winter road to Klen began in Q4 2018 with the
aim of transporting a drilling rig and camp equipment to the site.
The supplies are required for exploration drilling planned in 2019
on the flanks of the Klen deposit and within the boundaries of
surrounding Verkhne-Krichalskaya license area.
Valunisty
Highland Gold completed the acquisition of Valunisty mine and
related assets in Chukotka from Aristus Holdings Limited at the end
of December 2018. The assets purchased include:
-- Valunisty, an operating gold mine and a processing plant with
an annual capacity of 250k tonnes of ore;
-- 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.
A tender is currently underway to select a design contractor for
the planned expansion of the Valunisty mine, including upgrading
the processing plant to annual throughput of 350k tonnes, as well
as underground development.
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.
One of the highlights of the Company's health & safety
team's work in 2018 was the development and introduction of new
corporate standards covering PPE quality and use; contractors'
safety management; audits and rating of labour safety; emergency
medical response, leader inspections, and labour safety risk
assessment. Tools for ensuring compliance with these standards were
rolled out at MNV, Belaya Gora, Novo and Kekura. A new employee
health management programme was also introduced at the Company's
operations.
The management HSE Committee met last October to review the
Company's updated labour safety strategy. That was followed by a
review at the Board of Directors' HSE Committee meeting in
November.
In Q4 2018, the Lost Time Incident Frequency Rate (LTIFR),
calculated as the number of incidents for every 1,000,000
man-hours, was 1.96 compared to 2.61 in Q4 2017. Three lost-time
incidents were registered during the period - one at Novo and two
at MNV - versus four the previous year (three at Novo and one at
Belaya Gora).
LTIFR for the full year 2018 was 4.02, down from 4.88 for the
year 2017. There was a total of 22 incidents registered during the
12 months - 12 at Novo, eight at MNV, one at Belaya Gora and one in
the Moscow office - compared to 26 incidents in 2017.
Training sessions conducted in Q4 2018 included a "Conscious
Safety Management: Behavioural Safety Audit" course for 10 people
in the Moscow office, 13 at Novo, and 6 at MNV. That brought the
total number of people trained in the course during the year to
over 200 at Moscow, Novo, MNV, Belaya Gora, and Kekura, plus
another 40 offered the same course at Valunisty. In addition, a
course on "Conscious Safety Attitude" was attended by 47 people at
Novo and 85 people at MNV in December 2018.
Labour safety management system audits were performed in
November-December 2018 at Novo and MNV. The audit results enabled a
full assessment of labour safety practices across the Company
during the year.
The Company contracts external auxiliary mine rescue teams to be
kept on alert near each of its operations to ensure preparedness to
react to emergency situations. The recent incident at MNV mentioned
above highlights the importance and the danger of their work.
On 29 December 2018, a team of mine rescue contractors responded
to an avalanche outside Adit #1 of the MNV underground mine, which
resulted in non-life-threatening injuries to a Highland Gold
employee. After arriving on site, two of the rescuers were killed
by a second avalanche that fell in the same location. An
investigation is underway with a view toward preventing any
recurrence of this unfortunate event.
Environment
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. All aspects
of operational activity that do or could impact the environment are
identified and analysed in order to outline the most significant
associated risks and to develop programmes to minimize them.
The Company updated standards for its corporate environmental
management systems in 2018 to keep them in line with the latest
revision of ISO 14001:2015.
Quality assurance and risk management company DNV GL carried out
an independent audit of environmental management systems at the
Moscow office, Belaya Gora and Novo to ensure compliance with ISO
14001-2015. A new certificate valid until March 01, 2022 was issued
based on the audit results, which confirm the systems in place are
functioning properly.
Over the course of the year, 2,068 employees underwent
environmental safety training and 436 employees had training and
tests on handling class I-IV hazard waste via the OlympOKS system.
The Company sent 52 managers and specialists for skills improvement
training in dedicated centres where they attended professional
environmental courses.
This information is provided by RNS, the news service of the
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END
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