Nordgold lowers production guidance for 2011 to 745,000-755,000 oz gold equivalent
MOSCOW. Dec 9 (Interfax) - Russian steelmaker OJSC Severstal's gold-producing subdivision, Nordgold, has lowered its production guidance for 2011 to 745,000-755,000 ounces of gold equivalent, the company said in a press release.
The company had previously mentioned a guidance of 800,000 oz. of gold equivalent (at the beginning of the year, production was expected to be even higher, up to 840,000 oz. of gold equivalent). Thus, the decrease is roughly 6% of the initial lower limit. Nordgold's management expects solid financial results in Q4 due to the ending of the wet season in Africa and favorable gold prices.
The company's production guidance for 2012 is 800,000-850,000 oz. of gold equivalent, and "the objective remains to reach 1 million ounces in 2013 from organic growth at the existing asset base and Bissa and Gross projects production input," the press release said.
In the first nine months of 2011 Nordgold has invested $198 million on capex programs, including $77 million on exploration activity, a y-o-y increase of 66.0% and 70.8%. Overall proposed capex for the year is $320- million, including $124 million on exploration.
Nordgold operating results for Q3 and 9M 2011:
| Q3 2011 | Q3 2010 | % | 9M 2011 | 9M 2010 | % | |
| Ore processed kt | 4,588 | 2,990 | 53,4% | 12,071 | 6,207 | 94,5% |
| Head grade g/t | 1,65 | 2,04 | -19,1% | 1,84 | 2,45 | -24,8% |
| Total gold equivalent ounces produced (Dore) | 192,103 | 148,392 | 29,4% | 565,490 | 389,769 | 45,1% |
| Total gold equivalent ounces produced (refined) oz | 178,417 | 147,906 | 20,6% | 550,702 | 394,954 | 39,4% |
| Total gold equivalent ounces sold oz | 149,376 | 148,412 | 0,6% | 521,240 | 408,406 | 27,6% |
| Revenue US $ mln | 253,435 | 184,663 | 37,2% | 796,868 | 485,333 | 64,2% |
| Revenue per ounce US $/oz | 1,697 | 1,244 | 36,4% | 1,529 | 1,188 | 28,6% |
| Total cash cost US$ mln | 121,446 | 94,140 | 29,0% | 368,962 | 211,236 | 74,7% |
| Total cash cost per ounce US$/oz | 687 | 640 | 7,3% | 677 | 539 | 25,6% |
| Normalized EBITDA US$ mln | 111,279 | 77,835 | 43,0% | 379,589 | 233,524 | 62,6% |
| Normalized EBITDA margin % | 43,9% | 42,1% | 1,8 pp | 47,6% | 48,1% | -0,5 pp |
| Net profit US$ mln | 43,759 | 59,431 | -26,4% | 173,782 | 98,910 | 75,7% |
| Cash flows from operating activity US$ mln | 38,999 | 63,266 | -38,4% | 213,320 | 146,991 | 45,1% |
| Capital expenditures US $ mln | 91,113 | 61,957 | 47,1% | 197,889 | 119,194 | 66,0% |
Nordgold's general director, Nikolai Zelenensky, said during a conference call on December 9 that the company expected $550 million-$600 million EBITDA in 2011.
Nordgold has eight operating assets in four countries, plus a number of assets at the exploration and pre-production phase. The assets include High River Gold Mines (HRG) Ltd., in which Nordgold owns 72.64%, and which operates the Berizitovy mine in Russia's Amur region; the Zun-Holba and Irokinda deep mines in Buryatia, licensed to OJSC Buryatzoloto ; 50% of the Prognoz silver deposit in Yakutia; and two projects in Burkina-Faso - Somita, operating company for the Taparco mine, and the Bissa exploration project.
Nordgold also owns the Aprelkovo mine in Russia's TransBaikal territory; Neryungri-Metallik in Yakutia;
Suzdal, Zherek and Balazhal in Kazakhstan; and 100% of Crew Gold, which operates the Lefa mine in Guinea.
Nordgold said on December 9 that its Gross project in Yakutia had entered a pre-feasibility phase, undertaken by consultants Snowden and Ahma. This phase is expected to continue until April 2012 and will cover mine, processing plant and infrastructure design.
The Bissa project has moved into the active construction phase. Lycopodium will complete the design phase of the plant by the end of the year. The first mining fleet equipment has arrived on site. Construction of the mine camp and initial earth works are proceeding as planned. First gold is expected in H1 2013.
Nordgold currently has JORC compliant resources of 22.6 million ounces of gold and prospective reserves of 8.2 million ounces of gold. New resource and reserves figures will be disclosed by the Company at the beginning of 2012 when a Wardell Armstrong report will be available.
Severstal has decided to split-off its gold production division and this should be completed by January 2012. On November 30 it was announced that Nordgold shares would be swapped for Severstal GDR and shares. The register for shareholders taking part in the deal was closed the day before. The exchange will have a ratio of 186 Nordgold (preliminarily consolidated at a ratio of 2:1) for 100 Severstal shares. If there is sufficient agreement from minority shareholders to acquire 5% of Nordgold capital, the gold producer will apply for GDR listing on the London Stock Exchange.
Otherwise there minority stakes will not be exchanges and 100% of Nordgold will go to a structure of Severstal's main beneficiary Alexei Mordashov. If the exchange goes ahead, Mordashov will own at least 82.94% of the gold producer (with bids of over 17.06% of Nordgold capital, the exchange will be carried out on a proportional basis). The proposal to minority shareholders extends only to qualified investors and institutional buyers. The approximate expiry date for minority shareholders to take part in the exchange is January 13 2012. A purchase of shares from those that do not favour the deal is not envisaged. Severstal shareholders will receive compensation from the split-off of the gold business through redemption of the main volume of shares exchanged for Nordgold shares (16.42% of Severstal capital).