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Highland Gold's underlying progress

One-off charges fed into a full-year loss for Highland Gold, but a strong operating performance inclines us to turn bullish
April 24, 2015

Despite a strong operational performance, Highland Gold Mining (HGM) slipped into the red with a full-year loss of $24.8m (£16.4m) last year, as a combination of mine impairments, foreign-exchange losses and $49.4m in back-taxes took their toll.

IC TIP: Buy at 47p

The $11.4m impairment charge largely related to a goodwill write-down at the miner's Klen gold deposit, following the postponement of development projects. Even so, the Russia-based miner managed to boost total gold production by 10.8 per cent to a record 258,937 ounces. The increase helped insulate revenues against a 10 per cent reduction in realised gold prices.

Those ounces were also delivered at $809 apiece - a 3.8 per cent saving on the 2013 all-in sustaining cash cost. The fall in the value of the Russian rouble has helped on the cost front, but the miner was also forced to take a $9.6m foreign-exchange charge on cash and liabilities denominated in currencies other than the US dollar.

Looking ahead, Highland is aiming to expand production to at least 270,000 ounces of gold, driven by an expected doubling in output from the Belaya Gora mine this year. Prior to these figures, Westhouse Securities anticipated adjusted full-year EPS of 17.4p, against 20.7p in 2014.

HIGHLAND GOLD MINING (HGM)
ORD PRICE:47pMARKET VALUE:£153m
TOUCH:46-47p12-MONTH HIGH:74pLOW: 23p
DIVIDEND YIELD:9.6%PE RATIO:na
NET ASSET VALUE:236¢NET DEBT:32%

Year to 31 DecTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (p)
201024414437.6nil
201130013231.95.0
201235215838.87.8*
201330482.116.75.0
201430445.5-7.74.5
% change0.01-45--10

Ex-div: 30 Apr

Payment: 29 May

*Includes special dividend of 4.8p, paid in October 2012 £1=$1.51