Lower gold prices are being more than offset by lower costs for Russia-based Highland Gold Mining (HGM). The devaluation of the rouble drove a decline in all-in sustaining costs - a measure that includes the capital spending necessary to sustain reserves - by around a fifth in the first half. That lifted the miner's cash profit margin by eight whole percentage points to 42 per cent, leaving cash profits 13 per cent higher at $54.9m (£36m).
While total gold production at Highland Gold rose by just 1 per cent on the previous year, progress at its Belaya Gora mine in the Khabarovsk region steamed ahead. Ore production almost doubled to 885,314 tonnes, while the average ore grade increased by a quarter to 1.63 grams per tonne. The plant’s first processing stage was fully commissioned, while design documentation and the tender process for the installation of automated process control systems have been completed for the second stage.
Work is also under way to optimise mining and processing technology at the group's Novo mine. Management expects this to almost double the volume of ore processed to 650,000 tonnes by the end of the year. However, the average ore grade of the group's Mnogovershinnoye mine, which accounts for 35 per cent of revenues, fell by more than a third as mining began at lower-grade sites.
Broker Numis expects adjusted EPS of 10¢ for the full year, down from 22¢ in 2014.
HIGHLAND GOLD MINING (HGM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 54p | MARKET VALUE: | £176m | |
| TOUCH: | 53.25-54p | 12-MONTH HIGH: | 58p | LOW: 23p |
| DIVIDEND YIELD: | 7.4% | PE RATIO: | na | |
| NET ASSET VALUE: | 237p | NET DEBT: | 30% | |
| Half-year to 30 June | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 142 | 29.4 | 6.2 | 2.50 |
| 2015 | 131 | 16.6 | 4.4 | 2.00 |
| % change | -8 | -44 | -29 | -20 |
Ex-div: 1 Oct Payment: 16 Oct £1=$1.53 | ||||
