Full year results for Highland Gold (HGM), the Aim-quoted miner which operates several projects in Russia and Kyrgyzstan, caused a one-day 14 per cent leap in the shares. After a difficult recent history – and a $10m (£7m) net loss in 2015 due to adverse currency swings and impairments to the Kekura mine – all that was needed for the market to pile in was for Highland to commit to maintaining current levels of production.
That’s because Highland’s total cash costs fell by 26 per cent in 2015, to just $480 per ounce of gold. All-in sustaining cash costs – a better measure for gold producers, as it includes exploration expenses and ongoing capital needs – also declined precipitously, to $640 an ounce, thanks in part to the devaluation of the rouble against the dollar. So even though average realised gold prices were weak last year, the company managed to increase its cash profits margin from 41 to 48 per cent.
Hitting the 255,000 oz to 265,000 oz production target range this year is still going to be a balancing act. Further declines at the Mnogovershinnoye project, which is approaching the end of its mine life, should be offset by improvements at Belaya Gora. If this is achieved, WH Ireland analyst Paul Smith expects full year adjusted pre-tax profit of $124m, giving EPS of 27¢, up from $104m and 23¢ in 2015.
HIGHLAND GOLD MINING (HGM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 97p | MARKET VALUE: | £316m | |
| TOUCH: | 97-97.5p | 12-MONTH HIGH: | 99p | LOW: 37p |
| DIVIDEND YIELD: | 4.6% | PE RATIO: | NA | |
| NET ASSET VALUE: | 227¢ | NET DEBT: | 31% | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 300 | 132 | 31.9 | 5.0 |
| 2012 | 352 | 158 | 38.8 | 7.8* |
| 2013 | 304 | 82.1 | 16.7 | 5.0 |
| 2014 | 304 | 45.5 | -7.7 | 4.5 |
| 2015 | 276 | 13.9 | -3.2 | 4.5 |
| % change | -9 | -69 | - | - |
Ex-div:28 Apr Payment:27 May £1 = $1.44 | ||||
