Russian gold miner Highland Gold (HGM) kept good on one of its promises in the first half - increasing gold production to 101,900 ounces from 93,057 ounces in the same period last year. This means the company remains on track to produce between 200,000 and 215,000 ounces of gold in 2012, and, with the shares up 13 per cent on our buy tip since July, and quantitative easing in the US supporting a bullish gold price environment, there should be further upside to come.
Coupled with a 5 per cent rise in the average price of gold received, the production increase resulted in a minor revenue boost and another healthy interim dividend for Highland in the first half. Nevertheless, operating cash costs soared to $804 (£496) an ounce from $531 an ounce in the same period last year - which is also well up on the $594 per ounce achieved in full-year 2011. Management blamed the greater-than-expected rise on higher waste stripping volumes at the ageing MNV mine as well as lower-grade ore being processed at both MNV and the Novo mine.
Prior to these results, Numis Securities forecast full-year EPS of 34¢ (2011: 31.9¢).
HIGHLAND GOLD (HGM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 125p | MARKET VALUE: | £406m | |
| TOUCH: | 124-125p | 12-MONTH HIGH: | 205p | LOW: 94p |
| DIVIDEND YIELD: | 3.8% | PE RATIO: | 8 | |
| NET ASSET VALUE: | 227¢ | NET CASH: | $110m | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p)** |
|---|---|---|---|---|
| 2011 | 158 | 85.1 | 21.6 | 5.00 |
| 2012 | 161 | 57.3 | 13.9 | 4.80 |
| % change | +2 | -33 | -36 | -4 |
Ex-div: 26 Sep Payment: 19 Oct £1=$1.62 **Dividend includes special dividend of 2.5p a share in 2011, and 4.8p in 2012 | ||||
