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Aim 100: 20 to 11

Aim 100: 20 to 11

20. Highland Gold Mining

At first glance, there appears to be a hole in full-year results for Highland Gold Mining (HGM), which were released this month. Although costs and production were flat, operating profit more than tripled to $69.4m. The average realised price for gold and gold equivalent was also $1,136, more than $100 below the average gold price. So why the earnings boost? The reason is partly down to the lead concentrate Highland produces from its (say it with us) Novoshirokinskoye mine, although better free cash flow also helped, as it allowed the company to reduce its net debt ratio from 1.74 to 1.26 times cash profit. With production forecasts unchanged for 2017, the main near-term focus for investors (aside from a buoyant gold price) will be further progress on two major development projects. The first concerns expansion of the mining and processing rates at Novo from 0.7mtpa to 1.3mtpa, and construction of Kekura, a greenfield site in the far north east of Russia. However, we are less confident that costs can be held at present levels this year if the rouble continues its oil-linked rally. Hold. AN

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