Ideally, gold would only be mined in the United States. That would at least remove foreign exchange swings from the many sources of volatility in the shares of gold mining companies, which typically book sales in dollars and costs in local currencies. Unfortunately for investors in Highland Gold Mining (HGM), this isn’t the case. Indeed, a strengthening rouble and attendant cost inflation has prevented shares in the Russian miner from matching the 16 per cent ‘return’ of a dollar-denominated ounce of gold in 2017.
The price has been an 11 per cent rise in all-in sustaining costs to $674 (£518) per ounce, which fed through to a 4 percentage point drop in the cash profit margin, and a slight increase in the net debt position. The latter can partly be explained away by a 46 per cent jump in capital expenditure to $27.4m, reflecting a step-up in exploration costs at Mnogovershinnoye, $13.5m worth of spending at the Kekura project, and expansion to processing capacity at Novoshirokinskoye.
On average, analysts are asking for full-year pre-tax profit of $78m and adjusted EPS of 18¢, against $66.2m and 20.2¢ in 2016.
| HIGHLAND GOLD MINING (HGM) | ||||
| ORD PRICE: | 161p | MARKET VALUE: | £ 524m | |
| TOUCH: | 161-162p | 12-MONTH HIGH: | 196p | LOW: 111p |
| DIVIDEND YIELD: | 5.0% | PE RATIO: | 19 | |
| NET ASSET VALUE: | 233¢ | NET DEBT: | 27% | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
| 2016 | 147.1 | 48.8 | 11.3 | 5.0 |
| 2017 | 147.2 | 43.5 | 7.9 | 5.0 |
| % change | +0.1 | -11 | -30 | - |
| Ex-div: | 14 Sep | |||
| Payment: | 13 Oct | |||
| £1=$1.30 | ||||
