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Highland takes the long road

Buffeted by a recent sell-off, Highland's shares look like decent value
April 17, 2018

Donald Trump's intervention in Syria was punishing for London-listed Russian stocks, irrespective of their connections to oligarchs and businesses targeted by US sanctions. The irony for Highland Gold Mining (HGM), whose shares fell 10 per cent following the move, is that the concurrent drop in the rouble and rise in the gold price would be bullish signals in any other circumstance.  

IC TIP: Buy at 144p

Geopolitical events come at you fast. Gold miners, which spend years exploring and planning projects to dig up metal forged aeons ago, are forced to think over slightly longer time periods. And in its 15th year as a public company, Highland has set the stage for steady, medium-term and low-cost growth.

As 2017 results outline, each of the group’s mines are in a better position than they were a year ago. New reserve estimates have extended the life of MNV by at least four years, Novo is ramping up to reach full capacity in 2020, the life and size of the Belaya Gora development has been extended, and Kekura is preparing for construction next year. On Numis’s forecasts, this should all translate to 295,000 ounces (oz) of gold equivalent in 2020, up from 272,274 last year.

Consensus forecasts are for adjusted pre-tax profit of $92.7m (£64.8m) and EPS of 21.7¢ this year, versus estimates of $87m and 19.3¢ in 2017.

HIGHLAND GOLD MINING (HGM)  
ORD PRICE:144pMARKET VALUE:£468m
TOUCH:143-144p12-MONTH HIGH:181pLOW: 131p
DIVIDEND YIELD:7.2%PE RATIO:10
NET ASSET VALUE:239¢NET DEBT:26%
Year to 31 DecTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (p)
201330482.116.75.0
201430445.5-7.74.5
201527613.9-3.24.5
201630666.214.510.4
201731710020.110.4
% change+4+51+39-
Ex-div:26 Apr   
Payment:25 May   
£1=$1.43

*A previous version of this piece referenced a dividend paid in US cents. This has been corrected to pence, alongside the dividend yield.