After 2018 started with operational challenges at each of its mines, Highland Gold Mining (HGM) looks like it’s back on track. So, while output declined 2.2 per cent and total group cash costs edged up 5 per cent in the first half, the Russian explorer-producer was sufficiently confident about its near-term prospects to raise an already generous half-year dividend by a fifth.
Even among the top-yielding mining stocks, Highland is a fairly prolific income stock, although this distribution largesse didn’t fully chime with chief executive Denis Alexandrov’s reassurance of “incremental progress” in the strategy. Plainly, Highland has some catching up to do if it is to produce at least 265,000 ounces of gold and gold equivalent in 2018, while keeping a lid on an expanding cost base.
Indeed, it was a stronger gold price that really rescued these numbers. Higher metals prices contributed $8.7m (£6.8m) to the first-half cash profit line, and nearly offset the drop in sales and rise in costs. Further down the income statement, an $8.3m increase in the deferred tax expense led to a 22 per cent rise in the overall tax charge, though lower depreciation charges and impairment losses meant net profits rose 10 per cent in the period. That in turn helps to explain both the looming bump in the half-year payout and the retirement of $9m-worth of borrowings since the end of 2017.
On average, analysts expect full-year earnings per share of 24¢ this year, narrowing to 23¢ in 2019.
| HIGHLAND GOLD MINING (HGM) | ||||
| ORD PRICE: | 134p | MARKET VALUE: | £437m | |
| TOUCH: | 134.2-134.5p | 12-MONTH HIGH: | 181p | LOW: 125p |
| DIVIDEND YIELD: | 8.4% | PE RATIO: | 8 | |
| NET ASSET VALUE: | 240¢ | NET DEBT: | 24% | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
| 2017 | 147.2 | 43.5 | 7.9 | 5.0 |
| 2018 | 146.9 | 50.2 | 8.8 | 6.0 |
| % change | -0.2 | +15 | +11 | +20 |
| Ex-div: | 13 Sep | |||
| Payment: | 5 Oct | |||
| £1=$1.28 | ||||
