20th Sep 2011 07:00
HIGHLAND GOLD MINING LIMITED
INTERIM RESULTS FOR THE FIRST HALF OF 2011
20 September 2011 - Highland Gold Mining Limited ("Highland Gold", or the "Company") announces its production and financial results for the half year ended 30 June 2011.
FINANCIAL SUMMARY | ||
IFRS, US$000 (unless stated) | H1 2011 | H1 2010 |
Production (gold and gold eq. oz) | 93,057 | 85,789 |
Total Group cash costs (US$/oz) | 531 | 518 |
Revenue | 158,085 | 100,473 |
Gross profit | 85,355 | 43,226 |
EBITDA | 88,068 | 46,687 |
Net profit after tax | 70,296 | 23,334 |
Earnings per share (US$) | 0.216 | 0.072 |
Net cash inflow from operations | 77,778 | 37,449 |
Capital expenditure | 31,388 | 13,685 |
Cash, short term deposits and bonds | 272,233 | 216,484 |
HIGHLIGHTS
Financial:
·; Net profit after tax tripled year-on-year to US$70.3 million (H1 2010: US$23.3 million) and resulted in earnings per share of US$0.216 (H1 2010: US$0.072), demonstrating the Company's leverage to higher gold prices
·; EBITDA was US$88.1 million (H1 2010: US$46.7 million), an 88.6% increase due to increased production, gold sales volumes and higher realised prices
·; Total group cash costs were contained at US$531/oz (H1 2010: US$518/oz), despite inflationary cost pressures
·; Cash margins expanded significantly to US$922/oz (H1 2010: US$645/oz) as the Company is unhedged and fully participated in the increase in gold prices
·; Cash, short term deposits and bonds at June 30, 2011 were US$272.2 million (H1 2010: US$216.5 million) due to the generation of strong net cash inflow from operations
·; An interim dividend payable of 5.0 pence per share (H1 2010: £nil per share), consisting of an ordinary dividend of 2.5 pence and a special dividend of 2.5 pence per share
Producing Mines:
·; Mnogovershinnoye ("MNV"), Novoshirokinskoye ("Novo") (48.3% shareholding) and Belaya Gora combined produced 93,057 oz of gold and gold equivalents - an 8.5% increase on H1 2010 production
·; New JORC compliant audit increased MNV reserves by 190%
·; Novo continued production ramp up resulting in a 33% increase in processed tonnes compared to H1 2010
·; The Company remains on track to produce 210,000 - 220,000 oz of gold and gold equivalents in 2011
Development and Exploration Sites:
·; Belaya Gora select oxide ore processing via MNV continued during the first half of 2011 and pre-construction preparations for a stand-alone processing facility remained on track with the submission of design documentation to Federal authorities
·; MNV exploration programme continued to target potential resources adjacent to existing operations
·; 1.38 million oz of C1+C2 reserves at Unkurtash approved by the State Committee on Reserves in Kyrgyzstan
·; Exploration drilling and underground development results at Unkurtash support potential continuity of mineralisation along strike and at depth
·; Exploration work at Lyubov being compiled for GKZ regulatory submission and commencement of JORC audit by year end 2011
·; Blagodatnoye and Belaya Gora Flanks exploration properties continue to provide positive drilling intercepts
The Company will hold a conference call on Tuesday, 20 September 2011 hosted by Valery Oyf, CEO to discuss the interim results. The conference call will take place at 8.30 UK time (11.30 Moscow). To participate in the conference call, please dial one of the following toll-free numbers:
UK Free Call 8000 440 189 UK Local Call 0844 493 38 00 | |
UK Standard International + 44(0) 14 52 55 55 66 | |
Russia Free Call 8108 002 097 2044 USA Free Call 1866 966 9439 Conference ID 1167 08 19 | |
A replay of the presentation will be accessible shortly afterwards by dialing one of the following numbers:
| |
International Dial In: +44 (0) 1452 55 00 00 | |
UK Free Call Dial In: 0800 953 1533 | |
UK Local Dial In: 0845 245 5205 | |
USA Free Call Dial In: 1866 247 4222 Encore Replay Access Number: 11670819# | |
For further information please contact:
Highland Gold Duncan Baxter, Chairman - + 44 (0) 1534 814202 Dmitry Yakushkin, Head of Communications - +7 495 4249521
Matrix (Nominated Adviser) Nick Stone - + 44 (0) 203 206 7000 Stephen Mischler - + 44 (0) 203 206 7000
www.highlandgold.com
|
The Interim Report to 30 June 2011 will be available on our website from 21 September 2011.
INTERIM OPERATIONAL REVIEW
Production
Mnogovershinnoye (MNV) - Khabarovsk region, Russia
Overall production remained in line with Company targets. During the first half of 2011, process plant throughput accounted for 499,082 tonnes of ore with 71,926 oz of gold produced. Production was impacted by poor weather conditions in the first quarter but results have improved in recent months and operating conditions are normal. Upgrades to the process plant have been completed with the target of improving recovery levels to approximately 90% in the second half of 2011.
Mined ore tonnes and waste stripping volumes were both on target and equated to a 10% improvement on H1 2010 performance. New mining equipment introduced in 2010 has helped in maintaining production targets as well as controlling operating costs. Additional equipment now in transit is expected to arrive on site during the second half of the year and will make a positive impact on production by providing an opportunity to retire some less efficient units. The near mine exploration programme continued drilling and trenching adjacent to existing mine workings and is focused on converting resources to reserves as well as adding potential new resources to help offset production depletion.
A 190% increase in proven and probable reserves resulted from a new JORC compliant audit carried out from June 2010 to July 2011. The primary factor for the increase in reserves was the use of a higher gold price assumption than in the previous audit in 2005.
MNV 100% | Units | H1 2011 | H1 2010 |
Mine development | |||
Waste stripping | m3 | 790,897 | 713,390 |
Underground development | metres | 2,915 | 3,627 |
Mining | |||
Total ore mined | tonnes | 606,440 | 550,018 |
Average grade | g/t | 4.6 | 5.1 |
Ore processing | |||
Ore processed | tonnes | 499,082 | 521,855 |
Average grade | g/t | 5.2 | 5.2 |
Recovery rate | % | 87.7 | 88.1 |
Gold produced | oz | 71,926 | 75,771 |
Novoshirokinskoye (Novo) - Zabaikalsky region, Russia
Novo mine continued its ramp-up of operations and remains in line with expectations. Production improvements are expected to continue in both ore mining and processing with approximately 450,000 tonnes of ore expected to be produced by year end. During the first half of 2011, underground ore production, waste development metres and processed ore throughput all exceeded their respective targets. Access to additional stopping blocks continues as a main focus of underground development in order to provide flexibility in future ore supply to the process plant.
Novo 100% | Units | H1 2011 | H1 2010 |
Mine development | |||
Underground development | metres | 3,614 | 3,143 |
Mining | |||
Ore mined | tonnes | 218,978 | 121,748 |
Average grade * | g/t | 6.6 | 6.1 |
Processing | |||
Ore processed | tonnes | 217,953 | 163,323 |
Average grade * | g/t | 6.6 | 5.4 |
Recovery rate * | % | 84.9 | 78.0 |
Gold Produced * HGML (48.3%) interest | oz oz | 39,214 18,940 | 20,741 10,018 |
*calculated approximate Au equivalent
DEVELOPMENT AND EXPLORATION PROJECTS
Belaya Gora - Khabarovsk region, Russia
Belaya Gora 100% | Units | H1 2011 | Q4 2010 |
Mining | |||
Waste stripping | m3 | 202,310 | 226,000 |
Total ore mined | tonnes | 255,319 | 76,000 |
Average grade | g/t | 2.1 | 1.7 |
Select ore to MNV | tonnes | 42,265 | 26,700 |
g/t | 2.6 | 2.4 | |
Ore processed at MNV | |||
Ore processed | tonnes | 30,460 | 10,971 |
Average grade | g/t | 2.6 | 3.3 |
Recovery rate | % | 87.3 | 87.3 |
Gold produced | oz | 2,191 | 1,000 |
The Belaya Gora project continued to build momentum. The stand-alone process plant designs were completed and submitted to government authorities in anticipation of receiving the permit for construction in H2 2011. Open pit ore and waste mining operations were maintained in order to increase ore stock feed for the future plant. During the first half of 2011, 30,460 tonnes of ore were processed at MNV and resulted in the production of 2,191 ounces of gold. Oxide ore processed was lower than plan due to previously noted delays at MNV. Results at Belaya Gora are expected to improve in the second half as throughput levels increase and higher grades are expected to be mined. Full production will be reached when the new mill is commissioned which is expected in late 2012.
Taseevskoye - Zabaikalsky region, Russia
A new drilling programme, deemed critical for future design, was initiated during H1 2011 for ore characterisation. This programme will ensure that the planned semi-industrial pilot test works will be completed using fully representative samples from each of the varying ore zones located within the potential open pit. Once collected, these samples will be used in the final process flotation and autoclave recovery tests which are now expected in 2012. The Company believes this to be a prudent course of action to ensure that test lab results can be reproduced in an industrial production environment.
In 2011 the Company has substantially increased funding for its exploration pipeline and considerable work volumes are now being completed underlining the Company's confidence in the potential of the exploration properties and its commitment to organic growth.
Unkurtash - Kyrgyzstan
A major milestone for the development of the Unkurtash project in H1 2011 was the approval of an initial 42.9 tonnes (1.38 million oz) gold reserves (C1+C2 category) by the regulatory authorities of Kyrgyzstan which led to a 19% increase of the Company's overall GKZ reserves as stated at 31 December 2010. In H1 2011 the Company continued with its drilling programmes at three targets - Unkurtash, Sarytube and Karatube where a total of more than 27,000 metres of reverse circulation and diamond core drilling and 1,000 metres of new underground development were completed in order to delineate mineral resources. Drilling results obtained continue to support the potential of the property for hosting a world class open-pit mineable gold resource at Unkurtash and Sarytube. Final assays with evaluation of results are expected to be completed by Q1 2012. The Company's ongoing 2011 drilling programme allocates over 50,000 metres of reverse circulation and diamond core drilling as well as advancing 3,000 metres of underground exploration development in order to test the continuity of the mineralisation across the three prospects. A JORC compliant resource audit is anticipated to be completed during H2 2011.
Lyubov - Zabaikalsky Region, Russia
In H1 2011 the Company completed a 1,700 metres diamond core drilling programme designed to convert part of prognostic P1 resources into the C1+C2 category at the Evgraf target as well as providing data for regulatory submittals. In order to accelerate the project towards reserve registration, 12,000 metres of drilling were completed last year. Final assays with evaluation of results were completed in Q1 2011 and drilling results obtained to date remain in-line with the Company's own resource model. Independent metallurgical test work during the first half was aimed at corroborating previous tests, indicating conventional process methodologies. This work will be finalised and submitted by year end along with exploration data results for consideration by the regulatory authorities in development of reserves. A JORC compliant resource audit is planned to follow shortly thereafter.
Blagodatnoye - Khabarovsk region, Russia
At the Blagodatnoye prospect located 30 km to the southwest of the Belaya Gora Project the Company completed 4,000 metres of diamond core drilling and 1,000 metres of trenching in H1 2011. This work is part of a programme of 10,000 metres of drilling aimed to delineate the extent and continuity of widespread gold mineralisation which was confirmed during the Company's initial 2010 exploration programme. Historic government data has previously reported a prognostic resource estimate of 161,000 oz of gold at Blagodatnoye. Assay results received to date indicate the potential for Blagodatnoye to host substantial near surface resources grading between 1.0 and 2.0 g/t and support potential to significantly exceed the historic resource estimate. Final assays with evaluation of drilling results are planned to be completed in H2 2011.
Belaya Gora Flanks - Khabarovsk region, Russia
During H1 2011 the Company commenced its trenching and diamond drilling programme at several gold prospects historically known to be located within the license area. The H2 2010 acquisition included the exploration and mining rights for the license area (a total of 33 sq km) which encapsulates the Belaya Gora deposit and represents good near-mine exploration potential. Total trenching of 2,000 metres and 3,000 metres of diamond core drilling have been completed to date, with assay results providing several promising intercepts.
Mnogovershinnoye - Khabarovsk region, Russia
At the Pebble and Quiet prospects the Company continues with its near-mine surface exploration programme, which in 2011 will allocate 8,000 metres of resource definition diamond core drilling, including the testing of 0.6 kilometres of undrilled sections along the entire length of the Pebble and Quiet zones. Assay results received to date continue to be in line with the reserve models' potential to add to the life of mine ounces. In addition, the underground diamond core drilling programme remains on target to complete 16,000 metres drilled by year end.
Mr. Werner Klemens, Head of Exploration at Highland Gold, has reviewed and verified the information contained in this release with respect to drilling and resource / reserves matters. Mr. Klemens holds a Ph.D. in Geology from the University of Toronto. He has 13 years experience in mineral exploration and is a fellow of the Geological Association of Canada. A rigorous quality assurance programme complying with international standards is in effect at all exploration projects and includes duplicate sampling, insertion of standards and check assaying at external laboratories.
INTERIM FINANCIAL REVIEW
Highland Gold reported a net profit after tax of US$70.3 million for the first half of 2011, triple the US$23.3 million reported for the prior year period. The reasons for the increase were higher production resulting in higher gold sales volumes, and significantly higher average gold sales prices realised by the Company. Earnings per share also tripled from US$0.072 per share in H1 2010 to US$0.216 in H1 2011.
Revenue for the first half of 2011 increased by 57.3% to US$158.1 million from US$100.5 million. The Company sold 104,911 ounces of gold and gold equivalents in H1 2011 versus 86,093 ounces in H1 2010. The higher gold sales volumes were due primarily to the successful ramp-up in production at Novo and the sale of accumulated gold inventory. Average realised gold sales prices for the period increased from US$1,163/oz in H1 2010 to US$1,453 in H1 2011. As the Company has a "no-hedge" policy, it fully participated in the increase in the gold price.
Cost of sales for the period increased by 27.0% year-on-year to US$72.7 million, as a result of the increased production attributed to Novo and the start-up of Belaya Gora.
Total group cash costs were US$531/oz in H1 2011 compared to US$518/oz in H1 2010. Despite inflationary cost pressures of higher material and labour costs year-on-year, including a 5% appreciation of the Russian Rouble versus the US dollar, total group cash costs were contained to a 2.5% increase. The Company also incurred higher royalty costs which are tied to the increase in the spot gold price.
Total cash costs at MNV increased from US$489/oz to US$514/oz due to the strengthening of the Rouble against the US dollar by 5.0% compared to H1 2010. Total cash costs at Novo fell from US$721/oz to US$528/oz due to the mine's ramp up of production capacity.
The Group's EBITDA (which is defined as operating profit excluding depreciation, amortisation, impairment gain/(loss) and inventory write-down) increased by 88.6% in H1 2011 to US$88.1 million from US$46.7 million in H1 2010. The increase was due to higher revenues as discussed above.
Cash margins (defined as the average realised gold sales price per oz less total group cash costs per oz) improved from US$645/oz in H1 2010 to US$922/oz. As total group cash costs per oz were contained, the cash margin increased by 42.9% due to the increase in average realised gold prices to US$1,453/oz.
Finance income increased to US$12.0 million in H1 2011 from US$11.5 million in H1 2010, primarily because of earning interest on higher balances of cash, short term deposits and bonds which were US$272.2 million as at June 30, 2011 versus US$216.5 million as at June 30, 2010. The increase in these balances was due to the generation of strong net cash flow from operations which totaled US$77.8 million in H1 2011 compared to US$37.4 million in H1 2010.
Finance costs decreased to US$6.0 million in H1 2011 from US$12.6 million in H1 2010. After the repayment of US$4.7 million of bank debt in January 2011, the Company has no outstanding bank debt.
The income tax expense of US$14.8 million was higher compared to the tax expense of US$7.1 million in the prior period. The tax charge consists of US$13.3 million of current tax expenses (US$13.1 million at MNV and US$0.2 million at RDM) and US$1.5 million of deferred tax charge. The effective tax rate has dropped from 23.3% to 17.4% during the period mainly as a result of foreign exchange rate fluctuations and growth of non-taxable profit.
During the six months ended June 30, 2011, the Group invested US$31.4 million in capital expenditures compared to US$13.7 million in the prior period. H1 2011 capital expenditure comprised US$9.5 million at MNV, US$2.3 million at Novo, US$9.2 million at Belaya Gora, US$10.3 million at the development and exploration projects and US$0.1 million at the other entities of the Group. All capital expenditures were financed from net cash flows from operating activities and existing cash balances.
PAYMENT OF DIVIDENDS
The Board has considered the Company's financial strength and strong half year results and approved an interim Dividend of £0.025 per share and intend to pay future dividends bearing in mind the capital requirements necessary to support the expansion of the group. In addition as a result of the stronger revenues due primarily to the gold price, the Board has also approved a special dividend of £0.025 per share, making a total interim dividend of £0.05 per share (2010: £nil per share) which is expected to result in an aggregate dividend payment of £16.3 million. The interim dividend will be paid on 21 October 2011 to the shareholders on the register at the close of business on 30 September 2011, the record date and the ex dividend date will be 28 September 2011.
HEALTH, SAFETY & ENVIRONMENT
During the first half of 2011 the Group's overall safety performance was negatively impacted by incidents involving ancillary vehicles, accounting for seven lost time injuries out of a total eleven recorded during the period. A review of all incidents noted that poor weather conditions and individual errors were the major contributors resulting in several corrective measures and controls being implemented. As a result, the lost time incident (LTI) rate (the LTI rate is the number of lost time incidents for every 200,000 man hours worked) increased to 0.84 up from 0.25 achieved during H1 2010.
746 employees went through introductory (1 day) safety training, 235 employees completed courses in safe working methods, labour protection and industrial (3/5 days) safety training and 291 employees were involved in industrial safety certification by the RosTechNadzor Agency. In addition, special courses included 51 drivers and 13 managers receiving vehicle safety and driving training with a focus on vehicular incident mitigation.
Our approach to Health and Safety remains a focus for improvement and, in keeping with this approach; licenses were obtained for site medical facilities at both MNV and Novo operations. These licenses are expected to help improve medical response times and health testing services for employees.
Environmental compliance remained in good standing with regulatory authorities. Environmental safety training was provided to 68 employees at MNV, Belaya Gora and Taseevskoye. The Company has progressed with its programme of Environmental Management Systems (EMS) through an independent consultant specialising in ISO 14001 standards. The programme is expected to continue through to the end of 2012 at which time certification is targeted.
NEW APPOINTMENTS
During the latter part of the first half of 2011, two new appointments to the management team took place.
Tatyana Breeva retired as Chief Financial Officer of the Company. We are grateful for her valuable input as CFO since 2008. Alla Baranovskaya has joined the Company as the new CFO. After graduating with honors from the Economic faculty of the Moscow State University, she worked as the CFO in oil companies Slavneft and Russneft. Before joining Highland Gold, Alla was the CFO in the West Alumina Division of Rusal.
Sergei Mineev joined the Company as Director of Exploration and Development Projects. He graduated from the Geology faculty of the Moscow State University and the Institute of Geochemistry and Analytical Chemistry of the Russian Academy of Science majoring in Geochemistry. Sergei holds a degree of doctor of Geology and Mineralogical Science. Prior to joining our Company he worked as Director for strategic planning and development at OJSC Zoloto Kamchatka.
Ulan Kachkynbekov joined the Company as General Director of Highland Exploration LLC which oversees the Unkurtash operation. He graduated from the Underground mining faculty of the Kyrgyz Mining and Metallurgical Institute as a specialist in mining engineering. Prior to joining the Company, he worked for Kumtor Gold, Frontier Mining Ltd., European Minerals, Global Gold and Kazakhmys Gold Kyrgyzstan.
CONCLUSION
A strong set of financial and production results, as well as progress on the exploration front has made this a very positive first half for Highland Gold. Not only are we on track to increase our overall gold production yet again, but by increasing our JORC reserves at MNV we can transparently support the medium-term production as far as 2016. This gives us ample opportunity and funding to develop our key exploration assets at Unkurtash and Lyubov.
I would like to extend my sincere thanks to all the employees of Highland Gold and to the Board for their contribution during the period and look forward to continuing to work closely with them.
DUNCAN BAXTER
Non-Executive Chairman
19 September 2011
Interim consolidated statement of comprehensive income
for the six months ended 30 June 2011
| Notes | 2011unauditedUS$000 |
| 2010unauditedUS$000 |
|
|
|
|
|
Revenue |
| 158,085 |
| 100,473 |
Cost of sales |
| (72,730) |
| (57,247) |
Gross profit |
| 85,355 |
| 43,226 |
|
|
|
|
|
Administrative expenses |
| (9,665) |
| (6,228) |
Other operating income |
| 254 |
| 508 |
Other operating expenses |
| (2,239) |
| (839) |
Operating profit |
| 73,705 |
| 36,667 |
|
|
|
|
|
Foreign exchange gain/(loss) |
| 5,398 |
| (5,201) |
Finance income | 4.1 | 12,037 |
| 11,520 |
Finance costs | 4.2 | (5,997) |
| (12,571) |
Profit before income tax |
| 85,143 |
| 30,415 |
|
|
|
|
|
Income tax expense | 5 | (14,847) |
| (7,081) |
Profit for the period |
| 70,296 |
| 23,334 |
|
|
|
|
|
Total comprehensive income for the period |
| 70,296 |
| 23,334 |
|
|
|
|
|
Attributable to: |
|
|
|
|
Equity holders of the parent |
| 70,296 |
| 23,334 |
|
|
|
|
|
Earnings per share (US$ per share) |
|
| ||
·; Basic, for the profit for the period attributable to ordinary equity holders of the parent | 15 | 0.216 | 0.072 | |
·; Diluted, for the profit for the period attributable to ordinary equity holders of the parent | 15 | 0.215 | 0.071 |
Interim consolidated statement of financial position
as at 30 June 2011
| Notes | 30 June2011unaudited |
| 31 December2010audited |
| 30 June2010unaudited | |
| US$000 | US$000 | US$000 | ||||
Assets |
|
|
|
|
|
| |
Non-current assets |
|
|
|
|
|
| |
Exploration and evaluation assets | 6 | 37,915 |
| 27,317 |
| 21,200 | |
Mine properties | 6 | 187,553 |
| 178,380 |
| 133,518 | |
Property, plant and equipment | 6 | 75,809 |
| 74,090 |
| 63,994 | |
Intangible assets |
| 65,231 |
| 65,231 |
| 65,231 | |
Financial assets | 14 | 23,832 |
| 30,738 |
| 33,252 | |
Other non-current assets |
| 12,364 |
| 4,305 |
| 4,335 | |
Deferred income tax asset |
| - |
| 941 |
| 3,589 | |
Total non-current assets |
| 402,704 |
| 381,002 |
| 325,119 | |
|
|
|
|
|
|
| |
Current assets |
|
|
|
|
|
| |
Inventories | 9 | 38,555 |
| 46,753 |
| 36,262 | |
Trade and other receivables |
| 36,978 |
| 31,663 |
| 21,956 | |
Income tax prepaid |
| 52 |
| 214 |
| 117 | |
Prepayments |
| 6,751 |
| 2,649 |
| 10,109 | |
Other financial assets | 14 | 10,840 |
| 4,022 |
| 2,822 | |
Investments | 7 | 52,752 |
| 54,902 |
| 42,139 | |
Cash and cash equivalents | 10 | 219,481 |
| 167,568 |
| 174,345 | |
Total current assets |
| 365,409 |
| 307,771 |
| 287,750 | |
Total assets |
| 768,113 |
| 688,773 |
| 612,869 | |
|
|
|
|
|
|
| |
Equity and liabilities |
|
|
|
|
|
| |
Equity attributable to equity holders of the parent |
|
|
|
|
|
| |
Issued capital | 12 | 585 |
| 585 |
| 585 | |
Share premium |
| 718,419 |
| 718,370 |
| 718,370 | |
Assets revaluation reserve |
| 832 |
| 832 |
| 832 | |
Accumulated losses |
| (35,947) |
| (106,231) |
| (205,189) | |
Total equity |
| 683,889 |
| 613,556 |
| 514,598 | |
|
|
|
|
|
|
| |
Non-current liabilities |
|
|
|
|
|
| |
Interest-bearing loans and borrowings | 11,14 | 23,139 |
| 29,210 |
| 40,586 | |
Provisions | 6 | 18,355 |
| 9,595 |
| 9,557 | |
Long-term accounts payable |
| 207 |
| 96 |
| 226 | |
Deferred income tax liability |
| 12,301 |
| 11,734 |
| 11,064 | |
Total non-current liabilities |
| 54,002 |
| 50,635 |
| 61,433 | |
|
|
|
|
|
|
| |
Current liabilities |
|
|
|
|
|
| |
Trade and other payables |
| 17,035 |
| 15,198 |
| 12,864 | |
Interest-bearing loans and borrowings | 11,14 | 9,810 |
| 8,524 |
| 21,969 | |
Income tax payable |
| 3,348 |
| 801 |
| 1,975 | |
Provisions |
| 29 |
| 59 |
| 30 | |
Total current liabilities |
| 30,222 |
| 24,582 |
| 36,838 | |
Total liabilities |
| 84,224 |
| 75,217 |
| 98,271 | |
Total equity and liabilities |
| 768,113 |
| 688,773 |
| 612,869 |
Interim consolidated statement of changes in equity
for the six months ended 30 June 2011
|
| Attributable to equity holders of the parent |
| ||||
|
| Issued capital | Share premium | Asset revaluation reserve | Accumulated losses | Total equity | |
|
| US$000 | US$000 | US$000 | US$000 | US$000 | |
At 1 January 2011 |
| 585 | 718,370 | 832 | (106,231) | 613,556 | |
Total comprehensive income for the period |
| - | - | - | 70,296 | 70,296 | |
Exercise of share options |
| - | - | - | (12) | (12) | |
Issue of share capital |
| - | 49 | - | - | 49 | |
At 30 June 2011 (unaudited) |
| 585 | 718,419 | 832 | (35,947) | 683,889 | |
for the six months ended 30 June 2010
|
| Attributable to equity holders of the parent |
| ||||
|
| Issued capital | Share premium | Asset revaluation reserve | Accumulated losses | Total equity | |
|
| US$000 | US$000 | US$000 | US$000 | US$000 | |
At 1 January 2010 |
| 585 | 718,370 | 832 | (227,152) | 492,635 | |
Total comprehensive income for the period |
| - | - | - | 23,334 | 23,334 | |
Share-based payment |
| - | - | - | (1,371) | (1,371) | |
At 30 June 2010 (unaudited) |
| 585 | 718,370 | 832 | (205,189) | 514,598 | |
Interim consolidated cash flow statement
for the six months ended 30 June 2011
|
| For the six months ended30 June (unaudited) | ||
|
| 2011 |
| 2010 |
| Notes | US$000 |
| US$000 |
Operating activities |
|
|
|
|
Profit before tax |
| 85,143 |
| 30,415 |
|
|
|
|
|
Adjustments to reconcile profit before taxto net cash flows from operating activities: |
|
|
|
|
Depreciation of property, plant and equipment | 3,6 | 13,646 |
| 10,020 |
Inventory write-down | 9 | 717 |
| - |
Write-off of property, plant and equipment | 6 | 740 |
| 139 |
Loss/(gain) on disposal of property, plant and equipment |
| 2 |
| (9) |
Share-based payments credit |
| - |
| (1,371) |
Finance income |
| (3,364) |
| (2,545) |
Bonds fair value movement | 7 | (3,968) |
| 1,444 |
Finance expense | 4.2 | 1,523 |
| 1,739 |
Net foreign exchange loss/(gain) |
| (5,398) |
| 5,201 |
Movement in provisions |
| 308 |
| 346 |
Fair value gain related to loans given to jointly controlled entity | 4.1 | (4,705) |
| (8,975) |
Fair value expense related to receipts from Kazzinc to finance joint venture | 4.2 | 4,474 |
| 9,388 |
Working capital adjustments: |
|
|
|
|
Increase in trade and other receivables and prepayments |
| (10,734) |
| (12,333) |
Decrease in inventories |
| 5,185 |
| 6,767 |
Increase in trade and other payables |
| 949 |
| 1,333 |
Income tax paid |
| (6,740) |
| (4,110) |
Net cash flows from operating activities |
| 77,778 |
| 37,449 |
|
|
|
|
|
Investing activities |
|
|
|
|
Proceeds from sale of property, plant and equipment |
| 58 |
| 110 |
Purchase of property, plant and equipment | 3 | (31,388) |
| (13,685) |
Increase in deferred stripping costs | 6 | (1,101) |
| (175) |
Loans given to jointly controlled entity |
| - |
| (2,068) |
Loans repaid by jointly controlled entity | 14 | 726 |
| - |
Interest received from deposits and bonds |
| 4,627 |
| 3,492 |
Interest received from jointly controlled entity | 14 | 5,459 |
| 257 |
Sale of investments - bonds | 7 | 23,427 |
| - |
Purchase of investments - bonds | 7 | (19,765) |
| - |
Net cash flows used in investing activities |
| (17,957) |
| (12,069) |
|
|
|
|
|
Financing activities |
|
|
|
|
Issue of share capital |
| 37 |
| - |
Repayment of borrowings |
| (4,710) |
| (42,865) |
Repayment of loan to Kazzinc | 14 | (565) |
| - |
Interest paid |
| (21) |
| (1,966) |
Interest paid to Kazzinc | 14 | (5,306) |
| (243) |
Receipts from Kazzinc to finance joint venture |
| - |
| 1,834 |
Lease payments |
| - |
| (270) |
Net cash flows used in financing activities |
| (10,565) |
| (43,510) |
|
|
|
|
|
Net (decrease)/increase in cash and cash equivalents |
| 49,256 |
| (18,130) |
Effects of exchange rate changes |
| 2,657 |
| (4,220) |
Cash and cash equivalents at 1 January |
| 167,568 |
| 196,695 |
Cash and cash equivalents at 30 June |
| 219,481 |
| 174,345 |
1. Corporate information
These interim condensed consolidated financial statements of Highland Gold Mining Limited for the six months ended 30 June 2011 were authorised for issue in accordance with a resolution of the directors on 19 September 2011.
Highland Gold Mining Limited is a public company incorporated and domiciled in Jersey. Its ordinary shares are traded on the Alternative Investment Market ("AIM").
The principal activity is building of a portfolio of gold mining operations within the Russian Federation.
2. Basis of preparation and accounting policies
Basis of preparation
The interim condensed consolidated financial statements for the six months ended 30 June 2011 have been prepared in accordance with IAS 34 'Interim Financial Reporting'. The annual financial statements of the Group were prepared in accordance with International Financial Reporting Standards as issued by the European Union.
The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 31 December 2010.
The interim condensed consolidated financial statements have been prepared on a going concern basis as the directors believe the Group will continue to be a going concern into the foreseeable future.
The impact of seasonality or cyclicality on operations is not considered significant to the interim condensed consolidated financial statements.
New standards, interpretations and amendments thereof, adopted by the Group
The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended31 December 2010, except for the adoption of new standards and interpretations as of 1 January 2011, noted below:
IAS 24 Related Party Transactions (Amendment)
The IASB has issued an amendment to IAS 24 that clarifies the definitions of a related party. The new definitions emphasise a symmetrical view of related party relationships as well as clarifying in which circumstances persons and key management personnel affect related party relationships of an entity. Secondly, the amendment introduces an exemption from the general related party disclosure requirements for transactions with a government and entities that are controlled, jointly controlled or significantly influenced by the same government as the reporting entity. The adoption of the amendment did not have any impact on the financial position or performance of the Group.
IAS 32 Financial Instruments: Presentation (Amendment)
The amendment alters the definition of a financial liability in IAS 32 to enable entities to classify rights issues and certain options or warrants as equity instruments. The amendment is applicable if the rights are given pro rata to all of the existing owners of the same class of an entity's non-derivative equity instruments, to acquire a fixed number of the entity's own equity instruments for a fixed amount in any currency. The amendment has had no effect on the financial position or performance of the Group.
IFRIC 14 Prepayments of a Minimum Funding Requirement (Amendment)
The amendment removes an unintended consequence when an entity is subject to minimum funding requirements (MFR) and makes an early payment of contributions to cover such requirements. The amendment permits a prepayment of future service cost by the entity to be recognised as pension asset. The Group is not subject to minimum funding requirements in Euroland. The amendment to the interpretation therefore had no effect on the financial position or performance of the Group.
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (effective 1 July 2010)
IFRIC 19 clarifies that equity instruments issued to a creditor to extinguish a financial liability qualify as consideration paid. The equity instruments issued are measured at their fair value. In case that this cannot be reliably measured, the instruments are measured at the fair value of the liability extinguished. Any gain or loss is recognised immediately in profit or loss. The adoption of this interpretation had no effect on the financial statements of the Group.
Improvements to IFRSs (issued May 2010)
In May 2010, the IASB issued its third omnibus of amendments to its standards, primarily with a view to removing inconsistencies and clarifying wording. There are separate transitional provisions for each standard. The adoption of the amendments resulted in changes to accounting policies, but did not have any impact on the financial position or performance of the Group.
The Group has not early adopted any other standard, interpretation or amendment that was issued but is not yet effective.
3. Segment information
For management purposes, the Group is organized into business units based on the nature of their activities, and has four reportable operating segments as follows:
·; Gold production;
·; Polymetallic concentrate production;
·; Development and exploration; and
·; Other.
Management monitors the gold production segment, namely Mnogovershinnoye and Belaya Gora, for the purpose of making decisions about resource allocation and evaluating the effectiveness of its activity. To keep the presentation form consistent with 2011 presentation, Belaya Gora was reclassified from the development and exploration segment to the gold production segment in segment information for the period ended 30 June 2010 given it began production during 2010.
The polymetallic concentrate production segment, namely Novoshirokinskoye, was commissioned in October 2009. Management analyses it separately due to the fact that the nature of its activities differs from the gold production process.
The development and exploration segment contains the holders of the licenses being in the development and exploration stage.
The "other" segment includes head office, management company, trade house and other costs which have been aggregated to form the reportable segment.
Segment performance is evaluated based on EBITDA (defined as operating profit/(loss) excluding depreciation and amortisation, impairment gain/(loss) and WIP write-down). The development and exploration segment is evaluated based on the life of mine models in connection with the capital expenditure spent during the reporting period.
The following tables present revenue, EBITDA, profit and loss and asset information for the Group's operating segments.
The Highland Gold financing (including finance costs and finance income), income taxes and foreign exchange gains/(losses) are managed on a group basis and are not allocated to operating segments.
Non-current financial assets include long-term loans given to a jointly controlled entity that are not allocated to operating segments.
Revenue from two customers was greater than 10% of total revenues.
Period ended 30 June 2011 | Gold production segment | Polymetallic concentrate production segment | Development & exploration | Other | Adjustments and eliminations | Total | ||||||
|
| US$000 | US$000 | US$000 | US$000 | US$000 | US$000 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Gold revenue |
| 124,288 |
| - |
| - |
| - |
| - |
| 124,288 |
Silver revenue |
| 1,109 |
| - |
| - |
| - |
| - |
| 1,109 |
Concentrate revenue |
| - |
| 29,309 |
| - |
| - |
| - |
| 29,309 |
Other third-party |
| 26 |
| 123 |
| 23 |
| 3,207 |
| - |
| 3,379 |
Inter-segment |
| 97 |
| - |
| 60 |
| 7,073 |
| (7,230) |
| - |
Total revenue |
| 125,520 |
| 29,432 |
| 83 |
| 10,280 |
| (7,230) |
| 158,085 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
| 56,316 |
| 13,980 |
| 14 |
| 2,420 |
| - |
| 72,730 |
EBITDA |
| 71,875 |
| 18,829 |
| (251) |
| (2,258) |
| (127) |
| 88,068 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other segment information |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
| (9,849) |
| (3,614) |
| - |
| (183) |
| - |
| (13,646) |
WIP write-down |
| (717) |
| - |
| - |
| - |
| - |
| (717) |
Net finance expenses including foreign exchange |
|
|
|
|
|
|
|
|
|
|
| 11,438 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before income tax |
|
|
|
|
|
|
|
|
|
|
| 85,143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax |
|
|
|
|
|
|
|
|
|
|
| (14,847) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period |
|
|
|
|
|
|
|
|
|
|
| 70,296 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets at 30 June 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditure* |
| 92,348 |
| 94,832 |
| 112,620 |
| 1,477 |
| - |
| 301,277 |
Goodwill |
| 22,253 |
| - |
| 42,978 |
| - |
| - |
| 65,231 |
Non-current financial assets |
|
|
|
|
|
|
|
|
|
|
| 23,832 |
Other non-current assets |
|
|
|
|
|
|
|
|
|
|
| 12,364 |
Current assets** |
|
|
|
|
|
|
|
|
|
|
| 365,409 |
Total assets |
|
|
|
|
|
|
|
|
|
|
| 768,113 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditure - addition during the first half of 2011, including: |
| 19,808 |
| 2,301 |
| 10,301 |
| 96 |
| - |
| 32,506 |
Deferred stripping costs |
| 1,101 |
| - |
| - |
| - |
| - |
| 1,101 |
Capitalised interest |
| - |
| - |
| 17 |
| - |
| - |
| 17 |
Cash capital expenditure*** |
| 18,707 |
| 2,301 |
| 10,284 |
| 96 |
| - |
| 31,388 |
|
|
|
|
|
|
|
|
|
|
|
|
|
*Capital expenditure is the sum of exploration and evaluation assets, mine properties and property, plant and equipment.
**Current assets include corporate assets not directly attributable to operating segments. Such unallocated assets include corporate cash and cash equivalents of US$219 million (2010: US$168 million), investments of US$53 million (2010: US$55 million), inventories of US$39 million (2010: US$47 million), trade and other receivables of US$37 million (2010: US$32 million), and other assets of US$17 million (2010: US$6 million).
*** Cash capital expenditure include additions to property, plant and equipment of US$26.3 million and prepayments given for property, plant and equipment of US$5.1 million.
Period ended 30 June 2010 | Gold production segment | Polymetallic concentrate production segment | Development & exploration | Other | Adjustments and eliminations | Total | ||||||
|
| US$000 | US$000 | US$000 | US$000 | US$000 | US$000 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Gold revenue |
| 87,637 |
| - |
| - |
| - |
| - |
| 87,637 |
Silver revenue |
| 574 |
| - |
| - |
| - |
| - |
| 574 |
Concentrate revenue |
| - |
| 10,054 |
| - |
| - |
| - |
| 10,054 |
Other third-party |
| 2 |
| - |
| 2 |
| 2,204 |
| - |
| 2,208 |
Inter-segment |
| 75 |
| - |
| 92 |
| 5,999 |
| (6,166) |
| - |
Total revenue |
| 88,288 |
| 10,054 |
| 94 |
| 8,203 |
| (6,166) |
| 100,473 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
| 41,149 |
| 9,635 |
| 4,233 |
| 2,400 |
| (170) |
| 57,247 |
EBITDA |
| 49,539 |
| 1,942 |
| (4,435) |
| (335) |
| (24) |
| 46,687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other segment information |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
| (7,961) |
| (1,788) |
| - |
| (271) |
| - |
| (10,020) |
Net finance expenses including foreign exchange |
|
|
|
|
|
|
|
|
|
|
| (6,252) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before income tax |
|
|
|
|
|
|
|
|
|
|
| 30,415 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax |
|
|
|
|
|
|
|
|
|
|
| (7,081) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period |
|
|
|
|
|
|
|
|
|
|
| 23,334 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets at31 December 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditure* |
| 78,942 |
| 96,739 |
| 102,543 |
| 1,563 |
| - |
| 279,787 |
Goodwill |
| 22,253 |
| - |
| 42,978 |
| - |
| - |
| 65,231 |
Non-current financial assets |
|
|
|
|
|
|
|
|
|
|
| 30,738 |
Other non-current assets |
|
|
|
|
|
|
|
|
|
|
| 5,246 |
Current assets |
|
|
|
|
|
|
|
|
|
|
| 307,771 |
Total assets |
|
|
|
|
|
|
|
|
|
|
| 688,773 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditure - addition during the first half of 2010, including: |
| 7,737 |
| 1,682 |
| 6,054 |
| 263 |
| - |
| 15,736 |
Deferred stripping costs |
| 175 |
| - |
| - |
| - |
| - |
| 175 |
Capitalised interest |
| 139 |
| - |
| 1,737 |
| - |
| - |
| 1,876 |
Cash capital expenditure |
| 7,423 |
| 1,682 |
| 4,317 |
| 263 |
| - |
| 13,685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
*Capital expenditure is the sum of exploration and evaluation assets, mine properties and property, plant and equipment.
All revenue and assets for both 2011 and 2010 are located in CIS.
4. Finance income and costs
4.1 Finance income
For the six months ended 30 June | |||
2011 | 2010 | ||
US$000 | US$000 | ||
Interest from joint venture (Note 14) | 1,392 | 1,470 | |
Gain on modification of terms of loan to jointly controlled entity (Note 14) | 4,705 | - | |
Gain on modification of terms of loan from Kazzinc (Note 14) | - | 8,975 | |
Bank interest | 1,972 | 1,075 | |
Bonds fair value gain (Note 7) | 3,968 | - | |
Total finance income | 12,037 | 11,520 |
4.2 Finance costs
For the six months ended 30 June | |||
2011 | 2010 | ||
US$000 | US$000 | ||
Interest expense - related party (Note 14) | 1,323 | 1,402 | |
Loss on modification of terms of loan from Kazzinc (Note 14) | 4,474 | - | |
Loss on modification of terms of loan to jointly controlled entity (Note 14) | - | 9,388 | |
Bonds fair value loss | - | 1,444 | |
Accretion expense on site restoration provision | 200 | 252 | |
Write off of deferred financing costs | - | 60 | |
Finance charges payable under finance leases and hire purchase contracts | - | 25 | |
Total finance costs | 5,997 | 12,571 |
5. Income tax
The major components of income tax expense in the interim consolidated income statement are:
| For the six months ended30 June | ||
| 2011 |
| 2010 |
| US$000 |
| US$000 |
Current income tax |
|
|
|
Current income tax charge | 13,339 |
| 8,137 |
Adjustments in respect of prior year current tax | - |
| (111) |
Deferred income tax |
|
|
|
Relating to origination and reversal of temporary differences | 1,508 |
| (945) |
Income tax expense | 14,847 |
| 7,081 |
There are no tax amounts recognised directly in equity during the first half of 2011 (H1 2010: $Nil).
6. Property, plant and equipment
Reconciliation of fixed assets on period-by-period basis for the period ending 30 June 2011
Mining | Exploration and evaluation assets | Freehold building | Plant and equipment | Construction in progress | Deferred stripping costs | Total | ||||||||
US$000 | US$000 | US$000 | US$000 | US$000 | US$000 | US$000 | ||||||||
Cost | ||||||||||||||
At 1 January 2011 | 232,874 | 27,317 | 26,206 | 74,526 | 6,820 | 118 | 367,861 | |||||||
Additions | 7,316 | 10,578 | - | 102 | 8,279 | - | 26,275 | |||||||
Transfers | (91) | 15 | 462 | 5,770 | (6,156) | - | - | |||||||
Write-off* | - | - | - | (1,529) | - | - | (1,529) | |||||||
Disposals | - | - | - | (87) | - | - | (87) | |||||||
Movement in deferred stripping | - | - | - | - | - | 1,101 | 1,101 | |||||||
Capitalised depreciation | 46 | 5 | - | - | - | - | 51 | |||||||
Change in estimation - site restoration asset** | 8,560 | - | - | - | - | - | 8,560 | |||||||
At 30 June 2011 | 248,705 | 37,915 | 26,668 | 78,782 | 8,943 | 1,219 | 402,232 | |||||||
Depreciation and impairment | ||||||||||||||
At 1 January 2011 | 54,612 | - | 6,219 | 26,540 | 703 | - | 88,074 | |||||||
Provided during the year | 7,759 | - | 1,084 | 4,803 | - | - | 13,646 | |||||||
Write-off* | - | - | - | (789) | - | - | (789) | |||||||
Disposals | - | - | - | (27) | - | - | (27) | |||||||
Capitalised depreciation | - | - | 8 | 43 | - | - | 51 | |||||||
At 30 June 2011 | 62,371 | - | 7,311 | 30,570 | 703 | - | 100,955 | |||||||
Net book value: | ||||||||||||||
At 1 January 2011 | 178,262 | 27,317 | 19,987 | 47,986 | 6,117 | 118 | 279,787 | |||||||
At 30 June 2011 | 186,334 | 37,915 | 19,357 | 48,212 | 8,240 | 1,219 | 301,277 |
* In the first half of 2011 US$0.7 million (H1 2010: US$0.1 million) write off relates to retirement of old inefficient equipment.
** During the first half of 2011 there was a change in the rehabilitation estimate mainly due to a change in the method of waste removal at MNV. The net present value of the increase in the cost estimate is US$8.6 million (US$7.8 million at MNV, US$0.8 million at BG) which was booked as an increase to mining assets and non-current provisions.
Reconciliation of fixed assets on period-by-period basis for the period ending 30 June 2010
Mining | Exploration and evaluation assets | Freehold building | Plant and equipment | Construction in progress | Deferred stripping costs | Total | ||||||||
US$000 | US$000 | US$000 | US$000 | US$000 | US$000 | US$000 | ||||||||
Cost | ||||||||||||||
At 1 January 2010 | 203,053 | 30,853 | 24,035 | 64,807 | 12,612 | 1,792 | 337,152 | |||||||
Additions | 4,197 | 3,855 | - | 3,356 | 4,153 | 175 | 15,736 | |||||||
Transfers | 1,696 | (13,508) | 437 | 12,579 | (1,204) | - | - | |||||||
Capitalised depreciation | 37 | - | - | - | - | - | 37 | |||||||
Change in estimation | (22) | - | - | - | - | - | (22) | |||||||
Write-off | - | - | - | (776) | - | - | (776) | |||||||
Disposals | (39) | - | - | (171) | (4) | - | (214) | |||||||
At 30 June 2010 | 208,922 | 21,200 | 24,472 | 79,795 | 15,557 | 1,967 | 351,913 | |||||||
Depreciation and impairment | ||||||||||||||
At 1 January 2010 | 79,947 | - | 13,355 | 30,592 | - | - | 123,894 | |||||||
Provided during the year | 5,515 | - | 842 | 3,663 | - | - | 10,020 | |||||||
Impairment transfer | (8,091) | - | - | 8,091 | - | - | - | |||||||
Write-off | - | - | - | (637) | - | - | (637) | |||||||
Disposals | - | - | - | (113) | - | - | (113) | |||||||
Capitalised depreciation | - | - | 4 | 33 | - | - | 37 | |||||||
At 30 June 2010 | 77,371 | - | 14,201 | 41,629 | - | - | 133,201 | |||||||
Net book value: | ||||||||||||||
At 1 January 2010 | 123,106 | 30,853 | 10,680 | 34,215 | 12,612 | 1,792 | 213,258 | |||||||
At 30 June 2010 | 131,551 | 21,200 | 10,271 | 38,166 | 15,557 | 1,967 | 218,712 |
7. Investments
Investments (coupon bonds)
In 2009-2010 the Group invested funds in British pound denominated bank coupon bonds. During the first half of 2011 the Group additionally invested US$19.8 million (2010: US$40.1 million) and received US$23.4 million (2010: US$17.4 million) as a result of selling bonds purchased in 2009 and 2010. The bonds are treated as financial assets at fair value through profit or loss as the performance of these investments is assessed on a fair value basis in accordance with management's investment strategy. Fair value of those bonds was determined based on quoted bid prices at each period end date (source: Bloomberg). The table below contains fair value movement for the reporting period.
|
| US$000 |
At 1 January 2010 |
| 46,274 |
Fair value loss |
| (11,655) |
Foreign exchange loss |
| (1,731) |
Coupon interest income accrued |
| 4,647 |
Coupon interest income received |
| (5,369) |
Bonds sold |
| (17,401) |
Bonds acquired |
| 40,137 |
At 31 December 2010 |
| 54,902 |
Fair value loss |
| (729) |
Foreign exchange gain |
| 1,704 |
Coupon interest income accrued |
| 2,993 |
Coupon interest income received |
| (2,456) |
Bonds sold |
| (23,427) |
Bonds acquired |
| 19,765 |
At 30 June 2011 |
| 52,752 |
Fair value hierarchy
All financial instruments carried at fair value are categorised in three categories defined as follows:
Level 1 - Quoted market prices
Level 2 - Valuation techniques (market observable)
Level 3 - Valuation techniques (non-marked observable)
The Group held the following financial instruments measured at fair value:
Assets measured at fair value | 30 June 2011 | Level 1 | |
US$000 | US$000 | ||
Coupon bonds | 52,752 | 52,752 | |
31 Dec 2010 | Level 1 | ||
US$000 | US$000 | ||
Coupon bonds | 54,902 | 54,902 | |
30 June 2010 | Level 1 | ||
US$000 | US$000 | ||
Coupon bonds | 42,139 | 42,139 |
The Group held neither level 2 nor level 3 financial instruments at fair value.
8. Commitments and contingencies
Capital commitments
At 30 June 2011, the Group had commitments of US$11.4 million (at 31 December 2010: US$2.2 million, at 30 June 2010: US$2.8 million) principally relating to development assets and US$5.5 million (at 31 December 2010:US$2.7 million, at 30 June 2010: US$3.8 million) for the acquisition of new machinery.
Contingent Liabilities
Management has identified possible tax claims within the various jurisdictions in which it operates totalling US$0.2 million as at 30 June 2011 (at 31 December 2010: US$0.5 million, at 30 June 2010: US$1.5 million). As it is uncertain that possible tax claims will result in a future outflow of resources, no provision has been made in respect of these matters.
9. Inventories
| 30 June2011unaudited | 31 December 2010audited | 30 June2010unaudited |
| US$000 | US$000 | US$000 |
Raw materials and consumables | 38,709 | 45,195 | 35,835 |
Ore stockpiles | 7,561 | 4,014 | 3,393 |
Gold in progress | 3,411 | 4,988 | 5,261 |
Finished goods | 222 | 2,891 | 449 |
| 49,903 | 57,088 | 44,938 |
|
|
|
|
Ore stockpile obsolescence provision | (1,695) | (978) | - |
Raw materials and consumables obsolescence provision | (9,653) | (9,357) | (8,676) |
Total inventories | 38,555 | 46,753 | 36,262 |
In the first half of 2011 stock-piled low grade ore has been tested for impairment at Belaya Gora. The balance of WIP in the amount of US$0.7 million has been written down in the first half of 2011 due to unrecoverability.
10. Cash and cash equivalents
Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. The fair value of cash and cash equivalents is equal to the carrying value.
For the purpose of the interim consolidated cash flow statement, cash and cash equivalents are comprised of the following:
| 30 June2011unaudited | 31 December 2010audited | 30 June2010unaudited |
US$000 | US$000 | US$000 | |
Cash in hand and at bank | 15,765 | 2,609 | 22,145 |
Short term deposits | 203,716 | 164,959 | 152,200 |
219,481 | 167,568 | 174,345 |
11. Interest-bearing loans and borrowings
In January 2011 the Group made an early repayment of US$4.7 million to MDM bank. After this repayment the Group has no outstanding bank debt.
12. Share Capital
Authorised | 30 June 2011 |
| 31 December 2010 |
| Shares |
| Shares |
Ordinary shares of £0.001 each | 750,000,000 |
| 750,000,000 |
| |||
Ordinary shares issued and fully paid | Shares | AmountUS$000 | |
At 30 June 2011 | 325,222,098 |
| 585 |
At 31 December 2010 and 30 June 2010 | 325,197,098 |
| 585 |
13. Share-based payments
During the six months ended 30 June 2011 the Group did not issue any new share options as the Board considered and agreed that at the present time there would be no further grant of options under the unapproved share option scheme.
No options have been forfeited. Options of 25,000 shares have been exercised. Currently there are 17 participants of the scheme representing board members, directors and executive management of the Group.
14. Related party transactions
The following table provides the total value of transactions which have been entered into with related parties during the six months ended 30 June 2011 and 2010, and the twelve months ended 31 December 2010:
Services/Sales provided to related parties | Services/Sales provided by related parties | Amounts owed by related parties | Amounts owed to related parties | ||
US$000 | US$000 | US$000 | US$000 | ||
Entity with significant influence over the Group: | |||||
Barrick International | 30.06.11 | - | - | 20 | - |
31.12.10 | - | - | 18 | - | |
30.06.10 | - | - | 18 | - | |
Barrick Gold Services | 30.06.11 | - | - | - | 214 |
31.12.10 | - | - | - | 197 | |
30.06.10 | - | - | - | 192 | |
Joint venture in which the Company is the venturer: | |||||
OAO Novoshirokinskoye | 30.06.11 | 10 | - | 11 | 5 |
31.12.10 | 10 | - | 1 | 8 | |
30.06.10 | 12 | - | 10 | 11 | |
Partner in the joint venture: | |||||
Kazzinc | 30.06.11 | 29,309 | 85 | 9,599 | 3 |
31.12.10 | 33,983 | 781 | 6,086 | 28 | |
30.06.10 | 10,054 | 266 | 2,489 | 148 |
The following table provides the interest received and loans outstanding from related parties during the six months ended 30 June 2011 and 2010, and the year ended 31 December 2010:
Loans given to related parties | Interest on the loan given to the related party | Loan and interest paid by related parties | Loans received from related parties | Interest on the loan received from the related party | Loan and interest paid to related parties | Fair value adjustment due to discounting | Amounts owed by related parties | Amounts owed to related parties | ||
US$000 | USD$000 | USD$000 | US$000 | US$000 | US$000 | US$000 | US$000 | US$000 | ||
Joint venture in which the Company t is the venturer: | ||||||||||
OAO Novoshirokinskoye | 30.06.11 | - | 1,392 | (6,185) | - | - | - | 4,705 | 34,672 | - |
31.12.10 | 2,068 | 2,936 | (5,466) | - | - | - | (8,175) | 34,760 | - | |
30.06.10 | 2,068 | 1,470 | (257) | - | - | - | (9,388) | 37,290 | - | |
Partner in the joint venture: | ||||||||||
Kazzinc | 30.06.11 | - | - | - | - | 1,323 | (5,871) | 4,474 | - | 32,949 |
31.12.10 | - | - | - | 1,843 | 2,792 | (5,180) | (7,802) | - | 33,024 | |
30.06.10 | - | - | - | 1,834 | 1,402 | (243) | (8,975) | - | 35,389 |
During 2011 the terms of original loan agreements of Kazzinc and HGML for financing the joint venture Novoshirokinsky Rudnik have changed. The change of terms included revision of interest rates and re-schedule of repayments.
The carrying amount of financial assets and liabilities was adjusted to the present values of all future cash receipts and repayments under new terms using the previous effective interest rate of 8.5%. This resulted in an increase of Kazzinc loans received by US$4.5 million (48.3%) and an increase of loans issued by the Group to Novo by US$4.7 million (51.7%). These differences were recognised as fair value gain and fair value expense within finance income and finance costs in the statement of comprehensive income.
15. Earnings per share
Basic earnings per share amounts are calculated by dividing profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing the profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the exercise of share options into ordinary shares.
The following reflects the income and share data used in the basic and diluted (loss)/earnings per share computations:
|
| For the six months ended 30 June | ||
|
| 2011 |
| 2010 |
|
| US$000 |
| US$000 |
|
|
|
|
|
Net profit attributable to ordinary equity holders of the parent |
| 70,296 |
| 23,334 |
|
|
|
|
|
|
| Thousands |
| Thousands |
Weighted average number of ordinary shares for basic earnings per share |
| 325,210 |
| 325,197 |
Effect of dilution: |
|
|
|
|
Share options |
| 1,037 |
| 1,853 |
Weighted average number of ordinary shares adjusted for the effect of dilution |
| 326,247 |
| 327,050 |
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements.
16. Events after the reporting period
On 19 September 2011, the Board of Directors approved an interim dividend of £0.05 per share (2010: £nil per share) which is expected to result in an aggregate dividend payment of £16.3 million. The interim dividend will be paid on 21 October 2011 to the shareholders on the register at the close of business on 30 September 2011.
Related Shares:
HGM.L