Nordgold Reports Q1 2012 Financial Results
Amsterdam, Netherlands, 18 May 2012 – Nord Gold N.V, (“Nordgold” or the “Company”, LSE: NORD), an independent pure-play gold producer focused on emerging markets, announces its financial results for the first quarter ended March 31, 2012.
First Quarter Financial Highlights
- Average realised gold price of US$1,689 per ounce, up 20% (Q1 2011: US$ 1,403)
- Production of 156.2 koz down 10.2% (Q1 2011: 173.9 koz)
- Revenue of US$264m, up 8% (Q1 2011: US$244m)
- EBITDA of US$ 114 m, down 15% (Q1 2011: US$135m)
- EBITDA margin of 43% (Q1 2011: 55%)
- Net income of to US$ 60m down 30% (Q1 2011: US$ 85 m)
- Cash outflow from operating activities of US$ 19 m (Q1 2011: cash inflow US$: 80 m)
- Bissa project construction in Burkina Faso is within budget and progressing rapidly with engineering works mostly complete; on track to deliver first gold in H1 2013
- Gross project in Russia on track to complete pre-feasibility study in May/June 2012
- Nordgold maintains 2012 production forecast range of 800-850 thousand gold equivalent ounces
As we previously disclosed in our recent Q1 Production Report, first quarter production was impacted by mine-specific issues which have since been identified and largely fixed. While revenues in the quarter are up 8%, this short term impact on production has affected overall costs, resulting in a 15% drop in EBITDA in the quarter. However with production now returning to our forecast rates we anticipate a strong second half to the year. We expect that the investments we have made across our portfolio will ensure we meet our 2012 and 2013 production targets.
Our long term growth profile remains very strong. Work at our major development projects of Bissa and Gross is on schedule and on budget and we expect first gold production at Bissa in H1 2013. Our reserves and resources update announced in April 2012, which identified a 54% increase in Combined JORC and CIM Code Compliant Proved and Probable Ore Reserves to 12.7 Moz, gives us real confidence to deliver on our ambition to become a truly world class gold producer.
Nikolai ZelenskiCEO of Nordgold
- Revenue for Q1 2012 was higher than in Q1 2011 by US$ 19.8 m in spite of lower sales volume (156.2 koz in Q1 2012 vs 173.9 koz in Q1 2011) due to favourable average gold price (US$1689/oz vs US$1403/oz)
- Cost of sales in Q1 2012 increased in comparison with Q1 2011 by US$ 26.6, m primarily due to growth in consumables prices, increased staff costs, increased levels of consumption of spare parts and fuel and energy prices
- General and administrative expenses increased by US$ 22.2 m from income of US$ 7.3 m in Q1 2012 to expense of US$ 15.0 m. This increase was due to a gain of US$ 16.8 m recorded in Q1 2011 from the reversal of a provision following the repayment of a debt owed by Prognoz-Silver to Buryatzoloto
- Taxes other than income tax decreased by US$ 2.1 m from US$ 18.5 m in Q1 2011 to US$ 16.4 m in 2012 due to lower level of production and sales
- Other operating (expenses)/income decreased by US$ 4.1 m from income of US$ 1.4 m in Q1 2011 to an expense of US$ 2.7 m in 2012 largely due to a gain in Q1 2011from the reversal of provisions and contingencies of US$ 4.8 m
- Finance income in Q1 2012 remained broadly on the same level as in Q1 2011, the change relating to foreign currency rate fluctuations
- Finance expense decreased by US $ 8.4 m from US$ 15.4 m in Q1 2011 to US$ 7.0 m in 2012 due to equity transaction costs borne in Q1 2011 related to the withdrawn IPO project
- Income tax increased by US$ 0.6 m from US$ 16.8 m in Q1 2011 to US$ 17.4 m in 2012 due to factors described above
Q1 2012 cash cost per ounce produced was US$798, an increase of 11% when compared to Q4 2011 and 30% when compared to Q1 2011. Costs were primarily affected by the combination of a lower production rate in Q1 2012, growth in consumables prices, increased staff costs, increased level of spare parts consumption rates and increased fuel and energy prices. We expect the volume effect on costs to reverse later this year and we would expect a reduction in the per ounce cash costs in H2 2012.
As a part of the cost efficiency programme which is a major focus for management, we have started the implementation of the Business System of Nordgold (BSN) — the unique program is based on a system that has already shown considerable benefits at Severstal. Improvements in efficiency, the attraction and retention of the best in class personnel, cost reductions and the realization of safety projects will all contribute to an enhanced financial performance.
The operational progress made during 2011 and the beginning of 2012 has not been fully reflected in the production and financial results for Q1 2012 as these were primarily impacted by short term mine-specific operational and geological factors which have now been largely rectified.
Nordgold production guidance for 2012 remains unchanged and we expect to produce 800 — 850 thousand gold equivalent ounces in 2012. For 2013 our objective remains to reach production of 1 million gold equivalent ounces from organic growth at the existing asset base as well as contribution from the Bissa and Gross projects.
We forecast 2012 capex to be in the region of US$472m, with a continued focus on the Lefa mine turnaround and bringing our new deposits into production. The Company’s existing operations will mainly require mainly maintenance capex going forward.
Furthermore, exploration will continue to remain a significant part of Nordgold’s capex programme. From the total capex programme we have budgeted for this year some US$114 million will be dedicated to exploration and evaluation.
Reserves & Resources
On 24 April 2012 Nordgold announced the results of its Resource and Reserve upgrade using all available data for the Company’s mines and deposits as reported by Wardell Armstrong International, Snowden Group (JORC Code compliant updates) and Ricardo Valls (CIM compliant updates). These estimates supersede all previously announced estimates.
- Combined JORC and CIM Code Compliant Proved and Probable Ore Reserves of 12.7 Moz, up 54% from 8.2 Moz in June 2011
- Total JORC Code and CIM Compliant Mineral Resources of 29.5 Moz (up 30% from 22.7 Moz in June 2011) of which 16.7 Moz are Measured and Indicated Resources (up 39% from 12.0 Moz) and 12.7 Moz are Inferred Resources (up 20% from 10.6 Moz)
- Ore Reserves were estimated using a gold price of US$1,250/oz. The previous estimate in June 2011 was at a price of US$1,100/oz. Given the increased grade at nearly all projects, the substantial growth in reserves and resources is attributable primary to our exploration works, and only marginally to the change in price assumptions
- The average gold grade in Ore Reserves shows a decrease from an average 1.30 g/t to 1.15 g/t since the last update, due to inclusion of the Resource base at Gross (a low grade robust heap leach project in Russia with low stripping ratio and high recoveries) in the Company’s Reserves. Excluding the Gross project, average reserve grade has increased from 1.50 g\t to 1.59 g\t
The 2011 exploration programme of $115 m showed encouraging results across all regions and mines:
- Gross: following an effective exploration programme the Company has transferred 3.2 Moz of Mineral Resources into Ore Reserves at an upgraded average grade of 0.64 g/t. Mineral Resources significantly increased by 46% to 8.3 Moz
- issa: Mineral Resources up 10%. New resources estimated near the Bissa mine combining five different satellites, contain total Mineral Resources of approximately 1.7 Moz, including 1.0 Moz of Resources at a grade of 0.77 g/t at Bouly
- Lefa: the mine exploration programme was highly successful, with growth in Resources to 7.8 Moz at higher grades for almost all Lefa deposits and pits (up 37% from 5.7 Moz in last update). There is significant potential for further Reserve and Resource growth
Key exploration priorities in 2012 — 2013 will include:
- Continued life of mine extension at Buryatzoloto, Taparko and Neryungri
- Initiation of drilling programme at Berezitovy, conversion of a significant Mineral Resource at Suzdal
- Further Resource definition at Bouly and Uryakh
- Bissa satellite drilling
- Regional exploration in Russia and Burkina Faso
The Company’s financial results for Q1 2012 will be available from 07:00 AM London time on May 18th on the company’s official website: www.nordgold.com