Highland Gold H1 EBITDA plummets 24% to $48.4 mln (Part 3)

MOSCOW. Sept 23 (Interfax) – Highland Gold Mining plc (HGM) saw its earnings before taxes, depreciation and amortization (EBITDA) plummet 23.6% year-on-year in H1 2014 to $48.4 million, the company said in a statement.

Sales revenue to International Financial Reporting Standards (IFRS) fell 9.4% to $142.24 million and the EBITDA margin fell to 34%, from 40.3% a year previously.

Revenue fell due to a drop in gold prices: the average realized sale price of gold fell 12.5% from $1,381 to $1,210/oz. HGM sold 116,567 oz of gold, up 5.6% year-on-year.

Net profit grew, by 19.5% to $20.307 million.

Total cash costs fell 3.9% to $689/oz, and all-in sustaining costs were down 1.3% to $900/oz.

The board of directors has approved a divided of 2.5 pence per share for the half, as much as the company paid for the same period of last year.

HGM financial highlights for H1 2014:
H1 2014 H1 2013 H1 2014/H1 2013
Production, gold equivalent, ’000 oz 120,121 105,630 13,7%
Total cash costs, $/oz 689 717 -3,9%
All-in sustaining costs, $/oz 900 912 -1,3%
Revenue, $ mln 142,240 157,033 -9,4%
Operating profit, $ mln 26,268 35,528 -26,1%
EBITDA, $ mln 48,375 63,278 -23,6%
Net profit, $ mln 20,307 17,000 19,5%
EPS, $ 0,062 0,052 19,2%
Net operating cash flow, $ mln 64,495 71,640 -10,0%
Capex, $ mln 36,429 67,929 -46,4%
Net debt, $ mln 239,242 177,604 34,7%

Net debt was $239.242 million at end-H1 2014, which was 34.7% higher than a year previously but 4.8% less than at end-2013. Net debt/EBITDA stayed at 2, in line with the company’s debt policy.

HGM said Unicredit opened a revolving credit facility of $50 million at the beginning of September. The facility remains open until March 2016 and may be accessed “if gold prices decline rapidly, and will be used to finance development and operating activities within the Group.”

Capex fell by a third to $36.429 million. HGM had forecast capex at $77 million for the full year 2014.

Overall gold production rose 13.7% year-on-year in H1 to 120,121 oz gold and gold equivalent. HGM has lowered FY 2014 guidance first from 300,000 oz to 280,000-291,000 oz, which would be 20% more than in 2013. The company originally forecast 300,000-320,000 oz.

Valery Oif, CEO, said on a conference call that guidance was lowered because gold recoveries at the company’s Belaya Gora field in the Khabarovsk territory, where the first gold was poured in 2013, were still only 63% in H1 2014, and the 85%-86% the company is now aiming for will not be achieved until the end of the year.

Highland Gold has projects in the Khabarovsk territory (Mnogovershinnoye, Belaya Gora, Blagodatnoye), the Transbaikal area (the Novoshirokinskoye, Lyubavinskoye and Taseevskoye polymetallic mines), and Kyrgyzstan (Unkurtash).

HGM’s main shareholder is Millhouse, which represents the interests of Roman Abramovich and his partners – they control 32% through Primerod International Ltd. Firms affiliated with non-executive board chairman Eugene Shvidler own 11.35%. The Prosperity Capital fund owns 18.3%, Van Eck Associates – 5.39%, former HGM manager Ivan Kulakov – 4.15% (as of April 15, 2014) and JPMorgan Chase & Co – 5.17% (as of the middle of May).a

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