Cashed Up And Profitable, Highland Gold Is Looking To The Future With Confidence
By Alastair Ford
minesite.com
Highland Gold’s latest set of financial results are fairly easy on the eye, given some of the ugly reports it’s had to make in the past, and bearing in mind the current strength in the gold price. Highland produced more gold at lower cost this time round, putting it on schedule to hit a total of between 155,000 ounces and 165,000 ounces this year. Putting out that sort of news must be especially gratifying for a company that’s not been without its issues in the past. But memories of the troublesome Darasun mine have now almost completely faded, and the focus is now very much on production from the key Mnogovershinnoye gold mine (MNV) in the Khabarovsk region of Russia’s far east. At MNV, Highland produced just over 78,000 ounces in the six months to June 2009, an increase of around 14 per cent on the total produced during the comparable period in 2008. Total cash costs per ounce fell to US$514 from US$574 in 2008. That combination meant that sales during the period rose to nearly US$79 million, up from US$76.5 million a year ago, while operating profits rose to just over US$19 million, up from US$14 million.
It was a result that was partly driven by the strong gold price, and partly by continuing efforts to optimize plant and procedures, according to chief operating officer Brent Horochuck. MNV is now a mine that might be described these days, as long in the tooth, having been first brought into operation in 1991. Over the years it’s proved its worth, but plant is ageing, and a lot of the activity that Brent calls “fine-tuning” at MNV involves replacing ageing bits of kit. That process has generated some cost saving, and may yet deliver more, though Brent is fairly that for the full year this year at least, costs will be steady at around the US$500 mark.
So, having hit first half production targets, the mine is going strong, and July and August have also been up to speed. Going into winter, when blustery snow conditions often make maintaining operations at full capacity real challenge, this year the company will be supported by an increased stockpile, created partly as the higher gold price has rendered what was formerly designated as waste ore economic. The big variable, of course, remains diesel - setting the price of that remains well outside Highland’s jurisdiction, nothwithstanding that oil and gas oligarch Roman Abramovich is a cornerstone investor in the company. Even so, with gold bumping around at a spot US$1,000 an ounce, there’s plenty of room for manoeuvre.
And Highland’s not been shy about adding ounces. The latest big hit comes from the Taseevskoye deposit in the Chita region, where the state regulator has just signed off on a new resource of just under 3.4 million ounces at an average grade of 5.22 grammes per tonne. As Brent Horochuk says, “it’s a monster”! Slightly further behind, but potentially even more exciting, is Unkurtash in Kyrgyzstan, where Highland reckons it might have a five million ounce deposit on its hands. That’s not yet been independently verified, but roll in the additional 820,000 ounces just booked at Belaya Gora, also in Khabarovsk, and the 1.6 million ounces at Lyubov in Chita, and Highland begins to pack a real punch in terms of its resource base. MNV also has at least a million ounces ahead of it, and plans to drill up the neighbouring Pebble region look set to add yet more. Nice to be booking all of that, in an era of US$1,000 gold.
But the next cab of the rank will be the polymetallic Novoshirokinskoye, referred to in company literature and by directors as Novo for short. Novo’s now operated by Kazzinc, and was, for a while, a casualty of the credit crunch. But a decision in July of this year to restart development has meant that commissioning is now due for October, with plans to ratchet output up to between 400,000 tonnes and 450,000 tonnes initially, although it may eventually go as high as 550,000 tonnes, according to Brent Horochuk. Although it’s a sizeable project, the production currently envisaged of between 45,000 and 50,000 ounces of gold per year, with roughly the same again in equivalents, means that for now Novo won’t be leapfrogging MNV as Highland’s flagship project. Especially since not all of the production is attributable to the company anyway. But, says Dmitry Yakushkin, Highland’s communications director, what the start up at Novo will show is that the company can be work more than just one mine, that it can keep to its commitments and keep the regional authorities in side, and that, in general terms, it has the ability to grow.
On that last point, it’s worth bearing in mind the company’s cash pile of around slightly less than US$295 million. Much of that is earmarked towards the acquisition of near-term production projects in the region. The company’s past may be chequered, but as a cashed-up profitable gold miner on the hunt for deals, its future looks a lot more straightforward. It’ll be interesting to see what the rest of the year has in store. |
