Project in Russia’s Far East
13
Kekura: Premier Development Project in Russia’s Far East Eastern Economic Forum September 2016 Denis Alexandrov Chief Executive Officer
Transcript of Project in Russia’s Far East
Kekura: Premier Development
Project in Russia’s Far East
Eastern Economic Forum
September 2016
Denis Alexandrov
Chief Executive Officer
Disclaimer
Certain statements within this presentation constitute forward looking statements. Such forward looking statements involve risks and other factors which may cause the actual results, achievements or performance of the Group to be materially different from any future results, achievements or performance expressed or implied by such forward looking statements. Such risks and other factors include, but are not limited to, general economic and business conditions, changes in government regulations, currency fluctuations (including the US$/RUR rate), the gold price, the Group’s ability to recover its reserves or develop new reserves, competition, changes in development plans and other risks.
There can be no assurance that the results and events contemplated by the forward looking statements contained in this presentation will, in fact, occur. These forward-looking statements are correct or represent honestly held views only as at the date of delivery of this presentation.
The Company will not undertake any obligation to release publicly any revisions to these forward looking statements to reflect events, circumstances and unanticipated events occurring after the date of this presentation except as required by law or by regulatory authority.
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Highland Gold At a Glance
2
6th largest publicly-
listed producer
in Russia
Production
Au 8.2 T/Y
8.7 billion RUB
EBITDA
in 2015
Reserves
Au 57 T*
Resources
Au 521 T*
* JORC-compliant reserves and resources as of 31 December 2015
Resources (Tonnes):
<100
100-500
500-1000
>1000
Gold Mining – A Vital Industry for Russia’s East
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Source: RDIF.
Khakassia Republic
Buryat Republic
Zabaikalsk Region
Amur Region
Chukotka
Republic of Sakha Irkutsk Region
Khabarovsk Region
3 4
3 7
1
6
8
6
6
7
5 2
1 Polyus Gold
2 Petropavlovsk
3 Polymetal
4 Kinross Gold
6 Nordgold
7 Highland Gold
5 Yuzhuralzoloto
8 GV Gold
7
3 6 Magadan
Region
Kamchatka
9 Seligdar
10 Zoloto Kamchatki
9
9
9
10
Krasnoyarsk Region
1
5 1
8
5
The majority of
Russia’s gold
reserves are located
in Eastern Siberia
and the Far East.
All of the major
Russian gold
producers operate in
the region.
Significant resources
still to be explored or
developed.
Highland Gold – A Key Player in Eastern Russia
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Kekura
Klen
Belaya Gora
Mnogovershinnoye
Baley Hub
(Taseevskoye, Sredny Golgotay)
Novoshirokinskoye Blagodatnoye
KHABAROVSK REGION
Operating Mines Mnogovershinnoye (MNV)
Belaya Gora
Exploration/
Development Blagodatnoye
Current Mid-Term
Target
Mill Capacity 3m T ~3.4m T
Resources 76 T 78 T
Annual Production 4.8 T 5 T
Workforce 1700
ZABAIKALSK REGION
Operating Mines Novoshirokinskoye
(Novo)
Exploration/
Development
Taseevskoye
Sredny Golgotay, Lyubov
Current Mid-Term
Target
Mill Capacity 0.7m T ~1.3m T
Resources 220 T 220 T
Annual Production 3.3 T 4.4 T
Workforce 1200
CHUKOTKA
Exploration/
Development Kekura, Klen
Current Mid-Term
Target
Mill Capacity – ~1m T
Resources 110 T 110 T
Annual Production – 6.2 T
Workforce 100 1200
Lyubov
Kekura – A World Class Gold Deposit
• Located in the Bilibino District of the
Chukotka Autonomous Area, 120 km south
of the town of Bilibino
• High grade, open pit and underground
mining and favourable metallurgy to make
Kekura a low cost operation
• Envisaged initial mill capacity of 800 ktpa
with recoveries of ~85%
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Key Project Parameters
Unit Total
Post-Tax IRR % 38
Post-Tax NPV (5%) bil. RUB 23.2
Milling Capacity ktpa 800
Average Annual Production (LoM) k oz 209
Capital Cost Estimate bil. RUB 12.2
Payback Period Years 3
• A Gold price of US$1,150 per troy ounce has been applied.
Mayskoye
Kupol
Klen
Dvoinoye
Kekura
Chukotka
Valunisty
Pevek
Anadyr
Bilibino
120 km
390 km
670 km
Kekura – A World Class Gold Deposit
• JORC-compliant resource (indicated and inferred) of 80 tonnes at an average grade of 7.57 g/t
• JORC-compliant reserves (proven and probable) of 52 tonnes at an average grade of 10.73 g/t
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Kekura Mineral Resource Estimate (cut-off grade 1.0 g/t)
Resource Classification Tonnage
(Mt)
Au Grade
(g/t)
Metal Au
(tonnes)
Metal Au
(Moz)
Indicated 7.412 8.64 64.04 2.06
Inferred 3.266 4.80 15.68 0.51
Total 10.678 7.47 79.72 2.57
• Compliant to JORC Code 2012
• Mineral Resources are reported
inclusive of any reserves.
• Mineral Resources have been
constrained using a US$1488/oz
conceptual open pit.
Kekura Ore Reserves Estimate
Ore Reserve Classification Mine Type Tonnage
[Mt]
Au Grade
[g/t]
Metal Au
[tonnes]
Metal Au
[Moz]
Proven - - - - -
Probable Open Pit 4.296 10.94 47.00 1.51
Underground 0.541 9.04 4.89 0.16
Total 4.837 10.73 51.89 1.67
• A Gold price of US$1,150 per troy
ounce has been applied.
• Cut-off Grade of 2.2 g/t Au is
applied to the open pit and 4.2 g/t
Au to the underground mine.
• Rounded figures may result in
small tabulation errors.
• Ore Reserves have been
estimated under the 2012 Edition
of the JORC Code.
Kekura – Project Status and Plan of Action
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Completed
• Extensive exploration program
• Scoping study
• Registration of reserves with
GKZ
• Pre-feasibility study
• Fatal flaw review of initial open
pit and underground mine design.
• Metallurgical tests for selection of
processing technology
• Technical design documentation
• Contractors selected for process
plant building.and basic mill
engineering
• Access roads from ice road to
process plant site, road from pit
to process plant site.
In Progress
• 25k meter advanced exploration
programme to convert
underground resources to
“Indicated”
• Preparations for construction of
the main process plant building
• Purchases of materials for fuel
and lubricants storage
• Shipment of key construction
materials and structures to the
Port of Pevek
2017-2019
• Complete engineering and pass
state expert review of design
documentation
• Commence civil works on the
process plant and infrastructure
facilities
• Commence capital mining
activities in the open pit
• Launch pilot plant
• Contracts for supply of main
equipment: mining, processing,
auxiliary
• Delivery of the main equipment
to the port of Pevek during 2017
navigation period and to site in
winter 2017-18.
• Equipment installation and piping
• Commissioning
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Chukotka Challenges
Chukotka’s location and limited infrastructure present a
unique array of challenges in developing a project like Kekura.
Remoteness
Project site
accessible only by
winter road or
helicopter. No
nearby settlements.
Transportation
Limited
transportation
options, including
lack of regular
regional flights.
Logistics
Short sea navigation
period and ground
transport seasonality
complicate planning
and increase costs.
Electricity
Insufficient local
power generation
and lack of links to
neighboring regions
Chukotka Challenges
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3.5
10.2 10.7
0
2
4
6
8
10
12
Khabarovsk Chukotka Diesel
Average Electricity Cost
(RUB/kWh)
28
50
0
10
20
30
40
50
60
Belaya Gora Kekura
Shift Change Expenses
(1000 RUB/person)
Kekura Costs & Benefits
Total Investment
RUB
23.8 billion
10
9.8
6
8
HGM (to date) HGM (planned)
Outside Financing
10.9
3.6
8.3
1
Equipment Infrastructure
Exploration Other
Cost
Breakdown (billion RUB)
Financing
Sources (billion RUB)
800 jobs to be
created
56.8 billion RUB
added to
Chukotka regional
GDP by 2026
3 billion RUB
In additional tax
revenue by 2026
Kekura’s Upside Potential
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• Significant exploration
upside potential at
deposit and greater
licence area
• In 2016, a 25,000 meter
drilling program is being
carried out on the Kekura
deposit, designed to
convert resources into
additional reserves.
• 11 prospects have been
identified within the
Kekura licence area as
warranting further
prospecting work
Prospects
1 – Zabytiy
2 – Granat
3 – Ryzhiy
4 – Iris
5 – Bond
6 – Zakol
7 – Gonch
8 – Zapadny 2
9 – Zapadny 1
10 – Iris (detailed)
11 – Alpinist
Kekura Deposit
