23 Apr 2007 07:02
Highland Gold Mining Limited23 April 2007 HIGHLAND GOLD MINING LIMITED ANNOUNCES FINAL RESULTS FOR THE YEAR TO 31 DECEMBER 2006 London, 23 April 2007 - Highland Gold Mining Limited "Highland Gold" or the"Company" announces its final results for the full year ended 31 December 2006. FINANCIAL HIGHLIGHTS ------------------------------ -----------UK GAAP, US$000 (unless stated)------------------------------ ----------- ----------- 2006 2005 restated------------------------------ ----------- -----------Production (oz) 167,544 160,216------------------------------ ----------- -----------Turnover 102,365 75,955------------------------------ ----------- -----------Group operating loss (98,340)* (7,753)------------------------------ ----------- -----------Loss on ordinary activities before taxation (83,202)* (14,063)------------------------------ ----------- -----------Loss for the financial period (96,445)* (11,830)------------------------------ ----------- -----------Earnings per share (cents) (59.7)* (7.7)------------------------------ ----------- -----------Total assets 388,906 368,547------------------------------ ----------- -----------Net cash flow from operations 7,041 7,751------------------------------ ----------- -----------Capital expenditure (38,911) (56,143)------------------------------ ----------- -----------Dividends per share Nil Nil------------------------------ ----------- ----------- * Darasun's after tax operating loss was $101.454 million. Of this number,$79.274 million relates to a non-cash impairment of Darasun and $2.373 millionis attributable to certain costs directly associated with the Darasun fire. Full Year Highlights •Darasun placed on care and maintenance •Gold production for 2006 was 167,544 ounces including 151,146oz from MNV; an 8% increase on gold production compared to 2005 •Transaction with Barrick Gold consolidates assets and strengthens Board and Management team •A joint venture with Kazzinc at Novoshirokinskoye was established •Evaluation studies at Darasun underway •Taseevskoye: phase one exploration drilling programme and in-house scoping study completed •Mayskoye: progress on feasibility study; favourable results for metallurgical test work on bio-oxidation. •Drilling completed at Belaya Gora and Lyubov; preparatory work for reverse circulation drilling completed at Unkurtash. Post year end: •Debt restructured - US$90 million in new financing facilities raised through two major Russian banks Commenting on today's announcement, James Cross, Chairman, said: "The 2006 results were significantly impacted by the Darasun impairmentadjustment. Notwithstanding, 2006 marks a turning point for Highland Gold andwill be a year remembered as one where we put in place many of the key buildingblocks to secure the Company's long term future. By far the most significant ofthese was the increased commitment from Barrick Gold. Barrick brings to Highlandgreat strengths as a world-leader in building and operating mines. Combiningtheir technical expertise with our own assets and experience in Russiangold-mining business, means that we are now in a stronger position to focus onmaximising the value of our current operations, and accelerating our developmentprojects." The Company will hold a conference call on Monday, 23 April 2007 hosted by JamesCross, Chairman and Henry Horne, Managing Director to discuss the final results.The conference call will take place at 10.00 am UK time (1.00 pm Moscow). Toparticipate in the conference call please dial one of the following numbers: UK National Dial in: 0871 871 0047 International Dial in: +44 (0) 1452 587 356 Conference ID / Access code: 6114623 A recording of the presentation will be available by dialing +44 (0) 1452 55 0000 (using the same access code) from Monday afternoon for 1 week, and will beaccessible on the company website: www.highlandgold.com shortly after. For further informationplease contact: Henry Horne, Managing Director Dmitry Yakushkin, Director of Communications Moscow: + 7 (495) 777 31 55 Dominic Palmer-Tomkinson, Head of Investor Relations London: +44 (0) 207851 64 00 Or, WMC Communications, Alex Glover on +44 20 7930 9030 The Annual General Meeting will be held on 7 June 2007. --------------------------------------------------------------------------- CHAIRMAN'S REPORT Major steps forward towards achieving our vision 2006 marks a turning point for Highland Gold and will be a year remembered asone when we put in place a number of the key building blocks to secure theCompany's long-term future. Indeed, since the year-end we have announced varioussteps forward that have only been achievable thanks to the strong progress madeon all fronts in 2006. It was, however, also a year when we saw a terrible tragedy in our mine atDarasun resulting in the death of 25 of our colleagues. This devastatingincident cannot and must not be forgotten and you will see later in this annualreport the actions we have taken to help the families of the victims as well asthose injured in the disaster. The dramatic events at Darasun also led theCompany to review its occupational health and safety policy. Mining Environment in Russia Before turning to a review of the year I would like to point out that in 2007 wewill be marking five years of operational activities for Highland Gold inRussia. Bearing in mind our corporate experience I welcome the stability of theinvestment, tax and regulatory conditions for companies involved in mining inRussia. More broadly the economic development in Russia during the last yearshas been remarkable and we are proud to be contributing, if only in a small way,to the country's growth. Barrick Gold The most significant advancement for Highland during 2006 was undoubtedly thetransaction with Barrick Gold marking the third year of our successfulcollaboration. The deal, announced in December, involved Barrick increasing itsstake in Highland to 34% in exchange for their 50% interest in our existingjoint ventures, four further gold exploration interests owned by Barrick, theappointment of two of their key personnel to the Highland Board as well asfurther appointments at executive level. Since the transaction we have alsomerged our two offices in Moscow having more than thirty former Barrickemployees join the Company. As a result, the central Moscow team has becomestronger at all levels and is better positioned to support our operational teamsin the field. Barrick brings to Highland great strengths as a world leader in building andoperating mines. Combining their technical expertise with our own world-classassets and experience in the Russian gold-mining business, means that we are nowin an even stronger position to focus on maximising the value of our currentoperations, and accelerating our development projects. Results In 2006 the Company had an after tax loss of US$14.7 million before a non-cashimpairment charge of US$79.3 million to reflect the combination of the continuedoperational weaknesses at the Darasun operation with the tragic events thatunfolded on September 7th and a US$2.4 million exceptional charge associatedwith one-off costs directly associated with the fire. At the same time we arereporting a higher turnover of US$102.4 million - a reflection of the stronggold prices in 2006 and a continuation of our no hedge policy. Throughout theyear we continued investing in our development projects - with and overallexpenditure of US$38.9 million. After the transaction with Kazzinc, whichinvolved selling 50% of our shareholding in the Novoshirokinskoye property, wereceived US$36 million in proceeds resulting in a before-tax profit on sale ofUS$18 million. At 31 December 2006, the Group held US$31.5 million of cash and US$80.1 millionof debt. Since that time we have announced completion of a debt restructuringprogramme. US$90 million in new financing facilities has been raised through twoRussian banks comprising a US$60 million facility with MDM Bank and a US$30million facility with GazpromBank. This is a key element of Highland Gold'scapital management plan and aligns the Company's debt maturities with itsbusiness plans. These new facilities reduce Highland Gold's cost of debt andprovide significantly more flexible covenants that are better suited to a growthfocused company, like Highland Gold. Additionally, this will allow the Companyto reclassify these debt facilities as long-term borrowings in future regulatoryaccounting filings. Production In 2006 gold production at Mnogovershinnoye (MNV), our core producing asset, waswithin the forecasted range at 151,146 oz. There was a significant increase of15% in the open pit grades, averaging 6.24g/t Au in 2006. We have undertakenvarious initiatives in early 2007 to further optimise the operation. The mine isworking stably but we intend to continue to improve production performancethrough various initiatives. Production at Darasun operations was 16,398 oz Au. Following the tragic fire on7th September, production in the final quarter of the year continued at areduced rate in the Talatui open pit. In the second half of the year, 80,199tonnes were processed from surface stockpiles and the Talatui open pit ore. Management has undertaken various studies investigating the cost of reopeningthe mine at Darasun and is currently evaluating these options in order to make adecision on the most appropriate action going forward. The mine is being kept ona care and maintenance basis, while stripping in the Talatui open pit iscontinuing. Project Development In the key area of project development we have seen significant progress in2006. At Novoshirokinskoye we signed a highly significant agreement with Kazzincinvolving the sale of a 50% interest in our development project at the mine forconsideration of US$36 million in cash. This partnership with Kazzinc allows usto leverage off Kazzinc's metallurgical expertise and their extensive globalsales and marketing experience. At Taseevskoye we completed phase 1 of the exploration drilling programme andcompleted an in-house scoping study. Site preparation work is ongoing withimplementation of environmental and social responsibility programmes for theBaley community. The Mayskoye feasibility study is progressing well, although delays in thedevelopment of the geological model due to data validation will postpone thestudy to the middle of 2007. We have confirmed the metallurgical process whichincorporates bio-oxidation. Auxiliary facilities like store and camp are nearingcompletion. Exploration 2006 has seen good progress being made at our five key exploration prospects.The sites are primarily in areas where we are already mining or are in the laterstage of project development. While the details of these prospects are discussedin the Managing Director's report later in this document, I am particularly keento praise the efforts of our teams working on these projects. I am also greatlyenthused by the expertise the Barrick specialists will now bring to the furtherdevelopment of these prospects. Changes to the Board I am delighted to welcome two new members on our Board, Rene Marion who is thenew Chief Operating Officer of Highland Gold and Nick Nikolakakis, vicepresident for Corporate Finance at Barrick Gold. On the management level ScottPerry has joined us as Chief Financial Officer. We look forward to benefiting from their wide-ranging experience in the months and years ahead. Darasun Tragedy The September disaster at Darasun has become a painful reminder of theimportance of health and safety practices in our industry. Indeed, theimportance to all of us at Highland Gold is the future health and safety of ouremployees and the communities that we affect as well as the environmental impactthat we, as a mining company, have on the areas surrounding our mines. As the Board confirmed in September, the families of the victims and the injuredduring the fire continue to be supported by the Company. Over and above thecompensation immediately paid to the families, we have continued to providemonthly financial support to their dependent children. The Board would also like to express our sincere gratitude to all the rescueservices, special mining teams from different Russian regions, governmentagencies and in particular the Head of the Ministry for Emergency SituationsSergei Shoigu and the Governor of the Chita region Ravil Gueniatullin for theirtireless efforts during the rescue operation in the tragic days at Darasun inSeptember. Conclusion In summary, and without wishing to overstress the point, I see 2006 as a turningpoint for our Company. We have addressed the production setbacks we had at MNVin 2005 and continue to seek to improve production performance. While we arestill dealing with the Darasun operation in the aftermath of the fire andassessing how best to make that asset work for the Company going forwards, weare hopeful of finding a solution that will benefit us and the communitydependent on the mine. We have also made real progress with our key developmentprojects at Novoshirokinskoye, Taseevskoye and Mayskoye, as well as with ourexploration prospects. Lastly, I would like to thank our Board, including the new members, and allemployees for their continued contribution and support through a highlychallenging, sometimes tragic but ultimately significant year in the developmentof our Company. James CrossChairman ---------------------------------------------------------------------------- MANAGING DIRECTOR'S REPORT 2006: Stabilising our current assets and optimising the potential of thedevelopment projects. In 2006 management took important decisions to improve operating performance andto position the Company for the future. Some key initiatives were: • Two major transactions were concluded with Barrick Gold and Kazzinc. • Operational stability was achieved at our core producing asset Mnogovershinnoye. • Development and exploration projects progressed well and all are on target. • Following the tragic events at Darasun the Company committed to maintaining and improving the opportunities to ensure compliance with the industry standards in occupational health and safety. Our People Our employees are our most important asset. We aim to attract and retain thebest people by providing them with opportunities for personal, professional andtechnical skills development. Development objectives set by the management teamin 2006 demanded that we continue to bring in new skilled professionals to theCompany. Among the key appointments which took place in 2006 I would highlight: •Mr. Rene Marion joined the Company as Chief Operating Officer. He has been with Barrick Gold Corporation for more than 14 years and has been involved in developing Barrick's business in Russia and Central Asia since 1996, most recently as Barrick's Regional Vice President, Russia and Central Asia. Prior to that Rene held various senior posts in Barrick's corporate headquarters in Toronto, Canada. Mr. Marion's background combines 21 years of mining experience in operations, operating management and mine engineering in North America with international experience in acquisition evaluations, feasibility studies, development and mergers in Asia, Africa, Australia, Europe, North and South America. •Mr. Scott Perry joined the Company as Chief Financial Officer. He has been with Barrick Gold for 8 years in various financial management roles in two of their largest business units in Australia/Pacific and North America. In January 2006, he was appointed Director of Finance at Barrick's Russia and Central Asia's business unit. Scott is a Certified Practicing Accountant (CPA) and a member of the Australian Society of Certified Practicing Accountants. •Mr. Yury Samokhval was appointed as the new Managing Director of the Darasun mine. He has more than 20 years of mining experience with Norilsk Nickel in the Taymyr Peninsula and gold mining operations in Yakutia. In 2003 he was appointed underground mine manager at the Nezhdaninskoye mine. Prior to his current appointment, he held the position of Kuranakh Mine Director for Polyus Gold. •Mr. Werner Klemens, Ph.D. has joined Highland Gold as Director of Exploration. He has 11 years experience in mineral exploration and has been associated with Barrick's exploration activities in Russia and Central Asia since 1998. Prior to his current appointment, Werner Klemens held the position of Exploration Manager, Russia and Central Asia at Barrick Gold. •Mr. Chris Bostwick joined Highland Gold as Director, Technical Services. He has more than 22 years of international mining experience in operations, engineering, maintenance and business development in South Africa, United States, Canada and Russia, feasibility and development work in Peru, Chile and Argentina and technical due diligence on business development initiatives in all major mining countries and districts around the world. For the last 18 years Chris has been with Barrick Gold. Prior to this, his most recent positions include Director of Technical Services for Barrick Russia and Central Asia in Moscow, Russia and Director of Evaluations and Capital Projects in Toronto, Canada.. Moreover, after the transaction with Barrick Gold thirty two of Barrick'semployees, who were primarily involved in technical, exploration and financialdisciplines joined Highland Gold effective January 1 2007. We welcome our newcolleagues and I am glad to report that the integration process was concludedsuccessfully. As of 31 December 2006, Highland Gold employed a total of 3,019 employeescompared to 3,616 at the end of 2005. Corporate & Social Responsibility On September 7th, the fire at the Darasun underground mine tragically took thelives of 25 of our colleagues. Our priority is to ensure that the families ofthe victims and the injured during the fire continue to be supported by theCompany. Over and above the compensation paid to the families in September, wehave continued to provide monthly financial support to the children of thevictims. Since we started operating in Russia in 2002 our aim has been to make a lastingcontribution to the communities where our assets are located. Taxes and otherpayments that we make to local, regional and federal Governments are vital tohelp supporting development programmes in Khabarovsk, Chita and Chukotkaregions. Whenever possible, we preferentially purchase materials, supplies,goods and services from local businesses - spending over US$105 million in 2006. Our approach to support social development initiatives reflects the prioritiesof local communities, sustainability and cost-effectiveness. In 2006 we chose tosupport a number of sports, cultural and charity activities focusing on thecommunities in Khabarovsk, Chita and Chukotka regions of Russia. Thebeneficiaries of these programmes include the boarding school forvisually-impaired children in Petrovsk-Zabaykalsky, a youth rehabilitationcenter in Novoshirokinskoye, a primary school on Ayon island, schools andkindergartens in Darasun, Mnogovershinnoye and the city of Nikolayevsk. We alsocontributed to a number of other charity and non-profit initiatives. HighlandGold also continued to provide sponsorship to the Society of Friends of theMoscow Kremlin Museums and we are proud to be one of its active members. At our Taseevskoye project site, located in the town of Baley in the Chitaregion, we initiated a comprehensive community development programme called theBaley Sustainable Development Alliance (BSDA) in order to empower the localcommunity to address some of their most pressing social and economic issues. TheBSDA mobilises funding and resources for the project, with financial donors suchas the United States Agency for International Development (USAID), the ChitaOblast administration and the community itself. Also in the town of Baley in 2006, alongside the preparation for thepre-feasibility study for the Taseevskoye project and in compliance with theInternational Finance Corporation's policies on resettlement, we conductedmapping of the area potentially impacted by the project and held communityhearings on the resettlement of the Taseevskoye village. The next stage of thiswork will be to conduct the census of affected residents and inventory ofaffected assets. In the Chukotka area, where our Mayskoye project is located, we addressed theissue of respecting the rights, customs and heritage of indigenous groups. Weseek to ensure that any issues related to their cultural heritage and traditionsare properly addressed and handled in a spirit of dialogue, trust and respect. Health, Safety & Environment With deepest sorrow we report 27 fatalities during 2006. Two miners were fatallyinjured in separate incidents one of which was at Darasun in February and theother at Mnogovershinnoye in May. The devastating mine fire at Darasun claimedthe lives of 25 employees in September. The fire started on the 7th of September at the 85M level station of the CentralShaft of the Darasun mine during welding repairs to the cage. 31 employees wereable to be evacuated, leaving 33 unaccounted for. After two days of rescueefforts, 5 miners were rescued and an additional 3 miners were able to escape ontheir own. Rescue efforts were halted on the 11th of September after 25 missingminers were found and confirmed dead. The official investigation conducted bythe authorities has been concluded in April 2007 with criminal charges beingbrought against 5 of our employees. The Company is providing legal assistance tothem. These tragic events have compelled the Company to focus on opportunities tostrengthen our health, safety, and environmental programmes which will help usexceed world safety standards within the industry. During 2006, the Company demonstrated its commitment to safety and health withthe assistance of our business partners from Barrick Gold. Barrick's CourageousSafety Leadership training was introduced at the end of 2005 and continuedthrough 2006. With nearly 200 employees successfully trained, beliefs andbehaviors are changing to drive safety and health excellence. Improvements in Lost Time Injuries were achieved partly by the success of theleadership training but also through strengthened safety commitments by seniormanagement throughout the organisation. Looking forward, formal training in areas such as risk assessment, fireprevention, incident investigation, and Courageous Safety Leadership will beprovided to the operating and supervisory staff at each of the sites. Thistraining provides an understanding of how costs and production are adverselyaffected by incidents and aids our supervisor's abilities to create an incidentfree workplace. We continue to focus on the health of our employees with annual check-ups, fluvaccinations and injections to help prevent encephalitis. To help identify otherareas for improvement, Barrick's health and medical specialist's assessed thehealth care capabilities at Darasun, Taseevskoye, and several hospitals in theChita region. We have an obligation to provide a safe workplace for all of our employees.Continually seeking opportunities to strengthen our health, safety, andenvironmental programmes will help us comply with world safety standards withinthe mining industry. There were no environmental incidents reported at Mnogovershinnoye in 2006.Recycled process water use reached 90.1%. Our environmental activities includeddevelopment of a water treatment plan for Mnogovershinnoye which is currentlyunder review for approval and rehabilitation of the land used to lift theMnogovershinnoye tails impoundment. The Tsentralnoye ore body shaft watertreatment plant construction project was developed and approved by stateregulatory bodies with construction to start in the first half of 2007. At Darasun, in order to conduct ground water monitoring, a set of observationaland baseline boreholes were drilled in the area of the tailings dump. Within the course of the preparation of the feasibility study, the Mayskoyedevelopment project received state environmental approvals for the constructionof the mine from Russia's Federal agency of Rostechnadzor. At Novoshirokinskoye the licence for the right to use subsurface mineralresources for the purpose of ground water use was acquired. At the Taseevskoye development project we have contracted Golder Associates, aninternational consulting firm, to carry out the Environmental Impact Analysis.Environmental monitoring and baseline studies were commissioned in the thirdquarter of 2006 and will continue throughout 2007. In 2006, we held 115 internal environmental inspections compared to 38 in 2005. Operations Mnogovershinnoye In 2006 Mnogovershinnoye mine located in the Khabarovsk region continued to beour main gold producing operation. MNV Operations Summary------------------------------------------------ ---------- ------------- ------------- Unit 2006 2005------------------ ---------- ------------- -------------Mine development------------------ ---------- ------------- -------------Open pit/waste stripping 000 M3 1,468 1,464------------------ ---------- ------------- -------------Underground Metres 8,338 8,461------------------ ---------- ------------- -------------Ore mined------------------ ---------- ------------- -------------Open pit Tonnes 389,036 374,387------------------ ---------- ------------- ------------- g/tonne 6.24 5.42------------------ ---------- ------------- -------------Underground Tonnes 407,836 396,330------------------ ---------- ------------- ------------- g/tonne 5.57 6.39------------------ ---------- ------------- -------------Total ore mined Tonnes 796,872 770,717------------------ ---------- ------------- ------------- g/tonne 5.90 5.92------------------ ---------- ------------- -------------Ore processed Tonnes 933,569 875,361------------------ ---------- ------------- ------------- g/tonne 5.52 5.51------------------ ---------- ------------- -------------Incl. from stockpile Tonnes 136,697 104,644------------------ ---------- ------------- ------------- g/tonne 3.30 2.49------------------ ---------- ------------- -------------Recovery rate % 91.18 90.3------------------ ---------- ------------- -------------Gold produced Ounces 151,146 140,038------------------ ---------- ------------- ------------- Mine development Overall production was stable throughout the year and in line with expectationsin spite of a number of technical and operational challenges. In total we processed 933,569 tonnes of ore which included over 130,000 of lowgrade stockpile material. A peak processing rate of 88,500 tonnes at 5g/t with91% recovery was reached in June. Various improvements to the processing plantwere started in 2006 and are due to be completed in 2007; these include the newelectro winning cells that were successfully commissioned and will generateimproved performance and power savings. Underground development to access the North Lode progressed ahead of scheduleand two diamond drill rigs are infill drilling. Narrow sections of the Deer orebody were successfully mined by shrinkage mining methods and the wider oresections have been developed for long-hole production in 2007. Open pit production tonnage was on target but grades were 6% lower; due todilution caused by a waste dike intrusion. The new centralised repair shop and stores is scheduled to be completed in 2007,improving quality of servicing and spares logistics. Agreements have been made with principal equipment suppliers to provide trainingfor operators and maintenance personnel. Additionally, we have entered intoservice agreements with suppliers to provide assistance with operationalmaintenance. Production Costs Our cash operating costs of US$361 per ounce rose by 31% compared with 2005.This was primarily attributable to continued increase in prices for consumables,spare parts and fuel. Mnogovershinnoye reviewed the salary scheme and increasedsalaries to a competitive level for the Khabarovsk region. These cost pressuresalong with higher royalties, due to the stronger gold price, raised our totalcash cost to US$402 per ounce. Our total production cost was US$458 per ounce. Capital Costs During 2006 the Company invested US$3.7 million at Mnogovershinnoye. Thisincluded US$1.8 million for the purchase of additional production equipment:drill rig; power engine; trucks; loaders and vehicles for the open pit and theunderground and the upgrade of IT equipment. US$0.4 million was spent on minedevelopment and US$1.5 million related to construction works at the site. Outlook Mnogovershinnoye will remain the main source of cash flow for the Company in2007. In the first three months of 2007, the Group has moved Darasun drillingequipment and mining trucks to MNV to accelerate stripping in the open pit. Withthe Darasun mine being put on care and maintenance, further heavy equipment atthe Talatui open pit will be available for transfer to Mnogovershinnoye tosupplement the existing equipment at the property. With the idling of Flank, andthe depletion of the Intermediate zone early in the year, mining operations willbe able to consolidate on three deposits, Northern, Central and Deer. Withconsolidation and the addition of new equipment, development and operatingefficiencies are expected to increase. Our production target for the mine in 2007 is in the range of 160-170,000 oz. Darasun As a result of the underground fire in one of the shafts on 7th September, 2006and the subsequent restructuring plan introduced in the second half of the year,production at Darasun was limited. Since the fire the mine has been placed on acare and maintenance basis. Darasun Operations Summary------------------------------------------------ ---------- ------------- ------------- Unit 2006 2005------------------ ---------- ------------- -------------Mine development------------------ ---------- ------------- -------------Waste stripping 000 M3 1,139 1,546------------------ ---------- ------------- -------------Underground Metres 2,918 3,922------------------ ---------- ------------- -------------Ore mined------------------ ---------- ------------- -------------Open pit Tonnes 100,112 47,286------------------ ---------- ------------- ------------- g/tonne 2.6 6.13------------------ ---------- ------------- -------------Underground Tonnes 83,835 127,071------------------ ---------- ------------- ------------- g/tonne 6.4 11.04------------------ ---------- ------------- -------------Total ore mined Tonnes 183,947 174,357------------------ ---------- ------------- ------------- g/tonne 4.33 9.71------------------ ---------- ------------- -------------Ore processed Tonnes 238,284 207,593------------------ ---------- ------------- ------------- g/tonne 3.32 4.54------------------ ---------- ------------- -------------Recovery rate % 62.65 68.8------------------ ---------- ------------- -------------Gold produced Ounces 16,398 20,178------------------ ---------- ------------- ------------- Mine Development Operating issues encountered during 2005 at Darasun were slowly being resolvedas 2006 progressed, until the bulk of the operation was shut down as a result ofthe September fire. Mining in the Talatui pit progressed in line with therevised pit optimisation plan and continued throughout the year. After the September fire, all operations, with the exception of the Talatui openpit, were placed on care and maintenance. Underground operations ceased andunderground personnel focused on ensuring that the shafts and workings continuedto be pumped and that the infrastructure was maintained. The mill was run inbatch mode as and when a significant quantity of ore was mined from the Talatuiopen pit. Since the fire, work plans and options are being formulated todetermine the economic and financial viability of re-starting undergroundoperations. Meanwhile, the underground mine is being kept on a care and maintenance basiswhile low scale stripping activity in the Talatui open pit continues. Production Costs Our cash operating costs for 2006 at Darasun averaged US$1,714 per ounce. Thiswas due to Darasun's low production, lower than anticipated grades, high miningcosts and high fixed administrative costs. Total cash costs were US$1,993 perounce and total costs were US$2,189 per ounce of gold produced. Capital Costs During 2006 we invested US$2.7 million in the Darasun operations. The majoritems included US$0.6 million for the purchase of mill equipment, US$1.3 millionon various underground and open pit mining equipment, US$0.2 million related toreplacement of the shaft emergency alarms and US$0.6 million for capitalconstruction works. Outlook Management is currently reviewing and evaluating a number of options in order tomake a decision on the future of the Darasun mine. Mayskoye Completion of the feasibility study is scheduled for mid year 2007. Delays in completion of the feasibility study resulted from a review of theprogress on the mining methods and the resulting decision to change to SRKEngineering for completion of this work. In addition, with over 40 mineralisedzones in the model, a rigorous review of the geological database has beenundertaken to ensure that a high confidence level in the model is achieved,prior to the finalisation of the mining plan. Elimination of the requirement forshafts in the mining plan during development is expected to reduce both capitalcosts and lead-time. Lakefield Research's testing on the sulphide material using conventional CIL incombination with a Biox plant has indicated that an 89% recovery rate isachievable. Aker Kvaerner has completed base case plant designs for productionlevels of 600,000 tonnes per year (tpy), 700,000tpy and 750,000tpy. Apreliminary Life of Mine schedule has been completed at 750,000tpy. 2,900 metres of the 23,000 metre eighteen month infill drilling programme werecompleted by the year-end. Results from this drilling support our confidence inthe potential of the Mayskoye resource. Capital Costs We have invested US$15.5 million in 2006 at Mayskoye. The major items includedUS$13.7 million of development costs (salaries, electricity, fuel, mineinfrastructure and overheads), US$1.5 million spent on power stations, US$0.3million for the purchase of trucks, geological equipment and crushing equipmentfor sample preparation. Outlook Emphasis in 2007 will be placed on completing the feasibility study andcontinuing the infill-drilling programme in order to increase the volume andconfidence of measured and indicated resources. Novoshirokinskoye The signing of an agreement at the end of 2006 with Joint Stock Company (AO)Kazzinc as 50% partner with Highland Gold means the development of theNovoshirokinskoye mine can now be accelerated. Kazzinc's experience withpolymetalic plant operations will ensure optimisation of the processing plant.Production development will proceed with approval for mining by the GKZ (RussianState Committee of Reserves and Resources). The revised Russian cut-off study to convert from the original Lead-based modelto a Gold-based model has been reviewed with GKZ and some changes have beenproposed that are currently being addressed. Development mining is scheduled to start in the fourth quarter of 2007, withplant start up scheduled for mid 2008. In coordination with Kazzinc the final design work for the process plant andtailings facilities are in progress with Highland completing the underground andsurface infrastructure design work. Capital Costs We invested US$4.4 million at Novoshirokinskoye at 2006. This covereddevelopment costs (salaries, electricity, fuel and overheads) and mineinfrastructure (buildings, ventilating system, water reticulation system,electricity supply network, boiler-houses and others) maintenance costs. Outlook The focus in 2007 will be on the construction of the Plant facility,particularly the flotation section, with most of the major crushing and grindingequipment already in place. In addition, the priorities will be on thecompletion of a water collection facility and tailings dam preparation.Underground, 3 levels are already opened up and there are 3 stopes ready to bedeveloped. Further development work is scheduled later in the year andassessment of existing underground crushing and hoisting facilities are inprogress. Taseevskoye With the integration of Highland Gold and Barrick resources in Russia,Taseevskoye is now 100% owned by Highland Gold. 26,500 metres of the 28,500 metre drilling programme was completed on schedulein 2006, providing 33,000 samples. A confirmatory block model has been completed with the new drilling results andvalidation work is in progress. Preliminary mine design work has been performedand final work is awaiting model verification. Currently there is no change inthe reported resource estimate from those reported in 2005. The first phase of metallurgical test work has been completed and we arecurrently embarking on the second phase that will also look into furtheroptimisation. The scoping study was completed in September providing further focus anddirection for the pre-feasibility study to be completed by the third quarter of2007. Current delays in approvals to ship samples out of the country formetallurgical testwork may cause delays in completion of the pre-feasibilitystudy. Capital Costs We invested US$8.9 million at Taseevskoye in 2006. The major part of theseexpenses included US$5.8 million on the drilling programme, environmentalmonitoring and operating costs of US$1.8 million with the remaining US$1.3million spent on vehicles and heavy production equipment. Outlook The second phase of the exploration drilling is in progress with diamonddrilling currently being performed from the surface of the frozen pit lake.Results from this early drilling will be incorporated in the finalpre-feasibility study. The remaining 28,500 metre diamond-drilling programme in2007 will be carried out after the pre-feasibility study has been completed. Exploration During 2006 we successfully carried out multidisciplinary exploration programmeson several properties in which Highland Gold acquired 100% ownership as a resultof the Barrick Gold - Highland Gold transaction in late 2006. This transactionalso added a number of other quality projects to our exploration portfolio whichis targeting sediment and intrusion-hosted gold deposits for bulk tonnageexploitation in low-cost open-pit operations. As part of the transaction we alsofully integrated Barrick's exploration personnel. Belaya Gora, Khabarovsk region The Belaya Gora exploration property is well situated to local infrastructureand is only 66 kilometers driving distance from our Mnogovershinnoye operation.Belaya Gora represents a typical epithermal gold prospect hosted in alteredvolcanic rocks. The excellent potential of this property is underlined by therich gold endowment within the immediate vicinity which has recovered more than1 million oz of placer gold. This property itself has seen extensive explorationactivities both on the surface and underground over the last 40 years. In 2006 we completed 4,400 metres of diamond drilling on the two previouslydefined mineralised blocks - Stockwork and Pologaya, and in addition excavated1,168 metres of trenching along three profiles. The programme involved theconstruction of a new exploration camp, installation of sample preparationfacilities and set-up of a quick-check analytical lab. From historicalexploration data we compiled a 3D geological and exploration block model of thedeposit which indicates gold-mineralisation in altered host rocks down to 300metres from surface. Preliminary assays from our 2006 drilling programmereceived to date corroborate the expected resource potential and warrant afollow-up drilling programme in 2007. Outlook The main component of the 2007 exploration programme will be a two-stage 12,000metre drilling programme with the objective of defining average grades anddelineating resources for the two targets Stockwork and Pologaya, both hostingoxide ores in their upper portions. Trenching across selected areas shouldfurther constrain the extent of mineralisation on the surface. Lyubov, Chita region The Lyubov project covers an area of 130 km2 near the Mongolian border andcombines the Lyubov license with the enclosed Malo-Fedorovsky license.Historically, the property has been extensively explored and exploited forhigh-grade gold quartz-vein mineralisation in several prospects and occurrencesalong two structural trends. The true potential of the property however lies inbulk tonnage gold mineralisation which occurs within under-explored low-gradequartz stock works occupying wide continuous zones in sand and siltstonesthroughout the area. In 2006 we carried out a multidisciplinary field programme which included 1,500metres of diamond drilling, 850 metres of trenching, and extensive geophysicalsurveys (induced polarisation, resistivity, magnetics) covering an area of10km2. Drilling at Malo-Fedorovsky confirmed low-grade stockwork-typemineralisation and along the Lyubov trend geophysics identified severalwell-defined broad anomalies over an area of 6km2 in continuity of known zonesof significant gold mineralisation. Outlook An initial 3,500 metres diamond-drilling programme in 2007 will be testing thenewly identified anomalies. Apart from selected trenching on the property wewill also continue with geophysical surveys in the northern license areas in thevicinity of known occurrences along the Renzel trend. Sovinoye, Chukotka region The Sovinoye license covers 9km2 and is located within the region of one of therichest placer-gold mining areas in Russia, approximately 350km to the east ofthe port of Pevek. Sovinoye had been extensively explored previously both onsurface and underground for high-grade quartz veins which are known to occupynumerous layers in the hinge region of a large fold in sandy sediments. Similarto Lyubov, the economic potential of the Sovinoye deposit lies in its low-gradebulk tonnage gold mineralisation which occurs as stockworks inbetween thehigh-grade veins. In September 2006 we started a 3,000 metre programme of large-diameter airpercussion drilling as an initial evaluation of the main 2,400 x 500 metresgold-mineralised zone which has a known vertical extent of more than 300 metres.The programme also included 1,900 metres of trenching of selected areas acrossthe mineralised zone and a special sample preparation flow sheet for retainingcoarse gold at our facilities at Mayskoye. Outlook The second half of the ongoing drilling programme should be completed by the endof the second quarter followed by interpretation of assays. If warranted a 3,000metres Phase-II drilling programme, which would test continuity of the mainmineralized zone to the north and to the south could then commence later in theyear. Unkurtash, Kyrgyzstan The Unkurtash project is located in the Middle-Tien Shan mountain range ofwestern Kyrgyzstan and combines the 11km2 Unkurtash license enclosed within themuch larger Kassan license of 760km2. The two licenses include the threeadjacent prospects Unkurtash, Sarytube and Karytube which are characterized bystockwork-type gold mineralization largely hosted by a granitic intrusion. Basedon previous data and extent of known mineralization along strike and depth thethree prospects hold the combined potential for a bulk-mineable gold resource ofpossibly more than 5 million oz grading 1.5-2.0g/t Au. Unkurtash wasinvestigated previously by both Russian and western explorers on surface and inthe underground. Barrick's large bulk sampling programme in 2005 corroboratedthe target grade of around 2g/t Au. In 2006 we prepared access roads and drill pads for a large diameterreverse-circulation drilling programme aimed to define gold grade and delineatethe extent of oxide ore and primary ore to a depth of 300 metres. The programmeis scheduled to begin in the second quarter of the year. Outlook The 2007 drilling programme is expected to confirm the bulk tonnage potentialalong a wide area of Unkurtash and we will also test the two adjacent prospectsKaratube and Sarytube for similar potential. As a next step, more than 10,000metres of delineation drilling at Unkurtash may then be warranted later duringthe year in order to constrain the extent of the system along strike. Maya & Inikan, Khabarovsk region The two adjoining property licenses Maya and Inikan with a combined area of3,733km2 are located in a highly prospective geological setting at the edge ofthe Siberian craton which compares to that of other world-class Russian golddeposits. In 2006 a logistically challenging grass root exploration programme wascompleted which covered the entire license area and was aimed at identifyinganomalies as exploration targets for follow-up work. About 2,200 samples werecollected during a detailed stream sediment geochemical and hydrological survey.Such early stage exploration method has been used successfully by other miningmajors elsewhere. Outlook The analysis of assay data is in progress. The preliminary interpretationalready suggests the presence of a major new gold anomaly that is worthy forfollow-up work. This work will include a detailed soil geochemical samplingsurvey and geophysical work. The results to date highlight the potential for agenuine new discovery on a geologically highly prospective property. Sarasa, Altay region The Sarasa license, a grass root property acquired through Barrick, occupies anarea of 400km2 and is located in the Altay region in a well explored districtrenowned for mercury mining but under-explored for gold. A small scaleexploration programme in 2006 was aimed at evaluating the property potential forCarlin type gold mineralisation and included an analysis of previous data andlimited soil-sampling surveys across the best geochemical anomalies in the area.Overall results are not supportive of significant concentrations of goldmineralisation and therefore does not warrant further exploration. Conclusion The tragic events at the Darasun mine undoubtedly had a major impact on themorale of the whole Company as well as negatively impacting our 2006 results.Having secured two key partnerships - one with Barrick Gold through itsincreased shareholding and the second with the joint venture atNovoshirokinskoye with Kazzinc - along with a new highly experienced andmotivated team on board, the Company feels it is well positioned to bring intoproduction its development projects and to further develop its explorationprojects. Our achievements in 2006 in our pipeline of development and exploration projectsclearly demonstrate that we are strengthened for growth. This would not havebeen possible without the tireless and unified efforts of all our employees whohave once again, energetically contributed to positioning us to meet all thechallenges that lie ahead. Henry HorneManaging Director ---------------------------------------------------------------------------- Chief Financial Officer's Report The net loss after tax for the Group was US$14.7 million before a non-cashafter-tax impairment charge of US$79.3 million was recorded to reflect theBoard's revised valuation for the Darasun operation, and a US$2.4 millionexceptional charge associated with one-off costs directly associated with thefire. 2006 was a year of many operational challenges at the Darasun operation . Thecontinued operational weakness at Darasun combined with the tragic events thatunfolded on September 7th, led the Board to determine that a non-cash after-taxcarrying value adjustment was required to correctly adjust the carrying value ofthe Darasun related assets. After the Darasun impairment charge and other provisions referred to below, andafter taking into account the profit on the sale of 50% of Novoshirokinskoye,the net after-tax loss for the year was US$96.4 million compared to a net lossof US$11.8 million in the prior year. Turnover for the Group was considerably higher in 2006 due to our no hedgepolicy which allowed the Group to fully participate in stronger gold pricesresulting in the Group's realised gold price appreciating by more than 38% whichwas the key reason for the US$26.4 million increase in turnover from US$76.0million to US$102.4 million. In 2006, the Group sold 161,018 ounces of gold atan average price of US$612 per ounce compared with 162,179 ounces sold in 2005at an average price of US$451 per ounce. Offsetting the higher turnover was the Company's total cost of sales before theexceptional impairment charge, which increased by US$27.2 million to US$97.2million and was driven primarily by an increase in costs related to MNVproduction of US$12.1 million (from US$52.7 million in 2005 to US$64.8 millionin 2006) and an increase in cost of sales related to the Darasun operation ofUS$14.4 million (from US$15.7 million in 2005 to US$30.1 million in 2006). Negatively impacting cost of sales at all of our operations was increasedenergy, material and manpower costs. Increased operating costs as a result ofhigher input costs were further impacted by higher royalties, an appreciatingRouble to Dollar exchange rate and increased non-cash charges at the MNVoperation in the form of depreciation and amortisation which were higher due tohigher gold production. Darasun's costs of sales increase was specifically highdue to a full twelve months of commercial operation versus 2005 where the mine'scosts were capitalised as pre-production costs for eight months prior to themine entering commercial production. In addition to the Darasun carrying value adjustment, a number of non-cashprovisions have been made that have impacted the Company's cost of sales. AtDarasun, we have provided US$3.6 million to cover outstanding royaltyliabilities for by-product elements that have not been recovered under themine's operating licence. Management is currently working together with themining agencies for the renegotiation of the licence to omit these requirementson the grounds that there is no viable means of recovery available. Administrative costs before exceptional items increased by US$8.2 million fromUS$13.7 million to US$21.9 million due to higher salaries and wages, additionalexpenses associated with employee share award entitlements following theadoption of accounting standard FRS20 'Share Based Payments', increasedprovisions for value-added-tax receivable positions that have been deemed nonrecoverable, the inability to capitalise management service costs aspre-production expenses following the commencement of commercial production atDarasun as well as increased labour costs particularly severance costsassociated with a corporate office restructuring. Net interest payable and similar charges of US$6.1 million was US$1.1 millionhigher than the prior year period due to generally lower levels of cash beingavailable for deposit in high yielding cash accounts. The Russian Roublecontinued to strengthen in 2006, resulting in the Company recognising US$4.2million of foreign exchange translation gains versus losses of US$1.4 million in2005. These gains were primarily associated with our non-dollar denominatedmonetary items as well as hedging gains arising from forward contracts thathedge the exchange rate exposure on our Russian Corporate Bonds. Given theongoing strength of the Rouble, the Company will consider the possibility ofoperating and capital expenditure currency hedges. In November, 2006, Highland Gold announced the sale of 50% of its share of theNovoshirokinskoye property to Kazzinc for which the Company received US$36million in proceeds resulting in a before-tax profit on sale of US$18 million. Tax expense of US$13.2 million was considerably higher than the prior year taxcredit of US$2.2 million. The tax expense increase was predominantly due toprofit taxes of US$3.3 million on the 48.3% sale of Novoshirokinskoye,provisions of US$2.8 million for tax related expenses arising from positionsthat are currently being contested by the Russian taxation authorities againstwhich management has considered it prudent to accrue the deemed probableexpense, and generally higher taxable income at MNV driven by the stronger goldprice environment and the cessation of tax depreciation acceleration benefits onMNV assets that are now fully depreciated. Exceptional expenses included in Administrative costs of US$2.4 millionrepresent those event specific costs that were directly associated with theDarasun tragedy and primarily represent mine rescue service costs and expensesassociated with compensation payment to the victims' families. Group cash flow from operating activities of US$7.0 million was US$0.8 millionlower than the US$7.8 million generated in 2005. The decreased cash flowcontribution was a result of higher revenues from gold sales being more thanoffset by higher cost of sales, higher general administrative expenses and thefinancial impacts associated with the September 7th tragedy at the Darasunoperation. In addition to cash flow from operating activities, the Group's net interest andloan arrangement outflow was US$5.9 million versus US$5.4 million in the prioryear period while US$10.4 million in Russian profit tax was paid in 2006 versusUS$2.5 million in 2005. Highland Gold continued to advance its development project pipeline investingUS$38.9 million in capital expenditures (US$56.1 million in 2005) comprisingUS$15.5 million at Mayskoye, US$4.4 million at Novoshirokinskoye and US$8.9million at Taseevskoye. In addition to our development project pipeline, theGroup invested expenditures of US$3.7 million at MNV, US$2.7 million at Darasunand US$3.2 million in advancing the Company's exploration licenses plus anotherUS$0.5 million at various other Group entities. In July 2006, following the receipt of the required regulatory approvals, thedisposal of 50% of Taseevskoye and interests in certain exploration licences toBarrick was completed. Barrick had previously exercised their option to acquirea 50% interest pursuant to the 2004 Participation Agreement. The advances thathad been received from Barrick when they had exercised their options weretreated as the proceeds for this disposal. The non-cash acquisition of the remaining 50% share of Taseevskoye and Barrick'sportfolio of exploration assets was satisfied by the issue of 34,492,305ordinary shares in Highland Gold. In acquiring the remaining 50% interest ofTaseevskoye, a business combination was deemed to have taken place andaccordingly, 100% of the fair value of Taseevskoye was included in the Groupaccounts and the existing 50% of Taseevskoye that was already accounted for inHighland's accounts was subsequently revalued to fair value. The acquisition ofBarrick's 50% ownership interests in the joint Barrick/Highland explorationlicences was valued at fair value and this value was then added to the carryingvalue of Highland Gold's existing 50% share. The exploration licences that wereacquired from Barrick, in which Barrick has a 100% ownership interest werevalued at full fair value. The group's net interest, tax liability and investment outflows were financed byexisting cash reserves of US$33.6 million and US$52.3 million of cash inflowscomprising the positive operating cash flow contribution of US$7.0 million, thereceipt of US$36 million from Kazzinc representing the consideration receivedfor 50% of Highland Gold's share in the Novoshirokinskoye project, US$7.9million in joint project funding from Barrick for the Taseevskoye project andother jointly held exploration properties and net financing cash in-flows ofUS$1.4 million. The net financing cash inflows of US$1.4 million comprise the drawdown of aUS$15 million 8% three year bank loan with Gazprombank, US$2.8 million in netequipment lease financing and a net US$4.1 million inflow following the exerciseof share options offset by principal debt repayments of US$20.5 million on theSyndicated Loan Facility. Cash and short term deposits at the end of the year were US$31.5 million versusUS$33.6 million at the end of 2005 while the net debt position of the Grouptotaled US$48.6 million at the end of 2006 versus US$47.0 million at the end of2005. The net debt of the Group includes Cash at Bank, Bank Borrowings,Outstanding Corporate Bonds and Long-Term-Lease Payables. The increase of US$1.6million in net debt was caused by a decrease in cash balances of US$2.7 million,a net reduction in loan principals of US$5.5 million, a US$2.8 million increasein the capital element of the finance leases and general increases in other netdebt items of US$1.5 million due to adverse exchange rate movements. The key to long term sustained value creation for Highland Gold lies in theCompany's ability to bring its development projects into profitable productionduring which one of our ongoing primary objectives will be optimising thecapital structure of the business. After the year end, the Group announced a significant debt restructuring whereUS$90 million in new financing facilities was raised through two large Russianbanks comprising a US$60 million facility with MDM Bank and a US$30 millionfacility with Gazprombank. This debt restructuring was specifically tailored tobetter align the Company's debt maturities with its business plans. These newfacilities reduce Highland Gold's cost of debt and provide significantly moreflexible covenants that are better suited to a growth focused company likeHighland Gold. We immediately utilised a portion of the proceeds from the new financingfacilities to complete the early repayment of the existing Syndicated LoanFacility (approximately US$25.6 million). During the year, the Company did notmeet the requirements of two financial covenants attached to this loan so thebalance outstanding was classified as debt falling due within twelve months onour year-end balance sheet however following the early repayment of thisfacility we will be able to classify the majority of our new debt facilities aslong term borrowings in the future. Advancing our growth pipeline is our top priority and given the current level ofnet debt we believe there is still substantial ability to fund growth. A numberof leading Russian and international financial institutions have alreadyexpressed their interest in participating in future project financing facilitiesfor Mayskoye and Taseevskoye and these will be investigated further in the leadup to the finalisation of each project's feasibility study. We will continue to investigate what are the best additional sources of fundingto supplement operating cash flows for financing the Company's rapid developmentwhile also optimising our capital structure through employing the correct mix ofappropriate capital. Scott Perry Chief Financial Officer HIGHLAND GOLD MINING LIMITED Consolidated Profit and Loss Account. ------------------------------- ------------- ------------- 12 months ended 12 months ended 31 December 2006 31 December 2005 US$000 US$000 Restated------------------------------- ------------- -------------Turnover 102,365 75,955Cost of sales:Before exceptional items (97,155) (70,038)Exceptional item: Asset impairmentfollowing fire (79,274) - ------------- ------------- (176,429) (70,038)------------------------------- ------------- -------------GROSS PROFIT/(LOSS) (74,064) 5,917Administrative costs:Before exceptional items (21,903) (13,670)Exceptional item: Costs associated withthe fire (2,373) - ------------- ------------- (24,276) (13,670)------------------------------- ------------- -------------GROUP OPERATING LOSS (98,340) (7,753)Share of operating loss of Joint Venture (666) -------------------------------- ------------- -------------GROUP OPERATING LOSS INCLUDING SHARE OFJOINT VENTURE (99,006) (7,753)Gain on disposal of 50% ofNovoshirokinskoye 17,988 -Loss on asset disposals (329) -Bank interest receivable 736 1,849Interest payable and similar charges (6,790) (6,804)Foreign exchange gains/(losses) 4,199 (1,355)------------------------------- ------------- -------------LOSS ON ORDINARY ACTIVITIES BEFORETAXATION (83,202) (14,063)Tax (charge)/credit on loss on ordinaryactivities (13,243) 2,233------------------------------- ------------- -------------LOSS FOR THE FINANCIAL PERIOD (96,445) (11,830)------------------------------- ------------- ------------- Basic earnings per share (US$) (0.597) (0.077)Diluted earnings per share (US$) (0.597) (0.077)------------------------------- ------------- ------------- Consolidated Statement of Total Recognised Gains and Losses. ------------------------------- ----------- ----------- 12 months ended 31 12 months ended 31 December 2006 US$000 December 2005 Restated US$000------------------------------- ----------- -----------Loss for period attributableto members of the parentcompany (96,445) (11,830) Asset revaluation 1,039 -------------------------------- ----------- ----------- Total recognised gain and lossrelating to the year (95,406) (11,830) Prior year adjustment due to change inaccounting policy (495) - Prior year adjustment associatedwith the provision forobsolete items (5,672) - ------------------------------- ----------- -----------TOTAL GAINS AND LOSSES RECOGNISEDSINCE LAST ANNUAL REPORT (101,573) (11,830)------------------------------- ----------- ----------- Consolidated Balance Sheet.---------------------------------- ------- -------- -------- At 31 December At 31 December 2006 2005 US$000 US$000 Restated---------------------------------- ------- -------- --------FIXED ASSETSIntangible assets -positive/(negative) goodwill 61,442 (8,796)Tangible assets 220,883 277,174Investments in joint ventures: 16,216 -Negative goodwill (4,398) -Share of gross assets 21,063 -Share of gross liabilities (449) ----------------------------------- ------- -------- -------- 298,541 268,378CURRENT ASSETSStocks 33,885 36,258Debtors 23,125 28,198Deferred costs 1,862 2,143Cash at bank and in hand 31,493 33,570---------------------------------- ------- -------- -------- 90,365 100,169 CREDITORS: amounts falling duewithin one year (58,217) (102,211)---------------------------------- ------- -------- --------NET CURRENT ASSETS 32,148 (2,042) TOTAL ASSETS LESS CURRENTLIABILITIES 330,689 266,336---------------------------------- ------- -------- -------- CREDITORS: amounts falling dueafter more than one year (46,754) (610)PROVISIONS FOR LIABILITIES ANDCHARGES (30,347) (17,572)MINORITY INTERESTS - EQUITY - (282)---------------------------------- ------- -------- -------- 253,588 247,872 ---------------------------------- ------- -------- --------EQUITY SHAREHOLDERS' FUNDSCalled up share capital 325 255Share premium 334,800 236,483Shares to be issued 510 -Profit and loss account (82,047) 11,134---------------------------------- ------- -------- -------- 253,588 247,872 ---------------------------------- ------- -------- -------- Approved by the Board on 21 April 2007 James Cross Henry Horne Chairman Managing Director Consolidated Cash Flow Statement. ----------------------------- ----------- ----------- 12 months ended 12 months ended 31 December 2006 31 December 2005 US$000 US$000 Restated----------------------------- ----------- -----------CASH (CONSUMED)/ GENERATED FROMOPERATING ACTIVITIES (2,416) 1,354----------------------------- ----------- -----------Changes in working capital 9,457 6,397----------------------------- ----------- -----------NET CASH INFLOW FROM OPERATINGACTIVITIES 7,041 7,751----------------------------- ----------- -----------RETURNS ON INVESTMENT AND SERVICING OFFINANCEInterest received 736 1,849Interest paid on bank loans (6,172) (4,792)Loan arrangement fees - (1,960)Interest paid on finance leases (420) (452)----------------------------- ----------- -----------NET CASH OUTFLOW FROM RETURNS ONINVESTMENT AND SERVICING OF FINANCE (5,856) (5,355)----------------------------- ----------- ----------- TAXATIONRussian profit tax paid (10,364) (2,521)----------------------------- ----------- -----------CAPITAL EXPENDITURE AND FINANCIAL INVESTMENTPayments to acquire tangible fixedassets (38,911) (56,143)----------------------------- ----------- -----------NET CASH OUTFLOW ON CAPITAL EXPENDITUREAND FINANCIAL INVESTMENT (38,911) (56,143)----------------------------- ----------- -----------ACQUISITIONS AND DISPOSALS Payment of deferred consideration forsubsidiary undertakings - (11,500)Payments for acquisition of newgeological licenses - (2,015)Pre-payment received for partialdisposal of Taseevskoye - 13,340Advances received from Barrick Gold forTaseevskoye and certain explorationlicences 7,922 -Cash received for the disposal of 50% ofNovoshirokinskoye's shares 36,000 ------------------------------ ----------- -----------NET CASH INFLOW / (OUTFLOW) ONACQUISITIONS AND DISPOSALS 43,922 (175)----------------------------- ----------- ----------- Equity dividends paid - (1,473)----------------------------- ----------- -----------NET CASH OUTFLOW BEFORE FINANCING ANDMANAGEMENT OF LIQUID RESOURCES (4,168) (57,916)----------------------------- ----------- ----------- ----------------------------- ----------- -----------MANAGEMENT OF LIQUID RESOURCESDecrease in short term deposits (5,080) (1,464)----------------------------- ----------- ---------------------------------------- ----------- -----------FINANCINGIssue of ordinary shares 4,416 50,562Share issue costs (313) (1,687)Receipt of long-term loans 15,000 65,849Repayment of borrowings (20,475) (58,624)Receipt from sale and leasebacktransactions 5,897 -Repayment of capital element of financeleases (3,094) (4,195)----------------------------- ----------- -----------CASH INFLOW FROM FINANCING 1,431 51,905----------------------------- ----------- -----------DECREASE IN CASH (7,817) (7,475)----------------------------- ----------- ----------- RECONCILIATION OF NET CASH FLOW TO MOVEMENTIN NET DEBTDecrease in cash and short-term deposits (7,817) (7,475)Receipt/repayment of capital element offinance leases (2,803) 4,195Cash inflow from short-term deposits 5,080 1,464Movements in loans and other creditors 5,475 (7,225)----------------------------- ----------- -----------MOVEMENTS IN NET DEBT ARISING FROM CASHFLOWS (65) (9,041)----------------------------- ----------- -----------Other movement in long term payables - 199New finance leases and other (36) (618)Exchange differences (1,512) 188----------------------------- ----------- -----------MOVEMENT IN NET DEBT (1,613) (9,272)----------------------------- ----------- -----------NET (DEBT) AT BEGINNING OF PERIOD (46,966) (37,694)----------------------------- ----------- -----------NET (DEBT) AT END OF PERIOD (48,579) (46,966)----------------------------- ----------- ----------- Accounting Policies The accounting policies adopted in the preparation of the financial informationare consistent with those applied to the year ended 31 December 2005 except forthe adoption of FRS 20 'Share Based Payments', issued by the AccountingStandards Board. The impact of the adoption of this standard is as follows: Adoption of a new accounting standard - FRS 20 'Share Based Payments'Starting from 1 of January 2006 the Group has adopted FRS 20 "Share BasedPayments". The adoption of FRS 20 has resulted in a change in accounting policyfor share based-payment transactions. FRS 20 requires the fair value of optionsand share awards which ultimately vest to be charged to the profit and lossaccount over the vesting or performance period. For equity-settled transactionsthe fair value is determined at the date of the grant using an appropriatepricing model. For cash-settled transactions fair value is established initiallyat the grant date and at each balance sheet date thereafter until the awards aresettled. If any award fails to vest as the result of certain types ofperformance condition not been satisfied, the charge to the income statementwill be adjusted to reflect this. Previously, equity based instruments were valued at intrinsic value at thereporting date, and recognised as an expense over the performance period. Thestandard has been adopted retrospectively leading to the following changes inthe comparatives. Current liabilities in both the group and company balancesheets have been increased by $495k as at 31 December 2005. Share-based paymentreserve at 31 December 2005 in both the group and company balance sheets havebeen increased by $2,254k. Additional staff costs of $2,699k for 2005 and $50kfor 2004 have been recognised respectively. The audited financial information for the years ended 31 December 2006 and 31December 2005 contained in this document do not constitute statutory accounts asdefined in the Companies (Jersey) Law 1991. The financial information for theyear ended 31 December 2006 has been extracted from the financial statements ofHighland Gold Mining Limited which will be delivered to the Registrar ofCompanies in due course. The auditors have issued an unqualified opinion on theGroup's statutory financial statements for the year ended 31 December 2006. Thecomparative financial information is based on the statutory accounts for thefinancial year ended 31 December 2005, as adjusted for the adoption of FRS 20referred to above, and adjusted for the item outlined below. Those accounts,upon which the auditors issued an unqualified opinion, have been delivered tothe Registrar of Companies. Prior year adjustment due to change in inventory obsolescence provisionDuring the current year the Group implemented inventory turnover analysis tomore accurately estimate the level of inventory obsolescence at its operations.The reason for the adoption of this inventory analysis technique was to increasethe overall effectiveness of the Group's inventory management. The results of this analysis indicated that the prior years inventoryobsolescence provision balances for raw materials, consumables and spare partswere understated. This error has been corrected in the 2006 financial statementsby restating the 2005 comparatives. This restatement resulted in an increase tothe provision for obsolete items at 31 December 2005 of US$5,672,000. Theobsolete provision charge in 2005 was increased by US$3,433,000, with retainedearnings at 1 January 2005 being decreased by US$2,239,000. There was noassociated tax effect of these adjustments. Selected Notes to the Group Financial Statements. Tax on profit on ordinary activities (a) Analysis of tax (charge)/credit on loss on ordinary activities in the period----------------------------- ----------- ----------- 12 months ended 12 months ended 31 December 2006 31 December 2005 US$000 US$000----------------------------- ----------- -----------Current tax:Russian profit tax for the period 14,243 418----------------------------- ----------- -----------Total current tax (see (b)) 14,243 418 Deferred tax:Adjustment to prior period 111 (3,644)Origination and reversal of timingdifferences (1,111) 993----------------------------- ----------- -----------Total deferred tax (1,000) (2,651)----------------------------- ----------- -----------Tax (charge)/credit on loss on ordinaryactivities 13,243 (2,233)----------------------------- ----------- ----------- (b) Factors affecting tax charge for the period The differences between the effective provision for Russian profits tax and thestatutory tax provision at the statutory rate is reconciled as follows: ----------------------------- ----------- ----------- 12 months ended 12 months ended 31 December 2006 31 December 2005 US$000 US$000 restated----------------------------- ----------- -----------Loss on ordinary activities before tax (83,202) (14,063)Standard tax rate 24% 24%----------------------------- ----------- -----------Loss on ordinary activities multipliedby standard rate (19,968) (3,375)----------------------------- ----------- -----------Effects of:Permanent differencesForeign exchange differences 3,827 (1,492)Lower tax rates on overseas earnings (9,079) (2,224)Non deductible expenses 7,862 3,917Other permanent differences 6,321 436----------------------------- ----------- ----------- 8,931 637----------------------------- ----------- -----------Timing differencesFixed asset timing differences (1,238) (7,154)Tax losses 2,104 6,329Other 245 (168)----------------------------- ----------- ----------- 1,111 (993)----------------------------- ----------- ----------- Unrecognised tax losses and otherunrecognised timing differencesLosses arising from Darasun impairment 19,026 -Other 5,143 4,149----------------------------- ----------- ----------- 24,169 4,149----------------------------- ----------- ---------------------------------------- ----------- -----------Current tax charge for the period 14,243 418----------------------------- ----------- ----------- (c) Factors affecting tax charges Russia has a number of laws relating to various taxes imposed by both federaland regional governmental authorities. Applicable taxes include value added tax,corporate income tax (profits tax), a number of turnover based taxes, andpayroll (social) taxes, together with others. In addition, the subsidiaries ofthe Company are also subject to various industry taxes including mineralextraction taxes. Laws related to some of these taxes have not been in force forsignificant periods, in contrast to more developed market economies; therefore,regulations are often unclear or non-existent. Accordingly, few precedents withregard to issues have been established. Often, differing opinions regardinglegal interpretation exist both among and within government ministries andorganisations (like the Ministry of Taxes and Levies and various inspectorates);thus creating uncertainties and areas of conflict. Tax declarations, togetherwith other legal compliance areas (as examples, customs and currency controlmatters), are subject to review and investigation by a number of authorities,who are enabled by law to impose extremely severe fines, penalties and interestcharges. These facts create tax risks in Russia substantially more significantthan typically found in countries with more developed tax systems. Exceptional items. Impairment of assets at Darasun Following in-depth engineering studies, rehabilitation assessments and financialreviews and in compliance with required accounting practice, management hasdowngraded its valuation of the mine at Darasun, determining that a permanentdecline in value has occurred. The year 2006 was a year of many operational challenges at the Darasun Propertyand there were two key triggering events that led to this carrying valueevaluation: • Continued mine-to-reserve dilution coupled with adversemill-to-mine grade reconciliations in the Underground Mine resulted inmanagement placing the South West and Teremky shafts on a care and maintenancebasis in August 2006. In isolation this did not result in an impairment as thecarrying value of the assets were deemed to be recoverable against the cashflows of the remaining operations; followed by, • The tragic events of 7th September 2006 resulted in the cessationof all remaining underground production activities with production access tounderground mining areas still prohibited. Access to these areas for thepurposes of rehabilitation only, was granted on December 13, 2006. Followingthis access, Management continues to undertake and evaluate various studiesinvestigating the cost of rehabilitation and future viability of recommencingunderground operations at Darasun. In accordance with FRS 11 'Impairment of Fixed Assets and Goodwill' the carryingvalues of the Darasun property at 31 December 2006, have been compared to itsrecoverable amount, represented by its net realisable value. Management's valuation assessment has resulted in a US$79 million non-cashpost-tax carrying value charge to reduce Darasun's Balance Sheet carrying value.The impairment related to the following assets: US$000---------------------- -------TANGIBLE ASSETSMine assets 29,397Property, plant and equipment 11,224Buildings 15,768Assets under construction 6,746---------------------- ------- 63,135 CURRENT ASSETSStock 6,258Deferred stripping costs 2,501Debtors 4,760---------------------- ------- 13,519 Increase to site restoration provision 2,620---------------------- -------TOTAL IMPAIRMENT 79,274---------------------- ------- Costs associated with the Darasun fire. Costs associated with the Darasun fire in the amount of US$1,174,000 wereincreased by the provision for rescue services costs (US$250,000) and emotionalsuffering claims (US$949,000). These costs include the following: Type of cost US$000 ------------------------------- -------------Costs already incurred: - Fixed assets write-off 426 - Financial aid 224 - Materials 211 - Rescue services 170 - Other 143 ------------------------------- ------------- 1,174Costs provided for: - Rescue services 250 - Emotional suffering claims 949 ------------------------------- ------------- 1,199 ------------------------------- -------------Total: 2,373 Tax on exceptional items. There was no tax associated with the exceptional items recognised. Theimpairment of assets at Darasun, and the other exceptional items, generateddeferred tax assets in the amounts of US$19,026,000 and US$570,000 respectively,which were not recognised due to insufficient forecasted income against whichthe losses could be offset. Investments Disposals Following the receipt of the anti-monopoly approval on 5 July 2006, HighlandGold disposed a 50% interest in Taseevskoye and certain exploration licences.Barrick had previously exercised their option to acquire these interestspursuant to the Participation Agreement between Highland Gold and Barrick signedon 27 January 2004. The US$21,825,708 advances previously received from Barrickwhen they originally exercised their options were treated as the considerationfor these disposals. The book values at the date of this disposal of the interests acquired byBarrick were as follows: US$'000------------------------------------------------ --------50% share of the net assets of Taseevskoye (19,274)50% share in the Sovinoye, Belaya Gora and Malo Fedorov explorationdeposits (2,552)------------------------------------------------ -------- No gain or loss arose as a result of this transaction. Following this disposal, Highland Gold's remaining interest in Taseevskoye wasaccounted for as a joint venture using the gross equity method, until thesubsequent re-purchase of the 50% interest disposed to Barrick). Acquisitions. On 18th December 2006 Highland Gold announced that Barrick Gold Corporation("Barrick") had increased its shareholding in Highland Gold to approximately34%. In exchange Highland received: • Barrick's 50% share in Taseevskoye Netherlands B.V., and Barrick's rights and interests in the Taseevskoye licence; • Barrick's 50 % share in HB Ventures Netherlands B.V., and Barrick's rights and interests in Sovinoye, Belaya Gora and Malo Fedorov licences; • A 100% of the share in Barrick Resources LLC, the holder of the Lyubov, Maya-Inikan, and Sarasa licences; • A 100% of the shares in Barrick Gold Kyrgyzstan LLP, the holder of the Unkurtash and Kassan licences in Kyrgyzstan. The consideration for the acquisition of these share interests was satisfied bythe issue to Barrick entities of 34,492,305 ordinary shares in Highland. Thefirst tranche of 34,312,657 new ordinary shares was admitted to AIM on theLondon Stock Exchange and started trading on 18 December, 2006. A second trancheof 179,648 new ordinary shares is to be issued in 2007. In acquiring the remaining 50% interest of Taseevskoye, a business combinationwas deemed to have taken place. Accordingly, 100% of the fair value ofTaseevskoye was included in the Group accounts and the existing 50% ofTaseevskoye that was already accounted for in Highland's accounts wassubsequently revalued to fair value resulting in a valuation increment to theAsset Revaluation Reserve. The fair value of the net assets of Taseevskoye at the date of acquisition is asfollows: --------------------------------- --------- --------- --------(100%) Book value Fair value adjustments Fair value US$'000 US$'000 US$'000--------------------------------- --------- --------- --------Mining assets 36,126 2,078 38,204Investments 420 - 420Inventory 47 - 47Debtors 2,294 - 2,294Cash 320 - 320Liabilities (659) - (659)--------------------------------- --------- --------- --------Net Assets 38,548 2,078 40,626--------------------------------- --------- --------- ----------------------------------------- --------- --------- --------Fair value of the 50%acquired 20,313--------------------------------- --------- --------- -------- The acquisition of Barrick's 50% ownership interests in the joint Barrick/Highland exploration licenses was valued at fair value and this value was thenadded to the carrying value of Highland's existing 50% share. The applicableexploration licenses, and the assessment of the fair value of the 50% interestacquired in each are as follows: --------------------------------- --------- Fair value of 50% interest acquired US$'000--------------------------------- ---------Belaya Gora 4,000Sovinoye 2,000Malo-Fedorovsky 250Lubov 2,500--------------------------------- --------- 8,750--------------------------------- --------- The exploration licenses acquired from Barrick, in which Barrick had a 100%ownership interest were valued at full fair value. The applicable explorationlicenses, and their fair value at the date of acquisition were: --------------------------------- -------- Fair value US$'000--------------------------------- --------Unkurtash ( including the Kasan deposit) 5,000Maya-Inikan 1,000Sarassa ---------------------------------- --------Total 6,000--------------------------------- -------- A summary of this acquisition is presented below:--------------------------------- -------- Fair value US$'000--------------------------------- --------Fair value of 50% of net assets of Taseevskoye 20,313Fair value of the joint Barrick/Highland exploration deposits 8,750Fair value of the 100% owned exploration deposits 6,000Cash received from Barrick not spent as at 31/12/2006 1,493Goodwill arising on acquisition 61,442--------------------------------- --------Total fair value of the net assets acquired 97,998--------------------------------- -------- Discharged by:Fair value of shares issued 97,998 The goodwill generated in this transaction will be carried forward as a noncurrent intangible asset on the balance sheet and amortised evenly over a periodof twenty years. Novoshirokinskoye Joint Venture On 1st December 2006 the Group signed a joint venture agreement with Kazzincwith the purpose of further developing the Novoshirokinskoye polimetallicdeposit. According to the agreement a 48.3% interest in OAO Novoshirokinskoye ("Novo")was sold for a consideration of US$36 million in cash. This interest soldrepresented 50% of the Group's 96.6% interest. The disposal resulted in a gainof US$17,988,000. US$000-------------------------------------------- ----------Novo net assets at the date of sale 46,088Negative goodwill (8,796)-------------------------------------------- ---------- 37,292-------------------------------------------- ----------Share of net assets and negative goodwill disposed - 48.3% 18,012Consideration received in cash 36,000-------------------------------------------- ----------Gain on disposal 17,988-------------------------------------------- ---------- This transaction resulted in the creation of a joint venture, NovoshirokinskoyeRudnik open joint stock company, Russian Federation, Chita region,Gazimuro-Zavodskoy raion, Novo-Shirokaya. The Group's interest in the JointVenture is treated as an investment in a joint venture as it is jointlycontrolled by the Group and Kazzinc under contractual agreement. The existenceof joint control is based on following factors: - Investment in the joint venture will be split 48.3%/ 48.3% between the Group and Kazzinc. - The Board of Directors of the joint venture will consist of three representatives from each venturer. - The operator of the project is selected every year. For 2007, the operator of project will be OOO Russdragmet (RDM), a wholly owned subsidiary of Highland Gold. The Group's share of the net assets in the joint venture comprise the following: US$000------------------------------------------- ---------- Negative goodwill (4,398)Tangible assets 18,777Current assets 2,286------------------------------------------- ----------TOTAL SHARE OF GROSS ASSETS 16,665------------------------------------------- ---------- Share of gross liabilities due within one year (449)------------------------------------------- ----------TOTAL INVESTMENTS IN JOINT VENTURE 16,216------------------------------------------- ---------- The Group's share of the results of the Novo Joint Venture is a loss ofUS$666,000. The balance of the loan outstanding as at 31st December 2006 given by the Groupto the joint venture was US$500,000. Reconciliation of shareholders' funds. ---------------------------- ------------ ------------ 12 months ended 12 months ended 31 December 2006 31 December 2005 US$000 US$000 restated---------------------------- ------------ ------------Shareholders' funds at the beginning ofperiod, as originally reported 247,872 211,409Prior year adjustment due to change inaccounting policy - (50)Prior year adjustment associated withthe provision for obsolete items - (2,239)---------------------------- ------------ ------------Shareholders' funds at the beginning ofperiod, as restated 247,872 209,120---------------------------- ------------ ------------Dividends (1,473)Shares issued during the period 102,414 50,562Share issue costs (3,517) (761)Asset revaluation reserve 1,039 -Share based payment expense 2,225 2,254Loss incurred in the period (96,445) (11,830)---------------------------- ------------ ------------Shareholders' funds at end of period 253,588 247,872---------------------------- ------------ ------------ Note to the cash flow statement (a) Reconciliation of operating loss to net cash inflow fromoperating activities---------------------------------- ----------- ---------- 12 months ended 12 months ended 31 December 2005 31 December 2006 US$000 US$000 restated---------------------------------- ----------- ----------Operating loss (99,006) (7,753)Impairment of Darasun 79,274 -Costs associated withthe fire 2,373 -Share of operating lossof Joint Venture 666 -Depreciation, depletionand amortisation 11,428 8,639Other non cash 2,849 468---------------------------------- ----------- ----------Cash generated fromoperating activity (2,416) 1,354---------------------------------- ----------- ----------Changes in working capital: - Decrease/(increase) in debtors (8,716) 7,098 - Decrease/(increase) in stock (2,483) (1,862) - Decrease/(increase) in deferred costs (2,221) (617) - Increase/(decrease) in creditors 15,267 1,469 - Decrease/(increase) in VAT receivable 9,503 (4,101) - Decrease/(increase) in provisions (1,893) 4,410---------------------------------- ----------- ----------Total changes in workingcapital 9,457 6,397---------------------------------- ----------- ----------Net cash inflow fromoperating activities 7,041 7,751---------------------------------- ----------- ---------- (b) Analysis of net debt -------------------------- ------- ------- ------- ------- ------- As at 31 Cash flow Exchange Other As at December difference non cash December 2005 2006 US$000 US$000 US$000 US$000 US$000-------------------------- ------- ------- ------- ------- -------Cash in bankand in hand 17,106 (7,817) 660 - 9,949Short-termdeposit* 16,464 5,080 - - 21,544Capitalelement offinance leases (3,010) (2,803) - (36) (5,849)Loans andother longterm creditors (77,526) 5,475 (2,172) - (74,223)-------------------------- ------- ------- ------- ------- -------Total (46,966) (65) (1,512) (36) (48,579)-------------------------- ------- ------- ------- ------- ------- * Short-term deposits at 31st December 2006 and 2005 are included within cash atbank and in hand in the balance sheet. Earnings per share ---------------------------------- ----------- ---------- 12 months 12 months ended 31 December ended 2005 restated 31 December 2006 ---------------------------------- ----------- ----------Profit for theperiodattributable toshareholders(US$000) (96,445) (11,830)Weighted averagenumber of sharesin issue 161,586,100 153,012,018Basic earningsper share (0.597) (0.077) Diluted loss per ordinary share has not been disclosed as inclusion ofunexercised options and warrants would be anti-dilutive in 2006. Post Balance Sheet events. Breach of loan covenants As at the 31st December 2006, the Group was in breach of one of the loancovenants attached to its long-term loan facility, and accordingly the US$10.2million long-term portion of the facility was reclassified to "creditors:amounts falling due within one year". On 16th March 2007, this facility wasfully repaid. MDM bank facility On 16th March 2007, the Group entered into a long term loan agreement with MDMbank for US$60 million at the annual interest rate of 8.6%. The loan isrepayable over five years and is secured by forward gold sales. Gazprom Bank facility On 31st March 2007, the Group entered into a long term loan agreement withGazprombank for US$30 million at the annual interest rate of 8.7%. The loan isrepayable over four years and is secured by forward gold sales. Unaudited Historic Summary ------------ -------- -------- -------- -------- -------- -------- -------- 12 months 6 months 6 months 6 months 6 months 6 months 6 months ended ended ended ended ended ended ended 31 December 31 December 30 June 2006 31 December 30 June 2005 31 December 30 June 2006 2006 2005 restated restated restated US$000 US$000 US$000 US$000 US$000 2004 2004 US$000 US$000------------ -------- -------- -------- -------- -------- -------- -------- Balance Sheet------------ -------- -------- -------- -------- -------- -------- -------- Non-currentassets 298,541 298,541 279,152 268,378 238,861 215,418 154,977Current 90,365 90,365 96,137 100,169 157,858 119,360 76,691assets -------- -------- -------- -------- -------- -------- --------------------Total assets 388,906 388,906 375,289 368,547 396,719 334,778 231,668------------ -------- -------- -------- -------- -------- -------- -------- Non-currentliabilities 77,101 77,101 27,850 18,182 46,369 42,812 42,027Currentliabilities 58,217 58,217 94,179 102,211 99,934 82,458 68,572Minorityinterests - - 197 282 338 338 1,024Equity 253,588 253,588 253,063 247,872 250,078 209,170 120,045------------ -------- -------- -------- -------- -------- -------- --------Totalliabilitiesand equity 388,906 388,906 375,289 368,547 396,719 334,778 231,668------------ -------- -------- -------- -------- -------- -------- -------- Production 162,241 71,036 91,205 101,737 63,749 102,910 96,986(Oz) -------- -------- -------- -------- -------- -------- -------------------- Profit andLoss Account -------- -------- -------- -------- -------- -------- -------------------- Sales 102,365 48,550 53,815 47,704 28,251 43,903 38,159Operatingprofit (99,006) (103,199) 4,193 (6,107) (1,646) 5,679 10,819Other gainsand lossesincludinginterest net 15,804 15,773 31 (2,221) (4,089) (2,042) (2,513)Profit beforetaxation (83,202) (87,426) 4,224 (8,328) (5,735) 3,637 8,306Tax (13,243) (8,818) (4,425) 3,672 (1,439) (7,400) (1,818)Profit aftertaxation (96,445) (96,244) (201) (4,656) (7,174) (3,763) 6,488Dividends - - - (1,473) (1,199) (1,798)------------ -------- -------- -------- -------- -------- -------- --------Retainedearnings (96,445) (96,244) (201) (4,656) (8,647) (4,962) 4,690 Statistical------------ -------- -------- -------- -------- -------- -------- -------- Sharesissued, 161,586,100 161,586,100 159,929,655 153,012,018 150,618,363 122,528,340 118,149,741averageEPS (0.597) (0.596) (0.001) (0.030) (0.048) (0.031) 0.055Dividends pershare - - - - 0.01 0.01 0.02Dividend - - - - (4.9) (3.1) 3.6coverInterest (14.58) (27,30) 1.39 (2.22) (0.41) 1.73 5.60cover -------- -------- -------- -------- -------- -------- -------------------- This information is provided by RNS The company news service from the London Stock Exchange
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