HGM.L Regulatory News (HGM)

HIGHLAND GOLD MINING LIMITED

Interim Results Announcement for H1 2016

26 September 2016

Highland Gold Mining Limited ("Highland Gold", the "Company" or "Group") today reports its unaudited financial results and production figures for the half year ended 30 June 2016 ("H1").

FINANCIAL SUMMARY

* Definitions for non-IFRS terms are provided in the glossary to the Chief Financial Officer's Report below.

The interim condensed consolidated financial statements of Highland Gold for the six months ended 30 June 2016 are set out below.

H1 2016 HIGHLIGHTS

Financial

· Total first half revenue rose 13% year-on-year to US$147.1 million, reflecting improved metals prices and increased sales volumes during the period.

· H1 2016 EBITDA was US$ 79.7 million, an increase of 45% over H1 2015, while EBITDA margin rose to 54%.

· All-in sustaining costs (AISC) per ounce fell by 14% to US$609/oz, assisted by ongoing weakness in the rouble and strict cost controls.

· Free cash flow (defined as net cash flows from operating activities less cash flows used in investing activities) was US$60.7 million

· Net debt to EBITDA ratio reduced to 1.3 as of 30 June 2016 versus 1.7 as of 31 December 2016 as the Company directed free cash flow to debt repayment.

Operations

· Total H1 2016 production of 128,671 oz of gold and gold equivalent at Mnogovershinnoye (MNV), Novoshirokinskoye (Novo), Belaya Gora, and Sredny Golgotay (Kaftan site), an increase of 6% from 121,242 oz in H1 2015.

· MNV and Novo exceeded internal production targets for the quarter, while at Belaya Gora efforts to optimise operations were ongoing.

· Exploration work continued on the Northern ore body at MNV, with reserves expected to receive approval from regulators by year-end.

· Work commenced on the planned expansion of processing capacity at the Novo mill.

· Pre-feasibility study completed for Kekura, and a subsequent fatal flaw review supported open pit and underground mine design plans.

· Scoping studies initiated for the Baley Cluster Projects (Taseevskoye, Sredny Golgotay and ZIF-1 tailings) and Unkurtash, and a revised pre-feasibility study initiated for Klen.

POST HALF YEAR EVENTS

· Interim Dividend of £0.05 per share approved by the Board of Directors

· The Company affirms its forecast for total production of gold and gold equivalent of 255,000-265,000 oz for the full year.

CONFERENCE CALL DETAILS

The Company will hold a simultaneous webcast and conference call to discuss the results, hosted by CEO Denis Alexandrov, on Monday, 26 September 2016 at 10:00 UK time (12:00 Moscow).

This event is being streamed. It is recommended that you listen via your computer speakers. The link for online registration is: http://engage.vevent.com/rt/webcasting/index.jsp?seid=746 

To register to participate by telephone and to receive local dial-in numbers, please follow this link:

http://emea.directeventreg.com/registration/87650126 

FOR FURTHER INFORMATION PLEASE CONTACT:

***

CEO STATEMENT

Denis Alexandrov, CEO of Highland Gold, said:

"Sadly, I have to begin by stating that, after the reporting period, on 10 September, the Company witnessed a fatality at our MNV underground mine. In light of this accident and an increase in minor incidents this year, we have undertaken urgent measures to strengthen and expand our HSE team and to update our safety standards across all of our operations. We have also initiated safety inspections of all underground shafts at MNV and Novo.

Overall, the Company witnessed a positive first half of 2016, with increased production, stronger gold prices, cost controls, and the weak rouble together contributing to improved earnings, lower costs and higher margins.

At the core of this progress were MNV and Novo, which both exceeded their six-month production targets. Work on reassessing MNV's reserves, as well as exploration of near-mine targets, continued apace with a target of extending life of mine. Novo increased mining and processing throughput while also advancing plans to expand the mill's capacity to 1.3 million tons over the next two years.

Belaya Gora continued to face challenges with both geology and metallurgy during the half, despite higher ore production and a reduction in tailings grade. The Company has initiated work, together with consultants SRK, to reassess the mine's reserves, to study the combined processing of Belaya Gora ores with those of the nearby Blagodatnoye deposit, and to upgrade the mill with CIL technology. This work will continue throughout the second half and be finalised early next year.

The Company also saw progress in its exploration and development projects, with over US$ 10 million spent on drilling programs at MNV, Kekura, Sredne Golgotay, and Blagodatnoye, as well as on a pre-feasibility study (PFS) for Klen, open pit dewatering at Taseevskoye, and a scoping study for Unkurtash. A PFS for Kekura was delivered in the second quarter and preparations for construction at the site are already underway. These efforts are laying the foundations for production growth in the years to come."

OPERATIONAL REVIEW

Mnogovershinnoye (MNV), Khabarovsk Region, Russia

· A re-evaluation of MNV's historical waste dumps resulted in 300,000 tonnes of ore being put on the balance sheet at a grade of just over 1.0 g/t.

· Significant improvement was seen in mined grades during H1.

· Improvement in ore mining, recovery and total gold production over H1 2015 figures.

Novoshirokinskoye (Novo), Zabaikalsky Region, Russia

· Underground development, ore mining and processing continued to trend upward versus the previous two halves.

· Recovery rates remain stable at over 86%.

* In gold equivalents at actual prices.

(Metal grade of mined ore = Au 3.09 g/t, Ag 86.08 g/t, Pb 2.63 %, Zn 0.71 %)

Preparatory construction work has commenced on the planned expansion of Novo's processing capacity to 1.3 million tonnes per annum. Geotechnical construction studies are being finalised at the site and design documentation is being developed. The mine and mill are expected to reach the new, increased capacity in late 2018.

Belaya Gora, Khabarovsk Region, Russia

· Higher H1 processing volumes versus H1 2015 were offset by a fall in grades.

· The percentage recovery rate fell slightly due to the lower grades, but improvements in mill performance meant the amount of gold sent to tailings was actually reduced to 0.35 g/t from 0.45 g/t for the first half.

Studies continued on avenues for improving recovery rates at the mill, while outside consultants have been brought in to assist in optimising mining operations and reassessing gold reserves.

Sredny Golgotay (Kaftan Site), Zabaikalsky Region, Russia

A pilot project to mine ore from the Kaftan site of the Sredny Golgotay licence, initiated in Q1 of this year, resulted in 4,501 tonnes of ore being transported to the Novo mill for processing. The ore had an average grade of 3.6 g/t, somewhat below initial expectations.

To help to better understand the quantity and quality of reserves at Kaftan, contractor Sosnovgeo carried out part of a 7,900 metre grade control drilling programme at the site. As of June 30, 6,654 linear metres were drilled. Assay results were obtained for 6,610 samples. The drilling was completed in July and results are expected later this year.

DEVELOPMENT PROJECTS

Kekura, Chukotka Autonomous District, Russia

Work carried out at Kekura in H1 included completion of a pre-feasibility study (PFS) drafted by Wardell Armstrong; development by a Russian design institute of a methodology for calculation of losses and dilution; and development of design documentation for a mining and processing complex.

A Fatal Flaw Review of the Kekura PFS by RungePincockMinarco resulted in a positive opinion on mine designs for both the open pit and underground scenarios. Ore reserves were determined to be of high quality and the project was recognised as having a low sensitivity towards gold prices.

The work produced by RungePincockMinarco identified a pathway forward for further optimisation of technical solutions and improvement of the project's economic viability.

Preparations for 2017 construction and installation are underway, including the procurement of construction materials and the selection of contractors to build key infrastructure facilities.

In the second half of the year, the Company will focus on obtaining approval of project documentation from the main environmental and state expert review panels; receiving approval of design documentation; obtaining permits for construction; and further preparing for the commencement of construction and installation work.

Klen, Chukotka Autonomous District, Russia

In H1, the Company initiated a review of previous decisions on Klen with a view towards identifying a viable scenario to develop the project under current market conditions. International consultants Hatch were selected via tender to draft a new pre-feasibility study for a processing plant and infrastructure facilities at Klen. Initial indications are that opportunities do exist to improve and optimise previous options considered for the project.

The Company expects to receive a full financial and economic model for Klen and to make a decision on further project development in the second half of this year.

Lyubov, Zabaikalsky Region, Russia.

During the first half, the Company signed an agreement with an outside contractor to process ore from existing tailings at the Lyubov site. Impoundments, water intake and drainage ditches have been arranged, a processing plant has been installed, and commissioning is underway, with all of the necessary equipment and materials delivered to the site. A pilot programme to test the project's production potential is expected to commence in the third quarter of this year.

Baley Ore Cluster, Zabaikalsky Region, Russia.

(Taseevskoye, Sredny Golgotay and ZIF-1 tailings licences)

At Taseevskoye, a programme was initiated in H1 to evaluate oversized rock stockpiles with a view to confirming reserves for a potential heap leaching initiative. The Company drilled 19 holes for a total of 208.7 metres drilled in Q2. Results indicated that the rock massif is likely waste from previous mining and the resource has been estimated at 700,000 tonnes at an average grade of 0.8 g/t.

On May 10, the Company began the process of dewatering the existing Taseevskoye open pit in order to provide drill platforms necessary for further evaluation, initially removing approximately 135,000 m3 of water. The programme will continue up until mid-November of this year.

At Sredny Golgotay, testwork was carried out on the first phase of R&D work on the development of a pilot X-ray fluorescence spectrometry (XRF) plant, which would enable the pre-concentration of gold-bearing ores from the site. Initial results indicate that XRF might be a feasible and effective solution, and a decision was made to continue to the second and third phases of the R&D programme.

EXPLORATION

Mnogovershinnoye, Khabarovsk Region, Russia.

The Company is close to completing the second stage of its exploration drilling programme at the Northern ore body (MNV Lower Horizon licence), which called for 11,000 m of diamond drilling this year. An ore zone of approximately 600 m in length with an average thickness of 1.2 m and average grade of 5.7 g/t has been identified on the Eastern flank of this ore body. An initial resource estimate from this drilling programme is expected in the fourth quarter.

Drilling and evaluation of the new reserves are ongoing. An additional 2,000 m on a 50x50 m grid were added to the programme to evaluate the Western flank of the ore body.

Also in H1, exploration drilling at underlying levels of the Southern and Flank ore bodies were initiated.

At the Chaynoye ore body (MNV Western Flank licence), trenching has commenced to verify anomalies identified during earlier exploration efforts.

Blagodatnoye, Khabarovsk Region, Russia.

In order to augment the mineral resource base for Belaya Gora, the Company has targeted further exploration of gold reserves at the nearby Blagodatnoye gold deposit. The licence has preliminarily measured С2 category reserves for open pit mining of about 10 million tonnes of ore and approximately 525,000 oz of gold. Initial metallurgical test work has supported gold recovery of up to 93% via cyanidation.

An exploration drilling programme of 15,000 m extended throughout H1 for the purpose of registering reserves with regulators and potentially adding measured and indicated reserves. Completion of the programme is expected in the fourth quarter. Additionally, processing samples of 3.1 tonnes of ore were extracted to develop a flowsheet for processing at the Belaya Gora mill.

Kekura, Chukotka Autonomous District.

A 25,000-metre exploration drilling programme, initiated early this year, continued throughout H1 with the goal of confirming and potentially increasing reserves intended for underground mining, which were not included in the JORC reserve audit results announced earlier this year.

As of June 30, a total of 16,900 metres had been drilled. Preliminary gold assay results continue to confirm the presence of commercial mineralisation with high gold grades in previously-explored ore zones. The programme is scheduled for completion in the fourth quarter.

Sredny Golgotay, Zabaikalsky Region, Russia.

An exploration drilling programme of 15,000 m commenced in Q2 in order to validate state-registered reserves across the Sredny Golgotay licence; to check for potential additional resources from low-grade halos surrounding high-grade veins; and to identify reserves suitable for open pit mining. The results are expected by year-end.

HEALTH, SAFETY, AND ENVIRONMENT

The Company remains dedicated to ensuring occupational safety and managing production risks, as well as offering relevant training for its employees and encouraging them to take personal responsibility at the workplace.

The Lost Time Incident ("LTI") factor (defined as the number of lost time incidents for every 200,000 man hours) in the first half of this year was 0.31 (0.25 in H1 2015). Five incidents were recorded across the Company, including three at MNV and two at Novo. All of them were minor injuries.

By mid-year, a safety induction (1 day) course was given to 688 employees in 2016. Meanwhile, 98 managers and specialists passed self-tuition courses and testing using OlimpOKS software (without work disruption) and were certified on industrial safety (7-30 day programmes).

Auxiliary mine rescue teams are kept ready at mine sites to address emergency localisation and response.

The Company continues to observe environmental and regulatory requirements and no environmental incidents were reported. In 2016, environmental safety training had been provided to 688 employees as of 30 June.

INTERIM FINANCIAL REVIEW

CHIEF FINANCIAL OFFICER'S REPORT

Strong operational performances at Novo and MNV resulted in a 6.1% growth in production in the first half of 2016. Favourable macroeconomic conditions, such as improving gold prices, the weak Rouble and better access to liquidity in Russia, allowed the Company to demonstrate sustained growth, increased margins and robust cash flow. Highland Gold continues to keep production costs low and to adhere to its goals of maintaining a strong cash position and paying dividends.

Overall Group revenue was US$147.1 million in H1 2016 compared to US$130.7 million in H1 2015. A 7.1% increase in the sales volume of gold and gold equivalents (GE), accompanied by slightly higher gold prices, resulted in 12.5% growth in revenue. Over the reporting period, the Company sold 127,697 ounces of gold and gold equivalents compared to 119,277 ounces in H1 2015. Novo and MNV increased their sales volumes, with Novo's sales growing to 57,787 eq. oz (up 16.2% y-o-y), accounting for 45.3% of the total, while MNV increased its sales volume by 7.2% to 44,902 ounces in H1 2016 for a 35.2% share. BG, with its share at 19.6%, saw its sales volume slip to 25,008 ounces (H1 2015: 27,675 oz), a decrease of 9.6%.

The Group continued its "no hedge" policy in H1 2016. The average realised price of gold for MNV and Belaya Gora (net of commission) was US$1,225 per oz, in line with the average market price (average H1 2016 LBMA price was US$1,222 per oz) and a slight increase of 1.9% y-o-y. Due to higher gold prices and the improved quality of concentrates, the average price of gold equivalents realised by Novo increased to US$1,044 per eq. oz in H1 2016, compared to US$928 per eq. oz in H1 2015. The average price at Novo is based on the spot price for metals contained in the concentrates (gold, lead, zinc and silver), net of fixed processing and refining costs at third-party plants.

The Company's cost of sales net of depreciation decreased by 11.7% to US$58.0 million in H1 2016 (H1 2015: US$65.6 million). The positive effect of the Russian Rouble's weakness enabled the Company to offset the negative impact of overall inflation and an increase in prices for energy and some major consumables. Depreciation was US$28.8 million, down 20.3% y-o-y, mainly resulting from the extension of life-of-mine at all operational assets.

Cash Operating Costs

Total cash costs [1] (TCC) decreased by a significant 17.6% to US$444 per oz, some 16.5% below the industry average. Breaking it down by business unit, total cash costs at our low-cost producer Novo were US$248 per eq. oz, falling by 25.9% from the first half of the previous year and reflecting the rise in production volumes, and improved grades and recoveries. MNV, our oldest mine, also saw considerably lower total cash costs of US$602 per oz (H1 2015: US$813 per oz) due to increases in the average grade and recovery rate. As a result of lower grades and recovery rates, total cash costs at Belaya Gora increased from US$489 per oz to US$613 per oz y-o-y.

All-in sustaining costs [2] (AISC) per ounce dropped by 14.3% to US$609 in H1 2016 from US$710 in H1 2015.

TCC and AISC Calculations

The Group's administrative expenses grew by 6.0% y-o-y, to $7.0 million.

Higher sales volumes, cost control initiatives and the weaker Rouble resulted in a 45.2% increase in EBITDA [3], to US$79.7 million in H1 2016 from US$54.9 million in H1 2015. The EBITDA margin [4] rose from 42.0% to 54.2%, within range of the world's most efficient gold miners. Broken down by business unit, EBITDA margin was 73.5% at Novo (H1 2015: 59.7%), 40.8% at MNV (H1 2015: 24.8%) and 49.1% at BG.

HGML EBITDA Bridge, million US$

The Company analysed internal and external indicators of impairment or reversal of previously recognised impairment losses. Management came to the conclusion that there were no such items as of 30 June 2016.

In H1 2016, the Group recorded a net finance loss of US$3.5 million compared to a US$0.4 million loss in H1 2015. The fair value of bonds held by the Company decreased by US$1.4 million (mainly due to a weaker Pound sterling) whereas in H1 2015 the company recognised a gain of US$2.1 million. Interest expense on bank loans was recorded in the amount of US$1.3 million in H1 2016 versus US$1.4 million in H1 2015.

A foreign exchange gain of US$1.9 million (H1 2015: loss of US$1.8 million) resulted from the settlement of foreign currency transactions and the transfer of monetary assets and liabilities denominated in currencies such as Russian Roubles into US Dollars.

Income tax charges totalled US$11.8 million in H1 2016 compared to US$2.1 million in H1 2015. The tax figure is comprised of US$17.5 million of current tax expenses (US$9.9 million at Novo, US$7.5 million at MNV and other US$0.1 million) and US$5.7 million (H1 2015: release of US$7.7 million) of deferred tax release.

Net profit for the first half of 2016 was US$37.1 million, compared to a profit of US$14.5 million in H1 2015, mainly reflecting higher revenue, lower cost of sales and foreign exchange gain due to the devaluation of the Russian Rouble. Earnings per share more than doubled to US$0.113 (H1 2015: US$0.044).

The Group's cash inflow from operating activities totalled US$78.4 million (H1 2015: US$56.5 million).

Capital expenditures in H1 remained flat y-o-y, totalling US$18.8 million versus US$18.2 million in H1 2015. They included US$6.0 million at MNV, US$3.8 million at Novo, US$1.3 million at Belaya Gora, US$5.4 million at Kekura, US$1.6 million at Taseevskoye, and US$0.7 million related to other exploration and development projects within the Group. Capital expenditures were funded by operating cash flow.

The amounts drawn down under the bank facilities decreased by 15.0% to US$215.5 million as of 30 June 2016 (31 December 2015: US$253.4 million). The Company's debt is denominated in USD with an effective annual interest rate of 5.09%. Despite the higher LIBOR, the interest rate was reduced by 0.40% since the end of 2015.

Gross Debt Breakdown, thousand US$

(6/30/2016)

Gross debt breakdown by business unit

Gross debt breakdown by lender

The Group's net debt position [5] as of 30 June 2016 was US$197.9 million, compared to US$231.4 million as of 31 December 2015. Cash and cash equivalents (GBP-denominated bonds) as of 30 June 2016 amounted to US$19.8 million, compared to US$24.2 million as of 31 December 2015.

The ratio of net debt to EBITDA was 1.3 on 30 June 2016, which is substantially lower than the ratio of 1.7 as of 31 December 2015 and well within the Board of Directors' debt policy.

Cash Position Bridge, million US$

Management reaffirms its intention to continue operational improvements and to improve margins, therefore allowing us to maintain a strong cash position and to continue to pay dividends.

EVENTS AFTER THE REPORTING PERIOD

In August 2016, the Group signed additional agreements with Alfa Bank and Raiffeisen Bank. The new agreements are long-term credit facilities with an overall limit of US$102.0 million, providing an extension of the final maturity until December 2019.

PAYMENT OF DIVIDENDS

The Board has approved an interim dividend of £0.05 per share. The interim dividend will be paid on 21 October 2016 to shareholders on the register at the close of business on 7 October 2016. The ex-dividend date is 6 October 2016.

PRINCIPAL RISKS AND UNCERTAINTIES

The Group is exposed to a number of risks and uncertainties which in most cases are relevant to the entire gold mining industry. These risks and uncertainties could cause actual results to differ materially from expected or historical results.

Main risks and uncertainties are disclosed in the Group's 2015 Annual Report (Pages 18-23) and have not changed during the first half of 2016. The Group's management considered these risks likely to be the same risks faced for the rest of 2016 and the Group at the moment does not foresee any additional principal risks.

Rounding of figures may result in computational discrepancies

Glossary

Interim consolidated statement of comprehensive income

for the six months ended 30 June

The Group does not have any items of other comprehensive income or any discontinued operations.

Interim consolidated statement of financial position

as at

Interim consolidated statement of changes in equity

for the six months ended 30 June 2016

for the six months ended 30 June 2015

Interim consolidated cash flow statement

for the six months ended 30 June

1. Corporate information

These interim condensed consolidated financial statements of Highland Gold Mining Limited for the six months ended 30 June 2016 were authorised for issue in accordance with a resolution of the Directors on 23 September 2016.

Highland Gold Mining Limited is a public company incorporated and domiciled in Jersey. The registered office is located at 26 New Street, St Helier, Jersey JE2 3RA. Its ordinary shares are traded on the Alternative Investment Market (AIM).

The principal activity is building a portfolio of gold mining operations within the Russian Federation and Kyrgyzstan.

2. Basis of preparation and accounting policies

Basis of preparation

The interim condensed consolidated financial statements for the six months ended 30 June 2016 have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union. The annual financial statements of the Group for the year ended 31 December 2015 were prepared in accordance with International Financial Reporting Standards as adopted by the European Union and Companies (Jersey) Law 1991.

The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 31 December 2015.

Having made relevant enquiries, the Directors believe that it is appropriate to adopt the going concern basis in the preparation of the interim condensed consolidated financial statements in view of the fact that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future.

The impact of seasonality or cyclicality on operations is not considered significant to the interim condensed consolidated financial statements.

Changes in accounting policies and presentation rules

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those applied in the preparation of the consolidated financial statements for the year ended 31 December 2015, except for the adoption of new standards and interpretations effective as of 1 January 2016. Although these new standards and amendments apply for the first time in 2016, they do not have a material impact on the interim condensed consolidated financial statements of the Group and are not expected to have a material impact on the annual consolidated financial statements of the Group.

The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

3. Segment information

For management purposes, the Group is organised into business units based on the nature of their activities, and has four reportable segments as follows:

· Gold production;

· Polymetallic concentrate production;

· Development and exploration; and

· Other.

The gold production reportable segment comprises two operating segments, namely Mnogovershinnoye (MNV) and Belaya Gora (BG) at which level management monitors its results for the purpose of making decisions about resource allocation and evaluating the effectiveness of its activity. MNV and BG have been aggregated into one reportable segment as they exhibit similar long-term financial performance and have similar economic characteristics: nature of products (gold and silver), nature of the production processes, type of customer for their products (banks), methods used to distribute their products and nature of the environment (both are located in the Khabarovsk region).

The polymetallic concentrate production segment, namely Novoshirokinskoye (Novo), is analysed by management separately due to the fact that the nature of its activities differs from the gold production process.

The development and exploration segment contains entities which hold licenses in the development and exploration stages: Kekura, Klen, Taseevskoye, Unkurtash, Lubov, and related service entities: Zabaykalzolotoproyekt (ZZP) and BSC.

The 'other' segment includes head office, management company and other non-operating companies which have been aggregated to form the reportable segment.

Segment performance is evaluated based on EBITDA (defined as operating profit excluding depreciation and amortisation, impairment losses, movement in ore stockpiles obsolescence provision, movement in raw materials and consumables obsolescence provision and gain on settlement of contingent consideration). The development and exploration segment is evaluated based on the life of mine models in connection with the capital expenditure spent during the reporting period.

The following tables present revenue, EBITDA and assets information for the Group's reportable segments. The segment information is reconciled to the Group's profit after tax for the period.

The finance costs, finance income, income taxes, foreign exchange gains/ (losses) are managed on a group basis and are not allocated to operating segments.

Transfer prices between operating segments are on an arm's length basis in a manner similar to transactions with third parties.

The accounting policies used by the Group in reporting segments internally are the same as those described in Note 2 of the interim condensed consolidated financial statements.

Revenue from several customers was greater than 10% of total revenues.

In the first half of 2016 the gold and silver revenue reported in the gold production segment was received from sales to Gazprombank (US$86.6 million) in the territory of the Russian Federation.

In the first half of 2015 the gold and silver revenue reported in the gold production segment was received from sales to Gazprombank (US$84.4 million) in the territory of the Russian Federation.

In the first half of 2016 the concentrate revenue reported in the polymetallic concentrate production segment in the amount of US$60.3 million was received from sales to Kazzinc in the territory of the Republic of Kazakhstan (H1 2016: US$53.6 million; H1 2015: US$46.1 million) and to Hyosung corporation in the territory of the People's Republic of China (H1 2016: US$6.7 million; H1 2015: Nil).

Other third-party revenues in both H1 2016 and H1 2015 were received in the territory of the Russian Federation.

Inter-segment revenues mostly represent management services.

* Capital expenditure is the sum of exploration and evaluation assets, mine properties and property, plant and equipment.

** Current assets at 30 June 2016 include corporate cash and cash equivalents of US$12.0 million, investments of US$7.8 million, inventories of US$59.3 million, trade and other receivables of US$33.8 million and other assets of US$2.2 million. Eliminations relate to intercompany accounts receivable.

*** Capital expenditure for the first half of 2016 includes additions to property, plant and equipment of US$26.9 million (Note 7) and capitalised interest of US$5.3 million (Note 7), less prepayments previously made for property, plant and equipment of US$0.8 million.

Non-current assets at 30 June 2016 are located in the Russian Federation (US$ 998.1 million) and in the Kyrgyz Republic (US$43.2 million). Current assets at 30 June 2016 are located in the Russian Federation.