24 Jul 2017 07:00
HIGHLAND GOLD MINING LIMITED
Q2 2017 Operating Results
24 July 2017
Highland Gold Mining Limited ("Highland Gold" or the "Company") today reports its operating results for the three months ended June 30, 2017 ("Q2").
HIGHLIGHTS
· Total production at Mnogovershinnoye (MNV), Novoshirokinskoye (Novo) and Belaya Gora for the first half of 2017 ("H1") was 131,784 oz of gold and gold equivalent, up 2.4% from 128,671 in H1 2016.
· Total Q2 2017 production was 66,536 oz of gold and gold equivalent versus 71,782 oz in Q2 2016.
· MNV and Novo improved on H1 2016 gold and gold equivalent production by 13% and 4.5%, respectively.
· At Belaya Gora, increased focus on processing low-grade ore stockpiles pending the completion of an ongoing project review resulted in lower Q2 production.
· Average realised gold price of 1,253 USD/oz.
· New exploration licences received for two areas adjacent to MNV, and an extensive near-mine exploration programme continued on existing MNV licence areas.
· The Company affirms its forecast for total production of gold and gold equivalent of 255,000-265,000 oz for the full year.
FOR FURTHER INFORMATION PLEASE CONTACT:
Highland Gold | John Mann, Head of Communications+ 7 495 424 95 21Duncan Baxter, Non-Executive Director+ 44 (0) 1534 814 202 |
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Numis Securities Limited(Nominated Adviser and Broker) | John Prior, James Black Paul Gillam +44 (0) 207 260 1000
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Peat & Co(Joint Broker) | Charlie Peat+44 (0) 207 104 2334 |
KHABAROVSK REGION, RUSSIA
Mnogovershinnoye (MNV)
· A higher average grade resulted in higher production for Q2 year-on-year, as increased open pit mining reduced the usage of lower-grade ore from rock waste dumps.
· Total ore mined increased 13% year-on-year during the quarter.
MNV | Units | Q2 2016 | Q2 2017 | H1 2016 | H1 2017 |
Waste stripping | t | - | 1,837,725 | - | 3,706,800 |
Underground development | m | 2,924 | 2,827 | 5,863 | 5,423 |
Open-pit ore mined | t | 22,067 | 111,042 | 22,067 | 160,900 |
Open-pit ore grade | g/t | 3.02 | 1.95 | 3.02 | 2.00 |
Waste dumps ore mined | t | 125,336 | 66,737 | 276,312 | 181,065 |
Waste dumps ore grade | g/t | 1.01 | 1.08 | 1.06 | 1.10 |
Underground ore mined | t | 186,016 | 200,295 | 351,336 | 388,657 |
Underground ore grade | g/t | 3.27 | 3.20 | 3.20 | 3.10 |
Total ore mined | t | 333,419 | 378,074 | 649,715 | 730,622 |
Average grade | g/t | 2.40 | 2.46 | 2.28 | 2.36 |
Ore processed | t | 373,875 | 360,326 | 672,600 | 720,463 |
Average grade | g/t | 2.32 | 2.51 | 2.28 | 2.43 |
Recovery rate | % | 91.1 | 91.2 | 90.9 | 90.9 |
Gold produced | oz | 25,970 | 26,564 | 44,929 | 50,749 |
During the quarter, as part of its ongoing programme of re-evaluating resources for each of MNV's ore bodies, the Company received regulatory approval for revised Russian-standard (GKZ) reserves for five ore bodies (Deer, Intermediate I & II, Silent and Deep), based on a report submitted earlier in the year. The five sites hold a combined 8 tonnes (~257k oz) of GKZ gold reserves.
Additionally, the Company received regulatory approval of a mining plan for the south-western flank of the Central ore body, with 440.8 kg (~14k oz) in GKZ gold reserves, and MNV's historic rock piles, with 237.3 kg (~7.6k oz) in GKZ gold reserves.
Near-mine exploration continued during the quarter, with 2,148 m of diamond drilling on the lower horizons of the underground Flank and Southern ore bodies. Surface diamond drilling on the Bear zone, to the northwest of MNV, totalled 612 m. Furthermore, operational exploration drilling commenced on the flanks of several MNV ore bodies (Central, Intermediate, Burlivoye, Northern, Southern) in order to identify additional gold-bearing areas.
In May, the Company received exploration licences for two greenfield sites adjacent to the existing licence areas for MNV. The Kulibinskaya licence area, located to the south west of MNV, covers a territory of 38 sq. km, while the Zamanchivaya area includes 4.2 sq. km to the north east of MNV. Early-stage exploration programmes were developed and filed with regulators, with exploration work and geochemical surveys scheduled for July-September 2017.
The Company has also developed a gold mineralisation forecast map for the surrounding Nizhny-Amur ore district with the goal of identifying potential new licences in the vicinity of MNV.
Belaya Gora
· Substantial year-on-year decline in waste stripping, ore mining, and average grade due to a 140% increase in ore supply from the BG-1 stockpile.
· Lower mined ore grade is due to the re-classification of some waste stripping following a decision by regulators to reduce the mine's cut-off grade from 0.7 g/t to 0.3 g/t.
· Processing plant throughput totalled 429,835 tonnes, which is 4.54% lower YoY but in line with the Company's 2017 production plan.
· The average recovery rate for Q2 was 72.8%, which is 3.8% higher than internal targets but 2.4% lower than Q2 2016, mainly due to the processing of lower-grade ore.
Belaya Gora | Units | Q2 2016 | Q2 2017 | H1 2016 | H1 2017 |
Waste stripping | t | 1,663,362 | 728,931 | 3,294,701 | 1,389,963 |
Ore mined | t | 590,923 | 241,696 | 955,385 | 695,068 |
Average grade | g/t | 1.24 | 0.75 | 1.22 | 0.81 |
Including: |
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- Ore Au >0.7 g/t | T | 590,923 | 97,292 | 955,385 | 311,592 |
- Average grade | g/t | 1.24 | 1.11 | 1.22 | 1.14 |
- Ore Au 0.3-0.7 g/t | t | - | 144,404 | - | 383,476 |
- Average grade | g/t | - | 0.50 | - | 0.53 |
Ore from stockpiles* | t | 49,473 | 118,515 | 101,091 | 633,871 |
Average grade | g/t | 0.90 | 1.03 | 0.68 | 1.01 |
Ore processed | t | 450,278 | 429,835 | 833,509 | 810,549 |
Average grade | g/t | 1.31 | 1.13 | 1.29 | 1.12 |
Recovery rate | % | 75.2 | 72.8 | 72.7 | 71.7 |
Gold produced | oz | 14,665 | 10,501 | 25,349 | 20,033 |
The Company continues to treat ore from low-grade stockpiles at Belaya Gora while it examines options for processing plant improvements to boost recovery rates. Work continues on a pre-feasibility study including upgrades to the Belaya Gora mill and a joint mining schedule for Belaya Gora and the nearby Blagodatnoye mine. The report is expected in Q3 of this year.
The PFS report will include a new JORC-compliant reserve estimation following a re-assessment of Belaya Gora's reserves carried out earlier this year under Russian GKZ standards and additional drilling this year. The re-assessment takes into account the mine's uneven grade distribution and other geological factors, which led to a decision to lower the cut-off grade to 0.3 g/t. The new cut-off grade was registered by regulators, thus necessitating the re-classification of some waste material as ore.
Blagodatnoye
The Blagodatnoye deposit is being targeted to augment the mineral resource base for the Company's Belaya Gora operation. During Q1, results were collated from an extensive exploration programme carried out at the site in 2016, which included 18,000 metres of exploration drilling.
An additional exploration drilling programme carried out in Q2 is now nearing completion, with the results to be used for registering with regulators and, if possible, increasing the mine's measured and indicated reserves.
ZABAIKALSKY REGION, RUSSIA
Novoshirokinskoye (Novo)
· Novo continued to achieve incremental increases in ore mining and processing during Q2 via the optimisation of technological processes.
· Lower average grade in Q2 offset the benefits of higher grades in Q1 (5.76 g/t) and were down 9% from Q2 2016.
Novo | Unit | Q2 2016 | Q2 2017 | H1 2016 | H1 2017 |
Underground development | m | 2,999 | 2,610 | 5,807 | 5,720 |
Ore mined | t | 205,287 | 207,400 | 401,983 | 414,863 |
Average grade * | g/t | 5.68 | 5.21 | 5.49 | 5.45 |
Ore processed | t | 195,593 | 205,589 | 376,446 | 404,595 |
Average grade * | g/t | 5.72 | 5.25 | 5.58 | 5.50 |
Recovery rate * | % | 86.6 | 84.9 | 86.5 | 85.2 |
Au production (100%)* | Oz. | 31,147 | 29,471 | 58,393 | 61,002 |
* calculated in Au equivalent in actual prices
(metal grades in ore mined = Au 2.97 g/t, Ag 57.56 g/t, Pb 1.69 %, Zn 0.75 %).
Preparations continue for the expansion of Novo's ore processing capacity to 1.3 mtpa, with work in Q2 focused on finalising design documentation. The mine is expected to achieve its new target production capacity in late 2018.
Baley Ore Cluster (Taseevskoye, Sredny Golgotay and ZIF-1)
The Company initiated a programme last year to de-water the existing Taseevskoye open pit with a view towards drilling the deposit to verify reserves. To date, 4.3 million cubic meters of water have been pumped into the nearby ZIF-2 tailings pond, resulting in a 10.05 m decrease in the pit's water level. Pumping is currently on hold as the receiving pond is full, and the Company is in the process of selecting a specialised contractor to identify additional water storage options.
Contractor Irgiredmet is currently finalising a technological flowsheet for a possible heap leach for the ZIF-1 Tailings licence. The Company's in-house research centre at Novo is also reviewing the flowsheet with the aim of increasing potential recovery rates. A tender to select a contractor for developing design documentation is planned for Q3.
CHUKOTKA AUTONOMOUS DISTRICT, RUSSIA
Kekura
Work continued on drafting a definitive feasibility study (DFS) for Kekura in Q2. With most of the report completed by contractor Fluor, the focus is currently on the mining section being developed by SRK. Work will continue in Q3 with delivery expected by the end of the quarter.
Together with the DFS mining section, SRK is carrying out an updated JORC-compliant reserve estimate that includes data from the 2016-2017 drilling program. Data processing of geotechnical studies to be used for the underground mine design was completed in Q2.
Also completed during the quarter was design documentation for a 110/6 kV power substation to be built by the Company in cooperation with the regional government. As part of its development strategy for the region, the Chukotka administration has included construction of the Bilibino-Kekura-Omsukchan power line in its infrastructure plans. The Company will submit the substation design for state expert review in July 2017.
The Company has conducted a tender for turnkey construction of the substation, to be based on the approved design. Preparation work has already begun at the construction site, and key equipment ordered for delivery during the summer sea navigation period. Completion of the facility is expected by the end of 2018.
HEALTH, SAFETY, AND ENVIRONMENT
The Company adopted a new and improved HSE Policy during Q2, with even greater emphasis on ensuring occupational safety, managing operating risks, training employees and boosting safety awareness.
As reported in the Company's Q1 operational report, there was one fatality at Novo in early April. In addition, there were nine minor incidents in April and May, comprising six at MNV and three at Novo. The month of June passed without incident.
Over the course of the past three months, 129 managers and specialists attended scheduled training courses on "Efficient methods of safety management with elements of behavioural safety audit" (one and a half day seminar); 55 managers and specialists were trained on "Internal investigation of incidents" (one day seminar); and 43 operational managers had additional training in "Behavioural safety audits". Operations managers also had training in "Standards", "Leader Inspection" and "Format A3". Managing directors of each division, and their deputies, are instructed to carry out inspections on a regular basis. Regular mentoring is being carried out by HSE department employees during site visits.
One of the most efficient tools being implemented for continuous safety monitoring across the Company is a system of three-stage safety controls and inspections, overseen by each division's managing director. Managers, specialists and clerks are instructed to utilise a set of behavioural safety audit principles in their inspections, which are designed to have a positive impact on employees' personal attitudes towards safety, encourage safe behaviour and help to prevents hazards.
The Company also continues to be committed to protecting the environment, with 655 employees undergoing some level of environmental safety training during the quarter. Regulatory agencies and auditors from the Company's head office carried out both scheduled and unscheduled inspections at Novo and MNV during Q2. A system is in place for following up on any recommendations resulting from these inspections.
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Glossary:
Russian Standard - Gosstandart of Russia (GOST), the national Russian standard on mining and minerals as published by the National Certification Body of the Russian Federation.
JORC - Widely accepted standard for reporting mineral resources and ore reserves established by the Australasian Joint Ore Reserves Committee.
Cut-Off Grade - A grade level below which the material is considered to be uneconomical to mine and process. The minimum grade of ore used to establish reserves.
Note: Waste stripping reported in tonnes as per standard industry practice. In previous years, the Company reported waste stripping in volume (m3).