Q3 2019 Operating Results

21 October 2019

Highland Gold Mining Limited ("Highland Gold" or the "Company", AIM: HGM) today reports its operating results for the three months ended 30 September 2019 ("Q3 2019") and for the first nine months of 2019 ("9M 2019").

 

HIGHLIGHTS 

  • Highland Gold’s four operating mines produced a total of 75,038 oz of gold and gold equivalent in Q3 2019 versus 74,826 oz in Q3 2018.
  • Total 9M 2019 production was 217,298 oz of gold and gold equivalent, an increase of 7% from 203,747 oz in the first nine months of last year.
  • Production at Mnogovershinnoye (MNV) and Belaya Gora in Q3 2019 was lower year-on-year due to decreases in processing volumes and grades, but output at MNV is 10% higher year-to-date.
  • Novoshirokinskoye (Novo) saw improved grades in Q3 2019, with quarterly output returning to last year’s level after a weaker first half of 2019.
  • Preparations for pre-stripping at Kekura commenced in the final days of the quarter, with the first blast occurring in early October, as the Company begins early mining at the site.
  • The Company’s Board of Directors gave a green light to the Baley ZIF-1 Tailings heap leach project. Construction will begin next year with first gold expected in H2 2021.
  • Improved medical facilities and personnel were rolled out at each of the Company’s operating sites.
  • Highland Gold employees collected over 3 tonnes of plastic for recycling as part of a Company-wide initiative that began in June of this year.
  • The average realised gold price was US$ 1,483 per ounce in Q3 2019.
  • The Company affirms its 2019 production forecast of 290,000-300,000 oz of gold and gold equivalent.

FOR FURTHER INFORMATION PLEASE CONTACT:

Highland Gold Mining Ltd.

John Mann, Head of Communications

+ 7 495 424 95 21

Duncan Baxter, Non-Executive Director

+ 44 (0) 1534 814 202

Numis Securities Limited

(Nominated Adviser and Joint Broker)

John Prior, James Black, Paul Gillam

+44 (0) 207 260 1000

BMO Capital Markets Limited

(Joint Broker)

Jeffrey Couch, Tom Rider, Pascal Lussier Duquette

+44 (0) 207 236 1010

Peat & Co

(Joint Broker)

Charlie Peat

+44 (0) 207 104 2334

 

KHABAROVSK REGION, RUSSIA

 Mnogovershinnoye (MNV)

  • Production at MNV in 9M 2019 rose by 10% year-on-year, with improved grades and increased processing volumes.
  • Preparations to switch mining activity to different ore bodies, in line with MNV’s mining plans, resulted in lower open pit ore mining and grades in Q3 2019.
  • Ore from MNV’s historic waste dumps was used to top up processing volumes, resulting in a lower head grade at the mill for the quarter.

 

MNV

Units

Q3 2018

Q3 2019

9M 2018

9M 2019

Waste stripping

t

1,160,684

2,449,946

3,258,130

5,085,292

Underground development

m

2,943

3,235

8,866

8,805

Open-pit ore mined

t

144,091

13,124

285,073

189,313

Open-pit ore grade

g/t

2.47

1.61

2.36

2.32

Underground ore mined

t

205,379

220,000

613,282

600,334

Underground ore grade

g/t

3.45

3.61

3.21

3.86

Waste dumps ore mined

t

20,966

113,169

68,262

259,418

Waste dumps ore grade

g/t

1.04

1.07

1.04

1.09

Total ore mined

t

370,436

346,293

966,617

1,049,065

Average grade

g/t

2.93

2.70

2.81

2.90

Ore processed

t

361,014

341,563

970,240

1,045,815

Average grade

g/t

2.96

2.84

2.83

2.90

Recovery rate

%

92.7

91.7

92.3

91.7

Gold produced

oz

31,942

28,951

80,031

88,269

 

Near-mine exploration at MNV in Q3 2019 focused on the flanks of the Deer, Intermediate, Pebble, Chainoye and Srednaya ore bodies, with 5,151 metres drilled during the period. The Company carried out another 1,940 metres of drilling to evaluate ore at MNV’s historic waste dumps.

Exploration work also continued on all three of the Company’s newer greenfield licences adjacent to MNV. This included 3,123 m2 of trenching and 2,164 m of diamond drilling on the Kulibinskaya area, 1,413 m of drilling on Zamanchivaya, and geochemical prospecting, 658 m2 of trenching and 878m of diamond drilling at Vilkinskaya.

Following the extension of MNV's life of mine from 2022 to 2029, as announced by the Company earlier this year, a scoping study and design documentation were commissioned this summer regarding renovations and upgrades to the mine, its production facilities and infrastructure. Work on these projects continued throughout Q3 2019, and an audit of MNV’s existing processing plant technology was completed during the quarter.

A trade-off study on options for increasing tailings storage capacity, commissioned earlier in the year, was completed in Q3 2019. Solutions under consideration include semi-dry and conventional stockpiling at various possible sites, and utilization of mined-out or abandoned open pits.

 

Belaya Gora 

  • Q3 2019 recoveries improved to 77.7%, which is 5% higher year-on-year.
  • Ore processing volumes during the quarter were in line with production plans.
  • Q3 2019 waste stripping and ore mining increased by 60% and 34% year-on-year.
  • Average head grade at the mill during the quarter declined by 13%, reflecting the lower grade of mined ore and a lower percentage of ore from stockpiles.

Belaya Gora

Units

Q3 2018

Q3 2019

9M 2018

9M 2019

Waste stripping

t

1,543,717

2,468,316

4,006,628

6,975,113

Ore mined

t

583,239

782,927

1,638,835

1,799,679

Average grade

g/t

0.87

0.83

0.83

0.86

including:

 

 

 

 

 

-       Ore Au >0.7 g/t

t

372,213

452,533

879,473

1,085,597

-       Average grade

g/t

1.12

1.07

1.15

1.10

-       Ore Au 0.3-0.7 g/t

t

211,026

330,394

759,362

714,081

-       Average grade

g/t

0.44

0.51

0.46

0.51

Ore from stockpiles

t

84,047

13,643

246,947

225,112

Average grade

g/t

1.02

1.04

1.01

0.85

Ore processed

t

456,970

413,561

1,175,838

1,192,345

Average grade

g/t

1.13

0.98

1.12

1.01

Recovery rate

%

73.8

77.7

74.8

75.9

Gold produced

oz

12,677

9,108

32,481

27,430

 

In July, the scientific and technical council of regulatory agency Dalnedra signed off on a geological report regarding the results of 2017-2018 exploration on the Kolchansky and Zayachy prospects (Belaya Gora Flanks licence) and subsequent metallurgical test work. Data is being assembled for a JORC-compliant audit of added reserves, which will be published in due course.

Similar to the process at MNV, in Q3 2019, the Company worked on a scoping study regarding alternatives for future tailings storage at Belaya Gora. Options under consideration include the further processing of existing tailings already stored at the site.

 

ZABAIKALSKY REGION, RUSSIA 

Novoshirokinskoye (Novo) 

  • Q3 2019 ore mining rose by 6.7% year-on-year
  • The Q3 2019 processing plant head grade of 5.25 g/t was much improved over an average of 4.73 g/t in the first half of this year.

Novo

Units

Q3 2018

Q3 2019

9M 2018

9M 2019

Underground development

m

2,670

2,950

8,853

8,245

Ore mined

t

213,533

227,893

652,963

639,068

Average grade*

g/t

5.30

5.20

5.50

4.77

Ore processed

t

216,271

217,654

621,780

631,975

Average grade*

g/t

5.35

5.25

5.66

4.91

Recovery rate*

%

81.2

81.7

80.6

79.9

Gold produced (100%)*

oz

30,207

30,025

91,235

79,767

* In gold equivalent at actual prices

(metal grades in mined ore = Au 3.45 g/t, Ag 59.60 g/t, Pb 1.21 %, Zn 0.53%).

 

Work on the Novo 1.3 Mtpa expansion project progressed in Q3 2019. Highlights included:

  • Detailed design work on Stage 2 of the project, which involves installing a pre-concentration circuit in the processing plant and upgrading the tailings dam.
  • Contracts signed for work on the surface facilities of the new ventilation system.
  • Engineering work for construction of a new boiler for heating air in the new ventilation system.
  • Engineering and design work on drilling new wells to supply water to the processing plant.

The Company selected XRT ore sorting equipment from TOMRA for the processing plant capacity expansion, which is due to be completed next year. The latest round of test work on XRT ore sorting was completed in Q3 2019, including bulk ore separation using three different size fractions.

 

Baley Ore Cluster (Baley ZIF-1 Tailings, Sredny Golgotay, Taseevskoye)

At its August meeting, the Company’s Board of Directors approved funding for construction of the Baley ZIF-1 Tailings heap leach project. The tailings, from the former Baley processing plant, contain an estimated 9.7 million tonnes of slime at a grade of 0.98 g/t Au. The heap leach is designed to process 840k tonnes of tailings sand per year. Construction is due to begin next year at a total estimated cost of US$ 23 million over three years. Production of about 15k oz of gold per year is expected to begin in the second half of 2021.

A preliminary review of the project’s design documentation by the Main State Expert Panel in Krasnoyarsk was completed in Q2 2019. The documentation was corrected and finalised based on comments received, and the full package of documents was submitted to the Expert Panel for final review in Q3 2019. Approval is expected by the end of this year.

At Sredny Golgotay, project bureau Zabaikalzolotoproyekt developed an amended mine design for the deposit, which was approved by the regional development commission of supervising agency Zabnedra. As a result, the Sredny Golgotay license was extended until 2034 to match the updated project schedule.

 

CHUKOTKA AUTONOMOUS DISTRICT, RUSSIA

 

Valunisty 

  • Ore processing volumes were higher year-on-year in both Q3 2019 and 9M 2019.
  • Grades were lower year-on-year, as expected, in both the latest quarter and 9M 2019 as the mill processed ore from the Glavnaya and Novaya zones as opposed to the main Valunisty ore body and the satellite Gorny mine in 2018.
  • Stripping declined year-on-year by 23% in Q3 2019 and by 19% in 9M 2019 due to the reallocation of equipment for snow ploughing and to equipment downtime.

Valunisty

Units

Q3 2018

Q3 2019

9M 2018

9M 2019

Waste stripping

t

1,951,448

1,510,060

4,907,235

3,977,723

Ore mined

t

103,058

98,836

219,482

233,251

Average grade*

g/t

3.82

2.64

3.99

2.90

Ore processed

t

68,142

69,230

170,464

200,824

Average grade*

g/t

4.58

3.35

5.57

3.63

Recovery rate

%

94.5

94.6

94.7

94.1

Gold produced*

oz

9,436

6,954

28,442

21,832

* gold equivalent, including silver

(pre-acquisition 2018 data showed for comparison only)

Work continues on the planned expansion of Valunisty's processing plant capacity from 250k tonnes to 350k tonnes of ore per annum, and for the beginning of underground mining at the site. Milestones in Q3 2019 included the selection of key technical solutions for the processing plant expansion. The project is now advancing into the detailed design phase.

 

Kekura

Construction continued throughout Q3 2019 at Kekura, where facilities such as the communications tower, assay laboratory, and fuel storage tanks are now finished or substantially closer to completion. Start-up and adjustment work was carried out on the power substation, which is due to be connected to the regional grid later this year. The explosives storage facility was upgraded and is now being prepared for inspection and certification by regulators.

Assembly and trial operation of the open pit excavator was performed in September. Waste stripping began in early October as the Company prepares for initial mining at Kekura in Q4 2019.

Earlier this year, the Company reinforced the steel structures of the pilot processing plant located on site. In Q3 2019, contractor SPB-Giproshakht performed a comprehensive inspection of the pilot plant’s structures, while Irgiredmet drafted technological regulations for operating the pilot plant should the Company receive permits to open the facility while the main processing plant is under construction.

Irgiredmet also finalised studies on tailings detoxification with hydrogen peroxide (as recommended in the project’s feasibility study by engineering firm Fluor). The results of the study are currently under review. A decision regarding the de-watering flowsheet for tailings will be made based on the results of that assessment.

The Company has ordered or is preparing orders for a range of materials and equipment for the next phase of Kekura construction. Modular buildings for the expanded camp are en route and the ground already prepared for their installation upon arrival. Other supplies in transit include additional equipment for the fuel storage facility and the mill for the main processing plant.

Lastly, the Company completed X-ray ore sorting laboratory studies during Q3 2019. Bulk tests of XRF (which demonstrated maximum efficiency) were initiated and are nearing completion. The verification of the laser-based optical method of separation with TOMRA equipment is in progress.

 

HEALTH, SAFETY AND ENVIRONMENT

Highland Gold's key health and safety goals include ensuring safe labour conditions, managing operational risks, offering ongoing employee training programmes and encouraging personal accountability for safety at the workplace.

In Q3 2019, the Lost Time Incident Frequency Rate (LTIFR), calculated as the number of incidents for every 1,000,000 man-hours, improved to 1.28 as compared to 2.94 in Q3 2018. Three lost-time incidents were registered during the period – one each at Novo, MNV, and Valunisty – versus five during the same period last year (three at Novo and two at MNV).

Over the first nine months of the year, the LTIFR also improved to 2.39 from 3.30 in 9M 2018. There were 13 incidents during the period (including the ones noted above) versus 19 in the same period last year. Unfortunately, as reported earlier this year, five incidents in the first half of 2019 involved fatalities (two at Belaya Gora and three at Novo).

Despite improving overall statistics, the number of serious incidents earlier in the year prompted the Board of Directors and management to call on outside consultants to conduct an extensive review of the Company’s HSE practices. A risk assessment process is nearing completion and a 2020 labour safety action plan will be developed based on the findings.

Employee health was a key focus for the Company in Q3 2019. Each mine has been equipped with electronic health monitoring equipment that measures factors like blood pressure, body temperature, and impairment by alcohol and drugs. Mine employees and drivers now undergo pre-shift and pre-trip screening, and those with health issues are restricted from work. The system can also help to identify risk groups, such as people with high blood pressure, for future monitoring.

In addition, the Company contracted International SOS for emergency medical services and medical evacuations in extreme cases. The contractor has equipped on-site ER rooms, seconded professional medical personnel to each mine, and provided training for the Company’s medical staff. 

Furthermore, the Company signed a contract for delivery of a high-tech special purpose surface/underground emergency vehicle, which is designated to replace older medical transport vehicles. Delivery of the vehicle is expected in November. 

In Nikolaevsk-na-Amur, which is the nearest city to MNV and Belaya Gora, the Company is in the process of opening a Safe Driving Academy. The building is being outfitted with four simulators (Kamaz truck, Belaz truck, front-loader, and head-on collision) and four more will be coming next year to simulate underground mining vehicles. Interactive software tests drivers’ knowledge of traffic rules. Instruction began on October 1.

At each of its sites, the Company maintains auxiliary mine rescue teams at the ready to localize and liquidate emergency situations. Negotiations are currently underway to improve those teams with the assistance of Russia’s Ministry for Emergency Situations.

In Q3 2019, the Company’s Health & Safety team developed and introduced new corporate standards on hazard identification and STOP (Safety Training Observation Programme) cards. Tools complying with these standards are being rolled out at each of the Company’s production sites.

Training sessions conducted in Q3 2019 included “Defensive driving” and “Driving with comments” for 77 employees from MNV and Belaya Gora. A total of 182 employees from MNV, Belaya Gora, and Novo took part in 14 training sessions on the topic “Conscious attitude to safety”. Two training sessions were held for engineers at MNV and Novo on the topic of “Efficient safety management methods”, while 42 MNV employees participated in training on “Behavioural safety audits”.

 

Environment 

Highland Gold continues to adhere to its stated policy of protecting the environment and operating in accordance with all relevant regulatory requirements. An environmental monitoring system is in place at each of the Company's operations, and reducing the impact of its operations on the environment remains one of the Company's key priorities.

In June of this year, the Company initiated a competitive programme for collecting plastic waste at each of its operating sites. By the end of September, employees had gathered a total of 3.1 tonnes of plastic to be sent for recycling. The programme continues in Q4, when the first rewards will be given to employees of the mine with the best results.

The Company conducted 70 in-house audits of environmental management systems at MNV, Belaya Gora and Novo in Q3 2019 to ensure compliance with environmental legislation. Action plans were developed based on the audits' findings in order to minimize the causes of systematic violations.

Some 1,827 employees underwent refresher training on environmental safety during the quarter. Another 120 employees had training and exams on management of class I-IV hazardous materials. Twenty eight managers and specialists attended external professional environmental safety courses.