Q3 2020 Operating Results

29 October 2020 

Highland Gold Mining Limited ("Highland Gold" or the "Company", AIM: HGM) today reports its operating results for the three months ended 30 September 2020 ("Q3 2020").

HIGHLIGHTS 

  • Highland Gold produced a total of 75,610 oz of gold and gold equivalent in Q3 2020, a slight increase from 75,038 oz in Q3 2019.
  • For the first nine months of the year (“9M 2020”), total production was 200,383 oz of gold and gold equivalent, down from 217,298 oz in 9M 2019, as 2020 production plans are heavily weighted to the latter part of the year.
  • The production figures include, for the first time, gold output from pilot mining and processing activities at Kekura, the Company’s main development project.
  • The Company reaffirms its guidance for total production of 290,000-300,000 oz of gold and gold equivalent for the full year 2020.
  • Mnogovershinnoye (MNV), Belaya Gora and Valunisty all met or exceeded their production targets for 9M 2020, balancing out a small shortfall at Novoshirokinskoye (Novo) due to lower grades.
  • Construction progressed on the expansion projects at Novo and Belaya Gora, with Belaya Gora on track for completion this year and Novo now planned for completion in Q1 2021.
  • Construction likewise continued at Kekura and the Baley ZIF-1 Tailings heap leach project, with the latter now expected to produce first gold in 2021, earlier than previous guidance.
  • The Company published its inaugural annual Sustainability Report on 17 August 2020. The report, which is available on the corporate website at highlandgold.com/home/sustainability, contains data on a range of ESG (environment, social, governance) metrics from 2019, as well as information on policies and programmes in progress this year.
  • Production, sales and supply chain were not materially affected by the COVID-19 pandemic in Q3 2020, but the Company continues to implement its broad programme for protecting its employees and the communities where it operates.
  • The average realised gold price was US$1903 per ounce in Q3 2020.

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)

Stuart Skinner, Louis McKeeve
+44 (0) 207 260 1000

BMO Capital Markets Limited
(Joint Broker)   

Tom Rider, Pascal Lussier Duquette, Neil Elliot
+44 (0) 207 236 1010

Peat & Co
(Joint Broker)

Charlie Peat
+44 (0) 207 104 2334

 ***

KHABAROVSK REGION, RUSSIA 

Mnogovershinnoye (MNV) 

  • MNV gold production rose by 26% year-on-year in Q3 2020 thanks to higher grades and recoveries
  • Open pit grades doubled during the quarter as mining activities moved to the Intermediate and Deer ore bodies, feeding a 40% year-on-year increase in the average head grade at the mill
  • Better grades and recoveries more than offset a 12% decline in ore processing volume during the quarter due to the re-lining of one of the mills and other scheduled maintenance
  • Mining at MNV’s historic waste dumps was curtailed in Q3 2020 after already meeting annual targets

MNV

Units

Q3 2019

Q3 2020

9M 2019

9M 2020

Waste stripping

t

2,370,609

2,577,173

5,085,292

7,864,045

Underground development

m

3,235

2,895

8,805

8,730

Open-pit ore mined

t

13,124

94,894

189,313

156,127

Open-pit ore grade

g/t

1.61

3.18

2.32

3.16

Underground ore mined

t

220,000

202,280

600,334

602,881

Underground ore grade

g/t

3.61

3.93

3.86

3.82

Waste dumps ore mined

t

113,169

63,219

259,418

226,282

Waste dumps ore grade

g/t

1.07

1.18

1.09

1.12

Total ore mined

t

346,293

360,393

1,049,065

985,290

Average grade

g/t

2.70

3.25

2.90

3.10

Ore processed

t

341,563

300,916

1,045,815

995,265

Average grade

g/t

2.84

4.04

2.90

3.02

Recovery rate

%

91.7

93.4

91.7

92.5

Gold produced

oz

28,951

36,502

88,269

89,224

 Following the success of the Company’s ongoing near-mine exploration programme and last year’s extension of MNV’s life of mine to 2029, planning work commenced for increasing the mine’s tailings capacity. In Q3 2020, the State Expert Panel gave its approval of an engineering survey for construction of the new Tier 3 tailings storage facility. A review of facility’s design documentation by the panel is in progress.

Construction of a diverting dam at the existing Tier 2 tailings strorag was completed by contractor Avik LLC during the quarter. Construction of the bedding and the bund wall for the Tier 3 tailings dam is in progress, with contractor Zoloto Plus LLC having completed approximately 85% of work on section one of the project and Spetspromstroy LLC having completed about 60% of section two. The scope of work for both sections has been expanded to include the construction of additional drainage systems and bund wall excavation and filling.

 

Belaya Gora                          

  • Q3 2020 production was 5% ahead of targets and 23% higher year-on-year due to a 12% increase in head grade at the mill, as well as higher recoveries
  • Higher grades and recoveries offset a 3% reduction in processing volume caused by unscheduled downtime for maintenance and repairs

Belaya Gora

Units

Q3 2019

Q3 2020

9M 2019

9M 2020

Waste stripping

t

2,468,316

2,664,586

6,975,113

6,969,801

Ore mined

t

782,927

384,969

1,799,679

1,689,625

Average grade

g/t

0.83

0.91

0.86

0.90

including:

 

 

 

 

 

-       Ore Au >0.6 g/t*

t

484,337

299,743

1,129,840

1,165,040

-       Average grade

g/t

1.06

1.04

1.09

1.09

-       Ore Au 0.3-0.6 g/t*

t

298,590

85,226

669,838

524,585

-       Average grade

g/t

0.46

0.47

0.47

0.48

Ore from stockpiles

t

13,643

0

225,112

4,090

Average grade

g/t

1.04

0

0.85

1.43

Ore processed

t

413,561

399,696

1,192,345

1,130,261

Average grade

g/t

0.98

1.10

1.01

1.03

Recovery rate

%

77.7

78.0

75.9

76.8

Gold produced

oz

9,108

11,212

27,430

29,038

* The low-grade cut-off in 2019 was 0.7 g/t

The Company is in the final stages of renovations to the Belaya Gora processing plant, which are on track for completion by the end of this year. The addition of a CIP circuit to the plant will improve gold recovery to around 90% from the current average of just over 75%. It will also enable the plant to process ore from the nearby Blagodatnoye deposit.

Highland Gold’s project bureau, ZabaikalZolotoProekt, drafted an environmental impact study for the processing plant expansion in Q3 2020. The study underwent and passed a review at a public hearing.

The installation of equipment for the sorption/elution and pre-leaching circuits progressed during the quarter, with the sorption section now completed and pre-leaching over 50% complete. The lower levels of the electrowinning and elution equipment were mounted and steel structures assembled for the elution and carbon regeneration equipment. Building construction is 90% complete with only access point openings left to facilitate moving equipment in and out. Installation of the thickener equipment is currently in progress alongside the installation of utilities, cabling and wiring.

In parallel, work continues on the expansion of Belaya Gora’s tailings capacity, including filling of the raised bund wall and construction of a diversion ditch. The work is more than 50% completed and is expected to be completed in the fourth quarter.

 

ZABAIKALSKY REGION, RUSSIA 

Novoshirokinskoye (Novo) 

  • Ore mining in Q3 2020 decreased by 36% due to planned shutdowns related to the reconstruction of the mine’s skip hoist system, but processing was slightly higher as the mine had stockpiled ore in preparation for stoppages
  • The average grade in ore mined decreased by 47% vs. Q3 2019 due to the accessing of lower grade stopes 

Novo

Units

Q3 2019

Q3 2020

9M 2019

9M 2020

Underground development

m

2,950

1,880

8,245

6,838

Ore mined

t

227,893

150,123

639,068

640,632

Average grade*

g/t

5.20

2.73

4.77

3.23

Ore processed

t

217,654

219,242

631,975

647,352

Average grade*

g/t

5.25

2.71

4.91

3.29

Recovery rate*

%

81.7

74.2

79.9

76.7

Gold produced*

oz

30,025

14,174

79,767

52,472

*  Gold equivalent calculated at actual prices

(Metal grade of mined ore = Au 2.14 g/t, Ag 39.72 g/t, Pb 0.84%, Zn 0.40%, Cu 0.21%).

The expansion of Novo’s ore mining and processing capacity from 800 ktpa to 1.3 Mtpa continues to be a key focus for the Company as it seeks to offset the effects of expected lower grades. Delays due to various factors, including the Covid-19 pandemic, mean the project is now likely to be completed Q1 2021.

In Q3 2020, the Company continued work on several objectives designed to increase mining capacity, including the skip hoist, skip measuring unit, measuring chamber, and hopper station. The new ventilation system, heating system and boiler house are also at advanced stages of construction.

Earlier in the year, the old chemical storage warehouse, boiler and chimney structures were dismantled to make way for the pre-concentrating unit that will increase Novo’s processing capacity. Construction of the pre-concentration circuit is in progress.

Additionally, design work continued for a new water treatment facility. Designs for the underground water pumping station have been approved and work on that facility will commence in Q4 2020.

 

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

Highland Gold accelerated the Baley ZIF-1 Tailings project in Q3 2020, with the Board of Directors approving a request for additional funding to expedite the construction process and procure equipment. The project entails building a heap leach to process 840k tonnes/year of slime from the tailings dam of the former Baley processing plant, producing an estimated 15,000 oz of gold per annum. Initial gold production is now expected to begin in H2 2021. 

Contracts for plant construction have been signed and agreements for the manufacture and procurement of equipment are currently being negotiated. The contractors already on site have brought in additional equipment and personnel and are finishing up initial earthwork and casting foundations Overhead electricity lines are completed and the associated documentation needed to put them into use is in progress. A small hazardous materials storage facility is nearing completion. 

Also during the quarter, Zabaikalzolotoproekt continued to work with in-house specialists on updated scoping studies for the Taseevskoye and Sredny Golgotay deposits. The Company is close to selecting a contractor for geo-metallurgical mapping of Taseevskoye. That work will be followed by the drafting of a pre-feasibility study, including geological, technical, metallurgical, hydro-geological and other studies.

 

CHUKOTKA, RUSSIA 

Valunisty

  • Q3 2020 gold equivalent production rose by 65% year-on-year, and substantially ahead of targets, on the back of higher processing volume, grades and recovery rates
  • Ore grades were 172% higher during the quarter as mining moved to lower levels of ore body № 12 in the mine’s Novaya zone

Valunisty

Units

Q3 2019

Q3 2020

9M 2019

9M 2020

Waste stripping

t

1,510,060

1,724,075

3,977,723

5,049,777

Ore mined

t

98,836

62,907

233,251

229,092

Average grade*

g/t

2.64

7.17

2.90

4.27

Ore processed

t

69,230

72,422

200,824

208,849

Average grade*

g/t

3.35

4.93

3.63

4.02

Recovery rate*

%

94.6

97.2

94.1

96.4

Gold produced*

oz

6,954

11,472

21,832

26,977

* Gold equivalent, calculated at actual prices, including silver

Operating priorities at Valunisty include advancing projects to increase the processing plant capacity from 250k tonnes to 350k tonnes of ore per year, and preparations for the commencement of underground mining. In addition, Q3 2020 saw progress on planning and preparing for new open-pit mining at the satellite Gorny deposit and the reconstruction of Valunisty’s mining equipment maintenance shop. All four projects together would result in increased production capacity and lower per-unit operating costs at the mine.

Following their approval at public hearings earlier in the year, design documentation for the processing plant expansion and underground mining projects has been prepared for submission to state environmental authorities. Tendering for the processing plant expansion is now underway and key equipment is being purchased with a view towards construction commencing in 2021.

 

Kekura

  • Highland Gold initiates reporting of mining and processing data from Kekura
  • Initial stripping and mining at the site began in October 2019 while ramp-up work on the pilot processing plant began in Q1 2020 and continued throughout the year
  • The pilot processing plant has the capacity to treat 120,000 tonnes of ore per year

Kekura

Units

Q3 2019

Q3 2020

9M 2019

9M 2020

Ore mined

t

-

121,508

-

210,488

Average grade

g/t

-

3.25

-

2.59

Ore processed

t

-

19,153

-

36,982

Average grade

g/t

-

7.39

-

4.86

Recovery rate

%

-

49.5

-

46.2

Gold produced

oz

-

2,250

-

2,672

Construction at Kekura continues at full pace in preparation for the launch of commercial production by 2023. In Q3 2020, work was completed on a broad array of facilities, including:

  • Foundations for the main processing plant;
  • Foundations for the bridge crane at the main processing plant site;
  • A pneumatic hangar at the main processing plant site;
  • Installation and start-up and adjustment of the mobile concrete batching plant (Flagman-45);
  • Installation, start-up and adjustment of the boiler room;
  • External utilities such as water supply, sewage, heat and power for the new camp expansion and canteen buildings;
  • Installation, start-up and adjustment of the water treatment station;
  • Construction and installation of an XRF (X-ray fluorescence) sorter at the pilot processing plant;
  • Anti-corrosion protection for tanks in the fuel storage facility; and
  • A 450 m3 tank for the camp’s firefighting station.

Throughout the quarter, work continued on several other projects including the new camp housing and canteen facilities, which opened for business in October. Other projects initiated in Q3 2020 that are still in progress include:

  • The operator’s room, technical pipelines, run-off water drainage, and foundations for the cable racks at the fuel storage facility;
  • External water pipelines;
  • Some internal utility work at the new camp housing and canteen;
  • Equipment installation at the assay laboratory; and
  • Installation of a BIOX water treatment station.

Steel structures and equipment for the main processing plant, as well as modular buildings for the second phase of the camp expansion, have now been manufactured. They are all expected to be delivered to site during the 2020-2021 navigation season.

Also in Q3 2020, public hearings were held to review late-stage construction plans for Kekura, and local residents signed off on the project. A review by environmental experts is currently 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 2020, the Company’s Lost Time Incident Frequency Rate (LTIFR), calculated as the number of incidents for every 1,000,000 man-hours, was 3.41, a notable deterioration from the 2.14 LTIFR recorded in Q3 2019. A total of six lost time incidents were recorded (three at MNV and one each at Belaya Gora, Novo and Kekura) compared to just three incidents in Q3 2019 (one each at MNV, Belaya Gora and Valunisty). For each incident, the Company commissions a detailed investigation and its findings are communicated to managers at all production sites.

Training seminars carried out during the quarter included two sessions on “Efficient Safety Management. Behavioural Safety Audits” for 23 managers, supervisors and personnel at MNV and Belaya Gora, and three courses on “Conscious Attitude towards Safety” for 38 MNV and Belaya Gora staff. Furthermore, an extensive training programme on corporate safety standards was developed for employees staying at the Company’s Observation Centres on their way to a production site.

 

COVID-19 Response

A key focus of the HSE team for much of this year has been the Company’s response to the COVID-19 pandemic. In addition to the corporate task force operating from the Moscow office, coronavirus task forces are in action at each production site. The task forces have implemented a complex programme of measures designed to protect the health and well-being of the Company’s employees and the communities in which we operate. The Company’s medical services contractor, International SOS, is assisting in coordinating the COVID-19 response.

Observation Centres have been established for each operating location, either near the mine or in the nearest town or regional capital, and shift changes are being conducted via 7 to 14 day quarantine with coronavirus testing. The centres feature comfortable accommodations for team members traveling to site and for others requiring isolation, and are staffed by medical professionals. Laboratories at each location are now fully operational and can carry out in-house express coronavirus testing.

While at the Observation Centres, employees receive additional training on health and safety, corporate values and standards, and vocational subjects.

At the Company’s administrative offices, measures taken include improved ventilation, wider spacing between work stations to ensure social distancing, regular disinfection of surfaces, and free distribution of PPE such as masks and gloves. A large proportion of staff has been designated to work remotely and business travel has been reduced to a bare minimum.

While there have been individual cases of COVID-19 infection among Highland Gold employees in each operating region, the Observation Centres and other precautions taken at administrative offices and production sites have thus far prevented any significant pandemic outbreaks or interruptions in the Company’s mining and processing plant operations, supply chain, and sales.

 

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.

Among the highlights of this year has been Highland Gold’s ongoing company-wide effort to encourage waste sorting and recycling among its employees and the small communities in which it operates. From January through September, employees collected a total of 14 tonnes of plastic for recycling. Our Taseevskoye unit, which enlisted the help of the entire town of Baley, has led the way with an average of 44.7 kg of plastic collected per employee. MNV and Novo are competing for the runner-up position with averages of 7.2 kg and 6.0 kg per person year-to-date as of September 30.

No environmental incidents were recorded in Q3 2020 or in the first nine months of the year. During the quarter, 164 internal audits of the Company’s environmental management system were carried at production sites to ensure adherence to environmental legislation, bringing the total of audits for the year to 427. In each case, action plans were developed based on audit findings to minimize the root causes of systematic violations.

Over the course of 9M 2020, 2,586 employees received online environmental training, 87 employees had training with subsequent testing in hazard class I-IV waste management, and 160 managers and specialists attended skills improvement seminars in professional environmental training centres.