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Nordgold: Low Cost Producer with Excellent Growth Pipeline Nikolai - - PowerPoint PPT Presentation

Nordgold: Low Cost Producer with Excellent Growth Pipeline Nikolai Zelenski, CEO / NORD LI (LSE) March 2016 Disclaimer Information contained in this presentation concerns industry in which the Group operates may differ officers or any other


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Nordgold: Low Cost Producer with Excellent Growth Pipeline

March 2016

Nikolai Zelenski, CEO / NORD LI (LSE)

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Disclaimer

Information contained in this presentation concerns Nord Gold N.V., a company organized and existing under the laws of Netherlands (the “Company”, and together with its subsidiaries, the “Group”), and is for general information purposes only. The opinions presented herein are based on general information gathered at the time of writing and are subject to change without notice. The Company relies on information obtained from sources believed to be reliable but does not guarantee its accuracy or completeness. These materials may contain forward-looking statements regarding future events or the future financial performance of the Group. One can identify forward looking statements by terms such as “expect”, “believe”, “estimate”, “anticipate”, “intend”, “will”, “could”, “may”, or “might”, the negative

  • f

such terms

  • r
  • ther

similar

  • expressions. These forward-looking statements

include matters that are not historical facts and statements regarding the Group’s intentions, beliefs or current expectations concerning, among

  • ther things, the Company’s results of operations,

financial condition, liquidity, prospects, growth, strategies, and the industry in which the Group

  • perates.

By their nature, forward-looking statements involve risks and uncertainties, because they relate to events and depend on circumstances that may or may not occur in the

  • future. The Company cautions you that forward-

looking statements are not guarantees of future performance and that the Groups’ actual results of

  • perations, financial condition, liquidity, prospects,

growth, strategies and the development of the industry in which the Group operates may differ materially from those described in or suggested by the forward-looking statements contained in these

  • materials. In addition, even if the Group’s results of
  • perations, financial condition, liquidity, prospects,

growth, strategies and the development of the industry in which the Group operates are consistent with the forward-looking statements contained in these materials, those results or developments may not be indicative of results or developments in future periods. The Company does not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in forward-looking statements of the Company, including, among

  • thers,

general economic conditions, the competitive environment, risks associated with

  • perating in the states where the Group operates,

changes in the world [gold] market, as well as many other risks specifically related to the Group and its operations. No reliance may be placed for any purposes whatsoever on the information contained in this presentation

  • r
  • n

its completeness, accuracy or fairness. The information in this presentation is subject to verification, completion and change. Accordingly, no representation or warranty, express or implied, is made or given by or on behalf of the Company or any of its shareholders, directors, officers or employees or any other person as to the accuracy, completeness or fairness of the information or

  • pinions contained in these materials. None of the

Company nor any of its shareholders, directors,

  • fficers or any other person accepts any liability

whatsoever for any loss howsoever arising from any use of the contents of this presentation or

  • therwise arising in connection therewith.

The presentation and the information contained herein does not constitute or form a part of any

  • ffer or solicitation to purchase or subscribe for

securities in the United States. The securities of the Company have not been, and will not be, registered under the US Securities Act of 1933, as amended (the “Securities Act”). Accordingly, the securities of the Company may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. The Company does not intend to conduct a public

  • ffering of any securities in the United States
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Actual production in 2015

Operating Mines Developing Assets Exploration Areas Exploration Assets

Suzdal 75 koz Taparko 83 koz Lefa 214 koz Bissa 235 koz Aprelkovo 20 koz Neryungri 84 koz Gross 230E+ koz Berezitovy 125 koz Buryatzoloto 113 koz Montagne d’Or Bouly 120E+ koz Pistol Bay 37% 8% 23% 33%

2015 Revenue by Geography

Russia Kazakhstan Guinea Burkina Faso

Nordgold: Diversified Asset Base Across Four Continents

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 All-in sustaining costs for 2015 at US$793/oz  Strong Free Cash Flow generation

Nordgold – a Premium Gold Mining Company

Premium Gold Mining Company

 Two compelling projects in construction phase  Several prospective projects in FS and PEA/exploration phase

Low Cost Producer High Quality Pipeline

 Track record of surpassing production and cost guidance  Bissa mine was constructed ahead of time and budget

Proven Track Record of Delivering

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Nordgold is a LOW COST Producer Compared to Peers

200 400 600 800 1 000 1 200 1 400 5 000 10 000 15 000

Nordgold

Gold production, koz

722

H1 2015 All-In Sustaining Cost, US$/oz Au Eq.

  • H1 2015 Nordgold’s AISC was US$722/oz (down 20% YoY) - one of the lowest compared to peers
  • FY2015 Nordgold AISC was US$793/oz (down 10% YoY)
  • US$158.1m Free Cash Flow achieved in 2015 while investing in construction of Bouly mine
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US$311m US$329m US$418m

200 400 600 800 1 000 1 200 1 400 150 300 450 2013 2014 2015 $/oz $ million OCF Gold price

Strong Cash Flow in Challenging Market Environment

Nordgold Consistently Generates Free Cash Flow

US$63m US$181 US$158m US$238 US$158 US$258m

100 200 300 2013 2014 2015 $ million FCF Capex

  • Nordgold Operating Cash Flow (OCF) increased despite the falling gold price as a result of higher
  • utput and lower costs
  • Meaningful positive Free Cash Flow (FCF) generation due to strong OCF and low maintenance capex
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Objectives Positive Free Cash Flow Generation at All Operating Mines Reduce Leverage Through Effective Debt Management Pay Dividends to Shareholders Continuation of Growth Achievements 2016 Strategy

Comprehensive cost

reduction program in place at all mines

FY2015 AISC of

US$793/oz, a 10% improvement YoY

8 out of 9 mines were

FCF positive in 2015, FY 2015 consolidated FCF reached US$158.1m

Total FY2014

dividend at USc10.31/GDR

FY 2015 dividend

at USc15.61/GDR

Share buyback

programme is

  • ngoing, new

program approved by the Board

Reduced cost of debt

and improved liquidity and debt profile through refinancing in 2014

Net debt on 31.12.2015

reduced to US$584.0m, cash position at US$361.7m

Net debt/ LTM EBITDA

as of the end of 2015 was 1.1x

Feasibility Study at

Bouly completed in Q2 2015. Construction

  • ngoing

Pilot stage operation

at Gross ongoing, construction will start in 2016

Montagne d’Or FS

started in Q4 2015 ♦ Continue to generate efficiencies ♦ Positive FCF generation at all mines ♦ Maintain dividend payout ratio (30% of net profit attributable to shareholders) ♦ Proceed with Bouly and Gross construction ♦ Continue to invest in the pipeline ♦ Continue to efficiently manage leverage with target level Net debt/ LTM EBITDA in the range 0.5-1.0x

Proven Strategy in a Lower Price Environment

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Proven Track Record of DELIVERING on Promises

Project Target Parameter Promised Delivered

Delivered Target? Exceeded Expectations? Consolidated Operations 2013 Production 770 - 850 koz Au 924 koz Au

✓ ✓

2014 Production 870 - 920 koz Au (1) 985 koz Au

✓ ✓

AISC US$1,050 - 1,100 / oz (1) US$887 / oz

✓ ✓

2015 Production 925 - 985 koz Au 950 koz Au

  • AISC

US$850-900/oz US$793/oz

✓ ✓

Bissa Mine

Commercial Production & Mine Construction Mid-2013 / 18 months January 2013 / 15 months

✓ ✓

Capital Expenditure

  • c. US$250 mln

US$250 mln

  • 2013 Production

100 koz Au 254 koz Au

✓ ✓

2013 TCC US$700 / oz US$468 / oz

✓ ✓

ON PROJECT DEVELOPMENT

Bissa payback period = 21 months

ON OPERATING BUSINESS

(1) Initial target announced on 24th February 2014

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Construction Phase Development Phase Advanced Exploration Early Exploration

(1) JV with a partner (50/50)

FS completed In engineering or construction Pilot production at Gross Production in 2-5 years Production in 6-8 years Production in 1-2 years

Satellite Standalone

Nordgold Pipeline is Robust and Balanced with Early Stage and Advanced Projects

Production in 3-5 years Significant drilling performed Established resources Scoping/PEA completed or underway Potential resource identified Target delineation Established resources FS completed or underway

Onot-Kitoy

Russia

Pistol Bay

Canada

Zhanok

Russia

Lefa Corridor

Guinea

Kolbachi

Russia

Goengo

Burkina Faso

Nerchinsk

Russia

Uryakh

Russia

Prognoz(1)

Russia

Kangarse

Burkina Faso

Yimiougou

Burkina Faso

Yeou

Burkina Faso

Montagne d’Or

French Guiana

Zinigma

Burkina Faso

Ronguen

Burkina Faso

Gross

Russia

Bouly

Burkina Faso

4.5 Moz reserves 8.8 Moz resources 1.3 Moz reserves 3.5 Moz resources

Robust Pipeline to Underpin Future Growth

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Compelling Economics of New Projects

New Projects are Efficient: Low Construction Capex and Low Production Costs

  • Nordgold projects are capital-efficient: low capex per ounce of production
  • Nordgold projects are competitively positioned at the low end of the global AISC curve

200 400 600 800 1 000 1 200 1 400 5 000 10 000 15 000

Nordgold’s New Projects AISC ($/oz) vs H1 2015 Global AISC Curve

koz Bouly US$730/oz Gross US$750/oz Montagne d’Or US$711/oz Nordgold, 722

400 800 1 200 1 600 2 000 Bissa Blagodatnoye Gross Montagne d'Or Bouly Copler Essakane Twanziga Tongon Phoenix Nzema Tropicana Buzwagi

Selected Gold Projects - Capex per ounce

  • f Production, US$/oz
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Location Location Burkina-Faso, 5 km east from Bissa mine Infrastructure Bissa infrastructure is available to support Bouly Project parameters Mine type Open pit, Heap leach Stage Under construction Start-up year H2 2016 Estimated capex US$150 million Annual production 118 koz, LoM 10 years LoM average TCC & AISC US$665/oz & US$734/oz

Bouly – Construction In Progress

 Large ore body: 1.3 Moz at 0.56 g/t in

Probable Reserves and 3.5 Moz at 0.57g/t in M,I&I Resources

 Straightforward heap leach metallurgy with

superior gold recovery at above 83%

 Low cost mining at strip ratio of 0.7 t/t  Located within 5 km from Nordgold’s

  • perating Bissa mine with key infrastructure

already in place

 Feasibility Study with strong project

economics: 26% IRR at a gold price of US$1,100/oz

 Possibility of Life of Mine extension through

processing of fresh rock ore resources and exploration at flanks

Bouly – Brief Overview and Summary

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Bouly – Construction In Progress

 Approximately US$85 million invested in 2015  All major engineering, drafting and procurement

activities were completed by the end of Q3 2015

 98% of structural concrete completed by the end

  • f 2015

 All plate work, steelwork and mechanical

equipment is either on site or has been shipped

 Approximately 65% of structural steel and plate

work erected on site as at the end of 2015

 Mining fleet delivery at approximately 75% with

remainder expected on site in Q1 2016

 Infill grade control program commenced  Pre-stripping works will commence at the end of

Q1 2016

 Construction continuing on schedule and within

budget

Projects Update

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 World class ore body: 4.5 Moz at 0.73 g/t in

P&P Reserves and 8.6 Moz at 0.67 g/t in M,I&I Resources

 Straightforward low cost heap leach

metallurgy with excellent recovery rate at above 82.5%

 Located just 5 km from Nordgold’s Neryungri

mine with all necessary infrastructure in place

 Feasibility study indicates very strong project

economics with IRR above 25% at a gold price of US$1,100/oz

 Construction has been approved by the

Board to start in early 2016, with 2016 capex

  • f US$125 million

 Production start up expected two years later

Location Location Russia, Yakutia Infrastructure 5 km from Neryungri operating mine, accessible by all-season road Project parameters Mine type Open pit, Heap leach Stage Fully permitted, construction will start in early 2016 Possible start-up year Early 2018 Average production 230 koz, 20 years LoM Capital to start production US$250 million LoM average TCC & AISC US$679/oz & US$760/oz

Gross – Fully Permitted and Ready for Construction

Gross – Brief Overview

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Projects Update

 The successful pilot production confirmed project

recovery, low cost profile and robust economics and also reduces execution risk

 AISC of the pilot production in 2015 at

US$638/oz

 Detailed design work was commenced in Q3

2015 and has continued in Q4 2015

 Engineering and long-lead equipment ordering

related to ore processing system including the primary gyratory crusher, as well as turbines and boilers for 16MW power plant, were ramped up

 In Q1 2016 project design and purchasing will

accelerate to support 2016 construction activities

 Earthworks and construction works on-site will

commence in March-April, 2016

Gross – Fully Permitted and Ready for Construction

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Montagne d’Or - High Quality Project in South America

Location Location French Guiana, 80 km from port of St Laurent Infrastructure Airstrip, all-season road, camp Project parameters Ownership Nordgold has the right to earn 55.01% Mine Type Open pit Possible start-up year 2020 Average production 250+ koz Development Stage Feasibility Study is underway, to be completed in Q4 2016

Project Summary

 World-class high-grade ore body: 3.8 Moz at 2.14 g/t of

in-pit Indicated and Inferred Resources

 Favorable stripping ratio  Straightforward metallurgy: gravity + cyanidation.

Excellent recovery - averaged at above 95% in lab tests

 Located in politically stable and low-risk jurisdiction  Significant reserve upside potential at strike and in depth

47m at 4.0g/t 50m at 4.6g/t 18m at 1.9g/t 12m at 5.6g/t 8m at 4.2g/t

 Pre-feasibility Study finalized in June, 2015 and

demonstrated positive economic data with CIL technology

 Preliminary ESIA were completed in Q1 2015,

completion of full ESIA is expected by Q4 2016

 Lycopodium won tender to complete Feasibility Study,

will be delivered in Q4 2016

 Nordgold became project operator from January 2016

Deposit Cross Section and Notable Intervals

Montagne d’Or Project Overview

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Pistol Bay Project – Nordgold’s Entry into North America

Pistol Bay Project Overview

Location Location Arctic Canada, Nunavut Territory, on the coast

  • f Hudson Bay

Infrastructure Accessible by air or by sea with about 5-month navigation

  • period. Village, port, airstrip and all season road on site.

Project parameters Mine type Open pit, high grade Development Stage Advanced exploration, successful 2014-2015 drilling programme Resources No NI or JORC compliant resource yet

Project Highlights

 Pistol Bay project is wholly owned by Northquest (TSX-V: NQ)  Nordgold holds a 51.5% stake in Northquest, financing Pistol Bay

project

 Best intersections include 8.23 g/t /156m and 5.61 g/t /163m  Preliminary metallurgical tests showed recovery from 93.1% to 99.6%

and indicated gold is recoverable through standard gravity and CIL methods

 High grade open-pit mining conditions with favourable logistics and

best mining jurisdiction

Project Location Map

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Nordgold New Project Criteria

♦ Located in mining-friendly geographies ♦ With gold as the primary metal ♦ Non-refractory ores ♦ Not less than 2Moz of reserve potential with grade at above 2g/t, low to medium strip ratio ♦ Potential annual production at above 150 koz

What We Look For in Greenfield Projects

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Qualified and Balanced Management Team

Nikolai Zelenski Chief Executive Officer

 Head of Strategy of Nordgold since its formation

in late 2007

 Joined OAO Severstal in 2004 and worked at

Strategy of Severstal Mining division

 Previously Consultant at American Appraisal

Oleg Pelevin Head of Strategy

 CEO of Nordgold since its formation in late 2007  At OAO Severstal since 2004. Held the position of

Head of Strategy at Severstal Mining division

 Previously at McKinsey & Company, Mining

Industry Practice

 Joined Nordgold in August 2013  Over 10 years of experience in optimising and

managing multiple ore processing plant

 Previously: Vice-President and Head of Metallurgy

  • f Gold Fields International

 Member of the Australian Institute of Mining and

Metallurgy and Canadian Institute of Metallurgists

 Joined Nordgold in June 2013 and has over 20

years of experience in the mining industry

 Previously COO of Alacer Gold and in various

roles at Gold Fields International

 Member of the Australian Institute of Mining and

Metallurgy

Philip Engelbrecht Director of Metallurgy Louw Smith Chief Operating Officer Michael Monaghan Director of Mining

 Joined Nordgold in July 2015 and has 30 years

experience in the mining industry

 Previously: COO of Akara Resources, General

and Mining manager in AngloGold Ashanti

 Member of the Australian Institute of Mining and

Metallurgy

Howard Golden Geology Director

 Joined Nordgold in March 2015  Over 24 years of experience across 6 countries  Previously: Rio Tinto, Kinross

A Balanced Management Team with Strong Corporate and Technical Track Record

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Nordgold Generates Superior Dividend Yield

Nordgold’s Dividend Yield Among the Highest in the Industry (FY2015)

 Nordgold pays quarterly dividends. Current targeted

dividend payout ratio is 30% of net profit attributable to shareholders

 Nordgold paid FY 2014 dividends of US$10.31

cents per share, which implies almost 7.0% annual dividend yield

 For FY2015 Nordgold declared total dividend at

$US15.61 cents per share

 In 2015 Nordgold has purchased a total of

10,282,212 GDRs for a total amount of US$29.3 million

 In November 2015, BoD approved a new GDR

buyback programme with max GDRs amount at 5 million, max purchase price US$5/GDR and max purchase sum at US$15 million

 The Board and management consider return of

capital to the shareholders in the form of share repurchase to be a good supplement to stable dividend payments

  • 0,6%

0,6% 1,1% 1,6% 1,9% 2,5% 6,4% IAMGOLD AngloGold Newmont Gold Fields Randgold Acacia Barrick Polymetal Nordgold

Market data as of 31 December 2015. Source: CapIQ, Company fillings. (1) Proposed final dividend

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Valuation Benchmarking – Nordgold vs. Key Peers

6 737 3 523 3 443 3 410 3 393 2 333 2 228 1 970 1 750 1 726 1 545 1 270

Market data as of 15 February 2016 Source: Company information, Bloomberg (1) Excludes IRC

EV / 2015E EBITDA (x) EV / Reserves (US$/oz Au Eq.) EV / 2015 Production (US$/oz Au Eq.)

23,7 8,3 7,7 7,1 6,8 6,0 5,9 5,6 5,2 4,5 3,6 3,2 Randgold Barrick Polymetal Newmont Acacia IAMGOLD AngloGold SEMAFO Gold Fields Petropavlovsk Highland Gold Nordgold

However, Nordgold is Dramatically Undervalued by the Market

544 388 254 222 205 196 128 128 124 119 98 87

(2) 2015 production guidance (3) Based on 2015E EBITDA

(3) (3)

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Nordgold – a Premium Gold Mining Company

Source: Bloomberg consensus market data as of 16 February 2016

Premium Gold Mining Company

Low Cost Producer High Quality Pipeline

 2015E EV/EBITDA at 3.2x  2015E P/E at 5.2x

Proven Track Record

  • f Delivering

Undervalued Relative to Peers

 All-in sustaining costs for FY 2015 at US$793/oz  Strong Free Cash Flow generation  Two compelling projects in engineering/construction phase  Several prospective projects in FS and PEA/exploration phase  Track record of surpassing production and cost guidance  Bissa mine was constructed ahead of time and budget

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Thank you for your attention

For further information on Nordgold please visit www.nordgold.com