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Nordgold: Profitable Growth in the Challenging Market Environment - - PowerPoint PPT Presentation

Nordgold: Profitable Growth in the Challenging Market Environment Nikolai Zelenski, CEO NORD LI (LSE) February 2015 Disclaimer Information contained in this presentation concerns Nord Gold N.V., a company organized and existing under the laws


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Nordgold: Profitable Growth in the Challenging Market Environment

Nikolai Zelenski, CEO NORD LI (LSE)

February 2015

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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 of such terms or other 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 other things, the Company’s results of operations, financial condition, liquidity, prospects, growth, strategies, and the industry in which the Group operates. 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 operations, 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 operations, financial condition, liquidity, prospects, growth, strategies and the development of the industry in which the Group
  • perates 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 others, general

economic conditions, the competitive environment, risks associated with operating in the states where the Group operates, changes in the world [gold] market, as well as many

  • ther 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 or on 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 opinions contained in these materials. None of the Company nor any of its shareholders, directors, officers or any other person accepts any liability whatsoever for any loss howsoever arising from any use of the contents of this presentation or otherwise arising in connection therewith. The presentation and the information contained herein does not constitute or form a part of any offer 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 offering of any securities in the United States
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Nordgold: Diversified Asset Base with Focus on Africa

Actual production in 2014

Operating Mines Developing Assets Exploration Areas Exploration Assets Suzdal 77 Koz Taparko 112 Koz Lefa 205 Koz Bissa 251 Koz Aprelkovo 32 Koz Neryungri 66 Koz Gross 220E+ Koz Berezitovy 123 Koz Buryatzoloto 120 Koz Montagne d’Or Bouly 140E+ Koz Pistol Bay 34% 8% 20% 38%

2014 Revenue by Geography

Russia Kazakhstan Guinea Burkina Faso

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 All-in sustaining costs for 9m 2014 at US$887/oz  Company is among lowest cost global producers

Nordgold – a Premium Gold Mining Company

Premium Gold Mining Company

 Two compelling projects ready for construction  Several prospective projects in PEA/exploration phase

Low Cost Producer High Quality Pipeline

 985 koz produced in 2014  6 out of 7 years company demonstrated production growth

Production Growth

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Nordgold is Low Cost Producer Compared to Peers

9m 2014 All In Sustaining Cost ($/oz Au Eq.)

754 784 844 846 887 918 926 947 963 1 023 1 030 1 031 1 063 1 111 1 138 1 183 1,225 1,228 1,246

Source: Company information (1) Including stock-piles / product inventory write-down (2) Maintenance, Capitalized stripping, Exploration capex

  • In June’13 World Gold Council published guidance on AISC metrics which is proposed to be applied

starting from Jan 2014. The general approach is: AISC = EBITDA-based TCC(1) + Sustaining CAPEX(2)

  • Nordgold’s AISC was US$887/oz in 9m 2014 and US$866/oz in Q3 2014, which is one of the lowest

level compared to peers

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35% 8% 21% 37%

200 400 600 800 1 000 1 200 2008 2009 2010 2011 2012 2013 2014

(1) Taparko, Berezitovy and Buryatzoloto production included as of acquisition in November 2008 (2) Figures shown on a 100% consolidated basis. Includes 5.3 koz gold equivalent (“GE”) of silver production (3) Includes production from acquisition of LEFA (Guinea) as of August 2010 and 4.2 koz GE of silver production (4) Includes 7.1 koz GE of silver production (5) Includes 5.2 koz GE of silver production (6) Includes 6.9 koz GE of silver production (7) Includes 6.4 koz GE of silver production

Peer-leading Track Record of Growth

Africa has been a focal point of growth for Nordgold

Guinea Russia Kazakhstan Burkina Faso

193 koz (1) 534 koz (2) 589 koz (3) 754 koz (4) 717 koz (5) 924 koz (6) 985 koz (7)

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Robust Pipeline to Underpin Future Growth

Development projects Advanced exploration projects Early exploration projects

Delineated resources / reserves Feasibility underway or completed Trial production ongoing at Gross Significant drilling performed Scoping underway Potential resource identified Target delineation

Uryakh

Russia

Prognoz(1)

Russia

Kaya

Burkina Faso

Zinigma

Burkina Faso

Tanzaka

Burkina Faso

Vitimkan

Russia

Nerchinsk

Russia

Yeou

Burkina Faso

Lefa Corridor

Guinea

Brownfield / Satellite Greenfield / Standalone

Production in 1-3 years Production in 3-6 years

Wayin

Burkina Faso

Production in 6-8 years

Nordgold pipeline is robust and balanced with early stage and advanced projects

Goengo

Burkina Faso

Montagne d’Or

French Guiana

Banora Corridor

Guinea

Bouly

Burkina Faso

Gross

Russia

13.3Moz resources 4.6Moz reserves

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

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2014 Objectives Positive Free Cash Flow Generation at All Operating Mines Reduce Leverage Through Effective Debt Management Pay Dividends to Shareholders Continuation of Growth 2014 Achievements 2015 Strategy

 Interim dividend for Q3

2014 of USc3.64/GDR, bringing total 9M 2014 dividend to USc8.98/GDR

 Q4 2014 dividend to be

reported shortly

Proven Strategy in a Lower Price Environment

 Comprehensive cost

reduction program in place at all mines

 9M 2014 Consolidated

AISC of US$887/oz, representing a 21% improvement YoY

 All mines generated

positive FCF in Q3 2014, 9M 2014 consolidated FCF reached US$161.4m

 Reduced cost of debt

and improved liquidity and debt profile through refinancing in March 2014

 Net debt on 31 Dec

2014 at US$631 m, and cash position at US$318.6 m

 Bond buy-back

program in progress

 Pilot stage operation

at Gross ongoing since Q1 2014

 Feasibility Study at

Bouly on track to be completed in Q1 2015

 Resource update at

Montagne d’Or expected in Q1 2015 ♦ Continue to improve efficiency ♦ Further upside for FCF generation in 2015 ♦ Dividend payout ratio

  • f 30% of net profit

attributable to shareholders ♦ Continue to reduce leverage with target level Net debt/LTM EBITDA at 1.0x ♦ Start construction of Bouly or Gross ♦ Continue to invest in the pipeline

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Bouly – Ready to Start Construction

In-house Preliminary Economic Assessment (PEA) completed in Q2 2014 and showed robust project economics We made a decision to progress the project towards a Feasibility Study (FS) Lycopodium was awarded the contract to be the lead consultant for FS and responsible for metallurgy/processing, engineering and

  • verall study report

Knight Piésold is responsible for design of the heap Environmental & social study is being conducted locally Feasibility Study is expected to be completed in Q1 2015. Mining permit is in place

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 Resources 1 Moz at 0.75 g/t Indicated & Inferred Reserve potential 2-3 Moz at 0.75 g/t for open pit Development stage Feasibility study Possible start-up year 2016 Scoping study Completed in Q2 2014

Bouly – Brief Overview

Development Highlights Bouly Landscape

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Bouly – Robust PEA Results

 Mineralisation at Bouly is very uniform down to 600 m and open at depth  Column tests demonstrated excellent recovery for oxide and transition zones 80-93% confirming heap leach potential  Gold recoveries in column tests from fresh rock were 56-73%  PEA considered oxide and transition ore only (phase I, <100 m vertical depth), while mine design will take into account probable

future fresh rock mining (phase II)

 Minable resources (Indicated + Inferred) for phase I amounted to 1.2 Moz  2014 drilling 38,000 m campaign was focused on upgrading oxide inferred resources to indicated category, and nearby

geochemical anomalies were tested as well, potentially increasing reserves of oxide ore for phase I

Life of mine (phase I) 8 years Production 145 koz* Total Cash Cost US$630/oz* Capex $140 million Payback period 2 years All-in sustaining costs US$825/oz Processing capacity 7.5 Mtpa Metallurgical recovery 75% (conservative estimate) Strip ratio 0.8 t/t

Bouly – PEA Results Overview

Development Highlights Bouly Long Section

* - first three years

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Gross – Pilot Stage in Progress

Feasibility study completed in February 2014

Project demonstrated good economic efficiency with IRR above 30% at long term gold price of US$1,250/oz and above 20% at long term gold price of US$1,100/oz

Start of pilot stage operation at the end of February 2014 – processing of Gross ore on existing facilities of Neryungri mine

2.3 Mt tons of ore was mined and 1.8 Mt was processed in 2014, 29 koz of gold was produced at Neryungri mine facilities

Excellent recovery is confirmed at production scale test – 83.7% recovery has been achieved after 90 days of leaching

Obtaining formal project construction permit from Russian authorities expected in H1 2015

2 year construction time to reach full capacity

Location Location Russia, Yakutia Infrastructure 5 km from Neryungri operating mine, access by all-season road Project parameters Mine type Open pit, Heap leach M + I + I resources 13.3 Moz at 0.56 g/t P&P reserves 4.6 Moz at 0.73 g/t Mining rate 12 Mtpa Recovery 82,5% for 150 days cycle Average production 220 koz Life of mine 17 years Capital to start production US$260 million All-in sustaining costs US$700-750/oz

Gross – Brief Overview

Gross 2014 Pilot Stage Ore Processing Development Highlights

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Gross Project - Challenges and Solutions

Gross main technical challenges to overcome…

 Large but low grade deposit for heap leach technology only  High seasonality of heap leaching in arctic climate, sharp

slowdown of the process at low temperatures

 Difficult hilly landscape and lack of flat space for large leach

pads

 No access to electric power grid

… and solutions suggested

 Dynamic leach pad with stacking ore and removing it to ore

dump after leaching cycle. Only one flat space is required for life of mine volume of ore processing instead of three of similar size

 Cyanide solution heating to reach high and stable recovery

and eliminate seasonality

 Onsite steam coal power plant to supply low cost electric

power and heat

 Presence of a large coal mine within 200 km vicinity  All metallurgical tests conducted to date produced

consistently high recoveries in excess of 80%

Gross Deposit Landscape

20 40 60 80 100 20 40 60 80 100 122 40 мм, sample 1 170 мм 700 мм 40 мм, sample 2

Irrigation period, days Recovery Au, %

Pilot Stage Metallurgical Tests Dynamics

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Montagne d’Or - High Quality Project in South America

Montagne d’Or Project Overview

Location

Location French Guiana, 115km from port of St Laurent Infrastructure Airstrip, all-season road, camp

Project parameters

Ownership Nordgold has the right to earn 50,01% Mine Type Open pit Resources 4.0 Moz at 1.1 g/t Inferred Reserve Potential 2-4 Moz Development Stage Preliminary Economic Assessment Scoping Study Will be done in Q1 2015 Bankable Feasibility Study Will be completed in 2016

Project Highlights

 Nordgold entered into an option agreement with Columbus Gold to earn 50.01% in Montagne d’Or  Nordgold should invest US$30 million and complete Feasibility Study no later than Q1 2017  Nordgold expenditures on the project to date US$16 million  Mining concession valid till 2019, renewable for 25 years; application made for adjacent areas  Metallurgic tests produced an excellent recovery at 95-97%  The 2013-2014 drilling program commenced in November 2013 to support Feasibility Study completed  Resource update and Preliminary Economic Assessment (PEA) to be completed by SRK in Q1-Q2 2015  Environmental Impact Study is underway

Deposit Cross Section and Notable Intervals 47m at 4.0g/t 50m at 4.6g/t 18m at 1.9g/t 12m at 5.6 g/t 8m at 4.2g/t

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Pistol Bay Project – Nordgold’s Entry in North America

Pistol Bay Project Overview

Location Location Arctic Canada, Nunavut Territory, on the coast of 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, 2014 drilling program underway Resources No NI or JORC compliant resource yet

Deal and Project Highlights

 Northquest (TSX-V: NQ) is a 100% owner of Pistol Bay project  Nordgold acquired a 23.7% stake in Northquest, financing 2014

Pistol Bay drilling program

 Promising in-house resource estimate based on drilling results  Best intersections include 8.23 g/t /156m and 5.61 g/t /163m  No metallurgical test doing yet, abundant visible gold suggests good

gravity recovery

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

some existing infrastructure on site

Project Location Map

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Nordgold New Project Criteria

♦ Located in emerging gold 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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Management Team with Broad International Expertise

A balanced management team with strong corporate and technical track record

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

 Joined Nordgold in February 2013  Previously: Aureus Mining, (COO), Ashanti

Goldfields, IMC consulting

 PhD in Mining Engineering  Appointed Acting CFO of Nordgold in May,

2014

 Joined Nordgold in July 2013 as Head of

Corporate Reporting

 Previously Head of Corporate Reporting in

SIBUR and in various roles at Deloitte and Arthur Andersen

Martin White Technical Director 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

Dmitry Guzeev Chief Financial Officer

 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

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We believe that only a socially responsible business that operates with full cooperation from all stakeholders can deliver success and long-term returns to investors.

~ US$520,000: social development programmes and donations in Burkina Faso and Guinea in 2013-2014 Lefa mine Partnership Agreement with UNICEF & Local Communities Employees’ safety is our top priority 1.23 LTIFR in 2014 Our goal – Zero Harm 19% YoY LTIFR improvement

 Preventing incidents and injuries benefits everyone  Every worker is responsible for observing safety rules  Health and safety targets must be clear to all employees

Community relations in partnership with local authorities, international & local NGOs Health Economic Empowerment Education & Culture

 Building and renovation of educational infrastructure  Student scholarships awarding  Ebola precautionary measures  Health support of local population, incl. sports’ events  Ambulance service improvement and medical equipment upgrade  Active support of anti-malaria program  Promotion of opportunities to launch and manage enterprises by locals  Support farming and ranching, tissage and joinery  Drinking water supply to residents and water-pumping equipment to local farmers Respect for People Safety Trust and Collaboration Professionalism and Efficiency

Responsible Approach to Gold Mining

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Nordgold – a Premium Gold Mining Company

Source: Bloomberg consensus market data as of 27 January 2015

 All-in sustaining costs for 9m 2014 at US$887/oz  Company is among lowest cost global producers

Premium Gold Mining Company

 Two compelling projects ready for construction  Several prospective projects in PEA/exploration phase

Low Cost Producer High Quality Pipeline

 985 koz produced in 2014  6 out of 7 years company demonstrated production growth  2015E EV/EBITDA at 3.3x  2015E P/E at 6.6x

Production Growth Undervalued Relative to Peers

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Nordgold Investor Relations

Valentina Bogomolova Head of IR Luna Arena, Herikerbergweg 238 1101 CM Amsterdam Zuidoost The Netherlands M +7 916 474 59 96 va.bogomolova@nordgold.com www.nordgold.com

Contact