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GV Gold Financial Results for FY 2018

  • Record revenue and EBITDA, solid growth of 33% and 28%, respectively
  • One of the lowest cost gold producers in Russia
  • Adjusted EBITDA margin stands at a sustainably high level of 45%
  • Focused on expanding resource potential at existing mines
  • Net debt / EBITDA ratio declined to 0.5x from 1.4x at the end of 2017

GV Gold (Vysochaishy, PJSC), together with its subsidiaries (“GV Gold”, “Vysochaishy” or the “Company”), announces its consolidated financial results for the twelve months ended 31 December 2018.

Financial Highlights

·         Revenue totaled USD 361 million, for the second year in a row increasing by 33% against a backdrop of successful development strategy execution and record operating results.

·         Total gold sales increased by 37% y-o-y to 299 koz, including 36 koz of gold contained in gravity and flotation concentrate.

·         Тotal cash cost (TCC)1 remained at a sustainably low level and amounted to USD 541 per ounce as a result of the Company’s programme to enhance operational efficiency across all business units.

·         All-in sustaining cost (AISC)2 decreased by 3% to USD 679 per ounce, mainly due to the weakening of the rouble.

·         Adjusted EBITDA3 increased by 28% to USD 164 million, mainly thanks to stronger gold sales and improvements to operational efficiency.

·         The adjusted EBITDA margin stands at a sustainably high level of 45%.

·         Net profit totaled USD 80 million, at approximately the same level as in 2017, despite the significant weakening of the rouble during the reporting period.

·         Capital expenditures increased by 12% y-o-y to USD 86 million. One of the key areas of focus was resource base expansion through a large-scale geological exploration programme carried out during the course of the year, as well as the acquisition of a license to develop the promising Svetlovsky ore field (Irkutsk region).

·         Net debt4 was reduced by more than twofold from USD 175 million to USD 72 million as at the end of 2018. The Company’s net debt / EBITDA ratio at the end of the reporting period was 0.5x, compared to 1.4x at the end of 2017.

Operational Highlights

·         For the second year in a row GV Gold has demonstrated unprecedented double-digit growth in gold output, effectively doubling this figure since 2016 to 304 koz.

·         Two projects launched in 2017 showed particularly high operating results, as Taryn and Ugakhan processing plants processed 93 koz and 57 koz, respectively. Meanwhile, the Bolshoy Kuranakh placer deposit set a new record with 17.4 koz of gold production.

·         The Ugakhan and Taryn processing plants reached and even exceeded nameplate capacity, which drove the 40% year-on-year increase in ore processing to 8,210 kt for FY 2018.

·         Successful completion of geological exploration and license acquisition of the promising Svetlovsky ore field laid the foundation for sustainable future growth at all of the Company’s business units. The Company spent approximately USD 19 million on geological exploration.

Statement from CEO German Pikhoya:

“GV Gold successfully completed 2018, once again demonstrating that we are effectively executing our development strategy in all its aspects. This is the result of the successful completion of a large-scale investment cycle, effective management of costs and capital expenditures, as well as a number of important corporate transformations that have been carried out over the past several years.

“The Company continuously strives to improve operating efficiency across all business units, which, coupled with the growth in gold output, has supported record financial results. Revenue increased by 33% and reached USD 361 million. As of the end of the year, GV Gold remains one of the lowest cost gold producers in Russia with a consistently high EBITDA margin at the level of leaders, coming in at 45% for the year.

“It is important to note that amidst volatile gold prices throughout 2018, the Company remained committed to a balanced approach to financial policies, directing money towards debt reduction, organic growth and dividend payments to our shareholders.

“As before, the success of our company is based on the well-coordinated and professional work of our team. Together, we have created an excellent platform for the further development of our company, making, at the same time, an increasing contribution to the development of the regions where we operate.”

Key financial results for the years ended 31 December 2018 and 2017

2018 2017
Y-o-Y, %
  
Financial performance 
Gold sold, koz
299 218 37%
Average refined gold selling price, USD /oz
1,267 1,265   0%
Revenue, USD million, of which:
361
271
33%
Revenue from gold sales, USD million
333 261
28%
Revenue from concentrate sales, USD million
27
9
197%
Operating profit, USD million
127
107
19%
Net profit, USD million
80
85
-6%
Adj. EBITDA, USD million
164 128 28%
Adj. EBITDA margin, %
45% 47% -2 п.п
Net cash inflow from operations, USD million 256 88 190%
Capital expenditures, USD million
86 77 12%
Total cash cost (TCC), USD /oz
541 530 2%
All-in sustaining cash cost (AISC), USD /oz
679 701 -3%
Financial position      
Cash and cash equivalents, USD million 100 35 185%
Net debt, USD million
72 175 -59%
Net debt/EBITDA, х
0,5 1,4 -68%
Operating highlights
Ore mined, kt
7,993 4,383 82%
Ore processed, kt
8,217  5,854 40%
Total gold production, koz
304 225 35%


IFRS accounts for 2018 are expected to be approved by the Board of Directors on 15 April 2019.

Contacts:

Investor Relations
Vasily Migunov, Deputy CEO for IR and Capital Markets
+ 7 (495) 287-8840
vvm@gvgold.ru

Press Office
Tatiana Demyanova, Deputy CEO for Public Relations
+ 7 (495) 287-8840
dtv@gvgold.ru

Forward looking statements

This release may contain “forward-looking statements” regarding GV Gold (Vysochaishy, PJSC) and (or) its subsidiaries. The words “will”, “can”, “must”, “should”, “will continue”, “possibility”, “believes”, “expects”, “intends”, “plans”, “estimates” and other similar phrases are largely indicators of forward-looking statements. Forward-looking statements contain elements of risk and uncertainty, as a result of which actual results can differ dramatically from the figures listed in the forward-looking statements. Forward-looking statements contain statements regarding future capital expenditures, strategies for business operations and management, as well as development and expansion of GV Gold (Vysochaishy, PJSC) and (or) its subsidiaries. Many of those risks and uncertainties pertain to factors that cannot be controlled or quantified by GV Gold (Vysochaishy, PJSC) and (or) its subsidiaries, so the content of the statements should not be treated as definitive because it is provided strictly as at the date of the statement. GV Gold (Vysochaishy, PJSC) and (or) any of its subsidiaries does not make any commitment and does not plan to provide updates to the forward-looking statements, except where required by applicable law.



[1] TCC is defined by the Company as cost of gold sales (less depreciation and amortization of property, plant and equipment and intangible assets that are recognized in cost of goods sold). TCC per ounce is calculated as TCC divided by total gold sold, including gold in concentrate.

[2] AISC per ounce sold is defined as TCC plus administrative expenses (less depreciation and amortization of property, plant and equipment and intangible assets that are recognized in administrative expenses), equipment acquisition costs, construction and design costs required for sustaining ongoing operations. General administrative expenses are excluded for the purpose of calculating AISC for separate deposits, but are included in total AISC for the Group. AISC per ounce is defined as AISC divided by total gold sold, including gold in concentrate.

[3] Adjusted EBITDA is defined by the Company as profit before finance costs, income tax, depreciation and amortization, write-down and impairment costs related to exploration and appraisal of mineral resources and excluding financial income. Adjusted EBITDA is based on the Company’s audited annual consolidated IFRS financial accounts for the reporting period.

[4] Net debt is defined as the amount of current and non-current liabilities on loans and borrowings as well as current and non-current liabilities on financial leases, minus cash and cash equivalents as of the reporting date. This calculation is based on the Company’s audited annual consolidated IFRS financial accounts for the reporting year.