robustly positioned for cash flow and growth in a volatile...
TRANSCRIPT
Nordgold: Robustly Positioned for Cash Flow and
Growth in a Volatile Environment
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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 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 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 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 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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H1 2014 Key Highlights Leading emerging markets gold producer with
operations in Burkina Faso, Guinea, Russia, and Kazakhstan
Diversified asset portfolio: nine producing mines, two large-scale development project and four advanced exploration projects
Large JORC resource base, exceeding 37 Moz gold-equivalent (1), and reserves at 12.6 Moz with life of approximately 13 years
World class board and management team, with a commitment to high standards of corporate governance
Commitment to a solid dividend plan, as Nordgold pays the dividend quarterly with payout ratio at 30%
London Stock Exchange listed GDR (ticker: NORD) with 14.6% free float (incl. into FTSE Gold Mines Index)
(1) Total resources (measured, indicated and inferred) including silver resources (2) Normalised EBITDA is presented / used, before year-end adjustments
Nordgold at a Glance
476koz Gold Production
US$708 / oz Total Cash Costs
US$899 / oz All-in Sustaining Costs
US$245M(2)
40% EBITDA & Margin
Russia
Kazakhstan
Guinea
Burkina Faso
34%
8%
17%
40%
H1 2014 Revenue by Geography
4 4 Operating Mines Developing Assets Exploration Areas
Nordgold: Diversified Asset Base
(1) Actual production in 2013
Suzdal
81 Koz
Taparko
108 Koz
Lefa
163 Koz
Bissa
254 Koz
Aprelkovo
33 Koz
Neryungri
67 Koz
Gross
220E+ Koz
Berezitovy
120 Koz
Buryatzoloto
99 Koz
Montagne
d’Or
Exploration Assets
Bouly
140E+ Koz
5 5
34%
9%
18%
39%
0
200
400
600
800
1,000
2008 2009 2010 2011 2012 2013
193 koz (1)
534 koz (2) 589 koz (3)
754 koz (4)
717 koz (5)
924 koz (6)
(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
History of Operations and Development
2009
2008
2010
2011
Expands into West
Africa acquiring High
River Gold
Optimisation and
integration of assets
Forms integrated
business model
Acquires Crew Gold –
further expanding in
West Africa and
diversifying resource
base
Established operations
in 4 countries
Completed 4
acquisitions
Next successful year of
substantial growth of
production and resource
base
More than doubled the
resource base to 22.7 Moz
Reached c. 50%
production
outside Russia
Growth in reserves by
more than 50%
Consolidation of 100% of
High River Gold
A year of consolidation
and construction of Bissa
mine
Peer-leading track record of dynamic growth
2012
Production in 2014 is expected to be in the range of 900 – 950 koz
Significant growth of gold
production and
enhancement of
management team
2013
Record gold production
Launch of world class Bissa
mine
Entering South America
with Montagne d’Or project
in French Guiana
Guinea Russia Kazakhstan Burkina Faso
6 6
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
Acting 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 of 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
7 7
On Track to Realize 2014 Strategy
Key Objectives 2014 Targets H1 2014 Achievements
Reduce Leverage Through Effective Debt Management
Continuation of Growth
♦ Organic debt reduction through
positive FCF generation
♦ Effective existing portfolio
management to obtain
favourable terms
♦ Nordgold entered into a 5-year facility agreement
with Sberbank for the amount of US$500 million
♦ Refinancing reduced a cost of debt and improved
the liquidity position and debt profile
♦ First debt repayment due to be made in summer
2016.
♦ Develop pipeline of high quality
greenfield and brownfield
projects through focused
exploration expenditure
♦ Evaluate potential purchases of
premium-quality reserves to
enlarge the reserve base
♦ Mining works commenced at Gross at the end of
February 2014.
♦ PEA of Bouly project was completed internally,
we progress to FS (will be completed in Q2
2015)
♦ 14-month drill programme commenced at
Montagne d’Or in November 2013
Pay Dividends to Shareholders
♦ Nordgold has a policy of paying
a dividend equivalent to 30% of
profits attributable to
shareholders
♦ Interim dividends for Q2 2014 of USc3.81/GDR
were approved, record date is September 15,
2014
♦ Total H1 2014 dividend is USc5.34/GDR
♦ We remain focused on delivering a dividend to
our shareholders
Positive Free Cash Flow Generation at All Operating Mines
♦ We are targeting positive FCF at
all our operating mines in 2014
through cost, working capital
and capex optimization and
mining model update
♦ Consolidated AISC declined 22% YoY to
US$899/oz
♦ Reached positive free cash flow of US$72.6
million
♦ Cash and cash equivalents as of June 30, 2014
were US$306.9 million
8 8
Nordgold New Project Criteria
♦ Located near existing operations
♦ With gold as the primary metal
♦ Non-refractory ores
♦ Processed by a familiar to Nordgold technology
♦ Capex minimized to put into production or to significantly increase
output
What We Look For in Brownfield Projects
♦ 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
♦ Possible to generate annual production at above 150 koz
What We Look For in Greenfield Projects
9 9
Nordgold: Further Growth Potential From Exploration
(1) JV with former shareholders of High River Gold (50/50)
Development projects Advanced exploration projects Early exploration projects
Delineated resource
Feasibility underway or completed
Trial production started in Q1 2014 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
Pro
du
cti
on
in
1-2
ye
ars
Pro
du
cti
on
in
3-5
ye
ars
Wayin
Burkina
Faso
Pro
du
cti
on
in
6-8
ye
ars
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
10 10
Gross – Advanced Development Project
Feasibility study completed in February 2014
Start of pilot stage operation in March 2014 – processing of Gross ore on existing facilities of Neryungri mine
1,000 ths tons of ore was mined and processed in H1 2014, including 400 ths tons as a large scale metallurgical test
Excellent recovery is confirmed at production scale test – 82,5% recovery has been achieved after 85 days of leaching
Obtaining formal project construction permit from Russian authorities expected in late 2014 – early 2015
With construction start in H1 2015, subject to construction permit and financing, Gross can be put into production in 2017
Lo
ca
tio
n
Location Russia, Yakutia
Infrastructure 5 km from Neryungri operating
mine, access by all-season road
Pro
jec
t p
ara
me
ters
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$300 million
All-in sustaining costs US$850-900 /oz
Gross – Brief Overview
Development Highlights
Gross 2014 pilot stage ore processing
11 11
Gross Project Major Challenges and Solutions
Gross major 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
0
10
20
30
40
50
60
70
80
90
100
0 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
12 12
Bouly – Advanced Project
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 overall study report
Knight Piésold will be responsible for design of the heap
Environmental & social study will be conducted locally. Geology & mining peer reviewers will be selected in Q3 2014
Feasibility Study is expected to be completed in Q2 2015. Mining permit is in place
Lo
cati
on
Location Burkina-Faso, 10km east from
Bissa mine
Infrastructure Bissa infrastructure is available to
support Bouly
Pro
ject
para
mete
rs 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
13 13
Bouly – PEA Results
Mineralization 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 30,000 m campaign is focused on upgrading oxide inferred resources to indicated category, but nearby
geochemical anomalies will be 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
14 14
Montagne d’Or - High Quality Project
Montagne d’Or Project Overview
Lo
ca
tio
n Location French Guiana, 115km from port of St
Laurent
Infrastructure Airstrip, all-season road, camp
Ownership Nordgold has the right to earn 50,01%
Pro
jec
t p
ara
me
ters
Mine type Open pit
Resources 4.0 Moz at 1.1 g/t Inferred
Reserve potential 2-4 Moz
Development Stage Advanced exploration
In-fill drilling to convert Inferred resource
into Indicated
Scoping study Will be done in 1Q 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 will invest US$30 million and complete Feasibility Study no later than Q1 2017
Nordgold expenditures on the project to date US$11.6 million
Mining concession valid till 2019, renewable for 25 years; application made for adjacent areas
The 14-month drilling program commenced in November 2013, to be completed in October 2014
SRK will update resource estimate by the end of 2014
Preliminary Economic Assessment (PEA) to be completed by SRK in Q1 2015
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
15 15
Pistol Bay project – Nordgold’s Recent Investment
Pistol Bay Project Overview
Lo
cati
on
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.
Pro
ject
para
mete
rs 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 purchases a 22.6% stake in Northquest for
CAD2.5mln, 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
16 16
Key Exploration Assets - Greenfields
Prognoz Silver Project – Brief Overview
Lo
cati
on
Location Russia, Yakutia
Infrastructure 300km winter road access
Pro
ject
pa
ram
ete
rs Ownership Nordgold - 50%
Mine type Potentially underground
Development stage Scoping study completed
Resources 290 Moz at 600 g/t of silver in
Indicated & Inferred (50^50)
Uryakh – Brief Overview
Lo
cati
on
Location Russia, Irkutsk region, 60km away
from BAM railway
Infrastructure Will require construction of all-season
road
Pro
ject
pa
ram
ete
rs
Mine type Underground and/or Open pit are
possible
Development Stage Advanced exploration
Possible start-up year 2018
Resources 946 koz at 1.61 g/t inferred (WAI
2012)
Reserve potential 1.5 – 2.5 Moz
Scoping study 2014 - 2015
Feasibility study Will take 1-2 years
17 17
83
15 14 13 13 10 9 2 2
29 26 37
28 30 26
6 17
Polyus Randgold ABG Nordgold Polymetal IAMGOLD (1) Petropavlovsk (2) Semafo Highland
Reserves Resources150
Operationally Nordgold Leads its Peer Group
H1 2014 Production (koz Au Eq.)
H1 2014 All In Sustaining Cost ($/oz Au Eq.)
Reserves & Resources (moz Au Eq.)
Nordgold is a Large, Low-cost vs. Peers Gold Producer with a Solid Resource Base
746
652
561 476
378 362 306
120 108
Polyus Polymetal Randgold Nordgold IAMGOLD (1) ABG Petropavlovsk (2) Highland Semafo
899 905 938 1,034
1,118
n/a n/a n/a n/a
Nordgold Polyus Polymetal IAMGOLD (2) ABG Petropavlovsk Randgold Semafo Highland
Source: Company information (1) Excludes Niobium (2) Excludes IRC
18 18
527 489
358
261 200
153 123 107 104
Randgold Semafo Polymetal Highland IAMGOLD (1) Petropavlovsk (2) Polyus ABG Nordgold
Valuation Benchmarking – Nordgold vs. Key Peers
EV / 2014E EBITDA (x) (3)
EV / Reserves ($/oz Au Eq.)
Market data as of 28 August 2014 Source: Company information, Broker research (1) Excludes Niobium (2) Excludes IRC
8,685
6,190 5,620
3,497 2,645 2,427 2,193 1,898
1,449
Randgold Polyus Semafo Polymetal Highland IAMGOLD (1) ABG Petropavlovsk (2) Nordgold
14.7 13.2
10.0
6.6 6.2 5.8 4.9
4.0 3.5
Randgold Polyus Semafo Polymetal Petropavlovsk (2) IAMGOLD (1) ABG Highland Nordgold
Nordgold is Undervalued by the Market
EV / 2013 Production ($/oz Au Eq.)
(3) EBITDA estimates as per latest available broker consensus
19 19
Nordgold: Investment Proposition
High Quality, Internationally Diverse Portfolio of Assets
World Class Board and Management Team, with a Demonstrated Commitment to Strong Corporate Governance
Large JORC Resource/Reserve Base with Substantial Potential for Growth
Proven Track Record of Operational Improvements, Organic Growth and Value Creation
♦ Improving efficiencies/output at producing assets
♦ Commissioned in 2013 Bissa operating at full capacity – a case study in project development
♦ 2 development and 4 advanced exploration projects
Commitment to Delivering Dividends to Shareholders
Conservative Balance Sheet, Strong Cash Generation and Focus on Delivering Competitive Cash Costs
GROSSLY UNDERVALUED
20 20
Contact
Nordgold Investor Relations Valentina Bogomolova
Head of IR
Luna ArenA, Herikerbergweg 238
1101 CM Amsterdam Zuidoost
The Netherlands
T +31 20 406 4480
F +31 20 406 4555
M +7 916 474 59 96
W www.nordgold.com