Since it was established in 2007, Nordgold has evolved from a high growth emerging markets gold company to a best in class internationally diversified nearly million ounce gold producer
We delivered a robust performace in 2018, a year in which we have made considerable investments in our mine portfolio to better position Nordgold for long term growth. The combination of lower grades and recoveries has had a short term impact on production and profitability, but we are confident by taking this action now, investing in both people, processes and operations, we are placing Nordgold in a strong positon to capitalise on our extensive asset base and the many opportunities we see ahead for organic growth. We have also successfuy progressed our pipeline during the year, once again showcasing our proven ability to complete major development projects.
A key highlight was the September launch of Gross mine in Russia, the third new mine we have built since 2013. The success of Gross gives us enhanced confidence in our ability to deliver Montagne d’Or, our next anticipated major growth project in French Guiana. Montagne d’Or has the potential to be a major driver of growth, providing jobs, infrastructure and revenue for the host country.
We payed out US$34.4 million to shareholders in dividends during the year, in line with the commitment to creating shareholder value we made at the time of our de-listing.
In order to drive shareholder value, Nordgold plans to continue to deliver on its strategic initiatives, designed to achieve production and profit growth:
Continue to generate strong free cash flow
- Nordgold will continue to improve operating efficiency and look for further upside in free cash flow generation at all its mines in 2018.
- Nordgold delivered free cash flow of US$63 million in 2017 while investing US$142 million in the construction of the new Gross mines during the year.
- A combination of Nordgold’s flexible capex, estimated to be US$390 million in 2018 (including construction of the Gross mine in Russia), a reduction in general and administrative expenses, improvements in operational efficiency, as well as the on-going implementation of Business System of Nordgold are keys to ensuring the Company remains focused on costs.
- Nordgold’s efficiency and Business System programmes are showing positive results with reduced fuel and oil costs, increased mining equipment productivity, benchmarking initiatives and associated operational efficiency programmes, the development of regular cost control systems and the outsourcing of auxiliary services.
- Nordgold is also focused on strengthening its employees' performance and talent. During 2017 Nordgold continued to expand and advance training and development programmes and incentive schemes. This is expected to help Nordgold to further progress with its on-going efficiency improvement initiatives.
Effective leverage management
- 2017 net debt of US$656.3 million reflecting strong free cash flow.
- Nordgold leverage was at 1.26x Net debt/LTM EBITDA as of 31 December 2017.
- Nordgold takes a proactive approach to managing its debt through effective portfolio management to obtain more favorable terms wherever possible.
Consistent shareholder returns
- In November 2013, Nordgold introduced a quarterly interim dividend payment. The purpose of this new dividend policy is to deliver more frequent dividend payments to shareholders.
- The current dividend payout ratio is up to 30% of normalised net profit attributable to shareholders.
- The total dividend for four quarters of 2017 is 15.79 US cents per share and the total pay-out is US$53.6 million.
Deliver profitable growth
- Nordgold has an extensive international pipeline of development projects and a proven track record of greenfield development. Nordgold expanded its flagship Bissa mine with the launch of a heap leach operation at the nearby Bouly deposit in September 2016. Construction of Bouly was completed on time and under budget. The mine reached its full capacity in November 2016, just two months after launch.In 2017, Bouly produced approximately 124.2 koz agains plan of 110 koz.
- Nordgold will seek to develop the existing pipeline of high quality greenfield and brownfield projects through carefully selected investments.
- Gross, located in southwestern Yakutia, Russia, is another development project. Gross is expected to mine approximately 12 million tonnes of ore and to produce more than 200 koz of gold per year at full production for 17 years. Nordgold started Gross construction in early June 2016 with production expected to start in mid 2018.
- Nordgold is also progressing the Montagne d’Or project in French Guiana. Finalised in March 2017, the Feasibility Study for the Montagne d’Or project demonstrated positive economic data. Environmental and Social Impact Assessment reports have been provided by consultants in draft form in Q4 2017. The reports will be finalised following review by the company and input from the public debate in French Guiana, which will occur in March-June 2018. The company plans to apply for construction and mining authorisations in H2 2018.
- Nordgold signed contract with SRK Denver to complete a pre-feasibility study for Uryakh advanced exploration project in the Irkutsk region of Russia that is expected to be delivered in Q4 2018. Based on current estimates production at Uryakh could begin as early as 2022.
- At Pistol Bay, regional exploration mapping, glacial till sampling, and a drilling program were undertaken in 2017.
- To supplement the organic growth pipeline, Nordgold will also seek to capitalise on other opportunities through the evaluation of potential purchases of premium-quality reserves and resources, which comply with our project criteria, to further enhance our reserve base.