2016 H1 Interim Results and Project Update September 2016 - PowerPoint PPT Presentation

2016 H1 Interim Results and Project Update September 2016

Disclaimer Certain statements within this presentation constitute forward looking statements. Such forward looking statements involve risks and other factors which may cause the actual results, achievements or performance of the Group to be materially different from any future results, achievements or performance expressed or implied by such forward looking statements. Such risks and other factors include, but are not limited to, general economic and business conditions, changes in government regulations, currency fluctuations (including the US$/RUR rate), the gold price, the Group’s ability to recover its reserves or develop new reserves, competition, changes in development plans and other risks. There can be no assurance that the results and events contemplated by the forward looking statements contained in this presentation will, in fact, occur. These forward-looking statements are correct or represent honestly held views only as at the date of delivery of this presentation. The Company will not undertake any obligation to release publicly any revisions to these forward looking statements to reflect events, circumstances and unanticipated events occurring after the date of this presentation except as required by law or by regulatory authority. 2

Highland Gold Today  Three operating mines and a pipeline of promising development projects.  Operations focused in 3 regions of Chukotka the Russian Federation. Kekura Cluster Klen Our Vision Drive production growth by developing existing resources Focus development in the regions of Baikal presence Cluster Mnogovershinnoye (MNV) Maximise usage of existing Belaya Gora infrastructure and milling capacity Blagodatnoye Novoshirokinskoye (Novo) Khabarovsk Seek and consolidate reserves Cluster Lyubov Baley Hub around existing production clusters (Taseevskoye, Sredny Golgotay) Maintain position as low-cost producer through strict cost controls Operating Mine Unkurtash Development Project Strengthen commitment to safety Kyrgyzstan Exploration Project and protecting the environment 3

Corporate Overview AIM-Listed: HGM.L Share Data  Shareholders include a broad range of major high- quality UK and European institutional investors Shares 325,222,098 Committed to Best Practice in Corporate Market Cap* GBP 427,667,059 Governance H1 2016 Earnings/Share US$ 0.113  Led by an experienced Board of Directors and * on 22 Sep 2016 management team  Seven directors – an executive chairman, one executive director, and five non-executive directors 2016 Share Performance Ownership Structure 160 3.0 Board & 140 2.5 Management 120 Other 2.0 42% 11% 100 80 1.5 60 Free Float: 1.0 40 57% 32% 0.5 20 15% Primerod 0 0.0 Prosperity Capital Management 4 Share Price (GBX) Average Daily Trading Volume (mln GBP)

H1 2016 Highlights Operational Milestones Total production of 128,671 oz of gold ↑ 6% and gold equivalent  MNV and Novo exceeded internal production targets for the half H1 2016 EBITDA – US$ 80 million ↑ 45% EBITDA Margin of 54%  Efforts to optimise mine and mill operations at Belaya Gora ongoing Total Cash Costs – 444 US$/oz ↓ 18%  Progress in exploration programmes at All-In Sustaining Costs – 609 US$/oz ↓ 14% MNV and 3 development projects  Work commenced on planned expansion Net Debt of US$ 197.9m on 01.07.16 ↓ 15% of the Novo mill  PFS for Kekura completed and reviewed, preparations for construction underway H1 2016 Free Cash Flow of US$ 60.7m ↑ 60% Interim Dividend of £ 0.05 per share approved by Board of Directors (H1 2015 - £ 0.02 ) Percentage comparisons are H1 2016 versus H1 2015 5

H1 2016 Financial Overview IFRS, US$000 (unless stated) H1 2015 H1 2016 Gold sold (gold and gold eq. oz) 119,277 127,697 Total Group cash costs (US$/oz) 538 444 Group all-in sustaining costs (US$/oz) 710 609 Revenue 130,740 147,097 Operating profit 18,778 50,420 Net profit 14,466 37,052 EBITDA 54,885 79,720 EBITDA margin (%) 42% 54% Earnings per share (US$) 0.044 0.113 Net cash inflow from operations 56,523 78,378 Capital expenditure 18,153 18,814 Net debt position 232,427 197,900 6

H1 2016 Financial Overview H1 2014 H1 2015 H1 2016 Gold and GE Production, koz 120.1 121.2 128.7 Average Price of GE, US$/oz 1 210 1 088 1 143 P & L, US$ m Revenue 142.2 130.7 147.1 Cost of sales (109.7) (101.7) (86.7) Gross profit 32.5 29.0 60.4 Administrative expenses (8.2) (6.7) (7.0) Other operating (expenses) / income 1.9 (3.6) (2.9) Operating profit 26.3 18.8 50.4 Financial costs (1.6) (2.6) (3.5) Financial income 6.2 2.2 - FX (1.5) (1.9) 1.9 Profit before income tax 29.4 16.6 48.8 Total income tax expense (9.1) (2.1) (11.8) Total comprehensive income for the period 20.3 14.5 37.1 7

H1 2016 Financial Overview 30 June 30 June 30 June 2014 2015 2016 STRONG BALANCE SHEET Total Assets, US$ m 1 290.5 1 212.2 1 156.4 Total Equity, US$ m 828.4 774.5 764.7 Gross Debt (incl. leasing), US$ m 304.0 272.2 217.7 KEY INDICATORS TCC, US$ / oz 689 538 444 AISC, US$ / oz 900 710 609 EBITDA, US$ m 48.4 54.9 79.7 Net Debt / EBITDA 2.0 1.8 1.3 EBITDA margin 34% 42% 54% DIVIDENDS Dividends paid during H1, US$ m 13.7 10.1 11.9 Dividends declared during H1, GBP per share 0.025 0.020 0.050 8

H1 2016 Operating Data Mining Data  Ore mining volumes in H1 2016: Rock Mined and Stripping Ratio Ore Mined, kt  650 kt at MNV (+5% y-o-y)  955 kt at Belaya Gora (+8% y-o-y) 6.9 6.5  402 kt at Novo (+23% y-o-y) 6.0 1,254  1,175 13 kt at Sredny Golgotay (Kaftan) 9,441 9,324 766 5,368  7% of mined ore was left in stockpiles 766 658 574 due to the ore selection programme at H1 2014 H1 2015 H1 2016 Belaya Gora H1 2014 H1 2015 H1 2015 Underground Open Pit Processing Data  Ore Processed, kt Ore processing volumes in H1 2016: Average Grade and Recovery Rate  673 kt at MNV (-5% y-o-y)  834 kt at BG (+23% y-o-y) 84.8% 84.1% 83.9%  376 kt at Novo (+14% y-o-y) • includes Kaftan 1,883 1,712 1,373  Average grade decreased by 5% due to 3.28 2.63 2.5 Belaya Gora grades falling from 1.9 g/t to 1.3 g/t (-31% y-o-y) H1 2014 H1 2015 H1 2016 H1 2014 H1 2015 H1 2015  Recovery rates increased by 1% thanks Average Grade, g/t to MNV and Novo 9 Recovery Rate, %

EBITDA Performance EBITDA BRIDGE, US$ m EBITDA Margin 100 3 90 6 Newmont 1 7 39% Median: Mining 80 16 44% 70 Anglogold 60 40% Ashanti 50 40 80 Barrick 30 40% 55 Gold 48 20 10 Newcrest Mining 43% 0 H1 2014 H1 2015 Exchange Metal Volume of Cost of G&A H1 2016 Actual Actual Rate Prices Sales Sales Actual Gold Fields 44% + US$ 7.2 m Slight increase in Au price at lower Zn and Pb prices Polymetal 50% + US$ 6.1 m Nord 52% Change in the volume of sales, including : Gold  NOVO + 8 077 oz Au equivalent  MNV + 3 010 oz Au Polyus Gold** 64%  BG - 2 667 oz Au HGML 54% - US$ 3 .1 m Increase in costs caused by 10% growth in mining and 0% 20% 40% 60% processing volumes 10

TCC & AISC Performance HGML TCC Breakdown by Mine MNV Belaya Gora Novo TCC (US$/oz) (adjusted) 471 426 136 813 178 613 602 538 489 444 335 248 H1 2015 H1 2016 H1 2015 H1 2016 H1 2015 H1 2016 H1 2015 H1 2016 Outside Processing Costs, US$/oz sold AISC (US$/oz)  Total Cash Costs fell by 18% to 444 US$/oz due to the weaker rouble, increased gold sales and an efficiency improvement programme at Novo  A 25% increase in BG TCC resulted from lower grades 710 609 and recovery rates  All-In Sustaining Costs were down 14% to 609 US$/oz • Low TCC were partially offset by an increase in H1 2015 H1 2016 maintenance CAPEX and G&A 11

Peer Cost Comparison Total Cash Costs, US$/oz 900 600 International Majors 707 706 631 300 591 Russian Companies 550 514 444 377 0 Newmont Barrick Goldcorp AngloGold Kinross Polyus Polymetal HGML Mining Gold Ashanti Gold Gold All-In Sustaining Costs, US$/oz 900 600 992 972 936 911 878 795 770 754 754 300 609 555 0 Newcrest Barrick Newmont AngloGold Goldcorp Kinross Gold Polyus Polymetal Nordgold HGML Mining Gold Mining Ashanti Gold Fields Gold 12

Operating Cash Costs  Operating cash costs decreased by 11%, Cost Breakdown despite an 8% increase in sales, due to H1 H1 Unit Deviation 2015 2016 NOVO cost reduction initiatives and the weaker rouble m US$ Consumables and spares 22.2 19.2 -14% Labour m US$ 19.5 18.1 -7%  Operating cash cost structure remained Services m US$ 11.3 9.8 -13% largely unchanged in H1 2016 with major Power m US$ 4.1 3.9 -8% cost items being materials (34%), labour Taxes m US$ 7.9 6.9 -13% (32%), services (15%), and taxes (12%) Total costs m US$ 65.0 57.9 -11% Cost Breakdown by Mine, H1 2016 MNV BG NOVO Consumables Consumables and spares Consumables and spares and spares 40% 35% Labour 38% Labour 22% 32% USD 28 m 25% Labour USD 16 m USD 14 m 9% 13% 13% Taxes 8% 6% 6% 23% 16% Taxes 14% Taxes Power 13 Services Power Services Power Services