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
Nordgold has established a reputation for financial and operational delivery. In 2016, against a backdrop of continued gold price volatility, we demonstrated financial discipline and our proven ability to identify, plan, develop and build new mining operations on time and on budget. Our newly launched Bouly mine in Burkina Faso reached full production capacity in just two months. Despite a limited gold price recovery in 2016, Nordgold has prioritised cash generation and shareholder returns. We increased the total dividend payout for 2016 to US$18.07 per share or per GDR (a total of US$66.9 million) compared with 15.6 US cents per share or per GDR (a total of US$58.5 million) in 2015.
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 2017.
- Nordgold delivered free cash flow of US$62 million in 2016 while investing US$117.8 million in the construction of the new low-cost Bouly and Gross mines during the year and despite a volatile gold price environment, highlighting the high quality of the Company’s mines.
- A combination of Nordgold’s flexible capex, estimated to be US$390 million in 2017 (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, which is expected to add US$60 million to 2017 EBITDA, 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 2016 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
- 2016 net debt reduced by 13% to US$505.4 million reflecting strong free cash flow.
- Nordgold leverage was at 1.0x Net debt/LTM EBITDA as of 31 December 2016.
- 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 30% of normalised net profit attributable to shareholders.
- The total dividend for four quarters of 2016 was 18.07 US cents per share or GDR and the total pay-out amounted to US$66.9 million compared with 15.61 US cents per share or GDR and the total pay-out of US$58.5 million for 2015.
- Nordgold has no limitation from bond- and debt holders on the dividend payments.
Deliver profitable growth
- Nordgold has an extensive international pipeline of low cost 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 will produce approximately 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 approximately 230 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 H1 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 and Nordgold is therefore looking forward to completing an Environmental and Social Impact Assessment in 2017.
- Following positive results from the exploration programmes at Pistol Bay in 2015-2016, which confirmed its potential of being a high quality deposit of substantial scale with high grade ore, a moderate stripping ratio and excellent metallurgy, Nordgold consolidated its stake in Northquest (owner of the Pistol Bay project) in October 2016.
- 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.