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Nordgold launches Bouly gold heap leach operation ...

Nordgold launches Bouly gold heap leach operation in Burkina Faso

Gold production has begun at Nordgold’s Bouly operation located 5km from its existing Bissa mine in Burkina Faso
Construction was completed on schedule in 13 months and under budget for a total investment of US$140 million (US$15 million less than initial capex guidance)
Bouly’s IRR is approximately 40% at a gold price of US$1,250/oz
Bouly is Nordgold’s third operating asset in Burkina Faso and total Nordgold production in the country will reach 400 koz at full capacity
Nordgold continues to progress its capital efficient, low cost development pipeline with its new Gross mine in Russia expected to commence production in early 2018
Extensive community engagement undertaken throughout the project with new infrastructure, housing and facilities construction

London, United Kingdom, 19 September 2016 – Nord Gold SE (“Nordgold” or the “Company”, LSE: NORD), the internationally diversified low-cost gold producer, is pleased to announce that it has expanded its flagship Bissa mine with the launch of a heap leach operation at the nearby Bouly deposit in Burkina Faso.

According to the Feasibility Study, Bouly’s average annual production will be approximately 120 koz over a life of mine («LOM») of 10 years at AISC of US$730 per oz. Bouly construction was completed on schedule and under budget. Nordgold started construction of the Bouly mine in July 2015 and invested US$140 million in the project (US$15 million less than initial capex guidance of US$155 million due to significant savings achieved during earthworks conducted in-house, lower equipment prices combined with disciplined procurement and foreign exchange gains). Construction was completed in 13 months in August 2016.

In line with Nordgold’s development strategy, the project had been de-risked prior to final Board approval. According to the Feasibility Study, the IRR for Bouly is approximately 40% at a gold price of US$1,250 per oz and approximately 26% at a gold price of US$1,100 per oz. The payback period is expected to be 30 months at a gold price of US$1,250 per oz and 42 months at a gold price of US$1,100 per oz.

Bouly is the Company’s third operating asset in Burkina Faso and the second project Nordgold has developed from a green field development stage in the country in the last six years, again highlighting Nordgold’s proven ability to plan, develop, and construct large mining projects on time and on budget. Nordgold already operates the world-class Bissa mine, which was built by the Company in 2013, and the Taparko mine acquired in late 2008. The launch of Bouly confirms Nordgold’s position as the second largest gold producer in the country, with total production of approximately 400 koz per year.

1,000 jobs were created during the construction phase and 350 permanent jobs will be created for its 10-year life span. Direct benefits to the state will come mainly in terms of income tax and royalties, which are estimated to be US$120 million over the life of the mine, excluding state revenue derived from fuel tax.

“We have delivered a robust financial performance in the quarter with EBITDA up sharply both on the same quarter last year and on the previous quarter this year, boosted by a higher gold price, but also a more resilient quarter’s production. This more positive gold price environment, combined with the considerable progress we have made on our development pipeline including the launch of our new Bouly mine in Burkina Faso, gives us confidence in a strong performance in 2017. We have guided the market towards higher AISC for the full year as we invest more in particular at our West African mines in order to access higher grade ores — we believe this investment will pay dividends in 2017 and expect AISC to reduce during the course of next year, as we continue to implement further cost saving measures. We remain a consistent Free Cash Flow generator committed to maintaining a low cost base and reiterate our full year capex guidance, despite the on-going investment into our portfolio of de-risked, low capital intensive development opportunities.” Nikolai ZelenskiChief Executive Officer of Nordgold

Project Details

Bouly is located within 5 km of Nordgold’s Bissa mine on the border of the rural communes of Sabce and Mane, 100 km north of the capital, Ouagadougou. Bouly is operated by Bissa’s management team.

Bouly is the result of a green field development initiative at Nordgold and successful exploration programme which identified a large, low-grade gold deposit hosting Mineral Resources of 3.5 Moz at 0.57g/t, and Ore Reserves of 1.3 Moz at 0.56 g/t. Nordgold sees potential to increase the Bouly deposit’s Reserve base through the conversion of fresh rock Resources to Reserves.

The Bouly deposit represents a large, low-grade gold mineralisation, favourable for heap leach treatment. Bouly is a single open pit operation. The ore is crushed with primary jaw and secondary cone crushers, followed by agglomeration before stacking on HDPE lined pad for irrigation with sodium cyanide leach solution. Bouly utilises mining equipment and jaw crushers similar to that of Bissa, to standardise stock holding and optimise maintenance costs.

Bouly will benefit from the low cost mining operations due to an excellent average LOM stripping ratio of 0.7 t/t and straightforward heap leach metallurgy with superior gold recovery at 83%. Bouly has its own all-season heap leach facilities with final processing stages, including desorption, electro-winning and smelting taking place at the Bissa’s processing plant.

Bouly’s average annual production will be approximately 120 koz over a LOM of 10 years. In 2016, Bouly is expected to produce up to 20 thousand ounces of gold.

Infrastructure

Bouly shares much of Bissa’s existing infrastructure, including camp and mess facilities, the laboratory and the raw water reservoir (Tiben dam). The proximity of Bouly to Bissa enables it to benefit from economies of scale, expert knowledge of the local geology, and a well-trained workforce.

Environment

Nordgold’s objective is that Bouly follows Bissa’s high environmental standards and becomes an example of environmental excellence. The Bouly project received a decree on environment compliance granted by the Burkina Faso Ministry of Environment, the Green Economy and Climate Change.

The leach pad and associated drains and ponds were designed by Knight Piesold Australia in accordance with international standards, utilising the best industry technology, including an HDPE liner.

Environmental considerations were key in all aspects of the project’s development.

CSR Priorities

Nordgold is a major contributor to the Burkina Faso economy and has invested US$690 million in the country between 2009-2015. In 2015, Nordgold’s income tax payments alone represented 5% of Burkina Faso’s entire income tax collected that year. Nordgold invested US$140 million in Bouly construction, of which approximately 30% was spent on services and products provided by local companies. Bouly’s contribution to the state in terms of taxes and other duties to be in the region of US$120 million for the 10-year period excluding state revenue derived from fuel tax.

Nordgold’s policy is to actively hire and promote citizens of Burkina Faso in all its operations in the country. As at the end of August 2016, the combined Bissa-Bouly operations employed more than 1400 people, of which only about 5% were expatriates. Bouly is expected to follow Bissa’s example in terms of its leading industrial safety standards.

The Company’s concern for, and awareness of, the needs of the local community is an integral part of its presence in all of the regions in which it operates. At Bouly, the main project in terms of infrastructure is the relocation of the villages within the project impact zone. The first phase of relocation is ongoing and expected to be completed shortly, while the last phase will be completed in March 2017 in line with the mine site expansion plan. Nordgold has conducted comprehensive consultations and compensated local communities for the project impact.

At completion, the Company will have built about 1000 new concrete quality houses for local communities, as well as socio-economic infrastructure including 16 water wells, eight mosques, one Protestant and two Catholic churches, four community centers, seven primary schools and one secondary school (each with six classrooms and six houses for teachers and a water well), eight sport fields and a vaccination center. The Tiben raw water reservoir also provides a valuable year round water source for gardening to the local communities. The overall resettlement budget exceeds US$10 million, which includes new houses and infrastructure construction, compensation paid to local communities, as well as livelihood restoration programmes. Through its resettlement programme at Bouly, Nordgold aims to improve both the living conditions and livelihoods of those affected.

Resources for those working in the agriculture and livestock sectors of the local communities were provided, as well as input products and training for new income-generating activities. To date, approximately 450 people from local communities have been trained for activities including driving vehicles, welding, forge, masonry, weaving and soap-making. The Company will continue training courses in 2017 with a special focus on agriculture and female empowerment. The exact list of livelihood restoration programmes for 2017 will be developed in consultations with local communities to ensure their source of income is restored.

In addition, the Company is dedicated to supporting economic development in the community and will assist with the expansion of small businesses and the allocation of microcredit. Nordgold is proud of the fact that its mines are active members of the local communities and that all its sustainable development programmes are guided by the expectations and needs of the local communities.