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Nordgold Reports Q2 and H1 2014 Financial and Oper...

Nordgold Reports Q2 and H1 2014 Financial and Operating Results

Amsterdam, Netherlands, August 29, 2014. Nord Gold N.V, (“Nordgold” or the “Company”, LSE: NORD), the internationally diversified, pure-play gold producer strategically focused on emerging markets, announces its financial and operating results for the second quarter and six months ended June 30, 2014.

H1 2014 Highlights

Gold production increased by 14% year-on-year (“YoY”) to 476.1 thousand ounces (“koz”). Based on this strong production performance, guidance for the FY 2014 has been increased to 900 — 950 koz.
EBITDA increased by 24% to US$244.8 million highlighting strong production performance and efficiencies offsetting lower gold price.
Total cash costs decreased by 22% to US$708/oz and all-in sustaining costs (“AISC”) decreased by 22% to US$899/oz. Based on the significant improvement in AISC, FY 2014 AISC guidance has been decreased to US$950/oz — US$1,000/oz.
Cash flow from operating activities of US$133.7 million and positive free cash flow of US$72.6 million.
The Board has declared a dividend of 3.81 US cents per share / GDR for Q2 2014, bringing the total dividend for H1 2014 to 5.34 US cents per share / GDR.
LTIFR improved by 49% to 0.73 compared to LTIFR of 1.42 in H1 2013.

Operating and Financial Highlights

Gold production in Q2 2014 was 265.0 thousand refined gold ounces, a 14% increase compared with Q2 2013 (232.6 koz) and a 26% increase compared with Q1 2014 (211.1 koz).
In H1 2014 gold production reached 476.1 koz, a 14% increase compared with 416.3 koz in H1 2013. During the first six months of the year eight out of Nordgold’s nine mines achieved a YoY production increase mainly as a result of measures the Company has implemented to improve operational efficiency at the mines. Double-digit growth was recorded at Bissa, Taparko, Lefa, both the Buryatzoloto underground mines (Irokinda and Zun-Holba) and Neryungri.
Despite a lower gold price, revenue in Q2 2014 was US$342.1 million, a 7% increase compared with US$320.3 million in Q2 2013 and a 24% increase compared with US$274.9 million in Q1 2014, due to higher gold production and sales volumes. In H1 2014, Nordgold revenue was US$617.0 million, in line with the same period last year (H1 2013: US$617.1 million) despite a 13% decrease in the average realised gold price.
EBITDA for Q2 2014 increased by 42% YoY and by 37% quarter-on-quarter (“QoQ”) to US$141.3 million. In H1 2014, EBITDA increased by 24% YoY to US$244.8 million mainly driven by improved operational efficiencies, higher production volumes and strict cost control, which offset lower gold prices. EBITDA margin for H1 2014 was 39.7% compared with 32.0% in H1 2013.
Net profit for Q2 2014(1) was US$49.1 million compared with US$24.6 million in Q1 2014 and against a net loss of US$204.6 million(2) related to impairment of tangible and intangible assets recognised in Q2 2013. In H1 2014 net income was US$73.7 million compared with a net loss of US$190.0 million(2) in H1 2013.
Normalised net profit attributable to shareholders for Q2 2014(4) was US$48.0 million compared with US$19.3 million in Q1 2014 and US$25.8 million in Q2 2013. In H1 2014 normalised net profit attributable to shareholders almost doubled YoY to US$67.3 million.
In Q2 2014, total cash costs (“TCC”) were US$699 per ounce, a 20% decrease compared with Q2 2013 (US$875/oz) and a 3% decrease compared with Q1 2014 (US$719/oz) mainly due to improved operational and consumption efficiency. The main drivers of the YoY TCC improvement were Lefa (down 40%), Taparko (down 11%), Buryatzoloto (down 17%), Berezitovy (down 29%), Neryungri (down 36%) and Suzdal (down 9%). In H1 2014, TCC were US$708/oz, a 22% decrease compared with US$911/oz in H1 2013. We continue to implement cost optimisation and operational improvement programmes at all our mines.
In H1 2014, eight out of Nordgold’s nine mines achieved significant improvement in all-in sustaining costs compared with H1 2013. As a result, Nordgold’s consolidated AISC were US$899/oz in H1 2014, which is 22% lower compared with H1 2013 (US$1,148/oz).
In H1 2014, Nordgold generated US$133.7 million of cash flow from operating activities (after interest and income tax paid), compared with US$103.5 million in H1 2013. In Q2 2014, cash flow from operating activities was US$83.8 million(1), compared with US$63.1 million in Q2 2013.
Capital expenditure ("capex“)(3) for H1 2014 decreased by 46% YoY to US$70.6 million (including US$10.0 million for exploration and evaluation).
The Company delivered US$72.6 million of positive free cash flow(1) in H1 2014 compared with negative free cash flow of US$30.1 million in H1 2013 on the back of higher operating cash flow and significantly lower capex.
Cash and cash equivalents as at June 30, 2014 were US$306.9 million with net debt of US$687.0 million, compared with US$244.0 million cash and cash equivalents as at December 31, 2013, and net debt of US$723.9 million.
The Board of Directors has approved an interim dividend of 3.81 US cents per share or per Global Depositary Receipt (“GDR”) in respect of the three months ended June 30, 2014, payable to shareholders on the register as of September 15, 2014.
In July 2014, Fitch Ratings affirmed Nordgold Long-term Issuer Default Rating (IDR) at ’BB-’ with a stable outlook. In its analysis of the Company, Fitch notes that the affirmation of the ratings reflects Nordgold’s manageable capex profile and its focus on organic growth.

(1) Suzdal’s doré produced in Q1 2014 was refined and sold during Q2 2014 and therefore was accounted in Q2 2014 revenue, EBITDA, net profit and Operating Cash Flows.
(2) The figures for Q2 2013 and H1 2013 were restated due to change in accounting policy. For more information, please see Note 2 in the Interim Condensed Consolidated Financial Statements. (3) For detailed definition, please see “Non-IFRS Financial Measures”.
(4) Normalised Net Profit attributable to shareholders adjusted for the non-current assets and inventories impairment or utilisation of impairment.

Outlook Update

Based on the robust operating performance delivered in H1 2014, Nordgold is revising upwards its 2014 full year production forecast to 900 — 950 koz from the original guidance of 870 — 920 koz.
Nordgold expects FY 2014 capex of approximately US$180 million, a 10% lower than the original guidance of US$200 million.
Based on the significant improvement in AISC in H1 2014, Nordgold is revising its FY 2014 AISC guidance and now expects AISC to be in range of US$950/oz — US$1,000/oz (previous range was US$1,050/oz — US$1,100/oz).

“This has been an extremely strong financial and operating performance for the Company in the first half of the year. We continue to successfully drive down operating costs across our mine sites, which combined with our strong production results and stringent focus on capex has enabled us to more than offset the on-going gold price weakness. I am delighted that as a result we have reported a rise in EBITDA and are able to restate our full year expectations for production, capex and AISC. We have achieved this with absolutely no compromise on our commitment to safety.
The market environment remains challenging, but we have clearly demonstrated our ability to achieve sustainable value for our shareholders through outstanding operating performance and a track record of cost reduction. This puts us in a strong position to achieve our full year targets. Looking ahead, we will continue to focus on organic growth and driving value through the existing portfolio, while seeking to advance our development projects carefully, complemented in the period by the bolt-on acquisitions of the very promising Ronguen Project and share in the Pistol Bay project.” Nikolai ZelenskiChief Executive Officer of Nordgold

Telephone Conference and Q&A Session

Nikolai Zelenski, Chief Executive Officer of Nordgold, Louw Smith, Chief Operating Officer, and Dmitry Guzeev, Acting Chief Financial Officer, will present the Company’s financial and operating results for the second quarter and the first six months of 2014 in a conference call on September 1, 2014 at 12.30 pm London time (GMT). The presentation will be followed by a Q&A session. To participate in the telephone conference, please register in advance.