Second quarter report – June 30, 2021

2021-08-26 08:00:00

APRIL – JUNE 2021 (April – June 2020)

  • Revenue TUSD 17,872 (21,110)
  • EBITDA TUSD 6,833 (8,529)
  • Unrealized loss from gold hedges TUSD -2,805 (-801)
  • Loss before tax TUSD -2,192 (+7,312)
  • Loss for the period TUSD -1,942 (+5,798)
  • Earnings per share before dilution USD 0.00 (0.01)
  • Gold in stock ready for sale increased by 3.2 koz during Q2 2021, corresponding to a sales value of TUSD 5,722.
  • USD 6.8 million exploration program on the Krasny project agreed with the partner GV Gold during the quarter with financing agreed after the end of the reporting period.

JANUARY – JUNE 2021 (January – june 2020)

  • Revenue TUSD 37,234 (44,235)
  • EBITDA TUSD 14,014 (17,805)
  • Unrealized gain from gold hedges TUSD 3,362 (-1,383)
  • Profit before tax TUSD 7,822 (12,324)
  • Profit for the period TUSD 5,928 (9,724)
  • Earnings per share before dilution USD 0.01 (0.01)
  • 2021 gold production guidance of 56-59 koz unchanged

Summary of financial information

MSEKQ2
2021
Q2
2020
H1
2021
H1
2020
FY
2020
Gold production (gold eqvivalent, GE), koz13.014.020.724.153.1
Gold sales (GE), koz9.812.320.826.555.4
Average realized gold price, USD/oz1,8001,7191,7751,6581,773
Revenue, TUSD17,87221,11037,23444,23598,841
Gross profit, TUSD4,36111,08511,64519,87840,973
Gross margin, %24%53%31%45%41 %
EBITDA, TUSD6,8338,52914,01417,80545,620
EBITDA margin, %38%40%38%40%46 %
Profit before tax, TUSD-2,1927,3127,82212,32424,728
Profit for the period, TUSD-1,9425,7985,9289,72419,153
Earnings per share before dilution, USD-0.000.010.010.010.02
Earnings per share after dilution, USD-0.000.010.010.010.02
Cash flow from operating activities before changes in working capital, TUSD6,8307,02014,00915,77044,268
Cash & cash equivalents at the end of the period, TUSD

868
10,388
Net debt, TUSD

59,592
41,938
Net debt/LTM EBITDA

1.42
0.92
Equity per share, USD

0.11
0.11

Comments from the CEO
On track towards long-term growth targets

We can look back on a rather smooth quarter for Kopy Goldfields, given the unstable circumstances. In the second quarter 2021, Kopy Goldfields’ gold production grew 69 percent on a quarter-by-quarter basis, following efforts to increase capacity and stabilize processing and underground min-ing operations at the Yubileyniy project. Gold in stock increased while revenue was lower than in the first quarter as sales volumes were lower than production volumes. EBITDA and EBITDA margins were stable and TCC per GE ounce sold improved slightly compared to the first quarter 2021. TCC per GE ounce sold improved substantially compared to the second quarter of 2020.

Operations had to a large extent recovered from the Covid-19 outbreak at the Yubileyniy site around new year, but the Company is still affected by the ongoing global pandemic. We have had several new cases of infection during the quarter, but following sanitary measures and protocol activities, we were able to quickly identify and isolate them. Kopy Goldfields strongly supports vaccinations and offers free and priority service to the employees. We have been able to restrict pandemic development and mitigate effects on gold production. However, Covid-19 continues to negatively affect operations by creating an industry-wide shortage of qualified mining personnel. At the same time, travel restrictions and lockdowns within Russia and neighbouring countries causes some delays for the mining and investment activities.

Production and sales
In the second quarter, the production from Kopy´s two bedrock and two alluvial mines in the Khabarovsk region of Russia totaled 13.01 koz, which was 69 percent higher than in the first quarter 2021 but seven percent lower than in the second quarter 2020. The Company’s gold production was affected by the shortage of qualified mining personnel at the Yubileyniy project in combination with an increased amount of gold held up in the alluvial production cycle (work-in-progress) that will be included in production in the third quarter 2021. Gold sales during the second quarter of 2021 amounted to 9.83 koz, compared to 10.99 koz in the first quarter of 2021 and 12.28 koz in the second quarter of 2020. The lower gold sales were offset by increased gold in stock, which increased by 3.2 koz, and will be realized in coming periods. If this gold would have been sold during the quarter, the revenues would have been TUSD 5,722 higher.

Investments
Investments in construction remain a top priority to reach the long-term organic production target of over 100 koz of gold and gold equivalent by 2025. We are on track with all investment projects. The construction of the Heap leach plant at Perevalnoe, which is planned to be commissioned by the end of 2021 and operating in 2022 continued. The construction of a second gravity and flotation line at Yubileyniy will be completed in the fourth quarter of this year, increasing the plant’s capacity from 130 ktpa to 250 ktpa. At Malyutka, one of the major drivers of growth, construction of the mine and mill infrastructure has begun. And at the Perevalnoe project, the preparations for underground mining at Brekchiyevaya has commenced with the first 107 meters of decline developed.

Exploration
The summer is the season for field exploration activities. With the target to increase total gold resources and increase the quality of the resources by converting Inferred resources into the Measured & Indicated category, the 2021 exploration program focuses on drilling in both the Khabarovsk and the Irkutsk regions. On our Krasny project, 5,115 meters of core holes out of the planned 27,500 meters were drilled by the end of the second quarter. The Krasny exploration program also includes gathering of geotechnical and hydrology data, further processing of sample tests, and a JORC resource update following the completion of the drilling program.

Outlook
Even though we got a delayed start for this season’s alluvial mining, we expect the alluvial operations to outperform 2020 results. This year, we launched the Khayarylakh placer – its first year in production. We also expect the first gold from the Heap leach operations at Yubileyniy, in the third quarter of 2021. We expect these activities, together with our efforts to increase capacity and stabilize processing and underground mining operations at the Yubileyniy project, to support further production growth in the second half of the year, which makes me confident to confirm our production guidance for 2021 of 56-59 koz.

Finally, I would like to thank you all for your trust in Kopy Goldfields. We are on track towards our long-term growth targets!

Mikhail Damrin
CEO Kopy Goldfields

This report has not been reviewed by the Company’s auditors.

Presentation for investors, analysts, and the media
CEO Mikhail Damrin and CFO Tim Carlsson will present the report and answer questions via a webcast on August 26, 2021, at 10.00 a.m. CEST. The presentation will be in English and can be followed online or via telephone. Number for participation by telephone: Sweden: +46850558374 / United Kingdom: +443333009270 / Russian Federation: +88005009867 (PIN: 42598186#). Follow the presentation at https://tv.streamfabriken.com/kopy-goldfields-q2-2021.

MFN