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Highland Gold to double output in midterm on Kekura project commissioning

Highland Gold Mining Ltd. is looking to double its gold output to 500,000 ounces per annum over the next few years as it brings online its Kekura project in Russia, CEO Denis Alexandrov told S&P Global Market Intelligence on the sidelines of the London Mines and Money conference Nov. 28.

"Currently we produce 265,000 ounces of gold per annum and our mid-term target is 500,000 ounces per annum with the commissioning of Kekura mine and an improvement of productivity at our existing mines. We can hit the 500,000-ounce target in several years," Alexandrov said.

The project holds a resource of 2.6 million ounces grading 7.47 g/t of gold. Highland Gold is currently conducting a definitive feasibility study at the site, the results of which will be published before the end of the year. With regards to other expansion plans, Alexandrov said the company is more focused on growing its already existing operations such as the mill at Novoshirokinskoye, which is being expanded to 1.3 million tonnes of capacity per annum.

In general, Alexandrov said the Russian gold industry was in a healthy condition, continuing to maintain low costs despite the appreciation of the ruble against the U.S. dollar during 2017. About 60% of Russia's gold production comes from public companies, but the rest comes from small and medium-sized companies that are not very well known to the western investor and this is why Russian assets are sometimes overlooked, Alexandrov explained.

"Secondly, if you look at the gold production forecast, it is expected to decline after 2020. But in Russia, I think the situation is different. A lot of companies put new mines into production and actually are increasing their production and the same is true for Highland Gold," he said.

Commenting on Russia's over-reliance on Soviet-era deposits, Alexandrov said the Soviet legacy is more of a positive factor in the midterm as it lays a solid foundation that mining companies can build on.

"In most cases we have geology maps and some geochemistry and geophysics from the Soviet era," he said.

On the flip side, while data collected during the 1960s and 1970s tends to be more or less accurate, Alexandrov said that 1980s data was prone to errors.

In terms of risks in 2018, Highland Gold views the strengthening ruble as a potential threat to its status as a low gold producer but believes that its EBITDA margin of 50% will serve as a buffer to appreciation in the short-term. Likewise, the company plans to start implementing digitization solutions and automating some operations in 2018 in an effort to offset rising costs.