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In This List

Nord Gold expands reserves to 14 million ounces, says Bouly project on track for H2 startup

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Nord Gold expands reserves to 14 million ounces, says Bouly project on track for H2 startup

Moscow-headquartered NordGold NV expanded its own reserves by 8% in 2015, to 14 million ounces,but discovering "good quality" deposits is becoming increasingly difficultin the struggling gold sector, Nikolai Zelenski, company CEO, told a London audienceApril 14.

Speaking at the Dutch-domiciled group's Investor Day briefing,Zelenski pointed to low all-in production costs of US$793 per ounce and a "strongpipeline" of upcoming greenfield projects as the company's major strengths.

But he stressed that finding quality reserves was becoming increasinglytough for the sector, and added that companies needed to geographically diversifytheir exploration efforts to avoid this problem.

"Finding quality reserves is becoming a major bottleneckfor the industry," he said.

The company anticipated this problem in its home Russian market,where the junior mining sector has failed to take off, he said.

"When we looked at our long-term strategy, we anticipatedthis and looked outside Russia. … If you restrict yourself to one geographic area,you are hampering the development of the business."

Nord Gold, which was spun out of Russian iron and steel holdingPAO Severstal in 2012,operates four main gold mines in Russia, and has also acquired operational minesin Guinea and Burkina Faso.

Other development projects include a feasibility-stage venturein French Guiana, and an early stage exploration project in Nunavut, Canada.

The company managed to increase its reserves to 14 million ouncesat the end of last year, fully replacing mining losses, said Howard Golden, explorationdirector at Nord Gold.

He said the company's team kept busy by converting resourcesand expanding reserves at satellite deposits around the existing operations, butwas also spending money drilling at independent early stage projects.

"We replaced all of our mined gold last year, we mined amillion ounces and replaced all of it," he told the same briefing of investorsand analysts in London.

He noted that the group's geologists were "chomping at thebit" to start drilling at some of the more promising deposits, such as Zhanok,a satellite of the operating Buryatzolotohub in the Russian Far East.

"We have 30 million bucks in the bank for exploration in2016," he said, adding exploration this year would focus on replacing reservesat operating mines by drilling satellite deposits. Other priorities included completingthe feasibility study at the company's Montagne d'Or joint venture in French Guiana,also known as Paul Isnard,and carrying out further exploration at the Pistol Bay deposit in Canada.

Development projects director, Igor Klimanov, also said thatNord Gold's stock stake in NorthquestLtd., the TSX-listed exploration group that began exploration of PistolBay, has increased toabove 51%. Under Nord Gold's joint venture agreement with the Canadian company,this will trigger a clause requiring Nord Gold to make a full buyout offer for Northquest'soutstanding shares, he said.

"We are getting the valuations together, we expect to makethis soon," he said.

Nord Gold, which is over 90% controlled by Severstal founderAlexey Mordashov, has carved a niche as a low-cost gold producer specializing inlow-grade leaching projects.

Most of its projects are open-pit operations utilizing heap leachingor carbon-in-leach processing, including its new Bouly project in Burkina Faso, where first goldproduction is expected in the second half of this year, according to Zelenski.

EBITDA in last year rose to US$520 million, despite a comparativelyweak gold price. The yellow metal price averaged below US$1,200 an ounce last year,as Chinese buyers sold volumes to boost liquidity during the country's midyear equityrout, while the strength of the U.S. dollar also reduced global demand for the metal.