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RNS Number : 3200E
Highland Gold Mining Limited
03 July 2019
HIGHLAND GOLD MINING LIMITED
03 July 2019
Kekura and Klen Admitted to Special Economic Zone
Highland Gold Mining Limited ("Highland Gold" or the "Company", AIM: HGM) today signed an agreement with Russia's Far East Development Corporation officially confirming residency in the Chukotka Advanced Special Economic Zone (ASEZ) for the Company's Kekura and Klen projects.
The Russian government's ASEZ programme is designed to spur new investments in the country's Far East Federal District and covers 19 geographic areas. The Chukotka ASEZ, in which Kekura, Klen, and the Company's Valunisty mine are located, was created earlier this year via the expansion of an existing zone.
As residents in the ASEZ, Kekura and Klen will be subject to zero or reduced income tax, precious metals royalties, land rental, land tax, and property tax over the first five to ten years of operations. They will also pay a unified social tax on payroll of 7.6% versus the statutory rate of 30%, and be entitled to an expedited refund process for value added tax expenses.
Kekura is Highland Gold's premier development project, with construction currently in progress, stripping and preliminary ore mining set to start later this year, and commercial production expected to begin in 2023. The Kekura project has audited JORC-compliant gold reserves of 2.0 million ounces at a grade of 7.0 g/t, and is designed to produce an initial 172,000 ounces of gold a year with forecasted total cash costs (TCC) of US$511 per ounce. The Company estimates that residency in the Chukotka ASEZ adds approximately US$100 million to the project's net present value (NPV).
Chief Executive Office Denis Alexandrov said: "Highland Gold would like to put on record its thanks to the Russian federal government and the Chukotka regional administration for their support of Kekura and Klen, which will bring substantial jobs and tax revenue to Chukotka over the full life of the projects. In addition to the ASEZ, the government is building a power line to Kekura as well as a year-round road not far from this remote site. This level of support confirms Chukotka's beneficial investment climate and Kekura's importance to the development of the region."
"Kekura and Klen will be subject to zero or reduced income tax, precious metals royalties, land rental, land tax, and property tax over the first five to ten years of operations. They will also pay a unified social tax on payroll of 7.6% versus the statutory rate of 30%"
Still dripping lower, I mean, what is it with this share at the moment - very frustrating. Feel like price will be punished on any gold price pullback despite it not rising on the way up.
Same felt here, with this share being 30 percent of my exposure to gold my patience is wearing thin
I thought about it, and am now certain it is one of 4 things:
- Sanctions between UK / Russia somehow impacting it - the p/e is insanely low here vs Centamin - why!?
- Lower production vs last year (despite this being inline with guidance) -less convinced by this theory as there was a rise on announcement of Q2 trading update, was just sold into
-Further liquidation of large stake by the seller that TR-1'd earlier in the month (most likely)
-Debt/covid jitters
I mean, theoretically, this will slide down to a point where the wider market just swallows the seller's stake but at what price that will be I do not know. Very surprised there is no broker coverage, only found this on Investor Chronicle really (they have it as a buy). I guess patience and trust required, but on AIM that sometimes comes at a high price - more frustrated at missing the gold bounce. Hopefully when seller clears the price will re-rate, so could actually be an ideal time to buy in if nothing untoward is occurring. GLA
Interesting thoughts mate. I am not sure if it is one factor only or indeed a combination of the four mentioned but worth considering how fellow Russian goldies have performed recently.
TSG has been trading in a tight range since the end of April, struggling to add value despite the stream of good news (debt refinanced, resource increase, divided and solid FY results) . POG has risen about 30-40% in that time, although most of that has been added in the past week and can be attributed to the court case proceedings. POLY rebounded well off March lows but has trickled lower in the past month despite gold breaking 8 year highs.
From what I can tell this isn't to do with wider debt or company debt fears. There are plenty of debt laden producers that have risen like PUR, RSG, HUM, PAF.
If Covid is having an effect it is probably minimal at this point but I know Russian cases are still quite high. The reason I say this is because HOC didn't fall much after they announced production was suspended and all Russian producers have been clear that they are operating without many issues.
HGM has been harder hit than the other Russian miners so my suspicion is that weak investor demand coupled with the heavy selling pressure from one of the big investors is to blame. Operationally speaking I don't think we have anything to worry about as the gold price is $400/oz higher than the start of the year. Russian relations have been fairly poor for years but it could be political tensions keeping bigger buyers at bay. I remember last year SHG had a distressed seller and the stock went down to the 4p level before doubling shortly after so I think there will be a rebound after our seller is finished.
Generally agree your comments on HGM of late, t_s - the next figs. should see a reasonable boost on the back of the much higher gold price and likely increase in the divd, too.
The shs are already yielding a safe 6% currently, so a good recovery in the sp looks well overdue to me - sasa.
HGM was a recommended in the Numis Notes (8th July 2020) "For UK mid caps we prefer HGM for its growth profile and dividend yield, which is the most compelling in the sector in our view. "