Fourth quarter report and year-end report – December 31, 2021
Q4 OCTOBER – DECEMBER 2021 (Q4 October – December 2020)
- Revenue TUSD 19,213 (31,452)
- EBITDA TUSD 7,553 (14,384)
- Unrealized loss from gold hedges TUSD -1,437 (-397)
- Non-cash inventory adjustment TUSD -5,170 (-4,447)
- Loss for the period TUSD -4,021 (2,505)
- Earnings per share before dilution USD -0.00 (0.00)
- Launch of the upgraded Yubileyniy plant
JANUARY – DECEMBER 2021 (January – December 2020)
- Revenue TUSD 89,578 (98,841)
- EBITDA TUSD 36,899 (45,620)
- Unrealized gain from gold hedges TUSD 2,099 (-2,131)
- Non-cash inventory adjustment TUSD -11,174 (-1,012)
- Profit for the period TUSD 7,715 (19,153)
- Earnings per share before dilution USD 0.01 (0.02)
- The Board of Directors proposes no dividend to be paid
- 2022 gold production target of 52-57 koz
Significant events after the reporting period
- In end of February 2022, the geopolitical tension in eastern Europe escalated. For more information, see headline “Comments from the CEO” on page 2, “Current geopolitical situation” on page 4 and Note 4 on page 19.
- During March 2022, the Board Members Andreas Forssell and Britta Dalunde resigned from the Board of Directors.
SUMMARY OF FINANCIAL INFORMATION
|Gold production (gold equivalent, GE), koz||9.94||10.83||-8%||51.61||53.11||-3%|
|Gold sales (GE), koz||10.50||16.87||-38%||49.81||55.43||-10%|
|Average realized gold price, USD/oz||1,805||1,857||-3%||1,783||1,773||1%|
|Gross profit, TUSD||1,712||8,487||-80%||24,421||40,973||-40%|
|Gross margin, %||9%||27%||27%||41 %|
|EBITDA margin, %||39%||46%||41%||46 %|
|Profit before tax, TUSD||-4,656||3,604||-229%||10,640||24,728||-57%|
|Profit for the period, TUSD||-4,021||2,505||-261%||7,715||19,153||-60%|
|Earnings per share before dilution, USD||-0.00||0.00||0.01||0.02|
|Earnings per share after dilution, USD||-0.00||0.00||0.01||0.02|
|Cash flow from operating activities before changes in working capital, TUSD||7,265||14,520||-50%||36,636||44,268||-17%|
|Total investments, including capitalized exploration costs||3,604||7,051||-49%||26,843||17,742||51%|
|Cash & cash equivalents at the end of the period, TUSD||6,145||10,388|
|Net debt, TUSD||60,637||41,938|
|Net debt/LTM EBITDA||1.64||0.92|
|Equity per share, USD||0.12||0.11|
Comments from the CEO
2021 – a year of operational achievements and major milestones
Towards the end of February 2022, the geopolitical tension in eastern Europe unfolded into a trag-edy. Our thoughts are with those directly affected and those who have lost their loved ones and we hope for a near ceasefire and peaceful settlement.
Current geopolitical situation
We continue to explore, mine, process and sell gold at international market prices. So far, the gold mining industry is not falling under any announced or published sanctions. The fundamentals of the Russian gold mining business have not changed and Kopy Goldfields’ mining operations have so far not been directly affected However, as any business active in Russia, Kopy Goldfields is influenced and exposed to the international sanctions environment. The Russian financial system and industries with trans-border activities are under strong pressure. Kopy Goldfields’ Russian subsidiaries co-operate with major Russian banks and some of them are subject to international sanctions. In addition, Russian companies are facing increased monetary restrictions and regulations, which affect intragroup transactions.
We continue to closely monitor the development of the situation, including the effects of the sanctions imposed by the EU, the US and other countries, as well as countersanctions from Russia and global financial market developments. Contingency measures have been initiated to ensure gold sales channels, liquidity and supply channels.
Turning to 2021 and the fourth quarter in particular, Kopy Goldfields made many operational achievements and reached a major milestone towards the long-term development plan.
The major milestone in 2021 was the completion of the modernization and extension of the Yubileyniy plant. We completed the construction work and commissioned the updated plant, which almost doubled the processing capacity from 130 to 250 kilo tonnes of ore per year. The expanded facility is already adding to the gold output and is also a vital part of our long-term plan to double gold production to above 100 koz by 2025. In addition, at year-end 2021 the major construction works of the new heap leach plant at Perevalnoe were also completed. This plant is planned to be commissioned in the second quarter 2022.
During the year, the development of the Malyutka mine and plant continued. Malyutka will also be our major investment focus in 2022. The commissioning of this major growth driver, planned for 2023, will be next major milestone in reaching our long-term production target. Currently, equipment procurement and construction at site is ongoing at full speed. We are taking advantage of the winter season using the winter roads to deliver the equipment to the site.
Kopy Goldfields’ gold equivalent production in the fourth quarter 2021 decreased by 8% compared to the same quarter last year, 9.94 koz compared to 10,83 koz. The late additional production from the modernized Yubileyniy plant couldn’t completely make up for the scheduled decline at the Perevalnoe plant due to the depletion of Perevalnoe’s open pit mines in 2021. Full year 2021 GE production amounted to 51.61 koz (53.11 koz).
Fourth quarter revenue decreased by 39% compared to the fourth quarter 2020, due to the lower volume of gold sold. In the fourth quarter 2021 we sold 10.50 koz of gold, compared to sales of 16.87 koz in the fourth quarter 2020. The sales in Q4 2021 were slightly above produced volume, in contrast with last quarter last year, when we sold almost 60% more than we produced. Our average achieved gold price during the quarter amounted to 1,805 USD/oz, 3% lower than Q4 2020. EBITDA decreased compared to the fourth quarter 2020, mostly driven by the lower sales volumes. Kopy’s gold bullions in stock by year-end amounted to 8.21 koz, with a market value of MUSD 14.7. Lower production and sales volumes resulted in decreasing operating costs. Total Cash Cost per GE ounce sold decreased compared to last year and amounted to USD 837 for the fourth quarter 2021, an improvement of 7%. The net result for the quarter and full year were further affected by non-cash adjustments for hedge positions and inventories.
In 2021 we conducted a total of over 45 km of exploratory drilling, essentially within the Krasny deposit. The 2021 exploration program for Krasny will be finalized in spring 2022, and thereafter we target to advance the project into the feasibility stage and production planning. Major efforts were also put on explorations in and around our present producing mines in Khabarovsk region to extend the mine life. We plan to update the reserve and resource estimations for our exploration projects later this year.
Our ambitions on environmental, social and governance issues continue with full focus. Now, more than ever, sustainable and profitable gold production requires acting in harmony with all stakeholders and nature. Kopy Goldfields has joined the UN Global Compact, the world's largest corporate sustainability initiative. Through this, we commit to do business responsibly by aligning our operations with ten principles related to human rights, labor, the environment and anticorruption. Accordingly, we have strengthened our team and I welcome our new ESG manager Dmitry Evdokimov and our Sustainability officer Marina Filippova to the company.
We remain on track towards our long-term target to double production to more than 100 koz by 2025. As a short-time target, our objective is to produce 52-57 koz in 2022. Substantial increases in production are planned to materialize in 2024 and 2025 as Malyutka is launched and Yubileyniy further upgraded. Increased gold production, the strengthened gold price environment and a depreciated Russian Ruble, provides support for improved financial performance, increased margins and further balance sheet strengthening going forward. However, the rapidly changing geo-political environment, the impact of sanctions on our business environment and financial market turbulence provides uncertainty and challenges. We have therefore temporarily paused our ambition to apply for listing on Nasdaq’s main market. In the meantime, we continue, from a stable position in an unstable environment, to operate our mines, produce and sell gold, and execute our development plans, which currently are fully financed.
CEO Kopy Goldfields