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INTERVIEWS |
 Gold mining company Nordgold controlled by Russian businessman Alexei Mordashov may merge with an undervalued mining company in order to increase the amount of outstanding shares in the free-float, Nordgold CEO Nikolai Zelensky said in an interview with TASS.
"Our limited free-float - is a big problem, the liquidity of our shares is very low. I am sure that the time will come and our free-float will be normal - over 25%, thus the liquidity will be good. Currently, the conditions for increasing the free-float are not favorable. Our shares are significantly undervalued and their price does not correspond to the value of business. It is possible that we will hold with an undervalued company, which will increase the free-float", Zelensky said.
He also highlighted that the company plans to keep LSE listing because the listing on several exchanges would be irrational.
Acquisition plans
In 2015, Nordgold may announce plans on the acquisition of new projects with a potential output of at least 100,000 ounces annually. "For big players, interesting assets mean output of at least 100,000 ounces (3.1 tonnes), 150,000 ounces is better", he said.
According to Zelensky, the company has no exact acquisition agreements. "There are a lot of acquisitions this year. But we are in the constant search of projects and watching for development of junior mining companies, as well as holding meetings. In the next year, we may possible acquire anything. We have interesting discussions about the projects which correspond to our criteria", Zelensky said.
Among the criteria, Zelensky also mentioned open-pit development, high gold grade - from 2 grams of gold per tonne, simple ore type for processing, which does not require special technologies, and reasonable stripping ratio.
Speaking about the geography of interesting assets for the company, Zelensky named North and South of America, and Africa. "We see nothing interesting at the moment in Russia. We also do not consider Australia and South Africa, because the industry is already significantly developed without us", he said.
Separately, Zelensky named Canada, where the company had recently acquired one promising project at the early stage of development. "In Canada, we are looking at objects, which are located in jurisdictions not traditional for mining. All the mining industry is currently located in Ontario and Quebec, and it is difficult to find anything new there. The north of Canada is not very explored now, but the logistics is good. For example, the Nunavut province with the Pistol bay project, and the only operating mine in the region owned by Agnico Eagle, which also has one more development project there, and that is all", he added.
Possible diversification
Nordgold may diversify its portfolio only by silver, but is not currently in search of such projects.
"Gold remains a priority direction for Nordgold's development. But, we have 50% in the Prognoz project - it is a large deposit with high silver grades. Silver is close in processing technology to gold, and in correlation on the market. If the economy of the project will be fine, we will implement the project. At the same time, we are not looking actively at new silver projects", Zelensky added.
Zelensky also rejected the idea of diversification into platinum group metals. "Gold and platinum group metals have different markets, as well as extraction technology. Our expertise envisages development and construction of gold mining enterprises, and we are not restricted in geography for the search of new quality gold deposits", he also said.
Capex
Nordgold plans to keep capital spending in the operating projects flat on year at about $120 million in 2015.
"This is due to the fact that we have reached a stable level of sustaining expenditures – about $80 million, as well as about $40 million for capitalized stripping operations", Zelensky said.
He said that the company's budget for 2015, including capital expenditures, is currently in the development stage and will be soon approved at the next board meeting.
Additionally, the company plans to complete feasibility study of the Bouly project in Burkina Faso in April–June 2015. After that the company will need to decide on investment in construction of the open-pit. Investment in the project is estimated at $140 million, while the period of construction will amount to two years.
"Currently, we have about $365 million in cash. It means that we will be able to finance construction of the mine from our own funds. Potentially, we may start construction already in 2015", Zelensky said.
He also said that the company's capital expenditures are planned at $180 million for this year, including about $30 million exploration spending. An extra $11.8 million will be invested in exploration at the Montagne d'Or project in French Guiana.
Hedging
Nordgold is not excluding a possibility of short-term hedging of gold price, but no more that three quarters.
"Gold has rather bad history with hedging. Companies made long-term hedging of gold prices in the periods of record low market prices. After some time gold prices began to grow, while hedging brought losses. Moreover, Russia has its own peculiarities in the tax code. If you hedge gold price and the market price goes up, the tax committee calculates your revenue taking into account the market price despite the fact that you were selling gold at a hedge price", Zelensky said.
From the other hand, short-term hedging of gold price may prove itself if the company has significant investment program. For example, you need to impement a capex program and the gold price looks reasonable, why not to fix it for three quarters ahead?. There are such moments and we are thinking about it, but nothing specific now", he added.
End
28.10.2014 20:15
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