Nordgold — A Low Cost Producer
A commitment to operational excellence,
Key Indices
Outlook
Peer group comparison
How we do it
AISC has dropped from $1,174/oz in 2012 to $793/oz in 2015, and cemented Nordgold position in the lowest quartile of the industry cost curve. Operating Cash Flow (OCF) increased despite the falling gold price as a result of higher sales and lower costs.
Meaningful positive Free Cash Flow (FCF) is generated due to strong OCF and low maintenance capex.
63
238
181
158
2013
2014
158
258
2015
2013
311
329
2014
2015
418
1,376
1,266
1,161
800-850
2016
793
2015
887
2014
1 091
2013
1 174
2012
$
158
m
Free Cash Flow achieved in 2015 while investing in construction of Bouly mine $
793
/oz
One of the lowest All-in Sustaining Costs in 2015 compared to peers
$
418
m
Operating Cash Flow up against backdrop of falling gold price
AISC, $/oz
AISC, $/oz
AISC, $/oz
AISC, $/oz
AISC, $/oz
OCF, $ m
OCF, $ m
OCF, $ m
Gold price, $/oz
Gold price, $/oz
Gold price, $/oz
FCF, $ m
FCF, $ m
FCF, $ m
Capex, $ m
Capex, $ m
Capex, $ m
$ 793 /oz
One of the lowest All-in Sustaining Costs in 2015 compared to peers
$ 418 m
Operating Cash Flow up against backdrop of falling gold price
$ 158 m
Free Cash Flow achieved in 2015 while investing in construction of Bouly mine
329
AISC has dropped from $1,174/oz in 2012 to $793/oz in 2015, and cemented Nordgold position in the lowest quartile of the industry cost curve. Operating Cash Flow (OCF) increased despite the falling gold price as a result of higher sales and lower costs. Meaningful positive Free Cash Flow (FCF) is generated due to strong OCF and low maintenance capex.
63
181
158
238
158
258
2013
2014
2015
2013
2014
2015
311
1 174
1 091
887
793
800-850
418
2013
2012
2014
2015
2016
1,376
1,266
1,161
AISC, $/oz
AISC, $/oz
AISC, $/oz
AISC, $/oz
AISC, $/oz
OCF, $ m
OCF, $ m
OCF, $ m
Gold price, $/oz
Gold price, $/oz
Gold price, $/oz
FCF, $ m
FCF, $ m
FCF, $ m
Capex, $ m
Capex, $ m
Capex, $ m
$ 793 /oz
One of the lowest All-in Sustaining Costs in 2015 compared to peers
$ 418 m
Operating Cash Flow up against backdrop of falling gold price
$ 158 m
Free Cash Flow achieved in 2015 while investing in construction of Bouly mine
329
AISC has dropped from $1,174/oz in 2012 to $793/oz in 2015, and cemented Nordgold position in the lowest quartile of the industry cost curve. Operating Cash Flow (OCF) increased despite the falling gold price as a result of higher sales and lower costs. Meaningful positive Free Cash Flow (FCF) is generated due to strong OCF and low maintenance capex.
63
181
158
238
158
258
2013
2014
2015
2013
2014
2015
311
1 174
1 091
887
793
800-850
418
2013
2012
2014
2015
2016
1,376
1,266
1,161
AISC, $/oz
AISC, $/oz
AISC, $/oz
AISC, $/oz
AISC, $/oz
OCF, $ m
OCF, $ m
OCF, $ m
Gold price, $/oz
Gold price, $/oz
Gold price, $/oz
FCF, $ m
FCF, $ m
FCF, $ m
Capex, $ m
Capex, $ m
Capex, $ m
Nordgold annual production
Assuming flat production from the existing portfolio of mines and 350+ koz from Bouly and Gross at full capacity.
$ 158 m
$ 250 m
950 Koz
1.3 Moz
$ 258 m
$ 380 m
2015
...
...
...
2018 E
2015
2018 E
2015
2018 E
Free Cash flow
Capex
Growing production and a stable cost base, combined with falling capex requirements as construction at our Gross mine completes in 2018, give Nordgold confidence in our ability to further increase free cash flow generation.
Annual sustaining capex requirements will remain below $200 million, while total capex will decline from 2018 following the completion of the Gross mine construction.
$ 158 m
$ 250 m
950 Koz
1.3 Moz
$ 258 m
$ 380 m
2015
...
...
...
2018 E
2015
2018 E
2015
2018 E
Nordgold annual production
Assuming flat production from the existing portfolio of mines and 350+ koz from Bouly and Gross at full capaci - ty.
Free Cash flow
Capex
Growing production and a stable cost base, combined with falling capex require - ments as construction at our Gross mine completes in 2018, give Nordgold conf - dence in our ability to further increase free cash flow generation.
Annual sustaining capex requirements will remain below $200 million, while total capex will decline from 2018 following the completion of the Gross mine construction.
$ 158 m
$ 250 m
950 Koz
1.3 Moz
$ 258 m
$ 380 m
2015
...
...
...
2018 E
2015
2018 E
2015
2018 E
Nordgold annual production
Assuming flat production from the existing portfolio of mines and 350+ koz from Bouly and Gross at full capacity.
Free Cash flow
Capex
Growing production and a stable cost base, combined with falling capex requirements as construction at our Gross mine completes in 2018, give Nordgold confidence in our ability to further increase free cash flow generation.
Annual sustaining capex requirements will remain below $200 million, while total capex will decline from 2018 following the completion of the Gross mine construction.
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
200
400
600
800
1,000
1,200
$/Oz
FY 2015 Global All-in Sustaining Cost Curve
Nordgold
793
In the lowest quartile of the industry cost curve The world's 15th largest gold producer
Global gold production, koz
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
200
400
600
800
1,000
1,200
$/Oz
FY 2015 Global All-in Sustaining Cost Curve
Nordgold
793
In the lowest quartile of the industry cost curve The world's 15th largest gold producer
Global gold production, koz
35,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
200
400
600
800
1,000
1,200
$/Oz
FY 2015 Global All-in Sustaining Cost Curve
Nordgold
793
Global gold production, koz
In the lowest quartile of the industry cost curve The world's 15th largest gold producer
Business System of Nordgold
Business system of Nordgold has been central to our success in becoming a low cost producer. It aims to establish best in class sustainable processes at our operating assets, ensuring they are as efficient, low cost, sustainable and above all, safe as possible.
Key components of BSN:
Platform for best
Operational
Costs
HSE
Workforce development
15 (3 %)
$
240
m
43
%
57
%
Positive impact on EBITDA of BSN since 2012
Proven impact on EBITDA, $ m
2015 BSN Effect on EBITDA by Source
Cost reduction
Productivity improvement
52 (13 %)
64 (13 %)
61 (12 %)
48 (9 %)
2012
2013
2014
2015
2016 E
533
533
512
490
495
400
West Africa
West Africa
West Africa
West Africa
West Africa
Total EBITDA
Total EBITDA
Total EBITDA
Total EBITDA
Total EBITDA
EBITDA effect
EBITDA effect
EBITDA effect
EBITDA effect
EBITDA effect
Underground
Underground
Underground
Underground
Underground
Russian open pits
Russian open pits
Russian open pits
Russian open pits
Russian open pits
15 (3 %)
$
240
m
43
%
57
%
Positive impact on EBITDA of BSN since 2012
Proven impact on EBITDA, $ m
2015 BSN Effect on EBITDA by Source
Cost reduction
Productivity improvement
52 (13 %)
64 (13 %)
61 (12 %)
48 (9 %)
2012
2013
2014
2015
2016 E
533
533
512
490
495
400
West Africa
West Africa
West Africa
West Africa
West Africa
Total EBITDA
Total EBITDA
Total EBITDA
Total EBITDA
Total EBITDA
EBITDA effect
EBITDA effect
EBITDA effect
EBITDA effect
Underground
Underground
Underground
Underground
Underground
Russian open pits
Russian open pits
Russian open pits
Russian open pits
Russian open pits
EBITDA Effect
EBITDA Effect
EBITDA effect
15 (3 %)
$
240
m
43
%
57
%
Positive impact on EBITDA of BSN since 2012
Proven impact on EBITDA, $ m
2015 BSN Effect on EBITDA by Source
Cost reduction
Productivity improvement
52 (13 %)
64 (13 %)
61 (12 %)
48 (9 %)
2012
2013
2014
2015
2016 E
533
533
512
490
495
400
West Africa
West Africa
West Africa
West Africa
West Africa
Total EBITDA
Total EBITDA
Total EBITDA
Total EBITDA
Total EBITDA
EBITDA effect
EBITDA effect
EBITDA effect
EBITDA effect
Underground
Underground
Underground
Underground
Underground
Russian open pits
Russian open pits
Russian open pits
Russian open pits
Russian open pits
EBITDA Effect
EBITDA Effect
EBITDA effect
Key principles / directions:
1
Constantly seeking for mining fleet efficiency improvement, which includes excavators, drill rigs and trucks.
2
Ensuring full operational and management control across the production value chain with best-in-class technology.
3
Making detailed productivity analysis for comparable open pit operations and mining equipment.
4
Identifying opportunities incorporated into a business improvement plan.
Efficiency case studies
Lefa turnaround
Cyanide consumption reduction
Overall equipment
2013
In 2013 Lefa free cash flow was negative and AISC was above $ 1,500/oz. By 2015, Lefa AISC had dropped to $ 832/oz and the mine generated $ 77.9 million in free cash flow.
Thanks to an increased level of monthly production, total cash cost decreased by $ 3.5-4 million monthly at each stage of the value chain (mining, processing, SG&A).
2015
A devoted management team, with the support of BSN, commenced the turnaround programme.
2013
In 2013 Lefa free cash flow was negative and AISC was above $ 1,500/oz. By 2015, Lefa AISC had dropped to $ 832/oz and the mine generat - ed $ 77.9 million in free cash flow.
Thanks to an increased level of monthly production, total cash cost decreased by $ 3.5-4 million monthly at each stage of the value chain (mining, processing, SG&A).
2015
A devoted management team, with the support of BSN, com - menced the turnaround programme.
2013
In 2013 Lefa free cash flow was negative and AISC was above $ 1,500/oz. By 2015, Lefa AISC had dropped to $ 832/oz and the mine generated $ 77.9 million in free cash flow.
Thanks to an increased level of monthly production, total cash cost decreased by $ 3.5-4 million monthly at each stage of the value chain (mining, processing, SG&A).
2015
A devoted management team, with the support of BSN, commenced the turnaround programme.
Key success factors of the turnaround programme:
Headcount reduced from 2,300 to 1,500 employees, as well as overtimes.
Mine planning, grade control improvement at new pits — Firifirini, Kankarta North.
Sustainably lower costs of logistics.
Accurate planning to reduce overstock.
Improvement of overall efficiency of equipment (OEE).
Control over SG&A, including travelling costs.
Lower reagent consumption due to improved control and process automatisation.
Cost dynamics and refined gold production, 2013-2015
2013
2014
2015
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
34.3
66.9
63.1
72.7
58.4
52.1
58.4
46.4
40.1
43.7
47.9
36.6
58.9
55.6
63.1
62.7
41.7
59.8
47.2
58.4
43.3
42.2
46.3
53.7
AISC, $ m
AISC, $ m
AISC, $ m
AISC, $ m
AISC, $ m
AISC, $ m
AISC, $ m
AISC, $ m
AISC, $ m
AISC, $ m
AISC, $ m
AISC, $ m
AISC, $ m
Production, koz
Production, koz
Production, koz
Production, koz
Production, koz
Production, koz
Production, koz
Production, koz
Production, koz
Production, koz
Production, koz
Cost dynamics and refined gold production, 2013-2015
2013
2014
2015
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
34.3
66.9
63.1
72.7
58.4
52.1
58.4
46.4
40.1
43.7
47.9
36.6
58.9
55.6
63.1
62.7
41.7
59.8
47.2
58.4
43.3
42.2
46.3
53.7
AISC, $ m
AISC, $ m
AISC, $ m
AISC, $ m
AISC, $ m
AISC, $ m
AISC, $ m
AISC, $ m
AISC, $ m
AISC, $ m
AISC, $ m
AISC, $ m
Production, koz
Production, koz
Production, koz
Production, koz
Production, koz
Production, koz
Production, koz
Production, koz
Production, koz
Production, koz
Production, koz
Cost dynamics and refined gold production, 2013-2015
2013
2014
2015
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
34.3
66.9
63.1
72.7
58.4
52.1
58.4
46.4
40.1
43.7
47.9
36.6
58.9
55.6
63.1
62.7
41.7
59.8
47.2
58.4
43.3
42.2
46.3
53.7
AISC, $ m
AISC, $ m
AISC, $ m
AISC, $ m
AISC, $ m
AISC, $ m
AISC, $ m
AISC, $ m
AISC, $ m
AISC, $ m
AISC, $ m
AISC, $ m
Production, koz
Production, koz
Production, koz
Production, koz
Production, koz
Production, koz
Production, koz
Production, koz
Production, koz
Production, koz
Production, koz
The Lefa turnaround programme was successful following an in-depth, detailed analysis of all the factors affecting the operational performance of the mine, combined with the resulting implementation of a series of corrective measures put in place by our experienced management team. Nordgold continues to monitor Lefa performance closely and to invest further in its development.
Nordgold installed an automatic cyanide analyser at the plant.
As a result, cyanide con- sumption rate decreased at Berezitovy by 350 tonnes in 2015.
The success of the cyanide consumption project at Berezitovy enabled Nordgold to roll out the technology more widely across its asset portfolio. The same cyanide analysers have now been installed at the Lefa and Taparko plants, which are now demonstrating significant reductions in the levels of cyanide consumption.
2014
2015
Having previously only analysed measurements of cyanide every 2 hours, the analyser now analyses cyanide concentration in leech solutions every two minutes and automatically makes corrections, increasing or decreasing the amount of fresh cyanide being added to the solutions.
-350t
-350t
1,061t
647t
2014
2015
Nordgold installed an automatic cyanide analyser at the plant.
As a result, cyanide con- sumption rate decreased at Berezitovy by 350 tonnes in 2015.
The success of the cyanide consumption project at Berezitovy enabled Nordgold to roll out the technology more widely across its asset portfolio. The same cyanide analysers have now been installed at the Lefa and Taparko plants, which are now demonstrating significant reductions in the levels of
2014
2015
Having previously only analysed measurements of cyanide every 2 hours, the analyser now analyses cyanide concentration in leech solutions every two minutes and automatically makes corrections, increasing or decreasing the amount of fresh cyanide being added to the solutions.
-350t
-350t
1,061t
647t
2014
2015
Nordgold installed an automatic cyanide analyser at the plant.
As a result, cyanide consumption rate decreased at Berezitovy by 350 tonnes in 2015.
The success of the cyanide consumption project at Berezitovy enabled Nordgold to roll out the technology more widely across its asset portfolio. The same cyanide analysers have now been installed at the Lefa and Taparko plants, which are now demonstrating significant reductions in the levels of cyanide consumption.
2014
2015
Having previously only analysed measurements of cyanide every 2 hours, the analyser now analyses cyanide concentration in leech solutions every two minutes and automatically makes corrections, increasing or decreasing the amount of fresh cyanide being added to the solutions.
-350t
-350t
1,061t
647t
2014
2015
Having analysed our studied breakdown of equipment costs, we concluded that the most significant reductions could be made by improvements in the following three performance metrics of loading and hauling units. We work continuously to improve and optimise our performance in these areas: availability ratio of staff and equipment, utilisation of available time, productivity rate.
Examples
Neryungri
Loading time efficiency improvement
Excavators availability and utilisation analysis
More info
Lefa
Hauling time efficiency improvement
Trucks availability and utilisation analysis
More info
Daily maintenance — bucket greasing can take up to 25 mins
Results of a test show that a mechanical worker can do this operation in 15 mins Investigate a possibility to organize a maintenance brigade for excavators during lunch
Permanent control of the start time of the shift by the shift leader is in place, including fueling time Dispatch monitoring system will help to avoid any downtimes
Takes up to 70 mins per shift Different methods of excavator operators to be investigated (during 300 cycles study)
Standard working areas need to be widened to reduce maneuvering time Maneuvering of the vehicle to be planned in advance where necessary
Fueling
Surface preparation
Waiting for maneuvering truck — occurs in 60% of all cases
Area for improvement
Estimated
Solution proposed
+20 mins/shift
+11 mins/shift
+25 mins/shift
+13 mins / shift
Total time Daily maintenance All other repairs Availability Shift Change Lunch Fuelling Surface preparation (waiting) Movement Surface preparation Blasting Waiting for truck Waiting for truck maneuvering Other downtimes Productive time Productive time post-BSN
100
5
%
81
5
0
10
0
2
2
9
2
6
1
44
49
14
Daily maintenance — bucket greasing can take up to 25 mins
Results of a test show that a mechanical worker can do this operation in 15 mins Investigate a possibility to organize a maintenance brigade for excavators during lunch
Permanent control of the start time of the shift by the shift leader is in place, including fueling time Dispatch monitoring system will help to avoid any downtimes
Takes up to 70 mins per shift Different methods of excavator operators to be investigated (during 300 cycles study)
Standard working areas need to be widened to reduce maneuvering time Maneuvering of the vehicle to be planned in advance where necessary
Fueling
Surface preparation
Waiting for maneuvering truck — occurs in 60% of all cases
Area for improvement
Solution proposed
Estimated effect
+20 mins/shift
+11 mins/shift
+25 mins/shift
+13 mins / shift
Total time Daily maintenance All other repairs Availability Shift Change Lunch Fuelling Surface preparation (waiting) Movement Surface preparation Blasting Waiting for truck Waiting for truck maneuvering Other downtimes Productive time Productive time post-BSN
100
5
%
81
5
0
10
0
2
2
9
2
6
1
44
49
14
Daily maintenance — bucket greasing can take up to 25 mins
Results of a test show that a mechanical worker can do this operation in 15 mins Investigate a possibility to organize a maintenance brigade for excavators during lunch
Permanent control of the start time of the shift by the shift leader is in place, including fueling time Dispatch monitoring system will help to avoid any downtimes
Takes up to 70 mins per shift Different methods of excavator operators to be investigated (during 300 cycles study)
Standard working areas need to be widened to reduce maneuvering time Maneuvering of the vehicle to be planned in advance where necessary
Fueling
Surface preparation
Waiting for maneuvering truck — occurs in 60% of all cases
+20 mins/shift
+11 mins/shift
+25 mins/shift
+13 mins / shift
Total time Daily maintenance All other repairs Availability Shift Change Lunch Fuelling Surface preparation (waiting) Movement Surface preparation Blasting Waiting for truck Waiting for truck maneuvering Other downtimes Productive time Productive time post-BSN
100
5
%
81
5
0
10
0
2
2
9
2
6
1
44
49
14
Solution proposed
Area for improvement
Estimated effect
Area for improvement
Estimated
Solution proposed
+6% to availability
Improvement of dispatching quality Opening up working area widths for less spot time Communication of Wenco data to the field
Improvement of communication between maintenance and mining, leading to decrease in standby without operator after maintenance
Improvement control of dumping areas Placing spotters on dumps to dump over the edge
+43 mins to utilisation
+59 mins to utilisation
+23 mins to utilisation
100
1
%
2
4
69
5
1
3
1
2
1
1
3
52
67
24
Total time Unscheduled breakdown Planned capital and major repairs Scheduled downtime Damages Availability Queue at loading unit Wait for loading unit Standby No operator Wait / Queue at dump Fuelling Shift charge Other delays Productive time Productive time post-BSN
Implementation of equipment maintenance strategy Planned capital repairs plan implementation
Wait / Queue at dump
Standby, No operator
Unscheduled breakdown / Maintenance
Queue at loading unit / Wait
Area for improvement
Solution proposed
Estimated effect
Wait / Queue at dump
Standby, No operator
Total time Unscheduled breakdown Planned capital and major repairs Scheduled downtime Damages Availability Queue at loading unit Wait for loading unit Standby No operator Wait / Queue at dump Fuelling Shift charge Other delays Productive time Productive time post-BSN
100
1
%
2
4
69
5
1
3
1
2
1
1
3
52
67
24
Unscheduled breakdown / Maintenance
Queue at loading unit / Wait
Improvement of dispatching quality Opening up working area widths for less spot time Communication of Wenco data to the field
Improvement of communication between maintenance and mining, leading to decrease in standby without operator after maintenance
Improvement control of dumping areas Placing spotters on dumps to dump over the edge
Implementation of equipment maintenance strategy Planned capital repairs plan implementation
+6% to availability
+43 mins to utilisation
+59 mins to utilisation
+23 mins to utilisation
Area for improvement
Solution proposed
Estimated effect
Wait / Queue at dump
Standby, No operator
Total time Unscheduled breakdown Planned capital and major repairs Scheduled downtime Damages Availability Queue at loading unit Wait for loading unit Standby No operator Wait / Queue at dump Fuelling Shift charge Other delays Productive time Productive time post-BSN
100
1
%
2
4
69
5
1
3
1
2
1
1
3
52
67
24
Unscheduled breakdown / Maintenance
Queue at loading unit / Wait
Improvement of dispatching quality Opening up working area widths for less spot time Communication of Wenco data to the field
Improvement of communication between maintenance and mining, leading to decrease in standby without operator after maintenance
Improvement control of dumping areas Placing spotters on dumps to dump over the edge
Implementation of equipment maintenance strategy Planned capital repairs plan implementation
+6% to availability
+43 mins to utilisation
+59 mins to utilisation
+23 mins to utilisation
Platform for best
Operational
Costs
HSE
Workforce development
We run detailed productivity analysis for comparable open pit operations and mining equipment
We continue to identify opportunities and incorporate them into our business improvement plans
