Nord Gold N.V (NORD) - Financial & Operating Results Q3 2012 RNS Number : 3016R Nord Gold N.V. 16 November 2012 Nord Gold N.V. reports financial and operating results for the third quarter and nine months ended September 30, 2012 Amsterdam, Netherlands, November 16, 2012 Nord Gold N.V, ("Nordgold" or the "Company", LSE: NORD), an independent, internationally diversified, pure-play gold producer strategically focused on emerging markets, announces its financial and operating results for the third quarter and ninemonths ended September 30, 2012. Highlights for the quarter Revenues EBITDA US$322.5 million US$131.5 million Up 27% (US$69.1 million) from Q3 2011; up Up 18% (US$20.2 million) from Q3 22% (US$57.9 million) compared to Q2 2011; up 27% (US$28.0 million) 2012. YoY growth in revenues was mainly compared to Q2 2012. YoY EBITDA due to higher volume of gold sales (up was positively impacted by higher 29%), which was marginally offset by production volumes at Lefa, lower realised gold prices (down 2%). Suzdal, Berezitovy and Aprelkovo. EBITDA margin for Q3 2012 was 41%. Gold production Cash flow from operating activities after 194.0 thousand gold ounces interest and income tax paid Q3 2012 gold production of 194.0 thousand US$68.6 million gold equivalent ounces ("Koz"), a 17% increase on Q2 2012 (165.3 Koz) and 9% Up 76% from Q3 2011; up 218% ahead of Q3 2011 (178.4 Koz). Production compared to US$21.6 million in Q2 growth was mainly driven by robust 2012. YoY improvement in cash flow production volumes at Lefa during the wet from operating activities was due season and increased recovery rates at to higher production volumes and Suzdal. reduced cash costs at certain mines. · The Company's cash and cash equivalents at September 30, 2012 were US$102.4 million with net debt at $420.8 million, compared to US$50.5 million cash and cash equivalents at 30 June 2012, giving net debt of $380.4 million. The increase in net debt is largely due to cash used for investing activities, mainly the US$148.7 million payment for construction at Bissa. The work at Bissa is now in its most active phase. The project remains on time and on budget. · In comparison to the previous quarter Q3 2012 total cash costs ("TCC") decreased by 3% from US$863 to US$837 per ounce. The decrease is a result of the volume effect for fixed costs and SG&A together with higher recovery, lower repair and maintenance expenses, discontinuation of use of hired mining equipment at Lefa mine and a positive forex effect during the period. · Net income for Q3 2012 increased by 32% to US$58.0 million compared to the same period last year, on the back of increased production and EBITDA and favourable exchange rate movements. Operating Highlights · Lost time injury frequency rates (LTIFR) for Q3 2012 fell by 21% to 1.96 from 2.48 in Q3 2011. Safety continues to be the absolute priority for the Board and management with the objective of Zero Harm for our employers and contractors. · Q3 gold production of 194.0 thousand gold equivalent ounces ("Koz"), a 17% increase on Q2 2012 (165.3 Koz) and 9% ahead of Q3 2011 (178.4 Koz). · Gold production in Q3 2012 increased at Lefa, Suzdal, Berezitovy and Aprelkovo from Q3 2011, while production fell at Taparko, Buryatzoloto and Neryungri in the same period. · Suzdal has delivered a particularly strong performance due to a return of gold recoveries to a historic high of 69% in Q3 2012, while Berezitovy has continued to perform at record levels. Taparko has achieved an improvement in gold recoveries after the launch of a regrind mill in early Q3 2012. However, at 83% recoveries are still below target levels, and operating settings at the plant are being further optimized. At Buryatzoloto production decreased by 26% relative to Q3 2011 due to a reduction in head grade. · Nordgold continues to make progress resolving operational issues across most of its mines. However we anticipate robust production and have identified clearly visible upside potential for the rest of 2012 and in 2013 at Lefa, Suzdal, Berezitovy and both Russian heap leach operations - Neryungri and Aprelkovo. Head grades at Burytzoloto and recoveries at Taparko remain an uncertainty. Message from the CEO "This has been a strong quarter for Nordgold, positioning us well for the rest of the year and more importantly a positive 2013. We have made considerable progress in dealing with the operational challenges we faced in the early part of the year, while our continued focus on production, costs and working capital has enabled us to achieve improvements in revenue, operating cash flows and net income both quarter on quarter and year on year. We were pleased to launch our offer to the minority shareholders in High River Gold Mines Ltd. in October. This is a significant development for the company which will enable Nordgold to increase the free float and liquidity in the shares of the Company in London. This will benefit all investors, in particular those High River Gold Mines Ltd. investors for whom the offer represents a great opportunity to participate in the long term growth of Nordgold. Nordgold remains a compelling growth story. Our strong emerging markets presence and expansion projects at Gross and Bissa, which are set to achieve first gold in 2013, combined with our exciting exploration portfolio, means we are well positioned to deliver long term shareholder growth." Nikolay Zelenski, Chief Executive Officer, Nordgold Refined gold production by mines ^(1) 9M Change, Q3 2012 Q3 2011 Change, Q2 2012 9M 2012 2011 (Koz) (Koz) YoY (Koz) Change,QoQ (Koz) (Koz) YoY Lefa 40.7 36.9 10% 43.6 (7%) 124.1 146.4 (15%) Taparko 29.4 33.8 (13%) 29.3 0% 91.2 105.1 (13%) Suzdal ^(2) 27.9 10.9 156% 18.7 49% 65.7 52.1 26% Buryatzoloto 24.7 33.6 (26%) 30.2 (18%) 86.6 98.1 (12%) Berezitovy 33.4 25.5 31% 25.5 31% 79.2 77.7 2% Neryungri 23.9 26.2 (9%) 11.3 115% 43.9 50.1 (12%) Aprelkovo 13.9 11.7 19% 6.6 111% 24.3 21.3 14% Nordgold 194.0 178.4 9% 165.3 17% 515.0 550.7 (6%) (1) Including 3.3 thousand gold equivalent ounces of silver production for the 9M 2012 (Q3 2012: 1.2 Koz; Q2 2012: 1.0 Koz; 9M 2011: 5.4 Koz; Q3 2011: 1.6 Koz) (2) Including refined gold from Zherek Safety We deeply regret the tragic death of one of our colleagues at the Aprelkovo mine in October 2012. Safety continues to be the first priority for the Board and the management team. We remain determined to achieve our objective of Zero Harm for all employees and our contractors at all our mine sites. We recognise we operate in a hazardous environment, but our focus on ensuring our employees return home safely at the end of each shift is absolute. We already can see good progress in the safety area across our mines. Q3 2012 LTIFR of 1.96, 21% lower than the corresponding period in 2011. Business System of Nordgold One of the key Nordgold management priorities for 2012 is the implementation of Business System of Nordgold (BSN). BSN will establish best in class sustainable processes at the Company's operating assets ensuring they are as efficient, low cost, sustainable and above all, safe as they can be. We continue to commit significant resources into this program. The first stage of BSN implementation began in Q2 2012 and is being implemented at four of Nordgold's sites - Taparko, Irokinda, Berezitovy and Suzdal. Many new initiatives have already been implemented at these mines, including hot seat change at Taparko, decision trees for CIL operators at Suzdal, efficiency improvement of mechanized drill and blasting operations at Irokinda (one of the Buryatzoloto mines). The financial impact of BSN implementation is a reduction in costs, with the most notable effect during 2012 expected at Lefa where reduction in contractors, labour costs, fuel consumption and administrative expenses should together bring overall costs down. We are looking forward to completing the implementation of the first wave of BSN at these mines in Q4 2012. BSN will continue its efficiency improvement programs into 2013. The target is to have a total cash cost reduction; a significant increase in the productivity of our equipment; increased utilization and availability of mining equipment at all open pits and an improvement in the level of operational management at the processing plants. Exploration & Development Nordgold continued to progress development work at Bissa and Gross during Q3 2012. The Bissa project is on track to deliver first gold in H1 2013 and we now believe that production of gold at Bissa can be started in the earlier part of the announced period. Mining fleet is available on site and started pre-stripping of the pits, while part of the fleet is assisting the tailings storage facility construction. Ball and SAG mills are installed and mechanical alignment is complete. CIL tanks are installed, while piping and other auxiliary mechanical equipment installation and most of electrical work is still to be finished. The pre-feasibility study for Gross was completed by Snowden this summer. Since then, new drilling data has been incorporated into the geological model, helping to enhance the KPIs of the project. The economics of the project appear to be robust and stable. Gold production is expected to commence in Q4 2013. Offer to High River Gold Minority Shareholders On October 19, 2012 Nordgold announced its offer to acquire the outstanding shares of High River Gold Mines Ltd ("High River") not already owned by Nordgold and its affiliates. Nordgold currently owns 630,627,472 High River shares, constituting approximately 75 percent of High River. The offer represents an attractive opportunity for High River shareholders to retain exposure to High River's asset base, whilst also benefiting from the stronger growth profile associated with heritage Nordgold assets, in particular the Lefa mine, and the substantial mineral reserves at the Gross development. Under the terms of the proposed offer, eligible High River shareholders who tender their High River Shares to the Offer (defined below) will have the right to elect to receive either: (i) 0.285 (the "Exchange Ratio") Nordgold global depositary receipts ("GDRs") for each High River share held by them (the "GDR Offer"); or (ii) C$1.40 in cash for each High River share held by them (the "Cash Alternative", together with the GDR Offer the "Offer"). Completion of this transaction will mark an important streamlining of our corporate structure and better position Nordgold as one of the leading emerging market gold producers. It also represents an outstanding opportunity for High River shareholders to share in the long terms growth of Nordgold. Dividends We remain focused on delivering a dividend to our shareholders based on the net profit that Nordgold delivers on an annual basis. According to our dividend policy, we intend to distribute approximately 25% of annual earnings as dividends. Outlook Nordgold now anticipates 2012 full year production at the lower end of our previously announced range of 720 to 770 koz. Financial Results Summary Financial results, Change, Change, Change, US$000 Q3 2012 Q3 2011 YoY Q2 2012 QoQ 9M 2012 9M 2011 YoY Revenue 322,532 253,435 27% 264,664 22% 851,072 796,868 7% EBITDA ^(3) 131,541 111,279 18% 103,504 27% 349,192 379,589 (8%) EBITDA margin, % ^(3) 40.8% 43.9% (3.1pp) 39.1% 1.7pp 41.0% 47.6% (6.6pp) Net income/(loss) 57,962 43,759 32% 5,558 943% 123,214 173,782 (29%) Cash flows from operating activity 68,592 38,999 76% 21,596 218% 70,971 213,320 (67%) Capital expenditures 118,448 91,113 30% 127,826 (7%) 342,779 197,889 73% incl. Exploration 31,273 36,068 (13%) 35,585 (12%) 96,273 76,562 26% Free cash flow ^(4) (43,737) (43,931) 0% (111,740) (61%) (270,145) 20,886 (1393%) Cash and cash equivalents 102,406 184,478 (44%) 50,524 103% 102,406 184,478 (44%) Total debt 523,234 439,500 19% 430,939 21% 523,234 439,500 19% Net debt ^(3) 420,828 255,022 65% 380,415 11% 420,828 225,022 94% TCC ^(3) 161,275 121,446 33% 141,806 14% 426,411 368,962 16% TCC, US$/oz ^(3) 837 687 22% 863 (3%) 833 677 23% (3) EBITDA, EBITDA margin, net debt and TCC are not measures defined by IFRS. See "Non-IFRS Financial Measures". (4) Free cash flow is a non-IFRS measure, used by Nordgold as an indicator of financial strength and performance. Free cash flow is defined as cash flow from operating activities, as reported in accordance with IFRS, less adjustments for cash flows used in investing activities, as reported in accordance with IFRS. Revenue increased from US$796.9 million in the first 9 months of 2011 to US$851.1 million in the same period of 2012. This increase was the result of a higher average sales price, which amounted to US$1,654 per ounce in the first 9 months of 2012. In the same period of 2011, the average sales price was US$1,529 per ounce. Sales volumes in the first 9 months of 2012 were marginally lower compared to the same period in 2011 and amounted to 514.6 Koz and 521.2 Koz respectively. Revenue in Q3 2012 increased to US$322.5 million from US$253.4 million in Q3 2011. This increase was the result of higher sales volumes - 193.2 Koz and 149.4 Koz respectively. The average sales price was lower in Q3 2012 than in Q3 2011 and amounted to US$1,670 per ounce compared to US$1,697 per ounce. In comparison with Q2 2012, revenue in Q3 2012 increased from US$264.7 million to US$322.5 million. This increase was the result of higher sales volumes (193.2 Koz in Q3 2012 in comparison to 165.2 Koz in the previous quarter) together with higher average sales prices (US$1,670 per ounce in Q3 2012 and US$1,602 per ounce in Q2 2012). Cost of sales for the 9 months ended September 30, 2012 was US$562.1 million, US$102.6 million higher than cost of sales in the 9 months ended September 30, 2011, which was US$459.5 million. The increase was a result of lower average recovery levels together with inflation and increased use of main production consumables, such as materials and spares, fuel and energy, services and staff costs. Cost of sales in Q3 2012 was US$220.0 million, US$75.0 million higher than Q3 2011, which was US$145.0 million. The increase was mainly due to higher production levels together with inflation, and lower average recovery levels. Compared to Q2 2012, cost of sales in Q3 2012 increased by US$42.9 million from US$177.1 million. The increase was mainly due to higher production levels together with growth in the consumption rate of fuel and energy at certain mines, together with higher staff costs due to an increase in the number of personnel. This increase was partly offset by lower consumption of materials, spare parts and services but intensified by lower average grades of ore. Total cash costs for the first 9 months of 2012 increased from US$677 per ounce in the first 9 months of 2011 to US$833 per ounce. This increase was due to lower recovery levels partly offset by the higher volumes of ore processed which had a positive effect on reducing fixed costs. Negative factors included inflation and an increased use of main production consumables, such as materials and spares, fuel and energy, services and staff costs. TCC for Q3 2012 increased from US$687 per ounce in Q3 2011 to US$837 per ounce. This increase was due to lower recovery levels, inflation, increased use of consumables and salary indexation. In comparison to the previous quarter Q3 2012 TCC decreased from US$863 to US$837 per ounce. The decrease is a result of the volume effect on fixed costs and SG&A together with a higher recovery in Q3 2012, lower repair and maintenance expenses, discontinuation of use of hired mining equipment on Lefa mine and a positive forex effect. General and administrative expenses increased by US$26.3 million from US$21.7 million in the 9 months ended September 30, 2011 to US$48.0 million in the same period of 2012. The increase was primarily due to income from the reversal of a bad debt allowance in the first half of 2011, increases in staff costs and payroll tax costs. In comparison to Q3 2011, general and administrative expenses remained generally the same in Q3 2012 with a slight increase from US$15.5 million in Q3 2011 to US$16.1 million in Q3 2012 due to higher staff costs and payroll tax costs. General and administrative expenses in Q3 2012 remained broadly at the same level in comparison to the previous quarter and amounted to US$16.1 million compared to US$16.9 million in Q2 2012. EBITDA decreased from US$379.6 million in the first 9 months of 2011 to US$349.2 million in the first 9 months of 2012. This decrease was due to higher production costs, lower sales volume and higher general and administrative costs partly compensated by higher sales prices. EBITDA for Q3 2012 amounted to US$131.5 million and was higher than both Q3 2011 (US$111.3 million) and Q2 2012 (US$103.5 million). The increase was due to higher revenues partly offset by higher costs. Taxes other than income taxes decreased by US$1.6 million from US$56.1 million in the first 9 months of 2011 to US$54.5 million in the first 9 months of 2012. The decrease relates to lower production and sales levels as the major constituent of this item relates to mining tax. Taxes other than income taxes remained at the same level in Q3 2012 as in Q3 2011 and amounted to US$20.8 million in both periods and increased by US$3.4 million in comparison to Q2 2012 from US$17.3 million. The deviations are explained by the levels of production and sales in corresponding periods. Other net operating income/(expenses) increased by US$14.6 million from expenses of US$8.5 million in the 9 months ended September 30, 2011 to income of US$6.1 million in the 9 months ended September 30, 2012. This increase in net operating income resulted from more significant amounts of impairment of available for sale financial assets and loss from inventory write-off in the first 9 months of 2011 than in the first 9 months of 2012, as well as increased income from the reversal of provisions and contingencies in 2012. Mostly the same factors resulted in the increase of other net operating income/(expenses) in Q3 2012 in comparison to Q3 2011 from an expense of US$0.9 million to income of US$4.7 million, except for the gain from inventory write-off in Q3 2011. Other net operating income/(expenses) in Q3 2012 remained broadly the same compared to Q2 2011 and amounted to US$4.7 million and US$4.1 million respectively. Finance income in the first 9 months of 2012 decreased by US$6.9 million from US$10.1 million in the first 9 months of 2011 to US$3.1 million in the first 9 months of 2012. The decrease was due to a foreign exchange gain of US$5.0 million in the first 9 months of 2011 and a loss of US$7.2 million in the first 9 months of 2012. This factor also influenced the change in finance cost, but the main reason for finance cost deviation was the US$15.7 million of equity transaction costs in the first 9 months of 2011. Interest expenses decreased from US$24.6 million in the first 9 months of 2011 to US$22.0 million in the first 9 months of 2012. The foreign exchange result also led to the increase in finance income in Q3 2012 compared to the previous quarter and amounted to a US$10.5 million gain in Q3 2012 and a US$35.0 million loss in Q2 2012. Interest expense increased in Q3 2012 from US$6.6 million in Q2 2012 to US$8.4 million in Q3 2012. Nordgold's primary source of liquidity is cash flows from operating activities. Nordgold's cash flows from operations decreased by US$142.3 million from US$213.3 million in the first 9 months of 2011 to US$71.0million in the same period in 2012. The decrease was principally due to the lower profit for the period, more significant changes in working capital and interest paid in nine months 2012. Cash flows from operating activities in Q3 2012 were higher than both in Q3 2011 and Q2 2012 and amounted to US$68.6 million, US$39.0 million and US$21.6 million respectively. The increase was a result of higher cash flows from operations and the lower amount of tax paid in Q3 2012 in comparison to Q3 2011 and Q2 2012. The principal uses of liquidity were investments in exploration and evaluation activity, acquisition of property, plant and equipment and business combinations. Cash flows used in investing activities in the 9 month period were US$341.1 million, US$148.7 million higher than in the same period of 2011. The amount of cash flows used in investing activity increased due to more significant levels of exploration activity and acquisition of property, plant and equipment. In Q3 2012 cash flows used in investing activities were US$112.3 million, which was US$29.4 million higher than Q3 2011 and US$21.0 million lower than Q2 2012. Cash flows from financing activities for the first 9 months of 2012 were US$148.4 million which was US$186.6 million higher than cash flows uses in financing activities in the first 9 months of 2011. The deviation is explained by cash flows for acquisitions on non-controlling interests used in the nine months 2011 together with net inflow from debt finance received in the nine months 2012. Cash flows from financing activities in Q3 2012 were US$91.0 million; this was higher than both Q3 2011 and Q2 2012, which were US$(51.5) million and US$3.5 million respectively. The reasons for the improvement were the acquisition of non-controlling interests in Q3 2011 and additional net inflow from debt finance in Q3 2012. Principal Risks The Group has a well-established system of internal control and risk management, designed to safeguard our assets and reputation. The Board has overall responsibility for our internal controls and for reviewing their effectiveness, and has delegated their implementation to our senior management. The Group faces a number of risks that are typical of our industry, as well as those relating to our operations and the markets in which we operate. In the 2011 Annual Report, the Group has described certain risk categories that could have a material adverse effect on its operations and financial position. In the Group's view, the nature and potential impact of these risk categories on the business are not materially different for the first half of 2012. It is not anticipated that the nature of the principal risks and uncertainties that affect the Group will change in the second half of the current financial year. Operating Results Summary Operating Change, Change, Change, results Q3 2012 Q3 2011 YoY Q2 2012 QoQ 9M 2012 9M 2011 YoY LTIFR 1.96 2.48 (21%) 1.03 90% 1.60 2.05 (22%) Run of mine, kt ^(5) 19,349 16,158 20% 18,487 5% 57,634 51,640 12% Waste mined, kt ^(5) 15,709 12,354 27% 14,437 9% 46,648 39,748 17% Ore mined, kt 3,913 3,745 4% 4,331 (10%) 11,843 11,689 1% Stripping ratio, tn/tn ^(5) 4.01 3.30 22% 3.33 20% 3.94 3.40 16% Ore milled, kt 4,656 4,588 1% 3,979 17% 11,238 12,071 (7%) Grade, g/t 1.70 1.65 3% 1.83 (7%) 1.86 1.84 1% Recovery, % 77.9% 79.4% (1.5pp) 76.2% 1.7pp 78.2% 81.3% (3.1pp) Gold production, Koz 194.0 178.4 9% 165.3 17% 515.0 550.7 (6%) Gold sold, Koz 193.2 149.4 29% 165.2 17% 514.6 521.2 (1%) Average realised gold price per ounce sold, US$/oz 1,670 1,697 (2%) 1,602 4% 1,654 1,529 8% Ore processed multiplied by head grade and multiplied by recovery may not be equal to gold produced due to differences in work in progress figures and volumes of silver production (5) Presented only for open pit mines. In the nine months ended September 30, 2012 the Company produced 11,843 kt of mined ore, a 1% increase from 11,689 kt in the first nine months of 2011. Ore milled in the nine months ended September 30, 2012 decreased to 11,238 kt from 12,071 kt in the nine months ended September 30, 2011. Gold production was 35.7 Koz lower than in the first nine months of 2011 and amounted to 515.0 Koz (nine months ended September 30, 2011: 550.7 Koz). The decrease was largely as a result of lower ore milled volumes and recovery levels at certain mines. The volume of gold sold decreased from 521.2 Koz in the nine months ended September, 30 2011 to 514.6 Koz in the same period of 2012. We provide a more detailed explanation in the mine site summary below in the next section. Operating Review Summary Guinea Lefa Overview Lefa mine has demonstrated improvements in a number of production KPIs. Availability and productivity of mining and processing equipment has improved significantly YoY which translated into higher production volumes in Q3 2012. Importantly, the heavy wet season that peaks in Q3 has had a minimal impact on Lefa productivity this year due to preparatory measures taken by the mine management. Head grade in Q3 2012 was 13% lower compared to a year ago, and 12% lower compared to the previous quarter. The geological model indicates that ore grade will start improving in December and better grades will continue in 2013. Gold recovery at Lefa, while better than in Q1 2012 and in line with Q2 2012, is still below target levels. To address this we are in the process of implementing a series of technical improvements: upgrading Carbon in Pulp ("CIP") tanks into Carbon in Leach ("CIL") tanks, and erecting new screening systems, and additional elution columns to improve the recovery rate. These improvements are expected to be completed by the end of 2012. Production costs remained high during Q3 2012; as head grade and recoveries improve going forward, and the efficiency program starts to deliver its initial results, we expect cash costs to fall significantly. Q3 Q3 Change, Q2 Change, Change, Operating results 2012 2011 YoY 2012 QoQ 9M 2012 9M 2011 YoY LTIFR 0.82 0.00 n.a. 0.91 (10%) 0.88 0.95 (7%) Run of mine, kt 5,838 3,783 54% 6,405 (9%) 19,386 14,812 31% Waste mined, kt 4,686 2,581 82% 4,576 2% 14,545 9,776 49% Ore mined, kt 1,152 1,201 (4%) 1,829 (37%) 4,841 5,036 (4%) Stripping ratio, 4.07 2.15 89% 2.50 63% 3.00 1.94 55% tn/tn Ore milled, kt 1,582 1,441 10% 1,466 8% 4,424 4,464 (1%) Grade, g/t 0.99 1.14 (13%) 1.13 (12%) 1.08 1.20 (10%) Recovery, % 83.3% 85.3% (2.0pp) 83.6% (0.3pp) 83.3% 86.4% (3.1pp) Gold production, 40.7 36.9 10% 43.6 (7%) 124.1 146.4 (15%) Koz Gold sold, Koz 40.7 36.9 10% 43.6 (7%) 124.1 146.4 (15%) Average realised 1,654 1,716 (4%) 1,616 2% 1,653 1,518 9% gold price per ounce sold, US$/oz Q3 Q3 Change, Q2 Change, Change, Financial results 2012 2011 YoY 2012 QoQ 9M 2012 9M 2011 YoY Revenue, US$m 67.3 63.3 6% 70.4 (4%) 205.0 222.3 (8%) EBITDA, US$m ^(6) 17.1 17.0 1% 14.7 16% 48.4 83.6 (42%) EBITDA margin, % 25.4% 26.8% (1.4pp) 20.8% 4.6pp 23.6% 37.6% (14.0pp) ^(6) TCC, US$/oz ^(6) 1,269 1,027 24% 1,202 6% 1,180 838 41% Ore processed multiplied by head grade and multiplied by recovery may not be equal gold produced due to differences in work in progress figures and volumes of silver production. (6) EBITDA, EBITDA margin and TCC are not measures defined by IFRS. See "Non-IFRS Financial Measures". Operating Review Summary continued Burkina Faso Taparko Overview Taparko mine YoY production dropped 13%. Since the beginning of 2012, Taparko has experienced a drop in recoveries to levels below 80%. To address this problem, a regrind mill and two leach tanks were installed at the mine in early August 2012. During the installation, plant productivity was reduced, resulting in lower ore processing volumes. Since the installation of the regrind mill, recoveries at Taparko have started to improve, reaching 83% in Q3 2012. This is however still below our target of 85-90% and mine management continues to optimize milling parameters. Q3 Change, Q2 Change, 9M 9M Change, Operating results Q3 2012 2011 YoY 2012 QoQ 2012 2011 YoY LTIFR 0.00 0.00 n.a. 0.00 n.a. 0.00 2.13 n.a. Run of mine, kt 3,100 3,378 (8%) 2,715 14% 8,789 8,737 1% Waste mined, kt 2,669 2,962 (10%) 2,314 15% 7,595 7,643 (1%) Ore mined, kt 431 416 4% 401 7% 1,194 1,093 9% Stripping ratio, tn/tn 6.19 7.12 (13%) 5.77 7% 6.36 6.99 (9%) Ore milled, kt 406 364 12% 361 12% 1,171 1,096 7% Grade, g/t 2.80 2.89 (3%) 3.19 (12%) 3.00 3.33 (10%) Recovery, % 82.8% 83.9% (1.1pp) 79.0% 3.8pp 82.2% 84.8% (2.6pp) Gold production, Koz 29.4 33.8 (13%) 29.3 0% 91.2 105.1 -(13%) Gold sold, Koz 29.4 33.8 (13%) 29.3 0% 91.2 105.1 -(13%) Average realised gold price per ounce sold, US$/oz 1,688 1,689 0% 1,597 6% 1,653 1,525 8% Q3 Change, Q2 Change, 9M 9M Change, Financial results Q3 2012 2011 YoY 2012 QoQ 2012 2011 YoY Revenue, US$m 49.6 57.1 (13%) 46.8 6% 150.7 160.3 (6%) EBITDA, US$m ^(7) 26.4 38.5 (31%) 28.1 (6%) 89.2 107.9 (17%) EBITDA margin, % ^(7) 53.3% 67.3% (14.0pp) 60.1% (6.8pp) 59.2% 67.3% (8.1pp) TCC, US$/oz ^(7) 720 516 40% 599 20% 625 458 36% Ore processed multiplied by head grade and multiplied by recovery may not be equal gold produced due to differences in work in progress figures and volumes of silver production. (7) EBITDA, EBITDA margin and TCC are not measures defined by IFRS. See "Non-IFRS Financial Measures". Operating Review Summary continued Russia Buryatzoloto Overview While ore milled volumes and recovery remained stable at both Buryatzoloto underground mines, head grade reduced significantly (-32% YoY; -20% QoQ) due to lower than expected geological ore grade and higher dilution. As previously announced, we have intensified preparation works in order to gain access to new ore blocks. Also, we are currently working on a new geological model for the Buryatzoloto mines, which should provide better visibility on the shapes of the ore bodies and their grade distribution. Due to the complexity of Buryatzoloto's geology, the new model will only be applied to mine planning towards the end of H1 2013. Until then, grade will remain a source of uncertainty for Buryatzoloto production. Q3 Q3 Change, Q2 Change, 9M 9M Change, Operating results 2012 2011 YoY 2012 QoQ 2012 2011 YoY LTIFR 3.37 6.37 (47%) 2.11 60% 3.20 3.38 (5%) Ore mined, kt 172 162 6% 178 (3%) 519 487 7% Ore milled, kt 178 177 1% 173 3% 522 506 3% Grade, g/t 4.49 6.59 (32%) 5.58 (20%) 5.29 6.62 (20%) Recovery, % 92.8% 92.3% 0.5pp 92.2% 0.6pp 93.2% 91.8% 1.4pp Gold production, Koz 24.7 33.6 (26%) 30.2 (18%) 86.6 98.1 (12%) Gold sold, Koz 24.7 21.5 15% 30.2 (18%) 86.6 85.7 1% Average realised gold price per ounce sold, US$/oz 1,661 1,691 (2%) 1,623 2% 1,652 1,526 8% Q3 Q3 Change, Q2 Change, 9M 9M Change, Financial results 2012 2011 YoY 2012 QoQ 2012 2011 YoY Revenue, US$m 41.1 36.3 13% 49.1 (16%) 143.0 130.8 9% EBITDA, US$m ^(8) 16.7 19.2 (13%) 23.7 (29%) 68.5 80.3 (15%) EBITDA margin, % ^(8) 40.7% 52.8% (12.1pp) 48.3% (7.6pp) 47.9% 61.4% (13.5pp) TCC, US$/oz ^(8) 783 692 13% 724 8% 761 707 8% Ore processed multiplied by head grade and multiplied by recovery may not be equal to gold produced due to differences in work in progress figures and volumes of silver production. (8) EBITDA, EBITDA margin and TCC are not measures defined by IFRS. See "Non-IFRS Financial Measures". Operating Review Summary continued Russia Berezitovy Overview Productivity (ore milled) increased by 20% YoY with record quarterly production volumes of 33.4 Koz compared to 25.5 Koz for Q3 2011 (31% increase YoY). With the second crusher and new pinion successfully installed halfway through Q2 2012, we expect strong production performance at the mine going forward. The new heap leach operation on site is on track to start gold production in Q4 2012. Q3 Q3 Change, Q2 Change, Change, Operating results 2012 2011 YoY 2012 QoQ 9M 2012 9M 2011 YoY LTIFR 0.00 1.97 n.a. 1.80 n.a. 1.20 0.67 79% Run of mine, kt 3,852 4,829 (20%) 4,233 (9%) 12,443 13,735 (9%) Waste mined, kt 3,403 4,462 (24%) 3,771 (10%) 11,090 12,466 (11%) Ore mined, kt 449 367 22% 462 (3%) 1,353 1,269 7% Stripping ratio, tn/tn 7.57 12.16 (38%) 8.16 (7%) 8.19 9.82 (17%) Ore milled, kt 439 366 20% 333 32% 1,016 1,058 (4%) Grade, g/t 2.65 2.54 4% 2.67 (1%) 2.70 2.59 4% Recovery, % 89.8% 91.0% (1.2pp) 89.8% 0.0pp 90.0% 89.5% 0.5pp Gold production, Koz 33.4 25.5 31% 25.5 31% 79.2 77.7 2% Gold sold, Koz 33.4 15.4 117% 25.5 31% 79.3 67.6 17% Average realised gold price per ounce sold, US$/oz 1,671 1,620 3% 1,588 5% 1,648 1,505 10% Q3 Q3 Change, Q2 Change, Change, Financial results 2012 2011 YoY 2012 QoQ 9M 2012 9M 2011 YoY Revenue, US$m 55.8 24.9 124% 40.5 38% 130.7 101.7 29% EBITDA, US$m ^(9) 34.0 11.3 201% 22.1 54% 75.2 52.0 45% EBITDA margin, % 60.9% 45.5% ^(9) 15.4pp 54.6% 6.3pp 57.5% 51.1% 6.4pp TCC, US$/oz ^(9) 595 619 (4%) 675 (12%) 641 590 9% Ore processed multiplied by head grade and multiplied by recovery may not be equal gold produced due to differences in work in progress figures and volumes of silver production. (9) EBITDA, EBITDA margin and TCC are not measures defined by IFRS. See "Non-IFRS Financial Measures". Operating Review Summary continued Russia Neryungri Overview As usual with Russian heap leach operations, the mine began to produce increasing amounts of gold in Q2 and Q3 2012 in warmer weather. Four new dump trucks, an excavator and a mobile crusher arrived in May, and as anticipated, we achieved higher mining volumes and productivity at the Neryungri mine in H2 2012, with a lower stripping ratio. Change, Q2 Change, 9M 9M Change, Operating results Q3 2012 Q3 2011 YoY 2012 QoQ 2012 2011 YoY LTIFR 0.00 2.19 n.a. 0.00 n.a. 0.00 2.91 n.a. Run of mine, kt 2,933 2,027 45% 2,761 6% 8,662 6,465 34% Waste mined, kt 2,187 1,322 65% 2,228 (2%) 7,201 4,417 63% Ore mined, kt 746 704 6% 533 40% 1,461 2,048 (29%) Stripping ratio, tn/tn 2.93 1.88 56% 4.18 (30%) 4.93 2.16 129% Ore milled, kt 1,091 1,014 8% 687 59% 1,992 2,153 (7%) Grade, g/t 1.03 1.10 (6%) 0.94 10% 1.00 1.12 (11%) Recovery, % ^(10) 75.0% 75.2% (0.2pp) 75.0% 0.0pp 75.0% 75.0% 0.0pp Gold production, Koz 23.9 26.2 (9%) 11.3 112% 43.9 50.1 (12%) Gold sold, Koz 23.2 21.1 10% 11.2 106% 43.5 44.8 (3%) Average realised gold price per ounce sold, US$/oz 1,673 1,686 (1%) 1,574 6% 1,653 1,583 4% Change, Q2 Change, 9M 9M Change, Financial results Q3 2012 Q3 2011 YoY 2012 QoQ 2012 2011 YoY Revenue, US$m 38.8 35.6 9% 17.7 119% 71.8 71.0 1% EBITDA, US$m ^(11) 18.2 18.3 0% 7.4 145% 33.2 29.2 14% EBITDA margin, % ^(11) 46.9% 51.3% (4.4pp) 42.1% 4.8pp 46.2% 41.1% 5.1pp TCC, US$/oz ^(11) 730 557 31% 843 (13%) 772 582 33% Ore processed multiplied by head grade and multiplied by recovery may not be equal gold produced due to differences in work in progress figures and volumes of silver production. (10) Technical recovery rate. Actual recovery may differ due to seasonal effects. (11) EBITDA, EBITDA margin and TCC are not measures defined by IFRS. See "Non-IFRS Financial Measures". Operating Review Summary continued Russia Aprelkovo Overview We continue to mine ore from the pit and substantially reduce volumes that we used from the Run of Mine ("ROM") stockpile. We expect that the processing of higher grade ores will balance the reduced recoveries of transitional and sulfide ores. We expect this to lead to flat production for the full year 2012. Q3 Q3 Change, Q2 Change, 9M 9M Change, Operating results 2012 2011 YoY 2012 QoQ 2012 2011 YoY LTIFR 7.02 0.00 n.a. 0.00 n.a. 2.72 0.00 n.a. Run of mine, kt 2,892 2,143 35% 1,856 56% 7,056 7,029 0% Waste mined, kt 2,135 1,460 46% 1,123 90% 5,126 5,816 (12%) Ore mined, kt 758 683 11% 733 3% 1,930 1,213 59% Stripping ratio, tn/tn 2.82 2.14 32% 1.53 84% 2.66 4.79 (45%) Ore milled, kt 520 976 (47%) 739 (30%) 1,329 2,181 (39%) Grade, g/t 1.43 0.73 96% 1.32 8% 1.35 0.78 73% Recovery, % ^(12) 47.7% 60.1% (12.4pp) 47.7% 0.0pp 47.7% 60.0% (12.3pp) Gold production, Koz 13.9 11.7 19% 6.6 111% 24.3 21.3 14% Gold sold, Koz 13.9 9.8 42% 6.6 110% 24.3 19.5 25% Average realised gold price per ounce sold, US$/oz 1,690 1,666 1% 1,575 7% 1,660 1,578 5% Q3 Q3 Change, Q2 Change, 9M 9M Change, Financial results 2012 2011 YoY 2012 QoQ 2012 2011 YoY Revenue, US$m 23.4 16.4 43% 10.4 125% 40.3 30.8 31% EBITDA, US$m ^(13) 9.4 7.4 27% 3.6 161% 15.4 12.4 24% EBITDA margin, % ^(13) 40.0% 45.4% (5.4pp) 34.4% 5.6pp 38.2% 40.1% (1.9pp) TCC, US$/oz ^(13) 884 667 33% 865 2% 876 650 35% Ore processed multiplied by head grade and multiplied by recovery may not be equal gold produced due to differences in work in progress figures and volumes of silver production. (12) Technical recovery rate. Actual recovery may differ due to seasonal effects. (13) EBITDA, EBITDA margin and TCC are not measures defined by IFRS. See "Non-IFRS Financial Measures". Operating Review Summary continued Kazakhstan Suzdal Overview Production at Suzdal substantially increased in Q3 2012 due to an increase in head grade and recovery. The recovery rate has grown by over 10 percentage points as a result of a series of measures implemented at the metallurgical plant, including optimization of floatation, CIL configuration, and parameters of bio-leaching. The current recovery level of 69% is at a historic high for Suzdal. Nevertheless, management sees potential for further improvement and will continue to optimize plant metallurgy in order to achieve recoveries in excess of 70%. We also expect to benefit from the significantly increased ore milled levels (137 kt in Q3 2012, an increase of 14% YoY) and head grade improvements (7.72 g/t in Q3 2012, an increase of 23% YoY). Q3 Q3 Change, Q2 Change, 9M 9M Change, Operating results 2012 2011 YoY 2012 QoQ 2012 2011 YoY LTIFR 2.27 0.00 n.a. 0.00 n.a. 0.78 1.65 (53%) Ore mined^(16), kt 102 120 (15%) 103 (1%) 340 331 3% Ore milled^(16), kt 137 120 14% 108 27% 369 378 (2%) Grade^(16), g/t 7.72 6.30 23% 7.52 3% 7.52 6.80 11% Recovery^(16), % 69.0% 58.2% 10.8pp 65.0% 4.0pp 65.0% 62.2% 2.8pp Gold production, Koz ^(14) 27.9 10.9 156% 18.7 49% 65.7 52.1 26% Gold sold, Koz ^(14) 27.9 10.9 156% 18.7 49% 65.7 52.1 26% Average realised gold price per ounce sold, US$/oz ^(14) 1,667 1,821 (8%) 1,593 5% 1,666 1,535 9% Q3 Q3 Change, Q2 Change, 9M 9M Change, Financial results 2012 2011 YoY 2012 QoQ 2012 2011 YoY Revenue, US$m 46.6 19.8 136% 29.8 56% 109.5 79.9 37% EBITDA, US$m ^(15) 16.3 6.1 167% 9.0 83% 37.5 30.4 23% EBITDA margin, % ^(15) 35.0% 30.9% (4.1pp) 30.3% 4.7pp 34.2% 38.1% (3.9pp) TCC, US$/oz ^(14)(15) 715 859 (17%) 884 (19%) 784 777 1% Ore processed multiplied by head grade and multiplied by recovery may not be equal gold produced due to differences in work in progress figures and volumes of silver production. (14) Represents figures for Celtic Group, includes gold from Zherek.TCC does not include Zherek (15) EBITDA, EBITDA margin and TCC are not measures defined by IFRS. See "Non-IFRS Financial Measures". EBITDA and EBITDA margin include Balazhal figures (16) Represents figures for Alel Telephone Conference and Q&A Session Nordgold CEO Nikolay Zelenski and CFO Sergey Zinkovich will present the Company's financial and operating results for the third quarter and nine months ended September 30, 2012 in a conference call today at 9.00 am London time. The presentation will be followed by a Q&A session. To participate in the telephone conference, please register in advance. Registration Details Conference Title: Nordgold Presentation of 9m 2012 Financial Results Conference ID: 4576455 Please use one of the following dial-in numbers to connect to the conference: Russia 810-8002-198-4011 United Kingdom 44-20-7190-1595 (Local access) 0800-358-5263 (Toll free) Webcast The press and analyst conference will also be broadcast live over the Internet, and will be available as a recording on the Company's website after the conference. To register and participate in the webcast please follow the link: http://www.audio-webcast.com/cgi-bin/visitors.ssp?fn=visitor&id=1881 Materials The Company's financial and operating results for the third quarter and nine months ended September 30, 2012 and the presentation materials will be available from 7:00 am London time on November 16, 2012 on the Company's official website: www.nordgold.comand will be available at www.sedar.com. Non-IFRS Financial Measures This press release includes certain measures that are not measures defined by IFRS. These measures are EBITDA and EBITDA margin, total cash costs and net debt, and they are used by the management of Nordgold to assess the Company's financial performance. However, these measures should not be used instead of or considered as alternatives to Nordgold's historical financial results based on IFRS. There are no generally accepted principles governing the calculation of these measures and the criteria upon which these measures are based can vary from company to company. EBITDA and EBITDA Margin EBITDA results from operating activities adjusted for income tax expense, finance income and costs, depreciation and amortisation charges, impairment / (reversal of impairment) of non-current assets, negative goodwill, the net result from the disposal of property, plant and equipment, equity remeasurement loss / (gain), social expenses and charity donations, and net gain on disposal of subsidiaries. Nordgold uses EBITDA in the reporting of its segments and in assessing its growth and operational efficiencies. The EBITDA margin is EBITDA as a percentage of sales. Information regarding EBITDA and the EBITDA margin or similar measures is sometimes used by investors to evaluate the efficiency of a company's operations and its ability to employ its earnings toward repayment of debt, capital expenditures and working capital requirements. EBITDA, by itself, does not provide a sufficient basis to compare Nordgold's performance with that of other companies and should not be considered in isolation or as a substitute for operating profit or any other measure as an indicator of operating performance, or as an alternative to cash generated from operating activities as a measure of liquidity. Total Cash Cost Total cash costs measure what Nordgold considers to be the cash costs most relevant to its principal operations. Total cash cost is calculated by subtracting non-cash, central corporate and ancillary or exceptional operational costs (including depreciation and amortisation, provision for asset retirement obligations, allowance for slow-moving and obsolete inventories, fair value adjustments for work-in-progress and finished goods, corporate overheads, allowance for bad debts, unused employee vacation time and employee bonuses, change in finished goods and revenue of by-products) from cost of sales, general and administrative expenses and taxes other than income tax. Net Debt In order to assess Nordgold's liquidity position, management uses a measure of net cash or debt, which is the sum of short- and long-term debt finance, which are divided between debt and lease liabilities, less cash and cash equivalents. Short-term and long-term debt include loans and other credit facilities, accrued interest and bank overdrafts. Enquiries Nordgold Alexey Shchedrin Tel: +7 (917) 502 2048 Director of Corporate Communications & Investor Relations Diana Asonova Tel: +7 (916) 347 9847 Press Secretary Maitland Peter Ogden Tel: +44 (0)20 7379 5151 James Devas For further information on Nordgold please visit the Company's website - www.nordgold.com Notes to Editors About Nordgold Nordgold (LSE: NORD) is a pure-play emerging-markets gold producer established in 2007. The Company has expanded rapidly through acquisitions and organic investment, achieving a rate of growth unmatched in the industry during that period. In 2011 Nordgold's gold production reached 754 Koz. The Company's proved and probable gold reserves as of January 1, 2012 totalled 12.7 Moz, while measured, indicated and inferred resources were estimated at 29.5 Moz. The company operates 8 active mines and has 2 development projects, 5 advanced exploration projects and a diverse portfolio of early exploration projects and licenses in Russia, Kazakhstan, Burkina Faso and Guinea. Nordgold employs about 10,000 workers in CIS and West Africa. Cautionary Note Regarding Forward-Looking Statements Certain information contained in this press release, including any information as to Nordgolds estimates, strategy, projects, plans, prospects, future outlook, anticipated events or results or future financial or operating performance and production, may constitute "forward-looking information" within the meaning of Canadian securities laws. All statements, other than statements of historical fact, constitute forward-looking information. Forward-looking information can often, but not always, be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", "predicts", "potential", "continue" or "believes", or variations (including negative variations) of such words, or statements that certain actions, events or results "may", "could", "would", "should", "might", "potential to", or "will" be taken, occur or be achieved or other similar expressions concerning matters that are not historical facts. The purpose of forward-looking information is to provide the reader with information about management's expectations and plans. Readers are cautioned that forward-looking statements are not guarantees of future performance. All forward-looking statements made or incorporated in this press release are qualified by these cautionary statements. Forward-looking information involves significant risks, assumptions, uncertainties and other factors that may cause actual future realities or anticipated events to differ materially from those expressed or implied in any forward-looking information and, accordingly, should not be read as guarantees of future performance or realities. Material factors or assumptions that were applied in formulating the forward-looking information contained herein include the assumption that the business and economic conditions affecting Nordgold's operations will continue substantially in their current state, including, without limitation, with respect to industry conditions, general levels of economic activity, market prices for gold, competition for and scarcity of gold mine assets, achievement of anticipated mineral reserve and mineral resource tonnages or grades, ability to develop additional mineral reserves, acquisition of funding for capital expenditures, adequacy and availability of production, processing and product delivery infrastructure, electricity costs, continuity and availability of personnel and third party service providers, local and international laws and regulations, foreign currency exchange rates and interest rates, inflation, taxes, and that there will be no unplanned material changes to Nordgold's facilities, equipment, customer and employee relations and credit arrangements. Nordgold cautions that the foregoing list of material factors and assumptions is not exhaustive. Many of these assumptions are based on factors and events that are not within the control of Nordgold and there is no assurance that they will prove correct. The risks and other factors that may cause actual future realities or anticipated events to differ materially from those expressed or implied in any forward-looking information include, but are not limited to the satisfaction or waiver of the conditions to completing the Offer; Nordgold's ability to execute its development and exploration programs; the financial and operational performance of Nordgold; civil disturbance, armed conflict or security issues at the mineral projects of Nordgold; political factors; the capital requirements associated with operations; dependence on key personnel; compliance with environmental regulations; estimated production; and competition. Actual performance or achievement could differ materially from that expressed in, or implied by, any forward-looking information in this press release and, accordingly, investors should not place undue reliance on any such forward-looking information. Further, any forward-looking information speaks only as of the date on which such statement is made, and Nordgold does not undertake any obligation to update any forward-looking information to reflect information, events, results, circumstances or realities after the date on which such statement is made or to reflect the occurrence of unanticipated events, except as required by applicable Canadian securities laws. All forward-looking information contained in this press release is qualified by such cautionary statements. New risk factors emerge from time to time, and it is not possible for management to predict all of such risk factors and to assess in advance the impact of each such factor on Nordgold's business or the extent to which any factor, or combination of factors, may cause actual realities to differ materially from those contained in any forward-looking information. Nord Gold N.V. Consolidated interim condensed financial statements as at and for the nine months ended September 30, 2012 Contents Consolidated interim condensed income statements 1 Consolidated interim condensed statements of comprehensive income 2 Consolidated interim condensed statements of financial position 3 Consolidated interim condensed statements of cash flows 4 Consolidated interim condensed statements of changes in equity 5 Notes to the consolidated interim condensed financial statements 6-17 1. Operations 6 2. Basis for preparation of the consolidated interim condensed financial statements 6 3. Segment reporting 8 4. Sales 10 5. General and administrative expenses 11 6. Other operating expenses, net 11 7. Finance income and costs 12 8. Related party transactions 13 9. Related party balances 13 10. Debt finance 14 11. Earnings per share 15 12. Acquisitions and disposals 16 13. Commitments and contingencies 16 14. Events after the reporting period 17 Nine months ended Three months ended September 30, September 30, 2012 2011 2012 2011 Note (unaudited) (unaudited) (unaudited) (unaudited) Sales 4 851,071 796,868 322,532 253,435 Cost of sales (562,128) (459,537) (220,023) (145,010) Gross profit 288,943 337,331 102,509 108,425 General and administrative expenses 5 (48,028) (21,712) (16,118) (15,503) Taxes other than income tax (54,511) (56,146) (20,758) (20,802) Other operating income/(expenses), net 6 6,080 (8,524) 4,720 (852) Profit from operations 192,484 250,949 70,353 71,268 Finance income 7 3,133 10,050 11,287 2,124 Finance costs 7 (29,187) (40,244) (8,361) (21,466) Profit before income tax 166,430 220,755 73,279 51,926 Income tax expense (43,216) (46,973) (15,317) (8,167) Profit for the period 123,214 173,782 57,962 43,759 Attributable to: Shareholders of the Company 76,873 110,296 40,950 27,690 Non-controlling interest 46,341 63,486 17,012 16,069 Weighted average number of shares outstanding during the period (millions of shares) 11 358.794 358.794 358.794 358.794 Earnings per share Basic and diluted profit per share (US dollars) 11 0.21 0.31 0.11 0.08 Nine months ended September Three months ended 30, September 30, 2012 2011 2012 2011 (unaudited) (unaudited) (unaudited) (unaudited) Profit for the period 123,214 173,782 57,962 43,759 Foreign exchange 25,838 (45,874) 51,821 (82,020) differences Changes in fair value of 4,036 - 5,366 - cash flow hedges Revaluation of available-for-sale 4,055 (19,957) 20,440 (2,769) financial investments Deferred tax on revaluation of (522) 1,902 (2,911) (1,715) available-for-sale investments Other comprehensive income/(loss) for the 33,407 (63,929) 74,716 (86,504) period, net of tax Total comprehensive 156,621 109,853 132,678 (42,745) income for the period Attributable to: Shareholders of the 102,470 61,776 99,233 (37,063) Company Non-controlling interest 54,151 48,077 33,445 (5,682) September 30, 2012 Note (unaudited) December 31, 2011 Assets Current assets Cash and cash equivalents 102,406 217,133 Accounts receivable 89,918 74,328 Inventories 525,763 375,281 VAT recoverable 85,990 57,031 Short-term financial investments 18,199 4,043 Income tax receivable 6,155 3,051 Total current assets 828,431 730,867 Non-current assets Property, plant and equipment 753,565 574,831 Intangible assets 1,251,914 1,242,820 Long-term financial investments 92,427 86,371 Investment in joint venture 4,856 4,769 Restricted cash 4,880 3,857 Deferred tax assets 2,137 2,709 Other non-current assets 1,549 1,657 Total non-current assets 2,111,328 1,917,014 Total assets 2,939,759 2,647,881 Liabilities and shareholders' equity Current liabilities Short-term debt finance 10 1,385 316,328 Accounts payable 193,316 172,697 Income tax payable 16,096 18,238 Provisions 24,500 24,538 Total current liabilities 235,297 531,801 Non-current liabilities Long-term debt finance 10 521,849 84,062 Provisions 65,641 61,283 Deferred tax liabilities 195,966 201,034 Other non-current liabilities 10,262 13,474 Total non-current liabilities 793,718 359,853 Total liabilities 1,029,015 891,654 Equity Share capital 1,244,501 1,244,501 Additional capital 862,340 862,340 Foreign exchange differences (52,454) (71,367) Retained earnings (473,480) (550,353) Revaluation reserves 37,026 30,342 Total equity attributable to 1,617,933 1,515,463 shareholders of the Company Non-controlling interest 292,811 240,764 Total equity 1,910,744 1,756,227 Total equity and liabilities 2,939,759 2,647,881 Nine months ended September 30, 2012 2011 (unaudited) (unaudited) Operating activities Profit for the period 123,214 173,782 Adjustments for non-cash movements: Finance costs, net 26,054 30,194 Income tax expense 43,216 46,973 Depreciation and amortization 154,565 126,429 Impairment of non-current assets 205 1,453 Net loss from associates and joint ventures 116 414 Gain on disposal of subsidiaries - (412) Loss on disposal of property, plant and 430 528 equipment Movements in provisions for inventories, 4,429 (13,267) receivables and other provisions Impairment of available-for-sale financial 240 6,167 assets Changes in operating assets and liabilities: Accounts receivable (15,245) (2,445) Inventories (133,628) (90,845) VAT recoverable (28,421) (20,548) Accounts payable 5,970 13,361 Net other changes in operating assets and 6,243 7,984 liabilities Cash flows from operations 187,388 279,768 Interest paid (60,401) (10,038) Income taxes paid (56,016) (56,410) Cash flows from operating activities 70,971 213,320 Investing activities Additions to property, plant and equipment (232,782) (120,604) Additions to exploration and evaluation assets (96,793) (76,111) Additions to other intangible assets (218) (136) Additions to financial investments (14,101) (13,800) Acquisition of entities under common control - 37 Proceeds from disposal of property, plant and 112 1,235 equipment Proceeds from disposal of financial 400 12,223 investments Proceeds from disposal of subsidiaries, net of - 457 cash disposed Interest received 2,266 4,265 Cash used in investing activities (341,116) (192,434) Financing activities Proceeds from debt finance 529,136 116,883 Repayment of debt finance (378,669) (86,029) Payment of finance lease liabilities - (572) Acquisition of non-controlling interest - (59,440) Proceeds from issue of share capital - 43 Equity transaction costs paid - (9,171) Dividends paid (2,104) - Cash from / (used in) financing activities 148,363 (38,286) Net (decrease) / increase in cash and cash (121,782) (17,400) equivalents Cash and cash equivalents at beginning of the 217,133 212,204 period Effect of exchange rate fluctuations on cash 7,055 (10,326) and cash equivalents Cash and cash equivalents at end of the period 102,406 184,478 Non-controlling Attributable to the shareholders of Nord Gold N.V. interest Total Foreign Share Additional exchange Retained Revaluation capital capital differences earnings reserves Total Balance at January 1,244,501 862,340 (46,671) (715,643) 47,266 1,391,793 231,031 1,622,824 1, 2011 Profit for the period - - - 110,296 - 110,296 63,486 173,782 (unaudited) Foreign exchange differences - - (34,782) - - (34,782) (11,092) (45,874) (unaudited) Revaluation of available-for-sale financial - - - - (15,088) (15,088) (4,869) (19,957) investments (unaudited) Deferred tax on revaluation of available-for-sale - - - - 1,350 1,350 552 1,902 investments (unaudited) Total comprehensive income for the 61,776 48,077 109,853 period (unaudited) Acquisition of entities under - - - (630) - (630) - (630) common control (unaudited) Acquisitions of non-controlling interest without a - - - (2,622) - (2,622) (56,818) (59,440) change in control (unaudited) Balance at September 30, 2011 1,244,501 862,340 (81,453) (608,599) 33,528 1,450,317 222,290 1,672,607 (unaudited) Balance at January 1,244,501 862,340 (71,367) (550,353) 30,342 1,515,463 240,764 1,756,227 1, 2012 Profit for the - - - 76,873 - 76,873 46,341 123,214 period (unaudited) Foreign exchange differences - - 18,913 - - 18,913 6,925 25,838 (unaudited) Changes in fair value of cash flow - - - - 4,036 4,036 - 4,036 hedges (unaudited) Revaluation of available-for-sale financial - - - - 3,040 3,040 1,015 4,055 investments (unaudited) Deferred tax on revaluation of available-for-sale - - - - (392) (392) (130) (522) investments (unaudited) Total comprehensive 102,470 54,151 156,621 income for the period (unaudited) Dividends - - - - - - (2,104) (2,104) (unaudited) Balance at September 30, 2012 1,244,501 862,340 (52,454) (473,480) 37,026 1,617,933 292,811 1,910,744 (unaudited) 1. Operations Nord Gold N.V. (the "Company") and its subsidiaries (together referred to as the "Group") comprise a Dutch public limited liability company as defined in the Netherlands Civil Code, and companies located abroad. The Company was established as a private limited liability company in 2005 named Sakha Gold B.V. and was renamed to a public liability company Severstal Gold N.V. on July 30, 2009 and further to a limited liability company Nord Gold N.V. on September 29, 2010. The Company's registered office is Luna ArenA, Herikerbergweg 238, 1101 CM Amsterdam Zuidoost, the Netherlands. As at December 31, 2011 the Company's ultimate parent company was JSC Severstal, an integrated steel and mining company with key assets in Russia, the US and Europe (the "Severstal Group"). The immediate parent company was Lybica Holding B.V., Severstal Group's 100% owned subsidiary. The Company's ultimate controlling party was Alexey Mordashov. In November 2011, the Severstal Group decided to spin off the Group by exchange of 100% shares ofNord Gold N.V. for JSC Severstal shares and GDRs based on the relative fair values. In January 2012, the Company completed exchange of 10.6 % of its shares with non-controlling shareholders which became traded on the London Stock Exchange in the form of GDRs. The exchange between Lybica Holding B.V. and Rayglow Limited, an entity controlled by Alexey Mordashov, of JSC Severstal shares for 89.4% of the Company's shares ("Shares") was completed in March 2012 and those Shares were then sold to Canway Holding B.V., a company controlled by Alexey Mordashov who remains the ultimate controlling party. The Group's principal activity is the extraction, refining and sale of gold. Mining and processing facilities are located in Burkina Faso, Guinea, the Republic of Buryatia, the Republic of Yakutia, the Amur region and the Transbaikal region of the Russian Federation, Kazakhstan. 2. Basis for preparation of the consolidated interim condensed financial statements Statement of compliance These consolidated interim condensed financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting and do not include all of the information required for full annual financial statements. The Board of Directors is responsible for the preparation of the condensed consolidated half-year financial statements for the nine months ended September 30, 2012, in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The responsibility of the Board of Directors includes selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances. Accounting policies The accounting policies applied by the Group in these consolidated interim condensed financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended December 31, 2011, except that the Group has adopted those new/revised standards mandatory for financial annual periods beginning on January 1, 2012. The adoption of the pronouncements did not have a significant impact on the Group's condensed consolidated interim financial statements. Since April 2012, the Group has held derivative financial instruments. Derivative financial instruments are initially recognized at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. The fair value of derivative financial instruments is classified as a non-current asset or long-term debt if the remaining maturity of the derivative financial instrument is more than 12 months and as a current asset or liability if the remaining maturity of the derivative financial instrument is less than 12 months after the balance sheet date. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument and if so, the nature of the item being hedged. The Group designates certain derivatives as hedges of a particular risk associated with a recognized liability (cash flow hedge). The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. The ineffective part is recognized immediately in the statement of income. If a hedging relationship is terminated and the derivative financial instrument is not sold, future changes in its fair value are recognized in the statement of income. The effective part of changes in the fair value of derivatives that are designated and qualified as cash flow hedges are recognized in equity. The gain or loss relating to the ineffective part is recognized in the income statement within finance income or costs. Amounts accumulated in equity are reclassified to the statement of income in the same periods the hedged item affects profit or loss. The gain or loss relating to the effective part of derivate financial instruments is recognized in the income statement within the line where the result from the hedged transaction is recognized. When a hedging instrument matures or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognized when the hedged transaction is ultimately recognized in the income statement. When a hedged transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is transferred to the income statement. Critical accounting judgements, estimates and assumptions The preparation of consolidated interim condensed financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from theseestimates. In preparing these consolidated interim condensed financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31December 2011 except described below. During 2012 the Group revised useful lives of certain mineral rights following an updated independent report on mineral reserves and resources valuation. The effect of the change in accounting estimate on these condensed consolidated interim financial statements was an increase in depreciation expense in amount of US$ 9.6 million. Effective April 1, 2012 the Company changed its functional currency from Euro to US dollars. The presentation currency for the Group remains US dollars. The change in functional currency is appropriate based on the fact that since April 2012 most of the Company's investing and financing activities and cash flows are denominated in US dollars while the impact of the operational activities on the Company's financial position remains insignificant. Having considered the aggregated effect of all the factors management concluded that the Company's functional currency had changed to US dollars. Management believes that this change more clearly reflects the Company's financial position and significantly reduces its exposure to currency risk. The change in functional currency has been accounted for prospectively since April 1, 2012. The Company will no longer have currency exchange effects deriving from USD denominated monetary assets and liabilities. Conversely, monetary assets and liabilities denominated in other currencies than USD may now generate such currency effects. As the presentation currency of the Group is US dollar the change of the Company's functional currency from Euro to US dollars has no impact on the Group's equity and comparative information for previous periods. Financial risk management The Group's risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adhere The story has been truncated, [TRUNCATED]
Nord Gold N.V NORD Financial & Operating Results Q3 2012
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