Third quarter report – September 30, 2023

Q3, JULY – SEPTEMBER 2023 (July – September 2022)

• Revenue TUSD 24,469 (43,313, including non-cash revenue of TUSD 32,619 from settlement of the gold loan in Q3 2022)
• EBITDA TUSD 9,932 (2,966)
• Gain for the period TUSD 2,974 (loss: -10,340)
• Earnings per share before dilution USD 0.0033 (-0.0114)

JANUARY – SEPTEMBER 2023 (January – September 2022)

• Revenue TUSD 66,561 (86,225)
• EBITDA TUSD 15,069 (18,255)
• Loss for the period TUSD -1,098 (-9,724)
• Earnings per share before dilution USD -0.0012 (-0.0108)

SUMMARY OF FINANCIAL INFORMATION

Improved margins supported by favorable macroeconomics

In the third quarter of 2023, the Company’s financial performance improved both compared to Q3 last year and Q2 2023. The EBITDA margin reached 41% following solid production from the Yubileyniy mine and the alluvial deposit in the Khabarovsk region. The international gold price remained strong during the quarter, supporting revenue, and the Russian Ruble depreciated against the US dollar which positively affected the cost of sales. The Malyutka project remained on track and the production is scheduled to commence this winter. In addition, the gold production from our Zolotaya Zvezda project in the Khakasia region increased in the reporting period compared to Q2 2023.

Production
In Q3 2023, the Yubileyniy CIP plant production increased by 28% compared to Q3 2022 following last year’s capacity upgrade. Heap leach output at Yubileyniy increased by 71% year-on-year. Alluvial production decreased by 27% compared to Q3 2022 despite strong performance of the Buor placer mine since the Onne placer deposit was rescheduled to the next season.
Operations at the Perevalnoe HL were mothballed early in 2023 which also negatively affected our total gold equivalent production.

Financial performance
Strong international gold prices together with the Ruble depreciation against the US dollar supported our financials during the third quarter of 2023. Our total revenues were down 44% compared to Q3 2022 which were affected by settlement of the gold loan last year. The average realized gold price in Q3 2023 increased by 34% year-on-year to 1,905 USD/oz.
The EBITDA margin reached 41% following the decrease in cost of sales. Bottom line result for Q3 2023 turned to a profit of TUSD 2,974 compared to a loss of TUSD -10,340 in Q3 last year.

Investments
We are progressing towards the launch of the Malyutka project - our key development focus area. The heaps are already in place and therefore we expect to commence production at Malyutka in coming months. Construction works are on track, meanwhile the temperature at the site is already about -35C.
In addition, we are preparing to further extend the Yubileyniy CIP capacity from 250 to 400 ktpa in 2024 following the updated resource statement issued in June 2023 for the Krasivoe gold field.
We are upgrading the Mayskiy processing plant at Zolotaya Zvezda in the Khakasia region targeting to significantly enlarge gold production within this area next year.

ESG
We continue reviewing opportunities to use renewable energy from solar power instead of diesel fuel. As noted in the 2022 CSR report we target to complete the waste utilization project in order to further minimize our environmental footprint.
We also plan to reduce Lost Time Injury Frequency Rate (“LTIFR”) as health and safety is one of our key strategic concerns.
We confirm our commitment to sustainable development and maintain mutually beneficial relationships with diverse stakeholder groups in the regions of the Company presence.

Macro environment
Strong international gold prices continue to support our operations. Meanwhile, recently the Ruble has appreciated against the US dollar which should dampen the positive effects experienced in Q3.
International sanctions and Russian counter sanctions as well as our counterparties’ policy decisions continue to negatively affect all aspects of our business, creating an increasingly challenging environment for Kopy Goldfields. Additional sanction packages and legislation are being developed both in the EU and Russia and are expected to add increasing complexity.

Outlook
Operationally, we proceed with enhancing our production in the Khabarovsk and Khakasia regions. We target to upgrade the plants at Yubileyniy and Mayskiy, to launch Malytka project and to explore and develop new gold deposits including Krasny. We look forward to the next warm season as alluvial and heap leach production depends on the temperature.
We remain committed to our long-term development plans and target to increase gold production to above 100 koz in 2025, while weathering the increasing challenges in our business environment.
We closely monitor and try our best to adapt the Company to the constantly changing circumstances and increasing challenges, but risks are increasing and our flexibility and options for developing the Group is continuously exposed. Against this background, we are reviewing strategic options to facilitate and secure efficient operations while balancing the interests of all stakeholders.

Mikhail Damrin
CEO Kopy Goldfields