SECOND QUARTER REPORT – JUNE 30, 2024
APRIL – JUNE 2024 (April – June 2023)
- Revenue TUSD 31,467 (15,985)
- EBITDA TUSD 11,971 (3,969)
- Profit/loss for the period TUSD 6,548 (-942)
- Earnings per share before dilution USD 0.0072 (-0.001)
- Net Debt TUSD 168,803 (124,782)
- The Annual General meeting approved the board’s redemption proposal
JANUARY – JUNE 2024 (January – June 2023)
- Revenue TUSD 48,690 (42,092)
- EBITDA TUSD 13,538 (5,132)
- Profit/loss for the period TUSD 2,336 (-4,072)
- Earnings per share before dilution USD 0.0026 (-0.0045)
SUMMARY OF FINANCIAL INFORMATION
| Q2 2024 | Q2 2023 | Δ % | H1 2024 | H1 2023 | Δ % | FY 2023 | |
| Gold production (gold equivalent), koz | 14.14 | 9.1 | 56% | 23.30 | 17.31 | 35% | 39.47 |
| Gold sales (gold equivalent), koz | 13.60 | 7.98 | 70% | 21.80 | 21.85 | 0% | 44.86 |
| Average realized gold price, USD/oz | 2,310 | 1,969 | 17% | 2,185 | 1,897 | 15% | 1,901 |
| Revenue, TUSD | 31,467 | 15,985 | 97% | 48,690 | 42,092 | 16% | 86,485 |
| Gross profit/loss, TUSD | 13,194 | 5,370 | 146% | 15,966 | 10,020 | 59% | 27,604 |
| EBITDA, TUSD | 11,971 | 3,969 | 202% | 13,538 | 5,132 | 164% | 18,259 |
| EBITDA margin, % | 38% | 25% | - | 28% | 12% | - | 21% |
| Profit/loss for the period, TUSD | 6,548 | -942 | 795% | 2,336 | -4,072 | 157% | -1,334 |
| Earnings/loss per share before dilution, USD | 0.0072 | -0.001 | 795% | 0.0026 | -0.0045 | 157% | -0.0015 |
| Cash & cash equivalents at the end of the period, TUSD | 1,732 | 1,160 | 49% | 1,732 | 1,160 | 49% | 1,949 |
| Net debt, TUSD | 168,803 | 124,782 | 35% | 168,803 | 124,782 | 35% | 144,814 |
| Equity per share, USD | 0.0839 | 0.0774 | 8% | 0.0839 | 0.0774 | 8% | 0.0795 |
Escalated sanction risks and cross-border operational uncertainties triggered redemption proposal to minority shareholders
During the second quarter of 2024, the Company and its operations were increasingly exposed to sanctions and other legislation in both Russia and the EU. In addition, policy decisions by third parties further discourage cross-border operations and transactions and also restrict liquidity and shareholder flexibility with respect to their shares. These developments promoted a redemption proposal for minority shareholders which was approved by the Annual General Meeting and will be completed in Q3 of 2024.
Redemption proposal and outcome
Since 2022, the Company and its operations have been increasingly exposed to sanctions and market restrictions in both Russia and the EU. In addition, policy decisions by third parties further discourage cross-border operations and transactions and also restrict liquidity and shareholder flexibility to trade their shares since March 2024. Kopy Goldfields, and ultimately its shareholders, therefore face increasing difficulties and significant sanction and operational risks. The Board of Directors recognized that there is significant interest and external pressure on the Company and the Swedish shareholders to cease operations in Russia.
Against this background the board presented a voluntary proposal for minority shareholders to redeem their shares.
The proposal was approved at the Annual General Meeting and the acceptance process was completed in Q3, 2024 when shareholders holding approximately 9% of the shares in the Company accepted the Company’s redemption offer. Upon completion of the redemption procedure, the main shareholders’ (HC Alliance Mining Group Ltd and Magomed Bazhaev) ownership will increase to approximately 93% of the shares and votes in the Company. The main shareholders were not entitled to participate in the voluntary redemption.
Production
The total consolidated production in Q2 2024 increased by 56% compared to Q2 2023 which was driven by the Yubileyniy CIP plant results and the Malyutka project launch in the end of 2023. The total unconsolidated production from the Zolotaya Zvezda Mayskiy and Chazy-Gol projects amounted to 2.58 koz in the reporting period compared to 0.75 koz in Q2 2023.
Financial performance
The Company’s EBITDA improved in the reporting period compared to Q2 2023 backed by growth in gold production and higher gold prices. The EBITDA margin increased from 25% to 38%. The average realized gold price in Q2 2024 amounted to 2,310 USD/oz compared to 1,969 USD/oz in Q2 2023.
Total Cash Costs (TCC) per oz produced increased in Q2 2024 compared to Q2 2023 by 8% and All-in Sustaining costs (AISC) decreased by 7%, reflecting escalation of production costs and reduction of overhead and lease costs respectively.
Financial costs in Q2 2024 also increased, to MUSD 6.716 compared to MUSD 2.143 in Q2 2023 due to further increases in Net debt from MUSD 124.8 in Q2 2023 to MUSD 168.8 in Q2 2024, following capital investments in our key production assets, and higher interest rates. Our key subsidiary, Amur Zoloto LLC breached one of production covenants for the bank debt and it was reclassified in short-term (see Note 3 in the Comments on financial performance).
Outlook
The Russian Central bank key interest rate was further increased to 18% in July 2024, which will accelerate financial costs in the rest of 2024 and further on.
Financial pressure on the operations in Russia is expected to further escalate in the next year. From 2025, the general corporate tax in Russia will be increased to 25% from the current 20%. On the revenue side, the lack of transparency in fixing the Ruble exchange rate against Euro and USD since May 2024, when Moscow Stock Exchange (the primary platform for trading Rubles in Russia) fell under international sanctions and stopped daily operations in foreign exchange, creates a lot of uncertainties in establishing fair domestic gold prices.
The Company intends to apply for a delisting of the shares from Nasdaq First North Growth Market once the redemption procedure is completed.
Mikhail Damrin
CEO Kopy Goldfields