acquisition of chukotka assets - highlandgold.com · q1 2018 ev/resources (kap inferred resources)...

Acquisition of

Chukotka Assets

April 2018

Disclaimer

2

Certain statements within this presentation constitute forward looking statements. Such forward looking statements involve risks

and other factors which may cause the actual results, achievements or performance of the Group to be materially different from

any future results, achievements or performance expressed or implied by such forward looking statements. Such risks and other

factors include, but are not limited to, general economic and business conditions, changes in government regulations, currency

fluctuations, the gold price, the Group’s ability to recover its reserves or develop new reserves, competition, changes in

development plans and other risks.

There can be no assurance that the results and events contemplated by the forward looking statements contained in this

presentation will, in fact, occur. These forward-looking statements are correct or represent honestly held views only as at the

date of delivery of this presentation.

The Company will not undertake any obligation to release publicly any revisions to these forward looking statements to reflect

events, circumstances and unanticipated events occurring after the date of this presentation except as required by law or by

regulatory authority.

Nothing in this presentation constitutes an offer, invitation, recommendation to purchase, sell or subscribe for any securities in

any jurisdiction or solicitation of any offer to purchase, sell or subscribe for any securities in any jurisdiction and neither the issue

of the information nor anything contained herein shall form the basis of or be relied upon in connection with, or act as any

inducement to enter into, any investment activity.

…

Total cash costs include mine site operating costs such as mining, processing, administration, royalties and production taxes,

but are exclusive of depreciation, depletion and amortization, capital and exploration costs. Total cash costs are then divided by

ounces sold to arrive at the total cash costs of sales. This data provides additional information and is a non-IFRS measure. In

line with guidance issued by the World Gold Council, the formula used to define all-in sustaining cash costs measure

commences with total cash costs per ounce sold and then adds sustaining capital expenditures, corporate general and

administrative costs, mine site exploration and evaluation costs and environmental rehabilitation costs. This data seeks to

represent the total costs of producing gold equivalent from current operations, and therefore it does not include capital

expenditures attributable to projects or mine expansions, exploration and evaluation costs attributable to growth projects,

income tax payments, interest costs or dividend payments.

Transaction Overview

3

Proposed transaction

Highland Gold Mining Ltd. (“Highland Gold”, “Highland” or “HGM”) to acquire certain assets in the

Chukotka region (collectively, “Acquisition Assets”)

A related party transaction with 100% of the acquired assets belonging to the concert party1

Consideration

Acquisition Enterprise Value of US$91m, comprising:

- $79 m in Highland Gold shares (issued at 20 day VWAP ending 23 April 2018)

- Assumption of $12 m of existing net debt3

NAV of $131 m2

Conditions

Highland Gold independent shareholder vote for “Whitewash” waiver from mandatory general offer

otherwise required under the Takeover Code (50% of independent shareholder votes cast)

Shareholder loan conversion

Transaction approval by the Federal Antimonopoly Service (FAS)

Transaction approval by the Foreign Investment Advisory Council (FIAC)

Post-deal shareholder

structure

Concert party – 44.1%4

Institutional and Retail Shareholders – 55.9%4

Vendors locked in for 6 months

Indicative timeline

Transaction announcement / mailing of Circular - 26 April 2018

Shareholder meeting – 24 May 2018

Closing expected in Q3-Q4 2018

1. Board of Directors, management and affiliated parties

2. Estimate based on PFS results prepared by CSA Global. Valuation as at 01.01.2018 applying 8% discount rate less $12 m net debt and $10 m Q1 2018 cash flow adjustment. Includes inferred

resources of 505 koz AuEq valued at $50/oz

3. As at 20.04.2018, excluding shareholder loans (to be converted before closing) and including value of finished precious metals

4. Assuming HGM share price of GBp146 (20 day VWAP) and USD/GBP exchange rate of 1.39 as at 23.04.2018 at 4.30pm

Diversified portfolio of high-quality assets with solid growth project pipeline

Valunisty: well established long-life operation (11 years) with significant underground potential

KAP: a number of satellite deposits and exploration targets including recently commissioned Gorny mine (combined resource base

of 571 koz AuEq)

Kayen: prospective 1,214 km2 exploration area located only ~130 km from Kupol, the second largest gold mine in Russia1

Corporate and operating synergies

Strengthening footprint in the core region of Chukotka

Leveraging Highland management team’s successful track record of running Valunisty operations

Cost savings via improving logistics (joint use of Highland’s Vladivostok logistics center)

Further operational optimisation potential through Highland’s expertise

Attractively valued and cash flow enhancing

Value accretive on key operational and financial metrics (NAV, production, cash return to shareholders and adjusted EPS)

Attractive P/NAV ratio for a producing asset 0.60x

Cementing Highland’s status as a peer-leading dividend payer

High-grade resource and reserve base

Ore Reserves: 554 koz of AuEq at 5.1 g/t (JORC 2012)2

Mineral Resources: 1,723 koz of AuEq at 3.0 g/t (JORC 2012)2

Substantial opportunities for resource-to-reserve conversion

Attractive production growth

Immediately increases Highland Gold’s production by 11% to ~300 koz3

Boost in production following the processing plant upgrade (to 350 ktpa) and underground mining commissioning at Valunisty

Strategic Rationale

4

1. In terms of production for 2016

2. As at 01.01.2018 (CSA Global)

3. Based on 2017: 272 koz for Highland and 31 koz AuEq for Valunisty (2018E production – 41 koz as per budget)

127

105

131

(12)

(10)

25

NPV, as at 31 Dec 2017(Valunisty and

Gorny reserves)

Net debt, as at20 Apr 2018

FCF forQ1 2018

EV/Resources(KAP inferred

resources)

NAV

Sum-of-The-Parts Valuation

5

SOTP Valuation KAP Valuation

KAP Valuation

KAP inferred resources, koz AuEq 505

@ HGM EV/Resources multiple 50

KAP resources valuation, $ m 25

Reserves and

ResourcesOre

AuEq

Grade

AuEq

contained

(kt) (g/t) (koz)

Valunisty O/P 1,700 3.9 215

Valunisty U/G 1,488 6.4 305

KAP (Gorny) 209 5.2 35

Reserves 3,397 5.1 554

(reflected in the NAV / financial model)

Valunisty 11,600 3.1 1,152

KAP Indicated 571 3.6 66

KAP Inferred 5,427 2.9 505

(valuation based on the EV/Resources multiple)

Resources 17,598 3.0 1,723

$ m

1. Not accounted for in the financial model and JORC-compliant Ore Reserves

2. As at 20.04.2018, excluding shareholder loans (to be converted before closing) and including value of finished precious metals

2

Assets’ Brief Overview

6

Project Location

JORC Reserves and Resources

Overview

KAP License Area

Located in Chukotka, a well established gold district where

Highland Gold already has a significant strategic presence

(Kekura, Klen)

Valunisty mine

Located within the boundaries of KAP license area

Significant supporting infrastructure:

– 110 kV grid to site

– Site access via seasonal roads from the port of Egvekinot

(~250 km)

Production ’17 - 30.8 koz1; Mine life - 11 years

Reserves of 554 koz at 5.1 g/t AuEq as at 01.01.2018

Kanchanalo-Amguemskaya Area (KAP)

Resource base for the Valunisty mill with significant exploration

potential

Mineral Resources - 0.6 moz at 3.0 g/t AuEq

Kayenmivaam (Kayen)

Prospective ~1,214 km2 exploration target with ~30 km drilled to

date

1. Operating performance distorted due to power supply disruptions in 2017

Zhilny (21.8 km)

Shakh (12.2 km)

Gorny (18.2 km)

Valunisty

mine area

KAP license

Valunisty Mill

Mines

License areas

Roads

Osenny

(~30 km)

KlenBilibino

Kekura Kupol

Anadyr

Dvoinoye

Mayskoye

Egvikinot (port)

Pevek

Kayen

Highland deposits

Deposits / exploration

areas to acquire

Operating mine

Airport

Port

Major settlements

Ugolnye Kopi

Egvekinot to Vladivostok

(~4,900km, Jul - Oct)

Planned road

Winter road(Jan - Apr)

Road from Valunisty to Egvikinot(Winter 290 km, Jan - Apr)(Summer 220 km, Jul - Oct)

Valunisty / KAP

Existing powerline

(Valunisty-Egvikinot)

Planned powerline

(Anadyr-Valunisty)

Roads / planned roads

Water routes

Summer road(Jul - Oct)

Omolon

Karalveem

Grand Total Ore AuEq

Grade AuEq AuEq

(kt) (g/t) (kg) (koz)

Valunisty O/P (probable) 1,700 3.9 6,686 215

Valunisty U/G (probable) 1,488 6.4 9,480 305

KAP (Gorny) (P&P) 209 5.2 1,078 35

Reserves 3,397 5.1 17,244 554

Valunisty (I&I) 11,600 3.1 35,837 1,152

KAP (I&I) 5,998 3.0 17,756 571

Resources 17,598 3.0 53,593 1,723

7

Gorny

Status Pilot mining

Distance from the mill 18 km

Mine type O/P

Commodities Gold-Silver

Production ’18E 15.7 koz

TCC ’18E $340/oz

Reserves3 35 koz @ 5.2 g/t

Resources3 309 koz @ 2.6 g/t

LoM 2018 (pilot mining)

Significant high-grade resource

base with limited capex

Only 18 km from the mill

Pilot mining is under way

In-fill drilling expected in 2018-2019

with further reserve expansion

Full-scale mining operation

expected in 2019

Significant tax reliefs (ASEZ)

Key highlights

Shakh

Status Resource Estimate


Mine type O/P

Commodities Gold

Resources N/A

Drilling to date 9 km

LoM N/A

Expected launch 10 years+

Promising exploration area in close

vicinity to Zhilny

Currently 27 quartz veins identified

Further drilling planned

Mining to commence after Valunisty

and Gorny are depleted

Key highlights

Valunisty

Established long-life operation with

high-grade reserve base

Production since 1999

~470 koz produced to date4

Established infrastructure in place

Significant decrease in production

costs following processing plant

ramp-up and start of U/G mining in

2020

ASEZ tax reliefs to support cash

generation from U/G operations

Key highlights

Status Production

Distance from the mill On site

Mine type O/P, U/G1

Commodities Gold-Silver

Production ’17 30.8 koz

TCC ‘16 $709/oz

TCC ‘172 $887/oz

Reserves3 520 koz @ 5.1 g/t

Resources3 1,152 koz @ 3.1 g/t

LoM 2028

Zhilny

Significant Ag credits

Large resource base (262 koz

AuEq) to support mine life

extension

Additional metallurgical test works

to be completed in 2018

Mining to commence after Valunisty

and Gorny are depleted

Key highlights

Status Resource Estimate


Mine type O/P

Commodities Silver-Gold

Reserves N/A

Resources3 262 koz @ 3.5 g/t

LoM N/A

Expected launch 10 years+

Production Resource Estimate

Well-known and established operations with significant cost reduction and exploration potential

Diversified Portfolio of High Quality Assets

Note: reserves and resources are on gold equivalent basis

1. Underground mining to commence in 2020

2. According to Russian Accounting Standards, IFRS accounts are yet to be released

3. Ore Reserves and Mineral Resources in gold equivalent in accordance with JORC, as at 01.01.2018 (CSA Global)

4. Data available from 2006 only as per Valunisty’s management

5. As per Valunisty’s management, not verified by Highland

Kayen

Status Exploration

Total area 1,214 km2

Drilling to date ~23.3 km

Historical cost to date $15.3 m5

Over 30 km of drilling

Contains a number of exploration

targets with multiple geochemical

anomalies

No JORC-compliant resource yet

Key highlights

Exploration

Successful Track Record of Optimizing Operations with

Upside Remaining

8

In March 2015, Auriant Mining with Denis

Alexandrov as CEO was awarded a

management contract for Valunistiy

Measures introduced to improve Valunistiy

operational efficiency and financial

performance:

Permanent permit on mining operations

received

Shift to own blasting operations

Mining equipment upgraded

Exploration work by own drilling rig at

KAP

Strengthened management team

1

TCC $1,448/oz $709/oz

Valunisty 2014 Valunisty 2016

Production 26 koz 33 koz

Cash return to

shareholders1$2.9 m $5.3 m

EBITDA ($3.8 m) $17.6 m

Note: production on gold equivalent basis, all historical data derived from IFRS accounts

1. Net repayments on shareholders debt for KAP LLC and Valunisty LLC

FCF ($1.4 m) $9.6 m

2

3

4

5

15.68 15.54

Highland Valunisty incr.

HGM Acquisition Assets incr.

0.8370.044

0.833

0.881

Highland Valunisty incr. Pro-forma avg'18-28E


27231 48

303 321

Highland Pro-forma Pro-forma avg '18-28E

HGM Acquisition Assets

Pro Forma ImpactValue accretion and enhanced dividend distribution

Note: Mineral Resources and Ore Reserves are in accordance with JORC

1. For HGM dividends paid; for Valunisty net repayments on shareholders debt for KAP LLC and Valunisty LLC

2. Production ‘17 for HGM and CSA Global estimate for Valunisty (LoM)

3. Assumes the issue of 38.6 m shares, based on an equity valuation of US$79 m and 20-day VWAP of 146p per HGM share as at 23.04.2018

Estimated 11% uplift in production – Highland Gold becomes a ~300koz pa gold producer

9

43.6 11.5

55.1

Highland Pro-forma


Cash return to

shareholders1, ’17 $ m

Pro-forma

0.1340.017

0.151

Highland Valunisty incr.


Cash return to

shareholders1 ‘17, $ per share3

Pro-forma

Gold Production, ’17 koz

Pro-forma Pro-forma

avg ’18-28E2

Production ’17, oz per ‘000 shares3

Pro-formaPro-forma

avg ’18-28E2

5.10.6

5.7

Highland Pro-forma


Reserves, moz

Pro-forma

Reserves, oz per ‘000 shares3

Pro-forma

44.1%

55.9%

10

Supportive Shareholder Base

1. Board of Directors, management and affiliated parties2. Assuming HGM share price of GBp146 and USD/GBP exchange rate of 1.39 (20 day VWAP) as at 23.04.20183. Assuming new shareholders will join relationship agreement

Transaction will result in increase of concert party’s stake from 37.4% to 44.1%

Increase of concert party’s

stake in HGM by 6.6%

37.4%

62.6%

Concert party

Free float

HGM Pre-Transaction Ownership

1

HGM Post-Transaction Ownership2,3

Valunisty Mine Overview

12

Located ~250 km from the port of Egvekinot

within the boundaries of KAP license area

Favorable processing (CIP) supporting high

recoveries

11-year mine life

Processing plant ramp-up to 350 ktpa expected

by 2020

110KV grid power to site

Camp facilities with capacity for 350 workers

The orebody is a narrow steeply dipping vein

hosted deposit

Ore Reserves1 - 520 koz at 5.1 g/t AuEq

Mineral Resources1 - 1.2 moz at 3.1 g/t AuEq

Valunisty MineProducing mine with established infrastructure

Historical performanceTailings storage facility

Accommodationblock

No

vaya

Zo

ne

Novaya open pit

Slurry pond

Plant site

Glavnaya Zone

Open pit #2

Open pit #1

0 5 10km

110/35kVsubstation

General Layout Overview


2. Based on FY 2017 Russian Accounting Standards, IFRS are yet to

be released

2014 2015 2016 2017

Production (koz AuEq) 26 35 33 31

Head Grade AuEq (g/t) 3.9 4.7 4.6 4.6

Au recovery (%) 94.5% 95.3% 95.9% 95.6%

TCC ($/oz) 1,448 842 709 8872

AISC ($/oz) 1,485 975 790 1,0062

13

Valunisty MineProducing mine with established infrastructure (Cont’d)

Processing Plant Mine Site

Mining Operations Open Pit (Novaya Zone)

TO REPLACE - RCH

Valunisty MineEstablished open pit operations with significant underground upside

14

Open Pit Mining Underground Mining

Mining operations since 2003

Remaining mine life - 11 years

Deposit divided into two main zones: Novaya and

Glavnaya

Open pit operations to be reduced to ~100 ktpa the

underground mining commissioning

CAPEX 2017 – $2.3 m

TCC 2017 – $887/oz1

Ore Reserves2 – 215 koz at 3.9 g/t AuEq

Existing Open Pits

To commence in 2020

Mine life of 8 years

Highly selective shrinkage stoping is considered a

preferred mining method for the deposit

Target production rate – 250 ktpa

Initial capital expenditure – $26m

Significant tax relief (ASEZ) to be applied (the

agreement signed in 2016)

Ore Reserves2 – 305 koz at 6.4 g/t AuEq

Underground Mine Design

1. Financial performance distorted due to power supply disruptions in 2017


Novaya Zone

Glavnaya Zone

Key Operating Metrics Commentary

1. Starting from 20202. Brokers’ long-term consensus

Key Financial MetricsUnit LoM

TCC $/oz 697

AISC $/oz 812

NPV@8% $ m 127

15

Valunisty MinePFS results: large reserve base and robust economics

Gold Price ($/oz)

$m $1,050 $1,100 $1,150 $1,200 $1,250 $1,3002 $1,350 $1,400 $1,450 E

xch

an

ge

ra

te (

US

D/R

UB

)

56.0 $50 $66 $81 $97 $111 $126 $140 $155 $169

57.0 $55 $70 $86 $101 $116 $130 $145 $159 $173

58.0 $59 $75 $90 $105 $120 $134 $149 $163 $177

59.0 $63 $79 $94 $109 $124 $138 $152 $167 $181

60.0 $68 $83 $98 $113 $127 $142 $156 $171 $185

61.0 $72 $87 $102 $116 $131 $145 $160 $174 $189

62.0 $75 $91 $105 $120 $135 $149 $163 $178 $192

63.0 $79 $94 $109 $123 $138 $152 $167 $181 $196

64.0 $83 $98 $112 $127 $141 $156 $170 $185 $199

NPV Sensitivities

Open pit

Unit LoM

Waste mt 43

Strip ratio t/t 23

Ore mined mt 1.9

Avg grade, AuEq g/t 4.0

AuEq contained koz 245

Mine life years 11

Underground

Unit LoM

Capital development ‘000 m3 239

Ore mined mt 1.5



Mine life years 8

Total

Unit LoM

Ore mined mt 3.4



Annual throughput1 ktpa 350

Gold recovery % 95%

Total AuEq production koz 532

Avg. AuEq production koz 48

Pre-feasibility level study for Valunisty completed by CSA in July 2017

Valunisty / Highland initiated revision of the mine plan and financial model

The model is based on the following assumptions:

– Pricing base case in financial model - $1,250/oz Au, $16/oz Ag

– FX rate of 60 RUB/USD applied over LoM

– Valuation as at beginning of 2018

– Model is in real terms; real pricing and mainly flat OPEX assumed (except electricity prices)

– Underground mine design, cost profile as per RPM study completed in June 2017

– Selective shrinkage stopping mining to be employed

– Production plant ramp-up to 350 ktpa from 2020

KAP Overview

Gorny309

Zhilny262

KAPHigh quality assets in close vicinity to production plant

17

Significant resource base (571 koz AuEq) and exploration potential to support mine life extension of the Valunisty mine

KAP license area located within the Eastern Chukotka flank of the Okhotsk-Chukotka volcanic belt (OCVB)

The license covers the area of 831 km2 comprising the Valunisty deposit and the areas of Gorny, Zhilny, Shakh and Osenny

Mineralisation is associated with metasomatites which host quartz and adular-quartz veins with silver-gold mineralisation

Mining operations at Zhilny and Shakh expected to commence after Valunisty and Gorny reserves are depleted

AuEq Mineral Resources

by asset, koz AuEq

Overview

Note: Mineral Resources and Ore Reserve as at 01.01.2018 (CSA Global)

571 koz

0 5km

Valunisty Mill

Zhilny

Status Resource estimate


Resources 262 koz @ 3.5 g/t AuEq

Gorny

Status Pilot mining


Reserves 35 koz @ 5.2 g/t AuEq

Resources 309 koz @ 2.6 g/t AuEq

Osenny

Status Exploration

Distance from the mill ~30 km

Resources N/A

Valunisty mine area

KAP License Area

Shakh

Status Resource estimate


Drilling to date 9 km

Resources N/A

KAPGorny. Current pilot mining with near-term full scale production

18

Plan View of Gorny Area

NORTH

CENTRAL

GORNY-7

Located only 18 km from the Valunisty mill

Significant potential for Resources-to-Reserves

conversion

Pilot mining is under way

In-fill drilling expected in 2018-2019 with further reserve

expansion

Full-scale mining operations expected in 2019

Mineralisation of gold-bearing quartz and adular-quartz

veins occur mainly among secondary quartzites

Ore Reserves1 - 35 koz at 5.2 g/t AuEq

Mineral Resources1 - 309 koz at 2.6 g/t AuEq

Overview

Gorny 7 Planned Open Pit


Kayenmivaam (“Kayen”) Overview

Kayenmivaam (“Kayen”) Overview

License AreaOverview Prospective 1,214 km2 exploration area located only ~130 km

from Kupol

Acquired by current shareholders in 2010

Drilling to date1 - ~23.3 km

Historical cost to date1,2 - ~$15.3 m

Trenches, ditches to date1 - 338,796 sq m

No JORC-compliant resource yet

Levoberezhny and Televeem / Televeem North are considered

the most prospective areas

Levoberezhny / Aryk

Preliminary C2+P1 resource estimate3 of 7.1 t Au at 2.5 g/t Au

and 341 t Ag at 120 g/t (up to 125 m depth)

Au and Ag grades in grab samples reach 150 g/t Au and 21 kg/t

Ag

Televeem / Televeem North

Extensive (more than 12 km) and thick (2.5 - 3 km) mineralized

zone with underexplored gold bearing veins with single

intersections

Average thickness of ore bodies (247 intersections) - 1.14 m at

8.05 g/t Au and 64 g/t Ag (up to 150 m depth)

Key license requirements

Report on prospecting and exploration works undertaken in 2011-

2016 to be submitted by April 2018

Exploration programme to be submitted by October 2018

1. 2000-2004 and 2011-2017 exploration and prospecting programmes

2. Inclusive of 12m RUB spent on the license

3. In accordance with Russian State Commission on Mineral Resources (GKZ), non-JORC compliant 20

Levoberzhny

Aryk

Televeem North

Televeem

Complexny

Kayen Middle

Mayuler

QuartzKayen Left

Appendices

Development History

22

1992

Valunisty ore cluster

was established

Gorny discovered,

mineral resources

estimate

1998

O/P mining

commissioned at

Valunisty

2003

Kanchalano-

Amguemskaya Area

(KAP) discovered

1957

Prospecting works

at KAP (well

logging, areal

measurements)

2007-2011

2011

Valunisty Mine LLC

acquired a license

on exploration and

mining at Valunisty

Valunisty Mine LLC

acquired by current

shareholders

2012

Valunisty and KAP

first JORC Mineral

Resource estimate

2013

KAP LLC acquired

by current

shareholders

2015 2016 2017

Auriant engaged as a

management Company

for

Valunisty and KAP

(2015 - 2016)

Valunisty and KAP

JORC Ore Reserve

estimate

Valunisty Reserves

increase (GKZ)

Extensive exploration

program at KAP

2013-2017

2018

Pilot mining at

Gorny commences

6%

0%

23

The Beringovsky Advanced Special Economic Zone (ASEZ)

Tax reliefs for Valunisty and KAP

Overview

As the part of the long-term Government strategy for

attracting direct investments into the Far East the

Beringovsky ASEZ was created in August, 2015

The law assumes significant tax reliefs to the corporate

income and mineral extraction taxes once operations

commence

The benefits can be used from the first year in which profits

are generated

The Beringovsky ASEZ covers the area of Anadyr city and

a significant part of the Anadyr municipal district

In 2016, the Valunisty mine (to be applied to U/G operations

only) and KAP joined the Beringovsky ASEZ

‒ Combined Valunisty U/G and KAP production over

mine life (2018 onwards) - ~340 koz

Location

Tax benefits

20%

0% 0%

30%

80 days

Declarative

2.2%

Profit tax Royalty1 Property tax Payroll Tax VAT refund

Years 1-5: 0%

Years 6-10: 12%

Years 1-2: 0%

Years 3-4: 1.2%

Years 5-6: 2.4%

Years 1-2: 0%

Years 6-10: 1.1%

Anadyr

Valunisty / KAPEgvekinot

Source: Tax Code of Russian Federation

1. In case of gold (standard royalty – 6.0%)

2. Effective rate

3. Expected PFS results (CSA Global), exclusive of Zhilny, Shakh and Osenny

15%2

JORC Ore Reserves (as at 1 January 2018)

24

Source: CSA Global

1. Equivalent gold grades are calculated as follows: Au Eq (g/t) = Au (g/t) + Conversion Factor*Ag (g/t);

Conversion Factors are calculated as follows: (Net Ag price / Net Au price) * (Ag recovery / Au recovery);

Assumed metal prices (Net price) for gold equivalent conversion are $1,250/oz for gold and $16/oz for silver;

Au recoveries for Valunisty – 95%, Gorny – 93%; Ag recoveries for Valunisty – 75%, Gorny – 75%

Valunisty Ore Grade Cont. Au Cont. Au Grade Cont. Ag Cont. Ag Au Eq Au Eq Grade1

(kt) (g/t Au) (kg) (koz) (g/t Ag) (kg) (koz) (kg) (koz) (g/t AuEq)

Novaya Underground 1,488 5.80 8,634 278 56.31 83,794 2,694 9,480 305 6.4

Novaya Open Pit 1,054 3.39 3,571 115 44.60 47,003 1,511 4,046 130 3.8

Glavnaya Open Pit 646 3.74 2,418 78 33.95 21,937 705 2,640 85 4.1

Total Valunisty (Probable) 3,188 4.59 14,623 470 47.91 152,735 4,911 16,166 520 5.1

KAP (Gorny) Ore Grade Cont. Au Cont. Au Grade Cont. Ag Cont. Ag Au Eq Au Eq Grade1


Gorny proved 44 6.39 281 9 32.90 1,449 47 296 10 6.7

Gorny probable 165 3.92 645 21 80.36 13,238 426 782 25 4.7

Total Gorny 209 4.44 927 30 70.35 14,687 472 1,078 35 5.2

Grand Total Ore Grade Cont. Au Cont. Au Grade Cont. Ag Cont. Ag Au Eq Au Eq Grade1


Proved 44 6.39 281 9 32.90 1,449 47 296 10 6.7

Probable 3,353 4.55 15,268 491 49.50 165,973 5,336 16,948 545 5.1

Grand Total 3,397 4.58 15,549 500 49.29 167,422 5,383 17,244 554 5.1

JORC Mineral Resources (as at 1 January 2018)

25

Valunisty Total1 Ore Grade Cont. Au Cont. Au Grade Cont. Ag Cont. Ag Au Eq Au Eq Grade4


Indicated 8,757 2.98 26,088 839 36.62 320,682 10,310 29,329 943 3.35

Inferred 2,843 1.91 5,426 174 37.66 107,069 3,442 6,508 209 2.29

Total Valunisty 11,600 2.72 31,514 1,013 36.88 427,751 13,753 35,837 1,152 3.09

Gorny2 Ore Grade Cont. Au Cont. Au Grade Cont. Ag Cont. Ag Au Eq Au Eq Grade4


Indicated 571 2.94 1,677 54 61.26 34,981 1,125 2,038 66 3.57

Inferred 3,097 2.18 6,761 217 25.38 78,612 2,527 7,573 243 2.45

Total Gorny 3,668 2.30 8,439 271 30.97 113,594 3,652 9,611 309 2.62

Zhilny3 Ore Grade Cont. Au Cont. Au Grade Cont. Ag Cont. Ag Au Eq Au Eq Grade4


Inferred 2,330 0.99 2,317 74 209.14 487,296 15,667 8,145 262 3.50

Total Zhilny 2,330 0.99 2,317 74 209.14 487,296 15,667 8,145 262 3.50

KAP Total Ore Grade Cont. Au Cont. Au Grade Cont. Ag Cont. Ag Au Eq Au Eq Grade4


Indicated 571 2.94 1,677 54 61.26 34,981 1,125 2,038 66 3.57

Inferred 5,427 1.67 9,078 292 104.28 565,909 18,194 15,718 505 2.90

Total KAP 5,998 1.79 10,756 346 100.18 600,890 19,319 17,756 571 2.96

Grand Total Ore Grade Cont. Au Cont. Au Grade Cont. Ag Cont. Ag Au Eq Au Eq Grade4


Indicated 9,328 2.98 27,765 893 38.13 355,663 11,435 31,367 1,008 3.36

Inferred 8,270 1.75 14,504 466 81.38 672,977 21,637 22,226 715 2.69

Grand Total 17,598 2.40 42,270 1,359 58.45 1,028,641 33,072 53,593 1,723 3.05

Source: CSA Global

Note: updated Mineral Resources (as at 1 January 2018) expected by the end 2017

1. Resources evaluated with specific cut-off grade of 0.5 g/t Au;

2. Resources evaluated with specific cut-off grade of 0.5 g/t Au;

3. Resources evaluated with specific cut-off grade of 40 g/t Ag;

4. Equivalent gold grades are calculated as follows: Au Eq (g/t) = Au (g/t) + Conversion Factor*Ag (g/t);

Conversion Factors are calculated as follows: (Net Ag price / Net Au price) * (Ag recovery / Au recovery);

Assumed metal prices (Net price) for gold equivalent conversion are $1,250/oz for gold and $16/oz for silver;

Au recoveries for Valunisty – 95%, Gorny – 93%, Zhilny – 91%; Ag recoveries for Valunisty – 75%, Gorny – 75%, Zhilny – 85%

Consolidated Financial Statements (IFRS)

26

Source: Company’s audited IFRS financial statementsNote: Consolidated accounts of Valunisty LLC and KAP LLC;1. EBITDA adjusted for movement in raw materials and consumables obsolescence provision, as per HGM approach 2. Non-IFRS measure3. Exclusive of related-party debt4. Adjustments are to be reflected in the FY 2017 financial statements; cash flow statement above is not adjusted

IFRS, US$000 (unless stated) 9M 20172016

(adjusted)42015 2014

P&L

Sales revenue 28,521 40,639 40,996 35,120

EBITDA1 6,933 17,573 11,427 (3,843)

Net profit /(loss) for the period 141 5,306 503 (8,418)

Balance sheet

Total Assets 78,325 75,218 74,626 37,121

Total Equity (2,042) (2,184) (7,490) (7,836)

Total Liabilities 78,325 75,218 74,626 37,121

Including

Related-party debt 56,780 62,287 63,282 33,013

Bank loans 16,309 9,286 12,579 6,800

Cash flow statement

Operating cash flow 3,000 14,419 4,503 (234)

Investing cash flow (5,211) (4,806) (5,942) (1,191)

Financing cash flow (1,355) (9,440) 4,231 832

Cash and cash equivalents, eop 345 3,911 3,738 946

Key financial metrics

EBITDA1 6,933 17,573 11,427 (3,843)

EBITDA1 margin 24% 43% 28% NM

Free cash flow (2,211) 9,613 (1,439) (1,425)

Total cash cost (TCC)2, $/oz 951 709 842 1,448

Capex2 5,211 4,811 6,133 1,242

Net debt3 15,964 5,375 8,841 5,854

Net debt / EBITDA3 2.3x 0.3x 0.7x NM

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