Sale of Kayen

02 June 2020

Highland Gold Mining Limited ("Highland Gold" or the "Company", AIM: HGM) today announces that it has entered into an agreement for the sale of the Kayenmivaam (“Kayen”) licence for cash consideration of US$15 million plus a royalty.

Kayen is an early-stage gold exploration property covering 1,214 square kilometres in the Chukotka region of Russia. Highland Gold received the licence as an add-on to the Valunisty acquisition in December 2018. The site’s distance from the Valunisty mine and from the Company’s premier development project, Kekura, preclude any operational synergies, and the project was considered to be a non-core asset.

Highland Gold has agreed to sell its wholly-owned subsidiary SVGGK LLC, holder of the Kayen license, to an unrelated party for US$15 million to be paid in two equal instalments, the first at closing and the second following the legal transfer of shares. In addition, the Company will receive a 2% royalty on gold produced and sold from the deposit in excess of 500,000 ounces for a period of 30 years. The transaction is subject to approval by Russia’s Federal Anti-Monopoly Service and is expected to be completed later this year.

The structure of the deal ensures that Highland Gold receives an immediate cash payment in a capital-intensive year during which the Company is investing in the construction of Kekura and the completion of improvement projects at the Belaya Gora and Novoshirokinskoye mines. At the same time, the Company retains an interest in Kayen’s upside potential via the royalty on future production from the licence.

 

FOR FURTHER INFORMATION, PLEASE CONTACT:

Highland Gold Mining Ltd.

John Mann, Head of Communications

+ 7 495 424 95 21

Duncan Baxter, Non-Executive Director

+ 44 (0) 1534 814 202

Numis Securities Limited

(Nominated Adviser and Joint Broker)

John Prior, James Black, Paul Gillam

+44 (0) 207 260 1000

BMO Capital Markets Limited

(Joint Broker)

Tom Rider, Pascal Lussier Duquette, Neil Elliot

+44 (0) 207 236 1010

Peat & Co

(Joint Broker)

Charlie Peat

+44 (0) 207 104 2334

 

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Disclosures in accordance with AIM rule 12, Schedule 4:

  • The transaction is comprised of the sale of a 100% interest in SVGGK LLC to an unrelated party.
  • SVGGK LLC is the holder of the Kayen licence, a greenfield exploration property.
  • A loss before income tax of US$27 thousand was attributed to the asset in the Company’s 2019 full-year audited accounts.
  • A net book value of US$738 thousand was carried for the asset in the Company’s 2019 full-year audited accounts.
  • The consideration to be received is US$15 million, plus a royalty on gold produced and sold from the deposit in excess of 500,000 ounces for a period of 30 years (the licence does not currently have any booked reserves).
  • The transaction represents the sale of a non-core asset.
  • The proceeds will be used for working capital.
  • The Company’s current intention is to retain the royalty.