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00 Creating success in rapidly changing environment GV Gold viewpoint on Russian gold mining industry Roman Schetinsky Director, Perspective development.

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Presentation on theme: "00 Creating success in rapidly changing environment GV Gold viewpoint on Russian gold mining industry Roman Schetinsky Director, Perspective development."— Presentation transcript:

1 00 Creating success in rapidly changing environment GV Gold viewpoint on Russian gold mining industry Roman Schetinsky Director, Perspective development March 2011 CERBA CONFERRENCE

2 1 Disclaimer The information in this presentation contains forward-looking statements. Forward-looking statements include statements regarding plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. All information regarding reserves and resources is given under the GKZ (State Reserves Committee) Code and JORC Code, CIM-compliant estimate prepared in accordance with the NI 43-101 requirements (2007). The information and opinions contained in this presentation are provided as of March 2011 and are subject to change without notice.

3 2 Russian Gold Mining Industry Today The Industry has already seen its most significant developments: –The majors are known –Consolidation is mainly over –New capacities are already in place Overall stability of the industry. Major Mining houses secured their long- term production plans. TOP-5 produce about 55% of gold, the following next TOP 15 companies – another 25% (TOP-20 ~80%). Remaining 400 totally produce 20%. Growth in gold production comes from hardrock assets. Alluvial mining will continue to decrease. Visible step up in the past (Y2009). What trend is following, up or down? Key HighlightsRussian Gold mining breakdown 55%55% 25%25% 20%20% Leading 5: -Polyus Gold -Kinross (Kupol) -Petropavlovsk -Polymetal -Severstal The next TOP 15 companies Remaining ~ 400 companies Sources: Russian Goldminers Union, Company sources Historical alluvial and hardrock production Sources: Russian Goldminers Union, Company sources (t)

4 33 Growth Opportunities Possibilities of organic growth are limited in Russia There are no deposits with reserves on state balance (except probably Sukhoi Log) Exploration in new areas has almost stopped Hard to name properties in real pre-production stage. Many of them are frozen with no intention to be developed Profits from M&A deals are in favor to capital investments in new projects: Opportunities to acquire mid-tier producers in Russia Going abroad is a new tendency. Joint ventures in CIS countries and/or far located parts of the World Efficiency of merging with new companies could be significantly higher than investing in developing mining projects High gold prices secure financial stability for companies development programs. Current environment creates opportunities for investments in new projects, targeting to increase overall gold production. How long will it last? Surely not forever. Companies try to follow two main approaches: organic growth or M&A strategies. Cash margins are rapidly increasing ($/oz) The average price in 2010 has risen by 25% to 1224 USD/oz Gold price Average Cash costs Source: Company sources Development and growth strategies Organic growthM&A approach Growth in cash margins

5 44 Cash margins sharp fall ($/oz) Source: Virtual Metals, Company sources Challenges and Threats Rapid cash costs increase in Russia up to the same level as in the rest of the World. Quality of the deposits in production stage is constantly decreasing. High grade ores depletion. Capital expenditures overrun in the most of the new projects. Mining analysts predict gold price to step down and reach 1200 USD\oz in 2013 and 1150 USD\oz in 2014. We believe the 900 USD\oz scenario in a short term could be realistic. Many projects will shut down, causing production to reduce. This will strongly reflect gold price. World constraints Gold price forecast Source: Apeco, Company Sources Investing current cash margins into new projects will allow to secure companies mid-term production plans and hardly to raise it Long-term range 850 - 1050 USD/oz Timeframe for investments

6 5 GV Gold in Russian Goldmining Industry 8 th place in Russian goldmining industry Current production - 125 koz AU p.a. (2010) Mineral Resource and Exploration Potential – 13.44 Moz Au Stable position in the Industry Balanced portfolio of assets Corporate governance principles Sustainable development 2 Producing assets 2 Development / Pre-production assets 7 Exploration projects Annual and interim IFRS reporting since 2003 Audited reserves under international reserve audit classifications in place Dividend policy implemented Two international independent non-executive board members Compliance with Health and Safety policies is strictly monitored Compliance with all Russian environmental requirements 2010 Revenue – 156 mln USD (E) 2010 EBITDA – 86 mln USD (E) 2010 EBITDA Margin – 55% (E) 2010 Total Cash Costs – 479 USD/oz (E) Strong financial performance

7 66 GV Gold Assets Portfolio Producing/ Expansion –Kuranakh alluvials Development / Pre-production –Open pit mining and hard rock ore processing at Kuranakh Exploration –Chudnoye deposit –Further license acquisitions Yakutia Region Producing / Expansion –Golets Vysochaishy Development/Pre-production –Ykanskoye –Ozherelie Exploration –Khomolho ore fields –Ugakhan –Leprindo –Further license acquisitions Irkutsk RegionKomi Region Marakan Leprindo Khomolkho Golets Kuranakh Chudnoye Production Moscow rep office Bodaibo office MOSCOW Exploration and development Bodaibo

8 77 Golets Vysochaishy Groups Development Loco Key Highlights Located in Bodaibo area, Irkutsk region. Significant growth potential with limited development risk. Total Resources 2.8 Moz Au, inclusive P&P reserves of 2.3 Moz Au. Two processing mills operating, launch of the third plant with annual capacity of 3.5 mpta in August 2011. Total processing capacity will reach 4.8 mpta in 2012. All principal Capital Expenditures have already been acrued. Production highlights: –116 koz Au (2010) –150 koz Au (2011E) –260 koz Au (2012E) Current resource base secures production till 2020. Production has a real chance to boost after 2020. The company is planning to take part in developing Sukhoi Log (located 30 km South of Golets Vysochaishy), using current facilities to process ores from the well-known giant deposit

9 88 Marakan project Efficient Capital Expenditures Ykanskoye is the next milestone in the Irkutsk project development. Located to the West of Golets Vysochaishy. Current Resource base – 250 Koz Au, average grade 3 g/t. In the end of 2010 a pilot processing plant was launched with capacity of 200 ktpa. Plans to double processing capacities up to 400 ktpa by 2015. Production plans: –15 koz Au (2012E) –30 koz Au (2015E) Ongoing intense exploration to increase current resource base. Ykanskoye deposit Ozherelie deposit Currently in advanced exploration stage with aggressive exploration plans for 2010 – 2013. Mineral Resource and Exploration potential 1.2 Moz Au. Plans to convert not less than 1 Moz Au into Reserves by 2013. By 2015, production capacity of 100 koz Au p.a. Plant at Ykanskoye

10 99 Kuranakh Unlocking the Value Kuranakh is Russias largest placer gold deposit. Located in the Southern part of Yakutia with well developed infrastructure. GV gold acquired the 51% stake in Kuranakh in 2008 –Option to acquire the remaining 49% Total Resources of 5.3 Moz Au, inclusive P&P reserves of 3.5 Moz Au. New deep digging dredge launch in August 2011. Expected to switch to open pit mining with a significant increase in production. Production plans: –20 koz Au (2011E) –30 koz Au (2012E) By 2015 production will reach 100 koz Au p.a. Key highlights Development program: New dredges installation in 2011 and 2013 Installation of the new hardrock processing plant, with a designed annual capacity of 2.0 mtpa, launch by 2015

11 10 Komi project – Chudnoye deposit Source of Additional Future Growth Relatively new mining region, with high prospective opportunities for greenfield projects. A convenient geographic location in the European part of Russia with a developed infrastructure. Ore bodies are represented with a stockwork of gold-bearing fuchsite veinlets in the faulted zone –High grades (4-9 g/t) with non-uniform distribution Available for open-pit development –Gold is recoverable via gravity GV Gold plans to continue intense exploration to grow the current resource base. Key highlights Geological map of the licence area and schematic longitudinal geological section Mineral Resource and Exploration Potential (JORC) – 1 Moz Au

12 11 Asset Ore Reserves (000'oz) Mineral Resources (000'oz)Exploration Potential (000'oz) Total (000'oz) Proven & ProbableMeasured and Indicated Inferred Irkutsk Project Golets Vysochaishy 2.9 Khomolkho Ore Field 1.2 Ugakhan 0.5 Ykanskoe Deposit 0.20.5 0.7 Ozherelie Deposit 0.11.3 1.4 Leprindo 0.040.4 0.44 Yakutia Project Kuranakh 5.3 Komi Project Chudnoe 1.0 Total Mineral Resource Base13.44 GV Gold Mineral Resource Base Exploration is the key building block of GV Golds operating strategy

13 12 M&A Deals – Affordable Opportunities for Future Growth All aspects of a potential project are carefully considered Ability to use Companys know-how and previous experience is highly desirable Ability to start processing with potential for gradual production ramp-up Priority given to high grade ores Environmentally friendly and economically effective processing technologies are preferred Geography Infrastructure Adequate transport links and access to power grid Availability of qualified labour force Technical aspects and mineral reserve base Open pit mining with low strip ratio (<10 t/t) Ore reserves of at least 0.5 Moz Au and substantial growth potential Suitability for highly efficient mining equipment Ore processing Economic requirements Cash margins of at least 30% Mid-size initial capital expenditure Possibility to start production in 3-5 years Time required to start/ complete the project Preference given to the regions of GV Gold presence - GV Gold has a stable gold mining business - Development programs for current projects are clear - Strong financial performance secures possibilities for large scale investments - Ready for further expansion The Projects we are looking for:

14 13 Bodaibo Office: 17, Berezovaya St. 666902, Bodaibo, Irkutsk Region, Russian Federation Tel/fax: + 7 (39561) 5-71-20 +7 (495) 748-13-04 Moscow Office: 8/8, B. Spasoglinishevskiy Per., Office#4 101000, Moscow, Russian Federation Tel: +7 (495) 623-39-63 +7 (495) 623-38-36 Fax: +7 (495) 623-44-13 Thank you for your attention

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