Q3 JULY – SEPTEMBER 2022 (July – September 2021)

• Revenue TUSD 43,313 (33,131)
• The Group recognized non-cash revenue from sale of gold of TUSD 32,619 and cost of gold purchased of TUSD 41,725, affecting the gross profit with TUSD -9,106 as a result of the settlement of a commodity loan.
• EBITDA TUSD 2,966 (15,376)
• Non-cash impairment of ore in stock TUSD -1,035 (-3,962)
• Net financial results affected by unrealized gain from gold hedges TUSD 2,804 (175)
• Loss for the period-10,340 (profit: 5,808)
• Earnings per share before dilution USD -0.01 (0.01)
• Gold in stock ready for sale increased to 13.41 koz, corresponding to a sales value of TUSD 22,400

JANUARY – SEPTEMBER 2022 (January – September 2021)

• Revenue TUSD 86,225 (70,365)
• The Group recognized non-cash revenue from sale of gold of TUSD 32,619 and cost of gold purchased of TUSD 41,725, affecting the gross profit with TUSD -9,106 as a result of the settlement of a commodity loan.
• EBITDA TUSD 18,255 (29,390)
• Unrealized gain from gold hedges TUSD 1,666 (gain of 3,537)
• Non-cash impairment of ore in stock TUSD -6,977 (-6,005)
• Loss for the period TUSD -9,724 (profit: 11,736)
• Earnings per share before dilution USD -0.01 (0.01)
• 2022 gold production guidance of 49-52 koz

Significant events after the reporting period

• Kopy Goldfields establishes operations in Khakassia through acquisition of 25% interest in the gold company Zolotaya Zvezda

SUMMARY OF FINANCIAL INFORMATION

Pursuing our long-term plan while seeking to manage many challenges
In Q3, the Ruble nominated gold price remained weak and we continued to position the company to benefit from further volatility in macro parameters by continuing to build gold inventory and settling outstanding delivery obligations under a gold loan. These factors, which are not typical for quarterly operations, had significant effects on the reported financial results. Our investment projects, especially our major development at Malyutka, remained on track, while the production targets were not fully reached.

Financial performance
As previously announced in the third quarter operational update, we acquired gold in the market to settle and refinance a commodity loan through a new bank loan. Reported revenue included non-cash revenue of TUSD 32,619 and cost of sales was affected by TUSD 41,725 which negatively affected the gross profit of the quarter and nine months period with net TUSD 9,106. The average realized gold price, operating cash flow and debt ratios were also affected beyond what is typical for normal quarterly operations.

Excluding the effects of the gold loan settlement, revenues decreased substantially compared to Q3 last year as we limited gold sales in order to further add to the gold inventory. By quarter end, our gold in stock ready for sale had increased to 13.41 koz with a market value of TUSD 22,400.

Production
Kopy Goldfields’ gold production from the upgraded Yubileyniy CIP plant increased by 35% in Q3 2022 compared to Q3 2021. During the quarter, we also saw the first gold from the new heap leach plant at Perevalnoe. The plant was commissioned late in Q2 2022 to be operated all-year round. During the warm season, we also had our placer mines in production. However, with a quarterly production of 14.39 koz, we didn’t fully reach our production targets for the quarter. Due to an extended time of finetuning of processes and processing equipment at the extended Yubileyniy plant in combination with issues related to understaffing, the production from Yubileyniy was lower than expected. In October we adjusted the production plan for 2022 accordingly, and we now forecast a production of 49-52 koz in 2022.

Investments
We have started to reap the benefits of investment projects recently launched. The Yubileyniy extension and the heap leach plant at Perevalnoe are adding more gold to our production. Our main development focus in 2022 is the Malyutka project, targeted for commissioning in 2023. We are on track with the construction schedule and have used the summer window for logistic and procurement activities to secure needed material for the development of this next milestone towards reaching our production target of 100 koz of gold in 2025. In addition, the feasibility study to further extend the Yubileyniy project capacity to 400 ktpa is ongoing.

In November, after the reporting period, we announced our entry into the Khakassia region of Russia through the acquisition of a 25% interest in the Russian gold company Zolotaya Zvezda CJSC. Zolotaya Zvezda holds substantial reserves and resources and has been in production since the mid 90s as a heap leach producer. This is a solid project with a significant exploration and production upside. Zolotaya Zvezda is in the process of modernizing and extending its Mayskiy processing plant, targeted to start operations in the second half of 2023.

ESG
Our action plan targeting to reduce Lost Time Injury Frequency Rate (“LTIFR”) is progressing, and I am happy to report that the LTIFR decreased significantly to less than 0.7 during the nine months period 2022, down from 1.66 in 2021. We are also moving ahead with our plans to use renewable energy from solar power plant at some of our sites. Pre-design and engineering works are almost finished. Pre-designed capacity of solar power plants is expected to cover more than 30% of required energy. We have also advanced our waste utilization project in order to further minimize our environmental footprint.

Macro environment
Although the macro environment continues to create many challenges, the industry is slowly adapting to some of the new circumstances by finding new supply channels for procurement of equipment and materials. However, the sanctions and other restrictions significantly affect the business environment and influence development strategies. As previously, there are no sanctions that affect us directly. The Russian mobilization of military reservists during the fall did not have any significant effect on our operations. Since the end of Q3, the international gold prices have strengthened and the local market has stabilized, which is supportive of our strategic decisions to settle the gold loan and build gold inventory. However, as the Russian Ruble remains strong, the Ruble nominated gold price continues to put pressure on us to look closely at our operation costs and to continue optimizations. The future effects of the many challenges continue to be hard to predict, but we are constantly evaluating the situation.

Outlook
The near term focus is on the fine tuning of processes and processing equipment at Yubileyniy mill. We expect the production to increase further going forward. We are also at fast pace advancing the development of the Malyutka plant. A new focus will be to bring the operations at our new Khakassian asset up to speed and to assume the operatorship of the project. In short - we remain on our path and continue to pursue our long-term plan while we seek to manage many challenges in the current environment.

Mikhail Damrin
CEO Kopy Goldfields