PREMIUM GOLD MINING COMPANY 2015 Integrated Report CONTENTS 1. Strategic Report 1.1 2015 in Brief 5 1.2 Message from the Chairman 9 1.3 Message from the CEO 11 1.4 Strategy 13 1.5 Market Overview 20 2. Business Overview 2.1 About Nordgold 27 2.2 Map of Operations 28 2.3 Mission, Vision and Values 29 2.4 Business Model 30 3. Performance and Efficiency 3.1 Operational Performance 34 3.2 Exploration Activities and Development Pipeline 54 3.3 Business System of Nordgold 73 3.4 Financial Performance (MD&A) 78 4. Responsible Mining 4.1 Approach to Sustainability 133 4.2 Stakeholder Engagement 135 4.3 Respect for People 144 4.4 Health and Safety 158 4.5 Environment 164 4.6 Communities 172 2 // Nordgold // 2015 Integrated report 5. Governance 5.1 Corporate Governance Summary 188 5.2 Directors Report 189 5.3 Corporate Governance Statement 195 5.4 The Board of the Company and committees 206 5.5 Management Team 213 5.6 Remuneration Report 217 5.7 Risk Management 226 6. Financial Statements Financial Statements with Notes 236 Company Only Financial Statements for the Year Ended 31 December 2015 285 Independent Audit’s Report 301 Appendix About the Report 308 GRI Index 312 Nordgold Sustainability Regulations 324 Glossary 325 3 // Nordgold // 2015 Integrated report 1 STRATEGIC REPORT Returns to shareholders in 2015 US$ 87.8 MLN including US$58.5 mln of dividends and US$29.3 mln through buyback Strategic Business Performance Responsible Governance Financial Appendix Report Overview and Efficiency Mining Statements 1.11.1 20152015 ININ BRIEFBRIEF Performance Operational Maintaining Nordgold’s position at the lower end of the global cost curve Gold sold AISC & Development Pipeline Exploration Activities +1%+1% US$ -11%-11% 972.9 KOZ 793/OZ Cash flow from operating activities EBITDA 2012) (JORC Estimate and Resources Reserves US$ +27%+27% US$ +7%+7% 417.9 MLN 519.8 MLN Free cash flow EBITDA Margin (%) +5.9 p.p.+5.9 p.p. of Nordgold System Business US$ -13%-13% 158.1 MLN 46% Strong free cash flow while investing in Normalised net profit construction of new low-cost Bouly mine attributable to shareholders with production expected to start in H2 2016 (MD&A) Financial Performance US$ 195.0 MLN +50%+50% Net debt US$ -7%-7% 584.0MLN Further reduction of net debt reflects strong free cash flow Investments in supporting Returns local communities to shareholders US$ US$ 1.8 MLN 87.8 MLN including US$58.5 mln of dividends and US$29.3 mln through buyback 5 // Nordgold // 2015 Integrated report Performance highlights Financial highlights, US$ million 2015 2014 Revenue 1,129.3 1,216.1 Gross profit 351.5 370.4 EBITDA 519.8 487.0 EBIDTA margin, % 46.0 40.1 Net profit 188.7 123.0 TCC, US$/oz 604 673 AISC, US$/oz 793 887 Cash flow from operating activities 417.9 328.0 Free cash flow 158.1 180.7 Capital expenditures 258.3 157.8 Net debt/LTM EBITDA 1.1x 1.3x Operational highlights 2015 2014 Gold production, koz 950.0 984.5 Gold sold, koz 972.9 960.4 Ore mined, kt 19,935 18,421 Ore processed, kt 22,127 22,001 Grade, g/t 1.58 1.74 Recovery, % 81.7 81.7 Non-financial highlights 2015 2014 LTIFR, lost-time injury frequency rate 1.60 1.23 LTI, total number of lost time injuries 29 23 Investments in supporting local communities, US$ thousand 1,7811 634 Total number of employees 8,396 8,757 1 Including US$740 thousand of Nordgold Community development programmes and US$1,041 thousand of Social tax accrued in 2015 in Guinea. 6 // Nordgold // 2015 Integrated report Events calendar Significant events January February April • French Government approves • Nordgold’s Berezitovy mine • Nordgold increases Ore the Columbus Gold's Agree- wins gold exploration and Reserves by 3% to 13.0 Moz ment with Nordgold on mining licence in Russia of gold since 2012 despite Montagne d’Or Project in depletion of 2.3 Moz due to • Despite the backdrop of falling French Guiana the success of 2013-2014 gold price, Nordgold delivers exploration programmes, • Nordgold delivers record both on an operational and which were mainly focused on operating results for 2014, financial level, with record standalone growth projects with production up 7% to gold production, a very strong 984.5 koz driven by improved EBITDA increase of 24% and • Nordgold appoints Howard operational efficiency at all over US$180 million of free Golden the Exploration mines cash flow Director • Nordgold provides strategic update during Investor Day in London May June July Nordgold starts HR project Nordgold increases stake in • Nordgold announces results "Gold Reserve" Northquest to 42.9% from of the NI 43-101 compliant 23.8% Preliminary Economic Assessment of the Montagne d’Or deposit in French Guiana • Nordgold receives construc- tion permit for Gross project November December Nordgold increases stake in Nordgold announces its intention Northquest to 52.3% to make an all-cash offer for Northquest 7 // Nordgold // 2015 Integrated report Industry events & participation February 9–12 February 10 March 1–4 June 15 Cape Town Moscow Toronto Amsterdam African Mining Precious Metals PDAC AGM Indaba Summit June 30 September 21–23 October November 30 London Denver Moscow London Natural Resources Denver Gold • MINEX Russia Mines and Money Forum Forum Forum 2015 • Russian CFO Summit 2015 Awards ••Berezitoviy took 4th place in the ranking of “The League of the Best” among the Far Eastern Federal District companies in the nomination “Production of ores and precious metals, ores of rare metals sands” ••Nordgold was named as Corporate Philanthropy Leaders 2015 for the contribution to charity and debut of the project Social bell (Berezitovy) ••Nordgold was named “The Attractive Employer 2014” according to the study of Superjob.ru 8 // Nordgold // 2015 Integrated report 1.2 MESSAGE FROM THE CHAIRMAN I believe that Nordgold has a winning formula. Our results suggest that we are making the right investments in the right places, and have the right team to deliver on our promises – from exploration to operation, and in the management of our costs. This year we have taken significant steps towards building a more focused and profitable business. We have also made substantial progress towards our goal of being a leading creator of value for our stakeholders in the gold sector. All of this is within a low gold price environment following the sharp correction in 2013. Price remains one of the biggest challenges for the industry – and for our Company. However, we believe we have positioned ourselves well to not only withstand but also to overcome these challenging circumstances. During the year Nordgold delivered a very strong operational performance, which is testament to the improvements we have been David Morgan making across the business. We were focused on managing our costs effectively and I am delighted with progress we have made. Our all-in Chairman of the Board sustaining costs (AISC) for the 2015 financial year were US$793 per ounce compared to US887 per ounce in 2014, firmly establishing ourselves in the lower quartile of the global cost curve. Safety remains an absolute priority. Our objective is to successfully pursue a policy of Zero Harm, and to ensure the occupational health and safety of all our employees and contractors. Despite our efforts, it is with great sadness I confirm during the past year there were four fatalities, compared to one in 2014, and our Lost Time Injury Frequency Rate (LTIFR) also increased, albeit marginally. We offer our deepest condolences to the bereaved families and the colleagues concerned, and accept that this performance is not good enough. We are determined to take even greater action to instill an absolute commitment to safety across all our mine sites. We will enhance HSE training programmes for employees at all the mines and begin a roll out of integrated HSE software. We will also continue to invest in the mechanisation of underground operations and to improve our underground control systems. In accordance with our goal, we have continued to create value for shareholders. Nordgold returned US$58.5 million in dividends to shareholders in 2015 and a further US$29.3 million through the 2015 buyback programme of global depository receipts (GDRs). Despite the challenging times being experienced by the entire mining industry, our strong balance sheet and consistent generation of free cash flow, enables us to continue investing in our exciting pipeline of low-cost development projects. 9 // Nordgold // 2015 Integrated report In 2015, our main efforts in this regard were on the Bouly project in Burkina Faso, which we believe will follow the success of our flagship Bissa mine and allow us to continue profitable growth. We expect to complete construction on schedule and within budget and begin production in the second half of 2016. Another significant project is the Gross mine in Russia, where construction will start in spring 2016 with production scheduled for early 2018. The commissioning of the Bouly and Gross mines would increase our production by more than 35 percent and further reduce our overall AISC. We have also successfully continued development of our other growth projects, including the Montagne d’Or project in French Guiana and the Pistol Bay exploration project in Canada. We are committed to a strong sustainable future. Growing our reserves base through exploration and through investments in new global opportunities are key components of that. The past year has been very positive, and saw us more than replace our mined ounces with increased reserves.