AFRICAN BARRICK GOLD
24 April 2014
Results for the three months ended 31 March 2014 (Unaudited)
Based on IFRS and expressed in US Dollars (US$)
African Barrick Gold plc ("ABG'') reports first quarter 2014 results
"We have delivered another strong set of results, with production of 168,375
ounces and all-in sustaining costs of US$1,131 per ounce, our sixth successive
quarterly reduction in AISC", said Brad Gordon, Chief Executive Officer of
African Barrick Gold. "As a result of our continued cost discipline we
generated positive cash from the operations during the quarter and continue to
expect to be cash flow positive for the full year. We also continue to make
progress on our expansion projects with the commencement of commissioning of
the Bulyanhulu CIL Expansion, approval for an underground portal at North Mara
and today's announcement on the approval of the Upper East Zone at Bulyanhulu
which together will further drive the business forward. We remain on track to
achieve our guidance of 650,000-690,000 ounces of gold production at AISC per
ounce of between US$1,100 and US$1,175."
First Quarter Operational Highlights
Gold production of 168,375 ounces 18% higher than Q1 2013
Gold sales were 5% below production at 159,384 ounces, but 10% higher than Q1
2013
Cash costs1,2 of US$756 per ounce sold, 15% lower than Q1 2013
All-in sustaining costs1,2 of US$1,131 per ounce sold, 3% lower than Q4 2013
and 28% lower than Q1 2013
Average realised gold price of US$1,303 per ounce was 19% below Q1 2013
Bulyanhulu CIL Expansion project moved into the commissioning phase which will
continue through Q2 2014
Post quarter end the Board approved the next step in optimising Bulyanhulu with
the acceleration of the Upper East Zone
First Quarter Financial Highlights
Revenue of US$216 million and EBITDA1,3 of US$65 million were 12% and 21%
respectively below Q1 2013 due to the lower average realised gold price in the
quarter
Net earnings2,3 of US$22.4 million (US5.5 cents per share), up 8% on Q1 2013
Total capital expenditure4 of US$55.7 million was reduced by 47% from Q1 2013
Generated cash flow from operations of US$13.3 million after sustaining capital
Cash position of US$254 million as at 31 March 2014
Three months ended Year ended
31 March 31 December
%
(Unaudited) 2014 20132 change 20132
Gold Production (ounces) 168,375 142,759 18% 637,002
Gold Sold (ounces) 159,384 144,277 10% 643,597
Cash cost (US$/ounce)1 756 893 -15% 812
AISC (US$/ounce)1 1,131 1,577 -28% 1,346
Average realised gold price (US$/ounce)1 1,303 1,610 -19% 1,377
(in US$'000)
Revenue 216,287 245,460 -12% 929,004
EBITDA1,3 64,731 81,943 -21% 240,407
Net earnings/(loss)3 22,410 20,716 8% (781,101)
Basic earnings/(loss) per share (EPS) (cents)3 5.5 5.1 8% (190.4)
Cash generated from operating activities 50,726 57,326 -12% 187,115
Capital expenditure4 55,780 105,709 -47% 385,069
1 Cash costs per ounce sold, all-in sustaining cost per ounce sold (AISC) and
EBITDA are non-IFRS measures. Refer to page 11 for definitions
2 2013 comparative amounts have been restated to exclude Tulawaka
3 EBITDA and net earnings consist of earnings from both continuing and
discontinued operations
4 Excludes non-cash reclamation asset adjustments and includes finance lease
purchases
Operational Review
Our continued delivery on the cost saving targets set out at the start of the
Operational Review is highlighted by a further reduction of 3% in AISC over the
first quarter of 2014 (28% reduction year on year) and improved cash flow
generation from our sustaining operations quarter on quarter supported by a
strong production profile. We remain committed and on track to deliver against
the US$185 million cost saving target as previously set out and reflected in
our AISC guidance. We are progressing the ongoing review in our core mining
areas, and we believe that this will deliver further efficiencies and cost
savings throughout 2014 and beyond.
Divestment of Tulawaka
In February, we announced the completion of the transfer of Tulawaka and
certain exploration licences to STAMICO, the Tanzanian state mining company. As
previously announced STAMICO took ownership and management of the
rehabilitation fund established as part of the closure plan for the mine, in
return for the assumption of all remaining past and future closure and
rehabilitation liabilities for Tulawaka, and has indemnified the other parties
to the agreement in relation to these liabilities. As a result ABG transferred
the balance of the rehabilitation fund to STAMICO, less the transaction
consideration and other closing adjustments, which equated to a cash payment of
US$11.6 million. Included in the net cash payment is a consideration received
from STAMICO of US$4.5 million for assets relating to the operation. After non
operational costs incurred in January and February and other closing
adjustments, this resulted in a realised gain of US$1.3 million included in
other charges and a total cash outflow during the quarter of US$15.9 million.
Safety
On 25 March 2014, Emmanuel Mrutu, one of our underground employees sadly passed
away as a result of injuries sustained following a fall-of-ground incident at
Bulyanhulu. After ceasing operations for a 24 hour period, we have ongoing
internal and external investigations into this tragic incident in order to
mitigate any reoccurrence in future. Ensuring the safety of all our employees
is paramount, and we have continuously improved our safety performance at all
of our operations over the past few years. In this regard, we have commissioned
a behavioural safety expert to further enhance our safety processes.
Barrick Gold Corporation Shareholding
On 11 March 2014 Barrick Gold Corporation ("Barrick"), ABG's majority
shareholder, completed the sale of 41 million shares representing 10% of ABG's
issued share capital through a placement with a number of institutional
investors. This placement was consistent with Barrick's ongoing portfolio
optimisation strategy and has significantly increased ABG's free float. After
completion of the transaction, Barrick's holding in ABG is 63.9%. At the same
time, our index weighting calculated by FTSE has increased to 37% from 27%.
Bulyanhulu Upper East
As announced today in a separate release, the Board has approved the next step
in the optimisation of Bulyanhulu through the acceleration of mining from the
Upper East Zone. The development of this area will require additional 2014
capital of approximately US$15 million, with initial production from the zone
expected within 3 months. The area is expected to produce 1.7 million ounces of
gold, averaging 60,000 ounces per annum over a life in excess of 25 years at
all-in sustaining costs of below our target run rate for Bulyanhulu for
year-end 2015 of US$900 per ounce.
Gokona Underground
As part of the feasibility study into the potential to mine Gokona Cut 3 via an
underground operation, the Board approved the development of an exploration
portal in the existing open pit. The portal will provide the opportunity to
develop a better understanding of the ore body, initial access to ore and
drilling access to the deeper extensions of the ore body. Final geotechnical
work is underway to decide the location of the portal with construction
expected to commence in Q3 2014. The total cost of the portal is expected to be
under US$10 million, and this cost is expected to be partially offset by
revenue from ore produced as part of the feasibility test work.
Indirect Tax Receivables
We are continuing to make progress with respect to the build-up of VAT and saw
net refunds of US$10 million during the quarter. The escrow account relating to
VAT on imports continues to work well, and we continue discussions with respect
to implementing a similar mechanism for VAT on domestic goods and services. As
at 31 March 2014, the outstanding amount relating to the total indirect tax
receivable stood at US$85 million.
Key statistics - restated to reflect Tulawaka as a discontinued operation
Three months Year ended 31
ended 31 March December
(Unaudited) 2014 20133 20133
Tonnes mined (thousands of tonnes) 9,537 13,977 54,076
Ore tonnes mined (thousands of tonnes) 1,793 1,651 7,225
Ore tonnes processed (thousands of tonnes) 1,845 1,911 7,914
Process recovery rate (percent) 89.1% 89.1% 88.7%
Head grade (grams per tonne) 3.2 2.6 2.8
Attributable gold production (ounces) 168,375 142,759 637,002
Attributable gold sold (ounces) 159,384 144,277 643,597
Copper production (thousands of pounds) 2,976 2,462 11,970
Copper sold (thousands of pounds) 2,517 3,357 11,570
Per ounce data
Average spot gold price2 1,293 1,631 1,411
Average realised gold price1 1,303 1,610 1,377
Total cash cost1 756 893 812
All-in sustaining cost1 1,131 1,577 1,346
Average realised copper price (US$/lb) 2.96 3.39 3.24
Cash on hand (US$'000) 254,094 401,520 282,409
Long term borrowings (US$'000) 142,000 50,000 142,000
Financial results - restated to reflect Tulawaka as a discontinued operation
Three months ended Year ended
31 March 31 December
(Unaudited) 2014 20133 20133
(US$'000)
Revenue 216,287 245,460 929,004
Cost of sales (159,141) (183,385) (713,806)
Gross profit 57,145 62,075 215,198
Corporate administration (6,356) (8,414) (33,813)
Share based payment expenses (3,324) 3,436 1,656
Exploration and evaluation costs (4,970) (3,589) (16,927)
Corporate social responsibility expenses (2,496) (3,151) (12,237)
Impairment charges - - (1,044,310)
Other charges (6,623) (2,938) (30,424)
Profit/(loss) before net finance cost 33,376 47,419 (920,857)
Finance income 350 588 1,670
Finance expense (2,402) (2,519) (9,552)
Profit/(loss) before taxation 31,324 45,488 (928,739)
Tax (expense)/credit (10,669) (14,259) 187,959
Net profit/(loss) from continuing operations 20,655 31,229 (740,780)
Discontinued operations:
Net profit/ (loss) from discontinued operations 1,288 (15,019) (57,653)
Net profit/(loss) for the period 21,943 16,210 (798,433)
Attributed to:
Owners of the parent (net earnings/(loss)) 22,410 20,716 (781,101)
- Continuing operations 20,655 31,229 (740,780)
- Discontinued operations 1,755 (10,513) (40,321)
Non-controlling interests (467) (4,506) (17,332)
- Discontinued operations (467) (4,506) (17,332)
Reconciliation of Group Financial Performance split by Continuing and
Discontinued Operations
Three months ended 31 March 2014 Three months ended 31 March 20133
(Unaudited) Continuing Discontinued Continuing Discontinued
(US$'000) Operations Operations Total Operations Operations Total
Revenue 216,287 - 216,287 245,460 9,189 254,649
Cost of sales (159,141) - (159,141) (183,385) (21,290) (204,675)
Gross profit 57,146 - 57,146 62,075 (12,101) 49,974
Corporate administration (6,357) - (6,357) (8,414) (989) (9,403)
Share based payment expenses (3,324) (3,324) 3,436 80 3,516
Exploration and evaluation costs (4,970) - (4,970) (3,589) (809) (4,398)
Corporate social responsibility expenses (2,496) (44) (2,540) (3,151) (295) (3,446)
Impairment charges - - - - - -
Other (charges)/ income (6,623) 1,331 (5,292) (2,938) (875) (3,813)
Profit/(loss) before net finance cost 33,376 1,287 34,663 47,419 (14,989) 32,430
Finance income 350 12 362 588 8 596
Finance expense (2,402) (11) (2,413) (2,519) (38) (2,557)
Profit/(loss) before taxation 31,324 1,288 32,612 45,488 (15,019) 30,469
Tax (expense)/credit (10,669) - (10,669) (14,259) - (14,259)
Net profit/(loss) for the period 20,655 1,288 21,943 31,229 (15,019) 16,210
1 Average realised gold price, total cash cost per ounce, all-in sustaining
cost per ounce, EBITDA, adjusted EBITDA, adjusted net earnings, adjusted net
earnings per share and operating cash flow per share are non-IFRS financial
performance measures with no standard meaning under IFRS. Refer to "Non IFRS
measures"' on page 11 for definitions.
2 Reflect the London PM fix price.
3 2013 comparative information has been restated to exclude the results of
Tulawaka.
For further information, please visit our website: www.africanbarrickgold.com
or contact:
African Barrick Gold plc +44 (0) 207 129 7150
Brad Gordon, Chief Executive Officer
Andrew Wray, Chief Financial Officer
Giles Blackham, Investor Relations Manager
Bell Pottinger +44 (0) 207 861 3232
Daniel Thöle
About ABG
ABG is Tanzania's largest gold producer and one of the largest gold producers
in Africa. We have three producing mines, all located in Northwest Tanzania,
and several exploration projects at various stages of development in Tanzania
and Kenya. We have a high quality asset base, solid growth opportunities and a
clear strategy of optimising, expanding and growing our business.
Maintaining our licence to operate through acting responsibly in relation to
our people, the environment and the communities in which we operate is central
to achieving our objectives.
ABG is a UK public company with its headquarters in London. We are listed on
the Main Market of the London Stock Exchange under the symbol ABG and have a
secondary listing on the Dar es Salaam Stock Exchange. Historically, and prior
to our initial public offering (IPO), our operations comprised the Tanzanian
gold mining business of Barrick Gold Corporation, our majority shareholder. ABG
reports in US dollars and in accordance with IFRS as adopted by the European
Union, unless otherwise stated in this report.
Conference call
A conference call will be held for analysts and investors on 24 April 2014 at
12:30pm London time.
The access details for the conference call are as follows:
Participant dial in: +44 (0) 203 003 2666 / +1 646 843 4608
Password: ABG
A recording of the conference call will be made available at
www.africanbarrickgold.com after the call.
FORWARD- LOOKING STATEMENTS
This report includes "forward-looking statements" that express or imply
expectations of future events or results. Forward-looking statements are
statements that are not historical facts. These statements include, without
limitation, financial projections and estimates and their underlying
assumptions, statements regarding plans, objectives and expectations with
respect to future production, operations, costs, projects, and statements
regarding future performance. Forward-looking statements are generally
identified by the words "plans," "expects," "anticipates," "believes,"
"intends," "estimates" and other similar expressions.
All forward-looking statements involve a number of risks, uncertainties and
other factors, many of which are beyond the control of ABG, which could cause
actual results and developments to differ materially from those expressed in,
or implied by, the forward-looking statements contained in this report. Factors
that could cause or contribute to differences between the actual results,
performance and achievements of ABG include, but are not limited to, changes or
developments in political, economic or business conditions or national or local
legislation or regulation in countries in which ABG conducts - or may in the
future conduct - business, industry trends, competition, fluctuations in the
spot and forward price of gold or certain other commodity prices (such as
copper and diesel), currency fluctuations (including the US dollar, South
African rand, Kenyan shilling and Tanzanian shilling exchange rates), ABG's
ability to successfully integrate acquisitions, ABG's ability to recover its
reserves or develop new reserves, including its ability to convert its
resources into reserves and its mineral potential into resources or reserves,
and to process its mineral reserves successfully and in a timely manner, ABG's
ability to complete land acquisitions required to support its mining
activities, operational or technical difficulties which may occur in the
context of mining activities, delays and technical challenges associated with
the completion of projects, risk of trespass, theft and vandalism, changes in
ABG's business strategy including, ABG's further implementation of the
Operational Review, as well as risks and hazards associated with the business
of mineral exploration, development, mining and production and risks and
factors affecting the gold mining industry in general. Although ABG's
management believes that the expectations reflected in such forward-looking
statements are reasonable, ABG cannot give assurances that such statements will
prove to be correct. Accordingly, investors should not place reliance on
forward-looking statements contained in this report. Any forward-looking
statements in this report only reflect information available at the time of
preparation. Subject to the requirements of the Disclosure and Transparency
Rules and the Listing Rules or applicable law, ABG explicitly disclaims any
obligation or undertaking publicly to update or revise any forward-looking
statements in this report, whether as a result of new information, future
events or otherwise. Nothing in this report should be construed as a profit
forecast or estimate and no statement made should be interpreted to mean that
ABG's profits or earnings per share for any future period will necessarily
match or exceed the historical published profits or earnings per share of ABG.
Operating and financial review for the three months ended 31 March 2014
During the first quarter of 2014 we continued to build on the strong platform
set towards the end of 2013, with all three operating sites delivering positive
results. This resulted in production of 168,375 ounces, an 18% increase on the
same period in 2013, with production increasing across all sites. Gold sales
amounted to 159,384 ounces, 5% lower than production due to strong production
late in the quarter at Bulyanhulu and Buzwagi which meant that the concentrate
shipments did not leave site until after the end of the quarter.
Bulyanhulu continues to show operational improvements which are resulting in
increased access to higher grade stopes with head grade improving by 12% from
Q1 2013 and 8% from Q4 2013. This resulted in production of 55,179 ounces, 4%
higher than Q4 2013 and 45% higher than Q1 2013. Gold ounces sold amounted to
49,121 ounces for the quarter, 6,058 ounces lower than production due to strong
production late in the quarter impacting on the timing of sales.
At Buzwagi, as a result of the revised mine plan, tonnes mined were 37% lower
than Q1 2013, while ore tonnes mined were 46% higher. As part of this plan,
higher grade areas have been opened up, resulting in a 23% increase in head
grade compared to Q1 2013. This more than offset the 11% decrease in throughput
and slightly lower recovery rate of 88.2%. As a result, production for the
quarter amounted to 44,557 ounces, 11% higher than the same period last year.
At North Mara, mining continued from the higher grade zones in the Gokona pit
resulting in a head grade of 3.7 grams per tonne, which more than offset the
28% decrease in ore tonnes mined due to mine sequencing and the revised mine
plan. Process plant improvements resulted in a slight increase in throughput
and an increased recovery rate of 87.8% (87.3% in Q1 2013). As a result,
production for the quarter amounted to 68,639 ounces, an increase of 6% on Q1
2013.
Total tonnes mined amounted to 9.5 million tonnes, a decrease of 32% on Q1
2013, mainly driven by a decrease in waste mining at Buzwagi (45%) and North
Mara (23%) due to the change in mine plan. Ore tonnes mined of 1.8 million
tonnes were 9% higher than in Q1 2013 as a result of the increase in ore tonnes
mined at Buzwagi, offset by lower ore tonnes mined at North Mara. Ore tonnes
processed amounted to 1.8 million tonnes, a decrease of 3% from Q1 2013. This
was mainly driven by lower throughput at Buzwagi due to plant downtime as a
result of restricted access to higher grade ore and maintenance, partially
offset by improved throughput at both Bulyanhulu and North Mara. Total head
grade for the quarter of 3.2 g/t was 23% higher than in Q1 2013. This was
mainly driven by the mining of higher grade stopes at Bulyanhulu and higher
grade ore mined at Buzwagi.
Our total cash costs of US$756 per ounce sold were 15% lower than Q1 2013. The
decrease was primarily due to decreased labour costs as a result of the
Operational Review (US$67/oz), lower energy costs due to a lower reliance on
self generated power (US$21/oz) and lower contracted services due to cost
saving initiatives (US$56/oz). This was partially offset by lower capitalised
stripping and development costs driven by lower waste mining mainly at Buzwagi
(US$51/oz).
All-in sustaining cost per ounce sold ("AISC") of US$1,131 was 28% lower than
Q1 2013 driven by lower cash costs and the impact of the Operational Review on
corporate administration costs, capitalised development costs and sustaining
capital expenditures combined with a higher production base. This was partially
offset by increased share based payment expenses due to the improved share
price performance.
Copper production for the quarter of 3.0 million pounds was 21% higher than in
Q1 2013, mainly due to improved grades and throughput at Bulyanhulu.
Revenue of US$216.3 million was 12% lower than Q1 2013 as a result of an
increase of 10% in ounces sold being more than offset by a US$307 per ounce
decrease in the average realised price reflecting the decrease in gold prices.
The average realised price for Q1 2014 amounted to US$1,303 per ounce sold
compared to US$1,610 in Q1 2013, but was marginally higher than the average
market price for the quarter.
EBITDA of US$64.7 million was 21% lower than Q1 2013 mainly as a result of a
12% decrease in revenue which was partially offset by lower direct mining costs
and lower corporate administration charges. This was in part offset by
increased share based payment expenses (reflecting improved share price
performance), increased exploration expenditure and increased other charges,
mainly relating to restructuring, Tulawaka non-operational costs and the impact
of a weakening exchange rate on the revaluation of Tanzanian Shilling
denominated receivables.
Capital expenditure for the quarter amounted to US$55.7 million compared to
US$100.8 million in Q1 2013. Key capital expenditures included the Bulyanhulu
CIL Expansion project (US$14.9 million), capitalised stripping at Buzwagi and
North Mara (US$21.9 million), capitalised underground development at Bulyanhulu
(US$11.3 million) and group sustaining capital investments of US$7.5 million.
In addition, land purchases of US$4.2 million were incurred at North Mara
during the quarter compared to US$4.1 million in Q1 2013.
The cash balance as at 31 March 2014 amounted to US$254 million, with positive
cash flow from sustaining operations of US$13.3 million offset by the total
cash outflow related to Tulawaka of US$15.9 million, US$14.9 million of
expansionary capital as explained above, and a US$6.8 million reduction of
amounts previously accrued toward the CIL Expansion.
Bulyanhulu
Key statistics
Three months ended Year ended 31
31 March December
(Unaudited) 2014 2013 2013
Underground ore tonnes hoisted Kt 211 172 872
Ore milled Kt 220 171 871
Head grade g/t 8.5 7.6 7.8
Mill recovery % 91.7% 91.3% 90.9%
Ounces produced oz 55,179 38,036 198,286
Ounces sold oz 49,121 33,416 195,304
Cash cost per ounce sold US$/oz 811 1,192 890
AISC per ounce sold US$/oz 1,145 1,921 1,344
Copper production Klbs 1,296 856 4,855
Copper sold Klbs 1,194 868 4,508
Breakdown of Capital Expenditure
- Sustaining capital US$('000) 2,148 7,593 25,193
- Capitalised development US$('000) 11,256 12,280 45,428
- Expansionary capital US$('000) 14,859 22,743 114,912
Capital expenditure US$('000) 28,263 42,616 185,533
- Non-cash reclamation asset
adjustments US$('000) 5,665 (2,365) (10,044)
Total capital expenditure US$('000) 33,928 40,251 175,489
Operating performance
Bulyanhulu continues to show operational improvements which are resulting in
increased access to higher grade stopes with head grade of 8.5g/t improving by
12% from Q1 2013 and 8% from Q4 2013. This resulted in production of 55,179
ounces, 4% higher than Q4 2013 and 45% higher than Q1 2013. Gold ounces sold
amounted to 49,121 ounces for the quarter, 6,058 ounces lower than production
due to strong production late in the quarter impacting on the timing of sales.
Ore tonnes mined and throughput remain at similar levels to Q4 2013, but were
23% and 29% higher respectively than in Q1 2013, which was impacted by downtime
as a result of the failure of the production winder transformer and workforce
shortages. Improvements made in the process plant together with the improved
grade resulted in an improved recovery rate of 91.7%.
Copper production for the quarter of 1.3 million pounds was 51% higher than
that of the same period in 2013, primarily due to an improved copper grade and
higher throughput.
Cash costs were US$811 per ounce sold compared to US$1,192 in the prior year
period mainly driven by the higher production base, lower maintenance costs due
to improved condition monitoring controls and lower labour costs as a result of
the Operational Review. This was in part offset by increased energy and fuel
costs given the temporary requirement for self generation of power during
January due to local damage to Tanesco transmission lines and an increase in
mining activity and lower capitalised development costs.
AISC per ounce sold was 41% lower than the prior year period at US$1,145 per
ounce as a result of the lower cash cost base and lower capitalised development
costs and sustaining capital.
On the 25th March, Emmanuel Mrutu, one of our underground employees sadly
passed away as a result of injuries sustained following a fall of ground
incident. Operations were ceased for a 24 hour period and investigations into
the incident are underway.
The Board has approved the next step in the optimisation of Bulyanhulu through
the acceleration of mining from the Upper East Zone. The development of this
area will require additional 2014 capital of approximately US$15 million, with
initial production from the zone expected within 3 months. The area is expected
to produce 1.7 million ounces of gold, averaging 60,000 ounces per annum over a
life in excess of 25 years at all-in sustaining costs of below our target run
rate for Bulyanhulu for year-end 2015 of US$900 per ounce.
The CIL Expansion, which will add over 40,000 ounces per annum once fully
ramped up, has now moved into the commissioning phase. The project remains on
budget with first gold expected in late Q2 2014.
These two projects, together with the planned step up in mined grade represent
important steps in the optimisation of Bulyanhulu.
Capital expenditure for the quarter of US$28.3 million was US$14.4 million
lower than the prior year period. Key capital expenditure included the CIL
Expansion project (US$14.9 million) and capitalised development costs of
US$11.3 million.
Buzwagi
Three months ended Year ended 31
Key statistics 31 March December
(Unaudited) 2014 2013 2013
Tonnes mined Kt 5,543 8,830 32,177
Ore tonnes mined Kt 1,021 701 3,753
Ore milled Kt 970 1,093 4,400
Head grade g/t 1.6 1.3 1.5
Mill recovery % 88.2% 89.3% 88.2%
Ounces produced oz 44,557 40,020 181,984
Ounces sold oz 42,963 51,811 187,348
Cash cost per ounce sold US$/oz 927 802 945
AISC per ounce sold US$/oz 1,274 1,654 1,506
Copper production Klbs 1,681 1,606 7,115
Copper sold Klbs 1,323 2,489 7,062
Breakdown of Capital Expenditure
- Sustaining capital US$('000) 1,861 16,145 31,589
- Capitalised development US$('000) 9,632 23,912 60,136
- Expansionary capital US$('000) - - -
Capital expenditure US$('000) 11,493 40,057 91,725
- Non-cash reclamation asset
adjustments US$('000) 665 (1,039) (9,230)
Total capital expenditure US$('000) 12,158 39,018 82,495
Operating performance
As previously announced, we have re-engineered the mine plan at Buzwagi to
significantly reduce the AISC of the mine and to enable positive free cash
generation. We began to implement the new plan during Q3 2013 and are
continuing to see a positive impact on the cost base.
Total tonnes mined of 5.5 million tonnes were 37% lower than Q1 2013, while ore
tonnes mined were 46% higher as a result of the changes to the mine plan.
Isolated instability of the Western wall of the pit resulted in a change in
mine sequencing which, in combination with mining constraints following
flooding after heavy rains in March 2014, negatively impacted on total tonnes
mined and the availability of higher grade ore but have increased waste
movement compared to the mine plan. These operational constraints have now been
addressed and we expect mining tonnes and the grade mined to return to expected
levels during Q2 2014.
During Q1 2014 the reduced ore tonnes mined led to reduced mill utilisation,
with a number of maintenance shutdowns rescheduled in the quarter to minimise
additional downtime, resulting in an 11% decrease in tonnes milled from Q1
2013. Daily throughput rates remained at nameplate capacity. As a result of
changes in the mine plan focusing mining on higher grade areas, the head grade
of 1.6 g/t was 23% higher than in Q1 2013, but lower than planned levels for
the quarter as a result of the constraints discussed above.
As a result of the above factors, production for the quarter amounted to 44,557
ounces, an 11% increase from Q1 2013. Gold ounces sold during the quarter
trailed production by 4% due to the timing of March 2014 production being
weighted towards the end of the month. Copper production for the quarter of 1.7
million pounds was 5% above that of the same period in 2013. This was primarily
due to the increased copper recoveries that were slightly offset by lower
throughput and copper grade.
Cash costs for the quarter were US$927 per ounce sold compared to US$802 in
2013. Cash costs have been positively affected by the impact of the revised
mine plan on activity based costs, lower labour costs mainly due to a reduction
of international employees, and lower reliance on self generated power.
However, this was more than offset by lower gold sales, capitalised development
costs driven by the lower waste mining activity and lower co-product revenue as
a result of lower copper prices.
AISC per ounce sold of US$1,274 per ounce decreased by 23% from Q1 2013 and was
also 2% below Q4 2013. This was due to lower sustaining capital and capitalised
stripping costs, partially offset by higher cash costs.
Capital expenditure for the quarter of US$11.5 million was 71% lower than the
prior year period, driven by lower sustaining capital and capitalised stripping
costs as a result of the new mine plan.
North Mara
Key statistics
Three months ended Year ended 31
31 March December
(Unaudited) 2014 2013 2013
Tonnes mined Kt 3,783 4,975 21,027
Ore tonnes mined Kt 560 777 2,601
Ore milled Kt 655 646 2,643
Head grade g/t 3.7 3.6 3.5
Mill recovery % 87.8% 87.3% 86.8%
Ounces produced oz 68,639 64,704 256,732
Ounces sold oz 67,300 59,050 260,945
Cash cost per ounce sold US$/oz 607 804 659
AISC per ounce sold US$/oz 980 1,369 1,227
Breakdown of Capital Expenditure
- Sustaining capital US$('000) 3,531 14,779 38,386
- Capitalised development US$('000) 12,267 6,646 65,594
- Expansionary capital US$('000) - 128 949
Capital expenditure US$('000) 15,798 21,553 104,929
- Non-cash reclamation asset
adjustments US$('000) 3,976 (1,508) (11,271)
Total capital expenditure US$('000) 19,774 20,045 93,658
Operating performance
North Mara delivered another strong operating performance this quarter, and
delivered gold production of 68,639 ounces, an increase of 6% on Q1 2013 and
14% on Q4 2013. Gold ounces sold amounted to 67,300 ounces for the quarter,
slightly lower than production.
Ore tonnes mined continued to be predominantly from the high grade zones of the
Gokona pit, with head grade of 3.7 g/t slightly higher than the prior year
period, but 9% higher than Q4 2013. We are currently removing waste in the
Nyabirama pit in order to increase our access to ore, and expect mining from
this pit to increase from the middle of Q2 2014 which will lead to a decrease
in head grade. Throughput and recovery was broadly in line with the prior year
period.
Total tonnes mined for the quarter amounted to 3.8 million tonnes, 24% lower
than the same quarter in 2013 as a result of changes made to the mine plan in
Q3 2013, while ore tonnes mined of 560 thousand tonnes were 28% lower than
2013.
Cash costs were US$607 per ounce sold compared to US$804 in the prior year
period. The decrease in cash cost per ounce was driven by the increased
production base, lower labour costs mainly as a result of a reduction in
international employees as part of the Operational Review, lower contracted
services and consumables as a result of the lower mining activity and an
increased in capitalised stripping.
AISC per ounce of US$980 was 28% lower than the prior year period as a result
of the lower cash costs as explained above, lower sustaining capital
expenditure, lower corporate administration and social responsibility
expenditure, slightly offset by an increase in capitalised stripping costs. In
addition, AISC includes US$4.2 million of land payments made during the
quarter.
Capital expenditure for the quarter of US$15.8 million was 27% lower than the
prior year. Key capital expenditure included capitalised stripping (US$12.3
million) and investments in mine equipment for component change-outs, tailings
and infrastructure (US$3.5 million).
As part of the feasibility study into the potential to mine Gokona Cut 3 via an
underground operation, the Board approved the development of an exploration
portal in the existing open pit. The portal will provide the opportunity to
develop a better understanding of the ore body, initial access to ore and
drilling access to the deeper extensions of the ore body. Final geotechnical
work is underway to decide the location of the portal with construction
expected to commence in Q3 2014. The total cost of the portal is expected to be
under US$10 million, and this cost is expected to be partially offset by
revenue from ore produced as part of the feasibility test work.
Exploration and Development Review
Bulyanhulu Deeps West Surface Drilling
In late 2013, we commenced drilling of three deep diamond core holes west of
the Bulyanhulu mine, targeting the extension of Reef 1 and Reef 2 vein series
west of the currently delineated resources. The holes are designed to
predominantly test the extensions of the Reef 1 structure from 400 metres to
1,200 metres west of the current Bulyanhulu resource where historic drilling
has shown indications of further gold mineralisation. The drilling is targeting
a potential new economic zone and plunge extensions of the Main Zone of Reef 1
at depths of between 1km and 2.5km vertical. Additionally, holes will also
intersect the Reef 2 vein series, and provide an indication of whether the Reef
2 system is mineralised up to 2km west of current underground resources.
During Q1 2014, a total of 3,369 metres of diamond core was drilled from the
surface holes. Two rigs are involved in this surface drilling programme, which
will continue well into 2014. The Reef 1 and Reef 2 system was intersected in
several holes during Q1 2014 with encouraging results including significant
intersections of:
BGMDD0055W2: 0.80m @ 16.2g/t Au from 944m - Reef 2
BGMDD0055W3: 0.50m @ 7.90g/t Au from 950m - Reef 2
BGMDD0055W3: 0.79m @ 7.00g/t Au from 1,059m - Reef 1
BGMDD0054W3: 1.20m @ 11.5g/t Au from 1,367m - Reef 2
The results from these holes are potentially significant in demonstrating that
gold mineralisation continues west of the mine which would open the potential
for a large expansion of the footprint of Bulyanhulu on both Reef 1 and Reef 2.
The drilling programme will continue through 2014 and will comprise
approximately 10,000 metres of further diamond core drilling from the three
active and planned drill sites. This programme will form an important part of
our assessment of how to most effectively develop the mine over the long term.
Bulyanhulu East Deeps Underground Drilling - Reef 2
The East Deeps drilling programme is targeting down dip mineralisation of the
Bulyanhulu Reef 2 system which is outside the current resource model. The
programme is being drilled from several underground drill platforms and is
aimed at adding high grade gold resources on the East Zone. Drilling continued
in Q1 2014 with a total of 2,464 metres of diamond core completed from two
holes, with assay results returning the following significant intersections:
UX4700-408: 1.75m @ 13.6g/t Au from 1,042m Incl. 0.68m @ 25.3g/t Au from 1,043m
UX4700-409: 1.35m @ 4.08g/t Au from 1,129m Incl. 0.55m @ 8.70g/t Au from 1,130m
The Reef 2 significant intersections continue to prove continuity at depth of
the mineralisation with high grade. This has the potential to add significantly
to the mine resource and increase the life of mine. The final drill hole in the
programme is underway and following completion of which the programme will be
reviewed before more drilling is undertaken.
West Kenya Joint Venture Projects
Exploration activities in Kenya continue to focus on grassroots target
generation with soil sampling, rock chip sampling and Aircore drilling
continuing throughout the Kakamega and Lake Zone gold camps. Assay results from
a further 327 reconnaissance Aircore drill holes testing existing gold-in-soil
anomalies along the Liranda Corridor on the south side of the Kakamega Dome
have been returned with some very positive results including:
KDAC0312: 3m @ 15.2 g/t Au from 41m and 9m @ 1.71 g/t Au from 62m
KDAC0361: 39.5m @ 0.81 g/t Au from 9m, including 6m @ 2.26 g/t Au
KDAC0376: 9m @ 2.57 g/t Au from 57m
The Aircore results to date are very encouraging given the current line spacing
of the Aircore traverses varies between 400 metres and 800 metres and the
average depth of drilling to date is a relatively shallow 40-50 metres. Infill
traverses will be undertaken as part of phase two of the programme before
targets will be ranked for testing by more advanced reverse circulation and
diamond drilling.
In addition to the Aircore programme we continue to undertake extensive soil
sampling of the licence area with a further 3,323 samples collected in Q1 2014
with over 50 gold-in-soil anomalies now delineated for follow-up work.
In tandem with this we have commenced gradient IP and Resistivity across
selected gold-in-soil anomalies. These surveys aim to target mineralisation
associated with sulphides and or resistive lithologies, structures or
alteration. Seven anomalies have been covered by IP surveys to date for
approximately 88 line kilometres, with four targets showing distinct
resistivity and/or chargeability zones coincident with the gold-in-soil
anomalies and should be considered as priority targets for future drilling
programmes.
Non IFRS Measures
ABG has identified certain measures in this report that are not measures
defined under IFRS. Non-IFRS financial measures disclosed by management are
provided as additional information to investors in order to provide them with
an alternative method for assessing ABG's financial condition and operating
results. These measures are not in accordance with, or a substitute for, IFRS,
and may be different from or inconsistent with non-IFRS financial measures used
by other companies. These measures are explained further below.
Average realised gold price per ounce sold is a non-IFRS financial measure
which excludes from gold revenue:
Unrealised mark-to-market gains and losses on provisional pricing from copper
and gold sales contracts; and
Export duties.
Cash cost per ounce sold is a non-IFRS financial measure. Cash costs include
all costs absorbed into inventory, as well as royalties, and production taxes,
and exclude capitalised production stripping costs, inventory purchase
accounting adjustments, unrealised gains/losses from non-hedge currency and
commodity contracts, depreciation and amortisation and corporate social
responsibility charges. Cash cost is calculated net of co-product revenue.
The presentation of these statistics in this manner allows ABG to monitor and
manage those factors that impact production costs on a monthly basis. ABG
calculates cash costs based on its equity interest in production from its
mines. Cash cost per ounce sold are calculated by dividing the aggregate of
these costs by gold ounces sold. Cash costs and cash cost per ounce sold are
calculated on a consistent basis for the periods presented.
All-in sustaining cost (AISC) is a non-IFRS financial measure. The measure is
in accordance with the World Gold Council's guidance issued in June 2013. It is
calculated by taking cash costs per ounce sold and adding corporate
administration costs, reclamation and remediation costs for operating mines,
corporate social responsibility expenses, mine exploration and study costs,
capitalised stripping and underground development costs and sustaining capital
expenditure. This is then divided by the total ounces sold. A reconciliation
between cash cost per ounce sold and AISC is presented below:
Three months ended 31 March 2014 Three months ended 31 March 2013
(Unaudited) ABG Group ABG Group
ongoing ongoing
(US$/oz sold) Bulyanhulu North Mara Buzwagi operations Bulyanhulu North Mara Buzwagi operations
Cash cost per ounce sold 811 607 927 756 1,192 804 802 893
Corporate administration 43 32 37 40 118 50 54 58
Share based expenditure 1 2 13 21 (6) (4) (3) (24)
Rehabilitation 7 18 9 12 11 38 19 25
Mine exploration 2 1 1 2 7 15 3 9
CSR expenses 7 18 19 16 6 33 6 22
Capitalised development 229 182 224 208 367 113 462 297
Sustaining capital 44 119 43 77 227 319 311 297
Total 1,145 980 1,274 1,131 1,921 1,368 1,653 1,577
AISC is intended to provide additional information on the total sustaining cost
for each ounce sold, taking into account expenditure incurred in addition to
direct mining costs, depreciation and selling costs.
EBITDA is a non-IFRS financial measure. ABG calculates EBITDA as net profit or
loss for the period excluding:
Income tax expense;
Finance expense;
Finance income;
Depreciation and amortisation;
Impairment charges of goodwill and other long-lived assets; and
Discontinued operations.
EBITDA is intended to provide additional information to investors and analysts.
It does not have any standardised meaning prescribed by IFRS and should not be
considered in isolation or as a substitute for measures of performance prepared
in accordance with IFRS. EBITDA excludes the impact of cash costs of financing
activities and taxes, and the effects of changes in operating working capital
balances, and therefore is not necessarily indicative of operating profit or
cash flow from operations as determined under IFRS. Other companies may
calculate EBITDA differently.
EBIT is a non-IFRS financial measure and reflects EBITDA adjusted for
depreciation and amortisation and goodwill impairment charges.
Cash margin is a non-IFRS financial measure. The cash cost margin is the
average realised gold price per ounce less the cash cost per ounce sold.
Operating cash flow per share is a non-IFRS financial measure and is calculated
by dividing Net cash generated by operating activities by the weighted average
number of Ordinary Shares in issue.
Mining statistical information
The following describes certain line items used in the ABG Group's discussion
of key performance indicators:
Open pit material mined - measures in tonnes the total amount of open pit ore
and waste mined.
Underground ore tonnes hoisted - measures in tonnes the total amount of
underground ore mined and hoisted.
Total tonnes mined includes open pit material plus underground ore tonnes
hoisted.
Strip ratio - measures the ratio of waste–to–ore for open pit material mined.
Ore milled - measures in tonnes the amount of ore material processed through
the mill.
Head grade - measures the metal content of mined ore going into a mill for
processing.
Milled recovery - measures the proportion of valuable metal physically
recovered in the processing of ore. It is generally stated as a percentage of
the metal recovered compared to the total metal originally present.