AFRICAN BARRICK GOLD
25 July 2014
Results for the 6 months ended 30 June 2014 (Unaudited)
Based on IFRS and expressed in US Dollars (US$)
African Barrick Gold plc ("ABG'') reports half year 2014 results
"We are pleased to report strong results for H1 2014, with increased production
and continued cost discipline enabling the business to return to cash
generation," said Brad Gordon, Chief Executive Officer of African Barrick Gold.
"We have now delivered our seventh successive reduction in quarterly all-in
sustaining costs (AISC) as we continue to drive operational improvements
through the business. During H1 2014 we produced 346,581 ounces of gold, an
improvement of 13% on the same period in 2013, at an AISC of US$1,118 per
ounce, a reduction of 25% on the previous year. During the second quarter, we
delivered the first ounces from the Bulyanhulu CIL Expansion project with
development work on the Bulyanhulu Upper East zone and the Gokona underground
exploration portal progressing to plan. As a result of the strong H1 2014
performance and the incorporation of the expected production from Bulyanhulu
Upper East, we now expect full year gold production to be in excess of 700,000
ounces whilst continuing to target an AISC at the bottom of our guidance range
of US$1,100-1,175 per ounce."
Operational Highlights
Q2 gold production of 178,206 ounces, 8% higher than Q2 2013, with gold sales
of 171,563 ounces
Q2 AISC1,2 of US$1,105 per ounce sold, 21% lower than Q2 2013, with cash
costs1,2 of US$749 per ounce
H1 gold production of 346,581 ounces with gold sales of 330,947 ounces, 13% and
5% respectively, higher than H1 2013
H1 AISC1,2 of US$1,118 per ounce sold and cash costs1,2 of US$752, respectively
down 25% and 14% on H1 2013
First ounces produced from the Bulyanhulu CIL Expansion project, with final
commissioning due to complete in Q3 2014
Bulyanhulu Upper East and North Mara Underground projects progressing well and
on schedule
Continued strong results from the West Kenya Exploration Project
Financial Highlights
Cash position increased during Q2 2014 by US$16 million to stand at US$270
million as at 30 June 2014
H1 revenue of US$446 million, 9% below H1 2013, as the impact of a lower
average realised gold price more than offset increased sales volumes
H1 EBITDA1,3 of US$132 million, 1% higher than H1 2013, due to lower cash costs
H1 net earnings1,3 of US$41 million (US10.0 cents per share) impacted by a
higher non cash tax charge during Q2 2014
H1 operational cash flow increased to US$127 million (28% higher than H1 2013)
H1 capital expenditure of US$115 million, 45% lower than H1 2013 due to revised
mine plans and stringent capital controls
Interim dividend of US1.4 cents per share declared, based on a new cash flow
based metric
Three months ended 30 June Six months ended 30 June
(Unaudited) 2014 20132 2014 20132
Gold Production (ounces) 178,206 164,439 346,581 307,198
Gold Sold (ounces) 171,563 170,092 330,947 314,369
Cash cost (US$/ounce)1 749 862 752 876
AISC (US$/ounce)1 1,105 1,404 1,118 1,483
Average realised gold price (US$/ounce)1 1,277 1,366 1,290 1,480
(in US$'000)
Revenue 229,222 241,900 445,509 487,360
EBITDA1,3 66,959 48,828 131,621 130,771
Net earnings/(loss)3 18,412 (721,946) 40,822 (701,230)
Basic earnings/(loss) per share (EPS) (cents)3 4.5 (176.0) 10.0 (171.0)
Cash generated from operating activities 76,381 41,691 127,107 99,017
Capital expenditure4 58,964 103,347 114,744 209,056
1 These are non-IFRS measures. Refer to page 23 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 in Q2 2014 AISC of 2%
over Q1 2014 and an H1 2014 reduction of 25% over the previous period. Together
with a strong production profile, this enabled ABG to deliver a return to net
cash flow generation during Q2 2014. 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.
Safety
During the first half of the year, Bulyanhulu regrettably experienced one
fatality. 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. We have completed internal and external investigations into this
tragic incident in order to mitigate any future reoccurrence. As a mark of
respect operations ceased for a 24 hour period.
During the second quarter Bulyanhulu experienced a non-operational fatality
which led to two weeks of disrupted operations at the mine. On 20 May 2014, an
underground employee went missing following a night shift. All mining
operations were initially ceased and an intensive search operation was
launched. On 1 June 2014, the body of the deceased was found and investigations
by the Tanzanian authorities have subsequently determined that regrettably the
employee took his own life.
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 launched a behavioural safety programme called
WeCare at each of our operations to further enhance our safety processes.
Board Changes
During the six months ended 30 June 2014, David Hodgson stepped down as
Non-Executive Director of the Company. The ABG Board now comprises eleven
Directors, including seven Independent Non-Executive Directors, one Executive
Director and three nominees from Barrick Gold Corporation.
Indirect Taxes
Further progress has been made with respect to the build up of VAT, and the
Company received net refunds of US$18 million during the second quarter,
bringing total net refunds for H1 2014 to approximately US$28 million. We have
also continued discussions with the Tanzanian Government on the establishment
of an appropriate mechanism to safeguard the recoverability of VAT payments
over the long term. In this regard, we have submitted proposals for the
establishment of an escrow account for VAT paid on domestic goods, similar to
that currently used to provide for the refunding of VAT paid on imports and are
awaiting further feedback on this proposal. As at 30 June 2014, the outstanding
amount relating to the total indirect tax receivable, not covered by the 2011
Memorandum of Settlement, stood at US$66 million, roughly US$30 million lower
than 31 December 2013.
Bulyanhulu Upper East
In April 2014 the Board approved the next step in the optimisation of
Bulyanhulu through the acceleration of mining from the Upper East Zone. The
Zone 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 an AISC of below our target run
rate for Bulyanhulu for year-end 2015 of US$900 per ounce.
Following the Board approval, the mine undertook waste development in the Zone
at a capital cost of US$4.7 million in Q2 2014. As expected, the mine will
commence ore development in Q3 2014 and this is expected to lead to production
from the Upper East Zone of approximately 15,000 ounces of gold in H2 2014,
weighted towards the fourth quarter. ABG continues to expect that the 2014
capital requirements for the project will be approximately US$15 million. All
capital associated with the project to date has been categorised as capitalised
development and is included in the Bulyanhulu and Group AISC figures.
Bulyanhulu Deep West
We have also progressed the accelerated development of the Bulyanhulu Deep West
Zone through a contractor to increase access to higher grade ore from Q4 2014.
During Q2 2014 we incurred underground development capital costs of US$4.8
million for the project and we expect to incur similar costs per quarter for
the remainder of 2014. This will be categorised as capitalised development and
is included in the Bulyanhulu and Group AISC figures.
Bulyanhulu CIL Expansion
During the second quarter, we progressed the commissioning of the new CIL
circuit at Bulyanhulu, which will add over 40,000 ounces per annum once fully
operational, and are nearing completion of the commissioning stage. Towards the
end of June, roughly 6,500 tonnes of rougher tailings were treated and pumped
into the new CIL circuit, resulting in 273 ounces of gold being produced in
circuit. We expect commissioning to be complete in early Q3 2014 with the first
gold pour in August and the ramp up of production to continue throughout the
third quarter. We continue to expect production of 20,000 ounces in 2014 from
the project, and are investigating an option for accelerating the retreatment
of the historic higher grade tailings in preference to the rougher tailings.
Gokona Underground
The feasibility study into the potential to mine Gokona Cut 3 via an
underground operation progressed well in the second quarter and is on track to
be presented to the Board for approval in Q4 2014. During Q2 2014, ABG made the
final decision on the location of the exploration portal which will provide the
opportunity to develop a better understanding of the ore body, provide initial
access to ore and drilling access to the deeper extensions of the ore body.
Early works towards the construction of the portal are in progress with the
first blast due in August. The total expansionary capital cost of the portal is
expected to be around US$10 million.
Interim dividend
To ensure that our dividend policy is more closely aligned with the cash
generation of the business, the Board of Directors have approved an amendment
to the existing dividend policy such that rather than being based on net
earnings it will now be based on operational cash flow after sustaining capital
and capitalised development but before expansion capital.
The Board believes this metric more appropriately reflects both ABG's and the
wider market's focus on cash flow generation as well as the commitment to
ongoing capital returns to shareholders. The dividend payout ratio of 15%-30%
and the timing of the payment, being 1/3 of the dividend as an interim dividend
and the balance as a final dividend, remain unchanged.
In line with the above change, the Board of Directors is pleased to announce
the approval of an interim dividend for 2014 of US1.4 cents per share, an
increase of 40% when compared to H1 2013.
The interim dividend will be payable on 22 September 2014 to holders on record
at 29 August 2014. The ex-dividend date will be 27 August 2014. ABG will
declare the interim dividend in US dollars. Unless a shareholder elects to
receive dividends in US dollars, they will be paid in pounds sterling with the
US dollar amount being converted into pounds sterling at the exchange rate
prevailing at the time. The last date for receipt of currency elections will be
2 September 2014. The exchange rate for the conversion of the interim dividend
will be elected on or around 4 September 2014.
Outlook
Over the past six months we have continued to deliver a strong performance from
our operating portfolio, with sustainable cost containment across each of the
mines and production growth led by North Mara. As we move into the second half
of the year we expect the contribution from Bulyanhulu to increase as we begin
to access higher grade areas, and both the CIL Expansion and the Upper East
projects begin to contribute ounces. At North Mara, we expect the head grade to
drop in the second half of the year as the high grade ore from Gokona will be
increasingly blended with lower grade material from Nyabirama. At Buzwagi, we
expect the grade to revert to between 1.5-1.6g/t in the second half, but
anticipate that throughput levels will increase.
Following the approval of the Upper East Project and the Gokona Underground
portal in Q2 2014 we expect capital expenditure for the year to be between
US$255-275 million. Sustaining capital (including land purchases) is expected
to be US$80-90 million, with an acceleration of spending in the second half of
the year versus H1 2014. Capitalised development is expected to total
US$125-135 million as a result of the accelerated development of the Bulyanhulu
Deep West Zone together with the categorisation of the Bulyanhulu Upper East
project as capitalised development. Expansionary capital is expected to amount
to US$50 million which incorporates reduced residual CIL Expansion spend and
the Gokona Underground portal.
As a result of the strong performance in H1 2014 and the addition of the Upper
East ounces into the 2014 plan, we are revising production guidance upwards for
the year to in excess of 700,000 ounces. We maintain our guidance for cash
costs of US$740 to US$790 per ounce and all-in sustaining costs of US$1,100 to
US$1,175 per ounce sold, and are targeting the bottom of both these ranges.
Key statistics - restated to reflect Tulawaka as a discontinued operation
Three months Six months ended
ended 30 June 30 June
(Unaudited) 2014 20133 2014 20133
Tonnes mined (thousands of tonnes) 10,355 15,141 19,892 29,118
Ore tonnes mined (thousands of tonnes) 2,115 1,727 3,908 3,378
Ore tonnes processed (thousands of tonnes) 1,925 2,072 3,770 3,983
Process recovery rate (percent) 89.8% 88.8% 89.5% 88.9%
Head grade (grams per tonne) 3.2 2.7 3.2 2.7
Gold production (ounces) 178,206 164,439 346,581 307,198
Gold sold (ounces) 171,563 170,092 330,947 314,369
Copper production (thousands of pounds) 3,454 3,122 6,430 5,584
Copper sold (thousands of pounds) 2,874 2,756 5,391 6,113
Cash cost per tonne milled (US$/t) 67 71 66 69
Per ounce data
Average spot gold price² 1,288 1,415 1,291 1,523
Average realised gold price1 1,277 1,366 1,290 1,480
Total cash cost1 749 862 752 876
All-in sustaining cost1 1,105 1,404 1,118 1,483
Average realised copper price (US$/lb) 3.16 3.04 3.07 3.23
Financial results - restated to reflect Tulawaka as a discontinued operation
Three months ended Six months ended 30
30 June June
(Unaudited, in US$'000 unless otherwise stated) 2014 20133 2014 20133
Continuing operations:
Revenue 229,222 241,900 445,509 487,360
Cost of sales (173,333) (203,348) (332,474) (386,733)
Gross profit 55,889 38,552 113,035 100,627
Corporate administration (7,618) (9,169) (13,975) (17,583)
Share based payments (1,593) 425 (4,917) 3,861
Exploration and evaluation costs (6,025) (4,126) (10,995) (7,715)
Corporate social responsibility expenses (1,811) (3,077) (4,307) (6,228)
Impairment charges - (910,989) - (910,989)
Other charges (6,159) (12,659) (12,782) (15,597)
Profit/(loss) before net finance expense and taxation 32,683 (901,043) 66,059 (853,624)
Finance income 280 407 630 995
Finance expense (2,102) (2,177) (4,504) (4,696)
Profit/(loss) before taxation 30,861 (902,813) 62,185 (857,325)
Tax (expense)/credit (12,047) 198,907 (22,716) 184,648
Net profit/(loss) from continuing operations 18,814 (703,906) 39,469 (672,677)
Discontinued operations:
Net (loss)/profit from discontinued operations (402) (25,722) 886 (40,741)
Net profit/(loss) for the period 18,412 (729,628) 40,355 (713,418)
Attributed to:
Owners of the parent (net earnings) 18,412 (721,946) 40,822 (701,230)
- Continuing operations 18,814 (703,906) 39,469 (672,677)
- Discontinued operations (402) (18,040) 1,353 (28,553)
Non-controlling interests - (7,682) (467) (12,188)
- Discontinued operations - (7,682) (467) (12,188)
1 These are non-IFRS financial performance measures with no standard meaning
under IFRS. Refer to "Non IFRS measures"' on page 23 for definitions.
2 Reflect the London PM fix price.
3 Restated for the reclassification of Tulawaka as a discontinued operation.
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. Barrick Gold Corporation
is our majority shareholder. ABG reports in US dollars 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 25 July 2014 at
11:30am London time.
The access details for the conference call are as follows:
Participant dial in: +44 (0) 203 003 2666 / +1 866 966 5335
Password: ABG
A recording of the conference call will be made available at
www.africanbarrickgold.com/investors/financial-reports/2014.aspx 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, the ongoing implementation of operational
reviews, 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.
AFRICAN BARRICK GOLD
LSE: ABG
TABLE OF CONTENTS
Interim Operating Review 7
Exploration Review 12
Financial Review 14
Going Concern Statement 22
Non-IFRS measures 23
Risk Review 25
Directors' Responsibility Statement 25
Auditor's Review Report 26
Condensed Interim Financial Information:
- Consolidated Income Statement and Consolidated Statement of 27/
Comprehensive Income 28
- Consolidated Balance Sheet 29
- Consolidated Statement of Changes in Equity 30
- Consolidated Statement of Cash Flows 31
- Notes to the Consolidated Interim Financial Information 32
Interim Operating Review
Half Year Review
For the first half of 2014 revenue amounted to US$445.5 million, 9% lower than
the same period in 2013. Production of 346,581 ounces drove a 5% increase in
sales volumes (16,578 ounces) but this was more than offset by a 13% decrease
in the average realised gold price of US$1,290 per ounce, down from US$1,480 in
H1 2013. EBITDA increased by 1% to US$131.6 million in H1 2014 despite the
lower revenue, mainly due to a US$30.2 million reduction in direct mining
costs, reflected in the 25% reduction of AISC to US$1,118 per ounce.
Operationally, North Mara continued to mine high grade material from the Gokona
pit which drove H1 2014 production of 138,816 ounces, up 8% on the prior year
period, and AISC down by 29% to US$936 per ounce sold. Bulyanhulu saw a 9%
increase in head grade and a marginal increase in throughput which drove up H1
2014 production by 13% to 105,420 ounces and AISC down by 21% to US$1,249 per
ounce sold. Buzwagi saw a 34% reduction in total tonnes mined over the first
half of the year against H1 2013 which helped to reduce AISC by 29% to US$1,169
per ounce sold. Production increased to 102,344 ounces as a result of higher
grade material milled which more than offset the reduction in throughput.
As a result of operational and working capital improvements, cash generated
from operating activities in H1 2014 increased by 28% over the prior year
period to US$127.1 million, in spite of the reduction in the average realised
sales price. Over the first six months of the year this was US$4.5 million
lower than EBITDA, but in Q2 2014 the Company generated positive net cash flows
of US$15.5 million.
Our cash balance as at 30 June 2014 amounted to US$269.6 million.
Capital expenditure for the six months ended 30 June 2014 amounted to US$114.7
million compared to US$209.1 million in H1 2013. Capital expenditure primarily
comprised capitalised development expenditure (US$69.0 million), including
US$4.7 million related to waste development from the Bulyanhulu Upper East
project and US$4.8 million related to the Bulyanhulu Deep West project,
investment in the Bulyanhulu CIL Expansion project (US$24.9 million),
investments in tailings and infrastructure (US$9.6 million) and component and
equipment costs (US$6.7 million).
Second Quarter Review
The second quarter delivered positive results, with total production of 178,206
ounces, an increase of 8% on Q2 2013. Sales ounces amounted to 171,563, 4%
lower than production due to the timing of concentrate production at the end of
the quarter. Copper production for the quarter of 3.5 million pounds was 11%
higher than in Q2 2013 (3.1 million pounds), due to higher copper grades,
mainly at Buzwagi.
North Mara continued its strong performance during the quarter with a 10% year
on year increase in production due to improved throughput rates as a result of
improved mill utilisation rates. The improved throughput rate was marginally
offset by a 3% decrease in head grade.
At Bulyanhulu, production of 50,241 ounces was 9% down on Q2 2013 due to lower
throughput as a result of ore shortages given the disruption of mining
operations for two weeks in May 2014 following a non-operational fatality.
Lower throughput was offset by a 6% increase in head grade as a result of
higher mined grade given improved availability of high grade stopes.
At Buzwagi, gold production for the quarter of 57,787 ounces was 26% higher
than in Q2 2013 driven by a 36% increase in head grade. Throughput rates were
negatively impacted by lower mill availability primarily as a result of the
re-lining of both the SAG and Ball mills during the quarter, while ore mined
was 67% higher in Q2 2013 year due to previously communicated changes in the
mine plan which reduced the amount of waste material removed when compared to
Q2 2013.
Total tonnes mined during the quarter amounted to 10.4 million tonnes, a
decrease of 32% on Q2 2013. Ore tonnes mined from open pits amounted to 1.9
million tonnes compared to 1.5 million in Q2 2013, driven by the increased
focus on mining ore at Buzwagi due to the change in the mine plan, partially
offset by a reduction of tonnes mined at North Mara due to mine sequencing.
Ore tonnes processed amounted to 1.9 million tonnes, a decrease of 7% on Q2
2013 primarily driven by reduced throughput at Buzwagi and at Bulyanhulu as
discussed above.
Head grade for the quarter of 3.2 grams per tonne (g/t) was 19% higher than in
Q2 2013 (2.7 g/t). This was due to a higher mined grade at Buzwagi as mining
focused on the main ore zone as per the revised mine plan, and an improvement
in grade at Bulyanhulu due to improved access to higher grade stopes.
Our cash costs for the quarter were 13% lower than in Q2 2013, and amounted to
US$749 per ounce sold. The decrease was primarily due to:
the impact of the increased production base (US$160/oz);
the impact of the Operational Review (US$77/oz) on direct mining costs through:
a reduction in the international workforce (29% down compared to the same
period in 2013);
lower G&A costs driven by lower freight costs and aviation charges at
Bulyanhulu and North Mara;
increased supplier discounts; and
lower consumables costs driven by lower reagents and grinding media costs at
North Mara and lower tyres and grinding media costs at Buzwagi.
This was partially offset by lower capitalised development costs at Buzwagi and
North Mara as a result of the revised mine plan driving a lower strip ratio
(US$122/oz).
All-in sustaining cost of US$1,105 per ounce sold for the quarter was 21% lower
than Q2 2013, predominantly due to lower cash costs as explained above,
combined with lower sustaining capital expenditure and capitalised development.
Capital expenditure for the quarter amounted to US$59.0 million compared to
US$103.3 million in Q2 2013. Capital expenditure mainly consisted of
capitalised development expenditure (US$35.8 million), including US$4.7 million
related to waste development from the Bulyanhulu Upper East project and US$4.8
million relating to the Bulyanhulu Deep West project, investment in the
Bulyanhulu CIL Expansion project (US$10.1 million), investments in tailings and
infrastructure (US$7.2 million) and component costs (US$3.8 million).
Mine Site Review
Bulyanhulu
Key statistics
Three months Six months ended
ended 30 June 30 June
(Unaudited) 2014 2013 2014 2013
Underground ore tonnes hoisted Kt 217 246 428 418
Ore milled Kt 205 243 425 414
Head grade g/t 8.3 7.8 8.4 7.7
Mill recovery % 91.5% 90.7% 91.6% 91.0%
Ounces produced oz 50,241* 54,938 105,420* 92,974
Ounces sold oz 52,044 54,386 101,165 87,802
Cash cost per tonne milled US$/t 233 210 206 219
Cash cost per ounce sold US$/oz 919 936 867 1,033
AISC per ounce sold US$/oz 1,348 1,375 1,249 1,581
Copper production Klbs 1,135 1,382 2,431 2,238
Copper sold Klbs 1,153 1,167 2,347 2,035
Breakdown of Capital Expenditure
- Sustaining capital US$('000) 2,334 7,953 4,482 15,546
- Capitalised development US$('000) 17,158 11,822 28,414 24,102
- Expansionary capital US$('000) 10,972 29,678 25,831 52,421
Capital expenditure 30,464 49,453 58,727 92,069
- Non-cash reclamation asset
adjustments US$('000) 3,056 (6,843) 8,721 (9,208)
Total capital expenditure US$('000) 33,520 42,610 67,448 82,861
* Includes 273 ounces of gold in circuit at the CIL Expansion Plant
Operating performance
Gold production of 50,241 ounces for the quarter was 9% lower than in Q2 2013,
in spite of the 6% increase in grade driven by an increase in the availability
of high grade stopes. Tonnes hoisted and throughput were both impacted by the
disruption of mining operations for approximately two weeks in May as a result
of the search for a missing underground employee who was subsequently found
deceased as a result of a non-operational incident. Gold ounces sold of 52,044
ounces were 4% below that in Q2 2013 primarily due to the lower production
base, but exceeded production for the quarter due to the sale of concentrate
ounces on hand at the end of Q1 2014.
Copper production of 1.1 million pounds for the quarter was 18% lower than in
Q2 2013 due to lower throughput.
Cash costs for the quarter of US$919 per ounce sold were 2% lower than the
prior year of US$936, although they increased over Q1 2014 as a result of the
lower production base and an increase in operating expenses to support the ramp
up of production in the second half of the year. Against the prior year period,
cash costs were positively impacted by lower general and administration costs
primarily driven by lower freight costs, aviation charges, corporate charges
and consumable costs.
AISC per ounce sold for the quarter of US$1,348 was 2% lower than in Q2 2013
(US$1,375), but higher than Q1 2014 as a result of lower production, higher
cash costs and higher capitalised development costs as explained below.
During the quarter, we progressed the commissioning of the new CIL circuit at
Bulyanhulu and are nearing the completion of the commissioning stage. In late
June, roughly 6,500 tonnes of rougher tails were treated and pumped into the
new CIL circuit, resulting in 273 ounces of gold being produced in circuit. We
expect commissioning of this project to be complete early in Q3 with the first
gold pour in August. The ramp up of production will continue throughout the
third quarter. We continue to expect production of 20,000 ounces in 2014 from
the project, and are investigating an option for accelerating the retreatment
of the historic higher grade tailings in preference to the rougher tailings.
We undertook waste development in the Upper East Zone for a capital cost of
US$4.7 million in Q2 2014 and will commence ore development as expected in Q3
2014. As a result, we expect production from the Upper East Zone of
approximately 15,000 ounces of gold in H2 2014, weighted towards the fourth
quarter. In addition, we have progressed the development of the Deep West Zone
through a contractor to accelerate access to higher grade ore from Q4 2014, and
have incurred underground development capital costs of US$4.8 million during
the quarter. ABG expects that the combined capital requirements the Upper East
Zone and Deep West Zone for 2014 will be approximately US$30 million. This is
categorised as capitalised development and is included in the Bulyanhulu and
Group AISC figures.
Capital expenditure for the quarter of US$30.5 million was 38% lower than in Q2
2013 of US$49.5 million. Capital expenditure consisted mainly of capitalised
underground development costs (US$17.2 million, inclusive of US$4.7 million of
Upper East and US$4.8 million of Deep West spend) and expansionary capital
investment relating to the CIL circuit (US$10.1 million).
Buzwagi
Key statistics
Three months Six months ended
ended 30 June 30 June
(Unaudited) 2014 2013 2014 2013
Tonnes mined Kt 5,803 8,475 11,346 17,305
Ore tonnes mined Kt 1,333 800 2,354 1,501
Ore milled Kt 1,010 1,197 1,980 2,290
Head grade g/t 1.9 1.4 1.8 1.3
Mill recovery % 91.9% 87.3% 90.3% 88.2%
Ounces produced oz 57,787 45,726 102,344 85,746
Ounces sold oz 49,479 44,556 92,442 96,367
Cash cost per tonne milled US$/t 41 39 41 39
Cash cost per ounce sold US$/oz 837 1,054 879 918
AISC per ounce sold US$/oz 1,078 1,632 1,169 1,643
Copper production Klbs 2,318 1,740 3,999 3,346
Copper sold Klbs 1,721 1,589 3,044 4,078
Breakdown of Capital Expenditure
- Sustaining capital US$('000) 3,915 4,512 5,776 20,657
- Capitalised development US$('000) 5,525 17,426 15,157 41,338
Capital expenditure 9,440 21,938 20,933 61,995
- Non-cash reclamation asset
adjustments US$('000) 174 (5,770) 839 (6,809)
Total capital expenditure US$('000) 9,614 16,168 21,772 55,186
Operating performance
Gold production for the quarter of 57,787 ounces was 26% higher than in Q2
2013, driven by increased head grade as a result of the re-engineered mine plan
as communicated in 2013. Gold sold for the quarter amounted to 49,479 ounces,
11% above that of Q2 2013 due to the increased production base, but lagging
production as a result of the availability and timing of copper concentrate
shipments. We anticipate that the majority of the unsold ounces at the end of
June will be shipped during Q3 2014 with the remainder sold in Q4 2014.
Tonnes milled during the quarter were 16% lower than in Q2 2013 due to lower
mill availability as a result of the re-lining of both the SAG and Ball mills
in May, coupled with the limiting of daily throughput to manage a defective SAG
mill gearbox ahead of a change out in early Q3. The management of the SAG mill
gearbox meant that the process plant ran on 100% diesel power to ensure
consistent power supply from May, although this has now reverted back to the
normal power mix.
Total tonnes mined for the quarter of 5.8 million tonnes were 32% lower than in
Q2 2013 due to changes in the mine plan compared to 2013 due to the focus on
the removal of less waste and mining of higher grade areas.
Copper production of 2.3 million pounds for the quarter was 33% higher than in
Q2 2013 driven by the increased copper grades and concentrate production.
Cash costs for the quarter of US$837 per ounce sold were 21% lower than in Q2
2013 (US$1,054). Cash costs were positively impacted by increased production
levels and resultant co-product revenue, together with savings driven by the
Operational Review in contracted services (lower rates) and labour costs (58%
reduction in the international workforce). This was partially offset by lower
capitalised development costs, increased power costs to run the process plant
on self generated power, and increased maintenance costs due to increased
maintenance activity.
AISC per ounce sold for the quarter of US$1,078 was 34% lower than in Q2 2013
(US$1,632). This was driven by the lower cash cost base and lower sustaining
capital and capitalised development expenditure.
Capital expenditure for the quarter of US$9.4 million was 57% lower than in Q2
2013 (US$21.9 million). The significant change to the mine plan reduced the
levels of waste movement thereby reducing capitalised stripping costs. Key
capital expenditure for the quarter included capitalised stripping costs
(US$5.5 million), investments in tailings and infrastructure (US$2.1 million)
and component change out costs (US$1.2 million).
North Mara
Key statistics
Three months Six months ended
ended 30 June 30 June
(Unaudited) 2014 2013 2014 2013
Tonnes mined Kt 4,335 6,420 8,118 11,395
Ore tonnes mined Kt 566 681 1,126 1,458
Ore milled Kt 710 634 1,365 1,280
Head grade g/t 3.5 3.6 3.6 3.6
Mill recovery % 86.9% 87.0% 87.3% 87.1%
Ounces produced oz 70,177 63,774 138,816 128,478
Ounces sold oz 70,040 71,150 137,340 130,200
Cash cost per tonne milled US$/t 55 77 59 75
Cash cost per ounce sold US$/oz 561 684 584 739
AISC per ounce sold US$/oz 893 1,266 936 1,313
Breakdown of Capital Expenditure
- Sustaining capital US$('000) 4,557 9,183 8,088 23,962
- Capitalised development US$('000) 13,125 22,271 25,392 28,917
- Expansionary capital US$('000) 978 376 978 504
Capital expenditure 18,660 31,830 34,458 53,383
- Non-cash reclamation asset
adjustments US$('000) 1,382 (4,442) 5,358 (5,950)
Total capital expenditure US$('000) 20,042 27,388 39,816 47,433
Operating performance
Production for the quarter of 70,177 ounces was 10% higher than in Q2 2013
despite the marginally lower head grade as throughput rates exceeded the prior
year period by 12%. The higher milled tonnes were due to improved mill
efficiency. Gold ounces sold for the quarter of 70,040 ounces were in line with
production.
Cash costs for the quarter of US$561 per ounce sold were 18% lower than in Q2
2013 (US$684). Cash costs were positively impacted by increased production
levels, together with a 36% reduction in the international workforce and lower
maintenance costs, both a result of initiatives driven by the Operational
Review. This was partially offset by lower capitalised mining costs and higher
contracted services costs given increased drilling rates and activity.
AISC per ounce sold for the quarter of US$893 was 29% lower than in Q2 2013
(US$1,266) due to the reasons outlined above, combined with lower sustaining
capital and capitalised development expenditure in combination with the
increased production base.
During the second half of the year, North Mara is expected to mill an increased
number of ore tonnes sourced from the lower grade Nyabirama pit rather than
from the Gokona pit. As a result head grades for the full year are expected to
revert towards the reserve grade of the mine.
The feasibility study into the potential to mine Gokona Cut 3 via an
underground operation continued to progress well during the quarter and is on
track to be presented to the Board for approval in Q4 2014. During Q2, ABG made
the final decision on the location of the exploration portal which 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.
Early works towards the construction of the portal are in progress with the
first blast due in August. The total expansionary capital cost of the portal
is expected to be around US$10 million.
Capital expenditure for the quarter of US$18.7 million was 41% lower than in Q2
2013 (US$31.8 million), due to lower capitalised development and lower
sustaining capital expenditure, slightly offset by increased expansionary
expenditure. Key capital expenditure included capitalised stripping costs
(US$13.1 million), investments in tailings and infrastructure (US$1.8 million)
and component costs (US$2.1 million). Expansion capital of US$1.0 million
relates to exploration drilling costs relating to the Gokona Underground
feasibility study.
Exploration Review
Exploration during H1 2014 continued to focus on the Tanzanian near-mine and
in-mine brownfield programmes and the West Kenya Joint Venture Greenfield
programmes. Exploration expenditure for the first half of the year was
approximately US$10.6 million and the full year forecast budget remains US$16.0
million. The 2014 exploration programmes have been weighted toward H1 2014,
with large diamond core programmes from surface and underground platforms at
Bulyanhulu, and extensive soil sampling, ground geophysics and Aircore drilling
programmes across the West Kenya Joint Venture.
In H2 2014, we expect to complete surface drilling on Bulyanhulu Deep West and
Aircore drilling in Kenya. We will assess the results of H1 2014 programmes and
design follow-up programmes to test positive results. The next phase of
underground drilling at Bulyanhulu, which is targeting the deep western
extension of Reef 2, commenced in early July.
Bulyanhulu Deep West Surface Drilling
Throughout H1 2014, we have continued a programme of deep diamond drilling West
of the Bulyanhulu mine, targeting extensions of the Reef 1 and Reef 2 vein
series. The holes are designed to test the extensions of the Reef 1 structure
from 400 metres to 1,200 metres west of the current Bulyanhulu resource where
historic drilling had shown indications of further gold mineralisation.
Additionally, holes will also intersect the Reef 2 vein series, and provide an
indication of whether the Reef 2 system is mineralised up to 2 kilometres west
of currently delineated underground resources.
During H1 2014, a total of 7,503 metres of diamond core has been drilled from
the surface holes. The Reef 1 and Reef 2 system has been intersected in several
holes during H1 2014, with better results being returned from Reef 2 in this
part of the Bulyanhulu mineralised system. Encouraging results from the
programme to date include the following significant intersections:
BGMDD0054: 2.0m @10.7g/t Au from 1,174m - Reef 2 series
BGMDD0054: 0.5m @ 37.9g/t Au from 1,335m - Reef 2 series
BGMDD0054: 0.5m @ 29.6g/t Au from 1,390m - Reef 2 series
BGMDD0054W1: 1.29m @ 11.7g/t Au from 1,435m - Reef 1
BGMDD0054W2: 1.02m @ 24.2g/t Au from 1,034m - Reef 2 series
BGMDD0054W2: 4.50m @ 8.05g/t Au from 1,640m, includes 1.0m @ 23.8g/t Au - Reef 1
BGMDD0054W3: 1.1m @ 5.35g/t Au from 1,363m - Reef 2 series
BGMDD0054W3: 1.20m @ 11.5g/t Au from 1,367m - Reef 2 series
BGMDD0055W1: 0.6m @ 18.8g/t Au from 613m - Reef 2 series
BGMDD0055W2: 0.80m @ 16.2g/t Au from 944m - Reef 2 series
BGMDD0055W3: 0.79m @ 7.00g/t Au from 1,059m - Reef 1
BGMDD0056W1: 0.50m @ 94.6g/t Au from 805m - Reef 2 series
The results from these holes are potentially significant in demonstrating that
gold mineralisation, particularly on the Reef 2 vein system continues West of
the mine, which would open the potential for an expansion of the footprint of
Bulyanhulu on Reef 2. The drilling programme is expected to be completed during
H2 2014 with a single rig drilling a further 2,500 metres of diamond core
drilling. This programme will form an important part of our assessment of how
to most effectively develop the Bulyanhulu mine over the long term.
Bulyanhulu East Deeps Underground Drilling - Reef 2
The East Deeps drilling programme targeted down dip mineralisation of the
Bulyanhulu Reef 2 system which is outside the current resource model. The
programme was drilled from several underground drill platforms and was aimed at
adding high grade gold resources on the East Zone. Drilling was completed
during H1 2014 with a total of 3,058 metres of diamond core completed from
three holes, bringing the total for the programme to five holes at 5,598
metres. The results received were all from the Reef 2 series and included the
following encouraging intersections:
UX4700-405: 1.0m @ 19.0g/t Au
UX4700-407: 1.3m @ 76.7g/t Au
UX4700-408: 1.75m @ 13.6g/t Au
UX4700-410: 0.5m @ 18.4g/t Au
These intersections continue to prove continuity at depth of the mineralisation
with high grade. This has the potential to add to the mine resource in this
area, with the high grade shoot remaining open at depth. This stage of the
programme has been completed and the results will be incorporated into the end
of year resource calculations. Further drilling programmes are planned in this
area and will be completed as part of a larger Reef 2 underground resource
expansion programme being undertaken by the mine over the next few years.
West Kenya Joint Venture Projects
Aircore drilling testing existing gold-in-soil anomalies along the Liranda
Corridor on the south side of the Kakamega Dome continued throughout H1 2014,
with a total of 830 holes completed for 32,215 metres. The Aircore programme
has been very successful, with 247 holes of the 992 holes completed since the
programme commenced in 2013 returning anomalous results (>0.1g/t Au), of which
87 holes intersecting zones of >0.50g/t Au including better results during H1
2014 of:
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
KDAC0617: 6m @ 7.7 g/t Au incl. 3m @ 13.7 g/t Au
KDAC0832: 12m @ 2.77 g/t Au incl. 3m @ 9.11 g/t Au
KDAC0841: 15m @ 1.94 g/t Au and 6m @ 4.35 g/t Au
KDAC0858: 6m @ 22.3 g/t Au incl. 3m @ 44 g/t Au
KDAC0860: 27m @ 1.31 g/t Au incl. 15m @ 2.16g/t Au
KDAC0877: 12m @ 12.6g/t Au incl. 3m @ 46.3 g/t Au
The gold mineralisation has been intersected in a variety of rock types along
the Liranda Corridor, which indicates opportunities to test for different types
and styles of gold deposits in this area. The majority of gold mineralisation
intersected to date has been within weathered (oxidised) bedrock, often
associated with quartz veining, but not always the case.
The Aircore results to date are very encouraging given the current line spacing
of the Aircore traverses varies between 200 metres and 800 metres and the
average depth of drilling to date is relatively shallow at approximately 50
metres. Step-out and infill traverses are being undertaken as part of the
current phase of the programme before targets will be ranked for testing by
more advanced reverse circulation and diamond drilling.
In tandem with the Aircore drilling we are undertaking gradient and pole-dipole
IP and Resistivity across selected gold-in-soil anomalies throughout the Lake
Zone Camp in the central and western areas of the project. A total of 147 line
kilometres of surveys have now been completed. Ten targets showing distinct
resistivity and/or chargeability zones coincident with the gold-in-soil
anomalies have been delineated and will be considered as priority targets for
future drilling programmes.
Financial Review
The positive impact of the Operational Review and the challenging gold price
environment in 2014 is reflected in the ABG Group's financial results for the
six months ended 30 June 2014 which also present Tulawaka as a discontinued
operation:
Revenue of US$445.5 million was US$41.9 million lower than H1 2013 driven by a
13% decrease in the average realised gold price to US$1,290 per ounce sold
(US$1,480 per ounce sold in the prior year period), which more than offset an
increase of 16,578 ounces (5%) in sales volumes.
Cash costs decreased to US$752 per ounce sold from US$876 in H1 2013, driven by
higher production, lower labour costs and contracted services.
All-in sustaining costs decreased to US$1,118 per ounce sold from US$1,483 in
H1 2013 due to lower cash costs, sustaining capital expenditures and
capitalised development costs.
EBITDA increased by 1% to US$131.6 million, mainly driven by lower direct
mining costs achieved from the implementation of the Operational Review
initiatives.
Operational cash flow of US$127.1 million was 28% higher than H1 2013, mainly
due to reduced operating costs and decreased working capital investment.
The following review provides a detailed analysis of our consolidated results
for the six months ended 30 June 2014 and the main factors affecting financial
performance. It should be read in conjunction with the consolidated interim
financial information and accompanying notes on pages 27 to 44, which have been
prepared in accordance with International Financial Reporting Standards as
adopted for use in the European Union (IFRS).
Discontinued operation - Tulawaka
On 15 November 2013, ABG announced that an agreement was reached with STAMICO,
the Tanzanian State Mining Corporation, whereby STAMICO acquired the Tulawaka
Gold Mine ("Tulawaka") and certain exploration licenses surrounding Tulawaka
for a consideration of US$4.5 million and the grant of a 2% net smelter royalty
on future production in excess of 500,000 ounces, capped at US$0.5 million. As
part of the agreement, 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 indemnified the other parties to
the agreement in relation to these liabilities. This resulted in a cash payment
by ABG to STAMICO of the balance of the rehabilitation fund, less the
transaction consideration on completion. Tulawaka was 100% owned by the
Tulawaka Joint Venture, in which ABG held a 70% economic interest through a
wholly owned subsidiary, and MDN Inc held the remaining 30% of the Joint
Venture. Production at Tulawaka ceased in Q2 2013. The transaction completed on
4 February 2014, resulting in a cash payment of US$11.6 million to STAMICO.
The financial results of Tulawaka have been presented as discontinued
operations in the consolidated interim financial information. The comparative
results in the consolidated interim income statement have been presented as if
Tulawaka had been discontinued from the start of the comparative period,
effectively excluding the net result relating to Tulawaka from individual
income statement lines and aggregating it in one line called "Net profit/(loss)
from discontinued operations". Below is a reconciliation showing Group
financial performance on a line by line basis.
Six months ended 30 June 2014 Six months ended 30 June 2013
(US$'000)
Continuing Discontinued Continuing Discontinued
(Unaudited) operations operations Total operations operations Total
Revenue 445,509 - 445,509 487,360 12,392 499,752
Cost of sales (332,474) - (332,474) (386,733) (28,151) (414,884)
Gross profit 113,035 - 113,035 100,627 (15,759) 84,868
Corporate administration (13,975) - (13,975) (17,583) (1,301) (18,884)
Share based payments (4,917) - (4,917) 3,861 114 3,975
Exploration and evaluation costs (10,995) - (10,995) (7,715) 161 (7,554)
Corporate social responsibility expenses (4,307) (92) (4,399) (6,228) (690) (6,918)
Impairment charges - - - (910,989) (16,701) (927,690)
Other charges (12,782) 958 (11,824) (15,597) (6,496) (22,093)
Profit/(loss) before net finance expense
and taxation 66,059 866 66,925 (853,624) (40,672) (894,296)
Finance income 630 36 666 995 10 1,005
Finance expense (4,504) (16) (4,520) (4,696) (79) (4,775)
Profit/(loss) before taxation 62,185 886 63,071 (857,325) (40,741) (898,066)
Tax (expense)/credit (22,716) - (22,716) 184,648 - 184,648
Net profit/(loss) for the period 39,469 886 40,355 (672,677) (40,741) (713,418)
The financial performance below is stated for continuing operations.
Revenue
Revenue for H1 2014 of US$445.5 million was 9% lower than in H1 2013 (US$487.4
million). Year-on-year realised gold prices decreased by 13% to US$1,290 per
ounce sold from US$1,480 in H1 2013, which more than offset the increase in
sales volumes of 16,578 ounces. The increase in sales ounces was primarily due
to the higher production base.
Included in total revenue was co-product revenue of US$18.7 million for H1
2014, which decreased by 17% from the prior year period (US$22.7 million) due
to the lower copper sales volumes and a lower realised copper price. The H1
2014 average realised copper price of US$3.07 per pound compared unfavourably
to that of H1 2013 (US$3.23 per pound), and was driven by global market factors
regarding supply and demand.
Cost of sales
Cost of sales was US$332.5 million for H1 2014, representing a decrease of 14%
on the prior year period (US$386.7 million). The key aspects impacting the cost
of sales for the reporting period were lower direct mining costs as a result of
Operational Review savings across labour, consumables and freight, a change in
inventory credit driven by the investment in ore inventory and build up of
ounces on hand and lower depreciation and amortisation charges driven by the
lower capital base employed.
The table below provides a breakdown of cost of sales:
Three months ended Six months ended 30
(US$'000) 30 June June
(Unaudited) 2014 2013 2014 2013
Cost of Sales
Direct mining costs 122,841 141,623 238,087 268,238
Third party smelting and refining fees 5,783 3,611 9,916 7,997
Royalty expense 10,011 10,845 19,775 21,831
Depreciation and amortisation 34,698 47,269 64,696 88,667
Total 173,333 203,348 332,474 386,733
A detailed breakdown of direct mining expenses is shown in the table below:
Three months ended 30 Six months ended 30
(US$'000) June June
(Unaudited) 2014 2013 2014 2013
Direct mining costs
Labour 32,976 39,040 67,973 80,440
Energy and fuel 33,926 35,932 66,345 70,228
Consumables 24,850 28,148 48,723 54,796
Maintenance 24,907 23,142 47,923 47,741
Contracted services 23,549 23,583 42,300 50,030
General administration costs 19,522 24,103 39,591 45,808
Capitalised mining costs (36,889) (32,325) (74,768) (80,805)
Total direct mining costs 122,841 141,623 238,087 268,238
Direct mining costs of US$238.1 million for H1 2014 were 11% lower than H1 2013
(US$268.2 million). Individual cost components comprised:
A 15% reduction in labour costs, mainly as a result of the lower headcount at
all operating sites, specifically a 29% reduction in group international
employees, driven by localisation efforts and the impact of the Operational
Review.
A 6% reduction in energy and fuel expenses, driven primarily by lower diesel
usage at North Mara as a result of reduced mining activity, and at Buzwagi as a
result of reduced mining and processing activity.
An 11% decrease in consumable costs, primarily due to supplier price
negotiations, increased mine site efficiencies and lower mining activity.
Maintenance costs of US$47.9 million were in line with prior year costs of
US$47.7 million.
A 15% decrease in contracted services, mainly driven by lower mining activity
at Buzwagi, and the renegotiated maintenance rates associated with maintenance
and repair contracts ("MARC") contracts at Buzwagi and North Mara.
A 14% decrease in general administration costs, mainly at Bulyanhulu and North
Mara driven by lower freight costs associated with inventory consumed, a
decrease in the stock obsolescence provision and lower aviation charter costs
driven by the Operational Review.
Capitalised direct mining costs, consisting of capitalised development costs
and the change in inventory charge, is comprised as follows:
Three months ended 30
(US$'000) June Six months ended 30 June
(Unaudited) 2014 2013 2014 2013
Capitalised direct mining costs
Capitalised development costs (30,649) (52,298) (64,095) (95,775)
(Investment in)/ drawdown of inventory (6,240) 19,973 (10,673) 14,970
Total capitalised direct mining costs (36,889) (32,325) (74,768) (80,805)
Capitalised development costs were 33% lower than H1 2013, driven by increased
focus on mining ore at Buzwagi due to the revised mine plan. The investment in
inventory was US$25.6 million higher than in H1 2013 due to a build up of ore
inventory at Buzwagi due to lower throughput rates combined with increased gold
inventory on hand driven by the timing of production compared to sales. This
was slightly offset by a drawdown of ore stockpiles at North Mara as a result
of the improved throughput rate and plant performance.
Corporate administration costs
Corporate administration expenses totalled US$18.9 million for H1 2014. A
US$3.6 million decrease in general corporate administration costs due to the
impact of the Operational Review was more than offset by an increase of US$8.8
million in share based payment expenses given the stronger share price
performance. This resulted in a 38% increase on H1 2013 (US$13.7 million) as
shown in the table below.
Three months ended 30 Six months ended 30
June June
(US$'000) 2014 2013 2014 2013
(Unaudited)
Corporate administration 7,618 9,169 13,975 17,583
Share based payments 1,593 (425) 4,917 (3,861)
Total corporate administration 9,211 8,744 18,892 13,722
Exploration and evaluation costs
Exploration and evaluation costs of US$11.0 million were incurred in H1 2014,
43% higher than the US$7.7 million spent in H1 2013. The key focus areas for H1
2014 were drilling at Bulyanhulu deep central reefs 1 and 2 (US$5.5 million),
and exploration programmes at the West Kenya Joint Venture project amounting to
US$3.3 million. The Bulyanhulu underground programme has been completed in H1
2014 and the second half of the year should see decreased field activity across
all projects.
Corporate social responsibility expenses
Corporate social responsibility costs incurred amounted to US$4.3 million for
the six months compared to the prior year of US$6.2 million. The main projects
for H1 2014 related to Village Benefit Implementation Agreements ("VBIAs") at
North Mara and contributions to general community projects funded from the ABG
Maendeleo Fund.
Other charges
Other charges amounted to US$12.8 million, 18% lower than H1 2013 (US$15.6
million). The main contributors were: (i) non-cash foreign exchange losses
mainly related to the indirect tax receivables due to the weakening of the
Tanzanian shilling (US$7.8 million), (ii) Operational Review costs, including
external services and retrenchment costs of US$5.3 million, (iii) legal costs
of US$1.9 million, and (iv) ABG's entry into zero cost collar contracts as part
of a programme to protect it against copper, silver, rand and fuel cost market
volatility. The entry into these arrangements resulted in a combined
mark-to-market revaluation gain of US$2.7 million, due to the fact that these
arrangements do not qualify for hedge accounting. Refer to note 7 of the
consolidated interim financial information for further details.
Finance expense and income
Finance expense of US$4.5 million for H1 2014 was 4% lower than H1 2013 (US$4.7
million). The key drivers were US$1.2 million (US$1.5 million in 2013) relating
to the servicing of the US$150 million undrawn revolving credit facility, and
accretion expenses relating to the discounting of the environmental reclamation
liability (US$2.5 million). Other costs include bank charges and interest on
finance leases. Interest costs relating to the project financing on the CIL
Bulyanhulu Expansion project are capitalised to the cost of the asset due to
the facility being directly attributable to the asset. For the six months ended
30 June 2014 US$2.0 million of borrowing costs have been capitalised to the
project.
Finance income relates predominantly to interest charged on non-current
receivables and interest received on money market funds. Refer to note 8 of the
consolidated interim financial information for details.
Taxation matters
The taxation charge was US$22.7 million for H1 2014, compared to a credit of
US$184.6 million in H1 2013. The tax charge was made up solely of deferred tax
charges and reflects the impact of the profitability on a year-to-date basis.
The effective tax rate in H1 2014 amounted to 36.5% compared to 21.5% in H1
2013. The increase is mainly driven by the increase in taxable income, and
temporary higher tax losses for corporate and exploration entities in Q2 2014
for which deferred tax assets are not recognised. This is expected to normalise
in H2 2014.
Net earnings from continuing operations
As a result of the factors discussed above, net profit from continuing
operations for H1 2014 was US$39.5 million, against the prior year period loss
of US$672.7 million. Lower impairment charges, costs of sales, and other
charges contributed to the variance. This was offset by the higher tax charge
and lower revenue.
Earnings per share
The earnings per share for H1 2014 amounted to US10.0 cents, an increase of
US181.0 cents from the prior year period loss of US171.0 cents. The increase
was driven by an increased net profit with no change in the underlying issued
shares. Earnings per share from continuing operations amounted to US9.6 cents.
Key financial performance indicators and reconciliations
Cash costs
Cash cost per ounce sold in H1 2014 (US$752 per ounce sold) decreased by 14%
when compared to H1 2013 (US$876 per ounce). Refer to the operating overview on
page 7 and cost of sales explanations as part of the financial review for the
details on the year on year change.
The table below provides a reconciliation between cost of sales and total cash
cost to calculate the cash cost per ounce sold.
Three months ended Six months ended 30
(US$'000) 30 June June
(Unaudited) 2014 2013 2014 2013
Total cost of sales 173,333 203,348 332,474 386,733
Deduct: depreciation and amortisation (34,698) (47,269) (64,696) (88,667)
Deduct: Co-product revenue (10,098) (9,544) (18,744) (22,670)
Total cash cost 128,537 146,535 249,034 275,396
Total ounces sold 171,563 170,092 330,947 314,369
Cash cost per ounce 749 862 752 876
Discontinued operations - 17 - 27
Attributable cash cost per ounce 749 879 752 903
Refer to note 6 to the consolidated interim financial information for a
reconciliation to all-in sustaining cost per ounce sold.
EBITDA
EBITDA for H1 2014 increased by 1% to US$131.6 million when compared to H1 2013
(US$130.8 million) as a result of the lower cost of sales and other charges,
partly offset by lower revenue and higher corporate administration costs. A
reconciliation between net profit for the period and EBITDA is presented below:
Three months ended 30 Six months ended 30
(US$'000) June June
(Unaudited) 2014 2013 2014 2013
Net profit/ (loss) for the period 18,412 (729,628) 40,355 (713,418)
Plus income tax expense 12,047 (198,907) 22,716 (184,648)
Plus depreciation and amortisation 34,698 47,865 64,696 97,377
Plus impairment charges/write-offs - 927,690 - 927,690
Plus finance expense 2,106 2,218 4,520 4,775
Less finance income (304) (410) (666) (1,005)
EBITDA 66,959 48,828 131,621 130,771
Financial position
ABG had cash and cash equivalents on hand of US$269.6 million as at 30 June
2014 (US$320.9 million as at 30 June 2013). The Group's cash and cash
equivalents are with counterparties whom the Group considers to have an
appropriate credit rating. Location of credit risk is determined by physical
location of the bank branch or counterparty. Investments are held mainly in
United States dollars and cash and cash equivalents in other foreign currencies
are maintained for operational requirements.
During 2013, a US$142 million facility was put in place to fund the bulk of the
costs of the construction of one of our key growth projects, the Bulyanhulu CIL
Expansion project ("Project"). The Facility is collateralised by the Project,
and has a term of seven years with a spread over Libor of 250 basis points. The
seven year Facility is repayable in equal instalments over the term of the
Facility, after a two year repayment holiday period. The interest rate has been
fixed at 3.6% through the use of an interest rate swap. The full facility of
US$142 million was drawn in 2013.
The above compliments the existing undrawn revolving credit facility of US$150
million which runs until November 2016.
The net book value of property, plant and equipment increased from US$1.28
billion in December 2013 to US$1.35 billion in June 2014. The main capital
expenditure drivers have been explained in the cash flow used in the investing
activities section below, and have been offset by depreciation charges of
US$64.7 million. Refer to notes 6 and 12 to the consolidated interim financial
information for further details.
Total indirect tax receivables, net of a discount provision applied to the
non-current portion, decreased from US$159.8 million as at 31 December 2013 to
US$126.6 million as at 30 June 2014. The decrease was mainly due to refunds of
US$65.8 million received during H1 2014, which was offset by a net increase in
current VAT receivables of approximately US$37 million. The net deferred tax
position decreased from an asset of US$14.9 million as at 31 December 2013 to a
liability of US$7.8 million. This was mainly driven by the reduction in
deferred tax assets as a result of the company making taxable income.
Net assets attributable to owners of the parent increased from US$1.93 billion
in December 2013 to US$1.96 billion in June 2014. The increase reflects the
current year profit attributable to owners of the parent of US$40.8 million and
the payment of the final 2013 dividend of US$8.2 million to shareholders during
H1 2014.
Cash flow generation and capital management
Cash flow - continuing and discontinued operations
For the three
months ended 30 For six months
(US$'000) June ended 30 June
(Unaudited) 2014 2013 2014 2013
Cash generated from operating activities 76,381 41,691 127,107 99,017
Cash used in investing activities (50,541) (102,943) (128,074) (208,822)
Cash (used in)/provided by financing activities (10,249) (20,263) (11,085) 27,588
Increase/(decrease) in cash 15,591 (81,515) (12,052) (82,217)
Foreign exchange difference on cash (89) 868 (761) 1,742
Opening cash balance 254,094 401,520 282,409 401,348
Closing cash balance 269,596 320,873 269,596 320,873
Cash flow from operating activities was US$127.1 million for H1 2014, an
increase of US$28.1 million, when compared to H1 2013 (US$99.0 million). The
increase primarily relates increased EBITDA, slightly offset by an investment
in working capital. The working capital investment of US$3.8 million related
mainly to a decrease in trade payables of US$16.4 million due to the timing of
payments combined with an investment in gold inventory of US$14.6 million. This
was offset by VAT refunds of US$28.2 million received from the Tanzanian
Government.
Cash flow used in investing activities was US$128.1 million for H1 2014, a
decrease of 39% when compared to H1 2013 (US$208.8 million), driven by lower
sustaining capital expenditure across all sites, lower expansion capital
expenditure mainly related to the Bulyanhulu CIL Expansion project and lower
capitalised development expenditure at Buzwagi and North Mara.
A breakdown of total capital and other investing capital activities for the six
months ended 30 June is provided below:
(US$'000) For six months ended 30 June
(Unaudited) 2014 2013
Sustaining capital 20,724 58,987
Expansionary capital 26,809 53,866
Capitalised development 68,963 94,357
Total cash capital 116,496 207,210
Non-cash rehabilitation asset adjustment 14,918 (22,128)
Non-cash sustaining capital1 (1,752) 1,846
Total capital expenditure 129,662 186,928
Other investing capital
- Non-current asset movement2 (55) 1,612
-Cash flow related to the sale of Tulawaka 11,633 -
1 Total non-cash sustaining capital relates to the impact of capital accruals
excluded from cash sustaining capital.
2 Non-current asset movements relates to the investment in the land
acquisitions reflected as prepaid operating leases and Tanzania government
receivables.
Sustaining capital
Sustaining capital expenditure included the investment in mine equipment of
US$6.7 million, mainly relating to component change outs at North Mara and
Buzwagi and investment in tailings and infrastructure at North Mara (US$3.4
million), Bulyanhulu (US$3.2 million), and Buzwagi (US$3.0 million).
Expansionary capital
Expansionary capital expenditure consisted mainly of the Bulyanhulu CIL
Expansion project (US$24.9 million).
Capitalised development
Capitalised development capital includes capitalised stripping for North Mara
(US$25.4 million) and Buzwagi (US$15.2 million) and Bulyanhulu capitalised
underground development of US$28.4 million.
Non-cash capital
Non-cash capital was US$13.2 million and consisted of reclamation asset
adjustments (US$14.9 million) and the six months increase in capital accruals
(US$1.8 million). The reclamation adjustments were driven by lower US risk free
rates driving lower discount rates.
Other investing capital
The sale of Tulawaka to STAMICO resulted in a cash payment of the balance of
the rehabilitation fund, less the transaction consideration on completion, and
amounted to US$11.6 million. During H1 2014 North Mara incurred land purchases
totalling US$5.3 million.
Cash flow used in financing activities for the six months ended 30 June 2014
was US$11.1 million, a decrease of US$38.7 million on H1 2014 (US$27.6 million
inflow). The outflow primarily relates to payment of the final 2013 dividend of
US$8.2 million and finance lease payments of US$2.9 million.
Dividend
The final dividend for 2013 of US2.0 cents per share was paid to shareholders
during May 2014. The Board of Directors have approved an interim dividend for
2014 of US1.4 cents per share, payable to shareholders in September 2014.
Significant judgements in applying accounting policies and key sources of
estimation uncertainty
Many of the amounts included in the consolidated interim financial statements
require management to make judgements and/or estimates. These judgements and
estimates are continuously evaluated and are based on management's experience
and best knowledge of the relevant facts and circumstances, but actual results
may differ from the amounts included in the consolidated financial information
included in this release. Information about such judgements and estimation is
included in the accounting policies and/or notes to the consolidated interim
financial statements, and the key areas are summarised below.
Areas of judgement and key sources of estimation uncertainty that have the most
significant effect on the amounts recognised in the consolidated interim
financial statements include:
Estimates of the quantities of proven and probable gold reserves;
The capitalisation of production stripping costs;
The capitalisation of exploration and evaluation expenditures;
Review of goodwill, tangible and intangible assets' carrying value, the
determination of whether these assets are impaired and the measurement of
impairment charges or reversals;
The estimated fair values of cash generating units for impairment tests,
including estimates of future costs to produce proven and probable reserves,
future commodity prices, foreign exchange rates and discount rates;
The estimated useful lives of tangible and long-lived assets and the
measurement of depreciation expense;
Property, plant and equipment held under finance leases;
Recognition of a provision for environmental rehabilitation and the estimation
of the rehabilitation costs and timing of expenditure;
Whether to recognise a liability for loss contingencies and the amount of any
such provision;
Whether to recognise a provision for accounts receivable and the impact of
discounting the non-current element;
Recognition of deferred income tax assets, amounts recorded for uncertain tax
positions, the measurement of income tax expense and indirect taxes;
Determination of the cost incurred in the productive process of ore stockpiles,
gold in process, gold doré/bullion and concentrate, as well as the associated
net realisable value and the split between the long term and short term
portions;
Determination of fair value of derivative instruments; and
Determination of fair value of stock options and cash-settled share based
payments.
Going concern statement
The ABG Group's business activities, together with factors likely to affect its
future development, performance and position are set out in the operational and
financial review sections of this report. The financial position of the ABG
Group, its cash flows, liquidity position and borrowing facilities are
described in the preceding paragraphs of this financial review.
At 30 June 2014, the Group had cash and cash equivalents of US$269.6 million
with a further US$150 million available under the undrawn revolving credit
facility which has been further extended until November 2016. Total borrowings
at the end of the year amounted to US$142 million, of which the first repayment
is only repayable from 2015.
Included in other receivables are amounts due to the Group relating to indirect
taxes of US$66.0 million which are expected to be received within 12 months,
but these will be offset to an extent by new claims submitted for input taxes
incurred during 2014. The refunds remain dependent on processing and payments
of refunds by the Government of Tanzania.
We expect that the above, in combination with the expected operational cash
flow generated during the year, will be sufficient to cover the capital
requirements and other commitments for the foreseeable future.
In assessing the ABG Group's going concern status the Directors have taken into
account the above factors, including the financial position of the ABG Group
and in particular its significant cash position, the current gold and copper
price and market expectations for the same in the medium term, and the ABG
Group's capital expenditure and financing plans. After making appropriate
enquiries, the Directors consider that ABG and the ABG Group as a whole has
adequate resources to continue in operational existence for the foreseeable
future and that it is appropriate to adopt the going concern basis in preparing
the consolidated interim financial statements.
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.
Refer to page 15 for a reconciliation to cost of sales.
The presentation of these statistics in this manner allows ABG to monitor and
manage those factors that impact production costs on a monthly basis. Cash cost
per ounce sold is 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 cost 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:
(Unaudited) Three months ended 30 June 2014 Three months ended 30 June 2013
ABG Group ABG Group
North ongoing North ongoing
(US$/oz sold) Bulyanhulu Mara Buzwagi operations Bulyanhulu Mara Buzwagi operations
Cash cost per ounce sold 919 561 837 749 936 684 1,054 862
Corporate administration 40 36 39 45 61 35 57 54
Share based payments 2 - (4) 9 - (1) - (3)
Rehabilitation 8 19 6 12 7 31 24 21
Mine exploration 2 2 1 2 3 16 2 8
CSR expenses 2 12 9 11 5 26 3 18
Capitalised development 330 187 112 209 217 313 391 303
Sustaining capital 45 76 78 68 146 162 101 141
Total continuing operations 1,348 893 1,078 1,105 1,375 1,266 1,632 1,404
Discontinued operations 0 12
Total 1,105 1,416
(Unaudited) Six months ended 30 June 2014 Six months ended 30 June 2013
ABG Group ABG Group
North ongoing North ongoing
(US$/oz sold) Bulyanhulu Mara Buzwagi operations Bulyanhulu Mara Buzwagi operations
Cash cost per ounce sold 867 584 879 752 1,033 739 918 876
Corporate administration 41 34 38 42 81 40 55 56
Share based payments 2 1 4 15 (1) (1) (1) (12)
Rehabilitation 7 19 7 12 8 34 21 23
Mine exploration 2 1 1 2 4 16 3 8
CSR expenses 4 15 14 13 5 29 4 20
Capitalised development 281 185 164 208 274 222 429 300
Sustaining capital 45 97 62 74 177 234 214 212
Total continuing operations 1,249 936 1,169 1,118 1,581 1,313 1,643 1,483
Discontinued operations 0 24
Total 1,118 1,507
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.
Cash cost per tonne milled is a non-IFRS financial measure. Cash costs include
all costs absorbed into inventory, as well as royalties, by-product credits,
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. Cash costs per tonne milled are calculated by dividing the
aggregate of these costs by total tonnes milled.
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.
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.
Risk Review
We have made a number of further developments in the identification and
management of our risk profile over the course of H1 2014 and where
appropriate, risk ratings have been reviewed against risk management controls
and other mitigating factors. Our principal risks continue to fall within four
broad categories: strategic risks, financial risks, external risks and
operational risks and, while the overall makeup of our principal risks has not
significantly changed from that published in the 2013 Annual Report, there have
been changes in certain risk profiles as a result of developments in our
operating environment, in particular enhancements made to operating and
planning practices, and continuing uncertainties and trends within the wider
global economy and/or the mining industry. This has resulted in the following
risks being removed from those risks previously viewed as principal risks to
ABG and its operations: (i) costs and capital expenditure; (ii) utilities
supply; (iii) land acquisitions; and (iv) loss of critical processes. Further
details of these risks are provided in the 2013 Annual Report. In conjunction
with this, we believe it appropriate to add a new risk as a principal risk for
the remainder of 2014, this being safety risks relating to mining operations.
This is due to the fact that, despite the significant health, safety and risk
management systems that ABG has in place for its underground and surface mining
operations, mining and in particular underground mining is subject to a number
of hazards and risks in the workplace, such as fall of ground relating to
underlying geotechnical risks, potential fires and mobile equipment incidents,
such that safety incidents in the workplace may unfortunately occur.
As a result of the review outlined above, for the remainder of 2014 we view our
principal risks as relating to the following:
Single country risk
Reserves and resources estimates
Commodity prices
Political, legal and regulatory developments
Taxation reviews
Community relations
Environmental hazards and rehabilitation
Employer, contractor and industrial relations
Security, trespass and vandalism
Organisational restructuring
Safety risks relating to mining operations
Further detail as regards the nature of the new safety risks relating to mining
operations is provided above. Further detail as regards all other principal
risks outlined above is provided as part of the 2013 Annual Report.
Directors' Responsibility Statement
The Directors confirm that, to the best of their knowledge, the consolidated
interim financial information has been prepared in accordance with IAS 34 as
adopted by the European Union. The interim management report includes a fair
review of the information required by Disclosure and Transparency Rule 4.2.7R
and Disclosure and Transparency Rule 4.2.8R, namely:
an indication of important events that have occurred during the first six
months of the financial year and their impact on the consolidated interim
financial information, and a description of the principal risks and
uncertainties for the remaining six months of the financial year; and
material related-party transactions in the first six months of the financial
year and any material changes in the related party transactions described in
the last Annual Report.
The Directors of African Barrick Gold plc are listed in the African Barrick
Gold plc Annual Report for 31 December 2013. A list of current Directors is
maintained on the African Barrick Gold plc website: www.africanbarrickgold.com.
On behalf of the Board
Brad Gordon, Chief Executive Officer Kelvin Dushnisky, Chairman
Auditor's Review Report
Independent review report to African Barrick Gold plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed the consolidated interim financial information, defined below,
in the interim financial statements of African Barrick Gold Plc for the six
months ended 30 June 2014. Based on our review, nothing has come to our
attention that causes us to believe that the condensed consolidated interim
financial information are not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the European Union and
the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct
Authority.
This conclusion is to be read in the context of what we say in the remainder of
this report.
What we have reviewed
The condensed consolidated interim financial information, which are prepared by
African Barrick Gold plc, comprise:
the consolidated balance sheet as at 30 June 2014;
the consolidated income statement and statement of comprehensive income for the
period then ended;
the consolidated statement of cash flows for the period then ended;
the consolidated statement of changes in equity for the period then ended; and
the explanatory notes to the condensed consolidated interim financial
information.
As disclosed in note 2, the financial reporting framework that has been applied
in the preparation of the full annual financial statements of the group is
applicable law and International Financial Reporting Standards (IFRSs) as
adopted by the European Union.
The condensed consolidated interim financial information included in the
half-yearly financial report have been prepared in accordance with
International Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the European Union and the Disclosure and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
What a review of condensed consolidated financial information involves
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK and Ireland) and, consequently,
does not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
We have read the other information contained in the half-yearly financial
report and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed consolidated
interim financial information.
Responsibilities for the condensed consolidated interim financial information
and the review
Our responsibilities and those of the directors
The half-yearly financial report, including the condensed consolidated interim
financial information, is the responsibility of, and has been approved by, the
directors. The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Our responsibility is to express to the company a conclusion on the condensed
consolidated interim financial information in the half-yearly financial report
based on our review. This report, including the conclusion, has been prepared
for and only for the company for the purpose of complying with the Disclosure
and Transparency Rules of the Financial Conduct Authority and for no other
purpose. We do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is shown or
into whose hands it may come save where expressly agreed by our prior consent
in writing.
PricewaterhouseCoopers LLP
Chartered Accountants, London
24 July 2014
Notes:
The maintenance and integrity of the African Barrick Gold Plc website is the
responsibility of the directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept no
responsibility for any changes that may have occurred to the financial
statements since they were initially presented on the website.
Legislation in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
INTERIM FINANCIAL STATEMENTS
Consolidated Income Statement
For the
For the six months ended year ended
30 June 31 December
(Unaudited) (Unaudited) (Audited)
(US$'000) Notes 2014 2013 Restated 2013
CONTINUING OPERATIONS
Revenue 445,509 487,360 929,004
Cost of sales (332,474) (386,733) (713,806)
Gross profit 113,035 100,627 215,198
Corporate administration (18,892) (13,722) (32,157)
Exploration and evaluation costs (10,995) (7,715) (16,927)
Corporate social responsibility expenses (4,307) (6,228) (12,237)
Impairment charges - (910,989) (1,044,310)
Other charges 7 (12,782) (15,597) (30,424)
Profit/(loss) before net finance expense and taxation 66,059 (853,624) (920,857)
Finance income 8 630 995 1,670
Finance expense 8 (4,504) (4,696) (9,552)
Profit/(loss) before taxation 62,185 (857,325) (928,739)
Tax (expense)/credit 9 (22,716) 184,648 187,959
Net profit/(loss) from continuing operations 39,469 (672,677) (740,780)
DISCONTINUED OPERATIONS
Net profit/(loss) from discontinued operations 5 886 (40,741) (57,653)
Net profit/(loss) for the period 40,355 (713,418) (798,433)
Net Profit/(Loss) attributable to:
Owners of the parent (net earnings/(loss)) 40,822 (701,230) (781,101)
- Continuing operations 39,469 (672,677) (740,780)
- Discontinued operations 1,353 (28,553) (40,321)
Non-controlling interests
- Discontinued operations (467) (12,188) (17,332)
Earnings/ (loss) per share: 10.0 (171.0) (190.4)
- Basic and diluted earnings/(loss) per share
(cents) from continuing operations 10 9.6 (164.0) (180.6)
- Basic and diluted earnings/(loss) per share
(cents) from discontinued operations 10 0.4 (7.0) (9.8)
The notes on pages 32-44 form an integral part of this financial information.
Consolidated Statement of Comprehensive Income
For the
year
For the six months ended 31
ended 30 June December
(Unaudited) (Unaudited) (Audited)
(US$'000) 2014 2013 2013
Net profit/(loss) for the period 40,355 (713,418) (798,433)
Other comprehensive income:
Items that may be subsequently reclassified to profit or loss:
Changes in fair value of cash flow hedges (1,037) 560 1,570
Total comprehensive income/ (loss) for the period 39,318 (712,858) (796,863)
Attributed to:
- Owners of the parent 39,785 (700,670) (779,531)
- Non-controlling interests (467) (12,188) (17,332)
The notes on pages 32-44 form an integral part of this financial information.
Consolidated Balance Sheet
As at As at As at
30 June 30 June 31 December
(Unaudited) (Unaudited) (Audited)
(US$'000) Notes 2014 2013 2013
ASSETS
Non-current assets
Goodwill and intangible assets 211,190 211,190 211,190
Property, plant and equipment 12 1,345,587 1,288,114 1,280,671
Deferred tax assets 45,046 49,510 50,787
Non-current portion of inventory 81,561 71,123 72,689
Derivative financial instruments 13 1,823 2,645 3,253
Other assets 132,892 130,251 137,191
1,818,099 1,752,833 1,755,781
Current assets
Inventories 253,264 282,471 253,676
Trade and other receivables 24,321 37,193 24,210
Derivative financial instruments 13 1,009 4,936 1,366
Other current assets 87,270 96,354 113,945
Cash and cash equivalents 269,596 320,873 282,409
635,460 741,827 675,606
Assets of disposal group classified as held for sale - - 596
Total assets 2,453,559 2,494,660 2,431,983
EQUITY AND LIABILITIES
Share capital and share premium 929,199 929,199 929,199
Other reserves 1,024,816 1,075,515 992,915
Total owners' equity 1,954,015 2,004,714 1,922,114
Non-controlling interests 4,781 10,392 5,248
Total equity 1,958,796 2,015,106 1,927,362
Non-current liabilities
Borrowings 14 142,000 80,000 142,000
Deferred tax liabilities 52,841 37,686 35,862
Derivative financial instruments 13 203 1,566 1,207
Provisions 149,075 147,843 132,237
Other non-current liabilities 13,824 17,656 10,101
357,943 284,751 321,407
Current liabilities
Trade and other payables 123,920 171,547 147,896
Derivative financial instruments 13 1,869 8,514 5,074
Provisions 991 10,610 1,028
Other current liabilities 10,040 4,132 12,456
136,820 194,803 166,454
Liabilities of disposal group classified as held for sale - - 16,760
Total liabilities 494,763 479,554 504,621
Total equity and liabilities 2,453,559 2,494,660 2,431,983
The notes on pages 32-44 form an integral part of this financial information.
Consolidated Statement of Changes in Equity
Contributed Cash
surplus/ flow Stock
Share Share Other hedging option
Notes capital premium reserve reserve reserve
(US$'000)
Balance at 31 December 2012 (Audited) 62,097 867,102 1,368,713 363 3,502
Total comprehensive income/(loss) - - - 560 -
Dividends to equity holders of the Company - - - - -
Stock option grants and valuation adjustments - - - - 114
Balance at 30 June 2013 (Unaudited) 62,097 867,102 1,368,713 923 3,616
Total comprehensive income/(loss) for the period - - - 1,010 -
Dividends to equity holders of the Company - - - - -
Stock option grants and valuation adjustments - - - - 362
Balance at 31 December 2013 (Audited) 62,097 867,102 1,368,713 1,933 3,978
Total comprehensive (loss)/income for the period - - - (1,037) -
Dividends to equity holders of the Company 12 - - - - -
Stock option grants and valuation adjustments - - - - 318
Balance at 30 June 2014 (Unaudited) 62,097 867,102 1,368,713 896 4,296
Retained
earnings/ Total Total non-
(Accumulated owners' controlling Total
Notes losses) equity interests equity
(US$'000)
Balance at 31 December 2012 (Audited) 453,934 2,755,711 22,580 2,778,291
Total comprehensive income/(loss) (701,230) (700,670) (12,188) (712,858)
Dividends to equity holders of the Company (50,441) (50,441) - (50,441)
Stock option grants and valuation adjustments - 114 - 114
Balance at 30 June 2013 (Unaudited) (297,737) 2,004,714 10,392 2,015,106
Total comprehensive income/(loss) for the period (79,871) (78,861) (5,144) (84,005)
Dividends to equity holders of the Company (4,101) (4,101) - (4,101)
Stock option grants and valuation adjustments - 362 - 362
Balance at 31 December 2013 (Audited) (381,709) 1,922,114 5,248 1,927,362
Total comprehensive (loss)/income for the period 40,822 39,785 (467) 39,318
Dividends to equity holders of the Company 12 (8,202) (8,202) - (8,202)
Stock option grants and valuation adjustments - 318 - 318
Balance at 30 June 2014 (Unaudited) (349,089) 1,954,015 4,781 1,958,796
The notes on pages 32-44 form an integral part of this financial information.
Consolidated Statement of Cash Flows
For the
year
For the six months ended 31
ended 30 June December
(Unaudited) (Unaudited) (Audited)
(US$'000) Notes 2014 2013 2013
Cash flows from operating activities
Net profit/(loss) for the period 40,355 (713,418) (798,433)
Adjustments for:
Tax expense/(credit) 9 22,716 (184,648) (187,959)
Depreciation and amortisation 64,746 90,101 141,159
Finance items 3,855 3,770 7,968
Impairment charges - 927,690 1,061,011
Profit on disposal of property, plant and equipment (4,113) (86) (175)
Working capital adjustments (3,785) (25,856) (41,165)
Other non-cash items 4,730 3,067 8,181
Cash generated from operations before interest and tax 128,504 100,620 190,587
Finance income 666 1,005 1,700
Finance expenses (2,063) (2,608) (5,172)
Income tax paid - - -
Net cash generated by operating activities 127,107 99,017 187,115
Cash flows from investing activities
Purchase of property, plant and equipment (116,496) (207,210) (373,101)
Investments in other assets (83) (2,032) (8,289)
Cash flow related to the sale of Tulawaka 5 (11,633) - -
Acquisition of subsidiary, net of cash acquired - - (588)
Other investing activities 138 420 (4,872)
Net cash used in investing activities (128,074) (208,822) (386,850)
Cash flows from financing activities
Loans received 14 - 80,000 142,000
Dividends paid 11 (8,202) (50,441) (54,541)
Finance lease instalments (2,883) (1,971) (5,137)
Net cash (used in)/generated by financing activities (11,085) 27,588 82,322
Net decrease in cash and cash equivalents (12,052) (82,217) (117,413)
Net foreign exchange difference (761) 1,742 (1,526)
Cash and cash equivalents at 1 January 282,409 401,348 401,348
Cash and cash equivalents at period end 269,596 320,873 282,409
The notes on pages 32-44 form an integral part of this financial information.
Notes to the Consolidated Interim Financial Information
GENERAL INFORMATION
African Barrick Gold plc (the "Company") is a public limited company, which is
listed on the London Stock Exchange and incorporated and domiciled in the UK.
It is registered in England and Wales with registered number 7123187. The
address of its registered office is 5th Floor, No.1 Cavendish Place, W1G 0QF,
United Kingdom.
Barrick Gold Corporation currently owns 63.9 percent of the shares of the
Company and is the ultimate controlling party of the Group.
This condensed consolidated interim financial information for the six months
ended 30 June 2014 were approved for issue by the Board of Directors of the
company on 24 July 2014. The condensed consolidated interim financial
information does not comprise statutory accounts within the meaning of section
434 of the Companies Act 2006. Statutory accounts for the year ended 31
December 2013 were approved by the Board of Directors on 11 March 2014 and
delivered to the Registrar of Companies. The report of the auditors' on those
accounts was unqualified, did not contain an emphasis of matter paragraph and
did not contain any statement under section 498 of the Companies Act 2006. The
condensed consolidated interim financial information has been reviewed, not
audited.
The Group's primary business is the mining, processing and sale of gold. The
Group has three operating mines located in Tanzania. The Group also has a
portfolio of exploration projects located across Tanzania and Kenya.
BASIS OF PREPARATION OF the condensed annual financial statements
The condensed consolidated interim financial information for the six months
ended 30 June 2014 has been prepared in accordance with the Disclosure and
Transparency Rules of the Financial Conduct Authority and with IAS 34, 'Interim
Financial Reporting' as adopted by the European Union. The condensed
consolidated interim financial information should be read in conjunction with
the annual financial statements for the year ended 31 December 2013, which have
been prepared in accordance with IFRS as adopted by the European Union.
The condensed consolidated interim financial information has been prepared
under the historical cost basis, as modified by the revaluation of financial
assets and financial liabilities (including derivative instruments) at fair
value through profit or loss.
The financial information is presented in US dollars (US$) and all monetary
results are rounded to the nearest thousand (US$'000) except when otherwise
indicated.
Where a change in the presentational format between the prior period and the
current period financial information has been made during the period,
comparative figures have been restated accordingly. The following
presentational changes were made during the current period:
Presentation of the results of discontinued operations due to the sale of
Tulawaka mine to STAMICO, the Tanzanian State Mining Corporation. Refer to note
5 for a discussion of the transaction.
The group's activities expose it to a variety of financial risks: market risk
(including currency risk, fair value interest rate risk, cash flow interest
rate risk and price risk), credit risk and liquidity risk. The condensed
interim financial statements do not include all financial risk management
information and disclosures required in the annual financial statements; they
should be read in conjunction with the group's annual financial statements as
at 31 December 2013. There have been no changes in the risk management
department or in any risk management policies since the year end.
The impact of the seasonality on operations is not considered as significant on
the condensed consolidated interim financial information.
After making enquiries, the Directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence for the
foreseeable future. The Group therefore continues to adopt the going concern
basis in preparing the consolidated interim financial information. Refer page
22 for the Going Concern statement.
ACCOUNTING POLICIES
The accounting policies adopted are consistent with those used in the African
Barrick Gold plc annual financial statements for the year ended 31 December
2013 except as described below.
Taxes on income in the interim periods are accrued using the tax rate that
would be applicable to expected total annual earnings.
IFRS 10, 'Consolidated financial statements', IFRS 11, 'Joint arrangements' and
IFRS 12 'Disclosures of interests in other entities'. The adoption of these
standards has had no effect on the financial statements for earlier periods and
on the interim financial statements for the period ended 30 June 2014 and is
not expected to have a significant effect on the results for the financial year
ending 31 December 2014.
IFRIC 21 'Levies'. IFRIC 21 addresses the accounting for a liability to pay a
levy if that liability is within the scope of IAS 37 'Provisions'. The
interpretation addresses what the obligating event is that gives rise to pay a
levy, and when should a liability be recognised. The group is not currently
subject to significant levies. The adoption of the interpretation has had no
significant effect on the financial statements for earlier periods and on the
interim financial statements for the period ended 30 June 2014. The group does
not expect IFRIC 21 to have a significant effect on the results for the
financial year ending 31 December 2014.
There are no other new standards, interpretations or amendments to standards
issued and effective for the period which materially impacted on the Group.
The following exchange rates to the US dollar have been applied:
Average
Average Average year
As at six months As at six months As at ended
30 ended 30 ended 31 31
June 30 June June 30 June December December
2014 2014 2013 2013 2013 2013
South African Rand (US$:ZAR) 10.62 10.70 9.88 9.20 10.50 9.63
Tanzanian Shilling (US$:TZS) 1,650 1,628 1,603 1,590 1,590 1,598
Australian Dollars (US$:AUD) 1.06 1.09 1.08 0.99 1.12 1.03
UK Pound (US$:GBP) 0.58 0.60 0.66 0.65 0.60 0.64
ESTIMATES
The preparation of interim financial statements requires management to make
judgements, estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets and liabilities, income and
expense. Actual results may differ from these estimates.
In preparing these condensed consolidated interim financial statements, the
significant judgements made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty were the same as those
that applied to the consolidated financial statements for the year ended 31
December 2013, with the exception of changes in estimates that are required in
determining the provision for income taxes (see note 3).
DISCONTINUED OPERATIONS AND DISPOSAL GROUP ASSETS AND LIABILITIES HELD FOR SALE
On 15 November 2013, ABG announced that an agreement was reached with STAMICO,
the Tanzanian State Mining Corporation, whereby STAMICO would acquire the
Tulawaka Gold Mine ("Tulawaka") and certain exploration licences surrounding
Tulawaka for consideration of US$4.5 million and the grant of a 2% net smelter
royalty on future production in excess of 500,000 ounces, capped at US$0.5
million.
On 4 February 2014, ABG announced the completion of the sale. STAMICO has taken
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. The transfer was completed with a net cash payment of US$11.6
million by ABG to STAMICO for the balance of the rehabilitation fund, less the
transaction consideration. This resulted in a net gain on sale of assets of
US$4.1 million. After non operational costs incurred in the six months to 30
June 2014 and other closing adjustments, this resulted in a total cash outflow
year to date of US$14.4 million.
The financial results of Tulawaka have been presented as discontinued
operations in the consolidated interim financial information. The comparative
results in the consolidated interim income statement have been presented as if
Tulawaka had been discontinued from the start of the comparative period.
Below is a summary of the results of Tulawaka for the six months ended 30 June
2014 and 30 June 2013, and year ended 31 December 2013:
For the
year
ended
For the six months 31
ended 30 June December
(Unaudited) (Unaudited) (Audited)
(US$'000) 2014 2013 2013
Results of discontinued operations
Revenue - 12,392 13,514
Cost of sales - (28,151) (30,368)
Gross loss - (15,759) (16,854)
Corporate administration - (1,187) (1,311)
Exploration and evaluation costs - 161 -
Corporate social responsibility expenses1 (92) (690) (3,259)
Impairment charges - (16,701) (16,701)
Other charges2 958 (6,496) (19,442)
Profit/(loss) before net finance expense and taxation 866 (40,672) (57,567)
Finance income 36 10 30
Finance expense (16) (79) (116)
Profit/(loss) before taxation 886 (40,741) (57,653)
Tax expense - - -
Net profit/(loss) for the period 886 (40,741) (57,653)
1 Corporate social responsibility expenses relate to projects supported from
the ABG Maendeleo Fund.
2 Other charges consist of non-operational costs incurred since the cessation
of operations.
Segment Reporting
The Group has only one primary product produced in a single geographic
location, being gold produced in Tanzania. In addition the Group produces
copper and silver as a co-product. Reportable operating segments are based on
the internal reports provided to the Chief Operating Decision Maker ("CODM") to
evaluate segment performance, decide how to allocate resources and make other
operating decisions. After applying the aggregation criteria and quantitative
thresholds contained in IFRS 8, the Group's reportable operating segments were
determined to be: North Mara gold mine; Tulawaka gold mine; Bulyanhulu gold
mine; Buzwagi gold mine; and a separate Corporate and Exploration segment,
which primarily consist of costs related to corporate administration and
exploration and evaluation activities ("Other").
Segment results and assets include items directly attributable to the segment
as well as those that can be allocated on a reasonable basis. Segment assets
consist primarily of property, plant and equipment, inventories, other assets
and receivables. Capital expenditures comprise additions to property, plant and
equipment. Segment liabilities are not reported since they are not considered
by the CODM as material to segment performance. The Group has also included
segment cash costs.
Segment information for the reportable operating segments of the Group for the
six months ended 30 June 2014 and 30 June 2013, and year ended 31 December 2013
is set out below.
For the six months ended 30 June 2014
(Unaudited) North Continuing Discontinued
(US$'000) Mara Bulyanhulu Buzwagi Other operations operations6 Total
Gold revenue 176,669 130,319 119,777 - 426,765 - 426,765
Co-product revenue 280 8,426 10,038 - 18,744 - 18,744
Total segment revenue 176,949 138,745 129,815 - 445,509 - 445,509
Segment cash operating cost1 (80,427) (96,092) (91,259) - (267,778) - (267,778)
Corporate administration and exploration (5,005) (4,605) (4,008) (16,269) (29,887) - (29,887)
Other charges and corporate social
responsibility expenses (6,196) (4,519) (6,596) 222 (17,089) 866 (16,223)
EBITDA2 85,321 33,529 27,952 (16,047) 130,755 866 131,621
Impairment charges - - -
Depreciation and amortisation7 (35,724) (20,063) (7,470) (1,439) (64,696) - (64,696)
EBIT2 49,597 13,466 20,482 (17,486) 66,059 866 66,925
Finance income 136 72 195 226 630 36 666
Finance expense (1,263) (766) (1,230) (1,246) (4,504) (16) (4,520)
Profit before taxation 48,471 12,772 19,447 (18,506) 62,185 886 63,071
Tax expense (14,783) (3,507) (5,835) 1,408 (22,716) - (22,716)
Net profit for the period 33,689 9,265 13,612 (17,097) 39,469 886 40,355
Capital expenditure:
Sustaining 8,088 4,482 5,776 626 18,972 - 18,972
Expansionary 978 25,831 - - 26,809 - 26,809
Capitalised development 25,392 28,414 15,157 68,963 - 68,963
Reclamation asset addition 5,358 8,721 839 - 14,918 - 14,918
Total capital expenditure 39,816 67,448 21,772 626 129,662 - 129,662
Segmental cash operating cost 80,427 96,092 91,259 - 267,778 - 267,778
Deduct: co-product revenue (280) (8,426) (10,038) - (18,744) - (18,744)
Total cash costs 80,147 87,666 81,221 - 249,034 - 249,034
Sold ounces3 137,340 101,165 92,442 - 330,947 - 330,947
Cash cost per ounce sold2 584 867 879 752 - 752
Attributable to outside interests4 -
Attributable cash cost per ounce sold2 752
Cash cost per ounce sold2 584 867 879 752 - 752
Corporate administration charges 35 43 42 57 - 57
Rehabilitation - accretion and depreciation 19 7 7 12 - 12
Mine site exploration costs 1 2 1 2 - 2
Corporate social responsibility expenses 15 4 14 13 - 13
Capitalised stripping/ UG development 185 281 164 208 - 208
Sustaining capital expenditure8 97 45 62 74 - 74
Attributable to outside interests4 -
All-in sustaining cost per ounce sold2 936 1,249 1,169 1,118 - 1,118
Segment carrying value5 344,975 1,158,894 257,522 92,844 1,854,235 - 1,854,235
For the six months ended 30 June 2013 (Restated)
(Unaudited) North Continuing Discontinued
(US$'000) Mara Bulyanhulu Buzwagi Other operations operations6 Total
Gold revenue 194,992 127,244 142,454 - 464,690 12,365 477,055
Co-product revenue 365 7,704 14,601 - 22,670 27 22,697
Total segment revenue 195,357 134,948 157,055 - 487,360 12,392 499,752
Segment cash operating cost1 (96,538) (98,425) (103,103) (298,066) (19,441) (317,507)
Corporate administration and exploration (7,141) (7,439) (16,468) 9,611 (21,437) (1,026) (22,463)
Other charges and corporate social
responsibility expenses (6,729) (3,355) (3,814) (7,927) (21,825) (7,186) (29,011)
EBITDA2 84,949 25,729 33,670 1,684 146,032 (15,261) 130,771
Impairment charges (173,938) - (690,478) (46,573) (910,989) (16,701) (927,690)
Depreciation and amortisation7 (40,859) (16,645) (29,332) (1,831) (88,667) (8,710) (97,377)
EBIT2 (129,848) 9,084 (686,140) (46,720) (853,624) (40,672) (894,296)
Finance income 170 581 221 24 995 10 1,005
Finance expense (1,196) (783) (1,168) (1,549) (4,696) (79) (4,775)
Loss before taxation (130,874) 8,882 (687,088) (48,245) (857,325) (40,741) (898,066)
Tax expense 33,278 (2,892) 146,754 7,507 184,648 - 184,648
Net loss for the period (97,595) 5,990 (540,334) (40,738) (672,677) (40,741) (713,418)
Capital expenditure:
Sustaining 23,962 15,546 20,657 85 60,250 583 60,833
Expansionary 504 52,421 - 941 53,866 - 53,866
Capitalised development 28,917 24,102 41,338 - 94,357 - 94,357
Reclamation asset reduction (5,950) (9,208) (6,809) - (21,967) (161) (22,128)
Total capital expenditure 47,433 82,861 55,186 1,026 186,506 422 186,928
Segmental cash operating cost 96,538 98,425 103,103 - 298,066 19,441 317,507
Deduct: co-product revenue (365) (7,704) (14,601) - (22,670) (27) (22,697)
Total cash costs 96,173 90,721 88,502 - 275,396 19,414 294,810
Sold ounces3 130,200 87,802 96,367 - 314,369 7,950 322,319
Cash cost per ounce sold2 739 1,033 918 - 876 2,442 915
Attributable to outside interests4 (12)
Attributable cash cost per ounce sold2 903
Cash cost per ounce sold2 739 1,033 918 876 2,442 915
Corporate administration charges 39 80 54 44 149 46
Rehabilitation - accretion and depreciation 34 8 21 23 77 24
Mine site exploration costs 16 4 3 8 (20) 8
Corporate social responsibility expenses 29 5 4 20 87 21
Capitalised stripping/ UG development 222 274 429 300 - 293
Sustaining capital expenditure8 234 177 214 212 73 209
Attributable to outside interests4 (9)
All-in sustaining cost per ounce sold2 1,313 1,581 1,643 1,483 2,808 1,507
Segment carrying value5 456,914 1,052,184 209,064 79,653 1,797,815 - 1,797,815
For the year ended 31 December 2013
(Audited)
North Continuing Discontinued
(US$'000) Mara Bulyanhulu Buzwagi Other operations operations6 Total
Gold revenue 364,574 262,539 258,879 - 885,992 13,483 899,475
Co-product revenue 819 16,882 25,311 - 43,012 31 43,043
Total segment revenue 365,393 279,421 284,190 - 929,004 13,514 942,518
Segment cash operating cost1 (172,894) (190,647) (202,286) - (565,827) (20,527) (586,354)
Corporate administration and exploration (13,026) (14,661) (20,976) (421) (49,084) (1,311) (50,395)
Other charges and corporate social
responsibility expenses (11,961) (5,827) (4,730) (20,143) (42,661) (22,701) (65,362)
EBITDA2 167,512 68,286 56,198 (20,564) 271,432 (31,025) 240,407
Impairment charges (307,259) - (690,478) (46,573) (1,044,310) (16,701) (1,061,011)
Depreciation and amortisation7 (68,565) (35,867) (39,906) (3,641) (147,979) (9,841) (157,820)
EBIT2 (208,312) 32,419 (674,186) (70,778) (920,857) (57,567) (978,424)
Finance income 327 662 406 275 1,670 30 1,700
Finance expense (2,501) (1,482) (2,446) (3,123) (9,552) (116) (9,668)
Loss before taxation (210,486) 31,599 (676,226) (73,626) (928,739) (57,653) (986,392)
Tax credit 44,283 (13,977) 146,990 10,663 187,959 - 187,959
Net loss for the year (166,203) 17,622 (529,236) (62,963) (740,780) (57,653) (798,433)
Capital expenditure:
Sustaining 38,386 25,193 31,589 690 95,858 583 96,441
Expansionary 949 114,912 - 1,608 117,469 - 117,469
Capitalised development 65,594 45,428 60,136 - 171,158 - 171,158
Reclamation asset reduction (11,271) (10,044) (9,230) - (30,545) (195) (30,740)
Total capital expenditure 93,658 175,489 82,495 2,298 353,940 388 354,328
Segmental cash operating cost 172,894 190,647 202,286 - 565,827 20,527 586,354
Deduct: co-product revenue (819) (16,882) (25,311) - (43,012) (31) (43,043)
Total cash costs 172,075 173,765 176,975 - 522,815 20,496 543,311
Sold ounces3 260,945 195,304 187,348 - 643,597 8,778 652,375
Cash cost per ounce sold2 659 890 945 812 2,335 833
Attributable to outside interests4 (6)
Attributable cash cost per ounce sold2 827
Cash cost per ounce sold2 659 890 945 812 2,335 833
Corporate administration charges 38 72 51 50 149 51
Rehabilitation - accretion and depreciation 29 7 15 18 86 19
Mine site exploration costs 12 3 2 6 6 6
Corporate social responsibility expenses 31 6 4 19 371 24
Capitalised stripping/ UG development 251 233 321 266 - 262
Sustaining capital expenditure8 207 133 168 175 66 173
Attributable to outside interests4 (6)
All-in sustaining cost per ounce sold2 1,227 1,344 1,506 1,346 3,013 1,362
Segment carrying value5 367,326 1,116,142 253,344 81,005 1,817,817 10,489 1,828,306
1 The CODM reviews cash operating costs for the three operating mine sites
separately from corporate administration costs and exploration costs.
Consequently, the Group has reported these costs in this manner.
2 These are non-IFRS financial performance measures with no standard meaning
under IFRS. Refer to "Non IFRS measures" on page 23 for definitions.
3 Reflects 100% of ounces sold.
4 Reflects the adjustment for non-controlling interests at Tulawaka.
5 Segment carrying values are calculated as shareholders equity after adding
back debt and intercompany liabilities, and subtracting cash and intercompany
assets and include outside shareholder's interest.
6 Represents Tulawaka which has been discontinued.
7 Depreciation and amortisation includes the depreciation component of the
cost of inventory sold.
8 Sustaining capital expenditure for the purposes of all-in sustaining cost
per ounce sold includes land purchases which are classified as long term
prepayments in the balance sheet.
OTHER CHARGES
For the
year
ended
For the six months ended 31
30 June December
(Unaudited) (Unaudited) (Audited)
(US$'000) 2014 2013 Restated1 2013
Other expenses
Operational Review costs (including retrenchment cost) 5,317 1,629 13,305
Foreign exchange losses (net) 7,794 40 -
Non-hedge derivative losses (net) - 4,807 7,203
Government levies and charges 527 - 2,387
Bad debt expense - 1,159 1,369
Disallowed indirect taxes 401 3,784 1,463
Legal costs 1,931 1,018 3,138
CNG related costs (residual) - 2,374 3,246
Discounting of indirect tax receivables - 1,375 1,375
Other - - 3,617
Total 15,970 16,186 37,103
Other income
Profit on disposal of property, plant and equipment (45) (86) (99)
Insurance theft claim - - (2,958)
Construction and consumable inventory gains - (111) -
Non-hedge derivative gains (net) (2,748) - -
Foreign exchange gains (net) - - (3,622)
Other (395) (392) -
Total (3,188) (589) (6,679)
Total other charges 12,782 15,597 30,424
1 Restated due to the classification of Tulawaka as a discontinued operation.
Refer to note 5.
FINANCE INCOME AND FINANCE EXPENSE
Finance income
For the six months ended For the year ended
30 June 31 December
(Unaudited) (Unaudited) (Audited)
(US$'000) 2014 2013 Restated3 2013
Interest on time deposits 382 753 937
Other 248 242 733
Total 630 995 1,670
Finance expense
For the
year
ended
For the six months ended 31
30 June December
(Unaudited) (Unaudited) (Audited)
(US$'000) 2014 2013 Restated3 2013
Unwinding of discount1 2,457 2,145 4,468
Revolving credit facility charges2 1,194 1,510 3,050
Interest on CIL facility 1,972 757 2,413
Interest on finance lease liability 164 333 658
Bank charges 313 396 756
Other 376 312 620
6,476 5,453 11,965
Capitalised during the year - interest on CIL facility (1,972) (757) (2,413)
Total 4,504 4,696 9,552
1 The unwinding of discount is calculated on the environmental rehabilitation
provision.
2 Included in credit facility charges are the amortisation of the fees related
to the revolving credit facility as well as the monthly interest and facility
fees.
3 Restated due to the classification of Tulawaka as a discontinued operation.
Refer to Note 5.
TAX (CREDIT)/EXPENSE
For the year
For the six months ended ended
30 June 31 December
(Unaudited) (Unaudited) (Audited)
(US$'000) 2014 2013 Restated1 2013
Current tax:
Current tax on profits for the period - 28 -
Adjustments in respect of prior years - - 40
Total current tax - 28 40
Deferred tax:
Origination and reversal of temporary differences 22,716 (184,676) (187,999)
Total deferred tax 22,716 (184,676) (187,999)
Income tax expense/(credit) 22,716 (184,648) (187,959)
1 Restated due to the classification of Tulawaka as a discontinued operation.
Refer to note 5.
The tax on the Group's profit before tax differs from the theoretical amount
that would arise using the weighted average tax rate applicable to the profits
of the consolidated entities as follow:
For the year
For the six months ended ended
30 June 31 December
(Unaudited) (Unaudited) (Audited)
(US$'000) 2014 2013 Restated 2013
Tax on profit/(loss) calculated at the Tanzanian tax rate of 30% 18,655 (269,420) (292,917)
Tax effects of:
Prior year adjustments - - 5,572
Other non-deductible expenses 254 93 13,111
Effect of tax rates in foreign jurisdictions (426) (1,754) 1,371
Deferred tax assets not recognised 4,233 73,540 84,904
Income tax payable - (28) -
Impairment of goodwill - 12,921 -
Tax charge/(credit) 22,716 (184,648) (187,959)
The tax rate in Tanzania is 30% (2013: 30%) and in South Africa 28% (2013:
28%).
Tax periods remain open to review by the Tanzania Revenue Authority ("TRA") in
respect of income taxes for 5 years following the date of the filling of the
corporate tax return, during which time the authorities have the right to raise
additional tax assessments including penalties and interest. Under certain
circumstances the reviews may cover longer periods. Because a number of tax
periods remain open to review by tax authorities, there is a risk that
transactions that have not been challenged in the past by the authorities may
be challenged by them in the future, and this may result in the raising of
additional tax assessments plus penalties and interest. The Group has
previously accounted for an adjustment to unrecognised tax benefits in respect
of tax losses to reflect uncertainty regarding recoverability of certain tax
losses. The Group makes no further provision in respect of such potential tax
assessments.
Earnings/ (LOSS) per share
Basic earnings/ (loss) per share ("EPS") is calculated by dividing the net
profit/ (loss) for the period attributable to owners of the Company by the
weighted average number of Ordinary Shares in issue during the period.
Diluted earnings/ (loss) per share is calculated by adjusting the weighted
average number of Ordinary Shares outstanding to assume conversion of all
dilutive potential Ordinary Shares. The Company has dilutive potential Ordinary
Shares in the form of stock options. The weighted average number of shares is
adjusted for the number of shares granted assuming the exercise of stock
options.
At 30 June 2014, 30 June 2013 and 31 December 2013, (loss)/earnings per share
have been calculated as follows:
For the
For the six months ended year ended
30 June 31 December
(Unaudited) (Unaudited) (Audited)
(US$'000) 2014 2013 Restated1 2013 Restated
Earnings/(loss)
Net profit/(loss) from continuing operations attributable to
owners of the parent 39,469 (672,677) (740,780)
Net profit/(loss) from discontinued operations attributable to owners of the parent 1,353 (28,553) (40,321)
Weighted average number of Ordinary Shares in issue 410,085,499 410,085,499 410,085,499
Adjusted for dilutive effect of stock options 194,163 - -
Weighted average number of Ordinary Shares for diluted 410,279,662 410,085,499 410,085,499
earnings per share
Earnings/(loss) per share 10.0 171.0 (190.4)
Basic and dilutive earnings/(loss) per share from 9.6 (164.0) (180.6)
continuing operations (cents)
Basic and dilutive earnings/(loss) per share from
discontinued operations (cents) 0.4 (7.0) (9.8)
1 Restated due to the classification of Tulawaka as a discontinued operation.
Refer to note 5.
11. DIVIDENDS
The final dividend declared in respect of the year ended 31 December 2013 of
US$8.2 million (US2.0 cents per share) was paid during 2014.
12. Property plant and equipment
Mineral
properties Assets
For the six months ended 30 June 2014 and mine under
(Unaudited) Plant and development construction
(US$'000) equipment costs ¹ Total
At 1 January 2014, net of accumulated
depreciation 296,299 596,166 388,206 1,280,671
Additions - - 129,662 129,662
Depreciation (28,941) (35,805) - (64,746)
Transfers between categories 44,126 62,477 (106,603) -
At 30 June 20142 311,484 622,838 411,265 1,345,587
At 1 January 2014
Cost 1,397,456 1,315,918 425,083 3,138,457
Accumulated depreciation (1,101,157) (719,752) (36,877) (1,857,786)
Net carrying amount 296,299 596,166 388,206 1,280,671
At 30 June 2014
Cost 1,441,472 1,378,395 448,142 3,268,009
Accumulated depreciation and impairment (1,129,988) (755,557) (36,877) (1,922,422)
Net carrying amount 311,484 622,838 411,265 1,345,587
For the six months Mineral Assets
ended 30 June 2013 properties and under
(Unaudited) Plant and mine development construction
(US$'000) equipment costs ¹ Total
At 1 January 2013, net
of accumulated
depreciation and
impairment 945,118 819,063 210,859 1,975,040
Additions - - 186,928 186,928
Impairments (510,650) (235,975) (36,876) (783,501)
Depreciation (54,907) (35,446) - (90,353)
Transfers between
categories 74,457 104,360 (178,817) -
At 30 June 2013 454,018 652,002 182,094 1,288,114
At 1 January 2013
Cost 1,475,374 1,250,088 210,859 2,936,321
Accumulated
depreciation and
impairment (530,256) (431,025) - (961,281)
Net carrying amount 945,118 819,063 210,859 1,975,040
At 30 June 2013
Cost 1,549,580 1,354,447 218,970 3,122,997
Accumulated
depreciation and
impairment (1,095,562) (702,445) (36,876) (1,834,883)
Net carrying amount 454,018 652,002 182,094 1,288,114
Mineral
properties Assets
and mine under
(Audited) Plant and development construction
(US$'000) equipment costs ¹ Total
For the year ended 31 December 2013
At 1 January 2013, net of accumulated depreciation and
impairment 945,118 819,063 210,859 1,975,040
Additions - - 354,328 354,328
Disposals/write-downs (477) - - (477)
Impairments (582,669) (287,276) (36,877) (906,822)
Depreciation (84,350) (56,809) - (141,159)
Transfers between categories 18,677 121,427 (140,104) -
Reclassification to disposal group assets held for sale - (239) - (239)
At 31 December 2013 296,299 596,166 388,206 1,280,671
At 1 January 2013
Cost 1,475,374 1,250,088 210,859 2,936,321
Accumulated depreciation and impairment (530,256) (431,025) - (961,281)
Net carrying amount 945,118 819,063 210,859 1,975,040
At 31 December 2013
Cost 1,397,456 1,315,918 425,083 3,138,457
Accumulated depreciation and impairment (1,101,157) (719,752) (36,877) (1,857,786)
Net carrying amount 296,299 596,166 388,206 1,280,671
Assets under construction represents (a) sustaining capital expenditures
incurred constructing tangible fixed assets related to operating mines and
advance deposits made towards the purchase of tangible fixed assets; and (b)
expansionary expenditure allocated to a project on a business combination or
asset acquisition, and the subsequent costs incurred to develop the mine. Once
these assets are ready for their intended use, the balance is transferred to
plant and equipment, and/ or mineral properties and mine development costs.
The gain on disposal of assets reflected in the income statement relates to the
assets disposed of in the sale of Tulawaka which were transferred to assets
held for sale in the year ended 31 December 2013.
Leases
Property, plant and equipment includes assets relating to the design and
construction costs of power transmission lines and related infrastructure. At
completion, ownership was transferred to TANESCO in exchange for amortised
repayment in the form of reduced electricity supply charges. No future lease
payment obligations are payable under these finance leases.
Property, plant and equipment also includes emergency back-up and spinning
power generators leased at Buzwagi mine under a three year lease agreement,
with an option to purchase the equipment at the end of the lease term. The
lease has been classified as a finance lease.
Property, plant and equipment further includes drill rigs leased at Buzwagi
mine under a one year rent to own lease agreement. The lease has been
classified as a finance lease.
The following amounts were included in property, plant and equipment where the
Group is a lessee under a finance lease:
For the six months ended For the year ended
30 June 31 December
(Unaudited) (Unaudited) (Audited)
(US$'000) 2014 2013 2013
Cost - capitalised finance leases 70,764 68,846 70,764
Accumulated depreciation (16,836) (17,065) (16,430)
Net carrying amount 53,928 51,781 54,334
13. Derivative financial instruments
The table below analyses financial instruments carried at fair value, by
valuation method. The Group has derivative financial instruments in the form of
economic and cash flow hedging contracts which are all defined as level two
instruments as they are valued using inputs other than quoted prices that are
observable for the assets or liabilities. The following tables present the
group's assets and liabilities that are measured at fair value at 30 June 2014,
30 June 2013 and 31 December 2013.
Assets Liabilities
Net
(Unaudited) fair
(US$'000) Current Non-current Current Non-current value
For the six months ended 30 June 2014
Interest contracts: Designated as cash flow hedges - 1,823 1,204 - 619
Currency contracts: Not designated as hedges 66 - 665 203 (802)
Commodity contracts: Not designated as hedges 943 - - - 943
Total 1,009 1,823 1,869 203 760
Assets Liabilities
Net
(Unaudited) fair
(US$'000) Current Non-current Current Non-current value
For the six months ended 30 June 2013
Currency contracts: Designated as cash flow hedges - - 1,652 - (1,652)
Interest contracts: Designated as cash flow hedges - 2,645 903 - 1,742
Currency contracts: Not designated as hedges 1,148 - 5,848 1,542 (6,242)
Commodity contracts: Not designated as hedges 3,788 - 111 24 3,653
Total 4,936 2,645 8,514 1,566 (2,499)
Assets Liabilities
Net
(Audited) fair
(US$'000) Current Non-current Current Non-current value
For the year ended 31 December 2013
Currency contracts: Designated as cash flow hedges - - - 353 (353)
Interest contracts: Designated as cash flow hedges - 3,191 1,168 449 1,574
Currency contracts: Not designated as hedges 158 3 3,666 387 (3,892)
Commodity contracts: Not designated as hedges 1,208 59 240 18 1,009
Total 1,366 3,253 5,074 1,207 (1,662)
BORROWINGS
During 2013, a US$142 million facility was put in place to fund the bulk of the
costs of the construction of one of our key growth projects, the Bulyanhulu CIL
Expansion project ("Project"). The facility is collateralised by the Project,
and has a term of seven years with a spread over Libor of 250 basis points. The
seven year facility is repayable in equal instalments over the term of the
facility, after a two year repayment holiday period. The interest rate has been
fixed at 3.6% through the use of an interest rate swap. The full facility of
US$142 million was drawn in 2013. Interest incurred on the borrowings has been
capitalised to the asset (US$2.0 million).
COMMITMENTS AND CONTINGENCIES
The Group is subject to various laws and regulations which, if not observed,
could give rise to penalties. As at 30 June 2014, the Group has the following
commitments and/or contingencies:
a) Legal contingencies
As at 30 June 2014, the Group was a defendant in approximately 316 lawsuits.
The plaintiffs are claiming damages and interest thereon for the loss caused by
the Group due to one or more of the following: unlawful eviction, termination
of services, wrongful termination of contracts of service, non-payment for
services, defamation, negligence by act or omission, unpaid overtime and public
holiday compensation.
The total amounts claimed from lawsuits in which specific monetary damages are
sought amounted to US$163.6 million. The Group's Legal Counsel is defending the
Group's current position, and the outcome of the lawsuits cannot presently be
determined. However, in the opinion of the Directors and Group's Legal Counsel,
no material liabilities are expected to materialise from these lawsuits.
Consequently no provision has been set aside against the claims in the books of
account.
Included in the total amounts claimed is an appeal by the TRA intended for a
tax assessment of US$21.3 million in respect of the acquisition of Tusker Gold
Limited. The case was awarded in favour of ABG however, the TRA has served a
notice of appeal. The calculated tax assessment is based on the sales price of
the Nyanzaga property of US$71 million multiplied by the tax rate of 30%.
Management is of the opinion that the assessment is invalid due to the fact
that the acquisition was for Tusker Gold Limited, a company incorporated in
Australia. The shareholding of the Tanzanian-related entities did not change
and the Tusker Gold Limited group structure remains the same as prior to the
acquisition.
Also included in the total amounts claimed is TRA claims to the value of
US$41.25 million for withholding tax on historic offshore dividend payments
paid by ABG to its shareholders. In addition to the claim, there are six other
withholding tax claims which have not been quantified. These claims are made on
the basis that ABG is resident in Tanzania for tax purposes. Management are of
the opinion that the claims do not have substance and that they will be
successfully defended.
b) Tax-related contingencies
The TRA has issued a number of tax assessments to the Group relating to past
taxation years from 2002 onwards. The Group believes that these assessments are
incorrect and has filed objections to each of them. The Group is attempting to
resolve these matters by means of discussions with the TRA or through the
Tanzanian appeals process. During the year under review the Board ruled in
favour of BGML in relation to seven of ten issues raised by the TRA in final
assessments for the 2000-2006 years under review. The TRA filed a notice of
intention to appeal against the ruling of the Board, while ABG has filed a
counter appeal in respect of Bulyanhulu to the Appeals Tribunal for all three
items that were lost. The positions that were ruled against BGML were
sufficiently provided for in prior year results and management is of the
opinion that open issues will not result in any material liabilities to the
Group.
RELATED PARTY BALANCES AND TRANSACTIONS
The Group has related party relationships with entities owned or controlled by
Barrick Gold Corporation, which is the ultimate controlling party of the Group.
The Company and its subsidiaries, in the ordinary course of business, enter
into various sales, purchase and service transactions and other professional
services arrangements with others in the Barrick Group. These transactions are
under terms that are on normal commercial terms and conditions. These
transactions are not considered to be significant.
At 30 June 2014 the Group had no loans of a funding nature due to or from
related parties (30 June 2013: zero; 31 December 2013: zero).
subsequent events
The Board of the Company has approved an interim dividend of US1.4 cents per
share for this financial year to be paid on 22 September 2014 to shareholders
on the register on 29 August 2014.