AFRICAN BARRICK GOLD
23 October 2014
Results for the three months ended 30 September 2014 (Unaudited)
Based on IFRS and expressed in US Dollars (US$)
African Barrick Gold plc ("ABG'') reports third quarter results
"We are pleased to announce production of 190,986 ounces in the quarter, up 16%
on Q3 2013, providing further evidence that the changes we are implementing at
our operations continue to improve performance", said Brad Gordon, CEO of
African Barrick Gold. "As a result we have delivered our eighth successive
quarterly reduction in all-in sustaining costs (AISC). During the quarter we
generated US$17 million in net cash flow and have now increased our cash
balance year to date, after returning US$14 million in dividends to our
shareholders and continuing to invest in growth. The optimisation of our assets
continues with good progress made during the quarter on the projects at both
Bulyanhulu and North Mara and we are looking forward to setting out our longer
term plan for the business at our Investor Day on 27 November."
Operational Highlights
Gold production of 190,986 ounces, up 16% on Q3 2013
Gold sales of 178,490 ounces, 11% higher than Q3 2013
AISC1,2 of US$1,098 per ounce sold, 14% lower than Q3 2013 and 1% lower than Q2
2014
Cash costs1,2 of US$679 per ounce sold, 7% lower than both Q3 2013 and Q2 2014
Bulyanhulu CIL Expansion produced 5,097 ounces, with commissioning due for
completion in Q4 2014
Bulyanhulu run of mine head grade increased to 8.8 grams per tonne as
underground development progressed well
Full year production guidance reiterated of upwards of 700,000 ounces with cost
guidance tightened to around US$740 and around US$1,100 per ounce sold, for
cash costs and AISC respectively (previously US$740-790 and US$1,100-1,175)
Financial Highlights
Cash position increased by US$17 million to stand at US$287 million at 30
September 2014
Revenue of US$241 million, 9% up on Q3 2013, as higher sales volumes more than
offset lower average realised gold prices
EBITDA1,3 of US$76 million, 17% higher than Q3 2013, due to increased revenue
and lower cash costs
Net earnings1,3 of US$28 million (US6.9 cents per share), 60% higher than Q3
2013
Operational cash flow of US$101 million (155% higher than Q3 2013), driven by
increased EBITDA and indirect tax refunds
Capital expenditure of US$81 million was in line with Q3 2013
Remain on track to exceed the planned US$185 million of cost savings as set out
in the Operational Review
Three months
ended 30 Nine months ended
September 30 September
(Unaudited) 2014 20132 2014 20132
Gold Production (ounces) 190,986 164,429 537,567 471,627
Gold Sold (ounces) 178,490 161,061 509,437 475,430
Cash cost (US$/ounce)1 679 728 727 826
AISC (US$/ounce)1 1,098 1,270 1,111 1,411
Average realised gold price (US$/ounce)1 1,268 1,309 1,282 1,421
Revenue (US$'000) 240,878 220,042 686,387 707,402
EBITDA1,3 (US$'000) 75,835 64,769 207,456 195,541
Net earnings/(loss)3 (US$'000) 28,444 17,830 69,266 (683,400)
Basic earnings/(loss) per share (EPS) (cents)3 6.9 4.3 16.9 (166.6)
Cash generated from operating activities (US$'000) 101,428 39,851 228,535 138,922
Capital expenditure4 (US$'000) 81,251 81,291 195,995 246,100
1 These are non-IFRS measures. Refer to page 10 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 Q3 2014 AISC versus
Q2 2014 and a 14% reduction from Q3 2013. In combination with a strong
production profile, we generated a further US$17 million of net cash during the
quarter and have now improved on our cash position from the beginning of the
year, notwithstanding our continuing investment in growth, dividends and in the
disposal of Tulawaka (together with its associated closure liabilities). We
remain on track to exceed the planned US$185 million of cost savings as set out
in the Operational Review by the end of 2014. Beyond this we continue to
anticipate a further reduction in our AISC as we see the benefits of further
business improvement initiatives being implemented throughout the business with
particular focus on mining and development efficiencies.
Board Changes
During the third quarter, Rick McCreary stepped down as Non-Executive Director
of the Company. The ABG Board now comprises ten Directors, including seven
Independent Non-Executive Directors, two Non-Executive Directors (nominees from
Barrick Gold Corporation) and one Executive Director.
Indirect Taxes
Further progress has been made with respect to the build-up of VAT, and the
Company received net refunds of US$14 million during the quarter. As a result,
as at 30 September 2014, the outstanding amount relating to the total indirect
tax receivable, not covered by the 2011 Memorandum of Settlement, stood at
US$51 million, roughly US$45 million lower than 31 December 2013.
Notwithstanding the significant progress made so far this year, we are
continuing discussions with the Tanzanian Government with respect to the
establishment of an appropriate mechanism to safeguard the recoverability of
VAT payments over the long term, specifically with respect to VAT paid on
domestic goods and services. We will provide feedback as these discussions
progress.
BulyanhuluCIL Expansion
During the quarter, we progressed the commissioning of the new CIL circuit at
Bulyanhulu and are nearing the completion of the commissioning stage. Some
initial issues were experienced with the elution circuit performance and
detoxification of the tailings, but these were largely resolved by the end of
the quarter. At quarter end tonnes treated from the reclaimed tailings
reflected the designed levels. During the quarter, the new CIL circuit produced
5,097 ounces from 220,000 tonnes of reclaimed tailings.
GokonaUnderground
The study into the potential to transition the Gokona deposit at North Mara
from an open pit to an underground operation is advancing in line with
expectations. Progress to date underlines our confidence that the project will
generate positive returns and help sustain the current production profile of
the mine. During Q3 2014, work continued on the development of the exploration
portal with 48 metres of advancement achieved. Year to date we have spent
US$6.4 million of expansionary capital on the exploration portal out of the
previously communicated amount for the year of US$10 million.
Investor Day
ABG will be hosting an Investor Day in London, commencing at 09:00 GMT on 27
November 2014 to outline the Company's longer term strategy and outlook. The
day will be attended by ABG senior management and is primarily for research
analysts and institutional investors. Space at the event is limited; please
therefore register your interest in attending with Sarah Vethaak
SVethaak@bellpottinger.com. For those who cannot attend in person, the
presentations will be webcast through our website, with a recording available
after the event.
Outlook
As announced as part of the interim results, we continue to forecast production
for the year to be in excess of 700,000 ounces. We now anticipate full year
cash costs to be around US$740 per ounce sold (previously US$740-US790 per
ounce sold), and full year all-in sustaining costs around US$1,100 per ounce
sold (previously US$1,100-US$1,175 per ounce sold).
Key statistics - restated to reflect Tulawaka as a discontinued operation
Three months
ended 30 Nine months ended
September 30 September
(Unaudited) 2014 20133 2014 20133
Tonnes mined (thousands of tonnes) 11,016 13,388 30,908 42,506
Ore tonnes mined (thousands of tonnes) 1,981 1,697 5,889 5,074
Ore tonnes processed (thousands of tonnes) 2,238 2,114 6,008 6,097
Process recovery rate (percent) 87.9% 88.3% 88.9% 88.7%
Head grade (grams per tonne) 3.0 2.7 3.1 2.7
Gold production (ounces) 190,986 164,429 537,567 471,627
Gold sold (ounces) 178,490 161,061 509,437 475,430
Copper production (thousands of pounds) 4,531 2,838 10,961 8,422
Copper sold (thousands of pounds) 4,242 2,448 9,633 8,561
Cash cost per tonne milled (US$/t)¹ 54 55 62 64
Per ounce data
Average spot gold price2 1,282 1,326 1,288 1,456
Average realised gold price¹ 1,268 1,309 1,282 1,421
Total cash cost¹ 679 728 727 826
All-in sustaining cost¹ 1,098 1,270 1,111 1,411
Average realised copper price (US$/lb) 3.14 3.20 3.10 3.22
Financial results - restated to reflect Tulawaka as a discontinued operation
Three months ended Nine months ended
30 September 30 September
(Unaudited, in US$'000 unless otherwise stated) 2014 20133 2014 20133
Continuing operations:
Revenue 240,878 220,042 686,387 707,402
Cost of sales (164,072) (157,303) (496,546) (544,036)
Gross profit 76,806 62,739 189,841 163,366
Corporate administration (8,436) (8,016) (22,411) (25,600)
Share based payments (1,055) (1,520) (5,972) 2,341
Exploration and evaluation costs (2,958) (3,232) (13,953) (10,948)
Corporate social responsibility expenses (3,068) (2,343) (7,375) (8,571)
Impairment charges - - - (910,989)
Other charges4 (13,630) (5,836) (26,412) (21,430)
Profit/(loss) before net finance expense and taxation 47,569 41,792 113,718 (811,831)
Finance income 309 77 939 1,072
Finance expense (2,357) (2,394) (6,861) (7,090)
Profit/(loss) before taxation 45,611 39,475 107,796 (817,849)
Tax (expense)/credit (17,167) (15,921) (39,883) 168,727
Net profit/(loss) from continuing operations 28,444 23,554 67,913 (649,122)
Discontinued operations:
Net (loss)/gain from discontinued operations - (8,226) 886 (48,968)
Net profit/(loss) for the year 28,444 15,328 68,799 (698,090)
Attributed to:
Owners of the parent (net earnings) 28,444 17,830 69,266 (683,400)
- Continuing operations 28,444 23,554 67,913 (649,122)
- Discontinued operations - (5,724) 1,353 (34,279)
Non-controlling interests - (2,502) (467) (14,690)
- Discontinued operations - (2,502) (467) (14,690)
1 These are non-IFRS financial performance measures with no standard meaning
under IFRS. Refer to "Non IFRS measures"' on page 10 for definitions.
2 Reflect the London PM fix price.
3 Restated for the reclassification of Tulawaka as a discontinued operation.
4 Other charges is predominantly made up of US$4.5 million retrenchment costs,
US$3.5 million of non-cash net FX losses, US$2.5 million of non-cash derivative
losses and US$2.3 million of legal costs.
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) 203 775 2500
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
remains 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 23 October 2014 at
09:30 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.
Third Quarter Review
During the third quarter, we continued to see strong operational results, with
total production of 190,986 ounces, an increase of 16% on Q3 2013. Sales ounces
amounted to 178,490, 7% lower than production due to the timing of concentrate
and dore shipments at quarter end. We expect to sell these ounces in Q4 2014.
Bulyanhulu delivered a strong performance with production of 63,333 ounces, 21%
higher than Q3 2013 due to a 12% increase in head grade as a result of higher
mined grade given improved availability of high grade stopes. The new CIL plant
is in the final stages of commissioning and produced 5,097 ounces in Q3 2014.
At North Mara, gold production of 64,332 ounces was down 5% on Q3 2013 as
expected due to a lower mine grade. Throughput and recovery rates for Q3 2014
were in line with Q3 2013.
At Buzwagi, gold production for the quarter of 63,321 ounces was 43% higher
than in Q3 2013 driven by a 45% increase in head grade due to increased mine
grades from the main ore zone. Ore tonnes mined were 9% higher than in Q3 2013
due to previously communicated changes in the mine plan to focus on the main
ore zones. Recoveries increased significantly during the quarter to 94.8%
compared to 87.3% in the prior year period driven by the improved grade
together with process plant efficiencies.
Copper production for the quarter of 4.5 million pounds was 60% higher than in
Q3 2013 (2.8 million pounds), due to higher copper grades, mainly at
Bulyanhulu, and higher concentrate production, mainly at Buzwagi.
Total tonnes mined during the quarter amounted to 11.0 million tonnes, a
decrease of 18% on Q3 2013. Ore tonnes mined from open pits amounted to 1.7
million tonnes compared to 1.5 million in Q3 2013, driven by the increased
focus on mining ore at North Mara due to mine sequencing and at Buzwagi due to
the change in the mine plan.
Ore tonnes processed amounted to 2.2 million tonnes, an increase of 6% on Q3
2013 primarily driven by higher throughput at Bulyanhulu due to the
commissioning of the new CIL plant.
Head grade for the quarter of 3.0 grams per tonne (g/t) was 10% higher than in
Q3 2013 (2.7 g/t). This was due to the higher mined grade at Buzwagi as mining
focused on the main ore zone and at Bulyanhulu, due to improved availability of
high grade stopes.
Our cash costs for the quarter were 7% lower than in Q3 2013, and amounted to
US$679 per ounce sold. The decrease was primarily due to:
the impact of the increased production base (US$125/oz); and
the impact of a reduction in the international workforce (28% down on the same
period in 2013), slightly offset by some of these positions being filled by
national workers (US$17/oz).
This was partially offset by the following factors (US$95/oz):
increased maintenance costs driven by increased underground equipment
maintenance activity at Bulyanhulu;
increased contracted services at Bulyanhulu due to ore development work
performed by a contractor;
lower capitalised development costs at North Mara as a result of the revised
mine plan driving a lower strip ratio;
higher consumables costs at Bulyanhulu driven by increased mining and
processing activity.
AISC of US$1,098 per ounce sold for the quarter were 14% lower than Q3 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$81.4 million compared to
US$81.3 million in Q3 2013. Capital expenditure mainly consisted of capitalised
development expenditure (US$41.8 million) relating to investment in the
Bulyanhulu CIL Expansion project (US$15.6 million), investments in tailings and
infrastructure (US$9.9 million), investment in the Gokona Underground project
at North Mara (US$5.4 million), investment in the Bulyanhulu Lower West project
(US$3.6 million) and component costs (US$3.5 million).
Cash flow from operations was US$101 million, compared to Q3 2013 of US$40
million. The increase primarily relates to increased EBITDA and favourable
working capital movements. The working capital inflow for Q3 2014 of US$23
million compared to an investment in working capital in Q3 2013 of US$36
million and was primarily driven by the timing of the settlement of payables
and a decrease in indirect tax receivables of US$14 million in Q3 2014.
The cash position increased during Q3 2014 by US$17 million to US$287 million
at 30 September 2014 (31 December 2013: $282 million), after the payment of
interim dividends of US$5.7 million and cash expansion capital expenditure of
US$25.7 million.
Mine Site Review
Bulyanhulu
Key statistics Three months
ended 30 Nine months ended
Bulyanhulu September 30 September
(Unaudited) 2014 2013 2014 2013
Key operational information:
Ounces produced oz 63,333 52,126 168,753 145,100
Ounces sold oz 51,409 50,767 152,574 138,569
Cash cost per ounce sold US$/oz 752 769 828 936
AISC per ounce sold US$/oz 1,350 1,183 1,283 1,437
Copper production Klbs 1,488 1,269 3,919 3,507
Copper sold Klbs 1,153 1,169 3,500 3,204
Underground ore tonnes hoisted Kt 236 232 664 650
Run-of-mine processing:
Ore milled Kt 236 228 661 642
Head grade g/t 8.8 7.8 8.6 7.7
Mill recovery % 87.1% 90.5% 89.9% 90.8%
Ounces produced oz 58,236 52,126 163,383 145,100
Cash cost per tonne milled US$/t 164 171 191 202
Reprocessed tailings:
Ore milled Kt 220 - 227 -
Head grade g/t 1.4 - 1.4 -
Mill recovery % 52.5% - 53.8% -
Ounces produced oz 5,097 - 5,370 -
Capital Expenditure:
- Sustaining capital US$('000) 8,970 5,314 13,452 20,860
- Capitalised development US$('000) 17,527 10,576 45,941 34,678
- Expansionary capital US$('000) 15,907 20,910 41,738 73,331
42,404 36,800 101,131 128,869
- Non-cash reclamation asset
adjustments US$('000) (2,399) (831) 6,322 (10,039)
Total Capital Expenditure US$('000) 40,005 35,969 107,453 118,830
Operating performance
Gold production of 63,333 ounces for the quarter was 21% higher than in Q3
2013, due to a 12% increase in head grade in the main plant driven by improved
availability of high grade stopes and the on-going commissioning of the CIL
plant which contributed 5,097 ounces. Gold ounces sold of 51,409 ounces were in
line with Q3 2013, but lower than production due to the timing of production at
the quarter end, impacting the timing of shipments. Recoveries were temporarily
lower during the quarter but returned to above 90% by the end of the quarter.
Copper production of 1.5 million pounds for the quarter was 17% higher than in
Q3 2013 due to higher throughput and a higher copper grade.
During the quarter, we progressed the commissioning of the new CIL circuit at
Bulyanhulu and are nearing the completion of the commissioning stage. Some
issues were experienced initially with the elution circuit performance and
detoxification of the tailings, but these have been largely resolved. At
quarter end tonnes treated from the reclaimed tailings reflected the designed
levels.
During the quarter we incurred total development costs (expensed and
capitalised) at the Upper East and Lower West of US$1.3 million (US$6.0 million
YTD) and US$5.9 million (US$10.7 million YTD), respectively. In the Upper East
we commenced ore development as expected in August 2014 and in the Lower West
we continue to expect to access higher grade ore in Q4 2014. ABG expects that
the combined total development costs (expensed and capitalised) required to
develop the Upper East and Lower West in 2014 will be US$30 million, as
planned, which will be included in the Bulyanhulu and Group AISC figures.
Cash costs for the quarter of US$752 per ounce sold were 2% lower than the
prior year of US$769, and 18% lower than Q2 2014 due to the higher production
base and lower labour costs as a result of the 19% reduction in international
headcount. During the quarter, the mine commenced a right-sizing of the
workforce with a reduction of over 500 employees, predominantly through
voluntary severance packages. The cost benefits of this initiative will become
evident in Q4 2014.
AISC per ounce sold for the quarter of US$1,350 was 14% higher than in Q3 2013
(US$1,183) as a result of higher sustaining capital expenditure and capitalised
development as explained above.
Capital expenditure for the quarter of US$42.4 million was 15% higher than in
Q3 2013 of US$36.8 million. Capital expenditure consisted mainly of capitalised
underground development costs (US$17.5 million, inclusive of US$3.6 million of
Lower West spend) and expansionary capital investment relating to the CIL
circuit (US$15.6 million).
Buzwagi
Key statistics
Three months ended 30 Nine months ended 30
Buzwagi September September
(Unaudited) 2014 2013 2014 2013
Key operational
information:
Ounces produced oz 63,321 44,408 165,665 130,154
Ounces sold oz 65,641 40,599 158,083 136,966
Cash cost per ounce sold US$/oz 645 1,012 782 946
AISC per ounce sold US$/oz 950 1,436 1,078 1,582
Copper production Klbs 3,043 1,569 7,042 4,915
Copper sold Klbs 3,089 1,279 6,133 5,357
Mining information:
Tonnes mined Kt 6,286 7,628 17,632 24,933
Ore tonnes mined Kt 1,090 1,001 3,444 2,502
Processing information:
Ore milled Kt 1,054 1,165 3,034 3,455
Head grade g/t 2.0 1.4 1.8 1.3
Mill recovery % 94.8% 87.3% 92.0% 87.9%
Cash cost per tonne milled US$/t 40 35 41 38
Capital Expenditure
- Sustaining capital US$('000) 2,816 6,623 8,592 27,280
- Capitalised development US$('000) 13,441 7,986 28,598 49,324
16,257 14,609 37,190 76,604
- Non-cash reclamation
asset adjustments US$('000) (652) (103) 187 (6,912)
Total Capital Expenditure US$('000) 15,605 14,506 37,376 69,692
Operating performance
Gold production for the quarter of 63,321 ounces was 43% higher than in Q3
2013, driven by increased head grade as a result of mining at the main ore zone
at the end of the Stage 2 pit. Gold sold for the quarter amounted to 65,641
ounces, 62% above that of Q3 2013 due to the increased production base, and 4%
higher than production as a result of the sale of concentrate ounces on hand at
the end of Q2 2014.
Tonnes milled during the quarter were 10% lower than in Q3 2013 due to lower
throughput rates as a result of the timing of downtime relating to plant
maintenance. Recoveries increased by 9% over Q3 2013 as a result of increased
grade and business improvement initiatives providing improved blending and
management of the CIL plant's performance.
Total tonnes mined for the quarter of 6.3 million tonnes were 18% lower than in
Q3 2013 due to changes in the mine plan compared to 2013. Ore tonnes mined of
1.1 million tonnes were 9% higher than Q3 2013 for the same reason.
Copper production of 3.0 million pounds for the quarter was 94% higher than in
Q3 2013 driven by the increased concentrate production as a result of higher
copper grades processed.
Cash costs for the quarter of US$645 per ounce sold were 36% lower than in Q3
2013 (US$1,012). Cash costs were positively impacted by increased production
levels and resultant co-product revenue, savings in contracted services (lower
rates) and labour costs (47% reduction in the international workforce) and
increased capitalised development costs driven by a higher proportion of waste
material removed from Stages 2 and 3 of the open pit. This was partially offset
by higher maintenance costs due to increased maintenance activity and increased
sales related costs due to the higher sales volumes.
AISC per ounce sold for the quarter of US$950 was 34% lower than in Q3 2013
(US$1,436). This was driven by the lower cash cost base, higher production base
and lower sustaining capital.
Capital expenditure for the quarter of US$16.3 million was 11% higher than in
Q3 2013 (US$14.6 million). Key capital expenditure for the quarter included
capitalised stripping costs (US$13.4 million) as a result of the focus on waste
movement in Stage 3 of the pit, investments in tailings and infrastructure
(US$1.8 million) and component change out costs (US$0.7 million).
North Mara
Key statistics
Three months ended 30 Nine months ended 30
North Mara September September
(Unaudited) 2014 2013 2014 2013
Key operational
information:
Ounces produced oz 64,332 67,895 203,148 196,373
Ounces sold oz 61,440 69,695 198,780 199,895
Cash cost per ounce sold US$/oz 655 532 606 667
AISC per ounce sold US$/oz 1,015 1,199 961 1,274
Mining information:
Tonnes mined Kt 4,494 5,528 12,612 16,923
Ore tonnes mined Kt 655 464 1,781 1,923
Processing information:
Ore milled Kt 721 720 2,086 2,000
Head grade g/t 3.2 3.4 3.5 3.5
Mill recovery % 87.2% 86.9% 87.3% 87.1%
Cash cost per tonne milled US$/t 56 52 58 67
Capital Expenditure:
- Sustaining capital US$('000) 4,994 10,862 13,082 34,824
- Capitalised development US$('000) 10,834 23,026 36,226 51,943
- Expansionary capital US$('000) 6,544 - 7,522 504
22,372 33,888 56,830 87,271
- Non-cash reclamation
asset adjustments US$('000) (1,574) (815) 3,784 (6,765)
Total Capital Expenditure US$('000) 20,798 33,073 60,614 80,506
Operating performance
Production for the quarter of 64,332 ounces was 5% lower than in Q3 2013 due to
the lower head grade, as expected, reflecting the higher proportion of mining
from the Nyabirama pit at lower grades than the Gokona pit. Milled tonnes
exceeded mined tonnes as mined tonnes were blended with stockpiles. Gold ounces
sold for the quarter of 61,440 ounces were 4% lower than production due to the
timing of dore production at the quarter end impacting on the timing of sales.
Cash costs for the quarter of US$655 per ounce sold were 23% higher than in Q3
2013 (US$532). Cash costs were negatively impacted by lower production levels
and lower capitalisation of waste stripping costs, partly offset by the impact
of a 38% reduction in the international workforce, lower maintenance costs and
lower freight costs.
AISC per ounce sold for the quarter of US$1,015 was 15% lower than in Q3 2013
(US$1,199) due to lower sustaining capital and capitalised development
expenditure, partly offset by the higher cash costs and the lower production
base as outlined above.
Capital expenditure for the quarter of US$22.4 million was 34% lower than in Q3
2013 (US$33.9 million), due to lower capitalised stripping and lower sustaining
capital expenditure, slightly offset by increased expansionary expenditure. Key
capital expenditure included capitalised stripping costs (US$10.8 million),
investments in tailings and infrastructure (US$1.9 million) and component costs
(US$2.9 million). Expansion capital of US$6.5 million relates mainly to portal
development costs relating to the Gokona Underground feasibility study (US$5.4
million).
The study into the potential to transition the Gokona deposit at North Mara
from an open pit to an underground operation is advancing in line with
expectations. Progress to date underlines our confidence that the project will
generate positive returns and help sustain the current production profile of
the mine. During Q3 2014, work continued on the development of the exploration
portal with 48 metres of advancement achieved. Year to date we have spent
US$6.4 million of expansionary capital on the exploration portal out of the
previously communicated amount for the year of US$10 million.
Exploration Review
Bulyanhulu
During Q3 2014, a total of 2,218 metres of diamond core were drilled, which
completed this year's surface drilling programmes at Bulyanhulu. The drilling
was continuing to target potential resource extensions west of the currently
delineated resources on both Reef 1 and Reef 2 systems. Encouraging results
from the programme this quarter include the following significant
intersections:
BGMDD0054W5: 0.5m @ 13.5g/t Au from 1,839.5m - Reef 2 series
BGMDD0054W5: 0.5m @ 23.0g/t Au from 1,842.0m - Reef 2 series
BGMDD0054W6: 0.94m @ 14.3g/t Au from 355.6m - Reef 2 series
BGMDD0054W6: 0.50m @ 31.1g/t Au from 680.5m - Reef 2 series
BGMDD0056W2: 0.50m @ 15.9g/t Au from 892.5m - Reef 2 series
BGMDD0056W2: 2.25m @ 26.6g/t Au from 906.5m - Reef 2 series
BGMDD0056W2: 0.50m @ 26.3g/t Au from 944.0m - Reef 2 series
BGMDD0056W2: 0.70m @ 6.50g/t Au from 947.6m - Reef 2 series
BGMDD0056W2: 0.50m @ 16.7g/t Au from 1,168.1m - Reef 2 series
BGMDD0056W2: 1.25m @ 16.5g/t Au from 1,550.3m - Reef 1
The results from these holes demonstrate that gold mineralisation, particularly
on the Reef 2 vein system, continues up to 2 kilometres west of the currently
delineated mineable resources. Therefore, there is potential to add further
resource ounces at Bulyanhulu on Reef 2, at relatively more shallow levels
(<1,000-1,600m) than Reef 1.
The intersection from Reef 1 has confirmed and extended the high-grade
mineralised zone that was intersected at the beginning of the drilling
programme.
The Bulyanhulu surface drilling programme has been completed with 9,721 metres
drilled year to date, with a programme total of 14,373 metres over 16 diamond
core holes.
West Kenya Joint Venture
Exploration activities in Kenya continue to focus on grassroots target
generation. The Aircore programme testing existing gold-in-soil anomalies along
the Liranda Corridor on the south side of the Kakamega Dome Camp was completed
with a total of 201 holes drilled for 6,948 metres during Q3 2014. Since 2013,
the total number of Aircore holes drilled along the Liranda Corridor is 1,209
holes for 46,595 metres. Better results during Q3 2014 included:
KDAC 0990: 27m @ 1.45 g/t Au from 12m Incl. 6m @ 3.72 g/t Au
KDAC 0998: 6m @ 3.20 g/t Au from 105m Incl. 3m @ 6.17 g/t Au
KDAC 1012: 3m @ 3.5 g/t Au from 30m
KDAC 1022: 21m @ 0.51 g/t Au from 18m Incl. 6m @ 1.15 g/t Au
KDAC 1331: 3m @ 2.66g/t Au from 15m
This Aircore program was highly successful with 363 holes returning anomalous
results (>0.1g/t Au), of which 106 holes intersected zones of >0.50g/t Au.
A programme of 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 was completed. A total of 190 line kilometres of surveys
have now been completed. Thirteen pole-dipole IP 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.
A 5,000 metre diamond core drilling programme is planned for Q4 2014 to follow
up on the best significant Aircore intercepts in the Liranda Corridor. Two
diamond core holes are also planned for the Abimbo prospect, a high priority
anomaly in the Lake Zone camp with coincident IP, resistivity and
gold-in-soils.
Non-IFRS Measures
ABG has identified certain measures in this report that are not measures
defined under IFRS. Non-IFRS financial measures disclosed by management are
provided as additional information to investors in order to provide them with
an alternative method for assessing ABG's financial condition and operating
results. These measures are not in accordance with, or a substitute for, IFRS,
and may be different from or inconsistent with non-IFRS financial measures used
by other companies. These measures are explained further below.
Average realised gold price per ounce sold is a non-IFRS financial measure
which excludes from gold revenue:
Unrealised mark-to-market gains and losses on provisional pricing from copper
and gold sales contracts; and
Export duties.
Cash cost per ounce sold is a non-IFRS financial measure. Cash costs include
all costs absorbed into inventory, as well as royalties, and production taxes,
and exclude capitalised production stripping costs, inventory purchase
accounting adjustments, unrealised gains/losses from non-hedge currency and
commodity contracts, depreciation and amortisation and corporate social
responsibility charges. Cash cost is calculated net of co-product revenue.
The presentation of these statistics in this manner allows ABG to monitor and
manage those factors that impact production costs on a monthly basis. 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 September 2014 Three months ended 30 September 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 752 655 645 679 769 532 1,012 728
Corporate administration 62 44 39 47 57 31 47 50
Share based payments 1 (0) 3 6 4 2 3 9
Rehabilitation 9 20 4 11 6 22 9 14
Mine exploration 6 3 1 3 3 8 2 5
CSR expenses 5 22 11 17 11 22 3 15
Capitalised development 341 176 205 234 208 330 197 258
Sustaining capital 174 95 43 101 125 252 163 190
Total continuing operations 1,350 1,015 950 1,098 1,183 1,199 1,436 1,270
Discontinued operations - 5
Total 1,098 1,275
(Unaudited) Nine months ended 30 September 2014 Nine months ended 30 September 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 828 606 782 727 936 667 946 826
Corporate administration 48 37 38 44 74 38 54 54
Share based payments 2 1 4 12 (0) (1) (1) (5)
Rehabilitation 8 19 6 12 8 30 18 20
Mine exploration 3 2 1 2 4 13 2 7
CSR expenses 5 17 12 14 7 27 4 18
Capitalised development 301 182 181 217 250 260 360 286
Sustaining capital 88 97 54 83 158 240 199 205
Total continuing operations 1,283 961 1,078 1,111 1,437 1,274 1,582 1,411
Discontinued operations - 18
Total 1,111 1,429
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 cost per tonne milled is 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
Run-of-mine processing - measures the ore tonnes processed from the main
underground mining activities at Bulyanhulu.
Reprocessed tailings - measures the tonnes processed through the new CIL
circuit from reclaimed tailing facilities at Bulyanhulu