TERANGA GOLD CORPORATION (TSX:TGZ)(ASX:TGZ) -
(All amounts are in US$000's unless otherwise stated)
For a full explanation of Financial, Operating, Exploration and Development
results please see the Interim Condensed Consolidated Financial Statements as at
and for the period ended June 30, 2014 and the associated Management's
Discussion & Analysis at www.terangagold.com.
-- Gold production for the three months ended June 30, 2014 totaled 39,857
ounces. Total cash costs were $815 per ounce sold(1) and all-in
sustaining costs were $1,060 per ounce sold(1) for the three months
ended June 30, 2014.
-- Despite the weaker second quarter the Company remains on track to meet
its full year production guidance of 220,000 to 240,000 ounces(2), but
expects production at the lower end of the guidance range; total cash
costs are expected at the higher end of the range of $650 to $700 per
ounce sold(1), and all-in sustaining costs are now expected to average
about $900 per ounce, $25 per ounce higher than the top end of the
original guidance range $800 to $875 per ounce sold(1).
-- The Company expects a strong second half of the year with higher
production and lower costs resulting from higher grades mined at
Sabodala and from high grade production from Masato.
-- A non-cash inventory write-down to net realizable value of $13.4 million
($0.04 loss per share) resulted in a consolidated loss attributable to
shareholders of $12.0 million ($0.04 loss per share) in second quarter
2014.
-- Development of the Masato deposit, the first of the Oromin Joint Venture
Group ("OJVG") deposits to be mined, is complete with mining expected to
commence in third quarter 2014.
-- Technical analysis on mill optimization is expected to be completed in
the third quarter.
-- Heap leach testing is underway, preliminary results are expected in the
third quarter and a preliminary economic analysis by year end.
-- Infill drilling of the Masato high grade zone is complete, assays
expected shortly. Reserve development drilling of high grade deposits
continues on the OJVG mine license.
-- During the second quarter, the Company closed on its offering of
36,000,000 common shares at a price of C$0.83 per share for net proceeds
of $25.4 million.
-- Cash balance at June 30, 2014 was $28.4 million, including restricted
cash. To date, the Company has made approximately $35.0 million of $80.0
million in one-time payments planned for 2014, including debt
repayments, one-time costs related to its Global Agreement with the
Republic of Senegal and acquisition-related costs to acquire the OJVG.
The Company remains on track to retire the balance of the debt facility
outstanding by December 31, 2014.
"Despite a weaker quarter at Sabodala we are on track to meet our production
guidance but at the lower end of guidance. The integration of the OJVG and the
growth initiatives announced at the beginning of the year are moving forward
quickly. Development of Masato, the first OJVG deposit, is complete and mining
is to begin in the third quarter, two quarters post-acquisition. Reserve
development drilling, mill optimization and heap leach testing began in the
second quarter. We expect to be announcing the results of these growth projects
through the balance of the year. Higher grades at Sabodala and the addition of
Masato should lead to a strong second half of the year with higher production
and lower costs", said Richard Young, President and CEO.
OPERATIONAL HIGHLIGHTS (details in Review of Second Quarter Operating Results table)
-- Gold production for the three months ended June 30, 2014 was 39,857
ounces, 20 percent lower than the same prior year period due to lower
mined and processed grade partly offset by higher tonnes milled. Gold
production for the quarter was weaker than expected due to lower mined
grade during the second half of the quarter, and longer than planned
downtime associated with scheduled maintenance of the crushing and
milling circuits in May.
-- Total cash costs for the three months ended June 30, 2014, excluding a
non-cash inventory write-down to net realizable value ("NRV"), were $815
per ounce, compared to $642 per ounce in the same prior year period.
While total mine production costs were 9 percent lower than the year
earlier quarter, higher per ounce costs were due to lower production and
lower capitalized deferred stripping costs compared to the year earlier
period.
-- All-in sustaining costs for the three months ended June 30, 2014,
excluding a non-cash inventory write-down to NRV, were $1,060 per ounce,
11 percent lower than the same prior year period. All-in sustaining
costs were lower due to lower capital expenditures in the current year
period.
-- Total tonnes mined for the three months ended June 30, 2014 were 18
percent lower compared to the same prior year period. Mining activities
in the current year were solely focused on lowering the benches of phase
3 of the Sabodala pit which has an overall reduced stripping ratio. In
the same prior year period, mining activities were focused on completing
phase 2 near the bottom of the Sabodala pit combined with primarily
waste stripping of the upper benches of phase 3.
-- Total tonnes mined are expected to decline further in the second half of
the year in line with the Company's plan to minimize material movement
in the current gold price environment with a focus on maximizing free
cash flows.
-- Ore tonnes mined for the three months ended June 30, 2014 were 40
percent higher than the same prior year period as mining activities in
the prior year period was mainly focused on waste stripping of phase 3.
-- Ore tonnes and overall grade mined in the second half of the quarter
were lower than planned as mining activity focused on a peripheral area
of the Sabodala ore body on the upper benches of phase 3. This area of
the ore body has shown less continuity than in other peripheral areas
previously mined. Greater variation in grade and thickness and
complexity in the geometry and continuity resulted in lower than
expected grades and ore tonnage. Management changed its practices for
ore recovery in these areas by increasing sampling, revising blast hole
modeling and mining the ore zones at 5 metre benches from the previous
10 metre bench intervals.
-- In addition, access to a high grade area of the deposit, scheduled for
mining in the second quarter was deferred into the third quarter due to
bench access constraints which required a small redesign of phase 3.
This modification adds 1.3 million waste tonnes to the 2014 plan that
was originally scheduled for mining in phase 4 of the Sabodala pit in
2016.
-- Mining through the balance of the year is primarily taking place in the
high grade area of the Main Flat Zone. This is expected to lead to
higher ore grades mined and processed in the second half of 2014.
Provided grades and ore tonnes mined are on plan, the Company remains on
track to meet its 2014 production guidance of 220,000 to 240,000 ounces
but expects production at the lower end of the range.
-- Total mining costs for the three months ended June 30, 2014 were 10
percent lower than the same prior year period due to decreased material
movement partly offset by higher costs for light fuel oil (LFO) and
higher costs associated with the redesign of phase 3 and mining in 5
metre benches from the previous 10 metres. Unit mining costs for the
three months ended June 30, 2014 were 10 percent higher than the same
prior year period due to fewer tonnes mined. Mining is concentrated on
the lower benches of phase 3 of the mine plan with limited space
resulting in lower productivity.
-- Total mining costs for the balance of the year are expected to be
approximately $7.0 million higher than plan due to changes in the mine
plan that will result in an additional 2.6 million tonnes mined, half of
which, as noted previously, is related to the redesign of phase 3 and
the balance is related to earlier than planned access to Masato.
-- The development of Masato, the first deposit from the OJVG acquisition,
is complete and ready for production in the third quarter.
-- Ore tonnes milled for the three months ended June 30, 2014 were 15
percent higher than the same prior year period due to improvements made
during the first and second quarters of 2013 to reduce the frequency and
duration of unscheduled operational downtime and increase throughput in
the crushing circuit to better match mill capacity. During the second
quarter of 2014, scheduled maintenance of the crushing and milling
circuits resulted in a net 10 days of planned and unplanned downtime in
May, due to repairs to the secondary cone crusher, replacement of high
wear components in the SAG mill and repairs to the primary crusher. No
major downtime is scheduled for the balance of the year.
-- Processed grade for the quarter ended June 30, 2014 was 28 percent lower
than the same prior year period, mainly due to lower ore grades.
-- Total processing costs for the three months ended June 30, 2014 were 3
percent higher than the same prior year period, mainly due to higher
mill throughput. Unit processing costs for the three months ended June
30, 2014 were 10 percent lower than the prior year period due to higher
tonnes milled.
-- Total mine site general and administrative costs for the three months
ended June 30, 2014 were 7 percent lower than the prior year mainly due
to lower insurance costs. Unit general and administration costs for the
three months ended June 30, 2014 were 21 percent lower than the same
prior year period due to lower general and administrative costs and
higher tonnes milled.
FINANCIAL HIGHLIGHTS (details in Review of Second Quarter Financial Results table)
-- Gold revenue for the three months ended June 30, 2014 was $57.5 million,
24 percent lower than the same prior year period. The decrease in gold
revenue was due to 20 percent lower production and 6 percent lower
realized gold prices during the second quarter of 2014.
-- During the second quarter 2014, the Company recorded a loss attributable
to shareholders of $12.0 million ($0.04 loss per share), compared to a
profit attributable to shareholders of $7.2 million ($0.03 per share) in
the same prior year period. The decrease in profit and earnings per
share over the prior year quarter were primarily due to a non-cash
inventory write-down to NRV totaling $13.4 million and lower revenues.
-- During the three months ended June 30, 2014, the Company recognized a
non-cash write-down on long-term low-grade ore stockpile inventory of
$13.4 million, as a result of an increase in costs added to low-grade
ore stockpiles during the quarter. Fewer ounces mined during the quarter
resulted in an increase in the per ounce cost of inventory (including
applicable overhead, depreciation and amortization). Higher per ounce
inventory costs have a greater impact on low-grade stockpile values
because of the higher future processing costs required to produce an
ounce of gold. The non-cash write-down represents the portion of
historic costs that would not be recoverable based on the Company's
long-term forecasts of future processing and overhead costs at a gold
price of $1,237 per ounce (including the impact of the Franco-Nevada
gold stream). Fluctuations in the mine plan result in wide fluctuations
in the per ounce cost of our long-term ore stockpiles. During periods
where fewer ounces are mined, per ounce costs rise, while during those
periods when mining takes place in higher grade areas, per ounce costs
fall. As mining takes place in higher grade areas of Sabodala and
Masato, a portion of this non-cash write-off is expected to reverse over
the course of the balance of the year. Conversely, should long-term gold
prices decline or future costs rise, there is a potential for further
NRV adjustments.
-- Cash flow used in operations was $9.8 million for the three months ended
June 30, 2014, compared to cash flow provided by operations of $20.8
million in the same prior year period. The decrease in operating cash
flow compared to the prior year quarter was due to lower revenues and
higher net working capital outflows.
-- Capital expenditures for the three months ended June 30, 2014 were $6.8
million compared to $26.0 million in the same prior year period. The
decrease in capital expenditures was mainly due to lower sustaining and
development expenditures and lower capitalized deferred stripping in the
second quarter of 2014.
-- During the second quarter of 2014, 44,285 ounces were sold at an average
realized gold price of $1,295 per ounce. During the second quarter of
2013, 54,513 ounces were sold at an average realized price of $1,379 per
ounce.
-- On May 1, 2014, the Company closed on its offering of 36,000,000 common
shares at a price of C$0.83 per share for gross proceeds of C$29.9
million, with a syndicate of underwriters. Net proceeds were $25.4
million after consideration of underwriter fees and expenses totaling
approximately $1.9 million.
-- The Company's cash balance at June 30, 2014 was $28.4 million, including
restricted cash. Cash and cash equivalents were similar to the balance
reported at March 31, 2014, as the increase in cash from the proceeds of
the share offering was offset by cash flow used in operations of $9.8
million, debt and interest repayments totaling $9.2 million and capital
expenditures of $6.8 million.
-- For the year to date ended June 30, 2014, the Company has made a total
of $35.0 million in one-time payments. This includes $16.4 million in
debt repayments, $2.1 million in payments to the Republic of Senegal and
one-time payments related to the acquisition of the OJVG, including $9.0
million for transaction, legal and office closure costs and $7.5 million
to acquire Badr's share of the OJVG.
OUTLOOK 2014
-- Despite the weaker second quarter, the Company remains on track to meet
its 2014 annual production guidance range of 220,000 to 240,000 ounces
but expects production at the lower end of the range. Total production
costs, including mining, processing and site general and administrative
expenditures are expected to be at the higher end of guidance of $155 to
$165 million due to changes in the mine plan that result in more
material moved than planned.(3) As a result, total cash costs are
expected to be at the higher end of the original guidance range of $650
to $700 per ounce.
-- Total exploration and evaluation expenditures for the Sabodala and OJVG
mine licenses as well as the Regional Land Package were originally
expected to total approximately $10 million for 2014. However, the
expenditures may increase to $12 million, for additional drilling, to
expedite the conversion of resources to reserves on the mine licenses.
-- Administrative and Corporate Social Responsibility ("CSR") expenses are
expected to be $15 to $16 million, in line with guidance. These include
corporate office costs, Dakar and regional office costs and CSR costs,
but exclude corporate depreciation, transaction costs and other non-
recurring costs.
-- Sustaining capitalized expenditures, including sustaining mine site
expenditures, project development expenditures, capitalized deferred
stripping, reserve development expenditures and payments to the Republic
of Senegal were originally expected to be $28 to $33 million. In the
first half of 2014, Management identified further growth opportunities
(please see Business and Project Development section for additional
information) including opportunities to convert resources to reserves on
the mine licenses; mill optimization opportunities to increase the
milling rate; and opportunities to accelerate heap leach testing and
related activities. Including planned expenditures for these growth
opportunities, and through optimization of existing capital projects,
total capital expenditures are now expected to be approximately $33
million in 2014.
-- As a result of production at the lower end of guidance and cash cost at
the higher end of guidance, the Company now expects all-in sustaining
costs of about $900 per ounce, $25 per ounce higher than the top end of
the original guidance range of $800 to $875 per ounce.
-- Total depreciation and amortization for the year is expected to be
between $285 and $315 per ounce sold in line with guidance, comprised of
$125 to $140 per ounce sold related to depreciation on Sabodala plant,
equipment and mine development assets, $40 to $45 per ounce sold related
to assets acquired with the OJVG and $120 to $130 per ounce sold for
depreciation of deferred stripping assets. At the end of 2014, the
balance of the deferred stripping asset related to Sabodala is expected
to be approximately $30 million, which will be amortized over the mining
of phase 4 of the Sabodala pit.
BUSINESS AND PROJECT DEVELOPMENT
Franco-Nevada Gold Stream
-- On January 15, 2014, the Company completed a gold stream transaction
with Franco-Nevada Corporation ("Franco-Nevada"). The Company is
required to deliver to Franco-Nevada 22,500 ounces annually over the
first six years followed by 6 percent of production from the Company's
existing properties, including those of the OJVG, thereafter, in
exchange for a deposit of $135.0 million. Franco-Nevada's purchase price
per ounce is set at 20 percent of the prevailing spot price of gold.
-- The deposit of $135.0 million has been treated as deferred revenue
within the statement of financial position.
-- During the three months ended June 30, 2014, the Company delivered 5,625
ounces of gold, to Franco-Nevada. During the three months ended June 30,
2014, the Company recorded revenue of $7.3 million, consisting of $1.5
million received in cash proceeds and $5.8 million recorded as a
reduction of deferred revenue.
Acquisition of the OJVG
-- During the third and fourth quarters of 2013, the Company issued
71,183,091 Teranga shares to acquire all of the Oromin shares (Oromin
being one of the three joint venture partners holding 43.5 percent of
the OJVG) for total consideration of $37.8 million.
-- On January 15, 2014, the Company acquired the balance of the OJVG that
it did not already own from Bendon International Ltd. ("Bendon") and
Badr Investment Ltd. ("Badr").
-- The Company acquired Bendon's 43.5 percent participating interest in the
OJVG for cash consideration of $105.0 million. Badr's 13 percent carried
interest in the OJVG was acquired for cash consideration of $7.5 million
and further contingent consideration based on higher realized gold
prices and increases to OJVG reserves through 2020. For the three months
ended June 30, 2014, $3.8 million of contingent consideration has been
accrued based on targeted additions to OJVG reserves. The acquisitions
of Bendon's and Badr's interest in the OJVG were funded by the gold
stream agreement with Franco-Nevada and from the Company's existing cash
balance.
-- The acquisition of Bendon's and Badr's interests in the OJVG increased
the Company's ownership to 100 percent and consolidated the Sabodala
region, increasing the size of the Company's interests in mine license
from 33km2 to 246km2, more than doubling the Company's reserve base and
providing the Company with the flexibility to integrate the OJVG
satellite deposits into its existing operations. The contribution of 100
percent of the OJVG has been reflected into Teranga's results from
January 15, 2014.
-- Acquisition related costs of approximately $0.3 million have been
expensed during the three months ended June 30, 2014, and are presented
within Other expenses in the consolidated statements of comprehensive
income.
Golouma Mine License and Extension of Sabodala Mine License
-- During the second quarter of 2014, the integration of the Golouma mine
license into an expanded Sabodala mine concession was agreed to in
principle with the Senegalese Ministry of Mines and a revised expanded
Sabodala mining convention is anticipated to be executed during the
third quarter. The Company has all approvals required to process Golouma
ore in the Sabodala mill. The Sabodala mine license was also extended
until 2022 as part of the integration of the two license areas during
the second quarter of 2014.
Municipal and Provincial Election in Senegal
-- In June 2014, Senegal held municipal and provincial elections. Following
the elections, the President re-constituted his cabinet with the
appointment of a new Prime Minister and a number of new ministers in
various portfolios. The Ministers of Mines and Finance, key points of
contact for the Company, remained unchanged. Overall, the Company
believes the new Prime Minister and new cabinet members will continue
with the President's pro foreign investment and mining mandate. In fact,
the new Prime Minister was previously in charge of the Emerging Senegal
Plan, and visited Sabodala with the President in April of this year.
Base-Case Life of Mine Plan
-- During the first quarter 2014, the Company filed a National Instrument -
Standards of Disclosures for Mineral Projects ("NI 43-101") technical
report which include an integrated life of mine ("LOM") plan for the
combined operations of Sabodala and the OJVG. The integrated LOM plan
has been designed to maximize free cash flow in the current gold price
environment. The sequence of the pits can be optimized, as well as the
sequencing of phases within the pits, based not only on grade, but also
on strip ratio, ore hardness, and the capital required to maximize free
cash flows in different gold price environments. As a result, the
integrated LOM annual production profile represents an optimized cash
flow for 2014 and a balance of gold production and cash flow generated
in the subsequent five years. There are opportunities to increase gold
production in years 2015-2018 based on current reserves. With
expectations for additional reserves, including infill drilling of the
high grade zone at Masato, further mine plan optimization work is
required. As a result, the integrated LOM production schedule represents
a "base case" scenario with flexibility to improve gold production
and/or cash flows in subsequent years. During the second quarter 2014,
the Company's technical team commenced a review of the 2015 mine plan to
identify opportunities, which may result in lower material movement,
lower capital expenditures and higher free cash flows.
Mill Enhancements
-- The average hourly mill throughput rate estimated when the crusher is in
operation is approximately 430 tonnes per operating hour (tpoh) or 3.5
million tonnes per annum (mtpa). However, the mill has experienced
periods of sustained operation where the mill throughput has exceeded
480 tpoh. These occurrences have typically been when the mill was
operating when the primary and secondary crushed ore stockpile levels
have been full. Analysis of plant data shows that there is a correlation
between the crusher downtime and mill throughput, which in turn is
directly related to the inventory level of the crushed stockpiles.
-- Several engineering studies have been initiated to determine potential
throughput enhancements to the current plant design, including:
-- The design and cost to install a second crushing system that would
provide redundancy and near 100% availability to the crusher
stockpiles.
-- The quantification of the relationship between an increase in
crusher availability to the SAG and Ball mill system (SABC), as well
as other design enhancements within the crush and grinding system.
-- Key milestones for the project are as follows:
-- Quantify SAG mill critical sizing relationships and throughput
potential through test work and simulation;
-- Determine the maximum sustained production rate and required design
changes to the SABC and crushing circuit;
-- Develop a cost estimate and construction schedule; and
-- Technical analysis supporting a development decision (targeted for
completion in third quarter 2014).
-- The Company is targeting an overall 5 to 10 percent increase in
throughput.
Heap Leach Project
-- The LOM plan shows a significant amount of both oxide and sulphide low
grade reserves that are mined during the operating period but not
processed until the end of the mine life. There also exists significant
potential along an 8km mineralized structural trend covering both mine
leases to increase the known reserves with near surface, oxidized ore.
-- The potential benefit to accelerating value from this ore earlier by
feeding it through a heap leach process is being evaluated. A
comprehensive testwork program is in progress that will evaluate the
heap leach potential for:
Phase 1
- Saprolite, near surface ore
- Various stages of the soft and hard oxidized transition zones
Phase 2
- Sulphide ore on the ROM stockpile
-- Previous testwork has shown that there are higher capital and operating
costs to heap leaching ore as depth increases and the level of oxidation
decreases. Phase 1 of the testwork will form the basis to determine the
optimum economics for three geological zones within the oxide:
saprolite, soft transition and hard transition. Phase 2 of the analysis
will examine the leachability for the sulphide ore. However, since this
is likely to include much higher capital and operating costs, the
decision to proceed in this phase will be contingent on the results of
the testwork carried out for Phase 1.
-- The testwork is being completed by Klappes, Cassidy and Associates (KCA)
at their facilities in Reno, Nevada, who are experienced in testing and
designing heap leach facilities throughout the world, including West
Africa. Phase 1 of the program is expected to be completed in third
quarter 2014, at which point engineering design can commence to
determine capital costs and operating parameters as a basis for economic
analysis.
-- The decision to initiate testwork for Phase 2 of the program will be
based on the results of Phase 1.
-- Key milestones for the project are as follows:
-- Complete Phase 1 testwork, economic analysis and if warranted, initiate
engineering design to pre-feasibility study ("PFS") level - third
quarter 2014;
-- Complete additional follow up optimization testwork and, if warranted,
initiate Phase 2 testwork - third/fourth quarters 2014;
-- Commence preliminary economic analysis and make development decision -
fourth quarter 2014; and
-- Initiate feasibility study ("FS") level engineering design, initiate
targeted resource drilling and environmental studies to support an
environmental and social impact assessment ("ESIA") submission - 2015
-- The Company is targeting potential annual heap leach production between
30,000 and 50,000 ounces commencing 2017.
Gora Development
-- The Gora deposit which hosts 0.29 million ounces of proven and probable
reserves at 4.74 g/t will be operated as a satellite deposit to the
Sabodala mine requiring limited local infrastructure and development.
Ore will be hauled to the Sabodala processing plant by a dedicated fleet
of trucks and processed on a priority basis, displacing lower grade feed
as required.
-- A revised environmental and social impact assessment ("ESIA") for the
Gora project was filed with the Senegalese authorities on April 1, 2014.
The revised EISA is required to be validated by a technical committee
and once approved it is then presented by that authority to a public
hearing. Following the public hearing it is anticipated that the
Ministry of Environment ("MOE") will issue an environmental approval for
the Gora project. The technical committee meeting to validate the
revised Gora EISA is scheduled for August. Assuming a successful
validation hearing, Management anticipates the final approval to be
received by the MOE within 30 to 60 days.
-- Management expects the permit process to be completed in third quarter
2014 and construction to be initiated based on the new integrated LOM
plan with the OJVG by fourth quarter 2014. Initial engineering is
ongoing and site surveys were conducted during the second quarter 2014
to allow for initiation of the access road construction in late 2014.
Sabodala Mine License Reserve Development
-- The Sabodala Mine License covers 33km2 and, in addition to the mine
related infrastructure, contains the Sabodala, Masato, Niakafiri,
Niakafiri West, Soukhoto and Dinkokhono deposits.
Niakafiri
-- In 2013, additional surface mapping was completed at Niakafiri in
conjunction with the re-logging of several diamond drill holes which
were incorporated into the geological model for the Niakafiri deposit.
Further exploration work, including additional drilling, is targeted for
the fourth quarter of this year following discussions with Sabodala
village.
-- In addition to the potential expansion of hard ore reserves at
Niakafiri, the Company is exploring for potential softer ore that may be
conducive to heap leach, with emphasis on the mineralized trend to the
north and south of the current reserves at Niakafiri.
OJVG Mine License Reserve Development
-- The OJVG mine license covers 213km2. As we have integrated the OJVG
geological database into a combined LOM plan, a number of areas have
been revealed as potential sources for reserve additions within the
mining lease. These targets have been selected based on potential for
discovery and inclusion into open pit reserves.
Masato
-- Development of the Masato deposit is complete and is ready for mining
once the geological drilling programs have been completed and analyzed.
The access road construction, waste dump preparation, mine
infrastructure and bench access development have been completed.
Masato Geology Programs
-- A significant amount of geological field work occurred on the Masato Ore
body during the second quarter 2014 to increase understanding in
preparation for mining in the second half of 2014. These programs
include infill Diamond Drill Hole ("DDH") drilling of the high grade
zones, a gridded pattern Reverse Circulation ("RC") grade control
program, surface trenching and a condemnation drilling program for the
waste dump areas.
1. Infill DDH Drilling
During the second quarter 2014, 22 diamond drill holes totaling
approximately 2,800 metres were completed to confirm the existing
interpretation and grades of the mineralization domains, upgrade resource
classification of Inferred Resource blocks, "twin" previously drilled
holes and delineate high grade zones. Sampling and dispatch of core
samples to ALS Chemex in South Africa is ongoing. Assay results are
expected in third quarter 2014 and will be incorporated into an updated
resource model.
A total of 4 diamond drill holes were drilled for geotechnical data and
testing. Logging is ongoing and will be completed in third quarter 2014.
2. Surface Mapping, Trenching and RC Grade Control
A gridded RC drill program has been planned to delineate mineralization at
10 metre spacing to determine the optimal spacing of RC holes for the mine
operations grade control program. A total of 98 holes totaling 6,100
metres are planned in two separate test blocks in the Masato north and
south pit areas. The program was 50 percent complete at the end of second
quarter 2014, and is expected to be completed during third quarter 2014.
Assay results from the first 28 holes have been received and confirm the
existing mineralization model trends and grades.
A total of 16 trenches have been planned to confirm the location and
grades of near surface mineralization. Approximately 85 percent of the
trenches in the North Pit area have been excavated with 50 percent of
these having been mapped and sampled. The remaining trenching and sampling
programs with the receipt of assay results is expected to be completed in
third quarter 2014. Four additional trenches were excavated for heap leach
sampling program. Assay results returned to date confirm the surface
location of mineralization and gold grades from adjacent drill holes.
3. Condemnation RAB drilling
A Rotary Air Blast ("RAB") drilling sterilization program over the planned
dumps and lay down footprint areas was completed during second quarter
2014. Approximately 80 percent of the assay results have been received to
date of which the maximum gold value reported was 0.6 g/t. There is no
indication at present of economic concentrations of gold occurring in
these areas.
Data from the RAB drilling program was used in conjunction with surface
mapping data to produce soil isopach plans (for stripping and stock piling
of topsoil) and soil characteristics for geotechnical investigations.
Golouma
-- Infill drilling is planned for potential conversion of inferred
resources and evaluating the mineralization potential of structural
features along strike to the existing reserves. Since access has been
established, drilling is expected to commence in third quarter 2014.
Kerekounda
-- Both RC and DDH drilling is planned to determine the extent of
mineralization further along strike of the existing reserves. This
program is expected to commence in fourth quarter 2014.
Niakafiri SE and Maki Medina
-- Both RC and DDH drilling is planned for potential conversion of inferred
resources, geotechnical holes for pit wall determination and exploratory
holes to the north toward the Niakafiri deposit to evaluate extension
along strike. Pending results of the heap leach test work, additional
drilling to determine near surface oxide resources may also be
evaluated. Work in these areas is expected to commence in late third
quarter 2014 and continue through to the end of the year.
Regional Exploration
-- The Company currently has 9 exploration permits encompassing
approximately 1,055km2 of land surrounding the Sabodala and OJVG mine
licenses (246km2 exploitation permits). Over the past 3 years, with the
initiation of a regional exploration program on this significant land
package, a tremendous amount of exploration data has been collected and
systematically interpreted to prudently implement follow-up programs.
Targets are therefore in various stages of advancement and are then
prioritized for follow-up work and drilling. Early geophysical and
geochemical analysis of these areas has led to the demarcation of at
least 50 anomalies, targets and prospects and the Company expects that
several of these areas will ultimately be developed into mineable
deposits. The Company has identified some key targets that despite being
early stage, display significant potential. However, due to the sheer
size of the land position, the process of advancing an anomaly through
to a mineable deposit takes time and the Company is using a systematic,
disciplined approach to maximize potential for success.
Ninienko
-- An extensive mapping and a trenching program, over 1,500 metres, was
conducted during second quarter 2014 at the Ninienko prospect. This work
outlined a 500 metre-plus wide zone with gold mineralization occurring
in flat lying, near surface (0-2 metres) quartz vein and felsic breccia
units developed over a strike length of 1,500 metres.
-- Highlights of the elevated gold values reported from these trenches
include:
0.5m @ 3.96 g/t, Quartz feldspar breccia
1.5m @ 7.24 g/t, Broken quartz feldspar breccia
0.9m @ 7.38 g/t, Quartz vein
0.4m @ 9.65 g/t, Quartz feldspar breccia and quartz vein
1.0m @ 2.53 g/t, Quartz feldspar breccia and quartz vein
1.0m @ 2.70 g/t, Quartz feldspar breccia and quartz vein
0.4m @ 2.48 g/t, Quartz vein
1.2m @ 2.45 g/t, Quartz feldspar breccia and quartz vein
0.8m @ 3.27 g/t, Quartz vein
1.0m @ 8.89 g/t, Quartz vein
-- An isopach plan of the mineralized quartz vein and felsic breccia
systems is in progress, this will be used to develop a plan for DDH and
a possible RC drill program in fourth quarter 2014. Additional trenching
and mapping will also be undertaken in the second half of 2014.
Soreto
-- Following up on a small 5 DDH program at the Soreto prospect in 2013, a
program totaling 15 DDH for 2014 has commenced, with 7 DDH totaling
1,500 metres completed during the second quarter 2014 with assay results
pending. These were located along two fence lines placed 150 metres on
either side of the 2013 fence that intersected gold values including 3
metres at 2.1 g/t, 7 metres at 1.38 g/t and 1 metre at 12.2 g/t. Several
of these holes intersected shallow dipping (25 - 35 degrees ) altered
shear zones with felsic dyke, sheared and brecciated silicified
metasediments containing quartz-carbonate veins with disseminated pyrite
and visible gold in places. The shear zones coincide with the major NNE
regional shear structure with an associated 6km long geochemical soil
anomaly. Sampling and dispatch of split core samples to ALS Chemex in
South Africa is ongoing.
-- A further 8 DDH totaling 2,000 metres are planned to be drilled along
the current fence lines. It is expected that all the DDH will be sampled
and assay results received by the end of third quarter 2014.
KC Prospect
-- Approximately 3,200 metres of trenching was completed across a
mineralized structural trend with intense quartz veining and brecciated
felsic intrusives developed over a strike length of approximately 1,800
metres. Sampling of the trenches yielded elevated gold values in the
overburden of up to 18.45 g/t over 0.4 metres and 6.27 g/t over 0.6
metres. The quartz vein and breccia zone yielded elevated gold values in
the range of 1.95 g/t over 0.3 metres true width and 1.41 g/t over 0.2
metres true width with limited continuity along strike. Due to limited
mineralization in the in situ rock, it was determined that follow up
drilling was not likely to produce results and resources were best
allocated to higher prospective targets.
-- A follow-up soil sampling and trenching program is planned in fourth
quarter 2014 to evaluate a large soil anomaly (peak values of 2.64 g/t
and 2.38 g/t) located 800 metres to the west of workings which may
account for the elevated gold anomalies identified in over burden in the
trenches.
Garaboureya
-- Evaluation of the Garaboureya prospect which shows promise through high
soil geochemical anomalies and mineralization in outcropping rock is
planned later in the year. The Company is working to obtain drill core
from over 200 DDH holes previously drilled which were exploring for iron
ore deposits on the property. The drill core was not assayed for gold.
Access to the drill core could help accelerate the understanding of the
geology.
Review of Second Quarter Financial Results
(US$000's, except where Three months Six months
indicated) ended March 31 ended June 30
--------------------------------------------
Financial Data 2014 2013 2014 2013
----------------------------------------------------------------------------
Revenue 57,522 75,246 127,324 189,061
Profit attributable to
shareholders of Teranga (12,018) 7,196 (8,061) 52,179
Per share (0.04) 0.03 (0.02) 0.21
Operating cash flow (9,793) 20,838 4,510 44,478
Capital expenditures 6,846 25,990 9,556 48,166
Free cash flow (1) (16,639) (5,152) (5,046) (3,688)
Cash and cash equivalents
(including bullion receivables
and restricted cash) 28,381 53,536 28,381 53,536
Net debt(2) 280 28,925 280 28,925
Total assets 706,182 583,937 706,182 583,937
Total non-current financial
liabilities 128,069 20,484 128,069 20,484
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Note: Results include the consolidation of 100% of the OJVG's operating
results, cash flows and net assets from January 15, 2014.
(1) Free cash flow is defined as operating cash flow less capital
expenditures.
(2) Net debt is defined as total borrowings and financial derivative
liabilities less cash and cash equivalents, bullion receivables and
restricted cash.
Review of Second Quarter Operating Results
Three months Six months
ended June 30 ended June 30
--------------------------------------------
Operating Results 2014 2013 2014 2013
----------------------------------------------------------------------------
Ore mined ('000t) 974 698 2,236 2,011
Waste mined - operating ('000t) 5,233 2,683 11,384 5,197
Waste mined -
capitalized ('000t) 458 4,770 955 9,792
--------------------------------------------
Total mined ('000t) 6,665 8,151 14,575 17,000
Grade mined (g/t) 1.39 1.59 1.51 1.77
Ounces mined (oz) 43,601 35,728 109,053 114,657
Strip ratio waste/ore 5.8 10.7 5.5 7.5
Ore milled ('000t) 817 709 1,710 1,405
Head grade (g/t) 1.69 2.36 1.86 2.83
Recovery rate % 89.8 92.3 89.9 92.2
Gold produced(1) (oz) 39,857 49,661 91,947 117,962
Gold sold (oz) 44,285 54,513 98,052 124,180
Average realized price $/oz 1,295 1,379 1,294 1,217
Total cash cost (incl.
royalties)(2) $/oz sold 815 642 750 582
All-in sustaining
costs(2) $/oz sold 1,060 1,185 925 1,024
($/t
Mining mined) 2.90 2.64 2.85 2.62
($/t
Milling milled) 21.29 23.77 19.68 23.13
($/t
G&A milled) 4.92 6.25 4.88 6.21
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Gold produced represents change in gold in circuit inventory plus gold
recovered during the period.
(2) Total cash costs per ounce and all-in sustaining costs per ounce are
prior to a non-cash inventory write-down to net realizable value and
are non-IFRS financial measures that do not have a standard meaning
under IFRS. Please refer to Non-IFRS Performance Measures at the end
of this report.
Review of Second Quarter Cost of Sales
Three months Six months
(US$000's) ended June 30 ended June 30
--------------------------------------------
Cost of Sales 2014 2013 2014 2013
----------------------------------------------------------------------------
Mine production costs - gross 40,988 44,901 84,057 87,932
Capitalized deferred stripping (1,543) (13,802) (2,961) (28,493)
--------------------------------------------
39,445 31,099 81,096 59,439
Depreciation and amortization -
deferred stripping assets 5,038 1,627 12,470 3,814
Depreciation and amortization -
property, plant & equipment and
mine development expenditures 8,529 15,692 19,307 33,824
Royalties 2,422 3,748 5,903 9,358
Rehabilitation - 1 - 2
Inventory movements (5,518) 2,303 (12,997) 5,640
Inventory movements - non-cash (1,103) (1,834) (1,681) (3,470)
--------------------------------------------
Total cost of sales before
writedown to net realizable
value 48,813 52,636 104,098 108,607
Writedown to net realizable
value 9,111 - 9,111 -
Writedown to net realizable
value - depreciation 4,312 - 4,312 -
--------------------------------------------
13,423 - 13,423 -
--------------------------------------------
Total cost of sales 62,236 52,636 117,521 108,607
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Quarterly Operating and Financial Results
(US$000's, except
where indicated) 2014 2013
------------------------------------------------------
Q2 2014 Q1 2014 Q4 2013 Q3 2013 Q2 2013 Q1 2013
----------------------------------------------------------------------------
Revenue 57,522 69,802 58,302 50,564 75,246 113,815
Average realized gold
price ($/oz) 1,295 1,293 1,249 1,339 1,379 1,090
Cost of sales 62,236 55,285 50,527 37,371 52,636 55,971
Net earnings (loss) (12,018) 3,957 (4,220) (442) 7,196 44,983
Net earnings (loss)
per share ($) (0.04) 0.01 (0.01) (0.00) 0.03 0.18
Operating cash flow (9,793) 14,303 13,137 16,692 20,838 23,640
Ore mined ('000t) 974 1,262 1,993 537 698 1,312
Waste mined -
operating ('000t) 5,233 6,151 6,655 3,321 2,683 2,513
Waste mined -
capitalized ('000t) 458 497 420 4,853 4,770 5,023
Total mined ('000t) 6,665 7,910 9,068 8,711 8,151 8,848
Grade Mined (g/t) 1.39 1.61 1.61 1.08 1.59 1.87
Ounces Mined (oz) 43,601 65,452 103,340 18,721 35,728 78,929
Strip ratio
(waste/ore) 5.8 5.3 3.6 15.2 10.7 5.7
Ore processed ('000t) 817 893 860 887 709 696
Head grade (g/t) 1.69 2.01 2.11 1.41 2.36 3.31
Gold recovery (%) 89.8 90.1 89.7 91.6 92.3 92.1
Gold produced(1)(oz) 39,857 52,090 52,368 36,874 49,661 68,301
Gold sold (oz) 44,285 53,767 46,561 37,665 54,513 69,667
Total cash costs per
ounce
sold(2)(including
Royalties) 815 696 711 748 642 535
All-in sustaining
costs per ounce
sold(2)
(including Royalties) 1,060 813 850 1,289 1,185 898
Mining ($/t mined) 2.9 2.8 2.6 2.5 2.6 2.6
Milling ($/t mined) 21.3 18.2 18.0 17.6 23.8 22.5
G&A ($/t mined) 4.9 4.8 4.8 4.6 6.3 6.2
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(US$000's, except
where indicated) 2012
------------------
Q4 2012 Q3 2012
----------------------------------------
Revenue 122,970 105,014
Average realized gold
price ($/oz) 1,296 1,290
Cost of sales 57,250 45,814
Net earnings (loss) 54,228 26,033
Net earnings (loss)
per share ($) 0.22 0.11
Operating cash flow 59,670 13,976
Ore mined ('000t) 2,038 655
Waste mined -
operating ('000t) 4,362 1,786
Waste mined -
capitalized ('000t) 912 4,456
Total mined ('000t) 7,312 6,897
Grade Mined (g/t) 2.04 1.92
Ounces Mined (oz) 133,549 40,516
Strip ratio
(waste/ore) 2.6 9.5
Ore processed ('000t) 725 650
Head grade (g/t) 3.40 3.11
Gold recovery (%) 90.7 84.6
Gold produced(1)(oz) 71,804 55,107
Gold sold (oz) 71,604 62,439
Total cash costs per
ounce
sold(2)(including
Royalties) 532 509
All-in sustaining
costs per ounce
sold(2)
(including Royalties) 1,004 1,025
Mining ($/t mined) 3.1 2.7
Milling ($/t mined) 19.9 21.9
G&A ($/t mined) 6.4 5.7
----------------------------------------
----------------------------------------
(1) Gold produced represents change in gold in circuit inventory plus gold
recovered during the period.
(2) Total cash costs per ounce and all-in sustaining costs per ounce are
non-IFRS financial measures and do not have a standard meaning under
IFRS. Please refer to Non-IFRS Performance Measures at the end of this
report.
Non-IFRS Financial Measures
The Company provides some non-IFRS measures as supplementary information that
management believes may be useful to investors to explain the Company's
financial results. Refer to the Company's Management's Discussion and Analysis
for further details.
(US$000's, except where Three months Six months
indicated) ended June 30 ended June 30
--------------------------------------------
Cash costs per ounce sold 2014 2013 2014 2013
----------------------------------------------------------------------------
Gold produced(1) 39,857 49,661 91,947 117,962
Gold sold 44,285 54,513 98,052 124,180
Cash costs per ounce sold
Cost of sales 62,236 52,636 117,521 108,607
Less: depreciation and
amortization (13,567) (17,319) (31,777) (37,638)
Less: realized oil hedge gain - - - (487)
Add: non-cash inventory movement 1,103 1,834 1,681 3,470
Less: inventory writedown to net
realizable value (13,423) - (13,423) -
Less: other adjustments (246) (2,135) (497) (1,645)
--------------------------------------------
Total cash costs 36,103 35,016 73,505 72,307
Total cash costs per ounce sold 815 642 750 582
All-in sustaining costs
Total cash costs 36,103 35,016 73,505 72,307
Administration expenses(2) 4,009 3,566 7,621 6,689
Capitalized deferred stripping 1,543 13,802 2,961 28,493
Capitalized reserve development 110 509 231 2,837
Mine site capital 5,191 11,679 6,361 16,836
--------------------------------------------
All-in sustaining costs 46,956 64,572 90,680 127,162
All-in sustaining costs per
ounce sold 1,060 1,185 925 1,024
All-in costs
All-in sustaining costs 46,956 64,572 90,680 127,162
Social community costs not
related to current operations 493 368 902 708
Exploration and evaluation
expenditures 583 1,486 1,727 3,513
--------------------------------------------
All-in costs 48,032 66,426 93,310 131,383
All-in costs per ounce sold 1,085 1,219 952 1,058
Depreciation and amortization 13,567 17,319 31,777 37,638
Non - cash inventory movement (1,103) (1,834) (1,681) (3,470)
--------------------------------------------
Total depreciation and
amortization 12,464 15,485 30,096 34,168
Total depreciation and
amortization per ounce sold 281 284 307 275
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Gold produced represents change in gold in circuit inventory plus gold
recovered during the period.
(2) Administration expenses include share based compensation and exclude
Corporate depreciation expense and social community costs not related
to current operations.
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF
TERANGA GOLD CORPORATION
STATEMENTS OF COMPREHENSIVE INCOME / LOSS
(Unaudited and in US$000's except per share amounts)
----------------------------------------------------------------------------
Three months Six months
ended June 30 ended June 30
2014 2013 2014 2013
----------------------------------------------------------------------------
Revenue 57,522 75,246 127,324 189,061
Cost of sales (62,236) (52,636) (117,521) (108,607)
----------------------------------------------------------------------------
Gross profit (4,714) 22,610 9,803 80,454
----------------------------------------------------------------------------
Exploration and evaluation
expenditures (583) (1,486) (1,727) (3,513)
Administration expenses (4,039) (3,857) (8,027) (7,687)
Share-based compensation (350) (356) (661) (283)
Finance costs (2,648) (2,861) (4,764) (5,557)
Gains on gold hedge contracts - 3,115 - 5,308
Gains on oil hedge contracts - - - 31
Net foreign exchange losses (47) (423) - (484)
Loss on available for sale
financial asset - (3,493) - (4,455)
Other expenses (248) (3,691) (2,033) (3,682)
----------------------------------------------------------------------------
(7,915) (13,052) (17,212) (20,322)
----------------------------------------------------------------------------
Net (Loss)/profit (12,629) 9,558 (7,409) 60,132
----------------------------------------------------------------------------
(Loss)/profit attributable to:
Shareholders (12,018) 7,196 (8,061) 52,179
Non-controlling interests (611) 2,362 652 7,953
----------------------------------------------------------------------------
(Loss)/profit for the period (12,629) 9,558 (7,409) 60,132
----------------------------------------------------------------------------
Other comprehensive
income/(loss):
Items that may be reclassified
subsequently to profit/loss for
the period
Change in fair value of
available for sale financial
asset, net of tax (6) - 4 (6,418)
Reclassification to income,
net of tax - - - 962
----------------------------------------------------------------------------
Other comprehensive
income/(loss) for the period (6) - 4 (5,456)
----------------------------------------------------------------------------
Total comprehensive
(loss)/income for the period (12,635) 9,558 (7,405) 54,676
----------------------------------------------------------------------------
Total comprehensive (loss)/
income attributable to:
Shareholders (12,024) 7,196 (8,057) 46,723
Non-controlling interests (611) 2,362 652 7,953
----------------------------------------------------------------------------
Total comprehensive
(loss)/income for the period (12,635) 9,558 (7,405) 54,676
----------------------------------------------------------------------------
Earnings (loss) per share from
operations attributable to the
shareholders of the Company
during the period
- basic (loss)/earnings per
share (0.04) 0.03 (0.02) 0.21
- diluted (loss)/earnings per
share (0.04) 0.03 (0.02) 0.21
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF
TERANGA GOLD CORPORATION
STATEMENTS OF FINANCIAL POSITION
(Unaudited and in US$000's)
----------------------------------------------------------------------------
As at June As at December
30, 2014 31, 2013
----------------------------------------------------------------------------
Current assets
Cash and cash equivalents 13,381 14,961
Restricted cash 15,000 20,000
Trade and other receivables 2,164 7,999
Inventories 59,448 67,432
Other assets 6,471 5,756
Available for sale financial
assets 9 6
----------------------------------------------------------------------------
Total current assets 96,473 116,154
----------------------------------------------------------------------------
Non-current assets
Inventories 73,021 63,740
Equity investment - 47,627
Property, plant and equipment 211,510 222,487
Mine development expenditures 269,451 173,444
Intangible assets 536 947
Goodwill 55,191 -
----------------------------------------------------------------------------
Total non-current assets 609,709 508,245
----------------------------------------------------------------------------
Total assets 706,182 624,399
----------------------------------------------------------------------------
Current liabilities
Trade and other payables 39,972 56,891
Borrowings 28,661 70,423
Deferred Revenue 23,838 -
Provisions 2,516 1,751
----------------------------------------------------------------------------
Total current liabilities 94,987 129,065
----------------------------------------------------------------------------
Non-current liabilities
Borrowings - 3,946
Deferred Revenue 99,492 -
Provisions 14,549 14,336
Other non-current liabilities 14,028 10,959
----------------------------------------------------------------------------
Total non-current liabilities 128,069 29,241
----------------------------------------------------------------------------
Total liabilities 223,056 158,306
----------------------------------------------------------------------------
Equity
Issued capital 367,851 342,470
Foreign currency translation
reserve (998) (998)
Other components of equity 16,100 15,776
Investment revaluation reserve 4 -
Retained earnings 88,680 96,741
----------------------------------------------------------------------------
Equity attributable to
shareholders 471,637 453,989
Non-controlling interests 11,489 12,104
----------------------------------------------------------------------------
Total equity 483,126 466,093
----------------------------------------------------------------------------
Total equity and liabilities 706,182 624,399
----------------------------------------------------------------------------
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF
TERANGA GOLD CORPORATION
STATEMENTS OF CHANGES IN EQUITY
(Unaudited and in US$000's)
----------------------------------------------------------------------------
Six months
ended June 30
2014 2013
----------------------------------------------------------------------------
Issued capital
Beginning of period 342,470 305,412
Shares issued from public
offerings 27,274 -
Less: Share issue costs (1,893) -
----------------------------------------------------------------------------
End of period 367,851 305,412
----------------------------------------------------------------------------
Foreign currency translation
reserve
Beginning of period (998) (998)
----------------------------------------------------------------------------
End of period (998) (998)
----------------------------------------------------------------------------
Other components of equity
Beginning of period 15,776 16,358
Equity-settled share-based
compensation reserve 324 1,059
----------------------------------------------------------------------------
End of period 16,100 17,417
----------------------------------------------------------------------------
Investment revaluation reserve
Beginning of period - 5,456
Change in fair value of
available for sale financial 4 (5,456)
asset, net of tax
----------------------------------------------------------------------------
End of period 4 -
----------------------------------------------------------------------------
Retained earnings
Beginning of period 96,741 49,225
Profit attributable to
shareholders (8,061) 52,179
----------------------------------------------------------------------------
End of period 88,680 101,404
----------------------------------------------------------------------------
Non-controlling interest
Beginning of period 12,104 11,857
Non-controlling interest -
portion of profit for the 652 7,953
period
Dividends accrued (1,267) (6,664)
----------------------------------------------------------------------------
End of period 11,489 13,146
----------------------------------------------------------------------------
Total shareholders' equity at
June 30 483,126 436,381
----------------------------------------------------------------------------
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF
TERANGA GOLD CORPORATION
STATEMENTS OF CASH FLOW
(Unaudited and in US$000's)
----------------------------------------------------------------------------
Three months Six months
ended June 30 ended June 30
----------------------------------------------------------------------------
2014 2013 2014 2013
----------------------------------------------------------------------------
Cash flows related to operating
activities
(Loss) / Profit for the period (12,629) 9,558 (7,409) 60,132
Depreciation of property, plant
and equipment 5,423 10,880 12,404 26,234
Depreciation of capitalized mine
development costs 8,144 6,528 19,373 11,524
Inventory movements - non-cash (1,103) (1,834) (1,681) (3,470)
Inventory write-down to net
realizable value - depreciation 4,312 - 4,312 -
Amortization of intangibles 160 252 405 521
Amortization of deferred
financing costs 861 518 1,604 868
Inventory write-down to net
realizable value 9,111 - 9,111 -
Unwinding of discount on mine
restoration and rehabilitation 238 25 207 49
provision
Share-based compensation 350 356 661 283
Deferred gold revenue recognized (5,830) - (11,670) -
Net change in gains on gold
forward sales contracts - (3,116) - (42,955)
Net change in losses on oil
contracts - - - 456
Buyback of gold forward sales
contracts - (8,593) - (8,593)
Loss on available for sale
financial asset - 3,493 - 4,455
Loss on disposal of property,
plant and equipment - - - 99
(Increase) / decrease in
inventories (4,971) 4,247 (13,342) 4,526
Changes in working capital other
than inventory (13,859) (1,476) (9,465) (9,651)
----------------------------------------------------------------------------
Net cash provided by (used in)
operating activities (9,793) 20,838 4,510 44,478
Cash flows related to investing
activities
Decrease in restricted cash - - 5,000 -
Acquisition of Oromin Joint
Venture Group ("OJVG") - - (112,500) -
Expenditures for property, plant
and equipment (840) (7,733) (1,283) (12,357)
Expenditures for mine
development (6,006) (18,257) (8,273) (35,736)
Acquisition of intangibles - - - (73)
Proceeds on disposal of
property, plant and equipment - - - 35
----------------------------------------------------------------------------
Net cash used in investing
activities (6,846) (25,990) (117,056) (48,131)
Cash flows related to financing
activities
Net proceeds from equity
offering 25,485 - 25,485 -
Proceeds from Franco-Nevada gold
stream - - 135,000 -
Repayment of borrowings (8,194) - (46,388) -
Draw down from equipment finance
lease facility, net of - 2,697 - 13,843
financing costs paid
Financing costs paid - - (1,000) -
Interest paid on borrowings (976) (1,543) (2,132) (3,213)
Dividend payment to government
of Senegal - (2,700) - (2,700)
----------------------------------------------------------------------------
Net cash provided by (used in)
financing activities 16,315 (1,546) 110,965 7,930
Effect of exchange rates on cash
holdings in foreign currencies (1) 156 1 475
----------------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents (325) (6,542) (1,580) 4,752
Cash and cash equivalents at the
beginning of period 13,706 51,016 14,961 39,722
----------------------------------------------------------------------------
Cash and cash equivalents at the
end of period 13,381 44,474 13,381 44,474
----------------------------------------------------------------------------
CORPORATE DIRECTORY
Directors Senegal Office
Alan Hill, Chairman 2K Plaza
Richard Young, President and CEO Suite B4, 1er Etage
Jendayi Frazer, Non-Executive Director sis la Route due Meridien
President
Dakar Almadies
Edward Goldenberg, Non-Executive Director T: +221 338 693 181
Christopher Lattanzi, Non-Executive Director F: +221 338 603 683
Alan Thomas, Non-Executive Director
Frank Wheatley, Non-Executive Director
Auditor
Senior Management Ernst & Young LLP
Richard Young, President and CEO
Mark English, Vice President, Sabodala Share Registries
Operations
Paul Chawrun, Vice President, Technical Canada: Computershare Trust
Services Company of Canada
Navin Dyal, Vice President and CFO T: +1 800 564 6253
David Savarie, Vice President, General Australia: Computershare
Counsel & Corporate Secretary Investor Services Pty Ltd
Kathy Sipos, Vice President, Investor & T: +1 300 850 505
Stakeholder Relations
Aziz Sy, Vice President, Development Senegal
Macoumba Diop, General Manager and Government
Relations Manager, SGO
Stock Exchange Listings
Registered Office Toronto Stock Exchange, TSX
symbol: TGZ
121 King Street West, Suite 2600 Australian Securities
Exchange, ASX symbol: TGZ
Toronto, Ontario, M5H 3T9, Canada
T: +1 416 594 0000 Issued Capital
------------------------------
F: +1 416 594 0088 As of July 30, 2014
------------------------------
E: investor@terangagold.com Issued shares 352,801,091
W: http://www.terangagold.com/ Stock options 23,159,933
------------------------------
Exercise Price
(C$) Options
------------------------------
$3.00 15,368,333
$1.09 - $2.17 7,791,600
------------------------------
------------------------------
FORWARD LOOKING STATEMENTS
This news release contains certain statements that constitute forward-looking
information within the meaning of applicable securities laws ("forward-looking
statements"). Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of Teranga, or developments in Teranga's business or in its
industry, to differ materially from the anticipated results, performance,
achievements or developments expressed or implied by such forward-looking
statements. Forward-looking statements include, without limitation, all
disclosure regarding possible events, conditions or results of operations,
future economic conditions and courses of action, the proposed plans with
respect to mine plan and consolidation of the Sabodala Gold Project and OJVG
Golouma Gold Project, mineral reserve and mineral resource estimates,
anticipated life of mine operating and financial results, targeted date for a NI
43-101 compliant technical report, amendment to the OJVG mining license, the
approval of the Gora ESIA and permitting and the completion of construction
related thereto. Such statements are based upon assumptions, opinions and
analysis made by management in light of its experience, current conditions and
its expectations of future developments that management believe to be reasonable
and relevant. These assumptions include, among other things, the ability to
obtain any requisite Senegalese governmental approvals, the accuracy of mineral
reserve and mineral resource estimates, gold price, exchange rates, fuel and
energy costs, future economic conditions and courses of action. Teranga cautions
you not to place undue reliance upon any such forward-looking statements, which
speak only as of the date they are made. The risks and uncertainties that may
affect forward-looking statements include, among others: the inherent risks
involved in exploration and development of mineral properties, including
government approvals and permitting, changes in economic conditions, changes in
the worldwide price of gold and other key inputs, changes in mine plans and
other factors, such as project execution delays, many of which are beyond the
control of Teranga, as well as other risks and uncertainties which are more
fully described in the Company's Annual Information Form dated March 31, 2014,
and in other company filings with securities and regulatory authorities which
are available at www.sedar.com. Teranga does not undertake any obligation to
update forward-looking statements should assumptions related to these plans,
estimates, projections, beliefs and opinions change. Nothing in this report
should be construed as either an offer to sell or a solicitation to buy or sell
Teranga securities.
COMPETENT PERSONS STATEMENT
The technical information contained in this document relating to the mineral
reserve estimates for Sabodala, the stockpiles, Masato, Golouma and Kerekounda
is based on, and fairly represents, information compiled by Mr. William Paul
Chawrun, P. Eng who is a member of the Professional Engineers Ontario, which is
currently included as a "Recognized Overseas Professional Organization" in a
list promulgated by the ASX from time to time. Mr. Chawrun is a full-time
employee of Teranga and is a "qualified person" as defined in NI 43-101 and a
"competent person" as defined in the 2012 Edition of the "Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore Reserves". Mr.
Chawrun has sufficient experience relevant to the style of mineralization and
type of deposit under consideration and to the activity he is undertaking to
qualify as a Competent Person as defined in the 2012 Edition of the
"Australasian Code for Reporting of Exploration Results, Mineral Resources and
Ore Reserves". Mr. Chawrun has consented to the inclusion in this Report of the
matters based on his compiled information in the form and context in which it
appears in this Report.
The technical information contained in this document relating to the mineral
reserve estimates for Gora and Niakafiri is based on, and fairly represents,
information and supporting documentation prepared by Julia Martin, P.Eng. who is
a member of the Professional Engineers of Ontario and a Member of AusIMM (CP).
Ms. Martin is a full time employee with AMC Mining Consultants (Canada) Ltd., is
independent of Teranga, is a "qualified person" as defined in NI 43-101 and a
"competent person" as defined in the 2004 Edition of the "Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore Reserves". Ms.
Martin has sufficient experience relevant to the style of mineralization and
type of deposit under consideration and to the activity she is undertaking to
qualify as a Competent Person as defined in the 2004 Edition of the
"Australasian Code for Reporting of Exploration Results, Mineral Resources and
Ore Reserves". Ms. Martin is a "Qualified Person" under National Instrument
43-101 Standards of Disclosure for Mineral Projects. Ms. Martin has reviewed and
accepts responsibility for the Mineral Reserve estimates for Gora and Niakafiri
disclosed in this document and has consented to the inclusion of the matters
based on her information in the form and context in which it appears in this
Report
The technical information contained in this Report relating to mineral resource
estimates for Niakafiri, Gora, Niakafiri West, Soukhoto, and Diadiako is based
on, and fairly represents, information compiled by Ms. Nakai-Lajoie. Ms. Patti
Nakai-Lajoie, P. Geo., is a Member of the Association of Professional
Geoscientists of Ontario, which is currently included as a "Recognized Overseas
Professional Organization" in a list promulgated by the ASX from time to time.
Ms. Nakai-Lajoie is a full time employee of Teranga and is not "independent"
within the meaning of National Instrument 43-101. Ms. Nakai-Lajoie has
sufficient experience which is relevant to the style of mineralization and type
of deposit under consideration and to the activity which she is undertaking to
qualify as a Competent Person as defined in the 2004 Edition of the
"Australasian Code for Reporting of Exploration Results, Mineral Resources and
Ore Reserves". Ms. Nakai-Lajoie is a "Qualified Person" under National
Instrument 43-101 Standards of Disclosure for Mineral Projects. Ms. Nakai-Lajoie
has consented to the inclusion in this Report of the matters based on her
compiled information in the form and context in which it appears in this Report.
The technical information contained in this Report relating to mineral resource
estimates for Sabodala, Masato, Golouma, Kerekounda, and Somigol Other are based
on, and fairly represents, information compiled by Ms. Nakai-Lajoie. Ms. Patti
Nakai-Lajoie, P. Geo., is a Member of the Association of Professional
Geoscientists of Ontario, which is currently included as a "Recognized Overseas
Professional Organization" in a list promulgated by the ASX from time to time.
Ms. Nakai-Lajoie is a full time employee of Teranga and is not "independent"
within the meaning of National Instrument 43-101. Ms. Nakai-Lajoie has
sufficient experience which is relevant to the style of mineralization and type
of deposit under consideration and to the activity which she is undertaking to
qualify as a Competent Person as defined in the 2012 Edition of the
"Australasian Code for Reporting of Exploration Results, Mineral Resources and
Ore Reserves". Ms. Nakai-Lajoie is a "Qualified Person" under National
Instrument 43-101 Standards of Disclosure for Mineral Projects. Ms. Nakai-Lajoie
has consented to the inclusion in this Report of the matters based on her
compiled information in the form and context in which it appears in this Report.
Teranga's disclosure of mineral reserve and mineral resource information is
governed by NI 43-101 under the guidelines set out in the Canadian Institute of
Mining, Metallurgy and Petroleum (the "CIM") Standards on Mineral Resources and
Mineral Reserves, adopted by the CIM Council, as may be amended from time to
time by the CIM ("CIM Standards"). CIM definitions of the terms "mineral
reserve", "proven mineral reserve", "probable mineral reserve", "mineral
resource", "measured mineral resource", "indicated mineral resource" and
"inferred mineral resource", are substantially similar to the JORC Code
corresponding definitions of the terms "ore reserve", "proved ore reserve",
"probable ore reserve", "mineral resource", "measured mineral resource",
"indicated mineral resource" and "inferred mineral resource", respectively.
Estimates of mineral resources and mineral reserves prepared in accordance with
the JORC Code would not be materially different if prepared in accordance with
the CIM definitions applicable under NI 43-101. There can be no assurance that
those portions of mineral resources that are not mineral reserves will
ultimately be converted into mineral reserves.
ABOUT TERANGA
Teranga is a Canadian-based gold company listed on the Toronto Stock Exchange
(TSX:TGZ) and Australian Securities Exchange (ASX:TGZ). Teranga is principally
engaged in the production and sale of gold, as well as related activities such
as exploration and mine development.
Teranga's mission is to create value for all of its stakeholders through
responsible mining. Its vision is to explore, discover and develop gold mines in
West Africa, in accordance with the highest international standards, and to be a
catalyst for sustainable economic, environmental and community development. All
of its actions from exploration, through development, operations and closure
will be based on the best available techniques.
SECOND QUARTER CONFERENCE CALL & WEBCAST
The Company will host a conference call and webcast on July 30, 2014 at 5:30
p.m. EDT Toronto (Sydney 7:30 a.m. AEST).
Telephone
Toronto: 416-340-2216
North America toll-free: 1-866-223-7781
International: 1-416-340-2216
Live Webcast
The webcast can be accessed directly at:
www.gowebcasting.com/5674 and on Teranga's website at www.terangagold.com
The conference call replay will be available for two weeks after the call by
dialing 1-905-694-9451 or toll-free 1-800-408-3053 and entering the Passcode:
9093856.
------
(1) Total cash costs per ounce, all-in sustaining costs per ounce and
total depreciation and amortization per ounce are prior to an
inventory write-down to net realizable value. Total cash costs per
ounce, all-in sustaining costs per ounce and total depreciation and
amortization per ounce non-IFRS financial measures and do not have a
standard meaning under IFRS. Please refer to Non-IFRS Performance
Measures at the end of this report.
(2) This production target is based on existing proven and probable
reserves only from both the Sabodala mining license and OJVG mining
license as disclosed in the Company's Management's Discussion and
Analysis for the year ended December 31, 2013. The estimated ore
reserves underpinning this production guidance have been prepared by a
competent person in accordance with the requirements of the 2012
Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves (the "JORC Code"). This production guidance
also assumes an amendment to OJVG mining license to reflect processing
of OJVG ore through the Sabodala mill.
(3) Key Assumptions: gold spot price/ounce - US$1,250, light fuel oil -
US$1.15/litre, heavy fuel oil - US$0.98/litre, US/euro exchange rate -
$1.325
(4) Key Assumptions: Based on increase of 20 - 30 tpoh; $15 million
initial capital; 14-year operations, $1250-$1500 spot gold price, 5
percent discount rate, before the effect of taxes, minority interests,
and Franco-Nevada gold stream
FOR FURTHER INFORMATION PLEASE CONTACT:
Kathy Sipos
Vice-President, Investor & Stakeholder Relations
T: +1 416-594-0000
E: ksipos@terangagold.com
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