TIDMACA
19 April 2018
Results for the 3 months ended 31 March 2018 (Unaudited)
Based on IFRS and expressed in US Dollars (US$)
Acacia Mining plc ("Acacia") reports first quarter results
"Acacia continued to demonstrate resilience during the first quarter,
delivering solid production of 120,981 ounces at all-in sustaining costs
("AISC") of US$976 per ounce sold," said Peter Geleta, Interim Chief Executive
Officer. "Production at all three of our assets was in line with our mine plans
and puts us in a good position to deliver against our full year guidance of
435,000-475,000 ounces at an AISC of US$935-985 per ounce. The switch to
stockpile processing at Buzwagi and the move to reduced operations at
Bulyanhulu in late-2017 were effectively executed and we are pleased to report
an increase in our cash balance to US$107 million. This was driven by the
delivery of our operational plans and the sale of a non-core royalty that
completed in January 2018. We continue to take measures to further stabilise
our balance sheet and continue to provide support to Barrick in its on-going
discussions with the Government of Tanzania."
Operational Highlights
* Production tracked full-year guidance whilst all three operations delivered
in line with their respective mine plans
* Gold production of 120,981 ounces, 45% lower than Q1 2017, primarily due to
Bulyanhulu being transitioned to reduced operations in September 2017, and
Buzwagi's production being sourced primarily from lower grade ore
stockpiles
* Gold sales of 116,955 ounces, 37% lower than Q1 2017, slightly below gold
produced for the quarter due to the timing of shipments
* AISC1 of US$976 per ounce sold, 4% above Q1 2017 and cash costs1 of US$715
per ounce sold, 24% higher than Q1 2017
Financial Highlights
* Q1 revenue of US$157 million, 33% lower than Q1 2017 due to lower sales,
offset slightly by higher realised gold prices
* Q1 EBITDA1 of US$86 million, 4% higher than Q1 2017, primarily due to the
sale of a non-core royalty asset for US$45 million which completed in
January 2018. Q1 2018 Adjusted EBITDA of US$44 million
* Net earnings of US$50 million (US12.2 cents per share), up from US$27
million in Q1 2017, with adjusted net earnings1 of US$7 million (US1.7
cents per share), 73% lower than Q1 2017
* Cash on hand of US$107 million as of 31 March, an increase of US$26 million
from 2017 year end with net cash of US$50 million
* Entered into option agreements to provide a floor price of at least
US$1,320 per ounce for majority of H1 2018 production
* In response to a number of expressions of potential interest, commenced a
process during the quarter with a small number of Chinese investors to
explore the value to the Company of selling a stake in its Tanzanian
operations.
Three months ended 31 Year ended
March 31 December
(Unaudited) 2018 2017 2017
Gold production (ounces) 120,981 219,670 767,883
Gold sold (ounces) 116,955 184,744 592,861
Cash cost (US$/ounce)1 715 577 587
AISC (US$/ounce)1 976 934 875
Net average realised gold price (US$/ounce)1 1,332 1,221 1,260
(in US$'000)
Revenue 156,517 233,901 751,515
EBITDA 1 85,774 82,193 257,180
Adjusted EBITDA1 43,804 82,193 310,527
Net earnings/(loss) 49,995 26,827 (707,394)
Basic earnings/(loss) per share (EPS) (cents) 12.2 6.5 (172.5)
Adjusted net earnings1 7,116 26,827 146,218
Adjusted net earnings per share (AEPS) (cents)1 1.7 6.5 35.7
Cash generated from/(used in) operating 23,954 25,224 (22,972)
activities
Capital expenditure2 25,779 46,828 149,376
Cash balance 106,557 281,442 80,513
Total borrowings 56,800 85,200 71,000
1 These are non-IFRS measures. Refer to page 14 for definitions
2 Excludes non-cash capital adjustments (reclamation asset adjustments) and
include land purchases recognised as long term prepayments
Other Developments
Update on Discussions between Barrick Gold Corporation ("Barrick") and the
Government of Tanzania
Barrick and the Tanzanian Government continued their discussions during the
quarter, aimed at agreeing and documenting in H1 2018 the details of the
framework announced in 2017. Acacia continues to support Barrick in its
discussions with the Government as the two parties work towards identifying a
possible negotiated resolution. Acacia is not directly involved in the on-going
discussions and awaits a detailed agreed proposal and documented final
agreements for a comprehensive settlement in the coming months. This will then
be reviewed by an Independent Committee formed of the Company's Directors.
Asset Level Discussions with Interested Parties
As previously announced, in response to a number of expressions of potential
interest from Chinese counterparties, the Company is engaging with a small
number of potential investors to explore the value to the Company of the sale
of a stake in one or more of its Tanzanian assets. There is currently no
certainty as to whether any agreement will be reached with any of the potential
investors. Acacia remains committed to shareholder value and evaluates all
opportunities against strict strategic and financial criteria. Any transaction
will be pursued only if it is determined by Acacia's Board to be in the best
interests of all shareholders.
Buzwagi Flotation Circuit
In September 2017 Buzwagi took the decision to cease operating the flotation
circuit which had previously been planned to run into the first part of 2018.
The mine continues to operate the existing gravity and CIL circuits which means
that all gold production is now in doré form. Buzwagi engaged extensively with
relevant government agencies prior to and at the time of the implementation of
this decision, although it did not require prior regulatory approvals and did
not involve additional or new process plant or processing technology. During
the first quarter and subsequent to the shutdown of the flotation circuit,
Buzwagi received correspondence from the Ministry of Minerals requiring the
restoration of operation of the flotation circuit and seeking further
explanations from Buzwagi on the Government's position regarding potentially
applicable regulatory approvals. Buzwagi continues to engage closely with
Government agencies on this matter.
Indirect Taxation
During the first quarter, Acacia incurred a further US$14 million of VAT
outflows and received no cash VAT refunds. We have also declared our first
provisional corporate tax payment for 2018 relating to North Mara, amounting to
approximately US$10 million. This payment has been offset against indirect tax
receivables in line with an existing agreement with the Tanzanian Revenue
Authority. As a result, the net increase in our indirect tax receivable
amounted to approximately US$4 million, with our total indirect tax receivables
increasing to approximately US$174 million as at 31 March 2018.
As previously disclosed, Tanzania's new mining legislation includes an
Amendment to the VAT Act 2015 to the effect that no input tax credit can be
claimed for the exportation of "raw minerals", with effect from 20 July 2017.
Bulyanhulu, Buzwagi and North Mara have each now received notices from the
Tanzania Revenue Authority that they are not eligible for any VAT relief from
July 2017 onwards on the basis that all production (both doré and concentrate)
constitutes "raw minerals". The total VAT claims submitted since July 2017
amount to approximately US$50 million. We have disputed this interpretation of
the legislation as a matter of Tanzanian law, while this is also a matter that
is in contravention of the relevant terms of our MDAs with the Government of
Tanzania.
Entry into Gold Price Protection Measures
As previously reported, in January 2018, as part of on-going measures to
mitigate cash outflows, Acacia bought put options covering 120,000 ounces of
gold at a strike price of US$1,320 per ounce. The total cost of the options was
US$2.0 million and they provide a minimum price for the majority of Acacia's
planned doré production until June 2018 above our budgeted gold price of
US$1,200 per ounce, with full upside exposure should the gold price trade above
US$1,320 per ounce. The options will expire in equal instalments of 30,000
ounces per month over the period.
Contribution to Tanzania
Since the inception of its businesses, over 15 years ago, the Acacia Group, and
its predecessors, have invested over US$4 billion into Tanzania and paid over
US$1 billion of taxes and royalties and we remain committed to supporting
efforts towards Tanzania's socio-economic advancement and, in particular, the
realisation of the Government's Development Vision 2025. In the first quarter
of 2018, Acacia has incurred a total of US$30.3 million to the Tanzanian
Government in taxes and royalties. This includes royalties and clearing taxes
of US$12.2 million, corporate tax of US$9.6 million, payroll taxes of US$7.6
million, and US$0.9 million in import duties. We have also paid US$1.1 million
in local service levies due on H2 2017 revenues.
During the first quarter Acacia continued to implement its strategy to develop
local talent within its workforce, furthering its commitment to localisation.
In March 2018, 105 of our first line leaders graduated from the Acacia Rainbow
Leadership Development Programme which is aimed at developing our future
leaders.
Through its Sustainable Communities programme Acacia has completed projects
during Q1 2018 which increase the accessibility of clean and safe water in
rural areas and contribute to resolving challenges identified in Tanzania's
education sector. In February, Acacia completed a water infrastructure project
in Msalala District near Bulyanhulu where we invested US$84,000 in the
installation of an electric water pump and water tower. The facility, which has
been linked to the national grid, channels clean water to the local Kakola
village and provides safe drinking water to 3,000 residents.
Further to the above investment Acacia is currently collaborating with the
Ministry of Water and Irrigation, three local District Councils, the Kahama
Shinyanga Water Supply and Sanitation Authority (KASHWASA) to tackle water
scarcity on behalf of residents around Bulyanhulu. The Company has committed
almost US$2 million to fund an extension of a transmission pipeline from Lake
Victoria to 14 villages spanning four districts. Once complete, the pipeline
will deliver clean water to approximately 100,000 people living around the
mine.
We have also continued our library refurbishment project in partnership with
the NGO, Read International Tanzania. During the quarter we officially opened
four new libraries in Tarime, Shinyanga and Kahama districts.
Local Content Rules
Post period-end Acacia submitted preliminary local content plans to the
Tanzanian Government in line with the new local content regulations that came
into force on April 10, 2018. These preliminary plans build on the work
undertaken by Acacia over the past years to enhance and develop our local
supply chain and increase local employment in the workforce. Under Acacia's
existing Mineral Development Agreements, Acacia is protected from changes to
laws that govern our operations including the introduction of the local content
regulations, but as part of our commitment to development in the country, the
Company intends to work with the Government to clarify the requirements of the
new local content regulations and to practically meet these requirements where
possible. We continue to seek advice on clarification of specific points around
these regulations and the practical implications thereof.
Key Statistics Three months ended 31 Year ended
March 31 December
(Unaudited) 2018 2017 2017
Tonnes mined Kt 4,027 9,481 31,917
Ore tonnes mined Kt 838 3,216 13,707
Ore tonnes processed Kt 2,159 2,420 8,719
Process recovery rate exc. tailings % 91.0% 93.4% 92.4%
reclaim
Head grade exc. tailings reclaim g/t 2.2 3.5 3.3
Process recovery rate inc. tailings % 86.5% 89.8% 90.0%
reclaim
Head grade inc. tailings reclaim g/t 2.0 3.1 3.0
Gold production oz 120,981 219,670 767,883
Gold sold oz 116,955 184,744 592,861
Copper production Klbs - 4,656 12,897
Copper sold Klbs - 2,487 1,341
Cash cost per tonne milled exc. US$/t 47 51 43
tailings reclaim1
Cash cost per tonne milled inc. US$/t 39 44 40
tailings reclaim1
Per ounce data
Average spot gold price2 US$/oz 1,329 1,219 1,257
Net average realised gold price1 US$/oz 1,332 1,221 1,260
Total cash cost1 US$/oz 715 577 587
All-in sustaining cost1 US$/oz 976 934 875
Average realised copper price US$/lbs - 2.79 2.98
Financial results
Three months ended 31 Year ended
March 31 December
(Unaudited, in US$'000 unless otherwise stated) 2018 2017 2017
Revenue 156,517 233,901 751,515
Cost of sales (108,400) (149,396) (458,447)
Gross profit 48,117 84,505 293,068
Corporate administration (5,458) (6,642) (26,913)
Share based payments 1,527 (10,424) 8,236
Exploration and evaluation costs (3,623) (6,778) (24,829)
Corporate social responsibility expenses (1,546) (2,195) (8,213)
Impairment charge - - (850,182)
Other income/(charges) 22,767 (10,815) (90,370)
Profit before net finance expense and taxation 61,784 47,651 (699,203)
Finance income 132 597 1,944
Finance expense (3,836) (2,238) (12,407)
Profit before taxation 58,080 46,010 (709,666)
Tax expense (8,085) (19,183) 2,272
Net profit for the period 49,995 26,827 (707,394)
1 These are non-IFRS financial performance measures with no standard meaning
under IFRS. Refer to "Non IFRS measures" on page 14 for definitions.
2 Reflect the London PM fix price.
For further information, please visit our website: http://www.acaciamining.com/
or contact:
Acacia Mining plc +44 (0) 207 129 7150
Peter Geleta, Interim Chief Executive Officer
Jaco Maritz, Chief Financial Officer
Giles Blackham, Head of Investor Relations and Corporate Development
Camarco +44 (0) 20 3757 4980
Gordon Poole / Nick Hennis
About Acacia Mining plc
Acacia Mining plc (LSE: ACA) is Tanzania's largest gold miner and one of the
largest producers of gold in Africa. We have three mines, all located in
north-west Tanzania: Bulyanhulu, Buzwagi, and North Mara, and a portfolio of
exploration projects in Kenya, Burkina Faso and Mali.
Acacia is a UK public company headquartered in London. We are listed on the
Main Market of the London Stock Exchange with a secondary listing on the Dar es
Salaam Stock Exchange. Barrick Gold Corporation is our majority shareholder.
Acacia reports in US dollars and in accordance with IFRS as adopted by the
European Union, unless otherwise stated in this report.
Conference call
A conference call will be held for analysts and investors on 19 April 2018 at
08:30 BST.
The access details for the conference call are as follows:
Participant dial in: +44 020 3936 2999
Password: 88 94 64
A recording of the conference call will be made available on the Company's
website, http://www.acaciamining.com/, after the call.
FORWARD- LOOKING STATEMENTS
This report includes "forward-looking statements" that express or imply
expectations of future events or results. Forward-looking statements are
statements that are not historical facts. These statements include, without
limitation, financial projections and estimates and their underlying
assumptions, statements regarding plans, objectives and expectations with
respect to future production, operations, costs, projects, and statements
regarding future performance. Forward-looking statements are generally
identified by the words "plans," "expects," "anticipates," "believes,"
"intends," "estimates" and other similar expressions.
All forward-looking statements involve a number of risks, uncertainties and
other factors, many of which are beyond the control of Acacia, 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 Acacia 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 Acacia
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), Acacia's ability to successfully integrate
acquisitions, Acacia'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, Acacia'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 Acacia'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 Acacia's management believes that the expectations
reflected in such forward-looking statements are reasonable, Acacia 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. Save as required under the Market Abuse
Regulation or otherwise under applicable law, Acacia 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
Acacia's profits or earnings per share for any future period will necessarily
match or exceed the historical published profits or earnings per share of
Acacia.
Operating Review
Acacia delivered production of 120,981 ounces in Q1 2018, a decrease of 45%
compared to the prior year quarter, whilst AISC of US$976 per ounce sold was 4%
higher than Q1 2017. Cash costs of US$715 per ounce sold were 24% higher than
the prior year period.
North Mara achieved gold production of 76,769 ounces for the quarter, 20% lower
than in Q1 2017. This was a result of lower average grades at the Gokona
underground mine on account of a higher proportion of mining taking place in
the lower-grade West Zone. The grade was also negatively impacted by lower
grades received from the Nyabirama pit. Gold sold of 74,955 ounces for the
quarter was 20% lower than the prior year quarter due to the lower production
base but broadly in line with production. AISC of US$950 per ounce sold was 32%
higher than Q1 2017 (US$717/oz) as a result of higher cash costs and lower
sales volumes.
Buzwagi produced 35,685 ounces of gold in the quarter, 40% lower than in Q1
2017 due to the mine transitioning to the processing of lower grade stockpiles
compared to run-of-mine ore from open pit. Gold sold for the quarter of 32,460
ounces was 9% lower than production and 13% behind Q1 2017, due to the timing
of shipments at quarter end and the lower production base, respectively.
Buzwagi will continue to solely produce doré until the end of its life of
mine. AISC per ounce sold of US$1,052 was 36% higher than Q1 2017 (US$773/oz),
mainly driven by the transition to processing lower grade stockpiles which
drove higher cash costs.
At Bulyanhulu, gold production of 8,527 ounces was 87% lower than Q1 2017 as a
result of the decision to place the underground mine on reduced operations. All
production resulted from the reprocessing of tailings which was 6% lower
compared to the prior year quarter due to lower feed grades. Gold sold for the
quarter of 9,540 ounces was 12% higher than production due to the selling of
gold ounces on hand at the end of 2017 and 87% lower than Q1 2017 mainly as a
result of the lower production base. AISC per ounce sold for the quarter of
US$923 was 25% lower than Q1 2017 (US$1,229/oz) driven by reduced operating and
capital spend.
Total tonnes mined during the quarter amounted to 4.0 million tonnes, 58% lower
than Q1 2017, mainly as a result of the transition to a stockpile processing
operation at Buzwagi and the halting of all underground mining at Bulyanhulu.
Total tonnes mined at North Mara were in line with Q1 2017.
Total ore tonnes mined of 0.8 million tonnes were 74% lower than Q1 2017 mainly
due to the cessation of mining at Buzwagi and Bulyanhulu. Ore tonnes mined at
North Mara were 12% lower than Q1 2017, mainly due to higher rainfall towards
the end of the quarter which resulted in mining delays at the Nyabirama open
pit.
Ore tonnes processed amounted to 2.2 million tonnes, a decrease of 11% on Q1
2017, mainly driven by the halting of run-of mine processing at Bulyanhulu and
a 7% reduction in ore tonnes processed at Buzwagi due to an extended planned
plant shutdown during the quarter. North Mara ore tonnes processed were in line
with Q1 2017.
Cash costs of US$715 per ounce sold for the quarter were 24% higher than in Q1
2017, primarily due to:
* A decreased build-up in finished gold inventory compared to Q1 2017 (US$103
/oz), given Q1 2017 was impacted by the imposition of the concentrate
export ban, resulting in a build- up of finished gold inventory in Q1 2017
of approximately 35,000 ounces;
* Increased drawdown of ore stockpiles at Buzwagi (US$133/oz) partially
offset by stockpile increases at North Mara (US$37/oz); and
* Lower co-product revenue compared to Q1 2017 as a result of the concentrate
export ban (US$64/oz).
This was offset by:
* Savings in direct mining costs at Buzwagi and Bulyanhulu as a result of
ceased mining activities partly offset by higher direct mining costs at
North Mara mainly driven by increased maintenance costs, offset in part to
the impact of the lower production base on unit costs (US$105/oz); and
* Lower selling related costs driven by lower sales volumes (US$22/oz).
All-in sustaining cost of US$976 per ounce sold for the quarter was 4% higher
than Q1 2017, mainly due to the impact of lower sales volumes on individual
cost items (US$207/oz) and higher cash costs (refer to above) (US$207/oz).
This was partly offset by lower capitalised expenditure relating to North Mara
and Bulyanhulu (US$154/oz), lower shared based payment charges (US$102/oz) and
lower sustaining capital spend mainly driven by Bulyanhulu being on reduced
operations (US$24/oz).
Cash generated from operating activities was an inflow of US$24.0 million which
was a decrease of US$1.2 million from Q1 2017 (US$25.2 million). Adjusted
EBITDA of US$44 million was offset by working capital outflows of US$7 million,
provisional corporate tax payments of US$10 million, finance costs of US$3
million and other non-cash items of US$7 million. Working capital outflows
mainly relate to an increase in indirect tax receivables of US$5 million.
Capital expenditure amounted to US$25.8 million compared to US$46.8 million in
Q1 2017. The decrease was mainly driven by lower capitalised development costs.
Capital expenditure primarily comprised capitalised development and stripping
(US$15.6 million), investment in mobile equipment and component change-outs
mainly relating to North Mara (US$3.9 million), capitalised drilling for
resource and reserve development at North Mara's Gokona underground (US$1.5
million).
Mine Site Review
Bulyanhulu
Key statistics
Three months ended 31 March Year ended
31
December
(Unaudited) 2018 2017 2017
Key operational information:
Ounces produced oz 8,527 63,346 175,491
Ounces sold oz 9,540 53,805 107,855
Cash cost per ounce sold1 US$/oz 713 786 840
AISC per ounce sold1 US$/oz 923 1,229 1,373
Copper production Klbs - 1,498 3,906
Copper sold Klbs - 956 588
Run-of-mine:
Underground ore tonnes hoisted Kt - 205 596
Ore milled Kt - 221 612
Head grade g/t - 8.4 8.6
Mill recovery % - 91.4% 90.1%
Ounces produced oz - 54,256 153,279
Cash cost per tonne milled1 US$/t - 171 126
Reprocessed tailings:
Ore milled Kt 450 413 1,010
Head grade g/t 1.1 1.4 1.4
Mill recovery % 52.6% 47.5% 48.0%
Ounces produced oz 8,527 9,089 22,212
Capital Expenditure
- Sustaining capital US$ 1,355 4,212 9,033
('000)
- Capitalised development US$ - 16,070 39,543
('000)
- Expansionary capital US$ 274 478 1,190
('000)
1,629 20,760 49,766
- Non-cash reclamation asset US$ (1,732) 1,042 (4,158)
adjustments ('000)
Total capital expenditure US$ (103) 21,802 45,608
('000)
1These are non-IFRS financial performance measures with no standard meaning
under IFRS. Refer to 'Non-IFRS measures" on page 14 for definitions.
Operating performance
Gold production amounted to 8,527 ounces, which was 87% lower than Q1 2017 as a
result of the decision taken in September 2017 to transition to reduced
operations at Bulyanhulu. Production consisted of the reprocessing of tailings
which was 6% lower compared to the prior year quarter due to lower feed grades.
Gold sold for the quarter of 9,540 ounces was 12% higher than production due to
the selling of gold ounces on hand at the end of 2017 and 87% lower than Q1
2017 mainly as a result of the lower production base. AISC per ounce sold for
the quarter of US$923 was 25% lower than Q1 2017 (US$1,229/oz) driven by
reduced operating and capital spend, partly offset by lower sales.
No copper production or sales for the quarter as a result of Bulyanhulu being
on reduced operations since the end of Q3 2017, resulting in no concentrate
production.
No underground ore tonnes hoisted during the quarter due to the mine's reduced
operational state and cessation of all underground mining activity.
Cash costs of US$713 per ounce sold were 9% lower than Q1 2017 (US$786/oz),
mainly due to lower direct mining costs compared to the prior year period as a
result of Bulyanhulu being on reduced operations and lower sales related costs
driven by lower sales volumes. This was partly offset by the lower production
base and lower co-product revenue.
AISC per ounce sold for the quarter of US$923 was 25% lower than Q1 2017
(US$1,229/oz) driven by the impact of lower capitalised development due to the
ceased underground development activities and lower corporate administration
charges. This was partly offset by the impact of lower sales ounces on
individual cost items.
Capital expenditure for the quarter before reclamation adjustments amounted to
US$1.6 million, significantly lower than Q1 2017 (US$20.8 million), mainly
driven by lower capitalised development due to Bulyanhulu being on reduced
operations, resulting in lower sustaining capital spend due to projects being
deferred or cancelled.
Capital expenditure consisted primarily of investment in mobile equipment and
component change-outs (US$0.8 million), costs relating to the completion of
underground ventilation raise borings (US$0.3 million), expansionary capital
relating to the Bulyanhulu feasibility studies (US$0.3 million) and TSF wall
raise (US$0.1 million).
During the quarter, reduced operating costs amounted to US$8.2 million and
mainly consisted of site overhead costs including labour, power and camp
related costs, security costs associated with protecting the site and
surrounding infrastructure and ongoing maintenance related work.
Buzwagi
Key statistics
Three months ended 31 March Year ended
31
December
(Unaudited) 2018 2017 2017
Key operational information:
Ounces produced oz 35,685 59,856 268,785
Ounces sold oz 32,460 37,199 160,552
Cash cost per ounce sold1 US$/oz 964 694 594
AISC per ounce sold1 US$/oz 1,052 773 667
Copper production Klbs - 3,158 8,991
Copper sold Klbs - 1,531 752
Mining information:
Tonnes mined Kt - 5,267 15,368
Ore tonnes mined Kt - 2,053 9,309
Processing information:
Ore milled Kt 1,001 1,076 4,256
Head grade g/t 1.3 1.8 2.1
Mill recovery % 88.3% 96.7% 94.3%
Cash cost per tonne milled1 US$/t 31 24 22
Capital Expenditure
- Sustaining capital US$ 1,300 141 4,338
('000)
- Capitalised development US$ - - -
('000)
1,300 141 4,338
- Non-cash reclamation asset US$ 133 (78) (1,978)
adjustments ('000)
Total capital expenditure US$ 1,433 63 2,360
('000)
1These are non-IFRS financial performance measures with no standard meaning
under IFRS. Refer to "Non-IFRS measures" on page 14 for definitions.
Operating performance
Gold production for the quarter of 35,685 ounces was 40% lower than in Q1 2017
due to Buzwagi transitioning to a low-grade stockpile processing operation
compared to the processing of run-of-mine ore in the previous period. Gold sold
for the quarter of 32,460 ounces was 9% lower than production due to the timing
of shipments at quarter end. Sales were 13% lower than the prior year period
due to the lower production base. Buzwagi will continue to solely produce doré
until the end of its life of mine. AISC per ounce sold of US$1,052 was 36%
higher than Q1 2017 (US$773/oz), mainly driven by the impact of the processing
of lower grade stockpiles.
Following Buzwagi's transition to a stockpile processing operation there was no
copper production and therefore no copper sales during the quarter. Recoveries
of 88.3% were lower than the previous year period due to lower grades and the
bypassing of the flotation circuit due to the low copper content of the
stockpiles.
There were no tonnes mined for the quarter, but we plan to mine the last ore
blocks from the main zone in the open pit in late Q2 2018 once the wet season
has concluded. These tonnes have been deferred from Q4 2017 due to flooding of
the bottom of the pit.
Cash costs for the quarter of US$964 per ounce sold were 39% higher than Q1
2017 (US$694/oz) mainly due to a drawdown in ore inventory as a result of
ceased mining activities (US$133/oz), lower co-product revenue (US$134/oz) and
the lower production base, offset by lower direct mining costs as a result of
Buzwagi transitioning to a stockpile processing operation (US$34/oz).
AISC per ounce sold of US$1,052 was 36% higher than Q1 2017 (US$773/oz). This
was driven by the higher cash costs as discussed above (US$270/oz) and higher
sustaining capital spend relating to the expansion of the tailings storage
facility (US$36/oz).
Capital expenditure before reclamation adjustments amounted to US$1.3 million,
significantly higher than in Q1 2017 (US$0.1 million), mainly consisting of the
expansion of the tailings storage facility (US$1.0 million) which started in
late 2017.
North Mara
Key statistics
Three months ended 31 March Year ended
31
December
(Unaudited) 2018 2017 2017
Key operational information:
Ounces produced oz 76,769 96,468 323,607
Ounces sold oz 74,955 93,740 324,455
Cash cost per ounce sold1 US$/oz 607 410 498
AISC per ounce sold1 US$/oz 950 717 803
Open pit:
Tonnes mined Kt 3,840 3,854 15,299
Ore tonnes mined Kt 651 803 3,147
Mine grade g/t 1.7 2.8 1.7
Underground:
Ore tonnes trammed Kt 187 154 654
Mine grade g/t 7.8 11.3 8.7
Processing information:
Ore milled Kt 709 710 2,841
Head grade g/t 3.7 4.6 3.9
Mill recovery % 92.3% 92.6% 92.0%
Cash cost per tonne milled1 US$/t 64 54 57
Capital Expenditure
- Sustaining capital2 US$ 5,688 6,256 22,563
('000)
- Capitalised development US$ 15,568 17,797 61,066
('000)
- Expansionary capital US$ 1,525 1,536 10,270
('000)
22,781 25,589 93,899
- Non-cash reclamation asset US$ (491) 124 (2,951)
adjustments ('000)
Total capital expenditure US$ 22,290 25,713 90,948
('000)
1These are non-IFRS financial performance measures with no standard meaning
under IFRS. Refer to 'Non-IFRS measures" on page 17 for definitions.
2 Includes land purchases recognised as long term prepayments.
Operating performance
Gold production for the quarter of 76,769 ounces was 20% lower than in Q1 2017.
The reduction stemmed from lower average grades at the Gokona underground mine
on account of a higher proportion of mining taking place in the lower-grade
West Zone, with the reconciled grade of 7.8g/t (declared ore mined of 7.0g/t),
compared to 11.3g/t in the previous period. The grade was also negatively
impacted by lower grades received from the Nyabirama pit. Gold ounces sold for
the quarter of 74,955 ounces were 20% lower than the prior year quarter due to
the lower production base but were broadly in line with production.
Cash costs of US$607 per ounce sold were 48% higher than Q1 2017 (US$410),
mainly driven by increased direct operating costs (US$117/oz) mainly relating
to increased maintenance costs and a lower proportion of mining costs being
capitalised as a result of a lower stripping ratio, the lower production base
(US$51/oz) and higher sales related costs driven by the increase in royalties
and clearance fees (US$31/oz).
AISC of US$950 per ounce sold was 32% higher than Q1 2017 (US$717/oz) as a
result of higher cash costs discussed above (US$197/oz) and the impact of lower
sales volumes on individual cost items (US$77/oz), partly offset by lower
capitalised development costs (US$30/oz).
Capital expenditure for the quarter before reclamation adjustments amounted to
US$22.8 million, 11% lower than in Q1 2017 (US$25.6 million). Key capital
expenditure included capitalised stripping costs (US$10.6 million), capitalised
underground development costs (US$5.0 million), capitalised drilling mainly for
resource and reserve development at Gokona underground (US$1.5 million),
investment in mobile equipment and component change-outs (US$3.9 million).
Exploration Review
Brownfield Exploration
North Mara
Gokona Underground
A total of 9,215 metres of extension and infill drilling were completed by four
rigs at Gokona Underground during Q1 2018, with a further 76 holes for 8,851
metres of grade control drilling also undertaken. Drilling continued to define
the Upper Central zone beneath the open pit; with further significant
intercepts returned during the quarter including:
UGKD453 15.0m @ 13.2 g/t Au from 176m
UGKD457 7.0m @ 53.1 g/t Au from 193m; and 17.0m @ 6.3 g/t Au from 225m
UGKD458 14.6m @ 8.1 g/t Au from 190m and 26.0m @ 4.1 g/t Au from 222m
UGKD463 10.0m @ 7.7 g/t Au from 174m
UGKD472 10.0m @ 14.3 g/t Au from 174m
UGKD448 20.0m @ 8.7 g/t Au from 157m
Drilling of the Central zone between the base of the open pit and the 1,000mRL
elevation has now been completed, and results will be incorporated into an
updated Mineral Resource model during the year. The mine development design and
schedule will then be revised in accordance with the defined economic
mineralisation. The drilling activity in the Central zone is currently
restricted to two drill rigs that will now test the mineralisation below 1,000m
RL down to the projected position of the Banana Fault.
The drilling programme testing the base of the second and top of the third
panels of mineralisation in the West zone continued. Drilling has confirmed a
low grade zone between the 1,000mRL and 970mRL elevations; which can be left as
a pillar between the second and third West mining panels. Planned drilling for
the third mining panel of the West zone is scheduled for the next six months,
with the Mineral Resource model due to be updated subsequent to this.
Greenfield Exploration
Kenya
West Kenya Project
During Q1 2018 the focus of the exploration was on testing for structures
within the Liranda Corridor, parallel to Isulu, within five kilometres of the
existing inferred resources in order to expand the current inferred resource of
1.17Moz at 12.6g/t. We are also progressing a scoping study, which commenced in
Q4 2017, with results expected in H2 2018. We continue to believe that 2Moz is
a resource target for the Liranda Corridor Project.
During Q1 2018 two diamond rigs were active across the West Kenya Project with
11 holes drilled for 3,590 metres. In addition, prospect focused geological
mapping and multi-element soil geochemical surveys were underway.
In the Liranda Corridor, nine diamond holes for 3,400 metres were completed on
the Isulu South East Prospect. These holes intersected multiple shear zones
with disseminated sulfides, quartz veining, carbonate and sericite alteration.
Results for two holes were received during Q1 2018 with low grade
mineralisation within shears of similar orientation and composition to the
Isulu prospect. Detailed structural analysis is presently underway to assist
with defining high grade shoots along these shears.
In the Lake Zone Camp geological mapping and soil geochemical surveys were
undertaken across the historic colonial mine workings at Ramba Lumba and Rambi
Aila to assist with drill targeting. This has confirmed gold bearing quartz
veins within several kilometre zones of altered and sheared mafic to
intermediate volcanics. Drilling commenced in Q1 2018 with six holes totalling
2,000 metres to be finalised in Q2 2018. The first hole drilled at Rumba Lumba
intersected a wide, strongly altered shear zone hosting visible gold.
Burkina Faso
During Q1 2018 exploration work on the Houndé Belt in southwest Burkina Faso,
where Acacia currently manages four joint ventures covering approximately
2,700km² of prospective greenstone belt, comprised air-core drilling on the
Tankoro corridor and field mapping, geochemistry sampling and IP surveys on the
regional targets.
South Houndé JV (Sarama Resources Limited)
Tankoro Corridor
Air-core drilling was conducted at the Djimbaké zone (south-western extension
of the Tankoro Corridor) to test the continuity of mineralisation along strike.
3,668 metres were drilled during the quarter out of a programme total of 4,900
metres. First results include 6m @ 2.63g/t Au from surface (including 2m @
7.25g/t Au) in AC3664 and 6m @ 4.01g/t Au from 36m (including 4m @ 5.6g/t Au)
in AC3665.
An IP geophysical survey, comprising 38 line kilometres, was conducted on the
Ben target (West of the resource area). Infill soil geochemistry sampling and
detailed field mapping was also done at Ben.
SRK Consulting (UK) Limited has been contracted to update the mineral resource
estimation, based on the new 3D geology model. Preliminary results are expected
in Q2 2018. The programme for the year on the Tankoro Corridor includes 7,000
metres of diamond drilling to test high-grade shoots at depth and 22,000 metres
of combined air-core and reverse circulation drilling to outline additional
high grade mineralisation. This programme may be revised depending on the
results of the new mineral resource estimation.
Ouangoro Corridor
An IP survey comprising 120 line kilometres, was conducted over the five
kilometre-long Yankadi zone. Detailed geology and regolith mapping, associated
with rock-chip and termite mound sampling, continued at Yankadi. The programme
for the year on the Ouangoro Corridor comprises 7,400 metres of air-core
drilling and 2,250 metres of reverse circulation drilling to test the
continuity of the gold mineralisation along strike and at depth.
Central Houndé JV (Thor Explorations Limited)
Detailed field geological mapping and rock-chip sampling continued on the
Légué-Bongui Corridor and on the Ouéré gold soil anomaly. An IP geophysical
survey, comprising 40 line kilometres, was conducted on the Legué South-West
target. The programme for the year on the Central Houndé project comprises
11,500 metres of air-core drilling to test the continuity of the gold
mineralisation along strike and to test soil anomalies. The drilling will be
converted to RC where ground conditions are not suitable.
Pinarello & Konkolikan JV (Canyon Resources Limited)
An IP geophysical survey, comprising 53 line kilometres, was conducted on the
Tangolobé target. The programme for the year on the Pinarello & Konkolikan
project comprises 30,000 metres of air-core drilling to test the continuity of
the gold mineralisation along strike on the priority targets (Tankoro Corridor
South, Tangolobé and Gagnhy). The drilling will start in Q2 2018.
Frontier JV (Metallor SA)
No field work was conducted on the Frontier project in Q1 2018. The programme
for the year comprises 6,000 metres of air-core.
Mali
Acacia currently manages two joint ventures and holds one permit covering 191km
².
Tintinba-Bané Project JV (Demba Camara and Cadem Gold)
The last results from the Q4 2017 reverse circulation drilling programme were
disappointing. At Tribala, only one significant result was returned: 2m @ 3.01g
/t Au from 19m in TIRC0136. The original drilling programme planned for Q1 2018
has been put on hold until a more detailed interpretation of the targets has
been finalised.
Boubou JV (Mande Empire) & Gourbassi Est - 100% Acacia (ABG Exploration Mali
SARL)
No field work was conducted on either the Boubou JV or Gourbassi Est in Q1
2018. A soil geochemistry survey will be conducted on both projects in Q2 2018
before running a reconnaissance drilling programme.
Non-IFRS Measures
Acacia 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 Acacia's financial condition and operating
results, and reflects more relevant measures for the industry in which Acacia
operates. 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.
Net average realised gold price per ounce sold is a non-IFRS financial measure
which excludes from gold revenue:
- Unrealised gains and losses on non-hedge derivative contracts; and
- Export duties
It also includes realised gains and losses on gold hedge contracts reported as
part of cost of sales.
Net average realised gold price per ounce sold have been calculated as follow:
(US$000) Three months ended 31 March Year ended 31
December
(Unaudited) 2018 2017 2017
Gold revenue 155,746 225,628 744,294
Less: Realised gold hedge losses - - 2,693
Net gold revenue 155,746 225,628 746,987
Gold sold (ounces) 116,955 184,744 592,861
Net average realised gold price (US$/ 1,332 1,221 1,260
ounce)
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, reduced operation costs and
corporate social responsibility charges. Cash cost is calculated net of
co-product revenue. Cash cost per ounce sold is calculated by dividing the
aggregate of these costs by total ounces sold.
The presentation of these statistics in this manner allows Acacia to monitor
and manage those factors that impact production costs on a monthly basis. Cash
costs and cash cost per ounce sold are calculated on a consistent basis for the
periods presented.
The table below provides a reconciliation between cost of sales and total cash
cost to calculate the cash cost per ounce sold.
Three months ended 31 March Year ended 31
(US$'000) December
(Unaudited) 2018 2017 2017
Cost of Sales
Direct mining costs 70,990 98,783 299,591
Third party smelting and refining 1,269 5,321 9,675
fees
Realised losses on economic hedges - 108 743
Realised losses on gold hedges - - (2,693)
Royalty expense 12,151 10,642 44,930
Depreciation and amortisation* 23,990 34,542 106,201
Total 108,400 149,396 458,447
Total cost of sales 108,400 149,396 458,447
Deduct: Depreciation and amortisation (23,990) (34,542) (106,201)
*
Deduct: Realised losses on gold - - 2,693
hedges
Deduct: Co-product revenue (771) (8,273) (7,221)
Total cash cost 83,639 106,581 347,718
Total ounces sold 116,955 184,744 592,861
Total cash cost per ounce sold 715 577 587
*Depreciation and amortisation includes the depreciation component of the cost
of inventory sold
All-in sustaining cost (AISC) is a non-IFRS financial measure. The measure is
in accordance with the World Gold Council's guidance issued in June 2013. It is
calculated by taking cash cost per ounce sold and adding corporate
administration costs, share-based payments, reclamation and remediation costs
for operating mines, corporate social responsibility expenses, mine exploration
and study costs, realised gains and/or losses on operating hedges, capitalised
stripping and underground development costs and sustaining capital expenditure.
This is then divided by the total ounces sold. A reconciliation between cash
cost per ounce sold and AISC for the key business segments is presented below:
(Unaudited) Three months ended 31 March 2018 Three months ended 31 March 2017
(US$/oz sold) Bulyanhulu North Buzwagi Group Bulyanhulu North Buzwagi Group*
Mara Mara
Cash cost per 713 607 964 715 786 410 694 577
ounce sold
Corporate 51 43 42 47 32 26 34 36
administration
Share based (43) (3) (7) (13) 13 8 25 56
payments
Rehabilitation 29 8 6 9 12 10 5 10
CSR expenses 32 11 6 13 8 6 12 12
Capitalised 27 208 - 135 299 190 - 183
development
Sustaining capital 114 76 41 70 79 67 3 60
Total AISC 923 950 1,052 976 1,229 717 773 934
* The group total includes a cost of US$56/oz in Q1 2017 mainly related to
corporate costs incurred.
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 and selling costs.
Where reference is made to AISC per ounce produced, this is calculated in a
similar manner as set out above, but adjusted for the impact of the change in
inventory charge/credit relating to finished gold inventory. This recalculated
number is then divided by ounces produced.
Cash cost per tonne milled is a non-IFRS financial measure. Cash costs include
all costs absorbed into inventory, as well as royalties, co-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. Acacia calculates EBITDA as net profit
or loss for the period excluding:
* Income tax expense;
* Finance expense;
* Finance income;
* Depreciation and amortisation; and
* Impairment charges of goodwill and other long-lived assets.
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.
Adjusted EBITDA is a non-IFRS financial measure. It is calculated by excluding
one-off costs or credits relating to non-routine transactions from EBITDA. It
excludes other credits and charges that, individually or in aggregate, if of a
similar type, are of a nature or size that requires explanation in order to
provide additional insight into the underlying business performance.
A reconciliation between net profit for the period and EBITDA, and between
EBITDA and adjusted EBITDA is presented below:
(US$000) Three months ended 31 March Year ended 31
December
(Unaudited) 2018 2017 2017
Net profit for the period 49,995 26,827 (707,394)
Plus income tax expense 8,085 19,183 (2,272)
Plus depreciation and amortisation* 23,990 34,542 106,201
Plus: impairment charges1 - - 850,182
Plus finance expense 3,836 2,238 12,407
Less finance income (132) (597) (1,944)
EBITDA 85,774 82,193 257,180
Adjusted for:
Restructuring costs - - 23,577
Profit on sale of non-core mineral (45,000) - -
royalty
One off legal settlements 3,030 - 5,083
Reduced operational costs - - 11,411
Discounting of indirect taxes - - 13,276
Adjusted EBITDA 43,804 82,193 310,527
1 For the year ended 31 December 2017, US$850.2 million represents the gross
impairment charge (net US$644.3 million) following the carrying review
conducted in light of changes in the operating environment in Tanzania, and by
reference to the terms of the Framework announcements by Barrick and the GoT,
US$838 million relating to Bulyanhulu and US$12.2 million relating to Nyanzaga.
*Depreciation and amortisation includes the depreciation component of the cost
of inventory sold.
EBIT is a non-IFRS financial measure and reflects EBITDA adjusted for
depreciation and amortisation and goodwill impairment charges.
Adjusted net earnings is a non-IFRS financial measure. It is calculated by
excluding certain costs or credits relating to non-routine transactions from
net profit attributed to owners of the parent. It includes other credit and
charges that, individually or in aggregate, if of a similar type, are of a
nature or size that requires explanation in order to provide additional insight
into the underlying business performance. Adjusted net earnings and adjusted
earnings per share have been calculated as follows:
(US$000) Three months ended 31 Year ended
March 31 December
(Unaudited) 2018 2017 2017
Net earnings 49,995 26,827 (707,394)
Adjusted for:
Restructuring costs1 - - 23,577
Profit on sale of non-core mineral (45,000) - -
royalty
One off legal settlements2 3,030 - 5,083
Reduced operational costs3 - - 11,411
Discounting of indirect taxes - - 13,276
Impairment charges/write-offs4 - - 850,182 -
Provision for uncertain tax - - 172,000
positions5
Tax impact of the above (909) - (221,917)
Adjusted net earnings 7,116 26,827 146,218
1 Restructuring costs for the year ending 31 December 2017 mainly relate to
Bulyanhulu (US$16.9 million) as a result of the transitioning to reduced
operations and other sites (US$8.2 million).
2 One off legal settlements relates to the North Mara royalty settlement.
3 Reduced operations costs not part of Bulyanhulu's AISC cost and includes
stock obsolescence costs (US$6 million) and contractor exit costs (US$4.9
million) for 2017.
4 For the year ended 31 December 2017, US$850.2 million represents the gross
impairment charge (net US$644.3 million) following the carrying review
conducted in light of changes in the operating environment in Tanzania, and by
reference to the terms of the Framework announcements by Barrick and the GoT,
US$838 million relating to Bulyanhulu and US$12.2 million relating to Nyanzaga.
5 Includes a tax provision raised in 2017 of US$172.0 million for uncertain tax
positions, based on an estimate of the impact of a comprehensive settlement
reflecting the key terms of the Framework announcements made by Barrick and the
GoT in October 2017.
Adjusted net earnings per share is a non-IFRS financial measure and is
calculated by dividing adjusted net earnings by the weighted average number of
Ordinary Shares in issue.
Free cash flow is a non-IFRS measure and represents the change in cash and cash
equivalents in a given period.
Net cash is a non-IFRS measure and is calculated by deducting total borrowings
from cash and cash equivalents.
Mining statistical information - the following describes certain line items
used in Acacia'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.
* Underground ore tonnes trammed - measures in tonnes the total amount of
underground ore mined and trammed.
* 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.
END
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