TIDMACA
20 July 2018
Results for the six months ended 30 June 2018 (Unaudited)
Based on IFRS and expressed in US Dollars (US$)
Acacia Mining plc ("Acacia") reports 2018 interim results
"We succeeded in delivering another strong operational performance during the
first half, producing 254,759 ounces of gold across the Group at all-in
sustaining costs ("AISC") of US$945 per ounce," said Peter Geleta, Interim CEO
of Acacia. "The changes we made to the business in late 2017 have delivered the
desired results, helping to return the Group to free cash generation for the
first time since Q4 2016 and we are on track to achieve the top end of our
production guidance range of 435,000-475,000 ounces for 2018 at an AISC of
US$935-985 per ounce. Following the stability we have brought to the business
during the last six months, our priority remains on optimising performance
across all areas of our operations as we manage through the current uncertainty
in the operating environment and the on-going disputes with the Government of
Tanzania. By continuing to be resilient, managing our costs and working to our
mine plans, we are addressing what we can control and will look to deliver
value for all of our stakeholders."
Operational Highlights
* Regrettably, at North Mara, an operator for one of our contractors had a
fatal vehicle-related accident during the period
* H1 gold production of 254,759 ounces, 41% lower than H1 2017, with gold
sales of 251,045 ounces being in line with production
* H1 AISC1 of US$945 per ounce sold, 6% above H1 2017, but tracking below the
mid-point of the full year guidance range
* Q2 gold production of 133,778 ounces, 36% lower than Q2 2017, but 11% above
Q1 2018
* Q2 gold sales of 134,090 ounces, 5% higher than Q2 2017, and in line with
gold production
* Q2 AISC1 of US$918 per ounce sold, 10% above Q2 2017, but 6% lower than Q1
2018
Financial Highlights
* H1 Revenue of US$333.4 million, 15% lower than H1 2017
* H1 EBITDA1 of US$133.6 million, 17% down from H1 2017 and adjusted EBITDA1
of US$91.6 million 45% lower than H1 2017
* H1 Net earnings of US$30.9 million (US7.5 cents per share), 51% down from
US$62.5 million in H1 2017, impacted by a US$24.2 million impairment at
Nyanzaga, with adjusted net earnings of US$13.5 million (US3.3 cents per
share), 79% lower than H1 2017
* Post period end, conditional agreement with OreCorp Limited, operator of
the Nyanzaga Project, for them to take full ownership of the project in
return for total consideration of US$10 million and a US$15 million capped
net smelter royalty
* Cash generated from operating activities in H1 2018 of US$58.9 million, was
US$57.6 million higher than H1 2017
* Generated US$14 million of free cash flow in Q2 2018 due to strong
operational performance
* Cash balance rose 49% during H1 2018 to US$120.1 million due to a non-core
royalty sale and the strong operational performance
* Net cash1 of US$63.3 million, increased by US$53.8 million from the end of
2017
Three months ended 30 June Six months ended 30
June
(Unaudited) 2018 2017 2018 2017
Gold production (ounces) 133,778 208,533 254,759 428,203
Gold sold (ounces) 134,090 127,694 251,045 312,438
Cash cost (US$/ounce)1 688 577 701 577
AISC (US$/ounce)1 918 835 945 893
Net average realised gold price (US$/ 1,324 1,255 1,328 1,235
ounce)1
(in US$'000)
Revenue 176,865 157,763 333,382 391,664
EBITDA 1 47,796 79,222 133,570 161,415
Adjusted EBITDA1 47,796 83,199 91,600 166,219
Net (loss)/earnings (19,118) 35,716 30,877 62,543
Basic (loss)/ earnings per share (EPS) (4.7) 8.7 7.5 15.3
(cents)
Adjusted net earnings1 5,116 38,500 13,519 65,906
Adjusted net earnings per share (AEPS) 1.2 9.4 3.3 16.1
(cents)1
Cash generated from/ (used in) 34,912 (23,909) 58,866 1,315
operating activities
Capital expenditure2 25,507 45,628 51,286 92,456
Cash balance 120,089 175,886 120,089 175,886
Total borrowings 56,800 85,200 56,800 85,200
1 These are non-IFRS measures. Refer to page 24 for definitions.
2 Excludes non-cash capital adjustments (reclamation asset adjustments) and
include finance lease purchases and land purchases recognised as long term
prepayments.
Other Developments
Safety
During the first half of the year we saw further improvements in our overall
safety results, with a Total Recordable Injury Frequency Rate (TRIFR) in H1
2018 of 0.26, which is 35% lower than the corresponding period in 2017. We also
reduced the number of High Potential Incidents (HPIs) by 35% compared to H1
2017.
However, regrettably, on 11 June 2018, Sadock Crispin Tindahinile, an operator
for one of our contractors at North Mara, passed away as a result of an
accident which involved a reversing vehicle at the Gokona deposit. Our thoughts
go out to his family, friends and colleagues. We have completed an
investigation into the incident and are implementing the relevant
recommendations at all our operations. We continue to target zero injuries and
remain committed to every person going home safely every day.
Update on Discussions between Barrick Gold Corporation ("Barrick") and the
Government of Tanzania ("GoT")
Barrick and the GoT continued their discussions during the first half, aimed at
agreeing and documenting the details of the framework announced in 2017. Acacia
has been providing support to Barrick to seek to ensure that they can have
informed discussions with the GoT, but has not been directly involved in those
discussions to date. Any proposal received by Acacia in the future for a
comprehensive resolution of the Company's disputes with the GoT that might be
agreed in principle between Barrick and the GoT as a result of those
discussions will be subject to review by the Independent Committee of the
Acacia Board of Directors.
On the 24 June 2018 Barrick announced that it would not be providing a
timetable for the completion of its discussions with the GoT, in order to allow
its process to continue in an orderly manner and without an arbitrary deadline.
Acacia continues to engage with Barrick to seek to understand Barrick's
expectations for the future conduct and a timetable for the completion of its
discussions with the GoT.
Asset Level Discussions with Interested Parties
As previously announced, in response to a number of indicative expressions of
interest from Chinese companies, the Company has engaged with a small number of
parties to explore the potential sale of a stake in one or more of its
Tanzanian assets. Given that the timetable and successful completion of any
discussions in relation to any such transaction are likely to be inextricably
linked to the Company's ability to reach a comprehensive agreement with the GoT
in order to settle historic disputes and provide a stable future operating
environment, no significant progress is expected to be made on a potential
transaction until there is a clearer picture of the likely outcomes of
Barrick's discussions with the GoT.
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 the Company. There is currently no certainty as to whether any agreement
will be reached with any of the potential investors.
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 in taxes and royalties. We remain committed to supporting efforts
towards Tanzania's socioeconomic advancement, including the realisation of the
Government's Development Vision 2025.
In the first half of 2018, Acacia paid a total of US$67.1 million in taxes and
royalties. This is made up of provisional corporate tax payments for the first
half of the year of US$19.1 million, a final 2017 corporate tax payment of
US$4.2 million, royalties of US$25.7 million, payroll taxes of US$13.0 million
and other taxes of US$5.1 million.
During the first half of the year, our Sustainable Communities initiatives
contributed to tangible benefits for the local communities around our
operations. These benefits included improvements to social infrastructure
across multiple sectors including agriculture, water and sanitation, education,
health, and road infrastructure. Access to safe, clean and potable water is a
challenge and the provision of water infrastructure in Kakola, Msalala District
alleviated this challenge for over 3,000 residents around our Bulyanhulu mine.
As part of its commitment to improving access to quality health care services,
North Mara funded an upgrade to the Nyamwaga Health Centre at a cost of over
US$600,000. Following the upgrade, the Government has decided to turn the
Nyamwaga Health Centre into a district and referral hospital, serving 350,000
people (2012 census data) and capable of handling approximately 500 patients a
day.
Agriculture is an important economic mainstay for our local communities and is
a key priority for our Sustainable Communities Strategy. At Buzwagi, where 75%
of the local population are farmers, the first half of the year saw the
development and implementation of a three-year US$1.1 million agricultural
improvement project in partnership with Farm Concern International ("FCI"). The
project seeks to substantially increase farmers' incomes through greater
productivity and improved links to market. Meanwhile at Bulyanhulu we continued
to support approximately 250 local farmers to access inputs and services that
improve agricultural practices and grow productivity. Furthermore, our
partnership with Africare at Bulyanhulu enabled poultry farmers to register
either as small enterprises or cooperatives. As part of the project the farmers
were given over 6,000 day-old chicks and access to finance opportunities to
grow their businesses.
An independent report released by EY during the half year demonstrated the
significant contribution that Acacia's three mines continue to make to
Tanzania's economy as well as the country's broader social development. The
report confirmed that during 2017 Acacia's businesses purchased US$434 million
of goods and services from suppliers located in Tanzania. This represented 67%
of our total spend on goods and services in 2017. Of this amount, approximately
US$120 million of goods and services were purchased from businesses in the
direct locality of the three mines in the country's Lake Zone.
Despite facing several challenges during the year, the EY report concluded that
in 2017 Acacia contributed US$712 million to the national economy, which
represents around 1.5% of Tanzania's total gross domestic product. The 2017
contribution is comprised of US$200 million by our businesses, an indirect
contribution via suppliers of US$304 million and induced contributions of
US$208 million. Meanwhile Acacia's three operations drove a direct tax
contribution to the Tanzanian Treasury of US$143 million in 2017 and led to a
further US$42 million in indirect or induced taxes.
Local Content Rules
During the period, Acacia's three local businesses submitted preliminary local
content plans to the Tanzanian Government in response to the new local content
regulations that came into force in April 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 ("MDAs"), Acacia's businesses
are protected from changes to laws that govern their 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
from the Government on clarification of specific points around these
regulations and the practical implications thereof.
Update on Nyanzaga Project
Post-period end, OreCorp Tanzania Limited ("OreCorp"), a wholly owned
subsidiary of OreCorp Limited (ASX:ORR) completed its earn-in obligations in
respect of the Nyanzaga Project (the "Project") in Tanzania in accordance with
the earn-in agreement it entered into on 22 September 2015. As a result,
OreCorp is executing its option under the earn-in agreement to move to 51%
ownership in the Project through the payment of US$3 million to Acacia. This
option is conditional on approval from the Tanzanian Fair Competition
Commission and newly established Mining Commission.
Acacia believes that a simplified ownership structure of Nyanzaga would be
beneficial to the future development of the Project and would enable it to be
best placed to provide significant benefits to Tanzania. As a result, Acacia
has signed a binding conditional agreement whereby OreCorp will move to 100%
ownership of the Project, by making a further payment of US$7 million. This
agreement is conditional on the Tanzanian regulatory approvals referred to
above, definitive documentation and on the grant of the Special Mining Licence
in respect of the Project. Acacia will also retain a net smelter return
production royalty, capped at US$15 million.
Carrying Value Review
At the end of the reporting period, there remained a number of potential
triggers for impairment testing of the carrying value of Acacia's assets,
including the on-going uncertainty surrounding a potential resolution of the
Company's disputes with the Government of Tanzania and the fact that Acacia's
market capitalisation has been lower than the carrying value of its assets for
a prolonged period of time. As a result, Acacia undertook a review of the
carrying value of its affected Cash Generating Units ("CGUs") post period end
using the latest information available as well as revised assumptions around
potential timing for a comprehensive resolution with the GoT. Based on this
review, the recoverable values of all our assets remain above their respective
carrying values at the discount rates used during the previous reporting
period. Further information on the carrying value review can be found in Note 6
to the condensed consolidated financial information.
As disclosed above, post period end, OreCorp, Acacia's JV partner in the
Nyanzaga Project, has executed its option under the earn-in agreement to
increase its stake to 51% in the project through the payment of US$3 million to
Acacia. Further to that, Acacia has signed a conditional agreement to sell its
remaining 49% stake to OreCorp for US$7 million and a net smelter royalty
capped at US$15 million based on future production. As a result of the
agreement, Acacia expects to recover the value of the asset through sale and
not through value in use and as such has valued the asset at fair value less
costs to sell of US$10.0 million and recorded an impairment charge of US$24.2
million (refer to note 6 of the condensed consolidated financial information
for details) and reclassified the intangible asset to non-current assets held
for sale on the balance sheet.
Indirect Taxation update
During the first half of 2018, Acacia incurred a further US$28.3 million of VAT
outflows and received no cash VAT refunds. We have also declared our first and
second provisional corporate tax payments for 2018 relating to North Mara,
amounting to approximately US$19.1 million, as well as a final 2017 corporate
tax payment of US$4.2 million, and incurred foreign exchange revaluation losses
on the balance of US$3.2 million. The provisional and final corporate tax
payments have been partially offset against indirect tax receivables in line
with an existing agreement with the Tanzanian Revenue Authority. As a result,
the net indirect tax receivables balance increased from US$170.7 million as at
31 December 2017 to US$172.5 million as at 30 June 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" for this purpose. The total VAT claims submitted
since July 2017 amount to approximately US$64 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 and subject to our on-going disputes with the GoT.
Dividend
Acacia has a cash flow based dividend policy where we aim to pay a dividend of
between 15-30% of our operational cash flow after sustaining capital and
capitalised development but before expansion capital and financing costs. As a
result of the uncertainty around the potential resolution of the disputes
between the Company and the GoT and current liquidity requirements, the Board
of Directors has not recommended the payment of an interim dividend.
Bulyanhulu Reduced Operations and Optimisation Study Update
In Q3 2017, Acacia took to the decision to place Bulyanhulu on reduced
operations ("ROP") due to the unsustainable losses experienced at the mine due
to the inability to export concentrate. This process was completed in Q4 2017.
During the first half of 2018, reduced operating costs amounted to US$16.6
million and mainly consisted of site overhead costs including labour, power and
camp related costs, security costs and on-going maintenance related work.
Acacia is taking the opportunity to progress essential capital spend of
approximately US$10 million in 2018, primarily on the process plant, together
with an optimisation study which is designed to ensure that when the mine
restarts it does so in an optimised manner. The optimisation study work is
progressing well and is on track for completion at the end of 2018. Preliminary
indications from the study suggest that there will be a focus on higher grade
and therefore higher margin ounces which consequently may lead to a smaller
initial reserve base than currently estimated. Once the study is completed at
the end of 2018, we will be in a position to provide further details.
International Arbitration
In 2017, Bulyanhulu Gold Mine Limited ("BGML"), the owner and operator of the
Bulyanhulu mine, and Pangea Minerals Limited ("PML"), the owner and operator of
the Buzwagi mine each referred their current disputes with the Government of
Tanzania to arbitration in accordance with the dispute resolution processes
agreed by the GoT in its MDAs with BGML and PML. The commencement of
arbitration was necessary to protect the rights of BGML and PML. The
arbitration processes have continued through 2018, with a number of necessary
procedural steps having been undertaken. Acacia remains of the view that a
negotiated resolution is the preferred outcome to its current disputes with the
GoT and the Company will continue to work to achieve this.
Outlook
Despite the continuation of the challenging environment, the Group has
delivered a strong operational performance in H1 2018. In achieving first half
production of 254,759 ounces we are on track to achieve the top end of our
guidance range of 435,000-475,000 ounces for 2018 and continue to demonstrate
the resilience that we have built within our business. All gold produced in
2018 is expected to be in doré form and will not, therefore, be impacted by the
current GoT export ban on concentrate.
During H1 2018 we recorded an AISC of US$945 per ounce sold, which was at the
lower end of the guidance range of US$935-985 per ounce and continue to expect
full year group all-in sustaining costs of between US$935-985 per ounce and
cash costs per ounce of between US$690-720 per ounce. Capital expenditure
during H1 2018 amounted to US$51 million, in line with expectations, and we
continue to expect full year group capital expenditure of approximately US$100
million.
Acacia is committed to strong cost discipline and is continuing to take steps
to ensure the long-term viability of our business whilst we work towards a
comprehensive resolution of our disputes with the Government of Tanzania.
Key Statistics Three months ended Six months
30 June ended 30 June
(Unaudited) 2018 2017 2018 2017
Tonnes mined Kt 4,158 8,558 8,185 18,039
Ore tonnes mined Kt 841 3,996 1,679 7,212
Ore tonnes processed incl. tailings reclaim Kt 2,411 2,440 4,570 4,860
Process recovery rate excl. tailings reclaim % 92.0% 93.0% 91.5% 93.2%
Head grade excl. tailings reclaim g/t 2.1 3.3 2.2 3.4
Process recovery rate incl. tailings reclaim % 87.4% 89.3% 87.0% 89.6%
Head grade incl. tailings reclaim g/t 2.0 3.0 2.0 3.1
Gold production oz 133,778 208,533 254,759 428,203
Gold sold oz 134,090 127,694 251,045 312,438
Copper production Klbs - 4,409 - 9,065
Copper sold3 Klbs - (1,183) - 1,304
Cash cost per tonne milled excl. tailings US$/t 45 34 46 43
reclaim1
Cash cost per tonne milled incl. tailings US$/t 38 30 38 37
reclaim1
Per ounce data
Average spot gold price2 US$/oz 1,306 1,257 1,318 1,238
Net average realised gold price1 US$/oz 1,324 1,255 1,328 1,235
Total cash cost1 US$/oz 688 577 701 577
All-in sustaining cost1 US$/oz 918 835 945 893
Average realised copper price US$/lbs - 2.56 - 2.99
Financial results
Three months ended 30 June Six months ended 30
June
(Unaudited, in US$'000 unless 2018 2017 2018 2017
otherwise stated)
Revenue 176,865 157,763 333,382 391,664
Cost of sales (112,826) (94,571) (221,226) (243,967)
Gross profit 64,039 63,192 112,156 147,697
Corporate administration (5,846) (5,878) (11,304) (12,520)
Share based payments (121) 18,209 1,406 7,785
Exploration and evaluation costs (3,608) (9,372) (7,231) (16,150)
Corporate social responsibility (1,537) (1,544) (3,083) (3,739)
expenses
Impairment charges (24,234) - (24,234) -
Other charges (26,388) (8,802) (3,621) (19,617)
Profit before net finance expense 2,305 55,805 64,089 103,456
and taxation
Finance income 676 946 808 1,543
Finance expense (4,404) (3,216) (8,240) (5,454)
(Loss)/profit before taxation (1,423) 53,535 56,657 99,545
Tax expense (17,695) (17,819) (25,780) (37,002)
Net (loss)/profit for the period (19,118) 35,716 30,877 62,543
1 These are non-IFRS financial performance measures with no standard meaning
under IFRS. Refer to "Non IFRS measures" on page 24 for definitions.
2 Reflect the London PM fix price.
3 Negative sales quantities in 2017 relate to the reversal of sales recorded
during Q1 2017.
For further information, please visit our website: http://www.acaciamining.com/
or contact:
Acacia Mining plc +44 (0) 207 129 7150
Peter Geleta, Chief Executive Officer
Jaco Maritz, Chief Financial Officer
Sally Marshak, Head of Investor Relations and Communications
Camarco +44 (0) 20 3757 4980
Gordon Poole / Nick Hennis
About Acacia Mining plc
Acacia Mining plc (LSE:ACA) is the UK holding company of the Acacia Group,
Tanzania's largest gold miner and one of the largest producers of gold in
Africa. The Acacia Group has three mines, all located in north-west Tanzania:
Bulyanhulu, which is owned and operated by Bulyanhulu Gold Mine Limited,
Buzwagi, which is owned and operated by Pangea Minerals Limited and North Mara,
which is owned and operated by North Mara Gold Mine Limited.
The Acacia Group also has 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 announcement.
Conference call
A presentation will be held for analysts and investors at 12.00 BST on 20 July
2018.
For those unable to attend, an audio webcast of the presentation will be
available on our website http://www.acaciamining.com/. For those who wish to
ask questions, the access details for the conference call are as follows:
Participant +44 20 3936 2999
dial in:
Password: 69 32 26
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 on-going 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.
LSE: ACA
TABLE OF CONTENTS
Interim Operating Review 8
Exploration Review 13
Financial Review 17
Significant judgements in applying accounting policies and key sources of 23
estimation uncertainty
Non-IFRS measures 24
Risk Review 28
Condensed Financial Information:
- Consolidated Income Statement and Consolidated Statement of Comprehensive 32/33
Income
- Consolidated Balance Sheet 34
- Consolidated Statement of Changes in Equity 35
- Consolidated Statement of Cash Flows 36
- Notes to the Condensed Financial Information 37
Operating Review
Half Year Review
Acacia delivered first half production of 254,759 ounces of gold, a decrease of
41% year on year, with sales ounces broadly in line with production at 251,045
ounces. AISC of US$945 per ounce sold and cash cost of US$701 per ounce sold
were 6% and 21% higher than H1 2017, respectively.
North Mara achieved production of 162,689 ounces of gold for the first half,
down 9% from H1 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. Gold sold of 158,870 ounces for the half year was
broadly in line with production. AISC of US$903 per ounce sold was 23% higher
than H1 2017 (US$736), due to higher cash costs and lower sales volumes, partly
offset by lower capitalised development costs.
At Buzwagi, gold production of 73,100 ounces of gold was 42% lower than the
comparative period in 2017 as a result of the mine transitioning to a lower
grade stockpile processing operation. Gold sold for the period amounted to
72,305 ounces, in line with production and 36% higher than H1 2017 when the
mine was unable to sell concentrate due to the export ban imposed in March
2017. AISC per ounce sold of US$1,037 was 35% higher than H1 2017 (US$770/oz),
mainly driven by the transition to processing lower grade stockpiles which
drove higher cash costs.
Bulyanhulu produced 18,970 gold ounces, 85% lower than the same period in 2017.
This was a result of the decision to place the underground mine on reduced
operations. All production resulted from the reprocessing of tailings which was
6% higher compared to H1 2017 due to higher throughput and recovery rates as a
result of operational efficiencies, partly offset by lower feed grades. Gold
sold for the period of 19,870 ounces was 5% higher than production due to the
selling of gold ounces on hand at the end of 2017 and 76% lower than H1 2017
mainly as a result of the lower production base. AISC per ounce sold for the
half of US$827 was 38% lower than H1 2017 (US$1,340/oz) driven by reduced
operating and capital spend, partly offset by lower sales, but excludes reduced
operations costs of US$16.6 million.
Total tonnes mined during the first half amounted to 8.2 million tonnes, 55%
lower than H1 2017, mainly as a result of the transition to a stockpile
processing operation at Buzwagi and the placing of the underground mine at
Bulyanhulu on reduced operations. Total ore tonnes mined of 1.7 million tonnes
were 77% lower than H1 2017, mainly due to the reasons above.
Ore tonnes processed amounted to 4.6 million tonnes, a decrease of 6% on H1
2017, mainly driven by the halting of run-of-mine processing at Bulyanhulu.
Cash costs of US$701 per ounce sold for the half were 21% higher than in H1
2017, primarily due to:
* The drawdown of ore stockpiles at Buzwagi and a decreased build-up in
finished gold inventory compared to H1 2017 (US$369/oz), given H1 2017 was
impacted by the imposition of the concentrate export ban, resulting in a
build- up of finished gold inventory in H1 2017 of approximately 115,000
ounces; and
* Lower production base (US$141/oz)
This was offset by:
* Savings in direct mining costs (US$410/oz) driven by the cessation of
mining activities at Buzwagi and Bulyanhulu, partly offset by higher direct
mining costs at North Mara, and lower sales related costs (US$9/oz) driven
by lower sales volumes.
All-in sustaining cost of US$945 per ounce sold for the first half was 6%
higher than H1 2017, mainly due to the impact of lower sales volumes on
individual cost items (US$77/oz), higher cash costs (refer to above) (US$124/
oz), and a smaller credit relating to the share based payment revaluation
driven by the reduction in Acacia's share price (US$25/oz), partly offset by
lower capitalised expenditure relating to North Mara and Bulyanhulu (US$144/oz)
and lower sustaining capital spend mainly driven by Bulyanhulu being on reduced
operations (US$19/oz).
Cash generated from operating activities of US$58.9 million for H1 2018, an
increase of US$57.6 million from H1 2017 (US$1.3 million), mainly due to
working capital outflows of US$24.2 million compared to outflows of US$159.7
million in H1 2017 which resulted from the build-up of concentrate stockpiles
in H1 2017, partly offset by lower adjusted EBITDA (US$74.6 million).
Capital expenditure amounted to US$51.3 million compared to US$92.5 million in
H1 2017. The decrease was mainly driven by lower capitalised development costs.
Capital expenditure primarily comprised capitalised development and stripping
(US$27.9 million), investment in mobile equipment and component change-outs
mainly relating to North Mara (US$8.9 million), capitalised drilling for
resource and reserve development at North Mara's Gokona underground (US$3.7
million), and investment in fixed equipment and infrastructure (US$2.4
million).
Second Quarter Review
Acacia recorded two Lost Time Injuries during the quarter at North Mara, one of
which related to the fatality involving a mechanic at the Gokona pit (please
refer above). The Total Recordable Frequency Rate (TRIFR) of 0.12 for the
second quarter was 76% lower than the corresponding period in 2017.
Production for Q2 2018 amounted to 133,778 ounces, a decrease of 36% on the
same period in 2017, but 11% above Q1 2018.
North Mara produced 85,920 ounces, 3% higher than Q2 2017 (83,110 ounces)
driven by marginally higher head grades compared to Q2 2017 together with
increased proportion of higher grade underground tonnes being processed. Gold
sold of 83,915 ounces for the quarter was in line with production and in line
with Q2 2017. AISC of US$861 per ounce sold was 14% higher than in Q2 2017
(US$758/oz) as a result of higher cash costs and sustaining capital
expenditure, partly offset by lower capitalised development costs.
At Buzwagi, gold production for the second quarter of 37,415 ounces was 44%
lower than Q2 2017 (66,228 ounces) as a result of production now being derived
solely from lower grade ore stockpiles. Gold sold for the quarter of 39,845
ounces was 6% higher than production due to the selling of gold ounces on hand
at the end of Q1 2018 and significantly higher than Q2 2017 due to the
inability to export concentrate following the export ban imposed in March 2017.
AISC per ounce sold of US$1,025 was 35% higher than Q2 2017, mainly driven by
the transition to processing lower grade stockpiles which drove higher cash
costs due to a drawdown in ore inventory and lower production.
Bulyanhulu produced 10,443 ounces, 82% lower than Q2 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 18% higher than Q2 2017
(8,856 ounces) due to process plant improvements. Gold sold for the quarter of
10,330 ounces was in line with the production base and 62% lower than H1 2017,
as a result of the lower production base. AISC per ounce sold for the quarter
of US$737 was 53% lower than Q2 2017 (US$1,558/oz) driven by reduced operating
and capital spend, partly offset by lower sales, but excludes reduced
operations costs of US$8.4 million.
Total tonnes mined during the quarter amounted to 4.2 million tonnes, 51% lower
than Q2 2017, mainly as a result of the transition to a stockpile processing
operation at Buzwagi and the halting of all underground mining at Bulyanhulu.
Tonnes mined at North Mara were in line with the Q2 2017. Total ore tonnes
mined of 0.8 million tonnes were 79% lower than Q2 2017, primarily due to the
cessation of mining at Buzwagi and Bulyanhulu.
Ore tonnes processed amounted to 2.4 million tonnes, broadly in line with Q2
2017, with head grade for the quarter (excluding tailings retreatment) of 2.1g/
t, 36% lower than Q2 2017 (3.3g/t) due to low-grade stockpile processing at
Buzwagi and no underground material from Bulyanhulu.
Capital expenditure for the quarter amounted to US$25.5 million compared to
US$45.6 million in Q2 2017, a decrease of 44%. Capital expenditure primarily
comprised capitalised development and stripping at North Mara (US$12.4
million), mobile equipment and component change-outs at North Mara (US$5.2
million), capitalised drilling at North Mara (US$2.1 million), investment in
Buzwagi's tailings storage facility (US$0.7 million) and Bulyanhulu
optimisation study costs (US$0.8 million).
Mine Site Review
North Mara
Key statistics
Three months ended 30 Six months ended 30
June June
(Unaudited) 2018 2017 2018 2017
Key operational information:
Ounces produced oz 85,920 83,110 162,689 179,578
Ounces sold oz 83,915 84,390 158,870 178,130
Cash cost per ounce sold1 US$/oz 570 476 588 441
AISC per ounce sold1 US$/oz 861 758 903 736
Open pit:
Tonnes mined Kt 3,974 3,896 7,814 7,750
Ore tonnes mined Kt 657 733 1,308 1,536
Mine grade g/t 2.2 1.7 1.9 1.8
Underground:
Ore tonnes trammed Kt 184 162 371 316
Mine grade g/t 8.3 8.4 8.0 9.0
Processing information:
Ore milled Kt 701 709 1,410 1,419
Head grade g/t 4.1 4.0 3.9 4.3
Mill recovery % 92.8% 92.3% 92.5% 92.5%
Cash cost per tonne milled1 US$/t 68 57 66 55
Capital Expenditure
- Sustaining capital2 US$ 7,993 5,921 13,681 12,177
('000)
- Capitalised development US$ 12,364 15,485 27,932 33,282
('000)
- Expansionary capital US$ 2,143 2,953 3,668 4,489
('000)
22,500 24,359 45,281 49,948
- Non-cash reclamation asset US$ (1,032) (180) (1,165) (56)
adjustments ('000)
Total capital expenditure US$ 21,468 24,179 44,116 49,892
('000)
1These are non-IFRS financial performance measures with no standard meaning
under IFRS. Refer to 'Non-IFRS measures" on page 24 for definitions.
2 Includes land purchases recognised as long term prepayments.
Operating performance
Gold production for the first half of 162,689 ounces was 9% lower than H1 2017.
The reduction primarily 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. Gold ounces sold for the half of 158,870 ounces were
11% lower than the prior period and broadly in line with production.
Cash costs of US$588 per ounce sold were 33% higher than H1 2017 (US$441/oz),
mainly driven by increased direct operating costs (US$102/oz), mainly relating
to higher external services costs and higher maintenance costs; as well as
higher sales related costs linked to the increase in the royalty rate and the
average gold price (US$32/oz) and the lower production base (US$15/oz).
AISC of US$903 per ounce sold was 23% higher than H1 2017 (US$736/oz) primarily
as a result of higher cash costs discussed above together with the impact of
lower sales volumes on individual cost items (US$36/oz), partly offset by lower
capitalised development costs (US$34/oz).
We continued to undertake drilling programmes at Gokona during the period as we
look to demonstrate the long term potential of the deposit and are also
undertaking a pre-feasibility study at Nyabirama in tandem with the permitting
for an underground exploration decline as we explore the potential for a second
underground mine at North Mara.
Capital expenditure for the period before reclamation adjustments amounted to
US$45.3 million, 9% lower than in H1 2017 (US$49.9 million). Key capital
expenditure included capitalised stripping costs (US$18.2 million), capitalised
underground development costs (US$9.7 million), capitalised drilling mainly for
resource and reserve development at Gokona underground (US$3.7 million) and
investment in mobile equipment and component change-outs (US$8.9 million).
Buzwagi
Key statistics
Three months ended 30 Six months ended
June 30 June
(Unaudited) 2018 2017 2018 2017
Key operational information:
Ounces produced oz 37,415 66,228 73,100 126,084
Ounces sold oz 39,845 15,895 72,305 53,094
Cash cost per ounce sold1 US$/oz 964 705 964 697
AISC per ounce sold1 US$/oz 1,025 762 1,037 770
Copper production Klbs - 3,095 - 6,253
Copper sold2 Klbs - (826) - 705
Mining information:
Tonnes mined Kt - 4,297 - 9,564
Ore tonnes mined Kt - 2,898 - 4,951
Processing information:
Ore milled Kt 1,255 1,119 2,256 2,195
Head grade g/t 1.0 1.9 1.1 1.8
Mill recovery % 90.1% 96.6% 89.2% 96,7%
Cash cost per tonne milled1 US$/t 31 10 31 17
Capital Expenditure
- Sustaining capital US$ 881 724 2,181 865
('000)
- Non-cash reclamation asset US$ (119) 79 372 (1)
adjustments ('000)
Total capital expenditure US$ 762 803 2,553 864
('000)
1These are non-IFRS financial performance measures with no standard meaning
under IFRS. Refer to "Non-IFRS measures" on page 24 for definitions.
2 Negative sales quantities in 2017 relate to the reversal of sales recorded
during Q1 2017.
Operating performance
Gold production for the first half of 73,100 ounces was 42% lower than the
comparative period in 2017 as a result of Buzwagi transitioning primarily to a
low-grade stockpile processing operation compared to the processing of
run-of-mine ore in the previous period. Gold sold in H1 2018 amounted to 72,305
ounces, in line with production and 36% higher than H1 2017 due to the
inability to sell concentrate following the export ban in H1 2017.
Whilst lower than H1 2017, production was ahead of plan driven by higher than
expected recoveries of 89.2% and throughput being above nameplate capacity.
Grades of 1.1 g/t for the period were in line with expectations for the period.
Following Buzwagi's transition to primarily a stockpile processing operation,
there was no copper production and therefore no copper sales during the half.
During the period Buzwagi continued to engage closely with Government agencies
around correspondence received from the Ministry of Minerals during Q1 2018
requiring the restoration of operation of the flotation circuit, which ceased
in September 2017. With primarily only low-grade stockpiles planned to be
processed through the remaining life of mine, there are no plans to resume
flotation circuit operations.
There were no ore tonnes mined from the open pit in H1 2018 but at the
beginning of Q3 2018 we started to mine the last ore blocks from the main zone
in the open pit. These tonnes were deferred from Q4 2017 due to flooding of the
bottom of the pit and were included in guidance at the beginning of the year.
Cash costs for the first half of US$964 per ounce sold were 38% higher than H1
2017 (US$697/oz), mainly due to a drawdown in ore inventory as a result of only
processing ore stockpiles and a smaller finished gold build up due to the
impact of the concentrate produced and not sold in H1 2017, offset by higher
sales volumes (US$751/oz), partially offset by lower direct mining costs as a
result of Buzwagi transitioning to a stockpile processing operation (US$534/
oz).
AISC per ounce sold of US$1,037 was 35% higher than H1 2017 of US$770/oz,
primarily driven by higher cash costs as explained above (US$267/oz).
Capital expenditure before reclamation adjustments amounted to US$2.2 million,
higher than H1 2017 (US$0.9 million), mainly consisting of the expansion of the
tailings storage facilities (US$1.8 million) which started late in 2017.
Bulyanhulu
Key statistics
Three months ended 30 Six months ended 30
June June
(Unaudited) 2018 2017 2018 2017
Key operational information:
Ounces produced oz 10,443 59,196 18,970 122,542
Ounces sold oz 10,330 27,409 19,870 81,214
Cash cost per ounce sold1 US$/oz 584 813 646 795
AISC per ounce sold1 US$/oz 737 1,558 827 1,340
Copper production Klbs - 1,313 - 2,811
Copper sold2 Klbs - (357) - 599
Run-of-mine:
Underground ore tonnes hoisted Kt - 204 - 409
Ore milled Kt - 202 - 423
Head grade g/t - 8.6 - 8.5
Mill recovery % - 89.9% - 90.7%
Ounces produced oz - 50,340 - 104,596
Cash cost per tonne milled1 US$/t - 91 - 133
Reprocessed tailings:
Ore milled Kt 454 410 904 823
Head grade g/t 1.3 1.4 1.2 1.4
Mill recovery % 55.1% 46.9% 53.9% 47.2%
Ounces produced oz 10,443 8,856 18,970 17,946
Capital Expenditure
- Sustaining capital US$ 754 4,387 2,109 8,599
('000)
- Capitalised development US$ - 14,984 - 31,054
('000)
- Expansionary capital US$ 1,260 504 1,534 982
('000)
2,014 19,875 3,643 40,635
- Non-cash reclamation asset US$ (14) (851) (1,746) 191
adjustments ('000)
Total capital expenditure US$ 2,000 19,024 1,897 40,826
('000)
1These are non-IFRS financial performance measures with no standard meaning
under IFRS. Refer to 'Non-IFRS measures" on page 24 for definitions.
2 Negative sales quantities in 2017 relate to the reversal of sales recorded
during Q1 2017.
Operating performance
Gold production for H1 2018 of 18,970 ounces was 85% lower than the same period
in 2017. This was a result of the decision taken in September 2017 to
transition to reduced operations at Bulyanhulu. Production consisted solely of
the reprocessing of tailings which was 6% higher compared to H1 2017 due to
higher throughput and recovery rates as a result of operational efficiencies,
partly offset by lower feed grades. Gold sold for the half of 19,870 ounces was
5% higher than production due to the selling of gold ounces on hand at the end
of 2017 and 76% lower than H1 2017 mainly as a result of the lower production
base. AISC per ounce sold for H1 of US$827 was 38% lower than H1 2017 (US$1,340
/oz) driven by reduced operating and capital spend, partly offset by lower
sales, but excludes reduced operations costs of US$16.6 million.
There were no copper production or sales for the period as a result of the
underground mine at Bulyanhulu being on reduced operations.
Cash costs of US$646 per ounce sold were 19% lower than H1 2017 (US$795),
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, partly offset by the lower production base.
Capital expenditure for the first half before reclamation adjustments amounted
to US$3.6 million, significantly lower than H1 2017 (US$40.6 million) due to
Bulyanhulu being on reduced operations. Expansionary capital includes
Bulyanhulu optimisation study costs (US$0.8 million) and upgrades to processing
facilities (US$0.6 million).
Exploration Review
Brownfield Exploration
North Mara
Gokona Underground
Activity on brownfield programmes in the first half of 2018 has been restricted
to underground diamond drilling at Gokona, North Mara where a total of 21,071
metres of extension and infill drilling were completed during H1 2018.
Drilling continued with four rigs on the programmes to define the Upper Central
zone beneath the open pit, with further significant intercepts returned during
the half 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
* UGKD476 14.0m @ 9.4g/t Au from 96m; and
10.0m @ 10.9g/t Au from 234m
* UGKD479 11.0m @ 3.2g/t from 359m
* UGKD485A 15.0m @ 3.6g/t Au from 185m
* UGKD486 10.0m @ 3.3g/t Au from 204m; and
30.0m @ 4.3g/t Au from 219m
* UGKD487 14.0m @ 6.0g/t Au from 95m
* UGKD493 17.5m @ 3.8g/t Au from 251m; and
10.0m @ 7.4g/t Au from 281m
* UGKD480 30.0m @ 4.6g/t Au from 163m; and
9.0m @ 11.1g/t Au from 201m
* UGKD481 31.0m @ 5.7g/t Au from 186m
The additional drilling information from the Central zone between the base of
the open pit and the 1,000mRL elevation is currently being incorporated into an
update of the Mineral Resource model. Initial development has already commenced
on the 1040mRL and 1070mRL elevations into the defined Central Zone
mineralisation. Drilling continues with three drill rigs in the 1030
Exploration Drive to test deeper mineralisation in the Central Zone.
The drilling programme testing the base of the second and the top of the third
panels of mineralisation in the West Zone at Gokona continued during the half.
Drilling continued to test the third mining panel in the West during June.
During the first half several significant intersections were returned:
* UKGC_01009 27.0m @ 3.6g/t Au from 203m
* UKGC_01011 7.0m @ 7.4g/t Au from 179m; and
33.0m @ 8.4g/t Au from 224m
* UKGC_01012 9.0m @ 15.9g/t Au from 116m
* UKGC_01029 13.0m @ 4.1 g/t Au from 237m; and
16.0m @ 3.5g/t Au from 289m
* UKGC_01073 9.0m @ 6.4g/t Au from 72m; and
14.0m @ 5.8g/t Au from 118m
Greenfield Exploration
Kenya
One of the focuses of the exploration during H1 2018 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. During H1 2018 two diamond rigs were
active across the West Kenya Project with 22 holes drilled for 9,158 metres. In
addition, prospect focused geological mapping and multi-element soil
geochemical surveys were completed over several target areas.
Liranda Corridor
During the half, 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.
Mineralisation within shears of similar orientation to the Isulu prospect were
intersected as targeted, however assays returned broad zones of lower-grade
mineralisation including:
* LCD0206: 20.5m @ 1.13 g/t Au from 44m; 1m @ 3.68g/ Au from
62.5m
* LCD0209: 31.8m @ 1.29g/t Au from 201m incl. 7.7m @ 3.05 g/t Au
from 207 (Northern Zone).
* LCD0210: 13.5m @ 0.90 g/t Au from 281m incl. of 1m @ 7.56g/t Au
from 281m (Southern Zone).
The Northern and Southern Zones comprise shear structures with disseminated
sulfides (pyrite, pyrrhotite, arsenopyrite, chalcopyrite), quartz carbonate
veining with carbonate, sericite and minor green mica alteration. Detailed
structural analysis and modeling was completed towards the end of the first
half.
Multi-element analysis of the soils collected in H1 2018 and modeling of strong
VTEM geophysical anomalies identified a 'blind' target between the Isulu and
Bushiangala, the so-called GAP target. Interpretation of the geophysical
signature points to a mineralised intrusive body. Drilling on this target
started at the end of June 2018.
Lake Zone
In the Lake Zone Camp geological mapping and soil geochemical surveys were
completed across several potential target areas with promising results received
from Ochiegue-Ramula and Ramba-Lumba.
The Ochiegue-Ramula system consists of two targets: Ramula prospect and
Ochiegue corridor. These targets together, situated only 1km apart, have a high
potential for discovery of >500,000 ounces of gold. Previously drilled (2015)
Ramula gold-bearing zones have been remodeled during the half and estimation
resulted in a non-classified exploration target estimate of around 0.67Mt at
12.8g/t for 275Koz Au (uncapped), or 0.67Mt at 9.10g/t for 197Koz Au (30g/t
capped) based on a Datamine block model. In H1 2018 three diamond drill holes
totaling 758 metres were drilled to test continuity and extension of the Ramula
mineralised zones. All holes intercepted mineralisation with the better visual
results returned from RMD0002 where multiple specs of visible gold were
encountered. Assays are still outstanding and, if positive, further work to
improve the confidence in the resource estimate will be undertaken in H2 2018.
The Ochiegue target comprises a complex mineralised system hosted in
intermediate volcanics and felsic intrusions. A >3km long Au soil anomaly
(20ppb-1.34 ppm Au) associated with strong pathfinders (Te, W, As, Sb, Bi) has
been identified in H1 2018. Four DD holes have been completed totaling 1,375
metres. Multiple potential shear zones and veins of various orientations have
been intercepted by the holes hosted in the strongly altered rocks. Diamond
hole RMD0004 intercepted multiple specs of visible gold in quartz veins. Assays
are still outstanding.
The Ramba-Lumba target is characterised by multiple parallel and anastomosing
shear structures and quartz veins mapped in a >3km long and up to 600m wide
corridor. The shallow parts of the mineralised shears were partially mined in
the 1980-1990s. Previously unknown ultramafic and conglomerate rocks have been
mapped and verified by the multi-element soil anomalies. A total of four,
widely spaced, DD holes, totaling 1604 metres, were drilled into the target.
All holes intercepted strong alteration, sheared and mineralised structures and
quartz veining. Significant intersections:
* LZD0002: 1.5m @ 4.34g/t Au from 105m, 2.0m @ 30.7g/t Au from 109m incl.
* LZD0004: 1.0m @ 1.10g/t Au from 129m; 1.6m @ 6.40g/t Au from 225m
* LZD0006: 0.5m @ 2.65g/t Au from 328m; 1.0m @ 3.30g/t Au from 368m
* LZD0007: 2.1m @ 4.81g/t Au from 79m; 1.0m @ 1.33g/t Au from 97m; 2.7m @
2.91g/t Au from 102m
The holes are several hundred metres apart. It appears that better grade is
associated where an intrusive is located in the vicinity and results will be
followed up in the second half of the year.
Burkina Faso
During H1 2018 we continued to explore our properties in the highly prospective
Houndé Belt in southwest Burkina Faso. Acacia currently manages four joint
ventures covering over 2,700km².
South Houndé JV (Sarama Resources Limited) - current interest 50%, next stage
earn-in to 70%
Tankoro Corridor- MM and MC Zones
Drilling at Tankoro comprised air-core drilling at the Djimbaké zone (southern
part of the Tankoro Corridor) to test the continuity of mineralisation along
strike. 4,424 metres were drilled during the half out of a programme total of
4,900 metres. The results received show continuity of low grade mineralisation;
best results include 4m @ 1.2g/t Au from 22m in AC3702, 4m @ 1.4g/t Au from 20m
in AC3703 and 6m @ 1.6g/t Au from 50m in AC3726.
During the first half air-core drilling was conducted at MM zone with a total
of 2,037 metres drilled. The aim of the programme was to infill some of the
better parts of the MM resource area to test the potential for additional high
grade zones.
Better results MM zone included:
* AC3743 6m @ 5.5g/t Au from 12m (including 3m @ 9.2g/t Au)
* AC3746 11m @ 3.6g/t Au from 13m (including 4m @ 8.5g/t Au)
* AC3752 14m @ 2.9g/t Au from 22m (including 2m @ 10g/t Au)
* AC3755 12m @ 2.7g/t Au from 38m (including 6m @ 3.9g/t Au)
* AC3759 12m @ 3g/t Au from 16m (including 6m @ 4.9g/t Au)
* AC3762 25m @ 1.4g/t Au from 5m
During the first half of the year SRK Consulting (UK) Limited (SRK) were
contracted to update the mineral resource estimation, based on the new 3D
geology model. Preliminary results of the new mineral resource estimation (MRE)
appear to demonstrate an increase in the geological inventory at the project.
Recent results at MM demonstrate the existence of additional high grade oxide
zones which are not included in the SRK work and are likely to add to the
mineralisation inventory.
Central Houndé JV (Thor Explorations Limited) - current interest 51%, next
stage earn-in to 80%
Detailed field geological mapping and rock-chip sampling continued on the
Légué-Bongui Corridor and on the Ouéré soil anomaly during H1 2018. Regional
soil sampling covered the north-western part of the Ouéré licence. A number of
anomalies were identified and are ready for air-core drilling.
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 recently identified soil anomalies. The drilling will
be converted to reverse circulation (RC) where ground conditions are not
suitable. For logistical reasons, drilling at Central Houndé will be conducted
in Q4 2018 after the wet season finishes.
Pinarello & Konkolikan JV (Canyon Resources Limited) - 100% interest
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).
Following an IP geophysical survey, comprising 53 line kilometres, conducted on
the Tangolobé target, a drilling programme started in mid-June on the Western
part of the project. The programme consists of 14,200 metres of air-core (to be
converted to RC where adverse ground conditions are encountered) and is aimed
to test the continuity of the gold mineralisation on the southern extension of
the Tankoro Corridor and to test regional soil anomalies.
Frontier JV (Metallor SA) - earning 100% through option payments
No field work was conducted on the Frontier project in H1 2018. A number of
strong targets have already been identified. These targets will be followed up
after the wet season ends in H2 2018 with 6,000 metres of air-core drilling.
Mali
During H1 2018 we continued to explore our properties in the highly prospective
Senegal-Mali Shear Zone (SMSZ) in southwest Mali. Acacia currently manages two
joint ventures and holds one permit covering a total of 191km².
Tintinba-Bané Project JV (Demba Camara and Cadem Gold) - 100% interest
The Tintinba-Bane Project consists of three permits covering approximately
150km2. These properties are located within the Kénéiba Inlier of Western Mali,
along the world class Senegal-Mali-Shear-Zone (SMSZ), which hosts more than 50
million ounces of gold endowment.
During the half detailed geology and regolith mapping, rock-chip sampling and
portable XRF measurements have been conducted to assess the potential of the
existing targets and to outline new drilling targets.
A drilling programme started in mid-June that consists of 5,000 metres of
air-core (to be converted to RC where adverse ground conditions) and is aimed
at testing a number of regional soil anomalies.
Boubou JV (Mande Empire) - earning 100% through option payments
The Boudala JV is a joint venture with a local company over the Bou Bou licence
located approximately 15 kilometres from the centroid of the Tintinba JV
further to the south. The property is located within the central portion of the
Kedougou-Kenieba Inlier and just to the east of the highly prospective
Senegal-Mali Shear Zone (SMSZ). Acacia can earn up to 100% of the project
through a series of staged payments over a period of 36 months.
During H1 2018 a regional soil sampling survey, accompanied by geology and
regolith mapping, was conducted over the licence. Results are still outstanding
at period end.
Gourbassi Est - 100% Acacia (ABG Exploration Mali SARL)
The licence is located immediately west of the Tintinba/Bane Project in the
central SMSZ area of the Kedougou-Kenieba Inlier. The property is located to
the west of the SMSZ in an area dominated by footway splays to the SMSZ. A
regional soil sampling survey, accompanied by geology and regolith mapping,
started during this quarter in the licence.
The exploration plan for the Gourbassi project in 2018 comprises 1,500 metres
of air-core drilling and 3,000 soil samples. The aim of the programme is to
generate exploration targets.
Financial Review
The financial performance of the Group has been impacted by the planned
transitioning of Buzwagi to a primarily low grade stockpile processing
operation and the transition of Bulyanhulu to reduced operations, which is
evident in the half year results when compared to the corresponding period in
2017. In an effort to minimise the impact of the challenging operating
environment, we have further increased our focus on cost control and optimising
working capital and capital allocation. The key aspects of our financial
performance over the first half of 2018 are summarised below, and should be
read in conjunction with the consolidated condensed interim financial
information:
* Revenue of US$333.4 million was US$58.3 million lower than H1 2017 driven
by the 20% decrease in sales volumes that resulted from the lower
production base, partly offset by an 8% increase in the net average
realised gold price.
* Cash costs increased to US$701 per ounce sold in the first half of 2018
from US$577 per ounce sold in H1 2017, driven by the drawdown in ore
inventory at Buzwagi and a smaller build-up in finished gold inventory
compared to H1 2017, due to the impact of the build-up in concentrate on
hand after the imposition of the concentrate export ban, the lower
production base and lower co-product revenue, partly offset by lower direct
mining costs.
* AISC at US$945 per ounce sold was 6% higher than in H1 2017 (US$893 per
ounce sold), mainly due to higher cash costs, the impact of lower sales
volumes on individual cost items and lower non-cash share based payment
revaluation credits, partly offset by lower capitalised development costs
at Bulyanhulu and North Mara and lower sustaining capital expenditure at
Bulyanhulu.
* As a result of the above, EBITDA decreased by 17% to US$133.6 million,
after being offset by lower other charges (mainly due to the gain on sale
of a non-core mineral royalty for US$45.0 million), lower exploration
expenditure and lower corporate administration costs.
* An impairment charge of US$24.2 million related to the Nyanzaga exploration
project in Tanzania, following the post period end conditional agreement to
sell the Group's stake in the project.
* Lower tax expense of US$25.8 million compared to the prior year expense of
US$37.0 million. The current year charge is driven by lower year to date
profitability. Included in the current year tax expense is a 2017 final
North Mara tax charge of US$3.1 million.
* As a result of the above, net earnings amounted to US$30.9 million, 51%
lower than US$62.5 million in H1 2017.
* Adjusted net earnings of US$13.5 million were US$52.4 million lower than H1
2017. Adjusted earnings per share amounted to US3.3 cents, down from US16.1
cents in H1 2017.
+ Operational cash flow of US$58.9 million increased by US$57.6 million
from H1 2017, primarily as a result of lower working capital cash
outflows due to the build-up of concentrate on hand which impacted H1
2017, partly offset by lower adjusted EBITDA.
The following review provides a detailed analysis of our consolidated results
for the 6 months ended 30 June 2018 and the main factors affecting financial
performance. It should be read in conjunction with the unaudited condensed
consolidated financial information and accompanying notes on pages 32 to 55,
which have been prepared in accordance with International Financial Reporting
Standards as adopted for use in the European Union ("IFRS").
Revenue
Revenue for H1 2018 of US$333.4 million was US$58.3 million lower than H1 2017
due to a 20% decrease in gold sales volumes (61,393 ounces) mainly from
Bulyanhulu and North Mara, partly offset by an increase in sales volumes from
Buzwagi as the mine was able to sell all of its production in H1 2018 following
the decision to switch off the flotation circuit in H2 2017; and an 8% increase
in the average net realised gold price from US$1,235 per ounce sold in H1 2017
to US$1,328 in H1 2018.
The net realised gold price for the year to date of US$1,328/oz was US$10/oz
higher than the average market price of US$1,318/oz due to the recognition of
realised gains on the gold put options of US$1.7 million for H1 2017 as a
result of the strike price of the put options of US$1,320/oz exceeding the
average market price for the period.
Included in total revenue is co-product revenue of US$1.7 million for H1 2018
relating to silver sales, 70% lower than the prior period (US$5.8 million), as
a result of the lack of concentrate sales from early March 2017. There were no
copper sales since the concentrate export ban commenced and copper production
also ceased from September 2017.
The concentrate ban has resulted in unsold concentrate on hand of approximately
186,000 ounces of gold, 12.1 million pounds of copper and 159,000 ounces of
silver. These contained metals are in a condition to be sold, and will deliver
revenue, net of government royalties, of approximately US$257 million (at the
average year to date spot gold price).
Cost of sales
Cost of sales was US$221.2 million for H1 2018, representing a decrease of 9%
on the prior year period (US$244.0 million). The key aspects impacting the cost
of sales for the year include a 22% decrease in depreciation and amortisation
costs as a result of the lower production base and carrying value of assets
(after the 2017 impairment) at Bulyanhulu, 6% reduction in direct mining costs,
primarily driven by the reduced operations at Bulyanhulu coupled with the move
to stockpile processing at Buzwagi and the continuing focus on cost control.
The table below provides a breakdown of cost of sales:
Three months ended 30 June Six months ended 30
(US$'000) June
(Unaudited) 2018 2017 2018 2017
Cost of Sales
Direct mining costs 79,163 61,527 150,153 160,310
Third party smelting and refining 758 1,417 2,027 6,738
fees
Realised (gains)/ losses on (238) 170 (238) 278
economic hedges1
Royalty expense 13,548 8,040 25,699 18,682
Realised gains on gold hedges (1,662) - (1,662) -
Depreciation and amortisation2 21,257 23,417 45,247 57,959
Total 112,826 94,571 221,226 243,967
1 Economic hedges include zero cost collars for brent crude and, in prior
years, copper.
2 Depreciation and amortisation includes credits relating to the depreciation
component of the cost of inventory build-up for Q2 2018 of US$0.6 million (Q2
2017 US$12.8 million) and for H1 2018 of US$0.9 million (H1 2017 US$15.8
million.)
A detailed breakdown of direct mining expenses is shown in the table below:
Three months ended 30 June Six months ended 30
(US$'000) June
(Unaudited) 2018 2017 2018 2017
Direct mining costs
Labour 11,532 23,859 23,703 47,261
Energy and fuel 14,646 21,161 28,974 44,604
Consumables 16,188 22,262 31,613 47,168
Maintenance 11,404 26,357 24,428 52,123
Contracted services 21,740 33,483 44,816 69,497
General administration costs 6,910 21,788 15,810 42,309
Gross direct mining costs 82,420 148,910 169,344 302,962
Capitalised mining costs (3,257) (87,383) (19,191) (142,652)
Total direct mining costs 79,163 61,527 150,153 160,310
Gross direct mining costs of US$169.3 million for H1 2018 were 44% lower than
H1 2017 (US$303.0 million). The overall decrease was driven by the impact of
the changes in mining activities at Bulyanhulu and Buzwagi, partly offset by an
increase in costs at North Mara as follows:
* An increase in maintenance cost driven by breakdowns and unplanned
maintenance at both the open pit and underground.
* Higher underground contracted services costs at Gokona due to improved
ground support activities and higher ore development tonnes mined by the
contractor.
* Higher energy and fuel costs driven by increased power generation as a
result of increased underground mining activities.
* Increased consumables mainly driven by higher explosive and underground
support materials.
Capitalised direct mining costs, consisting of capitalised development costs
and investment in inventory is made up as follows:
(US$'000) Three months ended 30 June Six months ended 30
June
(Unaudited) 2018 2017 2018 2017
Capitalised direct mining
costs
Capitalised development (11,222) (25,962) (25,710) (56,530)
costs
Drawdown/ (investment) in 7,965 (61,420) 6,519 (86,122)
inventory
Total capitalised direct (3,257) (87,382) (19,191) (142,652)
mining costs
Total capitalised direct mining costs were 87% lower than H1 2017, primarily
driven by a drawdown in ore inventory at Buzwagi in H1 2018 compared to the
build-up of concentrate ounces at Bulyanhulu and Buzwagi in H1 2017, combined
with a decrease in capitalised development costs mainly driven by the cessation
of development activities at Bulyanhulu and the lower stripping costs at North
Mara, as a result of a lower strip ratio at the Nyabirama pit.
Central costs
Total central costs amounted to US$9.9 million for H1 2018, a significant
increase on H1 2017 (US$4.7 million) mainly driven by a lower non-cash share
based payment revaluation credit compared to the prior period which saw a
greater decrease in the share price and share price performance compared to the
global mining index, impacting on the valuation of future share-based payment
liabilities to employees. This was partly offset by a 10% decrease in corporate
administration costs mainly as a result of lower labour costs across all
corporate offices and the increased focus on cost control.
Three months ended 30 June Six months ended 30
(US$'000) June
(Unaudited) 2018 2017 2018 2017
Corporate administration 5,846 5,878 11,304 12,520
Share-based payments 121 (18,209) (1,406) (7,785)
Total central costs 5,967 (12,331) 9,898 4,735
Exploration and evaluation costs
Exploration and evaluation costs of US$7.2 million were incurred in H1 2018,
55% lower than the US$16.2 million spent in H1 2017 in line with the reduced
budget for the year.
Corporate social responsibility expenses
Corporate social responsibility costs incurred for H1 2018 amounted to US$3.1
million compared to the prior year of US$3.7 million. Corporate social
responsibility overheads and central initiatives in H1 2018 amounted to US$1.6
million and were lower than US$2.3 million in H1 2017. General community
projects funded from the Acacia Maendeleo Fund amounted to US$1.5 million, in
line with H1 2017 (US$1.4 million).
Impairment charges
After the reporting period, OreCorp, Acacia's JV partner in the Nyanzaga
Project, has executed its option under the earn-in agreement to increase its
stake to 51% in the project through the payment of US$3.0 million to Acacia.
Further to that, Acacia has signed a conditional agreement to transfer its
remaining 49% stake to OreCorp for US$7.0 million and a net smelter royalty
capped at US$15 million based on future production. This has resulted in Acacia
recording an impairment charge of US$24.2 million for the Nyanzaga Project.
Refer to Note 6 of the condensed consolidated financial information for further
details.
Other charges
Other charges in H1 2018 amounted to US$3.6 million, compared to US$19.6
million in H1 2017. The main contributors include Bulyanhulu reduced operations
costs not included within all-in-sustaining costs of US$16.6 million, legal
fees driven by the concentrate export ban and historical outstanding tax
matters of US$15.9 million, foreign exchange losses of US$4.7 million and
once-off legal settlement costs relating to a North Mara village royalty
settlement of US$3.0 million. The charges were largely offset by the gain on
the sale of a non-core mineral royalty of US$45.0 million.
Finance expense and income
Finance expense of US$8.2 million for H1 2018 was 51% higher than in H1 2017
(US$5.5 million), mainly driven by the premium paid on gold put options. The
key components were the premium paid on gold put options of US$3.0 million,
accretion expenses of US$1.8 million relating to the discounting of the
environmental rehabilitation liability, US$1.2 million relating to the
servicing of the US$150 million undrawn revolving credit facility and borrowing
costs relating to the Bulyanhulu CIL facility of US$1.1 million which were
lower than the prior year due to a lower outstanding facility following capital
repayments. Other costs include bank charges and interest on bank accounts.
Finance income relates predominantly to interest charged on non-current
receivables and interest received on money market funds. Refer to note 8 of the
condensed financial information for details.
Taxation matters
The total income tax charge of US$25.8 million was lower than the prior year
expense of US$37.0 million. The current tax charge was predominantly made up of
current year income tax for North Mara, driven by year to date profitability,
in combination with deferred tax charges of US$5.9 million (2017: US$5.2
million) which reflects movements in temporary differences. Included in the
current year tax expense is a 2017 final North Mara tax charge of US$3.1
million. The effective tax rate in H1 2018 amounted to 46% compared to 37% in
H1 2017.
During H1 2018, we made provisional corporate tax payments of US$19.1 million
relating to North Mara, which is based on the pro rata portion of North Mara's
expected full year profitability. These provisional corporate tax payments have
been offset against the indirect tax receivable covered under the Memorandum of
Settlement entered into with the Tanzanian Government in 2011, and as a result,
were not paid in cash. In addition, during H1 2018 we have also offset US$4.2
million relating to the 2017 final corporate tax payment.
Net earnings and earnings per share
As a result of the factors discussed above, net earnings for H1 2018 were
US$30.9 million, against the prior year earnings of US$62.5 million.
Earnings per share for H1 2018 amounted to US7.5 cents, a decrease of US7.8
cents from the prior year earnings per share of US15.3 cents. The decrease was
driven by the lower earnings, with no change in the underlying issued shares.
Adjusted net earnings and adjusted earnings per share
Adjusted net earnings for the first half was US$13.5 million compared to
US$65.9 million in H1 2017. Net earnings in the periods as described above have
been adjusted for the impact of items such as impairment charges, restructuring
costs, gain on the sale of a non-core mineral royalty and once-off legal
settlements. Refer to page 26 for reconciliation between net earnings and
adjusted net earnings.
Adjusted earnings per share for H1 2018 amounted to US3.3 cents, a decrease of
US12.8 cents from H1 2017 adjusted earnings per share of US16.1 cents.
Financial position
Acacia had cash and cash equivalents on hand of US$120.1 million as at 30 June
2018 (US$80.5 million as at 31 December 2017) with net cash of US$63.3 million,
up by US$53.8 million from 31 December 2017. The Group's cash and cash
equivalents are with counterparties whom the Group considers to have an
appropriate credit rating. Location of credit risk is determined by physical
location of the bank branch or counterparty. Investments are held mainly in
United States dollars, with cash and cash equivalents in other foreign
currencies maintained for operational requirements.
During 2013, a US$142 million facility ("Facility") was put in place to fund
the bulk of the costs of the construction of the Bulyanhulu tailings
retreatment project ("Project"). The Facility is collateralised by the Project,
and has a term of seven years with a spread over Libor of 250 basis points. The
seven year Facility is repayable in equal instalments (bi-annual) over the term
of the Facility, after a two year repayment holiday period. The interest rate
has been fixed at 3.6% through the use of an interest rate swap. The full
facility of US$142 million was drawn in 2013. During 2018, the 6th repayment
amounting to US$14.2 million in total was made. At 30 June 2018, the
outstanding capital balance is US$56.8 million (31 December 2017: US$71.0
million).
The above complements the existing undrawn revolving credit facility of US$150
million, which runs until November 2019.
The net book value of property, plant and equipment increased from US$771
million as at 31 December 2017 to US$774 million as at 30 June 2018 mainly as a
result of capital expenditure of US$47.4 million as explained below, offset by
depreciation charges of US$43.6 million. Refer to note 13 to the condensed
financial information for further details.
The current portion of inventories increased from US$291.9 million as at 31
December 2017 to US$296.6 million as at 30 June 2018. This was mainly due to a
build-up in supplies inventory and an increase in finished gold doré on hand at
North Mara, partly offset by a decrease in ore stockpiles due to Buzwagi
transitioning to a low-grade stockpile processing operation and a decrease in
gold in circuit inventory at North Mara. Total finished gold ounces on hand of
approximately 200,000 ounces as at 30 June 2018 comprised approximately 186,000
ounces of gold in concentrate and 14,000 ounces of gold in doré.
Total indirect tax receivables increased from US$170.7 million as at 31
December 2017 to US$172.5 million as at 30 June 2018. The increase was mainly
due to VAT paid which was not refunded of US$28.3 million, partly offset by
provisional corporate tax prepayments of US$19.1 million, a final corporate tax
payment of US$4.2 million at North Mara and foreign exchange revaluation losses
of US$3.2 million.
The net deferred tax position was an asset of US$64.0 million as at 30 June
2018 compared to the asset of US$70.0 million as at 31 December 2017. This was
mainly as a result of temporary differences at all sites in the current period.
Net assets increased from US$1.12 billion as at 31 December 2017 to US$1.15
billion as at 30 June 2018. The increase reflects the current year income of
US$30.9 million.
Cash flow generation and capital management
Cash flow
(US$000) Three months ended 30 June Six months ended 30
June
(Unaudited) 2018 2017 2018 2017
Cash generated from/ (used in) 34,912 (23,909) 58,866 1,315
operating activities
Cash used in investing activities (21,472) (47,250) (4,511) (94,786)
Cash used in financing activities - (34,447) (14,200) (48,585)
Increase/ (decrease) in cash 13,440 (105,606) 40,155 (142,056)
Foreign exchange difference on 92 50 (579) 151
cash
Opening cash balance 106,557 281,442 80,513 317,791
Closing cash balance 120,089 175,886 120,089 175,886
Cash flow from operating activities was US$58.9 million for H1 2018, an
increase of US$57.6 million from H1 2017 (US$1.3 million) mainly due to lower
working capital outflows of US$24.2 million compared to outflows of US$159.7
million in H1 2017 as a result of the build-up in gold in concentrate ounces on
hand in H1 2017, partly offset by lower adjusted EBITDA (US$74.6 million).
The working capital outflow relates to a net increase in indirect and corporate
tax receivables of US$28.3 million, mainly driven by the lack of VAT refunds,
partly offset by an increase in trade and other payables of US$4.4 million.
Cash flow used in investing activities was US$4.5 million for H1 2018, a
decrease of US$90.3 million compared to H1 2017 (US$94.8 million), driven by
the proceeds of the sale of a non-core royalty of US$45.0 million, lower
capitalised development and sustaining capital expenditure at Bulyanhulu due to
reduced operations, and lower capitalised stripping costs at North Mara.
A breakdown of total capital and other investing capital activities for 2018 is
provided below:
(US$'000) Six months ended 30 June
(Unaudited) 2018 2017
Sustaining capital (18,607) (30,204)
Capitalised development (27,932) (64,336)
Expansionary capital (5,202) (5,522)
Total cash capital (51,741) (100,064)
Sale of mineral royalty 45,000 -
Reclamation spend (3,258) (250)
Non-current asset movement1 5,488 5,528
Cash used in investing activities (4,511) (94,786)
Capital expenditure reconciliation:
Total cash capital 51,741 100,064
Land purchases 130 1,247
Movement in capital accruals (585) (8,855)
Capital expenditure 51,286 92,456
Land purchases classified as long term (130) (1,247)
prepayments
Non-cash rehabilitation asset adjustment (2,539) 134
Other non-cash capital expenditure (1,244) (1)
Total capital expenditure per segment note 47,373 91,342
1 Non-current asset movements relates to the movement in Tanzania government
receivables, other long term assets
Sustaining capital
Sustaining capital expenditure includes investment in mobile equipment and
component change-outs at North Mara (US$8.9 million), investment in fixed
equipment and mining infrastructure at North Mara (US$2.4 million), expansion
of the tailings storage facility (US$1.8 million) which started late 2017 at
Buzwagi and the upgrade of the water management ponds and essential plant
upgrade costs US$1.0 million at Bulyanhulu.
Capitalised development
Capitalised development includes North Mara capitalised stripping costs
(US$18.2 million) and capitalised underground development (US$9.7 million).
Expansionary capital
Expansionary capital expenditure consisted mainly of capitalised expansion
drilling at North Mara (US$3.7 million) and Bulyanhulu optimisation studies
(US$0.8 million) and processing facilities upgrades (US$0.6 million).
Non-cash capital
Non-cash capital was a negative US$4.4 million and consisted mainly of a
decrease in capital accruals, non-cash rehabilitation asset adjustments (US$2.5
million) driven by changes in US risk free rates impacting discount rates and
foreign exchange losses on translation of asset balances.
Other investing capital
Other investing capital included the sale of a non-core mineral royalty for
proceeds of US$45.0 million, offset by rehabilitation expenditure incurred at
North Mara and Buzwagi of US$3.3 million and the movement in other non-current
assets of US$5.5 million. During H1 2018 North Mara incurred negligible land
purchases totalling US$0.1 million (H1 2017: US$1.2 million).
Cash flow used in financing activities for H1 2018 of US$14.2 million, a
decrease of US$34.4 million from US$48.6 million in H1 2017, mainly as a result
of a final 2017 dividend not being paid. A payment of the 6th instalment of the
borrowings for the Bulyanhulu CIL facility totalling US$14.2 million was made
in Q1 2018.
Dividend
As a result of the uncertainty around a resolution of the on-going disputes
between the Company and the GoT and current liquidity requirements, the Board
of Directors has not recommended an interim dividend for 2018.
Significant judgements in applying accounting policies and key sources of
estimation uncertainty
Many of the amounts included in the condensed consolidated financial
information require management to make judgements and/or estimates. These
judgements and estimates are continuously evaluated and are based on
management's experience and best knowledge of the relevant facts and
circumstances, but actual results may differ from the amounts included in the
condensed consolidated financial information included in this release.
Information about such judgements and estimation is included in the accounting
policies and/or notes to the consolidated financial statements, and the key
areas are summarised below.
Areas of judgement and key sources of estimation uncertainty that have the most
significant effect on the amounts recognised in the condensed consolidated
financial statements include:
* Estimates of the quantities of proven and probable gold and copper
reserves;
* Estimates included within the life-of-mine planning such as the timing and
viability of processing of long term stockpiles;
* The capitalisation of production stripping costs;
* The capitalisation of exploration and evaluation expenditures;
* Review of goodwill, tangible and intangible assets' carrying value, the
determination of whether a trigger for an impairment review exist, whether
these assets are impaired and the measurement of impairment charges or
reversals, and also includes the judgement of reversal of any previously
recorded impairment charges;
* The estimated fair values of cash generating units for impairment tests,
including estimates of future costs to produce proven and probable
reserves, future commodity prices, foreign exchange rates and discount
rates;
* The estimated useful lives of tangible and long-lived assets and the
measurement of depreciation expense;
* Recognition of a provision for environmental rehabilitation and the
estimation of the rehabilitation costs and timing of expenditure;
* Whether to recognise a liability for loss contingencies and the amount of
any such provision;
* Whether to recognise a provision for accounts receivable, and in particular
the indirect tax receivables from the Tanzanian Government, a provision for
obsolescence on consumables inventory and the impact of discounting the
non-current element of the indirect tax receivable;
* Recognition of deferred income tax assets, amounts recorded for uncertain
tax positions, the measurement of income tax expense and indirect taxes;
* Determination of the cost incurred in the productive process of ore
stockpiles, gold in process, gold doré/bullion and concentrate, as well as
the associated net realisable value and the split between the long term and
short term portions;
* Determination of fair value of derivative instruments;
* Determination of fair value of share options and cash-settled share-based
payments;
* Judgements around the prospect, timing and final terms of any comprehensive
negotiated settlement that the Company might be able to agree with the
Government of Tanzania, including by reference to the key terms of the
Framework announcements made in October 2017 by Barrick and the GoT and
including judgements around the timing and quantum of any cash outflows
that might be made in respect of historical tax matters; and
* Judgements around the timing of Bulyanhulu's restart and production ramp
up.
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 but 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$000) Three months ended 30 June Six months ended 30
June
(Unaudited) 2018 2017 2018 2017
Gold revenue 175,919 160,231 331,665 385,859
Add: Realised gold hedge gains 1,662 - 1,662 -
Net gold revenue 177,581 160,231 333,327 385,859
Gold sold (ounces) 134,090 127,694 251,045 312,438
Net average realised gold price 1,324 1,255 1,328 1,235
(US$/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 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 30 Six months ended 30
(US$'000) June June
(Unaudited) 2018 2017 2018 2017
Total cost of sales 112,826 94,571 221,226 243,967
Deduct: depreciation and (21,257) (23,417) (45,247) (57,959)
amortisation*
Add: realised gains on gold 1,662 - 1,662 -
hedges
Deduct: Co-product revenue (946) 2,468 (1,717) (5,805)
Total cash cost 92,285 73,622 175,924 180,203
Total ounces sold 134,090 127,694 251,045 312,438
Total cash cost per ounce 688 577 701 577
sold (US$/ounce)
* Depreciation and amortisation includes the depreciation component of the cost
of inventory sold.
All-in sustaining cost (AISC) per ounce sold 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 30 June 2018 Three months ended 30 June 2017
(US$/oz sold) Bulyanhulu North Buzwagi Group* Bulyanhulu North Buzwagi Group*
Mara Mara
Cash cost per 584 570 964 688 813 476 705 577
ounce sold
Corporate 35 32 24 44 44 21 81 46
administration
Share based - - - 1 (38) (13) (78) (143)
payments
Rehabilitation 28 8 6 9 23 10 11 13
CSR expenses 17 8 8 11 9 10 (3) 12
Capitalised - 147 - 92 547 184 - 239
development
Sustaining 73 96 23 73 160 70 46 91
capital
Total AISC 737 861 1,025 918 1,558 758 762 835
* The group total includes a cost of US$18/oz in Q2 2018 mainly related to
corporate costs incurred, and a credit of US$95/oz in Q2 2017.
(Unaudited) Six months ended 30 June 2018 Six months ended 30 June 2017
(US$/oz sold) Bulyanhulu North Buzwagi Group* Bulyanhulu North Buzwagi Group*
Mara Mara
Cash cost per 646 588 964 701 795 441 697 577
ounce sold
Corporate 43 37 32 45 36 23 48 40
administration
Share based (21) (1) (3) (6) (4) (2) (6) (25)
payments
Rehabilitation 28 8 6 9 16 10 7 11
CSR expenses 25 10 8 13 8 8 7 12
Capitalised 13 176 - 112 382 187 - 206
development
Sustaining 93 85 30 71 107 69 17 72
capital
Total AISC 827 903 1,037 945 1,340 736 770 893
* The group total includes a cost of US$9/oz in H1 2018 mainly related to
corporate costs incurred, and a credit of US$5/oz in H1 2017.
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.
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.
A reconciliation between net profit for the period and EBITDA is presented
below:
(US$000) Three months ended 30 June Six months ended 30 June
(Unaudited) 2018 2017 2018 2017
Net profit/(loss) for the period (19,118) 35,716 30,877 62,543
Plus income tax expense/(credit) 17,695 17,819 25,780 37,002
Plus depreciation and amortisation1 21,257 23,417 45,247 57,959
Plus: impairment charges/write-offs2 24,234 - 24,234 -
Plus finance expense 4,404 3,216 8,240 5,454
Less finance income (676) (946) (808) (1,543)
EBITDA 47,796 79,222 133,570 161,415
Adjusted for:
Restructuring costs - 2,477 - 3,304
Gain on sale of non-core mineral - - (45,000) -
royalty
One off legal settlements - 1,500 3,030 1,500
Adjusted EBITDA 47,796 83,199 91,600 166,219
1 Depreciation and amortisation includes the depreciation component of the cost
of inventory sold.
2 Refer to note 6 of the condensed financial information.
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.
EBIT is a non-IFRS financial measure and reflects EBITDA adjusted for
depreciation and amortisation and 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 30 June Six months ended 30
June
(Unaudited) 2018 2017 2018 2017
Net earnings/(loss) (19,118) 35,716 30,877 62,543
Adjusted for:
Gain on sale of non-core mineral - - (45,000) -
royalty
Restructuring cost - 2,477 - 3,304
Impairment charges/write-offs1 24,234 - 24,234 -
Once-off legal settlements2 - 1,500 3,030 1,500
Tax impact of the above - (1,193) 378 (1,441)
Adjusted net earnings 5,116 38,500 13,519 65,906
1 The impairment charge was recognised as a result of the revaluation of
Acacia's remaining stake in the Nyanzaga Project.
2 Once-off legal settlements relate to the North Mara royalty settlement.
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. It is calculated by deducting total borrowings
from cash and cash equivalents.
Mining statistical information
The following describes certain line items used in the Acacia Group's
discussion of key performance indicators:
* Open pit material mined - measures in tonnes the total amount of open pit
ore and waste mined.
* Underground ore tonnes hoisted - measures in tonnes the total amount of
underground ore mined and hoisted.
* 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.
Risk Review
We have made a number of further developments in the identification and
management of our risk profile over the course of H1 2018. Our principal risks
have continued to fall within four broad categories: strategic risks, financial
risks, external risks and operational risks. Generally, the makeup of our
principal risks has not significantly changed from that published in the 2017
Annual Report. However, there have been changes in certain risk trends and
impact assessments as a result of the challenges in our operating environment
in Tanzania, particularly as a result of ongoing disputes with the Government
of Tanzania, and developments or trends affecting the wider global economy and/
or the mining industry. As a result of our mid-year assessment, we continue to
view our principal risks for the remainder of 2018 as relating to the
following:
* Political, legal and regulatory developments
* Single country risk
* Attraction and retention of employees
* Significant changes to commodity prices
* Operational security and theft
* Liquidity
* Significant fraud and corruption
* Reserve and resource estimates
* Environmental hazards and rehabilitation
* Safety risks relating to mining operations
Further details as regards our Principal Risks and Uncertainties and risk
assessments conducted in respect thereof are provided as part of the 2017
Annual Report and Accounts.
Directors' Responsibility Statement
The Directors confirm that, to the best of their knowledge, the condensed
consolidated interim financial information has been prepared in accordance with
IAS 34 as adopted by the European Union. The half-year management report
includes a fair review of the information required by DTR 4.2.7R and DTR
4.2.8R, namely:
* an indication of important events that have occurred during the first six
months of the financial year and their impact on the condensed consolidated
interim financial information, and a description of the principal risks and
uncertainties for the remaining six months of the financial year; and
* material related-party transactions in the first six months of the
financial year and any material changes in the related party transactions
described in the last Annual Report.
The Directors of Acacia Mining plc are listed in the Acacia Mining plc Annual
Report for 31 December 2017. A list of current Directors is maintained on the
Acacia Mining plc Group website: www.acaciamining.com.
On behalf of the Board
Peter Geleta, Interim Chief Executive Officer
Kelvin Dushnisky, Chairman
Independent review report to Acacia Mining plc
Report on the condensed consolidated interim financial information
Our conclusion
We have reviewed Acacia Mining plc's condensed consolidated interim financial
statements (the "interim financial statements") in the interim results of
Acacia Mining plc for the 6 month period ended 30 June 2018. Based on our
review, nothing has come to our attention that causes us to believe that the
interim financial statements are not prepared, in all material respects, in
accordance with International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
Emphasis of Matter - Impact of mineral concentrate export ban
In forming our conclusion on the interim financial statements, which is not
modified, we have considered the adequacy of the disclosures made in note 2 to
the financial statements concerning the impact of the mineral concentrate
export ban and negotiations with the Government of Tanzania on the group's and
parent company's assets, liabilities and cash flows. In addition, these
conditions, along with the other matters explained in note 2 to the interim
financial statements, indicate the existence of a material uncertainty which
may cast significant doubt about the group's and parent company's ability to
continue as a going concern, should the assumptions on which the disclosures
are made in note 2 prove not to be correct. The interim financial statements do
not include the adjustments that would result if the group and parent company
were unable to continue as a going concern.
What we have reviewed
The interim financial statements comprise:
?the consolidated balance sheet as at 30 June 2018;
?the consolidated income statement and consolidated statement of comprehensive
income for the period then ended;
?the consolidated statement of cash flows for the period then ended;
?the consolidated statement of changes in equity for the period then ended; and
?the explanatory notes to the interim financial statements.
The interim financial statements included in the interim results have been
prepared in accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
As disclosed in note 2 to the interim financial statements, the financial
reporting framework that has been applied in the preparation of the full annual
financial statements of the Group is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The interim results, including the interim financial statements, is the
responsibility of, and has been approved by, the directors. The directors are
responsible for preparing the interim results in accordance with the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Our responsibility is to express a conclusion on the interim financial
statements in the interim results based on our review. This report, including
the conclusion, has been prepared for and only for the company for the purpose
of complying with the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into whose
hands it may come save where expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
statements consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express an
audit opinion.
We have read the other information contained in the interim results and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
19 July 2018
a. The maintenance and integrity of the Acacia Mining plc website is the
responsibility of the directors; the work carried out by the auditors does
not involve consideration of these matters and, accordingly, the auditors
accept no responsibility for any changes that may have occurred to the
interim financial statements since they were initially presented on the
website.
b. Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdictions.
Condensed Financial Information
Consolidated income statement
For the six months ended For the year
30 June ended 31
December
(Unaudited) (Unaudited) (Audited)
(US$'000) Notes 2018 2017 2017
Revenue 333,382 391,664 751,515
Cost of sales (221,226) (243,967) (458,447)
Gross profit 112,156 147,697 293,068
Corporate administration (11,304) (12,520) (26,913)
Share-based payments 1,406 7,785 8,236
Exploration and evaluation costs (7,231) (16,150) (24,829)
Corporate social responsibility expenses (3,083) (3,739) (8,213)
Impairment charges 6 (24,234) - (850,182)
Other charges 7 (3,621) (19,617) (90,370)
Profit/ (loss) before net finance expense 64,089 103,456 (699,203)
and taxation
Finance income 8 808 1,543 1,944
Finance expense 8 (8,240) (5,454) (12,407)
Profit/ (loss) before taxation 56,657 99,545 (709,666)
Tax (expense)/credit 9 (25,780) (37,002) 2,272
Net profit/ (loss) for the period 30,877 62,543 (707,394)
Earnings/ (loss) per share (cents):
Basic earnings/ (loss) per share (cents) 10 7.5 15.3 (172.5)
Diluted earnings/ (loss) per share (cents) 10 7.5 15.2 (172.5)
The notes on pages 37 to 55 are an integral part of this financial information.
Consolidated statement of comprehensive income
For the six months ended For the year
30 June ended 31
December
(Unaudited) (Unaudited) (Audited)
(US$'000) 2018 2017 2017
Net profit/ (loss) for the period 30,877 62,543 (707,394)
Other comprehensive income:
Items that may be subsequently reclassified
to profit or loss:
Changes in fair value of cash flow hedges 72 52 108
Total comprehensive income/ (loss) for the 30,949 62,595 (707,286)
period
The notes on pages 37 to 55 are an integral part of this financial information.
Consolidated balance sheet As at As at As at
30 June 30 June 31 December
(Unaudited) (Unaudited) (Audited)
(US$'000) Notes 2018 2017 2017
ASSETS
Non-current assets
Goodwill and intangible assets 12 48,149 216,190 82,383
Property, plant and equipment 13 774,353 1,465,309 770,574
Deferred tax assets 171,838 3,208 169,513
Non-current portion of inventory 15 129,318 115,775 133,550
Derivative financial instruments 14 739 770 907
Other non-current assets 16 161,051 58,474 180,708
1,285,448 1,859,726 1,337,635
Current assets
Inventories 15 296,633 280,692 291,880
Trade and other receivables 16,890 12,039 18,085
Derivative financial instruments 14 1,692 601 2,619
Other current assets 16 105,379 190,868 70,155
Cash and cash equivalents 120,089 175,886 80,513
540,683 660,086 463,252
Non-current assets classified as held for sale 17 10,000 - -
Total assets 1,836,131 2,519,812 1,800,887
EQUITY AND LIABILITIES
Share capital and share premium 929,199 929,199 929,199
Other reserves 222,742 961,912 191,793
Total owners' equity 1,151,941 1,891,111 1,120,992
Total equity 1,151,941 1,891,111 1,120,992
Non-current liabilities
Borrowings 18 28,400 56,800 42,600
Deferred tax liabilities 107,806 148,341 99,533
Derivative financial instruments 14 - 1,068 -
Provisions 124,461 147,314 127,028
Other non-current liabilities 4,113 4,778 5,038
264,780 358,301 274,199
Current liabilities
Trade and other payables 370,797 228,942 350,450
Borrowings 18 28,400 28,400 28,400
Derivative financial instruments 14 380 1,114 481
Provisions 19,213 9,336 24,650
Other current liabilities 620 2,608 1,715
419,410 270,400 405,696
Total liabilities 684,190 628,701 679,895
Total equity and liabilities 1,836,131 2,519,812 1,800,887
The notes on pages 37 to 55 are an integral part of this financial information.
Consolidated statement of changes in equity
Notes Share Share Other Cash flow Share
capital premium distributable hedging option
reserve reserve reserve
(US$'000)
Balance at 31 December 2016 62,097 867,102 1,368,713 559 3,953
(Audited)
Total comprehensive income for - - - 52 -
the period
Dividends to equity holders of - - - - -
the Company
Share option grants - - - - 6
Balance at 30 June 2017 62,097 867,102 1,368,713 611 3,959
(Unaudited)
Total comprehensive loss for the - - - 56 -
period
Share option grants - - - - (238)
Dividends to equity holders of - - - - -
the Company
Balance at 31 December 2017 62,097 867,102 1,368,713 667 3,721
(Audited)
Total comprehensive income for - - - 72 -
the period
Balance at 30 June 2018 62,097 867,102 1,368,713 739 3,721
(Unaudited)
Notes Accumulated Total Total non- Total
losses owners' controlling equity
equity interests
(US$'000)
Balance at 31 December 2016 (439,529) 1,862,895 - 1,862,895
(Audited)
Total comprehensive income for the 62,543 62,595 - 62,595
period
Dividends to equity holders of the (34,385) (34,385) - (34,385)
Company
Share option grants - 6 - 6
Balance at 30 June 2017 (Unaudited) (411,371) 1,891,111 - 1,891,111
Total comprehensive loss for the (769,937) (769,881) - (769,881)
period
Share option grants - (238) - (238)
Dividends to equity holders of the - - - -
Company
Balance at 31 December 2017 (1,181,308) 1,120,992 - 1,120,992
(Audited)
Total comprehensive income for the 30,877 30,949 - 30,949
period
Balance at 30 June 2018 (Unaudited) (1,150,431) 1,151,941 - 1,151,941
The notes on pages 37 to 55 are an integral part of this financial information.
Consolidated statement of cash flows
For the six months For the
ended year ended
30 June 31 December
(US$'000) Notes (Unaudited) (Unaudited) (Audited)
2018 2017 2017
Cash flows from operating activities
Net profit/ (loss) profit for the period 30,877 62,543 (707,394)
Adjustments for:
Tax expense/(credit) 25,780 37,002 (2,272)
Depreciation and amortisation 43,594 69,722 125,968
Finance items 7,432 3,911 10,463
Impairment charges 24,234 - 850,182
Gain from sale of mineral royalty (45,000) (1,753) (1,753)
Loss on disposal of property, plant and - - 123
equipment
Cash settlement of share options - - (259)
Working capital adjustments 19 (24,162) (159,697) (313,091)
Other non-cash items 19 1,749 (8,209) 22,160
Cash generated from/ (used in) operations before 64,504 3,519 (15,873)
interest and tax
Finance income 808 1,543 1,944
Finance expenses (6,446) (3,747) (9,043)
Net cash generated by/ (used in) operating 58,866 1,315 (22,972)
activities
Cash flows used in investing activities
Purchase of property, plant and equipment (51,741) (100,064) (157,408)
Movement in other assets 5,376 3,746 6,856
Proceeds from sale of mineral royalty 45,000 1,753 1,753
Other investing activities 19 (3,146) (221) (2,912)
Net cash used in investing activities (4,511) (94,786) (151,711)
Cash flows used in financing activities
Loans paid (14,200) (14,200) (28,400)
Dividends paid - (34,385) (34,385)
Net cash used in financing activities (14,200) (48,585) (62,785)
Net increase/ (decrease) in cash and cash 40,155 (142,056) (237,468)
equivalents
Net foreign exchange difference (579) 151 190
Cash and cash equivalents at the beginning of the 80,513 317,791 317,791
period
Cash and cash equivalents at the end of the 120,089 175,886 80,513
period
The notes on pages 37 to 55 are an integral part of this financial information.
Notes to the condensed financial information
1. General Information
Acacia Mining plc, formerly African Barrick Gold plc (the "Company", "Acacia"
or collectively with its subsidiaries the "Group") was incorporated on 12
January 2010 and re-registered as a public limited company on 12 March 2010
under the Companies Act 2006. It is registered in England and Wales with
registered number 7123187.
On 24 March 2010 the Company's shares were admitted to the Official List of the
United Kingdom Listing Authority ("UKLA") and to trading on the Main Market of
the London Stock Exchange, hereafter referred to as the Initial Public Offering
("IPO"). The address of its registered office is No.1 Cavendish Place, London,
W1G 0QF.
Barrick Gold Corporation ("Barrick") currently owns approximately 63.9% of the
shares of the Company and is the ultimate parent and controlling party of the
Group. The financial statements of Barrick can be obtained from
www.barrick.com.
The condensed consolidated interim financial information for the six months
ended 30 June 2018 was approved for issue by the Board of Directors of the
Company on 19 July 2018. Statutory accounts for the year ended 31 December 2017
were approved by the Board of Directors on 6 March 2018 and delivered to the
Registrar of Companies. The report of the auditors' on those accounts was
unqualified, but did contain an emphasis of matter paragraph regarding the
impact of the mineral concentrate export ban and negotiation with the
Government of Tanzania, and did not contain any statement under section 498 of
the Companies Act 2006. The condensed consolidated interim financial
information has been reviewed, not audited. The condensed consolidated interim
financial information does not comprise statutory accounts within the meaning
of section 434 of the Companies Act 2006.
The Group's primary business is the mining, processing and sale of gold. The
Group has three operating mines located in Tanzania. The Group also has a
portfolio of exploration projects located across Africa.
2. Basis of Preparation of the condensed interim financial information
The condensed consolidated interim financial information for the six months
ended 30 June 2018 has been prepared in accordance with the Disclosure and
Transparency Rules of the Financial Conduct Authority and with IAS 34, 'Interim
Financial Reporting' as adopted by the European Union. The condensed
consolidated interim financial information should be read in conjunction with
the annual financial statements for the year ended 31 December 2017, which have
been prepared in accordance with IFRS as adopted by the European Union. The
condensed consolidated interim financial information has been prepared under
the historical cost basis, as modified by the revaluation of financial assets
and financial liabilities (including derivative instruments) at fair value
through profit or loss. The financial information is presented in US dollars
(US$) and all monetary results are rounded to the nearest thousand (US$'000)
except when otherwise indicated.
Acacia Group's business activities, together with factors likely to affect its
future development, performance and position, are set out in the operational
and financial review sections of this interim results release. The financial
position of the Acacia Group, its cash flows, liquidity position and borrowing
facilities are described in the operating and financial review sections of this
interim results release.
At 30 June 2018, the Group had cash and cash equivalents of US$120 million with
a further US$150 million available under the undrawn revolving credit facility
which remains in place until November 2019. Total borrowings at the end of the
period amounted to US$57 million, of which US$28 million will be paid in the
next 12 months. Total indirect tax receivables at the end of the period
amounted to US$173 million, of which US$54 million is included in other current
assets and are expected to be received or recovered within 12 months. The
refunds remain dependent on processing and payments of refunds by the
Government of Tanzania. Furthermore, included in working capital is finished
gold contained in concentrate of approximately 186,000 ounces, approximately
12.1 million pounds of copper contained in concentrate and approximately
159,000 ounces of silver contained in concentrate.
In assessing the Acacia Group's going concern status the Directors have taken
into account the impact of the concentrate export ban on on-going operations as
well as the following factors and assumptions: the current cash position; the
latest mine plans, the short-term gold price, and Acacia Group's capital
expenditure and financing plans. In addition, the Directors have considered a
range of scenarios around the various potential outcomes for the resolution of
the current operating challenges in Tanzania in the circumstances, including
the cash flow impact of an extended concentrate export ban; and the potential
impacts of the timing and final terms of any comprehensive settlement which
might be approved by the Company which reflect key terms of the framework
announcements made by Barrick and the GoT in October 2017, including the
lifting of the concentrate export ban and staged payments of US$300 million
relating to historical tax matters. In addition, the Directors have assumed
that the Group will not be required to settle its current outstanding borrowing
obligations and will repay these in accordance with the current terms of the
relevant agreements. After making appropriate enquiries and considering the
uncertainties described above, the Directors consider that it is appropriate to
adopt the going concern basis in preparing the condensed consolidated interim
financial information, however have concluded that the combination of the above
circumstances represents a material uncertainty that may cast significant doubt
on the Group's ability to continue as a going concern. The condensed
consolidated interim financial information does not include any adjustments
that would result if the Group was unable to continue as a going concern should
the assumptions referred to above prove not to be correct.
The auditors have included an emphasis of matter within their Independent
review report on page 30, drawing attention to the material uncertainties
related to the impact of the concentrate export ban and ongoing discussions
between Barrick and the GoT on the Group's assets, liabilities and cash flows,
and have included a separate section within their Independent review report
under the heading "Emphasis of matter - Impact of mineral concentrate export
ban" detailing the matters outlined above.
3. Accounting Policies
The accounting policies adopted are consistent with those used in the Acacia
Mining plc annual financial statements for the year ended 31 December 2017. As
disclosed in those annual financial statements, IFRS 9, "Financial Instruments"
and IFRS 15, "Revenue from contracts with customers" were applicable for
financial reporting periods starting 1 January 2018 and as a result have been
adopted by the Group, however the changes have not materially affected the
Group. There are no other new standards, interpretations or amendments to
standards issued and effective for the period which materially impacted on the
Group. The following exchange rates to the US dollar have been applied:
As at Average As at Average As at Average
30 June six months 30 June six months 31 year ended
2018 ended 2017 ended December 31
30 June 30 June 2017 December
2018 2017 2017
South African rand 13.75 12.29 13.09 13.20 12.36 13.30
(US$:ZAR)
Tanzanian shilling 2,266 2,252 2,230 2,224 2,230 2,229
(US$:TZS)
Australian dollars 1.35 1.30 1.30 1.33 1.28 1.30
(US$:AUD)
UK pound (US$:GBP) 0.76 0.73 0.59 0.79 0.74 0.78
4. Estimates
The preparation of interim financial statements requires management to make
judgements, estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets and liabilities, income and
expense. Actual results may differ from these estimates. In preparing these
condensed consolidated interim financial statements, the significant judgements
made by management in applying the Group's accounting policies and the key
sources of estimation uncertainty were the same as those that applied to the
consolidated financial statements for the year ended 31 December 2017.
5. Segment Reporting
The Group has only one primary product produced in a single geographic
location, being gold produced in Tanzania. In addition the Group produces
copper and silver as a co-product. Reportable operating segments are based on
the internal reports provided to the Chief Operating Decision Maker ("CODM") to
evaluate segment performance, decide how to allocate resources and make other
operating decisions. After applying the aggregation criteria and quantitative
thresholds contained in IFRS 8, the Group's reportable operating segments were
determined to be: North Mara gold mine; Bulyanhulu gold mine; Buzwagi gold
mine; a separate Corporate and Exploration segment, which primarily consists of
costs related to other charges and corporate social responsibility expenses.
Segment results and carrying values include items directly attributable to the
segment as well as those that can be allocated on a reasonable basis. Segment
carrying values are disclosed and calculated as shareholders equity after
adding back debt and intercompany liabilities, and subtracting cash and
intercompany assets. Capital expenditures comprise of additions to property,
plant and equipment. The Group has also included segment cash costs and all-in
sustaining cost per ounce sold.
Segment information for the reportable operating segments of the Group for the
periods ended 30 June 2018, 30 June 2017 and 31 December 2017 is set out below.
For the six months ended 30 June 2018
(Unaudited) North Mara Bulyanhulu Buzwagi Other Total
(US$'000,except per ounce
amounts)
Gold revenue 210,172 26,192 95,301 - 331,665
Co-product revenue 903 446 368 - 1,717
Total segment revenue 211,075 26,638 95,669 - 333,382
Segment cash operating cost1 (94,267) (13,286) (70,088) - (177,641)
Realised gains on gold hedges 1,103 - 559 - 1,662
Corporate administration (5,919) (852) (2,340) (2,193) (11,304)
Share-based payments 194 414 212 586 1,406
Exploration and evaluation - - - (7,231) (7,231)
costs
Other charges and corporate (9,170) (18,617) (2,396) 23,479 (6,704)
social responsibility expenses
EBITDA2 103,016 (5,703) 21,616 14,641 133,570
Impairment charges - - - (24,234) (24,234)
Depreciation and amortisation4 (25,548) (18,668) (731) (300) (45,247)
EBIT2 77,468 (24,371) 20,885 (9,893) 64,089
Finance income 808
Finance expense (8,240)
Profit before taxation 56,657
Tax expense (25,780)
Net profit for the period 30,877
Capital expenditure:
Sustaining 13,552 2,109 2,181 180 18,022
Expansionary 3,668 1,534 - - 5,202
Capitalised development 27,932 - - - 27,932
45,152 3,643 2,181 180 51,156
Non-cash capital expenditure
adjustments
Reclamation asset adjustment (1,165) (1,746) 372 - (2,539)
Other non-cash capital - - - (1,244) (1,244)
expenditure
Total capital expenditure 43,987 1,897 2,553 (1,064) 47,373
Segmental cash operating cost 94,267 13,286 70,088 177,641
Deduct: co-product revenue (903) (446) (368) (1,717)
Total cash costs 93,364 12,840 69,720 175,924
Sold ounces 158,870 19,870 72,305 251,045
Cash cost per ounce sold2 588 646 964 701
Corporate administration 37 43 32 45
charges
Share-based payments (1) (21) (3) (6)
Rehabilitation - accretion and 8 28 6 9
depreciation
Corporate social responsibility 10 25 8 13
expenses
Capitalised stripping/ UG 176 13 - 112
development
Sustaining capital expenditure 85 93 30 71
All-in sustaining cost per 903 827 1,037 945
ounce sold2
Segment carrying value3 270,535 592,245 189,060 52,241 1,104,081
For the six months ended 30 June 2017
(Unaudited) North Mara Bulyanhulu Buzwagi Other Total
(US$'000,except per ounce
amounts)
Gold revenue 220,217 100,023 65,619 - 385,859
Co-product revenue 653 2,760 2,392 - 5,805
Total segment revenue 220,870 102,783 68,011 - 391,664
Segment cash operating cost1 (79,251) (67,344) (39,413) 0 (186,008)
Corporate administration (4,181) (2,937) (2,559) (2,843) (12,520)
Share-based payments 361 340 309 6,775 7,785
Exploration and evaluation - - - (16,150) (16,150)
costs
Other charges and corporate (4,204) (1,242) (6,408) (11,502) (23,356)
social responsibility expenses
EBITDA2 133,595 31,600 19,940 (23,720) 161,415
Depreciation and amortisation4 (29,009) (26,940) (1,777) (233) (57,959)
EBIT2 104,586 4,660 18,163 (23,953) 103,456
Finance income 1,543
Finance expense (5,454)
Profit before taxation 99,545
Tax expense (37,002)
Net profit for the period 62,543
Capital expenditure:
Sustaining 10,930 8,599 865 957 21,351
Expansionary 4,489 982 - 51 5,522
Capitalised development 33,282 31,054 - - 64,336
48,701 40,635 865 1,008 91,209
Non-cash capital expenditure
adjustments
Reclamation asset adjustment (56) 191 (1) - 134
Other non-cash capital - - - (1) (1)
expenditure
Total capital expenditure 48,645 40,826 864 1,007 91,342
Segmental cash operating cost 79,251 67,344 39,413 - 186,008
Deduct: co-product revenue (653) (2,760) (2,392) - (5,805)
Total cash costs 78,597 64,584 37,021 - 180,203
Sold ounces 178,130 81,214 53,094 - 312,438
Cash cost per ounce sold2 441 795 697 577
Corporate administration 23 36 48 40
charges
Share-based payments (2) (4) (6) (25)
Rehabilitation - accretion and 10 16 7 11
depreciation
Corporate social responsibility 8 8 7 12
expenses
Capitalised stripping/ UG 187 382 - 206
development
Sustaining capital expenditure 69 107 17 72
All-in sustaining cost per 736 1,340 770 893
ounce sold2
Segment carrying value3 294,744 1,281,208 142,280 97,233 1,815,465
For the year ended 31 December 2017
(Audited) North Mara Bulyanhulu Buzwagi Other Total
(US$'000,except per ounce
amounts)
Gold revenue 406,917 134,110 203,267 - 744,294
Co-product revenue 1,296 2,937 2,988 - 7,221
Total segment revenue 408,213 137,047 206,255 - 751,515
Segment cash operating cost1 (163,001) (93,521) (98,417) - (354,939)
Realised gains on gold hedges 1,294 - 1,399 - 2,693
Corporate administration (8,313) (6,314) (5,694) (6,592) (26,913)
Share-based payments 511 593 349 6,783 8,236
Exploration and evaluation - (571) - (24,258) (24,829)
costs
Other charges and corporate (13,243) (52,916) (13,605) (18,819) (98,583)
social responsibility expenses
EBITDA2 225,461 (15,682) 90,287 (42,886) 257,180
Impairment charges - (837,921) - (12,261) (850,182)
Depreciation and amortisation4 (54,826) (46,531) (4,288) (556) (106,201)
EBIT2 170,635 (900,134) 85,999 (55,703) (699,203)
Finance income 1,944
Finance expense (12,407)
Loss before taxation (709,666)
Tax expense 2,272
Net profit for the year (707,394)
Capital expenditure:
Sustaining 20,927 9,033 4,338 1,259 35,557
Expansionary 10,270 1,190 - 113 11,573
Capitalised development 61,066 39,543 - - 100,609
92,263 49,766 4,338 1,372 147,739
Non-cash capital expenditure
adjustments
Reclamation asset adjustment (2,951) (4,158) (1,978) - (9,087)
Total capital expenditure 89,312 45,608 2,360 1,372 138,652
Segmental cash operating cost 163,001 93,521 98,417 354,939
Deduct: co-product revenue (1,296) (2,937) (2,988) (7,221)
Total cash costs 161,705 90,584 95,429 347,718
Sold ounces 324,455 107,855 160,552 592,861
Cash cost per ounce sold2 498 840 594 587
Corporate administration 26 59 35 45
charges
Share-based payments (2) (6) (2) (14)
Rehabilitation - accretion and 11 20 5 11
depreciation
Corporate social responsibility 11 10 8 14
expenses
Capitalised stripping/ UG 188 367 - 170
development
Sustaining capital expenditure 71 83 27 62
All-in sustaining cost per 803 1,373 667 875
ounce sold2
Segment carrying value3 249,170 600,359 194,385 82,864 1,126,778
1 The CODM reviews cash operating costs for the three operating mine sites
separately from corporate administration costs and exploration costs.
Consequently, the Group has reported these costs in this manner.
2 These are non-IFRS financial performance measures with no standard meaning
under IFRS. Refer to 'Non IFRS measures' on page 24 for definitions.
3 Segment carrying values are calculated as shareholders equity after adding
back debt and intercompany liabilities, and subtracting cash and intercompany
assets and include outside shareholders' interests.
4 Depreciation and amortisation includes the depreciation component of the
cost of inventory sold.
6. Impairment Assessment
In accordance with IAS 36 "Impairment of assets" and IAS 38 "Intangible Assets"
a review for impairment of goodwill is undertaken annually, or at any time an
indicator of impairment is considered to exist, and in accordance with IAS 16
"Property, plant and equipment" a review for impairment of long-lived assets is
undertaken at any time an indicator of impairment is considered to exist.
At the end of the reporting period, there remained a number of potential
triggers for impairment testing, including the on-going uncertainty surrounding
a potential resolution of the Company's disputes with the Government of
Tanzania and the fact that the Company's market capitalisation has been lower
than its carrying value for a prolonged period of time.
As a result, the Group has undertaken a carrying value assessment of its
affected cash generating units ("CGUs") and long life intangible assets. The
assessment compared the recoverable amount of CGU to the carrying value of the
CGUs. The recoverable amount of an asset is assessed by reference to the higher
of value in use ("VIU"), being the net present value ("NPV") of future cash
flows expected to be generated by the asset, and fair value less costs to
dispose ("FVLCD"). The FVLCD of a CGU is based on an estimate of the amount
that the Group may obtain in a sale transaction on an arm's length basis. There
is no active market for the Group's CGUs. Consequently, FVLCD is derived using
discounted cash flow techniques (NPV of expected future cash flows of a CGU),
which incorporate market participant assumptions. Cost to dispose is based on
management's best estimates of future selling costs at the time of calculating
FVLCD. Costs attributable to the disposal of a CGU are not considered
significant.
For the purpose of carrying value assessments in accordance with applicable
accounting standards, Management has based its calculation of future cash flows
of the affected CGUs by reference to key terms of the Framework announcements
by Barrick and by the GoT in October 2017. Based on Barrick's announcements and
its discussions and exchanges with Acacia, it is Barrick's belief that it will
be able to agree with the GoT a detailed proposal for a comprehensive
settlement of the situation, and that this will be in a form that Barrick could
recommend to Acacia for review. Key assumptions applied in these calculations
include a 50% economic share of future economic benefits for the GoT in the
form of taxes, royalties and a 16% free carry interest in the CGUs, as well as
a US$300 million payment in relation to historical tax claims paid in
instalments as concentrate sales recommence. In addition the Framework
announcements provided for Acacia to contribute certain monies to fund specific
projects in Tanzania. With no updated information from Barrick, Management had
to make a best estimate of what can reasonably be assumed for timing of
conclusion of discussions between Barrick and the GoT and an agreement of a
proposal to be put to the Company for review, with consequent timing for the
commencement of concentrate sales and a potential Bulyanhulu start-up.
Management considers that it is reasonable for review purposes to assume a six
month prolongation (to the end of 2018) to the discussions between Barrick and
the GoT, and that in these circumstances there would be a further three to four
months delay thereafter for the resumption of concentrate sales and exports,
with concentrate revenues commencing in Q2 2019. The start-up of Bulyanhulu
production in late 2019 would be unaffected by a further six month delay in the
discussions, VAT refunds are assumed to recommence and historic carried forward
tax losses are assumed to continue to be available to offset against future
taxable profits.
Acacia has been providing support to Barrick to seek to ensure that they can
have informed discussions with the GoT, but has not received for review a
detailed proposal that has been agreed between Barrick and the GoT, and
therefore no conclusions can be made by Acacia as to whether any particular
terms of settlement would be approved by Acacia. In the meantime, Acacia
continues to reserve its rights included under our mine development agreements,
the disputes between Acacia and the GoT have not yet been resolved, and PML and
BGML remain in international arbitration with the GoT. Acacia continues to
prefer a negotiated resolution, but believes that there remain a range of
potential outcomes to the current situation.
Acacia considers that, in conducting the review of carrying values in
accordance with applicable accounting standards as at 30 June 2018, the
discount rate used in the 31 December 2017 calculation remains appropriate to
(a) reflect the uncertainty around the final terms of any comprehensive
settlement that might be agreed or whether settlement will be reached at all,
and (b) to best reflect the potential reduction in value as a result of the
proposed 16% free carry interest for the GoT which cannot otherwise be included
in calculations of value at a CGU level conducted on a 100% basis. Therefore,
for the purposes of the carrying value review of the affected CGUs, we have
kept a discount rate of 11% compared to Acacia's updated calculated weighted
average cost of capital of 6.5%.
The key economic assumptions used in the reviews during 2018 and 2017 were:
For the 6 months For the year ended
ended 31 December
30 June
2018 2017
Gold price per ounce US$1,200 US$1,200
Copper price per pound US$2.75 US$2.75
British Pound (US$:GBP) 0.76 0.76
Tanzanian Shilling (US$:TZS) 2,250 2,250
Long-term oil price per US$60 US$60
barrel
WACC 6.5% 6.5%
Discount rate used in 11% 11%
carrying value review
NPV multiples 1 1
Using the latest information received and updated with the latest understanding
of the framework agreement between the parties, the carrying values of all our
assets are still below the Company's view of its recoverable values.
After the reporting period, OreCorp, Acacia's JV partner in the Nyanzaga
Project in Tanzania, executed its option under the earn-in agreement to
increase its stake to 51% in the project through the payment of US$3.0 million
to Acacia. Further to that, Acacia has signed a conditional agreement to sell
its remaining 49% stake to OreCorp for US$7.0 million and a net smelter royalty
capped at US$15 million based on future production. In line with the applicable
accounting standard and driven by the uncertainty surrounding the current
environment, management did not recognise an asset for the right to the
royalty. As a result of the agreement, Acacia expects to recover the value of
the asset through sale and not through value in use and as such has valued the
asset at fair value less costs to sell of US$10.0 million and recorded an
impairment charge of US$24.2 million and reclassified the intangible asset to
non-current assets held for sale on the balance sheet.
The carrying value for the Group is now approximately US$1.1 billion, made up
of US$0.6 billion for Bulyanhulu, US$0.3 billion for North Mara and US$0.2
billion for Buzwagi.
The impairment charges recognised in the income statement for the periods ended
30 June 2018 and 31 December 2017 comprise the following:
For the six months For the year ended
ended 31 December
30 June
(in thousands of United States dollars) 2018 2017
Bulyanhulu - 837,921
Nyanzaga exploration property1 24,234 12,261
Gross impairment charge 24,234 850,182
Comprising:
Impairment of goodwill - 121,546
Impairment of property, plant and - 686,375
equipment
Impairment of supplies inventory - 30,000
Impairment of intangible assets 24,234 12,261
Gross impairment charge, before tax 24,234 850,182
Deferred income tax - (205,912)
Total impairment charge 24,234 644,270
1 The Nyanzaga exploration property is located in Tanzania. Acquired mineral
interests /exploration and evaluation assets are classified as intangible
assets and have indefinite useful lives.
Management's view is that the recoverable values are most sensitive to changes
in the assumptions around gold prices, discount rates and the timing of the
resolution of the export ban. As a result, sensitivity calculations were
performed for these for Bulyanhulu. The sensitivity analysis is based on a
decrease in the long-term gold price of US$100 per ounce, and an increase in
the discount rate of 1%, and a delay of resolution by 6 months.
Under these scenarios, a reasonably possible decrease in the gold price
assumption of US$100 per ounce would result in an impairment charge, net of
tax, at Bulyanhulu of approximately US$98 million.
A reasonably possible increase in discount rate of 1% would not result in any
additional impairment charges.
A further delay of six months in the resolution of the export ban will also not
result in any additional impairment charges.
Should a negotiated resolution of the current situation not eventuate, the
recoverable values of the identified CGUs may be further impacted, and these
will be reviewed at such time.
7. Other Charges
For the six months ended 30 For the
June year ended
31 December
(Unaudited) (Unaudited) (Audited)
(US$'000) 2018 2017 2017
Other expenses
Restructuring costs 844 3,304 25,077
Discounting of indirect tax receivables - - 13,276
Bulyanhulu reduced operations costs 16,636 - 24,804
Foreign exchange losses 4,683 4,583 2,710
Disallowed indirect taxes 2,085 615 -
Unrealised non-hedge derivative losses 1,150 2,431 -
Legal costs 15,931 4,601 14,421
Once off legal settlements 3,030 1,500 5,083
Project development costs - - 1,485
Government levies and charges - 535 -
Inventory write-downs - - 1,500
Other 4,262 3,801 5,573
Total 48,621 21,370 93,929
Other income
Unrealised non-hedge derivative gains - - (200)
Sale of mineral royalty (45,000) (1,753) -
Other - - (3,359)
Total (45,000) (1,753) (3,559)
Total other charges 3,621 19,617 90,370
8. Finance Income and Expenses
a) Finance income
For the six months ended 30 For the
June year ended
31 December
(Unaudited) (Unaudited) (Audited)
(US$'000) 2018 2017 2017
Interest on time deposits 794 1,443 1,841
Other 14 100 103
Total 808 1,543 1,944
b) Finance expense
For the six months ended 30 For the
June year ended
31 December
(Unaudited) (Unaudited) (Audited)
(US$'000) 2018 2017 2017
Unwinding of discount1 1,794 1,708 3,364
Revolving credit facility charges2 1,154 1,151 2,341
Interest on CIL facility 1,061 1,573 2,911
Premium on gold put options 3,042 - 2,113
Interest on finance leases - 200 204
Bank charges 676 319 583
Other 513 503 891
Total 8,240 5,454 12,407
1. The unwinding of discount is calculated on the environmental rehabilitation
provision.
2. Included in credit facility charges are the amortisation of the fees
related to the revolving credit facility as well as the monthly interest
and facility fees.
9. Tax Expense
For the six months ended For the year
30 June ended
31 December
(Unaudited) (Unaudited) (Audited)
(US$'000) 2018 2017 2017
Current tax:
Current tax on profits for the period 16,712 31,793 35,667
Adjustments in respect of prior years1 3,120 - 172,000
Total current tax 19,832 31,793 207,667
Deferred tax:
Origination and reversal of temporary differences 5,948 5,209 (209,939)
Total deferred tax 5,948 5,209 (209,939)
Income tax expense 25,780 37,002 (2,272)
1 The prior year charge included in 2018 relates to 2017 final tax adjustments
at North Mara. Included in 2017 is a provision for uncertain tax positions of
US$68.5 million relating to North Mara and US$103.5 million relating to
Bulyanhulu, for uncertain tax positions, based on an estimate of the impact of
a comprehensive settlement reflecting the key terms of the framework
announcements made by Barrick and the GoT in October 2017.
Income tax expense is recognised based on management's estimate of the weighted
average effective annual income tax rate expected for the full financial year.
The estimated average annual tax rate used for the year to 30 June 2018 is 46%,
compared to 37% for the six months ended 30 June 2017.
The tax on the Group's profit before tax differs from the theoretical amount
that would arise using the weighted average tax rate applicable to the profits
of the consolidated entities as follows:
For the six months ended For the year
30 June ended 31
December
(Unaudited) (Unaudited) (Audited)
(US$'000) 2018 2017 2017
Profit/(loss) before tax 56,657 99,545 (709,666)
Tax calculated at domestic tax rates applicable 18,600 30,519 (209,074)
to profits in the respective countries
Tax effects of:
Expenses not deductible for tax purposes2 4,605 57 49,142
Tax losses for which no deferred income tax asset 1,616 6,426 9,611
was recognised
Utilisation of previously recognised tax losses - - (25,594)
Increase in provision for uncertain tax - - 172,000
positions3
Recognition of previously unrecognised deferred (3,154) - -
tax asset
Prior year adjustments 3,120 - -
Other permanent differences 993 - 1,643
Tax charge 25,780 37,002 (2,272)
2 Relates mainly to impairment charges relating to goodwill, intangibles and
supplies inventory not deductible for tax purposes.
3 Included in 2017 is a provision for uncertain tax positions of US$68.5
million relating to North Mara and US$103.5 million relating to Bulyanhulu,
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.
In December 2017, Acacia raised an additional tax provision of US$172 million
relating to the estimated uncertain tax positions for its operating companies.
Acacia based its calculation 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, including in respect of historical tax
claims. This brought total provisions for Acacia's uncertain tax positions to
US$300 million. Acacia continues to reserve and protect all its legal rights,
as noted above and including through the arbitrations commenced by BGML and
PML, and no liability has been incurred by Acacia as a result of the framework
announcements. The additional provision was required, however, to meet
applicable accounting standards requiring assessment of current obligations for
accounting purposes based on an assessment of relevant cash outflows from the
relevant operating companies in respect of uncertain tax positions.
Tax periods remain open to review by the Tanzanian Revenue Authority (TRA) in
respect of income taxes for five years following the date of the filing of the
corporate tax return, during which time the authorities have the right to raise
additional tax assessments including penalties and interest. Under certain
circumstances the reviews may cover longer periods. Because a number of tax
periods remain open to review by tax authorities, there is a risk that
transactions that have not been challenged in the past by the authorities may
be challenged by them in the future, and this may result in the raising of
additional tax assessments plus penalties and interest.
10. Earnings/ (loss) Per Share (EPS)
Basic EPS is calculated by dividing the net profit/ (loss) for the period
attributable to owners of the Company by the weighted average number of
Ordinary Shares in issue during the period.
Diluted earnings/ (loss) per share is calculated by adjusting the weighted
average number of Ordinary Shares outstanding to assume conversion of all
dilutive potential Ordinary Shares. The Company has dilutive potential Ordinary
Shares in the form of stock options. The weighted average number of shares is
adjusted for the number of shares granted assuming the exercise of stock
options.
At 30 June 2018, 30 June 2017 and 31 December 2017, earnings/ (loss) per share
have been calculated as follows:
For the six months ended For the year
30 June ended
31 December
(Unaudited) (Unaudited) (Audited)
(US$'000) 2018 2017 2017
Earnings/ (loss)
Net profit/ (loss) attributable to owners of the parent 30,877 62,543 (707,394)
Weighted average number of Ordinary Shares in issue 410,085,499 410,085,499 410,085,499
Adjusted for dilutive effect of stock options - 382,474 -
Weighted average number of Ordinary Shares for diluted 410,085,499 410,467,973 410,085,499
earnings per share
Earnings/ (loss) per share
Basic earnings/ (loss) per share (cents) 7.5 15.3 (172.5)
Dilutive earnings/(loss) per share (cents) 7.5 15.2 (172.5)
11. Dividends
Acacia has a cash flow based dividend policy where we aim to pay a dividend of
between 15-30% of our operational cash flow after sustaining capital and
capitalised development but before expansion capital and financing costs. As a
result of the inability to export concentrates, Acacia experienced negative
free cash flow in 2017 and therefore the Company did not pay a final 2017
dividend. Although the Company has generated limited free cash flow for 2018,
the uncertainty in the Tanzanian operating environment and Group liquidity
requirements has resulted in the Directors opting not to declare an interim
dividend in 2018.
12. Goodwill and Intangible Assets
For the six months ended 30 June 2018 Goodwill Acquired Total
(in thousands of United States dollars) exploration
and
evaluation
properties1
At 1 January, net of accumulated impairment 6,352 76,031 82,383
Impairment2 (24,234) (24,234)
-
Reclassified as non-current asset held for sale3 - (10,000) (10,000)
At 30 June 2018 6,352 41,797 48,149
At 30 June 2018
Cost 401 250 102,842 504,092
Accumulated impairment (394,898) (61,045)
(455,943)
Net carrying amount 6,352 48,149
41,797
For the six months ended 30 June 2017 Goodwill Acquired Total
(in thousands of United States dollars) exploration
and
evaluation
properties1
At 1 January, net of accumulated impairment 88,292 216,190
127,898
At 30 June 2017 127,898 88,292 216,190
At 30 June 2017
Cost 401,250 112,842 514,092
Accumulated impairment (273,352) (24,550) (297,902)
Net carrying amount 127,898 88,292 216,190
For the year ended 31 December 2017 Goodwill Acquired Total
(in thousands of United States dollars) exploration
and
evaluation
properties1
At 1 January, net of accumulated impairment 127,898 88,292 216,190
Impairment (121,546) (12,261) (133,807)
At 31 December 2017 6,352 76,031 82,383
At 31 December 2017
Cost 401,250 112,842 514,092
Accumulated impairment (394,898) (36,811) (431,709)
Net carrying amount 6,352 76,031 82,383
1 Exploration and evaluation assets classified as intangible assets have
indefinite useful lives.
2 Impairments recognised in 2018 relate to the Nyanzaga exploration property
located in Tanzania (US$24.2 million). Refer to note 6 for further details.
3 Intangible assets related to the Nyanzaga exploration property have been
reclassified as non-current asset for sale as a result of Management's
intention to sell the property.
13. Property, Plant and Equipment
For the six months ended 30 June Plant and Mineral Assets under Total
2018 (Unaudited) equipment properties and construction
(US$'000) mine ¹
development
costs
At 1 January 2018, net of 245,568 486,059 38,947 770,574
accumulated depreciation and
impairment
Additions - - 51,156 51,156
Non-cash reclamation asset (2,539) - - (2,539)
adjustments
Foreign currency translation (1,244) - - (1,244)
adjustments
Depreciation (25,145) (18,449) - (43,594)
Transfers between categories 15,094 34,823 (49,917) -
At 30 June 2018 231,734 502,433 40,186 774,353
At 1 January 2018
Cost 1,943,643 1,887,068 38,947 3,869,658
Accumulated depreciation and (1,698,075) (1,401,009) - (3,099,084)
impairment
Net carrying amount 245,568 486,059 38,947 770,574
At 30 June 2018
Cost 1,954,954 1,921,891 40,186 3,917,031
Accumulated depreciation and (1,723,220) (1,419,458) - (3,142,678)
impairment
Net carrying amount 231,734 502,433 40,186 774,353
For the six months ended 30 June Plant and Mineral Assets under Total
2017 (Unaudited) equipment properties and construction
(US$'000) mine ¹
development
costs
At 1 January 2017, net of 553,993 842,019 47,164 1,443,176
accumulated depreciation and
impairment
Additions - - 91,209 91,209
Non-cash reclamation asset - - 134 134
adjustments
Foreign currency translation 512 - - 512
adjustments
Disposals/write-downs - - - -
Depreciation (37,854) (31,868) - (69,722)
Transfers between categories 21,373 74,511 (95,884) -
At 30 June 2017 538,024 884,662 42,623 1,465,309
At 1 January 2017
Cost 1,914,522 1,777,277 47,164 3,738,963
Accumulated depreciation and (1,360,529) (935,258) - (2,295,787)
impairment
Net carrying amount 553,993 842,019 47,164 1,443,176
At 30 June 2017
Cost 1,936,407 1,851,788 42,623 3,830,818
Accumulated depreciation and (1,398,383) (967,126) - (2,365,509)
impairment
Net carrying amount 538,024 884,662 42,623 1,465,309
For the year ended 31 December 2017 Plant and Mineral Assets under Total
(Audited) equipment properties construction
(US$'000) and mine ¹
development
costs
At 1 January 2017, net of 553,993 842,019 47,164 1,443,176
accumulated depreciation and
impairment
Additions - - 147,739 147,739
Non-cash reclamation asset (9,087) - - (9,087)
adjustments
Foreign currency translation 1,212 - - 1,212
adjustments
Disposals/write-downs (123) - - (123)
Impairment2 (274,608) (411,767) - (686,375)
Depreciation (71,984) (53,984) - (125,968)
Transfers between categories 46,165 109,791 (155,956) -
At 31 December 2017 245,568 486,059 38,947 770,574
At 1 January 2017
Cost 1,914,522 1,777,277 47,164 3,738,963
Accumulated depreciation and (1,360,529) (935,258) - (2,295,787)
impairment
Net carrying amount 553,993 842,019 47,164 1,443,176
At 31 December 2017
Cost 1,943,643 1,887,068 38,947 3,869,658
Accumulated depreciation and (1,698,075) (1,401,009) - (3,099,084)
impairment
Net carrying amount 245,568 486,059 38,947 770,574
1 Assets under construction represents (a) sustaining capital expenditures
incurred constructing property, plant and equipment related to operating mines
and advance deposits made towards the purchase of property, plant and
equipment; and (b) expansionary expenditure allocated to a project on a
business combination or asset acquisition, and the subsequent costs incurred to
develop the mine. Once these assets are ready for their intended use, the
balance is transferred to plant and equipment and/or mineral properties and
mine development costs.
2 The impairment in 2017 relates to property, plant and equipment at
Bulyanhulu.
Leases
Property, plant and equipment includes assets relating to the design and
construction costs of power transmission lines and related infrastructure. At
completion, ownership was transferred to TANESCO in exchange for amortised
repayment in the form of reduced electricity supply charges. No future lease
payment obligations are payable under these finance leases.
Property, plant and equipment also includes five drill rigs purchased under
short-term finance leases.
The following amounts were included in property, plant and equipment where the
Group is a lessee under a finance lease:
For the six months ended For the year
30 June ended
31 December
(Unaudited) (Unaudited) (Audited)
(US$'000) 2018 2017 2017
Cost - capitalised finance leases 51,618 51,618 51,618
Accumulated depreciation and (43,603) (42,050) (42,948)
impairment
Net carrying amount 8,015 9,568 8,670
14. Derivative Financial Instruments
The table below analyses financial instruments carried at fair value, by
valuation method. The Group has derivative financial instruments in the form of
economic and cash flow hedging contracts which are all defined as level two
instruments as they are valued using inputs other than quoted prices that are
observable for the assets or liabilities. The following tables present the
group's assets and liabilities that are measured at fair value at 30 June 2018,
30 June 2017 and 31 December 2017.
Assets Liabilities
Current Non-current Current Non-current
(US$'000)
For the six months ended 30 June 2018
(Unaudited)
Interest contracts: Designated as cash 514 739 380 -
flow hedges
Commodity contracts - Fuel: Not designated 1,178 - - -
as hedges
Total 1,692 739 380 -
Assets Liabilities
Current Non-current Current Non-current
(US$'000)
For the six months ended 30 June 2017
(Unaudited)
Interest contracts: Designated as cash 528 611 518 -
flow hedges
Commodity contracts - Fuel: Not designated 73 159 596 1,068
as hedges
Total 601 770 1,114 1,068
Assets Liabilities
Current Non-current Current Non-current
(US$'000)
For the year ended 31 December 2017
(Audited)
Interest contracts: Designated as 531 667 481 -
cash flow hedges
Commodity contracts - Fuel: Not 2,088 240 - -
designated as hedges
Total 2,619 907 481 -
15. Inventories
For the six months ended For the year
30 June ended
31 December
(Unaudited) (Unaudited) (Audited)
(US$'000) 2018 2017 2017
Raw materials
Ore in stockpiles 17,563 14,041 22,253
Mine operating supplies 124,129 154,859 117,946
Work in process 4,974 10,807 5,103
Finished products
Gold doré/bullion 10,467 7,084 7,078
Gold, copper and silver concentrate1 139,500 93,901 139,500
Total current portion of inventory 296,633 280,692 291,880
Non-current ore in stockpiles 129,318 115,775 133,550
Total 425,951 396,467 425,430
1 Gold, copper and silver concentrate on hand relate to finished products at
Bulyanhulu (US$88.5 million) and Buzwagi (US$51.0 million) due to the inability
to export concentrate since March 2017.
16. Other Assets
a) Other current assets
For the six months ended For the year
30 June ended
31 December
(Unaudited) (Unaudited) (Audited)
(US$'000) 2018 2017 2017
Current portion of indirect tax 54,289 157,936 38,285
receivables1
Other receivables and advance 51,090 32,932 31,870
payments2
Total 105,379 190,868 70,155
1 The current portion of indirect tax receivables included an amount of US$46.5
million (December 2017: US$31.4 million) relating to North Mara and US$2.0
million (December 2017: nil) at Buzwagi as it was expected that the current
portion will be recovered through offsets against corporate income tax, as
agreed under the MOS entered into in 2012, within the next year. Indirect tax
receivables in other corporate and exploration entities amounts to US$6.8
million.
2 Other receivables and advance payments relate to prepayments for insurance
and income taxes offset against outstanding refunds for VAT and fuel levies and
current amounts receivable from the NSSF of US$7.4 million (2017: US$4.8
million).
b) Other non-current assets
For the six months ended For the year
30 June ended
31 December
(Unaudited) (Unaudited) (Audited)
(US$'000) 2018 2017 2017
Amounts due from Government1 8,880 8,002 11,629
Operating lease prepayments - TANESCO powerlines 285 809 374
Prepayments - Acquisition of rights over 33,410 42,250 35,948
leasehold land2
Non-current portion of indirect tax receivables3 118,236 6,897 132,405
Village housing 121 254 151
Deferred finance charges 119 262 201
Total 161,051 58,474 180,708
1 Included in this amount are amounts receivable from the NSSF of US$4.4
million (2017: US$5.8 million).
2 Prepayments made to the landowners in respect of acquisitions of the rights
over the use of the leasehold land.
3 The non-current portion of indirect tax receivables was subject to
discounting to its current value using a discount rate of 6.5% (December 2017:
6.5%). There was no discounting charge in 2018 in the income statement
(December 2017: US$13.3 million).
17. Non-current assets classified as held for sale
After period end, OreCorp, Acacia's JV partner in the Nyanzaga Project, has
executed its option under the earn-in agreement to increase its stake to 51% in
the project through the payment of US$3.0 million to Acacia. Further to that,
Acacia has signed a conditional agreement to sell its remaining 49% stake to
OreCorp for US$7.0 million and a net smelter royalty capped at US$15 million
based on future production. In line with the applicable accounting standard and
driven by the uncertainty surrounding the current environment, management did
not recognise an asset for the right to the royalty. As a result of the
agreement, and Management's commitment to a sale, Acacia expects to recover the
value of the asset through sale and not through value in use and as such has
valued the asset at fair value less costs to sell of US$10.0 million and
recorded an impairment charge of US$24.2 million and reclassified the
intangible asset to non-current assets held for sale on the balance sheet.
18. Borrowings
During 2013, a US$142 million facility was put in place to fund the bulk of the
costs of the construction of one of Acacia's key growth projects, the
Bulyanhulu CIL Expansion project ("Project"). The Facility is collateralised by
the Project, has a term of seven years with a spread over Libor of 250 basis
points. In common with borrowing agreements of this nature the facility
includes various covenants as well as a material adverse effect clause. The
interest rate has been fixed at 3.6% through the use of an interest rate swap.
The 7 year Facility is repayable in equal US$14.2 million bi-annual instalments
over the term of the Facility, after a two year repayment holiday period. The
full facility of US$142 million was drawn at the end of 2013. The first
principal payment of US$14.2 million was paid in H2 2015 and regular repayments
have been made each half year. As at 30 June 2018 the balance owing was US$56.8
million (2017: US$85.2 million) and all covenants have been complied with.
Interest accrued to the value of US$0.5 million (2017: US$0.6 million) was
included in accounts payable at the end of the period. Interest incurred on the
borrowings as well as hedging losses on the interest rate swap for the period
ended 30 June 2018 was US$1.1 million (2017: US$1.2 million).
19. Cash flow - other items
a) Operating cash flows - other items
Movements relating to working capital items
For the six months ended For the
30 June year
ended
31
December
(Unaudited) (Unaudited) (Audited)
(in thousands of United States dollars) 2018 2017 2017
Indirect and corporate taxes1 (28,260) (51,047) (89,560)
Increase in indirect tax receivable (4,956) (33,747) (51,703)
Income tax paid - Final (4,187) - (3,257)
Income tax paid - Provisional (19,117) (17,300) (34,600)
Other current assets (103) 6,519 (10,774)
Trade receivables 1,195 6,931 745
Inventories2 (521) (113,217) (172,180)
Other liabilities3 (718) (7,626) (7,301)
Share based payments3 (1,302) (834) (1,780)
Trade and other payables4 4,427 795 (31,170)
Other working capital items5 1,120 (1,218) (1,071)
Total (24,162) (159,697) (313,091)
1 During the year, we have made US$23.3 million (2017: US$17.3 million at June
and US$37.9 million at December) corporate tax payments. This has been funded
through an offset against current indirect taxes that were due for refund.
2 The inventory adjustment includes the movement in current as well as the
non-current portion of inventory.
3 The other liabilities adjustment mainly relates to the revaluation of future
share-based payments. During the year, share-based payments of US$1.3 million
(2017: US$0.8 million) were made.
4 The trade and other payables adjustment exclude statutory liabilities in the
form of income tax payable.
5 Other working capital items include exchange rate losses associated with
working capital.
Other non-cash items
For the six months ended For the year
30 June ended
31 December
(Unaudited) (Unaudited) (Audited)
(in thousands of United States dollars) 2018 2017 2017
Adjustments for non-cash income statement items:
Foreign exchange losses 4,104 4,734 2,900
Discounting of indirect tax receivables - - 13,276
Provisions added - 2,101 7,550
Provisions settled (4,000) - -
Movement in derivatives 1,066 2,431 (1,495)
Share option expense - 6 27
Provisional tax offsets - (17,300) -
Other non-cash items - (30) 92
Exchange loss on revaluation of cash balances 579 (151) (190)
Total 1,749 (8,209) 22,160
b) Investing cash flows - other items
For the six months ended For the year
30 June ended
31 December
(Unaudited) (Unaudited) (Audited)
(in thousands of United States dollars) 2018 2017 2017
Other long-term receivables 112 29 194
Rehabilitation expenditure (3,258) (250) (3,106)
Total (3,146) (221) (2,912)
20. Commitments and Contingencies
The Group is subject to various laws and regulations which, if not observed,
could give rise to penalties. As at 30 June 2018, the Group has the following
commitments and/ or contingencies.
a) Legal contingencies
As at 30 June 2018, the Group was a defendant in a number of lawsuits. The
plaintiffs are claiming damages and interest thereon for the alleged loss
caused by the Group due to one or more of the following: unlawful eviction,
termination of services and/or, non-payment for services, defamation,
negligence by act or omission in failing to provide a safe working environment,
unpaid overtime, public holiday compensation and various other commercial/
project disputes. At present, Acacia considers the majority of cases to be
without merit and therefore the likelihood of any material unfavourable outcome
is remote and therefore no contingency is required.
b) Tax-related contingencies
The TRA has issued a number of tax assessments to the Group related to past
taxation years from 2002-onwards. The Group believes that the majority of these
assessments are incorrect and has filed objections and appeals accordingly in
an attempt to resolve these matters by means of discussions with the TRA or
through the Tanzanian appeals process. Overall, it is the current assessment
that the relevant assessments and claims by the TRA are without merit. The
claims include a TRA assessment to the value of US$41.3 million for withholding
tax on certain historic offshore dividend payments paid by Acacia Mining plc to
its shareholders in 2010 to 2013. Acacia is appealing this assessment on the
substantive grounds that, as an English incorporated company, it is not
resident in Tanzania for taxation purposes. The appeal is currently pending at
the Court of Appeal. In addition, the Company has raised certain tax provisions
amounting to US$300 million in aggregate, based on the potential impact of a
comprehensive settlement of all outstanding tax disputes, including, according
to Barrick, historic tax claims, reflecting the key terms of the Framework
announcements by Barrick and the GoT in October 2017. Refer to note 9 for
further information.
21. Related party balances and transactions
The Group has related party relationships with entities owned or controlled by
Barrick Gold Corporation, which is the ultimate controlling party of the Group.
The Company and its subsidiaries, in the ordinary course of business, enter
into various sales, purchase and service transactions and other professional
services arrangements with others in the Barrick Group. These transactions are
under terms that are on normal commercial terms and conditions. These
transactions are not considered to be significant.
At 30 June 2018 the Group had no loans of a funding nature due to or from
related parties (30 June 2017: zero; 31 December 2017: zero).
END
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